Congress will have a chance in the coming weeks to consider two pieces of legislation aimed at increasing investment in water infrastructure, including through bonds and public-private partnerships.
A draft of the new Water Resources Development Act crafted by Senate Environment and Public Works Committee chairman Barbara Boxer, D-Calif., includes a pilot program that would offer low-interest loans and loan guarantees for water infrastructure projects. Modeled on the highway-focused Transportation Infrastructure Finance and Innovation Act, or TIFIA, the new program, called WIFIA, would be authorized at $250 million over five years
The loans would be available to supplement bond financing and public private partnerships for a variety of water-oriented construction problems, such as flood control systems and water treatment plants. The program would be administered through the Environmental Protection Agency and loans could be secured by a private corporation, a public-private partnership, local or state governments, tribal governments, and state financing authorities.
To be eligible for WIFIA assistance under the terms of the draft legislation, the borrower applicant would need to supply a letter from at least one credit rating agency showing that the loan could receive an investment-grade rating. Repayment would have to come from a dedicated revenue source, and the cost of the project would have to be anticipated to be at least $20 million.
But the WIFIA program could suffer from some of the same limitations as TIFIA. Many states and localities almost never undertake such large infrastructure projects, and similar limitations have caused the TIFIA program to go unused in 39 states.
But the WIFIA program, long-speculated upon and first formally announced as a strong possibility by both Boxer and Rep. Bob Gibbs, R-Ohio last year, has garnered huge support from stakeholders. Aurel Arndt, general manager of the Lehigh County Authority in Allentown, Pa., testified last week before a House subcommittee that the House should also include WIFIA in its version of the WRDA bill.
“About 70% of American communities use municipal bonds and other forms of debt to finance water infrastructure projects,” Arndt said. “Being able to lower the interest rate by just a few percentage points on a multi-million-dollar loan can amount to significant savings in the cost of an infrastructure project. These savings for local borrowers can significantly accelerate needed water infrastructure investment by making it more affordable for utilities and their customers.”
Speaking for the American Water Works Association, Arndt added that it ought to be the utility itself that would apply for and receive loans through WIFIA, rather than a private partner. With a few tweaks and the preservation of the tax-exempt status of municipal bonds, Arndt said, WIFIA could provide a crucial tool for U.S. water infrastructure.
“In short, WIFIA will allow our nation to build more water infrastructure at less cost,” he said.
Bipartisan, bicameral legislation introduced last week by Reps. Cheri Bustos, D-Ill. and Rodney Davis, R-Ill., along with Sens. Dick Durbin, D-Ill. and Mark Kirk, R-Ill., would get the private sector involved in a slightly different way. The Water Infrastructure Now Public-Private Partnership Act would create a pilot program to explore agreements between the Army Corps of Engineers and private entities as alternatives to traditional financing, planning, design, and construction models.
The five-year pilot program would identify up to 15 previously authorized navigation, flood damage reduction, and hurricane and storm damage reduction projects that have not been realized due to a $60 billion backlog in the Corps’ to-do list. The Corps would then enter into agreements with private entities to move forward with those projects.
“In government we need to be innovative and learn how to do more with less, which is why I’m such a strong supporter of public-private partnerships,” said Davis. “This bipartisan, bicameral legislation will help us to fulfill our responsibility to invest in our nation’s infrastructure.”
The act would require an audit of activities of the private entities and would require a non-interested third party to complete a study to determine whether a proposed agreement provides a better public and financial benefit than the current system. The legislation would not allow the privatization of federal assets.
Both bills fall under the jurisdiction of Boxer’s committee and the House Committee on Transportation and Infrastructure. Rep. Bill Shuster, R-Pa., who chairs the House committee, has said he will begin work on a WRDA bill in the coming weeks.