SUBJECT: An Ordinance approving and authorizing a Second Supplement to the Project Contract Between the City of Houston, Texas and the Coastal Water Authority (CWA) for the Luce Bayou Inter-Basin Transfer Project.
RECOMMENDATION: (Summary) Approve the agreement It is recommended that City Council pass an Ordinance approving and authorizing the Second Supplement to the Project Contract Between the City of Houston, Texas and the Coastal Water Authority for the Luce Bayou Inter-Basin Transfer Project.
SPECIFIC EXPLANATION: On January 28, 2009, City Council approved an ordinance to execute a contract establishing the terms for cooperation between the City of Houston (the City) and the Coastal Water Authority to provide for the planning, design, property acquisition, construction and financing of the Luce Bayou Interbasin Transfer Project (Luce Bayou Project) that will bring approximately 400 million gallons of surface water per day from the Trinity River Basin to the San Jacinto River Basin (Lake Houston). The ordinance also authorized the pledge of payments from City of Houston’s Combined Utility System (CUS) General Purpose Fund to CWA for repayment of loans entered into in support of Phase I and Phase II of the Luce Bayou Project.
The original contract contemplated that future phases of the Project would be funded with Texas Water Development Board (TWDB) Board Participation loans secured by CWA for the City. In addition, the contract anticipated one or more supplemental agreements would be needed to finance the remaining phases of the Project. Currently, Phase I Preliminary Design for the Project is complete and land purchases and mitigation efforts are ongoing.
The Second Supplement agreement between CWA and the City authorizes CWA to enter into a TWDB Master Agreement under which TWDB will provide CWA with SWIFT funds of up to $276,742,000, with initial authorization to draw $66,570,000. The most beneficial financing method for financing these costs is through the TWDB State Water Implementation Fund for Texas (SWIFT) Board Participation program. Approval of this Second Supplement will provide CWA assurance of pledged revenues from the CUS sufficient to execute the timely repurchase of TWDB's ownership interest in Luce Bayou Project in the coming years. Under the TWDB SWIFT Board Participation program, TWDB will own up to 80% of the Luce Bayou Project based on their percentage of payments toward the overall cost of the Project. With financial support from the CUS and the regional water authorities, CWA will buy back TWDB’s ownership interest over time as the region’s need for the capacity in the Luce Bayou Project increases.
Further Council action will be required for each additional draw.