Get Your Project Off the Ground with WIFIA
Wouldn’t it be great if water and wastewater utilities could start an online crowdfunding campaign like Kickstarter or obtain federal grants to get their projects up and running? Unfortunately, the Environmental Protection Agency Construction Grants program has come and gone, but I would like to share with you another federal program that has proven to be very valuable, particularly for large capital projects.
The program is EPA’s Water Infrastructure Finance and Innovation Act. WIFIA was originally authorized in 2014 and is gaining traction as an innovative way to finance and deliver critical infrastructure projects. The first two loan cycles have included:
- $2.3 billion in WIFIA Loans (12 projects were invited to apply in 2017 from 43 letters of interest)
- $5 billion in WIFIA Loans (39 projects were invited to apply in 2018 from 62 letters of interest)
WIFIA can help borrowers accelerate delivery, save money on interest costs, and gradually increase rates as compared to traditional financing. Our team has had the opportunity to successfully support utilities in both funding rounds.
The program has proven to provide significant benefits, but I’d like to highlight three of my favorites:
- Low Interest: The WIFIA interest rate is equal to the US Treasury rate of a similar maturity (number of years of repayment). When working with the City of Omaha, the EPA estimated that the WIFIA Program saved them $20 million as compared to financing with traditional municipal bonds for their ~$100 million Saddle Creek Retention Treatment Basin. As part of our role on the Omaha CSO Program, we supported the City throughout the entire WIFIA application process. The City of Omaha was the second entity to reach loan closure in June 2018.
- Repayment Deferral (and Customized Repayment Schedules): The WIFIA Program allows a borrower to defer repayment up to 5 years after substantial completion of a project. In addition, borrowers can customize their repayments to match their anticipated revenues and expenses for the life of the loan. This flexibility provides time needed to generate revenue to repay the loan (i.e., phase in rate increases). In the latest funding round, we successfully supported a client who is planning to use the repayment deferral to proceed seven years earlier on their project than would have been possible without WIFIA financing.
- Earlier certainty: The WIFIA program has allowed our clients to “lock-in” the interest rate at loan closing. It is very difficult (or impossible) to predict future interest rates, but providing our clients earlier certainty on the financing costs is a benefit, particularly in the current environment when most are predicting a hike in federal interest rates.
Does WIFIA sound like it could help you? Feel free to reach out to me if you would like more specifics on project eligibility or potential benefits. The EPA has done a great job summarizing the program on its website: epa.gov/wifia.
We expect the EPA will release a notice of funding availability sometime in early 2019 (depending on the timing of federal appropriations). I look forward to helping our clients prepare WIFIA letters of interest and seeing more critical infrastructure projects take off in 2019!