April 24, 2018
Environmental Law Alert
Environmental Law Alert
While Congress and the Trump administration are still trying to shape a new nationwide infrastructure investment program, Congress recently opened up the federal purse strings, allowing the Environmental Protection Agency to actively seek water-related infrastructure projects under the Water Infrastructure Finance and Innovation Act of 2014 (WIFIA). Eligible borrowers—including public entities, private entities with demonstrated public support and tribal governments—have been invited to submit a “letter of interest” by July 6, 2018, during the 2018 WIFIA application process.
While Congress and the Trump administration are still trying to shape a new nationwide infrastructure investment program, Congress opened up the federal purse strings, allowing the Environmental Protection Agency (EPA) to actively seek water-related infrastructure projects under the Water Infrastructure Finance and Innovation Act of 2014 (WIFIA). Selected, eligible projects can qualify for WIFIA loans that, similar to loans available pursuant to the Transportation Infrastructure Finance and Innovation Act (TIFIA), underwrite up to 49% of total eligible project costs at AAA Treasury rates with 35-year repayment terms and potentially, a five-year deferral before loan repayments begin. Eligible borrowers, defined to include public entities, private entities with demonstrated public support and tribal governments, are invited to submit a “Letter of Interest” in the 2018 WIFIA application process by July 6, 2018.
The WIFIA program is a federal loan and loan guarantee program at EPA that aims to accelerate investment in the nation’s water infrastructure by providing long-term, low-cost funding for regionally and nationally significant water-related projects. In its April 4, 2018, Notice of Funding Availability (NOFA), EPA solicits Letters of Interest (LOIs) from prospective borrowers seeking credit assistance from EPA. The NOFA outlines the process that prospective borrowers must follow to be considered for WIFIA credit assistance and establishes relative weights for the selection criteria including project impact, project readiness and borrower creditworthiness. LOIs will be accepted until noon EDT on July 6, 2018. Additional program information is available in the recently published WIFIA Handbook. WIFIA anticipates, based on past experience, that prospective borrowers will likely be seeking direct loans rather than loan guarantees; the remainder of this article will therefore focus upon only WIFIA loans. Selected projects are generally required to satisfy all relevant federal laws and regulations, including compliance with the American Iron and Steel Requirement and the Davis-Bacon Wage Requirement.
The WIFIA program is governed by The Federal Credit Reform Act of 1990, which requires that the EPA estimate the long-term credit subsidy cost of each WIFIA loan and reserve for this cost using funds specially appropriated by Congress. The 2018 Consolidated Appropriations Act, which finalized the federal budget for Fiscal Year 2018, appropriated $63 million in credit subsidy support for WIFIA loans to be made in 2018. This federal budget allocation more than doubles the amount of federal funding available under the WIFIA program and, by leveraging WIFIA loan’s often lower and more elongated repayment terms with private capital and other funding sources, the WIFIA projects selected through 2018 could theoretically support $11 billion in water infrastructure investment and create more than 170,000 jobs. Loans through the WIFIA program can be supplemented by other federal grants and loans, including through the State Revolving Funds (SRF) programs. Federal loans and grants can pay for up to 80% of a project’s eligible cost, with the project host having to attract or raise the remainder of the money.
WIFIA credit assistance can be used for a wide range of projects, including:
The 2018 NOFA highlights the importance of protecting public health, including (1) providing for clean and safe drinking water, including reducing exposure to lead and other contaminants in drinking water systems and (2) updating the nation’s aging water and wastewater infrastructure.
EPA will evaluate proposed projects described in the LOIs using WIFIA’s statutory and regulatory criteria as described in the NOFA. Through this competitive process, EPA will select projects that EPA intends to fund and invite them to continue in the application process.
In 2017, for WIFIA’s inaugural round, 43 project sponsors, largely municipalities and states, scrambled to submit timely LOIs. Out of those 43 LOIs, EPA invited 12 projects in nine states to apply for more than $2 billion in WIFIA loans, as summarized in the table below (“2017 Invited WIFIA Projects”). The following categories and trends were identified:
While the WIFIA program is still in its infancy, making it difficult to identity success factors, the following elements are likely to contribute to strong LOIs and eventual invitations to continue:
|Project Name||Borrower||Project Description||Requested Loan Amount (Million)||Total Project Cost (Million)||% of Total|
|Ocean Outfall Discharge Reduction and Resiliency Enhancement Project||Miami-Dade County||Construction of new wells at three wastewater treatment plants to allow for redirecting existing effluent discharges from the ocean outfalls to injection wells.||$79||$160||49%|
|Deer Creek Sanitary Tunnel and Sanitary Relief||Metropolitan St. Louis Sewer District||Construction of a pump station at the downstream end of a sanitary sewage storage tunnel and approximately 15,900 feet of 8-inch to 54-inch sanitary sewer and slip-line, 1,700 feet of sanitary sewer and appurtenances to address sanitary sewer overflows.||$43||$88||49%|
|Saddle Creek Combined Sewer Overflow Retention Treatment Basin||City of Omaha||Construction of a new retention treatment basin to address combined sewer overflows in the Saddle Creek Basin.||$55||$113||49%|
|Groundwater Replenishment System Final Expansion||Orange County, CA Water District||Expansion of the existing water recycling plant from 100 millions of gallons per day to 130 millions of gallons per day by using treated wastewater from the Orange County Sanitation District Plant #2.||$124||$253||49%|
|Pure Water San Diego||City of San Diego, CA||Construction of Phase 1-North City of San Diego’s multi-year Pure Water program to achieve 30 millions of gallons per day of purified water production by 2021.||$492||$1,200.00||41%|
|Indiana Finance Authority FY 2017||Indiana Finance Authority||Expand the reach of its Clean Water and Drinking Water State Revolving Fund programs and fund dozens of additional projects in communities across the state.||$436||$890||49%|
|Georgetown Wet Weather Treatment Station||King County, WA||Construction of a new Wet Weather Treatment Station, conveyance pipelines and outfall structure to treat combined sewer overflows prior to discharge into the Lower Duwamish Waterway.||$129||$263||49%|
|Comprehensive Infrastructure Repair, Rehabilitation and Replacement Program||Baltimore City Department of Public Works||A bundled set of projects to repair, rehabilitate, replace, and upgrade the overall water system. Encompasses wastewater collection and treatment, water treatment and distribution and stormwater management throughout the City of Baltimore.||$200||$573||35%|
|Saco River Water Treatment Facility||Maine Water Company (application withdrawn)||Construction of a new 20 million gallons per day water treatment facility to replace the existing facility that has been providing service to the communities of Biddeford, Saco, Old Orchard Beach and Scarborough, Maine since 1884.||$25||$50||50%|
|Water Treatment Plant Design and Construction||City of Oak Ridge||Design and construction of a new 16 million gallons per day membrane treatment plant and associated assets to replace the existing 80-year old conventional treatment plant, which is currently at capacity and beyond its useful life.||$22||$45||49%|
|Water Reclamation Facility Project||City of Morro Bay||Replacement of the 62-year-old Morro Bay-Cayucos Wastewater Treatment Plant with a new water reclamation facility.||$82||$167||49%|
|Southeast Water Pollution Control Plant Biosolids Digester Facilities Project||San Francisco Public Utilities Commission||Replacement of the outdated existing 60-year- old solids treatment facilities with infrastructure that produces higher-quality Class A biosolids, captures and treats odors more effectively and maximizes biogas utilization and energy recovery.||$625||$1,300||48%|
The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.
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Originally presented June 27, 2017 | 07.05.17