Following the 412- 4 vote in the U.S. House on Tuesday and the 91-7 vote in the U.S. Senate yesterday, the president is expected to quickly sign into the law the Water Resources and Reform Development Act of 2014 (WRRDA). In addition to $12.3 billion earmarked for 8 current and 34 new water projects, a key provision of the WRRDA is the Water Infrastructure Finance and Innovation Act (WIFIA) which establishes a 5 year pilot program administered by the EPA and Corp of Engineers to provide low cost loans for water, waster\water and flood control infrastructure projects.
Modeled after the popular Transportation Infrastructure Finance and Innovation Act (TIFIA), the program aims to stretch federal dollars by leveraging nonfederal funds by providing loan guarantees and direct loans at long-term Treasury rates. WIFIA funds can achieve a significant leverage because they only have to cover the risk of project defaults, and the history of default in water projects is only 0.04%, according to the American Water Works Association.
In order to be eligible for WIFIA, projects must be deemed creditworthy, with loans repayable from a dedicated revenue source within 35 years of substantial project completion. The program generally 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, up to 25% of appropriated funds may be used in projects exceeding the 49% limitation.
While sharing many similarities with TIFIA, WIFIA will start out on a much smaller scale. Whereas the 2014 authorization for TIFIA under MAP-21 is $1 billion, funding for the WIFIA program totals $350 million over the entire 5-year pilot. Despite the funding limitations development of the program is viewed as an important victory by the water industry.
“The imminent creation of the Water Infrastructure Finance and Innovation Authority is a significant breakthrough in confronting the U.S. water infrastructure challenge,” said David LaFrance, Chief Executive Officer of the American Water Works Association. “WIFIA will reduce the financing costs of critical infrastructure projects, allowing communities to fix and expand water systems at a lower cost to their customers. Our elected representatives and senators deserve our gratitude.”