Local Water, Sewer Projects May Flow From WIFIA Infrastructure Funding
Water infrastructure in your area: Is it shovel-ready? Is it funding-ready?
Water infrastructure projects are almost certainly coming your way, as part of an all-out federal push to fix the infrastructure. And they will bring not only more jobs, but more environmental stories.
One of several federal programs affecting water pollution is known as WIFIA (for the Water Infrastructure Finance and Innovation Act of 2014). Even Republicans like it. Former U.S. Environmental Protection Agency Administrator Scott Pruitt always put out a proud press release whenever he awarded millions of WIFIA dollars to some deserving locality.
The Water Infrastructure Finance and Innovation Act (WIFIA) program provides financial assistance for water infrastructure projects, including projects to build and upgrade wastewater and drinking water treatment systems. Congress established the WIFIA program in the Water Resources Reform and Development Act of 2014 (WRRDA 2014, P.L. 113-121).
The WIFIA concept is modeled after a similar program that finances transportation projects, the Transportation Infrastructure Finance and Innovation Act (TIFIA) program. Proponents of the WIFIA approach, including water utility organizations, cite several potential benefits:
- WIFIA provides credit assistance to large water infrastructure projects that may otherwise have difficulty obtaining financing.
- WIFIA provides credit assistance, namely direct loans, at U.S. Treasury rates, potentially lowering the cost of capital for borrowers.
- WIFIA assistance has less of a federal budgetary effect than conventional project grants that are not repaid, because only the subsidy cost of a loan (representing the presumed default rate on loans) is required to be appropriated.
- WIFIA support limits the federal government’s exposure to default, because projects must be found creditworthy with a revenue stream for repayment to be eligible for assistance.
On the other hand, opponents of the WIFIA approach, including organizations that represent state environmental agency officials, have cited several concerns:
- Federal funding for a WIFIA program could have a detrimental effect on federal support for established State Revolving Fund (SRF) programs that provide the largest source of water infrastructure assistance today.
- If WIFIA funding resulted in a decrease in SRF assistance, smaller projects may face financing challenges.
- The Congressional Budget Office has warned that the future costs of a WIFIA program to the federal budget may be underestimated.
- America’s Water Infrastructure Act of 2018 (AWIA; P.L. 115-270), enacted on October 23, 2018, removed the pilot designation from the WIFIA program, reauthorized appropriations, and revised provisions related to program administration.
Appropriations for the WIFIA program have increased since its inception, allowing EPA to provide increasing amounts of credit assistance each year:
- FY2017 appropriations totaled $30 million.
- FY2018 appropriations totaled $63 million.
- FY2019 appropriations totaled $68 million.
On March 29, 2019, EPA announced a third round of WIFIA funding, inviting prospective borrowers to submit letters of interest to EPA. From these submittals, the agency will select projects for funding. EPA estimated that its budget authority ($63 million) would provide approximately $6 billion in credit assistance.
Now, as President Joe Biden and a Democrat-controlled Congress get ready for the Herculean effort of passing an “infrastructure” bill, we can expect WIFIA (and programs like it) to be conduits for larger amounts of federal money.
There is a “pipeline” for projects seeking funding and an established administrative mechanism for vetting and funding them. Most importantly, WIFIA and similar programs are not partisan or politically controversial. The prospect of more money could actually increase support in Congress.
WIFIA money can go toward both drinking water and sewage treatment projects. The money amounts to loan guarantees, which means the federal dollars can be highly leveraged. A small federal layout can back a much larger local project.
Why it matters
In short, there are a great many places in the United States where wastewater and drinking water systems are inadequate and harming people’s health. This may mean pathogens carrying disease, chemical pollutants threatening toxic harm or nutrients like nitrogen that fertilize fish-killing algae.
Many poorer and smaller municipalities and rural areas cannot keep waterways unpolluted.
Some of the bigger cities have enough money to keep up much of the time, but many poorer and smaller municipalities and rural areas cannot keep waterways unpolluted. Nor can they deliver clean, healthful drinking water to people’s taps. And in some locales, closed beaches mean lost tourist dollars.
The prevailing model for water infrastructure is that local governments pay the lion’s share by borrowing (municipal bonds) and repaying debt through user fees or taxes over a period that may span decades.
Yet many municipalities are so hard up for cash that paying for adequate water systems is difficult or impossible. A number of federal and state programs (WIFIA being only one) help local governments borrow by loaning money or backing loans.
Federal money has flowed toward water infrastructure for many decades. When the 1972 Clean Water Act called for fishable, swimmable waters, it also funded an immense grant program to help localities build sewage pipes and treatment plants. It was the second-biggest federal infrastructure program (after interstate highways) in U.S. history.
The WIFIA program supplemented those with a system that was more flexible and more highly leveraged. As federal funding for locks, dams and canals waned, WIFIA offered a new brand of environmental pork. In order to find out what’s happening in your area:
- Check the pollution reports for your local waterways to see how bad and how frequent any pollution incidents may be.
- Look at the “consumer confidence reports” and “source water assessments” from your local drinking water utilities (they should be on the utility’s website). What problems do they show?
- Look at EPA’s ECHO database to see if your local sewage and drinking water systems have any recent violations.
EPA publishes lists of the loans it has completed every year. Look at these to see if any ongoing projects are in your area.
Here’s a map of projects approved by EPA to apply for WIFIA loan backing. You can zoom in on the area or areas of interest to you. Currently, it shows 144 projects.
Here’s another map of projects that have sent EPA “letters of interest” about potential future loans. It currently shows 223 projects.
And, finally, don’t forget to look at this list of “closed loans” under WIFIA to see if any are for projects of interest in your area.