Water Industry Lobbies for Federal Loan Fund

Despite the federal budget crisis, water groups hope that Congress will enact legislation next year to facilitate the funding of large drinking and wastewater infrastructure projects. They are lobbying for the Water Infrastructure Finance and Innovation Act (WIFIA), a loan program modeled after the successful Transportation Infrastructure Finance and Innovation Act (TIFIA).

Jan 1st, 2013

By Patrick Crow, Washington Correspondent

Despite the federal budget crisis, water groups hope that Congress will enact legislation next year to facilitate the funding of large drinking and wastewater infrastructure projects.

They are lobbying for the Water Infrastructure Finance and Innovation Act (WIFIA), a loan program modeled after the successful Transportation Infrastructure Finance and Innovation Act (TIFIA). ) TIFIA provides Federal credit assistance in the form of direct loans, loan guarantees, and standby lines of credit to finance surface transportation projects of national and regional significance. The water bill would support projects in excess of $20 million, which are too large for assistance through existing federal funding mechanisms.

Last spring, water groups supported a draft WIFIA bill by Rep. Bob Gibbs (R-Ohio). It never advanced, despite the fact that Gibbs chairs the House Water Resources and Environment Subcommittee. Gibbs is expected to file a similar bill this year.

Sen. Jeff Merkley (D-Ore.) drew on the Gibbs proposal when he introduced a WIFIA bill last November. And Sen. Barbara Boxer (D-Calif.), Senate Environment and Public Works Committee chairman, used Merkley's bill and TIFIA to write her WIFIA proposal late last year.

She included it in her draft Water Resources Development Act (WRDA), which mostly authorizes waterways and port improvement projects. Boxer plans to push the WRDA bill through her committee in the opening month of the 113th Congress. It should meet with broad bipartisan support on the Senate floor.

Boxer proposed a five–year WIFIA pilot program, expandable in the future, funded through general appropriations and supporting 10-20 projects yearly. She explained, "Funding for water infrastructure projects has been insufficient to meet current needs."

The Association of Metropolitan Water Agencies (AMWA), the American Water Works Association (AWWA) and the Water Environment Federation say WIFIA would lower the cost of capital for water utilities while having little or no long term effect on the federal budget.

AWWA has observed that U.S. water and wastewater infrastructure is aging and many communities must significantly increase their investments. It said local rates and charges should remain the cornerstone of water infrastructure finance but there are occasions when large infusions of capital are needed.

The association has estimated that the cost of repairing and expanding U.S. drinking water infrastructure will top $1 trillion in the next 25 years and $1.7 trillion over 40 years. The American Society of Civil Engineers has said that a dearth of current investment in water infrastructure will significantly boost future costs, with the gap between actual and needed investments rising to $90 billion/year by 2040.

WIFIA would supplement, not supplant, the existing state revolving funds (SRFs) for drinking water and clean water. The WIFIA would offer a more stable funding mechanism than the SRFs, which fluctuate with annual congressional appropriations.

The Environmental Protection Agency (EPA) distributes the SRF funds to the states, which administer the programs. The loans are directed at small-scale infrastructure improvements that would reduce public health issues for communities.

The average SRF award is $2.4 million but WIFIA awards would start about 10 times higher. EPA would run the program, eliminating the state administrative costs. The eligibility of projects would not necessarily be based on water quality or compliance criteria.

AWWA Legislative Director Tommy Holmes said, "Since SFR funds must be prioritized toward water systems where there is the greatest risk of public health, that leaves out replacing infrastructure just because it's old. Also, SRF funds can't be used to address population growth."

Another advantage of WIFIA is that under Boxer's proposal, only $25 million per year would be needed to cover the risk factor of the much larger direct loans. (Water utilities have a default rate of only 0.04%).

Unfortunately, 2013 is shaping up to be an inopportune time to seek appropriations for new federal programs. The government faces a fiscal crisis that threatens steep cuts for EPA and other agencies.

AMWA spokesman Dan Hartnett said, "This is a very tough environment to be looking for more spending. But keep in mind; it's also a very tough environment for these water companies to raise funds for large infrastructure investments."

Holmes saw some reasons for optimism. "For one thing, the water community has done a good job of making people on Capitol Hill aware of the need for water infrastructure improvements."

And because a little federal money would leverage a high volume of WIFIA loans, "This is the most cost effective proposal out there."

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