SECTION 363.33. Interest Rates for Loans and Purchase of Board's Interest in State Participation and Board Participation Projects

(a) Procedure and method for setting interest rates.

(1) The executive administrator will set interest rates under this section for purchase of the board's interest in state and board participation projects or for loans on a date that is five business days prior to the political subdivision's adoption of the ordinance or resolution authorizing its bonds or drawdown of state participation funds and not more than 45 days before the anticipated closing of the loan or state participation project from the board. After 45 days from the establishment of the interest rate of a loan, rates will be reconsidered, and may be extended only with the approval of the executive administrator.

(2) For loans from the Texas Water Development Fund II or for rates for the purchase of the board's interest in state participation projects, the executive administrator will set the interest rate at:

(A) the rates established by the board under subsection (b) of this section;

(B) for loans funded by the board with proceeds of bonds, the interest of which is intended to be tax exempt for purposes of federal tax law, the executive administrator will limit the interest set pursuant to this subsection at no higher than the rate permitted under federal tax law to maintain the tax exemption for the interest on the board's bond; and

(C) the board may establish different interest rates for loans under this paragraph in order to facilitate a restructuring of an existing board loan that is in imminent risk of default as determined by the board.

(3) Interest rates for loans from the Water Loan Assistance Fund, or from funds from the board's sale of political subdivision bonds to the Texas Water Resources Finance Authority will be set according to the Municipal Market Data A scale. The board may establish different interest rates for loans under this paragraph if it finds such rates are legislatively directed or are necessary to promote major water initiatives designed to provide significant regional benefit.

(b) Lending and interest rate scale. After each bond sale, or as necessary to meet changing market conditions, the board will set the lending rate scale for loans and the interest rate scale for the purchase of the board's interest in state and board participation projects based upon cost of funds to the board, risk factors of managing the board's loan portfolio, and market rate scales. To calculate the cost of funds, the board will add new bond proceeds to those remaining bond funds that are not currently assigned to schedule loan closings, weighting the funds by dollars and true interest costs of each source. The rate scale shall include the program subsidy, if any. The board will establish separate lending rate scales for tax-exempt and taxable projects from each of the following:

(1) loans from the Texas Water Development Fund II;

(2) loans from the Water Infrastructure Fund;

(3) purchase of the board's interest in state participation projects from the State Participation Account;

(4) loans from the Economically Distressed Area Program Account;

(5) if revenue bonds constitute the consideration for the purchase of the board's interest in a state participation project by a political subdivision, the revenue bonds shall bear interest at:

(A) the prevailing state participation lending rate, as set in subsection (b)(3) of this section;

(B) if there is outstanding board indebtedness related to the purchase of its state participation interest, then at the rate then in effect at the time the board provided funds, through the issuance of bonds, to participate in the project; or

(C) a different rate as established by the board, where no schedule for the purchase of the board's interest in the project was fixed at the time the board provided funds to participate in the project; and

(6) loans from the SWIRFT.

Source Note: The provisions of this §363.33 adopted to be effective February 8, 1996, 21 TexReg 664; amended to be effective August 8, 1996, 21 TexReg 7264; amended to be effective October 13, 1997, 22 TexReg 9892; amended to be effective November 5, 1997, 22 TexReg 10743; amended to be effective February 5, 1998, 23 TexReg 783; amended to be effective July 7, 1999, 24 TexReg 5020; amended to be effective December 7, 1999, 24 TexReg 10882; amended to be effective August 7, 2001, 26 TexReg 5828; amended to be effective May 6, 2003,28 TexReg 3732; amended to be effective December 9, 2003, 28 TexReg 10951; amended to be effective June 6, 2005, 30 TexReg 3260; amended to be effective September 5, 2006, 31 TexReg 7132; amended to be effective December 25, 2007, 32 TexReg 9721; amended to be effective July 28, 2010, 35 TexReg 6539; amended to be effective July 30, 2012, 37 TexReg 5597; amended to be effective November 26, 2014, 39 TexReg 9209