A comprehensive transportation policy bill passed by Congress and signed into law by President Obama on December 4 includes a provision that will allow communities to finance water infrastructure projects through a combination of Water Infrastructure Finance and Innovation Act (WIFIA) loans and tax-exempt municipal bonds – fulfilling a key priority of AMWA and the water utility community.
The revision to the WIFIA program was tucked deep within the conference report of H.R. 22, the “Fixing America’s Surface Transportation Act.” The final bill was the product of weeks of negotiations between House and Senate lawmakers who were tasked with developing multiyear legislation to ensure the upkeep of the nation’s transportation infrastructure. Many of those same lawmakers also supported the creation of the WIFIA pilot program last year, so AMWA and other water utility organizations asked for the WIFIA fix to be part of the larger transportation bill. Congress was unlikely to consider the WIFIA fix by itself, so attaching the measure to a larger bill offered the best opportunity to advance it quickly.
Congress originally approved the WIFIA pilot program in 2014, but not before adding a restriction that would prohibit communities from funding projects with financing packages that include both WIFIA loan proceeds and tax-exempt debt like municipal bonds. The tax-exempt financing ban was added to comply with congressional budget neutrality rules, but because the WIFIA law also limits WIFIA loans to covering no more than 49 percent of a project’s total cost, many water utility representatives warned that a WIFIA program with such restrictions in place would not serve as a workable financing mechanism.
The WIFIA revision appears as Section 1445 of H.R. 22, and simply strikes the section of the original WIFIA law that prohibited the use of tax-exempt financing. The $17 million cost of this fix (as estimated by the Congressional Budget Office) is offset through other portions of H.R. 22. The joint explanatory statement of the conference committee explained that the revision will “ensure both public and private capital have an equal opportunity to participate” in the program.
The Senate passed its version of a long-term transportation bill in July, and (at the urging of Democratic California Senator Barbara Boxer, a key WIFIA supporter) included language to allow project financing with municipal bonds. The provision was left out of the House’s version of a transportation bill approved in October, but several House members (including Republican Reps. Bob Gibbs of Ohio and Carlos Curbelo of Florida, as well as Democrat Jerry McNerney of California) spoke up in favor of including the fix in the final legislation – support that paid off in the conference committee.
With WIFIA now positioned to effectively help finance major water infrastructure projects, AMWA will turn its attention to supporting robust funding for the program. Congress provided EPA with WIFIA administrative support funds for the 2016 fiscal year, but could provide funding to actually support projects in the 2017 fiscal year if EPA has finalized the program’s rules by that time.