STATE PARTICIPATION ACCOUNT.

(a) The Texas Water Development Fund II state participation account, referred to as the "state participation account," is an account established within the fund in the state treasury. Transfers shall be made from this account as provided by this subchapter.

(b) The state participation account is composed of:

(1) money and assets attributable to water financial assistance bonds designated by the board as issued for projects described in Sections 16.131 and 16.146;

(2) money from the sale, transfer, or lease of a project described in Subdivision (1) that was acquired, constructed, reconstructed, developed, or enlarged with money from the state participation account;

(3) payments received under a bond enhancement agreement with respect to water financial assistance bonds designated by the board as issued for projects described in Sections 16.131 and 16.146;

(4) investment income earned on money on deposit in the state participation account;

(5) money disbursed to the fund from the state water implementation fund for Texas as authorized by Section 15.434; and

(6) any other funds, regardless of their source, that the board directs be deposited to the credit of the state participation account.

(c) Money on deposit in the state participation account may be used by the board, in the manner that the board determines necessary for the administration of the fund, for:

(1) eligible projects, as defined by Section 1373.001, Government Code; and

(2) projects described in Sections 16.131 and 16.146.

(c-1) The comptroller shall establish a subaccount in the state participation account to be known as the state participation account II. The board may credit to the subaccount money in the state participation account allocated by the board for the purposes of Section 16.146. The board may transfer money from the subaccount to the state participation account if the board determines the money is needed for the purposes of Section 16.131.

(d) The board shall transfer back to the state water implementation fund for Texas any money disbursed to the fund as described by Subsection (b)(5) of this section if the requirements of Section 15.435 are satisfied.