12 entities selected to apply for WIFIA loans
The U.S. Environmental Protection Agency (EPA) has just identified the twelve projects it is inviting to apply for Water Infrastructure Finance and Innovation Act loans. On January 10, 2017, in an effort to provide much needed funding for America’s water and wastewater systems, the Water Infrastructure Finance and Innovation Act (“WIFIA”) program was launched. In response to a "Notice of Funding Availability," 43 public and private entities from 19 states submitted letters of interest. 19 of the applications came from California-based entities.
In two separate appropriations acts, one signed by President Obama, one signed by President Trump, Congress appropriated $25 million to cover the federal government's anticipated costs of providing larger amounts of credit assistance. These 12 projects are competing for more than $2 billion in WIFIA loans. This funding will help to meet what EPA estimates are approximately $660 billion of stormwater, wastewater, and drinking water infrastructure maintenance and rehabilitation needs.
The WIFIA program is open to an array of entities, ranging from local, state and federal government entities to corporations. Even so, the minimum project size is $5 million for communities of 25,000 residents and less. For communities with more than 25,000 residents, the minimum project project cost is $20 million. Also, WIFIA loans are limited to funding up to 49% of total eligible costs and the project must have other dedicated sources of funding. With that said, WIFIA projects are allowed to have up to 80% of the project’s “eligible” costs covered by federal assistance.
Organizations have presented different concerns with the WIFIA programs. The American Water Works Association (AWWA), the Association of Metropolitan Water Agencies (AMWA), National Association of Clean Water Agencies (NACWA), and the Water Environment Federation (WEF) coauthored a paper outlining concerns about the implementation of WIFIA. For example, the organizations encourage interest rates for WIFIA loans to be set at a rate equal to the Treasury rate interest on comparable maturities. This means that a WIFIA loan to be paid back in three months would match the Treasury interest rate for a loan being paid back in three months. If a WIFIA loan is to be paid back in nine months, then the interest rate would match for the Treasury interest rate for a loan being paid back in nine months. Affordable interest rates that do not create new financial burdens will ensure that the loans are affordable.
Even though there are likely kinks in the WIFIA program that will come to light and need to be worked out, America’s water and wastewater infrastructures are in great need of repair, replacement, and expansion, and federal assistance programs can help satisfy this need. Program officials should be attentive to affordability concerns, because if, for instance, interest rates end up being set too high, the program may become a substantial burden on the communities it was meant to assist.