Three years ago, the federal Water Infrastructure and Innovation Act (WIFIA) created a program that provided federal credit, administered by the U.S. EPA, to eligible water and wastewater infrastructure projects.
In a report from the Department of Treasury around that time, the increasing problems with financing infrastructure projects was laid out.
“Increasing fiscal pressures at all levels of government have led to reduced commitments for infrastructure and a greater reliance on debt financing which, in turn, has contributed to increased debt ratios and reduced debt service coverage levels for certain issuers,” the report reads. “At the same time, stagnant economic growth and absence of support for new or increased user fees have curtailed increased debt capacity among many issuers. In aggregate, these trends present challenges to increasing infrastructure investment at all levels of government.”
To avoid the cycle of debt, WIFIA was introduced as a way to supplement available funds.
“As suggested by the estimated size of national water infrastructure needs, currently available funding sources are not sufficient,” an EPA spokesperson said. “Similar to large-scale transportation projects, the financing of large water infrastructure projects can be addressed through the use of several financing tools and techniques that, when combined, can result in highly efficient capital structure that minimizes the financial impact on system users. WIFIA will assist in delivering on these needs in the water sector.”
Potential beneficiaries will likely associate WIFIA with similar programs like State Revolving Funds (SRFs). Indeed, the program is intended to be similar and complementary to SRFs, but with a slightly different purpose.
“SRF programs under the Clean Water Act and Safe Drinking Water Act are designed to primarily provide a benefit to smaller projects, typically under $100 million, in communities that often have limited access to funding,” the spokesperson said. “There is a large segment of need associated with projects that the SRFs cannot fund due to project size or ownership. WIFIA hopes to work in this space, not to compete with SRFs.”
While SRFs are supported and awarded by the EPA, they are state-operated programs. States determine which projects will receive loans and they prioritize applicants. SRFs are essentially loans that must be repaid with interest back into the program, allowing it to grow. WIFIA, however, is run out of the EPA headquarters with the federal agency deciding which projects will be funded. The federally-paid loans will be paid back to the federal government.
WIFIA can pay for up to 49 percent of an eligible project and is meant to be paired with other programs like SRFs. Accessing WIFIA has no bearing on eligibility for SRFs, the EPA said.
There is no question that new sources of funding are desperately needed to address things like crumbling pipelines and outdated treatment technology, but many utilities will wonder how they can access this relatively new source.
“Prospective borrowers will submit a letter of interest that demonstrates their project eligibility, creditworthiness, engineering feasibility, and alignment with statutory selection criteria and EPA’s policy priorities,” said the spokesperson. “Using the basic information about the project and the prospective borrower provided, EPA will evaluate and select projects based on criteria described in the Notice of Funding Availability. The purpose of the application is to provide EPA with materials necessary to underwrite the proposed WIFIA assistance and to develop, through negotiation, individual credit agreements between the prospective borrower and EPA. Following closing of a WIFIA loan, a borrower will submit invoices for eligible project costs to EPA for reimbursement from loan proceeds.”
A handbook on the program provides a list of 13 selection criteria that the EPA will use to determine which projects receive funding.
Potential borrowers should describe how WIFIA assistance will help their project meet each of the criteria in their letter of interest for funding. However, it’s unlikely that any eligible projects will sync up with all 13.
“Because the selection criteria encompass a wide range of factors, it is not expected that most projects will score highly on all of them,” the spokesperson said. “However, this is where the prospective borrower gets to make its best case to the EPA. Prospective borrowers are encouraged to demonstrate how their projects address the criterion, provide specific details, and, where available, include references to supporting documentation.”
If your community has an infrastructure project that meets the necessary criteria, it seems WIFIA is eager to help fund it.