U.S. Congress Poised to Take Action on WIFIA

us congressThe U.S. House and Senate are poised to act on water resources legislation that establishes a five-year Water Infrastructure Finance and Innovation Act (WIFIA) pilot program, much along the lines that organizations such as WDBC and AWWA have advocated (but with two serious limitations described below). The House will likely pass the bill on Tuesday, May 20, and the Senate will take action soon afterward.

As agreed to by House and Senate conferees — who met over a period of six months to reconcile differing House and Senate versions — the bill establishes WIFIA as a low-interest loan program administered by EPA, with a parallel program administered by the Corps of Engineers for flood control projects. The EPA program:

  1. Will support water and wastewater-related infrastructure projects, including pipe replacement or rehabilitation, construction or rehabilitation of treatment plants, desalination projects, groundwater replenishment projects, energy efficiency improvements, and others.
  2. Is aimed at larger projects, in which eligible projects must cost at least $20 million ($5 million for communities serving no more than 25,000 people).
  3. Provides loan guarantees and direct loans at long-term Treasury rates.  Projects must be deemed creditworthy, with loans repayable from a dedicated revenue source within 35 years of substantial project completion.
  4. Gives states the “right of first refusal” to fund any project.  No project can be funded by WIFIA if within 60 days, the state indicates an intention to support the project and the state enters a support agreement within 180 days at rates and terms no less favorable than WIFIA.  These deadlines are measured from the date of EPA’s notice to the state that it has received a WIFIA application.  EPA must give such notice within 30 days of receiving a WIFIA application.
  5. Limits WIFIA support of a project to 49% of the project’s costs, with an overall limitation of 80% for all federal assistance in any project (with an exception for certain federally funded projects in  Indian tribal communities), and provides that tax-exempt debt cannot be used to pay the non-federal share of project costs.  However, in any year the EPA Administrator can use up to 25% of appropriated funds in projects exceeding the 49% limitation.
  6. Reserves 15% of appropriated funds each year for projects in communities with a population of no greater than 25,000.  By June 1 of each year, any such reserved funds that have not been obligated shall be available for projects in communities of any size.
  7. Authorizes $20 million in the first year, which should support at least $200 million in loan guarantees or low-interest loans.  The authorization level rises to $50 million in year five, which should support up to $1.65 billion in assistance, according the Office of Management and Budget.  Appropriated funds achieve this significant leverage because they only have to cover the risk of WIFIA project defaults, and the history of default in water projects is only 0.04%, according to AWWA research.

Several water industry associations, including AWWA, the Water Environment Federation, and WDBC believe that WIFIA will prove to be a useful addition to the infrastructure finance toolbox.  At the same time, we are very aware of the need to remove the serious limitations noted above, so that WIFIA can fund up to 100% of eligible project costs and any non-federal share can be paid with tax-exempt debt.  

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Topics: WDBC Admin.

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