SQ 764: Towards a clean water future

This post is by OK Policy intern Amanda Marcott Thottunkal. Amanda is pursuing a Masters in Public Administration at the University of Oklahoma. To find more about all of the state questions on the ballot in November, see our 2012 State Questions page.

According to a 2012 report by the Oklahoma Water Resource Board (OWRB), Oklahoma will be unable to meet its water demands by 2060. State Question 764 asks voters this November to give OWRB the financial reinforcement it needs to prevent the projected water shortfalls.

The question would add a new section to the Oklahoma State Constitution that allows OWRB to issue up to $300 million in bonds for a Water Infrastructure Credit Enhancement Reserve Fund (WICERF). The OWRB is already constitutionally authorized to purchase and issue bonds, and SQ764 does not change this. Rather, the $300 million dollar reserve fund provides an additional safety net for OWRB’s creditors.  The WICERF would only be drafted as a last resort – only if an Oklahoma municipality or city defaulted on a loan and only if all other OWRB reserve funds had been depleted (a scenario that has never occurred in the 27 years since the inception of OWRB’s financial assistance program).

Why is SQ 764 being brought to a vote this year? Justification for this additional funding power now is twofold.  First, Oklahoma cities and water districts have a backlog of critical projects in need of funding.  JD Strong, Director of the OWRB, said there is a 5 year priority list for water and wastewater projects. Data from Oklahoma’s 2012 Comprehensive Water Plan suggests this list will only grow longer.

The OWRB currently provides 70 percent of the water and sewer infrastructure financing in Oklahoma. This funding is provided through three loan programs. Since 1985, the OWRB has approved over $2 billion in loans to Oklahoma cities and towns. Over $1.59 billion of that support was through OWRB AAA and AA+ rated revenue bonds. The remaining funds were provided through a combination of state matching funds, federal dollars, and bonds.

OWRB’s loan programs are a necessity for small Oklahoma towns that do not have the capital to fund expensive, yet vital water infrastructure projects.  The OWRB’s bond rating allows them to borrow and finance loans with lower interest rates than many small Oklahoma towns can access. Since the financial assistance programs began, the OWRB reports having saved taxpayers $917 million dollars.

The possibility that Oklahoma might face water scarcities in 2060 provides the second rationale for WICERF. In an interview with OK Policy, Joe Freeman, the Financial Assistance Division Chief for OWRB, explained that, “Most water and wastewater infrastructure needs replacing every 40-60 years. A good portion of Oklahoma’s current infrastructure was built in the 1980s, so it needs replacing now, or the next 10 years. That’s just to replace and repair normal wear and tear – this doesn’t factor the additional financing that will be needed to support the additional infrastructure and conservation programs needed to get us to 2060.”

The Comprehensive Water Plan found that, given Oklahoma’s current water and sewer system conditions and a projected 33 percent demand increase by 2060, Oklahoma will require an additional $82 billion dollars to fund drinking water infrastructure and $79.3 billion for wastewater, adjusted for inflation. This finding echoes a report by the American Water Works Association on the costly water infrastructure needs facing America in the near future.

What would happen if Oklahomans voted no on SQ 764? Based on the OWRB’s forecast, 93.7 percent of drinking water infrastructure needs and 95.6 percent of the wastewater infrastructure needs will lack financing if OWRB is not able to increase its financial authority. OWRB warns that water and sewer rates could increase for consumers. The AWWA report cautions that a typical family’s water bill could triple due to infrastructure costs.

It is not likely, given the AAA financial history of the OWRB, that the $300 million dollars in reserve funds will ever be needed. WICERF is third in the line of loan security defenses. Voters marking yes to SQ764 are simply guaranteeing that the funds will be there, in the rare event they are required. That simple promise places Oklahoma on a stronger trajectory towards a future of adequate clean water for all Oklahomans.

Supporters of SQ764 include the State Chamber of Oklahoma, American Council of Engineering Companies of Oklahoma, Oklahoma Farm Bureau, Oklahoma Water Environmental Association, the Oklahoma Sierra Club, the Oklahoma Municipal League, Inc., and the Oklahoma Rural Water Association.