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P.O. Box 13231, 1700 N. Congress Ave. Austin, TX 78711-3231, www.twdb.texas.gov Phone (512) 463-7847, Fax (512) 475-2053 AGENDA ITEM MEMO BOARD MEETING DATE: September 9, 2021 TO: Board Members THROUGH: Jeff Walker, Executive Administrator Ashley Harden, General Counsel Rebecca Trevino, CPA, Chief Financial Officer FROM: Georgia Sanchez, Development Fund Manager SUBJECT: Texas Water Development Board State Revolving Fund Revenue Bonds ACTION REQUESTED Consider approving by resolution: (a) the issuance, sale and delivery of Texas Water Development Board State Revolving Fund Revenue Bonds, in one or more series; (b) a Preliminary Official Statement; and (c) authorization for the Executive Administrator, Chief Financial Officer, Development Fund Manager, or any other authorized representative to act on behalf of the Texas Water Development Board in the sale and delivery of multiple series of such bonds. BACKGROUND Authorization was previously received to initiate the bond issuance process to provide funding for eligible projects through the Clean Water State Revolving Fund (CWSRF) and Drinking Water State Revolving Fund (DWSRF), state matching funds for projected federal CWSRF and DWSRF capitalization grants, and costs of issuance. Hilltop Securities Inc. was selected to serve as financial advisor, McCall, Parkhurst & Horton L.L.P. was selected to serve as bond counsel, and Bracewell LLP was selected to serve as disclosure counsel. Jefferies was selected to serve as senior managing underwriter for the transaction. Citigroup Global Markets Inc., FHN Financial Capital Markets, Piper Sandler & Co., Robert W. Baird & Co. Inc., Siebert Williams Shank & Co. LLC; Stifel, Nicolaus, & Company, Inc.; and UMB Bank, n.a. were selected to serve as co-managing underwriters. Staff, in coordination with the consultants, has drafted and attached the required documents, including a supplemental bond resolution and Preliminary Official Statement. Upon approval, a formal Notice of Intent to issue debt will be provided to the Bond Review Board (BRB), and approval is expected from the BRB in advance of posting the Preliminary . Our Mission . Board Members . Leading the state’s efforts in ensuring a . Brooke T. Paup, Chairwoman │ Kathleen Jackson, Board Member . secure water future for Texas and its citizens . Jeff Walker, Executive Administrator . Board Members September 9, 2021 Page 2 Official Statement. Legislative Budget Board approval is not required for this transaction. Staff anticipates non-substantive edits to update the bond documents prior to publication. KEY ISSUES While the par and premium amounts will be adjusted at the time of pricing due to final projected needs and market considerations, total the principal not-to-exceed amount is $500,000,000. The costs of issuance for the transaction have been estimated at a not-to-exceed of $4.25 per bond for the underwriter’s discount, and $795,000 for all other transaction-related fees and expenses. The estimated costs of issuance are appropriate, but may be negotiated further based on market conditions at the time of pricing. Below is a short summary of the preliminary schedule of events currently anticipated for this transaction: • September 9, 2021 Board considers bond sale resolutions/documents • October 12, 2021 Bond pricing initiation • October 13, 2021 Bond pricing • November 4, 2021 Closing and delivery of the bonds RECOMMENDATION In order to provide low-cost financing in a timely manner for eligible projects through the CWSRF and DWSRF, state matching funds for projected CWSRF and DWSRF capitalization grants, and costs of issuance, the Executive Administrator recommends approving by resolution: (a) the issuance, sale and delivery of Texas Water Development Board State Revolving Fund Revenue Bonds, in one or more series; (b) a Preliminary Official Statement; and (c) authorization for the Executive Administrator, Chief Financial Officer, Development Fund Manager, or any other authorized representative to act on behalf of the Texas Water Development Board in the sale and delivery of such bonds. Attachments: 1 – Draft Bond Resolution 2 – Draft Preliminary Official Statement FOURTH SUPPLEMENTAL RESOLUTION AUTHORIZING THE ISSUANCE, SALE AND DELIVERY OF TEXAS WATER DEVELOPMENT BOARD STATE REVOLVING FUND REVENUE BONDS, NEW SERIES 2021; AND APPROVING AND AUTHORIZING INSTRUMENTS AND PROCEDURES RELATING THERETO. Dated September 9, 2021 Table of Contents ARTICLE I AUTHORITY AND DEFINITIONS SECTION 1.01. Supplemental Resolution ...............................................................................2 SECTION 1.02. Definitions ......................................................................................................2 SECTION 1.03. Rules of Construction.....................................................................................2 SECTION 1.04. Interpretations ................................................................................................2 ARTICLE II AUTHORIZATION AND TERMS OF SERIES 2021 BONDS SECTION 2.01. Authorization and Designation; Payment ......................................................2 SECTION 2.02. Maturity Dates; Accrual and Determination of Interest ................................3 SECTION 2.03. Redemption of Series 2021 Bonds .................................................................4 SECTION 2.04. Notice of Redemption ....................................................................................5 SECTION 2.05. Payment of Redeemed Bonds ........................................................................6 SECTION 2.06. Execution; Special Obligation .......................................................................7 SECTION 2.07. Certificates of Registration and Authentication .............................................7 SECTION 2.08. Form of Bonds ...............................................................................................8 SECTION 2.09. Mutilated, Lost, Stolen or Destroyed Bonds ..................................................8 SECTION 2.10. Exchangeability and Transfer of Bonds; Persons Treated as Owners ...........8 SECTION 2.11. Cancellation ...................................................................................................9 SECTION 2.12. Book-Entry Only System ...............................................................................9 SECTION 2.13. Series 2021 Bonds Secured by Master Resolution ......................................11 ARTICLE III ISSUANCE OF SERIES 2021 BONDS; USE OF PROCEEDS SECTION 3.01. Issuance, Sale and Delivery of Series 2021 Bonds ......................................11 SECTION 3.02. Official Statement ........................................................................................12 SECTION 3.03. Use of Bond Proceeds ..................................................................................12 ARTICLE IV SUBACCOUNTS SECTION 4.01. Establishment and Use of Subaccounts .......................................................13 SECTION 4.02. Discharge of the Master Resolution .............................................................14 SECTION 4.03. Records .........................................................................................................14 SECTION 4.04. Investment of Subaccounts ..........................................................................14 ARTICLE V ADMINISTRATION OF THE FINANCING PROGRAM SECTION 5.01. Agent ............................................................................................................15 SECTION 5.02. Compensation and Indemnification of Agent ..............................................16 SECTION 5.03. Qualifications of Agent; Resignation; Removal ..........................................16 SECTION 5.04. Instruments of Bondholders .........................................................................17 i ARTICLE VI FEDERAL INCOME TAX MATTERS SECTION 6.01. Tax Exemption. ............................................................................................17 SECTION 6.02. Taxable Obligations. ....................................................................................19 ARTICLE VII CONTINUING DISCLOSURE UNDERTAKING SECTION 7.01. Annual Reports ............................................................................................19 SECTION 7.02. Disclosure Event Notices .............................................................................19 SECTION 7.03. Limitations, Disclosures, and Amendments ................................................21 SECTION 7.04. Continuing Disclosure Undertaking of Significant Borrowers ....................22 ARTICLE VIII MISCELLANEOUS SECTION 8.01. Amendment ..................................................................................................24 SECTION 8.02. Limitation of Rights .....................................................................................24 SECTION 8.03. Notices .........................................................................................................24 SECTION 8.04. Payments Due on Non-Business Days .........................................................25 SECTION 8.05. Severability ..................................................................................................25 SECTION 8.06. Effective Date ..............................................................................................26 SECTION 8.07. Governing Law ............................................................................................26 EXHIBITS: Exhibit