Date: 07/21/2009

CWCB Water Project Financing Issues


Votes: View--> Action Taken:

10:40 AM -- Colorado Water Conservation Board and Water Project Financing Issues

Jennifer Gimbel, Director of the Colorado Water Conservation Board (CWCB) explained that the mission of the CWCB is to aide in the protection and development of the waters of the state. Its programs include water project planning and finance, stream and lake protection, flood hazard identification and mitigation, weather modification, river restoration, water conservation and drought planning, water information, and water supply protection (Attachment ). She identified specific activities related to these responsibilities including the administration of the CWCB Construction Fund, the Perpetual Base Account of the Severance Tax Trust Fund, and the Water Supply Reserve Account. She also explained how the CWCB is helping to estimate future water needs and identify project and processes to meet these needs. She responded to questions from the committee about programs administered by the CWCB including the decision support systems that enable water planners and administrators to assess the effect of changes in water policy on streamflows and water users.

10:50 AM

Ms. Gimbel described the CWCB's budget. She explained that the agency does not receive General Fund moneys. Its revenue come primarily from the state severance tax on non-renewable minerals, federal mineral lease moneys, and interest on loans. These moneys are used to pay for administrative expenses, issue water project fiance loans, and pay for studies. To help address the shortfall in General Fund revenue, the legislature transferred $107 million from CWCB loan programs including $97 million from Perpetual Base Account and $10.25 million from the CWCB Construction Fund to the General Fund during the 2009 legislative session.

10:55 AM -- Revenue for CWCB Programs

Ms. Gimbel explained that revenues for the CWCB Construction Fund come from the return of principal and interest on outstanding loans, interest earned on the cash balance of the fund through investments by the State Treasurer, and federal mineral lease (FML) fund distributions. FML revenue is the portion of revenue the state receives from the money the federal government collects for mineral production on federal lands. The CWCB Construction Fund receives a distribution of 10 percent of FML revenue, excluding bonus payments, up to $14.0 million annually. The amount of FML revenue transferred to the construction fund is allowed to grow by 4 percent annually in succeeding years. The Perpetual Base Account receives half of the receipts to the Severance Tax Trust Fund which is one fourth of all severance tax revenue. The Perpetual Base Account is estimated to receive significantly lower revenue in FY 2009-10 due primarily to falling oil and gas prices and a local property tax offset. She also explained the CWCB administers several programs that rely on "Tier 2" moneys including the Water Supply Reserve Account, the Interbasin Compact Committee, the Water Efficiency Grant Program, and the Species Conservation Trust Fund. Section 39-29-109.3, C.R.S., allocates moneys from the Operational Account of the Severance Tax Trust Fund between Tier 1 and Tier 2 program. Tier 1 expenditures support salaries and on-going core programs of the DNR including the regulation of mining and oil and gas development. The Tier 2 programs support grants, loans, research, and construction. The required reserve for Tier 1 programs is one times the appropriations. The reserve requirement for Tier 2 programs is equal to 15.0 percent of the authorized expenditures. Ms. Gimbel expressed concern about having to rely on Tier 2 moneys that are subject to proportional reduction if mid-year revenue projections indicate there are insufficient funds.

10:57 AM -- Water Project Loans and Grants

Ms. Gimbel explained that moneys in the CWCB Construction Fund is a revolving loan program that finances projects that increase the consumption of Colorado's undeveloped river entitlements and that repair and rehabilitate existing water storage and delivery facilities. Moneys may be used to pay for up to 50 percent of the cost of feasibility studies and water supply investigations. Loans may not be used for domestic water treatment and distribution systems. Loans for more than $10 million must be approved by the General Assembly. Grants may not be made from the fund unless authorized by bill. She explained that construction fund moneys are used to pay for CWCB administrative expenses. For FY 2009-10, the General Assembly appropriated $8.8 million and 47.7 FTE to the CWCB for operations, primarily from moneys in the CWCB Construction Fund. She expressed concern about transfers from the CWCB Construction Fund and the Perpetual Base Account to the General Fund and the effect that these transfer will have on the ability of the CWCB to issue new loans and grants and address water supply needs in the state. For example, the legislature transferred $37 million from the Perpetual Base Account. These moneys were to be used to match federal moneys that may be appropriated for the Arkansas Valley Conduit Project.

11:02 AM

Ms. Gimbel explained that the CWCB provides water project financing for farmers and other private entities that are not eligible to borrow money from the Colorado Water Resources and Power Development Authority. These entities are also unable afford loans from commercial lenders. In 2007, the legislature authorized the CWCB to loan the City of Aurora Water Activity Enterprise $75.75 million for the Prairie Water Project. Ms. Gimbel expressed concern about a proposal that the CWCB sell this loan. She explained that the sale may only yield 20 percent to 40 percent of the actual loan value and reduce its ability to offer low interest loans to agricultural and low income borrowers. It would also impose a $6 million annual impact through lost interest payments. The sale of this loan and additional transfers from CWCB loan programs to the General Fund, she explained, threatens the ability of the CWCB to continue to be self supporting. She responded to questions from the committee concerning the federal mineral lease revenues that are transferred to the CWCB Construction Fund and the effect of recent revenue shortfalls on CWCB operations.

11:19 AM

At the request of Harris Sherman, Executive Director of the Colorado Department of Natural Resources, Senator Al White, member of the Joint Budget Committee, described the FY 2010-11 budget setting process and the challenges facing the legislature as it works to balance the budget. Senator White explained that Governor Ritter will released his FY 2009-10 budget balancing plan in August that seeks to reduce total General Fund appropriations by 10 percent for each department. He said he could not predict how the FY 2010-11 budget will be balanced, but understands the importance of the CWCB and the services that it provides to the state.

11:23 AM

Ms Gimbel closed her remarks and explained the moneys transferred from the CWCB Construction Fund and the Perpetual Base Account to the General Fund may prevent the CWCB from issuing new loans for water projects and limit the amount of money available for new grants in the annual CWCB water projects bill.