By Patrick Crow
An intense lobbying effort by water associations has persuaded Congress to remove a constriction in the operation of the Water Infrastructure Finance and Innovation Act (WIFIA) federal loan program.
Congress approved the 5-year WIFIA pilot program in 2014 as an initiative that was to be independent of the federal Drinking Water and Clean Water State Revolving Funds (SRFs).
Through WIFIA, the Environmental Protection Agency (EPA) and the Corps of Engineers together would offer $350 million in low-interest loans for water and wastewater infrastructure projects costing at least $20 million (or $5 million for improvements serving 25,000 or fewer people).
But to make the program budget neutral, Congress limited federal funding to 49% of the cost of projects and banned the use of tax-exempt bonds for financing the rest.
Water groups immediately complained that the program would be hamstrung if loan recipients had to draw at least 51% of project funding from sources aside from municipal bonds and other tax exempt debt. They said WIFIA recipients should be able to seek additional sources of funding such as taxable debt or partnerships with private sector organizations.
Several water associations immediately began a year-long effort to persuade legislators to remove the funding limitation. Their efforts prompted Congress to insert a WIFIA fix in an omnibus transportation bill (“Fixing America’s Surface Transportation Act”) that it passed in December and the President signed immediately.
David LaFrance, CEO of the American Water Works Association, said due to the legal change, “WIFIA loans will allow communities to move forward on critical water and wastewater infrastructure projects at a lower cost to their customers.”
Dan Hartnett, director of legislative affairs for the Association of Metropolitan Water Agencies, said the WIFIA fix enables EPA to set a regulatory framework for the program, clears the way for Congress to appropriate funds for WIFIA loans, and gives utilities a path to follow as they begin to apply.
“What’s left undone at this point is EPA’s plan for how it will administer the operational details of WIFIA, such as the specific process for how communities will apply, how applications will be judged, and how funds will be awarded,” Hartnett said.
“EPA staff has been working on these questions for some time. Hopefully if that plan is completed early this year, WIFIA will be on line to receive funding to back loans in the 2017 fiscal year.”
Congress appropriated $2.2 million to EPA in fiscal 2016 so that it could establish the WIFIA program. Both the SRFs received slight funding cuts, however.
The Drinking Water SRF was allocated $863.2 million, $40 million below the fiscal 2015 appropriation and well below the Obama administration’s request for $1.186 billion.
The Clean Water SRF got $1.394 billion, down $55 million from fiscal 2015 but substantially more than the $1.116 billion the administration had sought.
As before, the SRF appropriations bill requires states to earmark 10 percent of their clean water loans for environmentally innovative projects such as “green infrastructure, water or energy efficiency improvements.”
Also, states must reserve 10 percent of their clean water funds and 20 percent of their drinking water funds for low or negative interest loans or grants to eligible communities. Drinking water projects must use domestic iron and steel, although the EPA can waive those requirements in some cases.
The federal budget cycle will begin again in February, when the Obama administration sends its fiscal 2017 spending proposals to Congress.
About the Author: Patrick Crow covered the U.S. Congress and federal agencies for 21 years as a reporter for industry magazines. He has reported on water issues for the past 15 years. Crow is now an Austin, Texas-based freelance writer.
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