WIFIA Program: Background and Recent Developments

WIFIA Program: Background and Recent Developments

Updated June 2, 2020
WIFIA Program: Background and Recent Developments
The Water Resources Reform and Development Act of
(2 U.S.C. §661(a)), the subsidy cost of federal credit
2014 authorized the Water Infrastructure Finance and
programs, such as WIFIA, accounts for potential losses to
Innovation Act (WIFIA) program to promote development
the government as a result of loan defaults. The subsidy
of and private investment in water infrastructure projects
cost is often presented as a percentage or a ratio (i.e.,
(33 U.S.C. §§3901-3914). Initially established as a five-
subsidy rate) and largely determines the amount of loans
year pilot program, WIFIA authorizes the U.S.
that can be made available. For example, if the subsidy cost
Environmental Protection Agency (EPA) and the U.S.
of a WIFIA loan is 10%, a $1 million appropriation can
Army Corps of Engineers (USACE) to provide credit
provide $10 million of loan capacity. A lower subsidy rate
assistance in the form of secured or direct loans for a range
would support a larger loan amount. Relative to its budget
of water infrastructure projects.
authority ($60 million in FY2020), WIFIA appropriations
may provide a large amount of loans. In appropriations acts,
Capital improvements for drinking water and wastewater
Congress has capped the amount of loans supported by
systems protect public health and support local economies.
WIFIA appropriations (e.g., the cap is $11.5 billion for
They typically require major investments. Based on its most
FY2020). WIFIA loans, which are repaid to the U.S.
recent surveys, EPA estimates that the wastewater and
Treasury, have less of a federal budgetary effect than the
drinking water infrastructure capital investment needed to
SRFs, because states do not repay capitalization grants.
meet Clean Water Act and Safe Drinking Water Act
objectives exceeds $744 billion over 20 years. This amount
Each WIFIA loan has a fixed interest rate, which is the U.S.
does not include costs to extend services to accommodate
Treasury rate for loans with a similar maturity on the date
population growth or to repair infrastructure not linked to
of loan execution. Borrowers can structure the WIFIA
compliance and related health and environmental goals.
repayment schedule to align with anticipated receipt of
revenue. Initial repayments of WIFIA assistance may be
Communities generally pay for water projects through debt
deferred up to five years after project completion, and the
financing (e.g., municipal bonds) and revenue from user
repayment period may be extended up to 35 years after
fees. In 2017, state and local resources accounted for more
completion. For more information, see CRS Report
than 96% ($108.8 billion) of the public spending on water
R43315, Water Infrastructure Financing: The Water
utilities, while the federal contribution accounted for the
Infrastructure Finance and Innovation Act (WIFIA)
remaining 4% ($4.2 billion), according to the Congressional
Program.
Budget Office (CBO Publication 54539).
Eligibility
WIFIA complements two EPA-administered programs: the
The range of eligible projects for the EPA-administered
Clean Water State Revolving Fund (SRF) and the Drinking
WIFIA program is broader than for the SRF programs.
Water SRF. For FY2020, combined appropriations for the
WIFIA-eligible projects include SRF projects as well as
SRF programs totaled $2.77 billion. In both programs, EPA
desalination and alternative water projects, drought
provides grants to states to capitalize their SRF loan
mitigation, and enhanced energy efficiency projects for
programs. States, in turn, use their federal grant, state
drinking water systems or wastewater treatment works.
match, and sources of borrowed funds (e.g., bonds) to
provide assistance (primarily subsidized loans) to help
Eligible entities for WIFIA assistance include (1) a state
communities afford water infrastructure. Eligible entities
infrastructure financing authority (SIFA); (2) a corporation;
for Clean Water SRF include municipalities, state agencies,
(3) a partnership; (4) a joint venture; (5) a trust; or (6) a
and private and nonprofit entities. Clean Water SRF
federal, state, local, or tribal government or instrumentality.
assistance can support a range of projects needed for
Both public and private entities can use WIFIA assistance
constructing or upgrading (and planning and designing)
for eligible projects. Private entities must have a public
publicly owned treatment works, among other purposes.
sponsor to be WIFIA-eligible. WIFIA establishes broad
The Drinking Water SRF provides assistance to public
selection criteria that EPA uses to rank projects, including
water systems—which may be publicly or privately
the project’s national or regional significance with respect
owned—for projects intended to facilitate Safe Drinking
to economic and public benefits, creditworthiness, and
Water Act compliance or further health protection
readiness. To be eligible for WIFIA, projects must
objectives.
generally exceed $20 million in cost. For small
communities (25,000 people or fewer), eligible projects
Program Design
must exceed $5 million in cost. WIFIA directs EPA to set
WIFIA appropriations primarily cover long-term credit
aside 15% of each WIFIA appropriation to assist projects
subsidy costs. Under the Federal Credit Reform Act of 1990
serving small communities. If those funds remain
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unobligated by June 1 of that fiscal year, EPA may use the
The act further amended WIFIA to authorize EPA to enter
set-aside for any project.
into agreements with relevant federal agencies to administer
and service loans that such agencies are authorized to make.
Such agreements may avoid duplication of WIFIA-related
USACE-Administered WIFIA Program
administrative functions across agencies. AWIA Section
Projects eligible for the USACE-administered WIFIA program
4301 directed EPA and the Department of the Interior’s
include water resource projects for flood damage reduction,
Bureau of Reclamation to enter into such an agreement. In
aquatic ecosystem restoration, and navigation improvement,
November 2019, EPA announced a memorandum of
among other purposes. These categories of projects overlap
understanding with the bureau on the agencies’ intent to
with the types of projects that Congress authorizes USACE to
work together on WIFIA and potential federal credit
construct itself, typically with a nonfederal sponsor
instruments for water supply and reuse.
contributing toward the project costs. Congress recently
expanded the authority for nonfederal project sponsors to
In the 116th Congress, Section 2014 of the America’s Water
lead the construction of these congressionally authorized
Infrastructure Act of 2020 (S. 3591) would reauthorize
projects. The federal participation in such projects may affect
annual appropriations of $50 million for WIFIA for
USACE WIFIA operations (e.g., potentially a higher subsidy
FY2022-FY2024. Regarding SIFAs, this provision would
rate than EPA-administered projects). In July 2018, EPA and
reauthorize appropriations of $5 million for FY2022-
USACE entered into a memorandum of understanding stating
FY2024. EPA would be authorized to use up to $5 million
the agencies’ intent to work together on their WIFIA
of the annual WIFIA appropriation for administration for
implementation. As of mid-2020, USACE had advanced its
FY2022-FY2024. Section 2014 would also clarify that
efforts to develop its WIFIA program. Upon receipt of an
when nonfederal entities use nonfederal revenues to repay
appropriation, USACE would implement its WIFIA program.
WIFIA assistance, then such projects are considered
nonfederal projects for budgetary purposes under the
To spur private investment, WIFIA assistance can generally
Federal Credit Reform Act. Section 2015 would reduce
support no more than 49% of a project’s costs. However,
(from two to one) the number of final rating opinion letters
EPA may use as much as 25% of appropriated funds to
required from WIFIA applicants.
provide assistance in excess of 49% of project costs. Total
federal assistance, including from WIFIA, may not exceed
EPA Implementation
80% of a project’s costs, with some exceptions. Table 1
Each year that Congress appropriates funds to cover
contains FY2017, FY2018, FY2019, and FY2020 total
subsidies for WIFIA loans, EPA publishes a Notice of
WIFIA appropriations; appropriation for subsidy costs; and
Funding Availability (NOFA), which provides interested
capped loan capacity. In WIFIA appropriations, Congress
entities with WIFIA application information. In each
has specified amounts for both loan subsidy costs and EPA
NOFA, EPA identifies considerations for project
program administration costs.
prioritization (e.g., repairing aging infrastructure). The
Table 1. WIFIA Appropriations, Subsidy Costs, and
NOFA invites entities to submit a letter that validates the
Capped Loan Capacity
entity and project eligibility, provides preliminary project
information, and evaluates the project against the NOFA’s
Fiscal
Total
Subsidy Cost
Capped Loan selection criteria.
Year
Appropriation
Appropriation
Capacity
Based on letters of interest, EPA invites selected entities to

(nominal $ in mil ions, not adjusted for inflation)
submit applications to EPA within one year. Each
application must contain information on the prospective
2017
$30
$25
$3,049
project, including a comprehensive financing plan, a
2018
$63
$55
$6,710
maintenance and operation plan, and an assessment of the
project’s creditworthiness, among other details. For SRF-
2019
$68
$60
$7,310
eligible projects, WIFIA requires EPA to notify the relevant
2020
$60
$55
$11,500
state infrastructure financing authority to give states the
opportunity to fund the project through the SRF.
Source: Compiled by CRS using enacted appropriations and
associated loan capacity estimates therein.
EPA began issuing WIFIA loans in 2018. In response to the
Recent and Proposed WIFIA Revisions
FY2017 NOFA, EPA received 43 letters of interest and
invited sponsors of 12 projects to apply for WIFIA loans.
The 115th Congress amended WIFIA in the America’s
Of these, 11 projects finalized WIFIA loans for $2.5 billion.
Water Infrastructure Act of 2018 (AWIA; P.L. 115-270) to
For the FY2018 NOFA, EPA received 62 letters of interest
remove the pilot designation from the program and to make
and invited 39 projects to apply for loans totaling $5.5
several programmatic revisions. Among the revisions,
billion. Of the 39 projects, EPA had received 27
several addressed SIFAs’ use of WIFIA financial
applications and finalized 10 loans for roughly $1.9 billion
assistance. The act authorizes an appropriation of additional
as of May 2020. For the FY2019 NOFA, EPA received 51
$5.0 million for each of FY2020 and FY2021 for assistance
letters of interest and invited sponsors of 38 projects to
to SIFAs to support combined projects eligible for
apply for roughly $6 billion in WIFIA loans.
assistance from the SRFs under specified conditions. For
FY2020, Congress directed $5 million of the total WIFIA
appropriation to SIFA assistance.
Elena H. Humphreys, Analyst in Environmental Policy
IF11193
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WIFIA Program: Background and Recent Developments

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