The Brazos River Authority Waco Texas

that the failure of Bear Stearns would cause severe economic damage and worked to orchestrate aFederally subsidized buyout of the firm by JPMorgan Chase. Immediately following this action, theFOMC announced that they were lowering the Federal Funds rate by an additional .75%, from 4.25%to 3.50%. The list of troubled institutions continued to grow and firms such as Lehman Brothers failed,while others such as AIG received Federal support. The U.S. Agencies, Federal National MortgageAssociation (Fannie Mae)and Federal Home Loan Mortgage Corporation (Freddie Mac), were takenunder the conservatorship of the U.S. Government to avoid their financial failure. The list of casualtiesfrom this downturn continues, includes name brand institutions, and has prompted the FOMC to slashrates four more times before making their latest cut on October 29, 2008. The current Federal FundsRate stands at 1.00%.Congress has done their part to keep the economy breathing. During September, Congress took emergencyaction to provide $700 billion in funding for the program entitled the “Troubled Asset Relief Program”.The Federal Reserve, the Treasury Department and Congress will use these funds as necessary to keepessential markets above water and avoid more widespread economic collapse. It is anticipated that thesefunds will be essential to bring the credit markets, which have grinded to a halt in recent months, backto life.While the national and global economies have experienced severe deterioration, the Texas economyhas been surprisingly expansive. During the past year, Texas gained almost 248,000 jobs, more thanthe next 14 top job-growth states combined. The Texas unemployment rate in September 2008 was5.1% compared with the 6.1% national rate. The housing market in Texas has experienced some recentvaluation decreases, but is far below the rate of decrease in other states. Texas foreclosure rates inAugust 2008 indicated only one in every 1,003 homes faced foreclosure. This compares very favorablyagainst Nevada’s one in 82, California’s one in 189 and Arizona’s one in 178. As gasoline prices havedecreased more recently, the Texas sales tax receipts have increased. During September 2008, sales taxreceipts increased 3.7% when compared to the same period last year. Whether Texas’ experience beginsto reflect the national trend depends upon the length and severity of the national/global recession.LONG-TERM FINANCIAL PLANNINGIn July 2008, the Authority’s Board of Directors reviewed the Fiscal Year 2009 Long Range FinancialPlan. This fifty year look into the future is both an inventory of projects anticipated to be undertakenby the Authority to satisfy its mission, as well as an analysis of the implications of those projects onthe Authority’s System Water Rate. The inventory of projects is a mixture of water development,transportation, and treatment initiatives and range from those that are anticipated to be fully supportedby the System Water Rate to those which will have a specific customer base (such as a regional treatmentplant), for which a cost of service-based fee will be calculated. Initial indications based on this analysisare that the Authority’s System Water Rate over the next several decades will continue to be among thelowest in the State of Texas; while maintaining a level of service sufficient to address the obligationsplaced upon it by both our enabling legislation, our strategic plan, and the vision of our Directors andmanagement. Future rate-making will be based upon a combination of both debt-funded initiatives,as well as those in which a cash infusion will be made, through the use of the Board-mandated seriesof Reserve Funds to balance and stabilize rates. Additional information on the Authority’s BoardDesignated Reserves can be found in Note 12, of the Notes to the Basic Financial Statements.xiii