TITLE 31. NATURAL RESOURCES AND CONSERVATION

PART 10. TEXAS WATER DEVELOPMENT BOARD

CHAPTER 363. FINANCIAL ASSISTANCE PROGRAMS

The Texas Water Development Board ("TWDB" or "board") proposes to repeal 31 TAC §§363.401 - 363.404 and proposes new Subchapter D, 31 TAC §§363.401 - 363.408, relating to the establishment of flood financial assistance by recent statutory amendments to Chapter 15 and 16 of the Texas Water Code.

BACKGROUND AND SUMMARY OF THE FACTUAL BASIS FOR THE PROPOSED AMENDMENT.

Through Senate Bill 7 of the 86th Legislature, 2019, the Legislature created the Flood Infrastructure Fund and the Texas Infrastructure Resiliency Fund to ensure financial assistance is available for flood control, drainage, and mitigation projects. The new flood financial assistance will be administered by the TWDB and is designed to make the implementation of flood projects more affordable for Texas communities and to meet the immediate needs for funding from political subdivisions.

The TWDB is proposing the present rules to implement the establishment of flood financial assistance by creating a new subchapter in Chapter 363, relating to Financial Assistance Programs. By placing the flood financial assistance rules into this chapter, the general provisions of Chapter 363 will apply. This will allow the board to use the procedures and practices common to many of the board's existing financial programs rather than to recreate them separately in the flood financial assistance rules. Applicants will find the utilization of existing practices convenient and efficient, as opposed to having to navigate and understand new processes. To read and understand the rules in Chapter 363, Subchapter D that will apply to flood financial assistance, the rules must be read together with Subchapter A, relating to General Provisions.

The executive administrator envisions that the application process for flood financial assistance will be similar to the processes for the board's financial programs, as modified by any process improvements. The board will solicit initial abridged applications and then a longer application at the appropriate time. The abridged application will allow the applicant to describe the proposed project and provide information about the issues the project will address. After the board receives the abridged applications, staff will rate and prioritize the projects. The executive administrator will recommend a prioritized list of applications based on the criteria specified in proposed rule §363.404. The prioritized list of projects, as recommended by the executive administrator, will go to the board for deliberation and preliminary decision. The projects that are selected by the board for funding may be required to submit additional information by the board. The longer application will then be subject to the executive administrator's traditional analysis for evaluating projects.

Prior to proposing these rules, the board engaged in an extensive effort of outreach for suggestions on flood planning and financing. TWDB staff traveled across the state and solicited input from stakeholders on how to implement the flood financial assistance program.

SECTION BY SECTION DISCUSSION OF PROPOSED AMENDMENTS.

The proposed repeal of §§363.401 - 363.404 removes the current flood control provisions to allow for the implementation of the new flood financial assistance program.

Proposed Amendment to 31 TAC Chapter 363 by addition of a New Subchapter D (relating to Flood Financial Assistance)

31 TAC §363.401. Scope of Subchapter D.

Section 363.401 is proposed to specify the scope and coverage of Subchapter D. Subchapter D governs the board's new flood financial assistance program established by the Texas Water Code, Chapter 15, Subchapter I and Texas Water Code, Chapter 16, Subchapter L. The new section also clarifies that the provisions of Chapter 363, Subchapter A are applicable to the flood financial assistance program unless they are in conflict with Subchapter D.

31 TAC §363.402. Definitions.

Section 363.402 is proposed to clarify the definitions of words and terms used throughout Subchapter D.

31 TAC §363.403. Prioritization System.

Section 363.403 is proposed to provide a prioritization system for projects to be funded. The processing of applications and the steps in the proposed prioritization system is similar to the functioning of the prioritization for the current State Revolving Fund programs, but the dates and timing of flood financial assistance will not be fixed by rule to give the board additional flexibility in the timing of when it will make funds available. The factors to be evaluated in the prioritization will be outlined in a Flood Intended Use Plan, which will identify the uses of the funds for flood projects.

31 TAC §363.404. Use of Funds.

Section 363.404 incorporates the restrictions on the use of funds provided by Texas Water Code §15.534, as related to providing financial assistance to applicants. The board expects that the terms of the financial assistance provided to applicants will be tailored to best fit the needs of the applicants. After the board adopts the initial state flood plan, the flood financial assistance funds will be used for projects in the state flood plan, as required by Texas Water Code §§15.5341 and 16.4545.

31 TAC §363.405. Terms of Financial Assistance.

Section 363.405 is proposed to clarify when deferrals for principal and interest payments may be made, and to outline the terms that applicants will follow when receiving flood financial assistance.

31 TAC §363.406. Findings Required.

Section 363.407 is proposed to state the findings that are required prior to approval of an application for flood financial assistance, pursuant to Texas Water Code §15.536.

31 TAC §363.407. Application Requirements.

Section 363.407 is proposed to outline the requirements applicants will follow when applying for flood financial assistance. If an applicant proposes a flood control project, and that flood control project is located in a watershed with other political subdivisions, the applicant will be required to submit a memorandum of understanding that includes all the affected political subdivisions. This requirement is from Texas Water Code §15.005. Applicants will have to submit an affidavit demonstrating that they have acted cooperatively with the public and other political subdivisions in the area. The affidavit will fulfill the purposes of Texas Water Code §15.535, which requires political subdivisions to demonstrate their cooperation.

31 TAC §363.408. Investment and Administration of Funds.

Section 363.408 is proposed to implement the requirement from Texas Water Code §§15.537 and 16.460, which require that the board outline the investment and administration of funds.

FISCAL NOTE: COSTS TO STATE AND LOCAL GOVERNMENTS

Ms. Rebecca Trevino, Chief Financial Officer, has determined that there will not be fiscal implications for state government as a result of the proposed rulemaking. For the first five years these rules are in effect, there is no expected additional cost to state or local governments resulting from their administration. There are no fiscal implications to local governments in general as a result of enforcing or administering the rules, since no local government is required to apply for assistance under these programs. For local governments that choose to apply for funding under these programs, there will be costs associated with applying for and receiving funding, but those costs are anticipated to be more than offset by savings to the local government in financing costs for the projects.

These rules are not expected to result in reductions in costs to either state or local governments. These rules are not expected to have any impact on state or local revenues. The rules do not require any increase in expenditures for state or local governments as a result of administering these rules. Additionally, there are no foreseeable implications relating to state or local governments' costs or revenue resulting from these rules.

Because these rules will not impose a cost on regulated persons, the requirement included in Texas Government Code Section 2001.0045 to repeal a rule does not apply. However, §§363.401 - 363.404 are being repealed. Furthermore, the requirement in Section 2001.0045 does not apply because these rules are proposed in response to a natural disaster; are necessary to protect water resources of this state as authorized by the Water Code; are necessary to protect the health, safety, and welfare of the residents of this state; and are necessary to implement legislation.

The board invites public comment regarding this fiscal note. Written comments on the fiscal note may be submitted to the contact person at the address listed under the Submission of Comments section of this preamble.

PUBLIC BENEFITS AND COSTS

Ms. Rebecca Trevino also has determined that for each year of the first five years the proposed rulemaking is in effect, the public will benefit from the rulemaking as applicants are able to receive low cost financing for flood projects or receive grants for flood projects.

LOCAL EMPLOYMENT IMPACT STATEMENT

The board has determined that a local employment impact statement is not required because the proposed rule does not adversely affect a local economy in a material way for the first five years that the proposed rule is in effect because it will impose no new requirements on local economies. The board also has determined that there will be no adverse economic effect on small businesses, micro-businesses, or rural communities as a result of enforcing this rulemaking. The board also has determined that there is no anticipated economic cost to persons who are required to comply with the rulemaking as proposed. Therefore, no regulatory flexibility analysis is necessary.

DRAFT REGULATORY IMPACT ANALYSIS DETERMINATION

The board reviewed the proposed rulemaking in light of the regulatory analysis requirements of Texas Government Code §2001.0225 and determined that the rulemaking is not subject to Texas Government Code §2001.0225 because it does not meet the definition of a "major environmental rule" as defined in the Administrative Procedure Act. A "major environmental rule" is defined as a rule with the specific intent to protect the environment or reduce risks to human health from environmental exposure, a rule that may adversely affect in a material way the economy or a sector of the economy, productivity, competition, jobs, the environment, or the public health and safety of the state or a sector of the state. The intent of the rulemaking is to implement legislation and create a new flood financial assistance program.

Even if the proposed rule were a major environmental rule, Texas Government Code, §2001.0225 still would not apply to this rulemaking because Texas Government Code, §2001.0225 only applies to a major environmental rule, the result of which is to: (1) exceed a standard set by federal law, unless the rule is specifically required by state law; (2) exceed an express requirement of state law, unless the rule is specifically required by federal law; (3) exceed a requirement of a delegation agreement or contract between the state and an agency or representative of the federal government to implement a state and federal program; or (4) adopt a rule solely under the general powers of the agency instead of under a specific state law. This rulemaking does not meet any of these four applicability criteria because it: (1) does not exceed a standard set by any federal law; (2) does not exceed an express requirement of state law; (3) does not exceed a requirement of a delegation agreement or contract between the state and an agency or representative of the federal government to implement a state and federal program; and (4) is not proposed solely under the general powers of the agency, but rather is proposed under the authority of Texas Water Code §§15.537 and 16.460. Therefore, this proposed rule does not fall under any of the applicability criteria in Texas Government Code, §2001.0225.

The board invites public comment regarding this draft regulatory impact analysis determination. Written comments on the draft regulatory impact analysis determination may be submitted to the contact person at the address listed under the Submission of Comments section of this preamble.

TAKINGS IMPACT ASSESSMENT

The board evaluated this proposed rule and performed an analysis of whether it constitutes a taking under Texas Government Code, Chapter 2007. The specific purpose of this rule is to implement legislation and create a new flood financing program. The proposed rule would substantially advance this stated purpose by proposing new rules for flood financial assistance and guide applicants in the application process.

The board's analysis indicates that Texas Government Code, Chapter 2007 does not apply to this proposed rule because this is an action that is reasonably taken to fulfill an obligation mandated by state law, which is exempt under Texas Government Code, §2007.003(b)(4). The board is the agency that provides financial assistance for flood mitigation and flood control projects.

Nevertheless, the board further evaluated the proposed rules and performed an assessment of whether it constitutes a taking under Texas Government Code, Chapter 2007. Promulgation and enforcement of the proposed rules would be neither a statutory nor a constitutional taking of private real property. Specifically, the proposed regulations do not affect a landowner's rights in private real property because this rulemaking does not burden nor restrict or limit the owner's right to property and reduce its value by 25% or more beyond that which would otherwise exist in the absence of the regulations. Therefore, the proposed rules do not constitute a taking under Texas Government Code, Chapter 2007.

GOVERNMENT GROWTH IMPACT STATEMENT

The board reviewed the proposed rulemaking in light of the government growth impact statement requirements of Texas Government Code §2001.0221 and has determined, for the first five years the proposed rules would be in effect, the proposed rules will not: (1) require an increase or decrease in fees paid to the agency; (2) create a new regulation; (3) expand, limit, or repeal an existing regulation; (4) increase or decrease the number of individuals subject to the rule's applicability; or (5) positively or adversely affect this state's economy.

The board has reviewed the proposed rulemaking in light of the government growth impact statement requirements of Texas Government Code §2001.0221 and has determined, for the first five years the proposed rules would be in effect, the proposed rules will: (1) create or eliminate a government program; (2) require the creation of new employee positions or the elimination of existing employee positions; (3) require an increase or decrease in future legislative appropriations to the agency; and (6) expand, limit, or repeal an existing regulation. The board is required to implement a new financing program for flood projects as a result of legislation from the 86th Legislature.

SUBMISSION OF COMMENTS

Written comments on the proposed rulemaking may be submitted by mail to Office of General Counsel, Texas Water Development Board, P.O. Box 13231, Austin, Texas 78711-3231, by email to rulescomments@twdb.texas.gov, or by fax to (512) 475-2053. COMMENTS MUST INCLUDE REFERENCE TO CHAPTER 363 IN THE SUBJECT LINE. Comments will be accepted until 5:00 p.m. on January 13, 2020.

SUBCHAPTER D. FLOOD CONTROL

31 TAC §§363.401 - 363.404

STATUTORY AUTHORITY

The repeals are proposed under the authority of Texas Water Code §6.101, which provides the TWDB with the authority to adopt rules necessary to carry out the powers and duties in the Water Code and other laws of the State.

§363.401.Scope of Subchapter.

§363.402.Definitions of Terms.

§363.403.Projects Eligible.

§363.404.Flood Control.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on November 18, 2019.

TRD-201904326

Todd Chenoweth

General Counsel

Texas Water Development Board

Earliest possible date of adoption: December 29, 2019

For further information, please call: (512) 463-7847


SUBCHAPTER D. FLOOD FINANCIAL ASSISTANCE [FLOOD CONTROL]

31 TAC §§363.401 - 363.408

STATUTORY AUTHORITY

This rulemaking is proposed under the authority of Texas Water Code §6.101, which provides the TWDB with the authority to adopt rules necessary to carry out the powers and duties in the Water Code and other laws of the State, and also under the authority of Texas Water Code §§15.537 and 16.460, which require that the TWDB adopt rules necessary to carry out the affected subchapters.

Chapters 15 and 16 of the Texas Water Code are affected by this rulemaking.

§363.401.Scope of Subchapter D.

This subchapter shall govern the board's programs of flood financial assistance under the programs established by the Texas Water Code, Chapter 15, Subchapter I and Texas Water Code, Chapter 16, Subchapter L. Unless in conflict with the provisions in this subchapter, the provisions of Subchapter A of this chapter (relating to General Provisions) shall apply to projects under this subchapter.

§363.402.Definitions.

The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Drainage--includes, but is not limited to, bridges, catch basins, channels, conduits, creeks, culverts, detention ponds, ditches, draws, flumes, pipes, pumps, sloughs, treatment works, and appurtenances to those items, whether natural or artificial, or using force or gravity, that are used to draw off surface water from land, carry the water away, collect, store, or treat the water, or divert the water into natural or artificial watercourses.

(2) Eligible political subdivision--a district or authority created under Section 52, Article III, or Section 59, Article XVI, Texas Constitution, a district or river authority that is subject to Chapter 49 of the Texas Water Code and participates in cooperative flood control planning, a municipality, or a county.

(3) Flood control--structural mitigation or anything that diverts, redirects, impedes, or otherwise modifies the flow of water.

(4) Flood mitigation--the implementation of actions, including both structural and nonstructural solutions, to reduce flood risk to protect against the loss of life and property.

(5) Flood Intended Use Plan--a document prepared by the board which identifies the uses of the funds for flood projects.

(6) Flood project--a drainage, flood mitigation, or flood control project, including:

(A) planning and design activities;

(B) work to obtain regulatory approval to provide nonstructural and structural flood mitigation and drainage;

(C) construction of structural flood mitigation and drainage projects, including projects that use nature-based features to protect, mitigate, or reduce flood risk;

(D) construction and implementation of nonstructural projects, including projects that use nature-based features to protect, mitigate, or reduce flood risk;

(E) nonstructural or natural flood control strategies; and

(F) a federally authorized project to deepen a ship channel affected by a flooding event.

(7) Nonstructural flood mitigation--includes, but is not limited to, measures such as acquisition of floodplain land for use as public open space, acquisition and removal of buildings located in a floodplain, relocation of residents of buildings removed from a floodplain, flood warning systems, educational campaigns, and land use planning policies.

(8) Metropolitan statistical area--an area so designated by the United States Office of Management and Budget.

(9) Project Watershed--the area upstream and downstream substantially affected by the proposed flood project as documented in the project application and sealed by a Professional Engineer or Geoscientist. The Project Watershed shall be estimated using the best available data with analysis performed in accordance with sound engineering principles and practices.

(10) Structural flood mitigation--includes, but is not limited to, measures such as construction of storm water retention basins, enlargement of stream channels, modification or reconstruction of bridges, coastal erosion control measures, or beach nourishment.

§363.403.Prioritization System.

(a) The board will establish deadlines for application submittals. The executive administrator will provide the prioritization of those applications to the board for approval as soon thereafter as practicable. To be considered for prioritization, an applicant must provide adequate information to establish that the applicant qualifies for funding, to describe the project comprehensively, and to establish the cost of the project, as well as any other information requested by the executive administrator. The executive administrator will develop and provide an abridged application to gather information necessary for prioritization. If an applicant submits an abridged application for prioritization purposes, the applicant must submit a complete application to the board by the deadline established by the executive administrator, or the project will lose its priority ranking and the board may commit to other projects consistent with the prioritization.

(b) For each application that the executive administrator has determined has adequate information and is administratively complete for prioritization purposes and prior to each board meeting at which applications may be considered for prioritization, the executive administrator shall:

(1) prioritize the applications by the criteria identified in the Flood Intended Use Plan; and

(2) provide to the board a prioritized list of all complete applications as recommended by the executive administrator, the amount of funds requested, and the priority of each application received.

(c) The board will identify the amount of funds available for new applications by category, establish the structure of financing and the terms of any subsidy, and will consider applications in accordance with this title. The board reserves the right to limit the amount of funding available to an individual entity.

§363.404.Use of Funds.

The board may use the funds for financial assistance to eligible political subdivisions as follows:

(1) to make a loan to an eligible political subdivision at or below market interest rates for a flood project;

(2) to make a grant or loan at or below market interest rates to an eligible political subdivision for a flood project to serve an area outside of a metropolitan statistical area in order to ensure that the flood project is implemented;

(3) to make a loan at or below market interest rates for planning and design costs, permitting costs, and other costs associated with state or federal regulatory activities with respect to a flood project;

(4) to make a grant to an eligible political subdivision to provide matching funds to enable the eligible political subdivision to participate in a federal program for a flood project;

(5) to make a grant to an eligible political subdivision for a flood project if the board determines that the eligible political subdivision does not have the ability to repay a loan;

(6) to meet matching requirements for projects funded partially by federal money; and

(7) to make a loan to an eligible political subdivision below market interest rates and under flexible repayment terms, including a line of credit or loan obligation with early repayment terms, to provide financing for the local share of a federally authorized ship channel improvement project.

§363.405.Terms of Financial Assistance.

(a) Principal and interest payments on loans at or below market interest rates for planning and design costs, permitting costs, and other costs associated with state or federal regulatory activities with respect to a flood project may be deferred for not more than 10 years or until construction of the flood project is completed, whichever is earlier.

(b) The board shall determine the amount and form of financial assistance and the amount and form of repayment.

(c) The board shall determine the method of evidence of debt.

(d) If the board determines non-performance on the terms of the grant, the board may require reimbursement of all or part of the funds provided by grant assistance or impose sanctions such as prohibition of further board financial assistance.

§363.406.Findings Required.

On review and recommendation by the executive administrator, the board may approve an application only if the board finds:

(1) the application and the assistance applied for meet requirements of this subchapter and board rules;

(2) the application demonstrates a sufficient level of cooperation among eligible political subdivisions and includes all of the eligible political subdivisions substantially affected by the flood project;

(3) the taxes or other revenue, or both the taxes and other revenue, pledged by the applicant will be sufficient to meet all the obligations assumed by the eligible political subdivision; and

(4) other findings as required in the Flood Intended Use Plan.

§363.407.Application Requirements.

In addition to the general application requirements of Subchapter A of this chapter (relating to General Provisions), the following are required to be considered an administratively complete application:

(1) if the project is a flood control project and there is more than one political subdivision located in a watershed, the applicant must submit a memorandum of understanding relating to management of the project watershed. The memorandum of understanding must be approved and signed by all governing bodies of political subdivisions located in the project watershed. The memorandum of understanding at a minimum, must contain a requirement that all political subdivisions in the project watershed agree to work cooperatively;

(2) an affidavit attesting to the following:

(A) that the applicant has acted cooperatively with other political subdivisions to address flood control needs in the area in which the eligible political subdivisions are located;

(B) that all eligible political subdivisions substantially affected by the proposed flood project have participated in the process of developing the proposed flood project;

(C) that the eligible political subdivisions, separately or in cooperation, have held public meetings to accept comment on proposed flood projects from interested parties; and

(D) that the technical requirements for the proposed flood project have been completed and compared against any other potential flood projects in the same area. This statement is not required for applications for assistance for planning and design costs, permitting costs, and other costs associated with state or federal regulatory activities with respect to a flood project;

(3) an analysis of whether the proposed flood project could use floodwater capture techniques for water supply purposes, including floodwater harvesting, detention or retention basins, or other methods of capturing storm flow or unappropriated flood flow;

(4) a description of the Project Watershed sealed by a Professional Engineer or Geoscientist. Revisions to the Project Watershed may be necessary with additional data, development of more refined modeling tools, refinement of design criteria, or other factors. The applicant must provide the executive administrator with updates of the description of the Project Watershed as it is modified. If a revision to the Project Watershed results in the inclusion of additional political subdivisions, the Applicant must provide the executive administrator with the additional memoranda of understanding; and

(5) additional information as needed to allow the board to comply with its responsibility to act as a clearinghouse for information about flood planning and its reporting requirements.

§363.408.Investment and Administration of Funds.

The investment and administration of funds shall be managed in accordance with the Board's investment policy, in accordance with State of Texas Comptroller guidelines, and the Public Funds Investment Act, Texas Government Code, Chapter 2257.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on November 18, 2019.

TRD-201904327

Todd Chenoweth

General Counsel

Texas Water Development Board

Earliest possible date of adoption: December 29, 2019

For further information, please call: (512) 463-7847