On June 10, 2014, President Obama signed into law the new Water Resources and Reform Development Act of 2014 (“WRRDA”). The Act’s primary purpose is to improve America’s water infrastructure through the funding of construction programs and projects. Introduced in 2012 by Senators Barbara Boxer (D) and David Vitter (R), the bill garnered unusual bi-partisan support. The WRRDA is also noteworthy because of something the Act is missing. No earmarks. As noted by Speaker John Boehner (R), “this is quite a departure for a bill whose claim to fame -or infamy, as it were – was being saturated with earmarks. Hundreds of them.” Of significant importance, the WRRDA provides an avenue for the use and acceleration of private investment.
The WRRDA establishes the Water Infrastructure Finance and Innovation Authority (“WIFIA”), which will oversee a program to provide financial assistance for wastewater, drinking water and other water related projects. As part of the WIFIA program, Congress has allocated millions of dollars in federal funds. Some of which will be used to provide low interest loans, guarantees and subsidies to governmental entities for water infrastructure revitalization projects such as wastewater treatment facilities and flood risk mitigation programs.
WIFIA takes an approach modeled after the Transportation Infrastructure Finance and Innovation Act to attract private investment for water related projects. Under the loan program, WIFIA borrowers are not awarded a 100% of projected cost loan. Furthermore, the WIFIA borrowers are prohibited from supplementing the balance needed to fully fund the project with tax exempt financing. This presents a huge opportunity for private investment. In theory, the following is an example on how the WIFIA loan program would work to encourage an influx of private dollars:
The Louisville and Jefferson County Metropolitan Sewer District (“MSD”) needs 150 million dollars to fully fund modifications to a wastewater treatment facility and its related system. WIFIA provides MSD with a 77 million dollar very low interest loan with beneficial terms. As a WIFIA borrower, MSD would be precluded from procuring the balance of 73 million dollars needed from tax-exempt financing. Instead, the MSD must reach out to the private community to secure the funds to make up any shortfall for project costs.
Will WIFIA actually work to encourage private investment and job growth? One indication that it might are the endorsements of the program by trade organizations like the American Soybean Association and the Associated General Contractors of America. However, there are voiced concerns proffered by government entities and related organizations like the Association of Metropolitan Water Agencies and the National League of Cities to repeal portions of the WRRDA, specifically the loan prohibition on tax exempt financing. Ultimately, only time will tell if the WRRDA innovative approach will succeed.