Water Infrastructure Financing: The Water Infrastructure Finance and Innovation Act (WIFIA) Program
Congressional research reportMay 1, 2019
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Water Infrastructure Financing: The Water
Infrastructure Finance and Innovation Act
(WIFIA) Program
Jonathan L. Ramseur
Specialist in Environmental Policy
Mary Tiemann
Specialist in Environmental Policy
Elena H. Humphreys
Analyst in Environmental Policy
Updated May 1, 2019
Congressional Research Service
7-....
www.crs.gov
R43315
Water Infrastructure Financing: The WIFIA Program
Summary
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 April 5, 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 would provide approximately $6
billion in credit assistance.
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Water Infrastructure Financing: The WIFIA Program
Contents
Introduction ..................................................................................................................................... 1
Program Overview .......................................................................................................................... 2
WRRDA 2014 ........................................................................................................................... 2
AWIA 2018 ............................................................................................................................... 4
Appropriations ................................................................................................................................. 5
EPA Implementation ........................................................................................................................ 6
Selected Issues ................................................................................................................................. 9
Subsidy Amount for Credit Assistance...................................................................................... 9
Loan Interest Rates and Default Risk ...................................................................................... 10
Interactions with Existing Water Financing Programs ............................................................ 10
Potential Federal Revenue Loss from Tax-Exempt Bonds...................................................... 12
Figures
Figure 1. WIFIA Appropriations ..................................................................................................... 6
Tables
Table 1. EPA Implementation of WIFIA ......................................................................................... 8
Contacts
Author Contact Information .......................................................................................................... 13
Acknowledgments ......................................................................................................................... 13
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Water Infrastructure Financing: The WIFIA Program
Introduction
Water infrastructure issues, particularly regarding funding, continue to receive attention from
some Members of Congress and a wide array of stakeholders. Localities are primarily responsible
for providing wastewater and drinking water infrastructure services. According to the most recent
estimates by states and the U.S. Environmental Protection Agency (EPA), expected capital costs
for such facilities total $744 billion over a 20-year period.1 While some analysts and stakeholders
debate whether these estimates understate or overstate capital needs, most agree that the affected
communities face formidable challenges in providing adequate and reliable water infrastructure
services.
Capital investments in water infrastructure are necessary to maintain high quality service that
protects public health and the environment, and capital facilities are a major investment for local
governments. The vast majority of public capital projects are debt-financed (i.e., they are not
financed on a pay-as-you-go basis from ongoing revenues to the water utility). The principal
financing tool that local governments use is the issuance of tax-exempt municipal bonds. At least
70% of U.S. water utilities rely on municipal bonds and other debt to some degree to finance
capital investments.2 Beyond municipal bonds, federal assistance through grants and loans is
available for some projects but is insufficient to meet all needs. Finally, public-private
partnerships (P3s), which are long-term contractual arrangements between a public utility and a
private company, currently provide only limited capital financing in the water sector. Although
they are increasingly used in transportation and some other infrastructure sectors, especially P3s
that involve private sector debt or equity investment in a project, most P3s for water infrastructure
involve contract operations for operation and maintenance. Numerous drinking water utilities are
privately owned and make significant private capital investments in water infrastructure,3 unlike
the wastewater sector, in which facilities are generally owned by municipalities.
In recent years, Congress has considered several legislative options to help finance water
infrastructure projects, including projects to build and upgrade wastewater and drinking water
treatment facilities. Some Members have offered proposals that would amend, supplement, and/or
complement the existing clean water and drinking water State Revolving Fund (SRF) programs.4
Other proposals would address water infrastructure issues outside the framework of the SRF
programs.
1 EPA’s most recent estimate of capital needs for wastewater infrastructure was published in 2016. See EPA, Clean
Watersheds Needs Survey 2012, Report to Congress, EPA-830-R-15005, January 2016. The most recent EPA needs
estimate for drinking water infrastructure was issued in 2018. See EPA, Drinking Water Infrastructure Needs Survey
and Assessment, EPA-816-K-17-002, March 2018. Operation and maintenance (O&M) needs are not included in these
cost estimates, because the clean water and drinking water SRF programs cannot provide funding for O&M activities.
2 Testimony of Aurel Arndt, American Water Works Association, in U.S. Congress, Senate Committee on Environment
and Public Works, “The Federal Role in Keeping Water and Wastewater Infrastructure Affordable,” 114th Cong., 2nd
sess., April 7, 2016.
3 The National Association of Water Companies, representing private water companies, estimates that “its six largest
members alone are collectively investing nearly $2.7 billion each year in their water systems—and these six companies
provide service to about six percent of the U.S. population.” Testimony of Martin A. Kropelnicki, National Association
of Water Companies, before House Committee on Energy and Commerce, Subcommittee on Environment,
Reinvestment and Rehabilitation of Our Nation’s Safe Drinking Water Delivery Systems, 115th Cong., 1st sess., March
16, 2017, p. 2.
4 For more information on the SRF programs see CRS Report R44963, Wastewater Infrastructure: Overview, Funding,
and Legislative Developments, by Jonathan L. Ramseur; and CRS Report R45304, Drinking Water State Revolving
Fund (DWSRF): Overview, Issues, and Legislation, by Mary Tiemann.
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In 2014, Congress established the Water Infrastructure Finance and Innovation Act (WIFIA)
program, which creates a new mechanism of providing financial assistance for water
infrastructure projects. The first section of this report provides an overview of the WIFIA
program, including its origins, scope, and applicability. The second section describes WIFIA
program appropriation levels and estimates of the amount of credit assistance the federal funding
would provide. The third section discusses EPA’s implementation of the WIFIA program,
including recent developments. The fourth section identifies selected issues that may be of
interest to policymakers.
Program Overview
The WIFIA approach for supporting investment in water infrastructure is modeled after the
Transportation Infrastructure Finance and Innovation Act (TIFIA) program, which was
established in 1998 (see textbox below for further details). As the name suggests, only
transportation projects are eligible for TIFIA assistance. The TIFIA program generated interest in
creating a similar program for water infrastructure.
As discussed below, the Water Resources Reform and Development Act of 2014 (WRRDA 2014)
established and authorized appropriations for the WIFIA program. Congress provided the first
appropriations for EPA to offer credit assistance, such as direct loans, under the WIFIA program
in FY2017. In 2018, America’s Water Infrastructure Act of 2018 (AWIA) reauthorized
appropriations for the program and amended certain WIFIA provisions.5
Transportation Infrastructure Finance and Innovation Act (TIFIA)
TIFIA was enacted as part of the Transportation Equity Act for the 21st Century (TEA-21; P.L. 105-178) and was
reauthorized in 2012 in the Moving Ahead for Progress in the 21st Century Act (MAP-21; P.L. 112-141). TIFIA
provides federal credit assistance up to a maximum of 49% of project costs in the form of secured loans, loan
guarantees, and lines of credit (23 U.S.C. 601 et seq.). Transportation projects costing at least $50 million (or at
least $25 million in rural areas) are eligible for TIFIA financing. The threshold for Intelligent Transportation
Systems projects is $15 million. Projects must also have a dedicated revenue stream to be eligible for credit
assistance. TIFIA can provide senior or subordinated debt. With the enactment of MAP-21, funding authorized for
the TIFIA program increased from $122 million annually to $750 million in FY2013 and $1 billion in FY2014 and
FY2015. However, the Fixing America’s Surface Transportation Act (FAST Act, P.L. 114-94), enacted in December
2015, reduced the amount available to support TIFIA loans and other credit assistance. Under the FAST Act, the
annual amount is $275 million in each of FY2016 and FY2017, $285 million in FY2018, and $300 million in each of
FY2019 and FY2020.
WRRDA 2014
WRRDA 2014 established a five-year WIFIA pilot program.6 The act authorized (1) EPA to
provide credit assistance (loans or loan guarantees)7 for a range of drinking water and wastewater
5 The Fixing America’s Surface Transportation Act (FAST Act, P.L. 114-94) also made a change to WIFIA as
discussed below.
6 The President signed the bill into law on June 10, 2014 (P.L. 113-121). A standalone measure to create a WIFIA
program was also introduced in the 113th Congress: S. 335 proposed to empower the EPA Administrator to provide
credit assistance to drinking water and wastewater infrastructure projects. It was not a pilot program, as in P.L. 113121.
7 Although WIFIA credit assistance may include direct loans and loan guarantees, EPA stated that based on experience
from comparable government credit programs, the agency does not anticipate immediate demand for loan guarantee
instruments. See EPA, WIFIA Program Handbook, 2017, https://www.epa.gov/sites/production/files/2017-07/
documents/program_handbook_7-18-17_final.pdf.
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projects and (2) the U.S. Army Corps of Engineers to provide similar assistance for water
resource projects, such as flood control or hurricane and storm damage reduction.
Congress provided appropriations to EPA to administer the WIFIA program in FY2014. Congress
has not appropriated analogous funds to the Corps (nor has the Administration requested funds for
a Corps WIFIA program) that would enable the Corps to implement a WIFIA program as laid out
in WRRDA 2014. Regardless, this section identifies WIFIA provisions relating to both EPA and
the Corps.
To implement the program, the act authorized appropriations of $175 million over five years to
both EPA and the Corps (beginning with $20 million for each agency in FY2015 and increasing
to $50 million in FY2019). Project costs must generally be $20 million or larger to be eligible for
credit assistance. For projects in less populous communities (defined by WIFIA as populations of
25,000 or less), project costs must be $5 million or more. WIFIA credit assistance is available to
state infrastructure financing authorities;8
a corporation;
a partnership;
a joint venture;
a trust; or
a federal, state, local, or tribal government (or consortium of tribal governments).
In the case of projects carried out by private entities, such projects must be publicly sponsored. To
meet this requirement, WIFIA allows a project applicant to demonstrate to the EPA or the Corps
that the affected state, local, or tribal government supports the project. The maximum amount of a
loan is 49% of eligible project costs, but the act authorizes EPA or the Corps to make available up
to 25% of available funds each year for credit assistance in excess of 49% of project costs. Except
for certain projects in rural areas, the total amount of federal assistance (i.e., WIFIA and other
sources combined) may not exceed 80% of a project’s cost.
Activities eligible for assistance under the WIFIA pilot program include project development and
planning, construction, acquisition of real property, and carrying costs during construction.
Categories eligible for assistance by EPA include
projects eligible for assistance through the clean water state revolving fund
(CWSRF) and drinking water state revolving fund (DWSRF) programs (i.e.,
wastewater treatment and community drinking water facilities);
enhanced energy efficiency of a public water system or wastewater treatment
works;
repair or rehabilitation of aging wastewater and drinking water systems;
desalination, water recycling, aquifer recharge, or development of alternative
water supplies to reduce aquifer depletion;
prevention, reduction, or mitigation of the effects of drought;9 or
a combination of eligible projects.
8 State agencies may submit one application that addresses multiple projects.
9 The WIIN Act (P.L. 114-322) expanded WIFIA eligibility to include projects involving aquifer recharge;
development of alternative water supplies to reduce aquifer depletion; and prevention, reduction, or mitigation of the
effects of drought. For more information, see CRS In Focus IF10536, Water Infrastructure Improvements for the
Nation Act (WIIN), by Nicole T. Carter et al.
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Categories eligible for assistance by the Corps include
flood control or hurricane and storm damage reduction projects,
environmental restoration,
coastal or inland harbor navigation improvement, or
inland and intracoastal waterways navigation improvement.
The EPA Administrator or Secretary of the Army, as appropriate, determines project eligibility
based on creditworthiness and dedicated revenue sources for repayment. Selection criteria include
the national or regional significance of the project,
extent of public or private financing in addition to WIFIA assistance,
use of new or innovative approaches,
the amount of budget authority required to fund the WIFIA assistance,
the extent to which a project serves regions with significant energy development
or production areas, and
the extent to which a project serves regions with significant water resources
challenges.
Responding to concerns from some groups that WIFIA could impair and diminish support for
clean water and drinking water SRF programs under the Clean Water Act and Safe Drinking
Water Act (see discussion below), the act requires the EPA Administrator, when the agency
receives applications for WIFIA assistance, to notify state infrastructure financing authorities and
give them the opportunity to commit funds to the project.
WIFIA-assisted projects must use American-made iron and steel products. Projects must also
comply with the prevailing wage requirements of the Davis-Bacon Act in the same manner that
they would under the SRF provisions of the Clean Water Act.10
In addition, the act directed EPA and the Corps to provide information on a website concerning
applications and projects that have received assistance, and the Government Accountability
Office must report to Congress (four years after enactment, i.e., June 10, 2018) on the program
and provide recommendations for continuing, changing, or terminating the WIFIA program. 11 As
discussed below, AWIA extended the deadline for this report.
AWIA 2018
AWIA, enacted on October 23, 2018, amended WIFIA in several ways:12
It removed WIFIA’s designation as a pilot program.
It authorized appropriations of $50.0 million for each of FY2020 and FY2021 for
EPA program implementation.
It authorized EPA to administer the WIFIA program for relevant agencies
(through an interagency agreement), specifically directing EPA to enter into such
10 For more background on the Davis-Bacon Act, see this Department of Labor website, https://www.dol.gov/whd/
govcontracts/dbra.htm.
11 EPA’s WIFIA website is https://www.epa.gov/wifia.
12 For more information on AWIA, see CRS Report R45656, America’s Water Infrastructure Act of 2018 (P.L. 115270): Drinking Water Provisions, by Elena H. Humphreys.
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an agreement with the commissioner of the Bureau of Reclamation within the
Department of the Interior.
It required the Government Accountability Office to prepare a report for
Congress by October 23, 2021.
In addition, AWIA authorized an additional $5 million in WIFIA appropriations to provide credit
assistance to state finance authorities to support combined projects eligible for assistance from the
CWSRF and DWSRF. This additional appropriation authority is available for FY2020 and
FY2021 and is available only if (1) Congress appropriates funding for both the CWSRF and the
DWSRF at FY2018 levels or 105% or more of the previous year’s funding, whichever is greater,
and (2) EPA receives at least $50.0 million in WIFIA appropriations. State financing authorities
may use funding from WIFIA appropriations to cover 100% of project costs, in contrast to the
80% federal financial assistance cap that applies to most WIFIA-financed projects.13
Appropriations
For each of FY2015 and FY2016, Congress provided $2.2 million for EPA to hire staff and
design the new water infrastructure assistance program. In FY2017, Congress provided the first
appropriations to cover the subsidy cost of the program, thus allowing implementation of WIFIA
(i.e., making project loans). Congress provided a total of $30 million for the WIFIA program for
FY2017 through two appropriations acts:
The Further Continuing and Security Assistance Appropriations Act, 2017 (P.L.
114-254), enacted on December 10, 2016, provided the first appropriation of
funds to cover the subsidy cost of the program. P.L. 114-254 appropriated $20
million to EPA to begin making loans and allowed the agency to use up to $3
million of the total for administrative purposes. The act authorized EPA to use
these appropriations to subsidize costs to provide credit assistance not to exceed
$2.1 billion.14
The Consolidated and Further Continuing Appropriations Act, 2017 (P.L. 11531), enacted on May 5, 2017, provided an additional $8 million for EPA to apply
toward loan subsidy costs and $2 million for EPA’s administrative expenses.15
The act authorized EPA to use funds to guarantee as much as $976 million in
direct loans.16
For FY2018, the Consolidated Appropriations Act, 2018 (P.L. 115-141), provided $63 million for
the WIFIA program (including $8 million for administrative costs).17 The act authorized EPA to
13 33 U.S.C. §3908(b)(9)(C). Amended by Section 4201 in America’s Water Infrastructure Act of 2018 (P.L. 115-270).
14 P.L. 114-254 §197(a).
15 The $8 million appropriation for loan subsidy costs remain available until expended and $2 million for EPA’s
administrative expenses remain available until September 30, 2018 (P.L. 115-31).
16 P.L. 115-31, Division G, Title II.
17 Prior to the enactment of P.L. 115-141, the Continuing Appropriations Act, 2018, and Supplemental Appropriations
for Disaster Relief Requirements Act, 2017 (P.L. 115-56, §133), provided to EPA for FY2018 administrative expenses
to carry out the WIFIA program “at a rate for operations of $3 million.” The $55 million appropriation for loan subsidy
costs remains available until expended and $8 million for EPA’s administrative expenses remains available until
September 30, 2019 (P.L. 115-141).
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use funds to guarantee as much as $6.71 billion in direct loans.18 EPA estimated that its budget
authority ($55 million) would provide approximately $5.5 billion in credit assistance.19
For FY2019, the Consolidated Appropriations Act, 2019 (P.L. 116-6) provided $68 million for the
WIFIA program, including $8 million for administrative costs.20 The act authorized EPA to use
funds to guarantee as much as $7.31 billion in direct loans.21 EPA estimated that its budget
authority ($60 million) would provide approximately $6 billion in credit assistance.22
Figure 1 illustrates the WIFIA appropriations for administrative purposes and for loan subsidy
costs between FY2017 and FY2019. The appropriations acts for FY2017 through FY2019 state
that the appropriations for the subsidy costs would be available until expended. In contrast, fiscal
year appropriations for WIFIA administrative costs are not available after specific dates.
Figure 1. WIFIA Appropriations
in millions of dollars
Source: Prepared by CRS. FY2017 appropriations from P.L. 114-254 and P.L. 115-31. FY2018 appropriations
from P.L. 115-141. FY2019 appropriations from P.L. 116-6.
As discussed above, WRRDA 2014 authorized a parallel program for water resources projects to
be administered by the Corps. Congress has not yet appropriated funds (nor has the
Administration requested funds for a Corps WIFIA program) that would enable the Corps to
begin preparations or begin making WIFIA loans under the authority in the 2014 statute.
EPA Implementation
EPA began preparing for implementation of the WIFIA program, including through a series of
public listening sessions in several U.S. cities, in 2014. The intended audience was municipal,
18 P.L. 115-141, Division G, Title II, authorized EPA to use funds to guarantee as much as $610 million in credit
assistance, and Section 430(c) of Title IV authorized EPA to use the appropriation to guarantee as much as $6.1 billion.
19 EPA, “FY2018 Notice of Funding Availability,” https://www.epa.gov/wifia/how-apply-wifia-assistance-0#notice.
20 The $60 million appropriation for loan subsidy costs remains available until expended, and $8 million for EPA’s
administrative expenses remains available until September 30, 2020 (P.L. 116-6).
21 P.L. 116-6, Division E, Title II, authorized EPA to use funds to guarantee as much as $610 million in credit
assistance, and Section 429(c) of Title IV authorized EPA to use the appropriation to guarantee as much as $6.7 billion.
22 EPA, “FY2019 Notice of Funding Availability,” https://www.epa.gov/wifia/how-apply-wifia-assistance-0#notice.
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state, and regional water utility officials; private sector financing professionals; and other
interested organizations and parties. The purpose was to discuss project ideas, potential selection
and evaluation criteria, and numerous other implementation issues.
In 2016, EPA issued two rules intended to explain and clarify some provisions of the program and
establish guidelines for the application process. One was an interim final rule that sets guidelines
for the application and selection of projects, defines the requirements for credit assistance, and
defines reporting requirements and a fee collection structure.23 In this rule, EPA said that it would
initially give funding priority to four types of projects:
1. adaptation to extreme weather and climate change;
2. enhanced energy efficiency of wastewater treatment works and public water
systems;
3. green infrastructure;24 and
4. repair, rehabilitation, and replacement of infrastructure and conveyance systems.
Through the second rulemaking, EPA proposed a fee structure for WIFIA (application fee, credit
processing fee, and servicing fee).25 EPA finalized this rule in June 2017.26 WIFIA authorizes EPA
to charge fees to recover all or a portion of the agency’s costs administering the program.27 EPA’s
final rule requires a nonrefundable fee for each project that is invited to submit a full WIFIA
application. The application fee is $100,000, or $25,000 for projects serving small communities.
The fees are not required in connection with submission of letters of interest but would be
required for projects that EPA expects might reasonably proceed to closing on a credit assistance
agreement. Enacted December 16, 2016, the Water Infrastructure Improvements for the Nation
(WIIN) Act (P.L. 114-322, Section 5008(c)) amended WIFIA to allow fees to be financed as part
of the loan at the request of an applicant.28 In 2018, AWIA amended WIFIA to clarify that state
23 EPA, “Credit Assistance for Water Infrastructure Projects, interim final rule; request for public comments,” 81
Federal Register 91822, December 19, 2016. An interim final rule is one that is adopted without prior public comment
and is made effective immediately, although federal agencies typically request comments and can alter the interim rule
if warranted by public comments.
24 In the interim final rule, EPA defines green infrastructure as follows:
Green infrastructure includes a wide array of practices at multiple scales that manage wet weather
and that maintains and restores natural hydrology by infiltrating, evapotranspiring and harvesting
and using stormwater. On a regional scale, green infrastructure is the preservation and restoration
of natural landscape features, such as forests, floodplains and wetlands, coupled with policies such
as infill and redevelopment that reduce overall imperviousness in a watershed. On the local scale,
green infrastructure consists of site- and neighborhood-specific practices, such as bioretention,
trees, green roofs, permeable pavements and cisterns. (81 Federal Register 91828)
25 EPA, “Fees for Water Infrastructure Project Applications Under WIFIA,” Proposed Rule, 81 Federal Register
91890, December 19, 2016. EPA credits the application fee toward the credit processing fee, which is due upon the
execution of the loan agreement. The amount of the credit processing fee varies from project to project, as this fee is
intended to reimburse EPA for legal, financial, engineering, and other contracted services. If a final loan agreement is
not made, the entity must still pay relevant fees to EPA for costs incurred.
26 EPA, “Fees for Water Infrastructure Project Applications Under WIFIA, Final Rule,” 82 Federal Register 29242,
June 28, 2017.
27 33 U.S.C. §3909.
28 In the preamble to its final rule, EPA notes:
While not reflected in this rule, the ability to finance fees as part of a WIFIA loan is an option
available to applicants. EPA will publish additional information or guidance, as necessary, on its
Web site. (82 Federal Register 29242)
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financing authorities cannot pass along application fees on to the parties that utilize WIFIA
assistance.
After EPA received its first appropriations to cover loan subsidy costs, it announced its first round
of funding for the WIFIA program in January 2017.29 Additional rounds of funding have followed
with each fiscal year’s enacted appropriations.
Table 1 provides details for each of EPA’s funding rounds, including the project priorities EPA
listed in its annual funding notices, the number of letters of interest submitted, selected projects,
and loans closed.
Table 1. EPA Implementation of WIFIA
Fiscal
Year
2017
2018
2019
Letters of
Interest
Selected
Projects
Loans Closed
Project priorities: Adaption to extreme
weather events and climate change, enhanced
energy efficiency of water utilities, green
infrastructure, rehabilitation, and replacement
of water infrastructure.
Published: January 10, 2017
43
12
8
Project priorities: Provide clean and safe
drinking water, including reducing exposure
to lead; repair, rehabilitate, and replace aging
water infrastructure and conveyance systems.
Published: April 12, 2018
62
39
0
Project priorities: Readiness to proceed;
provide safe drinking water, including
reducing exposure to lead and addressing
emerging contaminants such as per- and
polyfluoroalkyl substances; repair,
rehabilitate, and replace aging water
infrastructure and conveyance systems; water
reuse and recycling.
Published: April 5, 2019
Not yet available
(NYA)
NYA
NYA
Notice of Funding Availability
In aggregate, the
closed loans account
for $1.39 billion in
federal financing
Source: Compiled by CRS from EPA, “Notice of Funding Availability for Applications for Credit Assistance
Under the WIFIA Program,” 82 Federal Register 2933, January 10, 2017; EPA, “Notice of Funding Availability for
Applications for Credit Assistance Under the WIFIA Program,” 83 Federal Register 15828, April 12, 2018; EPA,
“Notice of Funding Availability for Applications for Credit Assistance Under the WIFIA Program,” 84 Federal
Register 13657, April 5, 2019; https://www.epa.gov/wifia/wifia-selected-projects and https://www.epa.gov/wifia/
wifia-letters-interest.
Notes: This information is current as of the date of this report.
29 EPA, “Notice of Funding Availability for Applications for Credit Assistance Under the WIFIA Program,” 82 Federal
Register 2933, January 10, 2017.
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Selected Issues
Subsidy Amount for Credit Assistance
From the federal perspective, an advantage of the WIFIA program is that it can provide a large
amount of credit assistance relative to the amount of budget authority provided. In federal
budgetary terms, WIFIA assistance has less of an impact than a grant, which is not repaid to the
U.S. Treasury.
The volume of loans and other types of credit assistance that the program can provide is
determined by the size of congressional appropriations and calculation of the subsidy amount.
WIFIA defines the “subsidy amount” as follows:
The amount of budget authority sufficient to cover the estimated long-term cost to the
Federal Government of a Federal credit instrument, as calculated on a net present value
basis, excluding administrative costs and any incidental effects on governmental receipts
or outlays in accordance with the Federal Credit Reform Act of 1990 (2 U.S.C. 661 et
seq.).30
The subsidy amount, which is often expressed in percentage terms or as a ratio (i.e., subsidy rate),
largely determines the amount of credit assistance that can be made available to project
sponsors.31 For example, if a project’s subsidy rate is 10% and is the only charge against available
budget authority, a $20 million budgetary allocation could theoretically support a $200 million
loan. A lower subsidy rate would support a larger loan amount.
As a reference point, the Office of Management and Budget (OMB) identified a TIFIA subsidy
rate of 6.30% for direct loans in FY2020.32 Proponents of WIFIA have argued that loans for water
projects are likely to be less risky than transportation projects, because water utility collections
for services (i.e., water rates) provide an established revenue stream and repayment mechanism;
thus the subsidy cost would be lower and the amount of credit assistance higher (per dollar of
budget authority).33 Adding caution, however, analysts note that, even with stable revenue
mechanisms, some communities and water utilities have recently experienced problems with
borrowing and bond repayments, so repayment of a WIFIA loan is not a certainty.34
In the Trump Administration’s FY2020 budget proposal, OMB estimated a 0.91% subsidy rate for
WIFIA.35 This equates to a 1:110 ratio. At this subsidy rate, a $10 million appropriation could
support a direct loan (or loans) totaling $1.10 billion. However, this subsidy rate is an estimate for
30 33 U.S.C. §3901(13).
31 Douglas J. Elliott, Budgeting for Credit Programs: A Primer, Center for Federal Financial Institutions, April 2004,
http://www.coffi.org/pubs/Budgeting%20Primer.pdf.
32 OMB, Budget of the United States Government, FY2020 Supplemental Materials, Direct Loans: Subsidy Rates,
Obligations, and Average Loan Size.
33 See for example, testimony of Aurel Arndt, in U.S. Congress, House Committee on Transportation and
Infrastructure, Subcommittee on Water Resources and Environment, hearing on Innovative Funding of Water
Infrastructure of the United States, 112th Cong., 2nd sess., February 28, 2012,
http://republicans.transportation.house.gov/Media/file/TestimonyWater/2012-02-28-Arndt.pdf.
34 LaShell Stratton-Childers, “Navigating a Rough Terrain,” Water Environment and Technology, January 2012, pp.
24-29. This article describes the November 2011 bankruptcy filing by Jefferson County, AL, in part resulting from the
county’s inability to cover debts for wastewater system upgrades.
35 OMB, Budget of the United States Government, FY2019, Federal Credit Supplement, Table 1, https://www.gpo.gov/
fdsys/pkg/BUDGET-2019-FCS/pdf/BUDGET-2019-FCS.pdf.
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budgetary purposes. In the context of WIFIA implementation, subsidy rates are project-specific.36
EPA stated that the subsidy rate
is used for budgetary purposes and provides an estimate for what will be available for loans
each year based on the anticipated riskiness of the future loan portfolio. The actual ratio
will be determined for each project at the time of loan obligation. Project A with a higher
credit quality would consume less of the credit subsidy than Project B with a lower credit
quality, even if the projects are otherwise identical. Each applicant will be scored
independently.37
Loan Interest Rates and Default Risk
The WIFIA program provides capital at a low cost to the borrower, because even though the
interest on 30-year Treasury securities is taxable, Treasury rates can be less expensive than rates
on traditional tax-exempt municipal debt. Moreover, WIFIA financing may be characterized as
patient capital, because loan repayment does not need to begin until five years after substantial
completion of a project, the loan can be for up to 35 years from substantial completion, and the
amortization schedule can be flexible. In addition, there is less perceived investment risk, because
the project has been determined to be creditworthy (i.e., there is a revenue stream for repayment).
Additionally, the WIFIA program has the potential to limit the federal government’s exposure to
default by relying on market discipline through creditworthiness standards and encouraging
private capital investment.
On the other hand, the Congressional Budget Office (CBO) has argued38 that the federal
government underestimates the cost of providing credit assistance under such programs because it
excludes
the cost of market risk—the compensation that investors require for the uncertainty of
expected but risky cash flows. The reason is that the [Federal Credit Reform Act] requires
analysts to calculate present values by discounting expected cash flows at the interest rate
on risk-free Treasury securities (the rate at which the government borrows money). In
contrast, private financial institutions use risk-adjusted discount rates to calculate present
values.39
In an effort to encourage nonfederal and private sector financing, WIFIA funding assistance
generally cannot exceed 49% of project costs. In addition, WIFIA limits all sources of federal
assistance to no more than 80% of a project’s cost.
Interactions with Existing Water Financing Programs
In general, the WIFIA program is designed to support larger infrastructure projects with eligible
costs exceeding $20 million. For this reason, some have argued that the WIFIA program
complements existing water infrastructure financing tools—SRF programs under the Clean Water
Act and Safe Drinking Water Act—which are often used for smaller-scale projects.
36 33 U.S.C. §3908(a)(2).
37 EPA WIFIA website, “Frequent Questions,” https://www.epa.gov/wifia/learn-about-wifia-program#questions.
38 For more on this topic generally, see CBO, Fair-Value Accounting for Federal Credit Programs, March 2012,
http://www.cbo.gov/sites/default/files/cbofiles/attachments/03-05-FairValue_Brief.pdf.
39 CBO, “Estimating the Value of Subsidies for Federal Loans and Loan Guarantees,” August 2004, p. 2,
http://www.cbo.gov/ftpdocs/57xx/doc5751/08-19-CreditSubsidies.pdf.
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Policymakers set a lower minimum threshold for project costs ($5 million) for WIFIA projects in
communities with populations less than 25,000. One of 12 projects selected in the FY2017
funding round is located in a less populous community (Morro Bay, CA).40 Two of the 39 projects
in the FY2018 funding round are located in less populous communities (Frontenac, KS, and
Cortland, NY).
Generally, the level of interest from less populous communities in WIFIA financing is uncertain,
particularly considering the other financing options that may be available. The U.S. Department
of Agriculture has a variety of water and waste disposal programs to provide loans and grants for
wastewater and drinking water infrastructure in rural communities (10,000 people or fewer). In
addition, both of the SRF programs authorize states to provide subsidized financial assistance—
such as principal forgiveness, negative interest loans, or a combination—under certain
conditions.41 Appropriations acts in recent years have required states to use minimum percentages
of their federal grant amounts to provide additional subsidization. The FY2019 appropriations act
requires 10% of the CWSRF grants and 20% of the DWSRF grants to be used “to provide
additional subsidy to eligible recipients in the form of forgiveness of principal, negative interest
loans, or grants (or any combination of these).”
WIFIA financing can potentially support smaller projects by grouping, or aggregating, them
through a single application for financial assistance. For example, during the first round of WIFIA
funding (FY2017), one of the 12 entities selected to submit a loan application was the Indiana
Finance Authority, which administers the clean water and drinking water SRF programs in
Indiana. Indiana’s prospective WIFIA loan would provide $436 million to support multiple
projects in the state.
A major source of debate among opponents and proponents has been and continues to be potential
impacts of WIFIA on funds for the Clean Water Act and Safe Drinking Water Act SRF programs.
Several groups representing state environmental officials opposed the establishment of a WIFIA
program (in the 113th Congress). They argued that WIFIA funding could result in reduced
spending on the SRF programs, which are capitalized by federal appropriations. States are
concerned that WIFIA would likely be funded (through congressional appropriations) to the
detriment of the SRF programs.42
On the other hand, water utility groups that support WIFIA have argued that it would
complement, not harm, existing SRF programs. In their view, WIFIA will provide a new funding
opportunity for large water infrastructure projects that are unlikely to receive SRF assistance.43 As
described above, in part to address concerns about impacts of WIFIA on the SRF programs,
WIFIA requires EPA to notify state infrastructure financing authorities about WIFIA application
and gives state infrastructure financing authorities an opportunity to commit funds to the project.
Nevertheless, some states and environmental advocacy groups remain concerned that WIFIA will
compete with SRFs for congressional funding and that WIFIA will not prioritize public health or
affordability, as the SRFs can. The 2016 Water Infrastructure Improvements for the Nation Act
40 See https://www.epa.gov/sites/production/files/2017-07/documents/11_morro_bay_wifiaprojectfactsheet.pdf.
41 For more information, see CRS Report RL30478, Federally Supported Water Supply and Wastewater Treatment
Programs, coordinated by Jonathan L. Ramseur.
42 Letter from Association of Clean Water Administrators et al. to Honorable Bill Shuster, chairman, Committee on
Transportation and Infrastructure, and Honorable Nick J. Rahall II, ranking member, Committee on Transportation and
Infrastructure, October 24, 2013.
43 Letter from American Water Works Association, Association of Metropolitan Water Agencies, and Water
Environment Federation to Honorable Barbara Boxer, chairwoman, Committee on Environment and Public Works,
September 9, 2013.
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includes a “sense of the Congress” that WIFIA funding should be in addition to robust funding for
the SRFs.44
Potential Federal Revenue Loss from Tax-Exempt Bonds
Enacting the WIFIA program raised a federal budgetary and revenue issue. Legislation reported
by congressional committees is typically scored by the CBO for the effects on discretionary and
mandatory, or direct, spending and by the Joint Committee on Taxation (JCT) for effects on
revenue. The initial CBO cost estimate for S. 601, as approved by the Environment and Public
Works Committee in April 2013, concluded that the WIFIA provisions would cost $260 million
over five years. In addition, it would result in certain revenue loss to the U.S. Treasury; thus, payas-you-go procedures would have applied to the bill.45 CBO cited the JCT estimate that enactment
of the bill would reduce revenues by $135 million over 10 years, because states would be
expected to issue tax-exempt bonds for water projects in order to acquire additional funds not
covered by WIFIA assistance.46 To avoid the pay-as-you-go requirement in the bill, the committee
added a provision to S. 601 to prohibit recipients of WIFIA assistance from issuing tax-exempt
bonds for the non-WIFIA portions of project costs. CBO re-estimated the bill and concluded that,
because the change would make the WIFIA program less attractive to entities, most of which rely
on tax-exempt bonds for project financing, the cost of the bill would be $200 million less over
five years. CBO also said that the bill would have no impact on revenues, because the demand for
federal credit would be lower without the option of using tax-exempt financing.47 WRRDA 2014
retained the bar on tax-exempt financing for WIFIA-assisted projects. Thus, the apparent solution
to one issue in the legislation—potential revenue loss to the U.S. Treasury—raised a different
kind of issue for entities seeking WIFIA credit assistance, because tax-exempt municipal bonds
are the principal mechanism used by local governments to finance water infrastructure projects.
The restriction was widely criticized by potential users of WIFIA assistance. In their view, the
bond financing restriction in WRRDA 2014, together with the provision that caps WIFIA
assistance at 49% of project costs, would make it very difficult to finance needed projects.
Congressional interest in addressing the tax-exempt bond restriction was soon evident. For
example, H.R. 1710 in the 114th Congress proposed to make an exception from the limitation on
use of tax-exempt bonds for WIFIA loans made to finance water infrastructure projects in states
in which the governor has issued a state of drought emergency declaration.
More generally, in July 2015, the Senate passed H.R. 22, a bill to reauthorize highway and
transportation programs for six years. It included repeal of the provision in P.L. 113-121 that
limits any project receiving federal credit assistance under the WIFIA program from being
financed with tax-exempt bonds. However, repeal of the provision raised similar revenue
questions to those that arose in connection with P.L. 113-121. CBO’s report on S. 1647 (the
Senate Environment and Public Works Committee’s bill, which was the basis of Senate-passed
H.R. 22)48 stated that the Joint Committee on Taxation (JCT) estimated that repealing the WIFIA
44 P.L. 114-322, §5008(d).
45 “Pay-as-you-go,” or PAYGO, is a budget rule requiring that, relative to current law, any tax cuts or entitlement and
other mandatory spending increases must be paid for by a tax increase or a cut in mandatory spending. See CRS Report
RL31943, Budget Enforcement Procedures: The Senate Pay-As-You-Go (PAYGO) Rule, by Bill Heniff Jr.
46 CBO, Cost Estimate for S. 601, Water Resources Development Act of 2013, April 9, 2013, p. 6.
47 CBO, Cost Estimate for S. 601, Water Resources Development Act of 2013, April 17, 2013, p. 7.
48 U.S. Congress, Senate Committee on Environment and Public Works, Developing A Reliable and Innovative Vision
for the Economy (DRIVE) Act, report to accompany S. 1647, 114th Cong., 1st sess., July 15, 2015, S.Rept. 114-80
(Washington: GPO, 2015), pp. 27-33.
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limitation would increase states’ issuance of tax-exempt bonds for water projects and would
decrease federal revenues by $17 million over the FY2016-FY2025 period. Further, CBO
estimated that the change would increase demand for federal credit under the WIFIA program,
resulting in additional spending stemming from the appropriation levels authorized in P.L. 113121. Consequently, CBO estimated that implementing the WIFIA program would cost $146
million over the FY2016-FY2025 period.49
The issue of identifying offsets, or “pay-fors,” for the estimated federal revenue loss was
addressed in the conference agreement on H.R. 22, the FAST Act (P.L. 114-94). CBO estimated
that the conference agreement included offsets to fully cover the cost of the bill by reducing
spending or raising revenues.50 Thus, the enacted bill retained the provision repealing the taxexempt bond financing restriction on WIFIA assistance.
Author Contact Information
Jonathan L. Ramseur
Specialist in Environmental Policy
[redacted]@crs.loc.gov
, 7-....
Elena H. Humphreys
Analyst in Environmental Policy
[redacted]@crs.loc.gov , 7-....
Mary Tiemann
Specialist in Environmental Policy
[redacted]@crs.loc.gov, 7-....
Acknowledgments
This report was originally written by Claudia Copeland, who has retired from CRS.
49 CBO, Cost Estimate for S. 1647, Developing a Reliable and Innovative Vision for the Economy Act, July 14, 2015,
p. 3.
50 Letter from Keith Hall, director, CBO, to Honorable Bill Shuster, chairman, and Peter DeFazio, ranking member,
House Transportation and Infrastructure Committee, December 2, 2015, https://www.cbo.gov/sites/default/files/114thcongress-2015-2016/costestimate/hr22_1.pdf.
Congressional Research Service
R43315 · VERSION 41 · UPDATED
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