P.O. Box 13231, 1700 N. Congress Ave. Austin, TX 78711-3231, www.twdb.texas.gov Phone (512) 463-7847, Fax (512) 475-2053

Our Mission

To provide leadership, information, education, and support for planning, financial assistance, and outreach for the conservation and responsible

development of water for Texas

. . . . . . . . . . . . .

Board Members

Bech Bruun, Chairman │ Kathleen Jackson, Board Member │ Peter Lake, Board Member

Jeff Walker, Executive Administrator

TO: Board Members THROUGH: Jeff Walker, Executive Administrator Todd Chenoweth, General Counsel Jessica Zuba, Deputy Executive Administrator Joe Reynolds, Assistant General Counsel FROM: T. Clay Schultz, Director, Regional Water Project Development

Mireya Loewe, Manager, Regional Water Project Development DATE: July 3, 2017 SUBJECT: Amendment to the Coastal Water Authority’s multi-year commitment for

financial assistance from the State Water Implementation Revenue Fund for Texas (SWIRFT).

ACTION REQUESTED Amend by resolution, the previously adopted Texas Water Development Board (TWDB) Resolutions No. 15-075A (as amended by Resolution No. 16-087) and No. 15-075B to modify the Coastal Water Authority’s 2017 closing schedule to transfer $918,000 from Board Participation to the low-interest obligations. BACKGROUND The Coastal Water Authority (Authority) is a conservation and reclamation district that primarily transports and delivers raw water to the City of Houston (City), which in turn provides service to other entities: North Fort Bend Water Authority, Central Harris County Regional Water Authority, North Harris County Regional Water Authority, and West Harris County Regional Water Authority. The Authority delivers approximately 75% of the water used by the City. In 2008 and 2009, the TWDB provided a total of $33.1 million in financing from the Water Infrastructure Fund for the planning and design of the Luce Bayou Inter-basin Transfer Project (Project). In February 2013, the TWDB acquired an ownership interest in the Project by providing $28.7 million in State Participation funding. On July 23, 2015, the TWDB, through Resolutions No. 15-075A (as amended by Resolution No. 16-087) and No. 15-075B (Attachments 3, 4, and 5), approved a multi-year

Board Members July 3, 2017 Page 2

commitment to the Authority from the SWIRFT to finance the construction of the Project. The original multi-year schedule was as follows:

2015: $ 66,565,000 Board Participation 2016: $136,460,000 Board Participation 2017: $ 73,715,000 Board Participation 2017: $ 23,260,000 Low-Interest Obligations

$300,000,000 Total SWIRFT Funding Request In addition to the TWDB funding, the Authority pledged $20 million from its own resources to purchase land. The actual expenditures were lower by approximately $918,000, which reduced the amount of the Authority’s direct funding to less than 20 percent of the total Project cost. Therefore, the Authority needs to adjust the funding amounts by increasing the low-interest financing. This change will ensure the Authority meets the minimum requirement of funding at least 20 percent of the total Project costs with proceeds other than those from Board Participation and State Participation. KEY ISSUES The previously-approved multi-year closing schedule anticipated funding amounts for 2017 and 2018 that were based on the Authority’s reasonable estimate of costs at the early stages of the Project. As the Project progresses, more accurate costs become available. Each SWIRFT funding cycle, borrowers that received multi-year commitments are required to submit an annual closing schedule, which provides the TWDB with the most timely and accurate information and enables the TWDB to better evaluate program capacity based on final commitments and new applications. In its response to the “Annual Loan Closing Schedule” (Attachment 6) for the 2017 funding cycle, the Authority requested a change to its annual closing schedule that was originally approved by the Board. The Authority is requesting that the Board Participation be reduced by $918,000 and the low-interest obligation increased by the same amount in order for the Board’s ownership interest in the Project to not exceed 80 percent of the total Project cost. At the request of the Authority, the $918,000 not utilized for land purchase will be re-allocated to contingencies in the Project budget. Thus, the change requested by the Authority does not increase TWDB’s total SWIRFT commitment of $300,000,000. The new total funding for the Project per the requested change are show in the following table:

Board Members July 3, 2017 Page 3

Proposed Project Funding Closing

Year WIF

Obligations SWIFT Low-

interest Obligations

State/Board Participation

Cash Contribution

Total

2009 $28,000,000 $ 28,000,000 2010 $ 5,115,000 $ 5,115,000 2013 $ 28,754,000 $ 28,754,000 2015 $ 66,565,000 $ 66,565,000 2016 $136,460,000 $19,082,000 $ 155,542,000 2017 $24,180,000 $ 72,795,000 $ 96,975,000 Total $33,115,000 $24,180,000 $304,574,000 $19,082,000 $380,951,000 Percentage 8.7% 6.3% 80% 5% 100% The existing Master Agreement, which was originally executed in 2015 and amended in 2016 to include that year’s Board Participation funding, will be amended prior to closing to add the 2017 Board Participation funding. RECOMMENDATION In order for State Participation and Board Participation financing to account for no more than 80 percent of the total anticipated Project costs, and based on an analysis of the Authority’s request by TWDB and the TWDB’s financial advisor, the Executive Administrator recommends that TWDB Resolutions No. 15-075A (as amended by Resolution No. 16-087) and No. 15-075B be amended to reflect an increase of $918,000 for the low-interest obligations and a corresponding decrease for the Board Participation funding. Attachments:

1. Proposed TWDB Resolution amending Board Participation (17- ) 2. Proposed TWDB Resolution amending low-interest obligations (17- ) 3. TWDB Resolution 15-075A 4. TWDB Resolution 15-075B 5. TWDB Resolution 16-087 6. Authority’s response to “Annual Loan Closing Schedule”

A RESOLUTION OF THE TEXAS WATER DEVELOPMENT BOARD APPROVING AN AMENDMENT TO THE MASTER AGREEMENT WITH COASTAL

WATER AUTHORITY FOR THE LUCE BAYOU INTERBASIN TRANSFER PROJECT WITH FUNDS FROM THE STATE WATER IMPLEMENTATION REVENUE FUND FOR TEXAS

(17- )

WHEREAS, at its July 23, 2015 meeting, the Texas Water Development Board

(TWDB), by TWDB Resolution No. 15-075A, made a commitment to the Coastal Water Authority (Authority) to acquire and sell an ownership interest in the Luce Bayou Interbasin Transfer Project, not to exceed 80% of the total Project cost in an amount not to exceed $276,740,000 from the Board Participation Account of the State Water Implementation Revenue Fund for Texas (SWIRFT), all as is more specifically set forth in the TWDB’s Resolution and accompanying documentation, to which documents express reference is made; and WHEREAS, at its July 23, 2015 meeting, the TWDB, by TWDB Resolution No. 15-075B, made a commitment to purchase $23,260,000 Coastal Water Authority Contract Revenue Bonds, Proposed Series 2017; and WHEREAS, the TWDB and the Authority executed a Master Agreement on November 20, 2015 that set forth the duties, responsibilities, and liabilities of the TWDB and the Authority with regard to the Board Participation commitment; and WHEREAS, by letter dated July 14, 2016, the Authority requested that the TWDB approve an amendment to the Master Agreement incorporating the 2016 distribution of funds in the amount of $136,460,000 into the Master Agreement; and

WHEREAS, at its August 11, 2016 meeting, the TWDB, by TWDB Resolution No. 16-087 approved the request from the Authority to amend the Master Agreement to include closing on the $136,460,000 2016 Board Participation; and

WHEREAS, by letter dated January 20, 2017, the Authority requested that the

TWDB amend TWDB Resolution No. 15-075B to modify the Authority’s loan amount from $23,260,000 to $24,180,000 and to amend the Master Agreement to include closing on $72,795,000 2017 Board Participation distribution of funds; and

WHEREAS, by separate Resolution, the TWDB is considering the request from

the Authority to modify the Authority’s loan request from $23,260,000 to $24,180,000; and

WHEREAS, the TWDB hereby finds that the amendment(s) to the terms of the

Master Agreement is reasonable and that the request is in the public interest and will serve a public purpose; and

Attachment 1

2

WHEREAS, in accordance with the Texas Water Code, the TWDB has carefully considered all matters required by law.

NOW, THEREFORE, based on these considerations and findings, the TWDB resolves as follows:

1. The Executive Administrator is authorized to execute future amendments to

the Master Agreement as contemplated by the terms of that agreement and authorized under Resolution No. 15-075A, as amended by Resolution No. 16-087.

2. Further, the Board approves the request from Coastal Water Authority to

amend the Master Agreement to include closing on the $72,795,000 2017 Board Participation distribution of funds from the State Water Implementation Revenue Fund for Texas, as authorized in TWDB Resolutions No. 15-075A and 16-087.

3. All other terms and conditions of TWDB Resolutions No. 15-075A and 16-087

shall remain in full force and effect. APPROVED and ordered of record this the 20th day of July, 2017.

TEXAS WATER DEVELOPMENT BOARD

_____________________________________________ Bech K. Bruun, Chairman

DATE SIGNED: ____________________________ ATTEST: ________________________________________ Jeff Walker Executive Administrator

A RESOLUTION OF THE TEXAS WATER DEVELOPMENT BOARD AMENDING TEXAS WATER DEVELOPMENT BOARD RESOLUTION NO. 15-075B TO

PROVIDE FINANCIAL ASSISTANCE TO THE COASTAL WATER AUTHORITY IN THE AMOUNT OF $24,180,000

(17- )

WHEREAS, at its July 23, 2015 meeting, the Texas Water Development Board

(TWDB), by TWDB Resolution No. 15-075B, made a commitment to the Coastal Water Authority (Authority) for financial assistance in the amount of $23,260,000 from the State Water Implementation Revenue Fund for Texas (SWIRFT), through the purchase of $23,260,000 Coastal Water Authority Contract Revenue Bonds, Proposed Series 2017, all as is more specifically set forth in the TWDB’s Resolution No. 15-075B and accompanying documentation, to which documents express reference is made; and

WHEREAS, by letter dated January 20, 2017, the Authority requested that the TWDB amend the Resolution to modify the Authority’s loan amount from $23,260,000 to $24,180,000 and the 2017 Board Participation distribution from $73,715,000 to $72,795,000; and

WHEREAS, by separate Resolution, the TWDB is considering the request from the Authority for the TWDB to amend the Master Agreement executed on November 20, 2015 and amended on October 24, 2016 to include closing on the $72,795,000 2017 Board Participation distribution of funds; and

WHEREAS, the TWDB hereby finds that the proposed amendment to TWDB

Resolution No. 15-075B as requested by the Authority, is reasonable and within the public interest and will serve a public purpose; and

WHEREAS, in accordance with the Texas Water Code, the TWDB has carefully

considered all matters required by law.

NOW THEREFORE, based on these considerations and findings, the TWDB resolves as follows:

1. The commitment made through TWDB Resolution No. 15-075B to the Coastal Water

Authority for financial assistance from the State Water Implementation Revenue Fund for Texas is amended, and shall be evidenced by the TWDB’s proposed purchase of the $24,180,000 Coastal Water Authority Contract Revenue Bonds, Proposed Series 2017.

2. All other terms and conditions of TWDB Resolution No. 15-075B shall remain in full force and effect.

3. This commitment will expire December 31, 2017.

Attachment 2

2

APPROVED and ordered of record this, the 20th day of July, 2017. TEXAS WATER DEVELOPMENT BOARD

_____________________________________________ Bech K. Bruun, Chairman DATE SIGNED: ____________________________

ATTEST: _________________________________________ Jeff Walker Executive Administrator

A RESOLUTION OF THE TEXAS WATER DEVELOPMENT BOARD

APPROVING AN APPLICATION FROM COASTAL WATER AUTHORITY

FOR THE TEXAS WATER DEVELOPMENT BOARD'S

ACQUISITION AND SALE OF AN INTEREST INLUCE BAYOU INTERBASIN TRANSFER PROJECT WITH FUNDS

FROM THE STATE WATER IMPLEMENTATION REVENUE FUND FOR TEXAS

(15-075A)

WHEREAS, the Texas Water Development Board (TWDB), under the authority ofChapter 15, Subchapter H of the Texas Water Code, is authorized to use the Board ParticipationAccount of the State Water Implementation Revenue Fund for Texas (SWIRFT) to encourageoptimum regional development of projects through the acquisition of an interest in new watersupply project facilities and the sale, transfer, or lease of its interest in those facilities; and

WHEREAS, the Coastal Water Authority (Authority), has filed an application with theTWDB requesting that TWDB acquire an interest in the Luce Bayou Interbasin Transfer Project,Project No. 51008 (Project), not to exceed eighty percent (80%) of the total Project cost, in orderto enable excess capacity for the optimum regional development of the Project, using BoardParticipation Account from the SWIRFT; and

WHEREAS, the Authority will finance at least twenty percent (20%) of the total Projectcosts with proceeds other than proceeds from the Board Participation Account from theSWIRFT, in compliance with 31 TAG § 363.1308; and

WHEREAS, by separate Resolution the TWDB is considering a request from CoastalWater Authority for the TWDB to provide financial assistance through the TWDB's proposedpurchase of $23,260,000 Coastal Water Authority Contract Revenue Bonds, Proposed Series2018, Project No. 51008; and

WHEREAS, the portion of the Project currently being funded by the TWDB is expectedto cost $300,000,000, of which the TWDB's share, pursuant to this commitment, will not exceed$276,740,000; and

WHEREAS, the Authority will purchase the TWDB's interest in the Project with theproceeds of a future revenue bond issue, from other revenue, or from other lawful sources offunds in accordance with a Master Agreement to be executed between the Authority and theTWDB; and

WHEREAS, the Authority has offered a pledge of contract revenues as sufficient securityfor its obligation to purchase the TWDB's interest in the Project; and

WHEREAS, the TWDB has considered the long-term needs of the area, the costs of theProject, and the feasibility of the Project; and

WHEREAS, the Project will aid in addressing the long-term needs of the City of Houstonand Harris County; and

Attachment 3

WHEREAS, the TWDB has carefully considered all matters required by law and inparticular whether the project as set forth in the application meets the criteria provided by TexasWater Code § 15.434(b); and

WHEREAS, pursuant to 31 TAG 363.1308, the terms of the TWDB's ownership interestin the Project have been incorporated into a proposed Master Agreement that sets forth theresponsibilities, duties and liabilities of each party and that is attached hereto as Attachment A;and

WHEREAS, the TWDB staff seeks the Board's approval of the terms of the proposedMaster Agreement and consent to the execution of a Master Agreement with substantially similarterms; and

WHEREAS, the TWDB hereby finds that:

1. that the application and assistance applied for meet the requirements of Texas WaterCode, Chapter 15, Subchapters G and H and 31 TAG Chapter 363, Subchapters A and M;

2. it is reasonable to expect that the TWDB will recover its investment in the Projectbecause the revenue to be generated by the projected number of customers served by theProject will be sufficient to purchase the excess capacity owned by the TWDB inaccordance with 31 TAG § 363.1308(c)(1);

3. the cost of the Project exceeds the current financing capabilities of the area to be servedby the Project, in accordance with 31 TAG § 363.1308(c)(2);

4. the optimum regional development cannot be reasonably financed by local interest basedon an assessment of the estimated cost to construct the Project and the revenue to begenerated by the projected number of customers of the facility, in accordance with 31TAG § 363.1308(c)(3);

5. the public interest will be served by the TWDB's acquisition of an interest in the Projectbecause the cost of the Project to the public will be reduced by the Board's participationin the Project, in accordance with 31 TAG § 363.1308(c)(4);

6. the Project contemplates the optimum regional development that is reasonably requiredunder all existing circumstances of the site because the design capacity of thecomponents of the Project are sufficient to meet the foreseeable needs of the area, inaccordance with 31 TAG § 363.1308(c)(5);

7. the project is a recommended water management strategy in the State Water Plan adoptedpursuant to Texas Water Gode § 16.051, in accordance with Texas Water Gode§ 15.474(a);

8. the Authority satisfactorily completed any request by the Executive Administrator or aregional planning group for information relevant to the project, including a waterinfrastructure financing survey under Texas Water Code § 16.053(q), Water Code, inaccordance with Texas Water Code § 15.435(g)(2) and 31 TAC § 363.1309(b)(2);

9. that the Authority has acknowledged its legal obligation to comply with any applicablerequirements of federal law relating to contracting with disadvantaged businessenterprises, and any applicable state law relating to contracting with historicallyunderutilized businesses, in accordance with Texas Water Code § 15.435(h) and 31 TAC§ 363.1309(b)(3); and

10. that the Executive Administrator issued an Environmental Determination on February 24,2014, such findings being subject to the standard emergency discovery conditions forthreatened and endangered species and cultural resources in the Project contractdocuments. The TWDB concurs with the environmental finding issued by the ExecutiveAdministrator.

NOW THEREFORE, based on these findings, the TWDB resolves as follows:

1. a commitment is made by the TWDB to acquire and sell an ownership interest in theLuce Bayou Interbasin Transfer Project, not to exceed eighty percent (80%) of the totalProject cost, based on an application filed by Coastal Water Authority, in an amount notto exceed $276,740,000 from the Board Participation Account of the State WaterImplementation Revenue Fund for Texas, in accordance with the schedule proposedbelow.

a) $66,565,000 2015 Board Participation to expire on December 31, 2015;b) $136,460,000 2016 Board Participation to expire on December 31,2016; andc) $73,715,000 2017 Board Participation to expire on December 31, 2017.

2. the Board approves the terms of the Master Agreement attached to this Resolution asAttachment A; and

3. the Executive Administrator is authorized to negotiate and execute the terms of a MasterAgreement, in substantially the form attached hereto as Attachment A, that will set forththe duties, responsibilities and liabilities of the TWDB and the Authority.

Such commitment is conditioned as follows:

Standard Conditions;

1. this commitment is contingent on a future sale of bonds by the TWDB or on theavailability of funds on hand;

2. this commitment is contingent upon the Authority's continued compliance with allapplicable laws, rules, policies and guidance as these may be amended from time to timeto adapt to a change in law, in circumstance, or any other legal requirement;

3. this commitment is contingent upon the Authority executing a separate financingagreement, approved as to form and substance by the Executive Administrator, andsubmitting that executed agreement to the TWDB consistent with the terms andconditions described in the financing agreement;

The Following Conditions Must Be Included in the Master Agreement:

4. the Master Agreement must contain a provision that the pledged revenues from theAuthority may not be pledged to the payment of any additional obligations of theAuthority unless the Authority demonstrates to the Executive Administrator's satisfactionthat the pledged revenues will be sufficient for the payment of the Authority's obligationto purchase the TWDB's interest in the Project and the additional obligations;

5. the Master Agreement must contain a provision that the TWDB may exercise allremedies available to it in law or equity, and any provision of the Master Agreement thatrestricts or limits the TWDB's full exercise of these remedies shall be of no force and

effect;

6. loan proceeds are public funds and, as such, the Master Agreement must include aprovision requiring that these proceeds shall be held at a designated state depositoryinstitution or other properly chartered and authorized institution in accordance with thePublic Funds Investment Act, Government Code, Chapter 2256, and the Public FundsCollateral Act, Government Code, Chapter 2257;

7. loan proceeds shall not be used by the Authority when sampling, testing, removing, ordisposing of contaminated soils and/or media at the project site. The Master Agreementshall include an environmental indemnification provision wherein the Authority agrees toindemnify, hold harmless and protect the TWDB from any and all claims, causes ofaction or damages to the person or property of third parties arising from the sampling,analysis, transport, storage, treatment, recycling and disposition of any contaminatedsewer sludge, contaminated sediments and/or contaminated media that may be generatedby the Authority, its contractors, consultants, agents, officials and employees as a resultof activities relating to the project to the extent permitted by law;

8. the Master Agreement must include a provision stating that the Authority shall report tothe TWDB the amounts of project funds, if any, which were used to compensatehistorically underutilized businesses that worked on the project, in accordance with 31TAG § 363.1312;

Contract Revenue Pledge

9. prior to the execution of a financing agreement, the Authority must submit executedcontracts between the Authority and the contracting parties regarding the contractrevenues pledged to the payment of the Authority's obligation to purchase the TWDB'sinterest in the Project, in form and substance acceptable to the Executive Administrator.Such contracts shall include provisions consistent with the provisions of this Resolution

regarding the contracting parties' annual audits, the setting of rates and charges andcollection of revenues sufficient to meet the Authority's revenue obligations;

10. the Master Agreement must contain a provision requiring that, upon request by theExecutive Administrator, the Authority shall submit annual audits of contracting partiesfor the Executive Administrator's review;

11. the Master Agreement must contain a provision requiring the Authority to require itscustomers to maintain rates and charges sufficient to pay all of the Authority's revenueobligations arising from the operation of the Project; . " -

A

Conditions to Close or for Release of Funds:

12. prior to closing, the Authority will provide an attorney's opinion that is-satisfactory ^dacceptable to the Executive Administrator as to any impact of the Project on thetax-exempt status of any bonds issued by the TWDB to fund its acquisition-of an interestin the Project; -

13. the Authority agrees to take such actions as are necessary to assure, or to refrain fromsuch actions as would materially adversely affect, the excludability from gross incomefor Federal income tax purposes of interest payable on such obligations as are issued bythe TWDB to finance its acquisition of an interest in the Project;

14. prior to the sale of bonds to finance the Project, the Authority and the TWDB willexecute a Master Agreement which will set forth the responsibilities, duties and liabilitiesof each party;

15. prior to closing, and if not previously provided with the application, the Authority shallsubmit executed contracts for engineering, and, if applicable, financial advisor and legalcounsel contracts, for the project that are satisfactory to the Executive Administrator.Fees to be reimbursed under the contracts must be reasonable in relation to the services

performed, reflected in the contract, and acceptable to the Executive Administrator;

16. prior to closing, when any portion of financial assistance is to be held in escrow or intrust, the Authority shall execute an escrow agreement or trust agreement, approved as toform and substance by the Executive Administrator, and shall submit that executedagreement to the TWDB; and

17. prior to the sale of bonds to finance the Project, the Authority shall execute a separatefinancing agreement, approved as to form and substance by the Executive Administratorand shall submit that executed agreement to the TWDB at a date determined by theExecutive Administrator.

PROVIDED, HOWEVER, the commitment is subject to the following special conditions:

1. the Authority must comply with the standard emergency discovery conditions forthreatened and endangered species and cultural resources, as more fully specified in the

final environmental finding of the Executive Administrator; and

2. the Authority must comply with terms and conditions of U.S. Army Corps of EngineersPermit No. SWG-2009-00188, including the special conditions set out therein.

APPROVED and ordered of record this the 23 day ofJuly, 2015.

TEXAS WATER DEVELOPMENT BOARD

ATTEST:

Kevin Patteson

Executive Administrator

r

Bech K. Bruun, Chairman

DATE SIGNED: ^

A RESOLUTION OF THE TEXAS WATER DEVELOPMENT BOARD

APPROVING AN APPLICATION FOR FINANCIAL ASSISTANCE IN THE AMOUNT OF

$300,000,000 TO COASTAL WATER AUTHORITYFROM THE STATE WATER IMPLEMENTATION REVENUE FUND FOR TEXAS

THROUGH THE PROPOSED PURCHASE OF

$23,260,000 COASTAL WATER AUTHORITY CONTRACT REVENUE BONDS,PROPOSED SERIES 2017

(15-075B)

WHEREAS, the Coastal Water Authority, located in Harris County, Texas, (Authority)has filed an application for financial assistance in the amount of $300,000,000 from the StateWater Implementation Revenue Fund for Texas (SWIRFT), to finance the construction of certainwater supply project(s) identified as Project No. 51008; and

WHEREAS, the Authority seeks financial assistance from the Texas Water DevelopmentBoard (TWDB) through the TWDB's proposed purchase of $23,260,000 Coastal WaterAuthority Contract Revenue Bonds, Proposed Series 2017 together with all authorizingdocuments (Obligations), all as is more specifically set forth in the application and inrecommendations of the Executive Administrator's staff; and

WHEREAS, by separate Resolution the TWDB is considering a request from CoastalWater Authority for the TWDB to acquire an interest in the Luce Bayou Interbasin Transferunder Project No. 51008 in an amount not to exceed $23,260,000; and

WHEREAS, the Authority has offered a pledge of contract revenues as sufficient securityfor the repayment of the Obligations; and

WHEREAS, interest rate subsidies are available to the Authority at the following levels:35.5% for loans of a term of 20 years, 27% for loans of a term of 25 years, and 22% for loans ofa term of 30 years. The interest rate subsidy applicable to each proposed series will be setthrough each financing agreement executed between the TWDB and the Authority, pursuant tothis Resolution; and

WHEREAS, the TWDB hereby finds:

1. that the application and assistance applied for meet the requirements of Texas WaterCode, Chapter 15, Subchapters G and H and 31 TAC Chapter 363, Subchapters A and M;

2. that the project is a recommended water management strategy in the State Water Planadopted pursuant to Texas Water Code § 16.051, in accordance with Texas Water Code§ 15.474(a);

3. that the Authority satisfactorily completed any request by the Executive Administrator ora regional planning group for information relevant to the project, including a waterinfrastructure financing survey under Texas Water Code § 16.053(q), in accordance with31 TAC § 363.1309(b)(2);

Attachment 4

4. that the Authority has acknowledged its legal obligation to comply with any applicablerequirements of federal law relating to contracting with disadvantaged businessenterprises, and any applicable state law relating to contracting with historicallyunderutilized businesses, in accordance with Texas Water Code § 15.435(h) and 31 TAC§ 363.1309(b)(3); and

5. that the Executive Administrator issued an Environmental Determination on February 24,2014, such findings being subject to the standard emergency discovery conditions forthreatened and endangered species and cultural resources in the project contractdocuments. The TWDB concurs with the environmental finding issued by the ExecutiveAdministrator.

NOW THEREFORE, based on these findings, the TWDB resolves as follows:

A commitment is made by the TWDB to Coastal Water Authority for financial assistancein the amount of $300,000,000 from the State Water Implementation Revenue Fund forTexas, to be evidenced by the TWDB's proposed purchase of $23,260,000 Coastal WaterAuthority Contract Revenue Bonds, Proposed Series 2017. This commitment will expireon December 31, 2017.

Such commitment is conditioned as follows:

Standard Conditions:

1. this commitment is contingent on a future sale of bonds by the TWDB or on theavailability of funds on hand;

2. this commitment is contingent upon the issuance of a written approving opinion of theAttorney General of the State of Texas stating that all of the requirements of the lawsunder which said Obligations were issued have been complied with; that said Obligationswere issued in conformity with the Constitution and laws of the State of Texas; and thatsaid Obligations are valid and binding obligations of the Authority;

3. this commitment is contingent upon the Authority's continued compliance with allapplicable laws, rules, policies and guidance as these may be amended from time to timeto adapt to a change in law, in circumstances, or any other legal requirement;

4. this commitment is contingent upon the Authority executing a separate financingagreement, approved as to form and substance by the Executive Administrator, andsubmitting that executed agreement to the TWDB consistent with the terms andconditions described in the financing agreement;

5. the Authority shall use a paying agent/registrar in accordance with 31 TAC Section363.42(c)(2), and shall require the paying agent/registrar to provide a copy, to the TWDBand to the TWDB's designated Trustee, of all receipts documenting debt servicepayments;

The Following Conditions Must Be Included in the Obligations:

6. the Obligations must provide that the Obligations can be called for early redemption onlyin inverse order of maturity, and on any date beginning on or after the first interestpayment date which is 10 years from the dated date of the Obligations, at a redemptionprice of par, together with accrued interest to the date fixed for redemption;

7. the Obligations must include a provision wherein the Authority, or an obligated personfor whom financial or operating data is presented to the TWDB in the application forfinancial assistance either individually or in combination with other issuers of theAuthority's Obligations or obligated persons, will, at a minimum, regardless of theamount of the Obligations, covenant to comply with requirements for continuingdisclosure on an ongoing basis substantially in the manner required by Securities andExchange Commission (SEC) in 17 CFR § 240.15c2-12 (Rule 15c2-12) and determinedas if the TWDB were a Participating Underwriter within the meaning of such rule, suchcontinuing disclosure undertaking being for the benefit of the TWDB and the beneficialowners of the Authority's Obligations, if the TWDB sells or otherwise transfers suchObligations, and the beneficial owners of the TWDB's bonds if the Authority is anobligated person with respect to such bonds under SEC Rule 15c2-12;

8. the Obligations must include a provision requiring the Authority to use any loan proceedsfrom the Obligations that are determined to be surplus proceeds remaining aftercompletion of the project for the following purposes as approved by the ExecutiveAdministrator: (1) deposit into the Interest and Sinking Fund or other debt serviceaccount for the payment of interest or principal on the Obligations owned by the TWDB;or (2) eligible costs for the project as authorized by the Executive Administrator;

9. the Obligations must contain a provision that the TWDB may exercise all remediesavailable to it in law or equity, and any provision of the Obligations that restricts or limitsthe TWDB's full exercise of these remedies shall be of no force and effect;

10. loan proceeds are public ftmds and, as such, the Obligations must include a provisionrequiring that these proceeds shall be held at a designated state depository institution orother properly chartered and authorized institution in accordance with the Public FundsInvestment Act, Government Code, Chapter 2256, and the Public Funds Collateral Act,Government Code, Chapter 2257;

11. loan proceeds shall not be used by the Authority when sampling, testing, removing ordisposing of contaminated soils and/or media at the project site. The Obligations shallinclude an environmental indemnification provision wherein the Authority agrees toindemnify, hold harmless and protect the TWDB from any and all claims, causes ofaction or damages to the person or property of third parties arising from the sampling,analysis, transport, storage, treatment, recycling and disposition of any contaminatedsewage sludge, contaminated sediments and/or contaminated media that may begenerated by the Authority, its contractors, consultants, agents, officials and employeesas a result of activities relating to the project to the extent permitted by law;

12. the Obligations must include a provision stating that the Authority shall report to theTWDB the amounts of project funds, if any, that were used to compensate historicallyunderutilized businesses that worked on the project, in accordance with 31 TAG§ 363.1312;

13. the Obligations must contain a provision that the TWDB will purchase the Obligations,acting through the TWDB's designated Trustee, and the Obligations shall be registered inthe name of Cede & Co. and closed in book-entry form in accordance with 31 TAGSection 363.42(c)(1);

14. the Obligations must include a provision prohibiting the Authority from using theproceeds of this loan in a manner that would cause the Obligations to become "privateactivity bonds" within the meaning of § 141 of the Internal Revenue Code of amended(Code) and the Treasury Regulations promulgated thereunder (Regulations);

15. the Obligations must provide that no portion of the proceeds of the loan will be used,directly or indirectly, in a manner that would cause the Obligations to be "arbitragebonds" within the meaning of § 148(a) of the Code and Regulations, including to acquireor to replace funds which were used, directly or indirectly, to acquire NonpurposeInvestments (as defined in the Code and Regulations) which produce a yield materiallyhigher than the yield on the TWDB's bonds that are issued to provide financing for theloan (Source Series Bonds), other than Nonpurpose Investments acquired with:

a. proceeds of the TWDB's Source Series Bonds invested for a reasonabletemporary period of up to three (3) years after the issue date of the Source SeriesBonds until such proceeds are needed for the facilities to be financed;

b. amounts invested in a bona fide debt service fimd, within the meaning of§ 1.148—1(b)of the Regulations; and

c. amounts deposited in any reasonably required reserve or replacement fund to theextent such amounts do not exceed the least of maximum annual debt service on

the Obligations, 125% of average annual debt service on the Obligations, or 10percent of the stated principal amount (or, in the case of a discount, the issueprice) of the Obligations;

16. the Obligations must include a provision requiring the Authority take all necessary stepsto comply with the requirement that certain amounts earned on the investment of grossproceeds of the Obligations be rebated to the federal government in order to satisfy therequirements of § 148 of the Code. The Obligations must provide that the Authority will:

a. account for all Gross Proceeds, as defined in the Code and Regulations,(including all receipts, expenditures and investments thereof) on its books ofaccount separately and apart from all other funds (and receipts, expenditures andinvestments thereof) and retain all records of such accounting for at least six yearsafter the final Computation Date. The Authority may, however, to the extent

permitted by law, commingle Gross Proceeds of its loan with other money of theAuthority, provided that the Authority separately accounts for each receipt andexpenditure of such Gross Proceeds and the obligations acquired therewith;

b. calculate the Rebate Amoimt, as defined in the Code and Regulations, withrespect to its loan, not less frequently than each Computation Date, in accordancewith rules set forth in § 148(f) of the Code, § 1.148-3 of the Regulations, and therulings thereunder. The Authority shall maintain a copy of such calculations for atleast six years after the final Computation Date;

c. as additional consideration for the making of the loan, and in order to induce themaking of the loan by measures designed to ensure the excludability of theinterest on the TWDB's Source Series Bonds from the gross income of theowners thereof for federal income tax purposes, pay to the United States theamount described in paragraph (b) above within 30 days after each ComputationDate;

d. exercise reasonable diligence to assure that no errors are made in the calculationsrequired by paragraph (b) and, if such error is made, to discover and promptly tocorrect such error within a reasonable amount of time thereafter, includingpayment to the United States of any interest and any penalty required by theRegulations;

17. the Obligations must include a provision prohibiting the Authority from taking any actionthat would cause the interest on the Obligations to be includable in gross income forfederal income tax purposes;

18. the Obligations must provide that the Authority will not cause or permit the Obligationsto be treated as "federally guaranteed" obligations within the meaning of § 149(b) of theCode;

19. the Obligations must provide that neither the Authority nor a related party thereto willacquire any of the TWDB's Source Series Bonds in an amount related to the amount ofthe Obligations to be acquired from the Authority by the TWDB;

Contract Revenue Pledge

20. the Obligations must contain a provision requiring that, upon request by the ExecutiveAdministrator, the Authority shall submit annual audits of contracting parties for theExecutive Administrator's review;

21. The Obligations must contain a provision requiring the Authority to maintain and enforcethe terms and conditions set forth in the Project Contract executed by and between theAuthority and the City of Houston so that revenues paid to the Authority by the City aresufficient to meet the revenue requirements of the Authority's obligation to purchase theTWDB's interest in the Project that are being supported by the pledged ContractRevenues;

22. the Obligations must contain a provision that the pledged contract revenues from theAuthority may not be pledged to the payment of any additional parity obligations of theAuthority secured by a pledge of the same contract revenues unless the Authoritydemonstrates to the Executive Administrator's satisfaction that the pledged contractrevenues will be sufficient for the repayment of all Obligations and additional parityobligations;

Conditions to Close or for Release of Funds:

23. prior to closing, and if not previously provided with the application, the Authority shallsubmit executed contracts for engineering, and, if applicable, financial advisor and bondcounsel contracts, for the project that are satisfactory to the Executive Administrator.Fees to be reimbursed under the contracts must be reasonable in relation to the services

performed, reflected in the contract, and acceptable to the Executive Administrator;

24. prior to closing, when any portion of financial assistance is to be held in escrow or intrust, the Authority shall execute an escrow agreement or trust agreement, approved as toform and substance by the Executive Administrator, and shall submit that executedagreement to the TWDB;

25. prior to release of funds for construction, the Authority must provide the TWDB withevidence that the necessary acquisitions of land, leases, easements, and rights-of-wayhave been completed, or that the Authority has the legal authority necessary to completethe acquisitions;

26. prior to closing, the Authority's bond counsel must prepare a written opinion that statesthat the interest on the Obligations is excludable from gross income or is exempt fromfederal income taxation. Bond counsel may rely on covenants and representations of theAuthority when rendering this opinion;

27. prior to closing, the Authority's bond counsel must prepare a written opinion that alsostates that the Obligations are not "private activity bonds." Bond counsel may rely oncovenants and representations of the Authority when rendering this opinion;

28. the transcript must include a No Arbitrage Certificate or similar Federal Tax Certificatesetting forth the Authority's reasonable expectations regarding the use, expenditure andinvestment of the proceeds of the Obligations;

29. the transcript must include evidence that the information reporting requirements of§ 149(e) of the Code will be satisfied. This requirement may be satisfied by filing an IRSForm 8038 with the Internal Revenue Service. In addition, the applicable completed IRSForm 8038 or other evidence that the information reporting requirements of § 149(e)have been satisfied must be provided to the Executive Administrator within fourteen (14)days of closing. The Executive Administrator may withhold the release of funds forfailure to comply; and

30. prior to closing, the Authority must submit executed contracts between the Authority andthe contracting parties regarding the contract revenues pledged to the payment of theAuthority's Obligations, in form and substance acceptable to the ExecutiveAdministrator. Such contracts shall include provisions consistent with the provisions ofthis Resolution regarding the contracting parties' annual audits, the setting of rates andcharges and collection of revenues sufficient to meet the Authority's debt serviceobligations and additional parity obligations.

PROVIDED, however, the commitment is subject to the following special conditions:

1. the Authority must comply with the standard emergency discovery conditions forthreatened and endangered species and cultural resources, as more fully specified in thefinal environmental finding of the Executive Administrator; and

2. the Authority must comply with terms and conditions of U.S. Army Corps of EngineersPermit No. SWG-2009-00188, including the special conditions set out therein.

APPROVED and ordered ofrecord this, the 23*^^ day ofJuly, 2015.

TEXAS WATER DEVELOPMENT BOARD

ATTEST:

Kevin Patteson

Executive Administrator

V-.Bech K. Bruun, Chairman

DATESIGNED: -7 - X1 >r"

A RESOLUTION OF THE TEXAS WATER DEVELOPMENT BOARD

APPROVING AN AMENDMENT TO THE MASTER AGREEMENT WITH COASTAL

WATER AUTHORITY FOR THE LUCE BAYOU INTERBASIN TRANSFER

PROJECT WITH FUNDS FROM THE STATE WATER IMPLEMENTATION

REVENUE FUND FOR TEXAS

(16-087)

WHEREAS, at its July 23, 2015 meeting, the Texas Water Development Board(TWDB), by TWDB Resolution No. 15-075A, made a commitment to acquire^ancFsell anownership interest in the Luce Bayou Interbasin Transfer Project, not to exceed 80% of thetotal Project cost in an amount not to exceed $276,740,000 from the'Board ParticipationAccount of the State Water Implementation Revenue Fund for Texas (SWIRFT), all as ismore specifically set forth in the TWDB's Resolution and accompanying documentation,to which documents express reference is made; and

WHEREAS, the TWDB and Coastal Water Authority (Authority) executed aMaster Agreement on November 20, 2015 that set forth the duties, responsibilities, andliabilities of the TWDB and the Authority with regard to the Board Participationcommitment; and

WHEREAS, by letter dated July 14, 2016, the Coastal Water Authority (Authority)has requested that the TWDB approve an amendment to the Master Agreementincorporating the 2016 distribution of funds in the amount of $136,460,000 into the MasterAgreement; and

WHEREAS, the TWDB hereby finds that the amendment(s) to the terms of theMaster Agreement is reasonable and that the request is in the public interest and will servea public purpose; and

WHEREAS, in accordance with the Texas Water Code, the TWDB has carefullyconsidered all matters required by law;

NOW, THEREFORE, based on these considerations and findings, the TWDBresolves as follows:

1. The Executive Administrator is authorized to execute future amendments to the

Master Agreement as contemplated by the terms of that agreement and authorizedunder Resolution No. 15-075A.

2. Further, the Board approves the request from Coastal Water Authority to amend theMaster Agreement to include closing on the $136,460,000 2016 BoardParticipation from the State Water Implementation Revenue Fund for Texas, asauthorized in TWDB Resolution No. 15-075A.

Attachment 5

3. All other terms and conditions of TWDB Resolution No. 15-075A shall remain in

full force and effect.

ATTEST:

Jeff

Exefcut ministrator

APPROVED and ordered ofrecord this the 11^*^ day ofAugust, 2016.

' ^ - TEXAS WATER DEVELOPMENT BOARD

Bech K. Bruun, Chairman

DATE SIGNED:

Attachment 6