The Environmental Protection Agency (EPA) has posted its Notice of Funding Availability (NOFA) for the Water Infrastructure Finance and Innovation Act (WIFIA) program.
The purpose of the NOFA is to notify eligible applicants who have water infrastructure projects that require financing of available funding for prospective borrowers. EPA estimates the funding available (about $17 million) will allow them to finance over $2 billion in infrastructure projects. The types of credit assistance available includes secured (direct) loans or loan guarantees. The maximum amount of WIFIA credit assistance to a project is 49 percent of eligible project costs.
Below is a brief synopsis of the NOFA to help in better understanding the program.
Prospective borrowers from the WIFIA credit assistance Program must be:
- A corporation;
- A partnership;
- A joint venture;
- A trust;
- A Federal, State, or local governmental entity, agency, or instrumentality;
- A tribal government or a consortium of tribal governments; or
- A State infrastructure financing authority.
Projects must be publicly sponsored. Private entities should submit a certified letter from a municipal department, or Mayor, or similar designated authority as evidence of public sponsorship.
The next step for eligible applicants with future water infrastructure projects is to submit Letters of Interest to EPA. EPA will collect Letters of Interest by email only in two rounds, the first period begins January 10, 2017, and ends at midnight in the time zone of the prospective borrower on April 10, 2017. The second round for submitting Letters of Interest, if needed and funds remain available, will begin on August 1, 2017 and end at midnight on September 29, 2017.
Letter of Interest to EPA
The Letter of Interest is intended to provide EPA adequate information that
1. Validates the eligibility of the prospective borrower and the prospective project,
2. Performs a preliminary creditworthiness assessment,
3. Performs a preliminary engineering feasibility assessment, and
4. Evaluates the project against the selection criteria and identify which projects EPA will invite to submit applications.
EPA Offers Guidance to Prospective Borrowers for Water Infrastructure Projects
EPA offers guidance to prospective borrowers for their Letter of Interest. Generally, a good Letter of Interest will include:
- Describe the project’s organizational structure, financial condition and experience, and project’s readiness to proceed. Provide basic information such as address, Web site, Dun and Bradstreet Data Universal Number System (DUNS) number, and employer/taxpayer identification number numbers, three years of end-year audited financial statements. Projects must be publicly sponsored. Private entities should submit a certified letter from a municipal department, or Mayor, or similar designated authority as evidence of public sponsorship.
- Provide a general description of the project, including its location, population served, purpose, design features, estimated capital cost, and development schedule. List the estimated total capital costs of the project, broken down by activity type and differentiating between eligible project costs and ineligible project costs. Describe how the project can be categorized as one of the project types eligible for WIFIA assistance. Include other relevant information that could affect the development of the project, such as community support, pending legislation, or litigation. Summarize the status of the project’s environmental review, engineering report, and other approvals or analyses that are integral to the project’s development.
- Describe the plan for operating, maintaining, and repairing the project post-completion, discuss the sources of revenue used to finance these activities, and provides an estimate of the useful life of the project.
- Detail the proposed sources and uses of funds for the project and state the type and amount of credit assistance it is seeking from the WIFIA program. Identify the source(s) of revenue or other security that would be pledged to the WIFIA assistance. Describe the credit characteristics of the project and how the senior obligations of the project will achieve an investment-grade rating as well as the anticipated rating on the WIFIA instrument. Include a summary financial pro forma as well as revenue and expense projections for the life of the WIFIA debt.
- Describe the potential policy benefits achieved through the use of WIFIA assistance with respect to each of the WIFIA program selection criteria. These criteria and their weights are enumerated below.
- Identify the point of contact with whom the WIFIA program should communicate.
- Provided certification that the project will abide by all applicable laws and regulations, including NEPA, the Federal Water Pollution Control Act, the American Iron and Steel requirements, and Federal labor standards, among others if selected to receive funding.
- Prospective borrowers acknowledges that EPA will notify the State infrastructure financing authority in the State in which the project is located that it submitted a letter of interest and provide the submitted letter and source documents to that authority. The prospective borrower may opt out of having its letter of interest and source documents shared.
The Letter of Interest is important as it serves as EPA’s pre-screen process. EPA will only invite projects to apply if it anticipates that those projects are able to obtain WIFIA credit assistance.
EPA Selection Process
After EPA evaluates all letters of interest a Selection Committee is formed. The Selection Committee invites prospective borrowers to apply based on:
- the scoring of the selection criteria,
- the initial estimated amount of budget authority consumed by the project,
- the preliminary creditworthiness assessment, and
- the preliminary engineering feasibility assessment.
In addition, the selection committee will take into consideration geographic and project diversity when identifying which projects should be invited to submit complete applications.
EPA Criteria for Water Infrastructure Projects
To maintain consistency throughout the evaluation process, project criteria will receive a score on a rating scale of 1– 5, 1 being the lowest. Each criterion is weighted based upon EPA’s mission and priorities as well as factors influencing the successful implementation of the WIFIA program. There is no threshold score that must be achieved in order to be selected. Rather, the selection committee will weigh each of the factors outlined above in making final determinations.
The selection criteria incorporate statutory eligibility requirements and EPA priorities. Those priorities include: (NOTE: It is important to cover these in the Letter of Interest)
- Adaptation to extreme weather and climate change including enhanced infrastructure resiliency, water recycling and reuse, and managed aquifer recovery;
- Enhanced energy efficiency of treatment works, public water systems, and conveyance systems, including innovative, energy efficient nutrient treatment;
- Green infrastructure; and
- Repair, rehabilitation, and replacement of infrastructure and conveyance systems.
EPA’s priorities reflect water sector challenges that require innovative tools to assist municipalities in managing and adapting to our most pressing public health and environmental challenges. These priorities are reflected in the relative weights of the thirteen selection criteria below (***Listed in order of relative weight for the letter of interest***):
- The extent to which the project is nationally or regionally significant, with respect to the generation of economic and public health benefits: 10 percent.
- The likelihood that assistance under WIFIA would enable the project to proceed at an earlier date than the project would otherwise be able to proceed: 5 percent.
- The extent to which the project uses new or innovative approaches such as the use of energy efficient parts and systems, or the use of renewable or alternate sources of energy; green infrastructure; and the development of alternate sources of drinking water through desalination, aquifer recharge or water recycling: 10 percent.
- The extent to which the project protects against extreme weather events, such as floods or hurricanes, as well as the impacts of climate change: 10 percent.
- The extent to which the project helps maintain or protect the environment or public health: 10 percent.
- The extent to which the project serves regions with significant energy exploration, development, or production areas: 5 percent.
- The extent to which the project serves regions with significant water resource challenges, including the need to address water quality concerns related to groundwater, surface water, or other resources, significant flood risk, water resource challenges identified in existing regional, state, or multistate agreements, and water resources with exceptional recreational value or ecological importance: 10 percent.
- The extent to which the project addresses identified municipal, state, or regional priorities: 5 percent.
- The readiness of the project to proceed towards development, including a demonstration by the prospective borrower that there is reasonable expectation that the contracting process for construction of the project can commence by not later than ninety days after the date on which a Federal credit instrument is obligated: 5 percent.
- The extent to which the project financing plan includes public or private financing in addition to assistance under WIFIA: 5 percent.
- The extent to which assistance under WIFIA reduces the contribution of Federal assistance to the project: 5 percent.
- The extent to which the project addresses needs for repair, rehabilitation, or replacement of a treatment works, community water system, or aging water distribution or wastewater collection system: 10 percent.
- The extent to which the project serves economically stressed communities, or pockets of economically stressed rate payers within otherwise non- communities: 10 percent.
For more details consult the WIFIA program handbook.
U.S. Water Infrastructure: A Big Challenge
Officials from EPA testified before a House Appropriations Subcommittee hearing in March 2016 stating, “We are looking at a significant challenge in terms of water infrastructure… Across the U.S. we took a look at this in 2011 and 2012 and we estimated that the backlog of need for drinking water up through 2030 was something in the order of $300 some-odd billion. I do not have the exact figure in my head but I think that is a lowball estimate now. There are others that are now estimating it’s upwards of $600 billion.”
According to the American Water Works Association (AWWA), much of the U.S. drinking water infrastructure includes more than one million miles of pipes beneath our streets and IS NEARING THE END OF ITS USEFUL LIFE. Compounding the challenges is the shifting U.S. population that generates significant growth in some areas of the country and requires larger pipe networks to provide water service.
Bottom line: the AWWA estimates that restoring the deteriorating existing water systems in the U.S. and expanding them to serve growing populations will cost at least $1 trillion over the next 25 years, if we are to maintain current levels of water service.
Delaying investment in the U.S. water infrastructure will further degrade current water systems and result in increasing water service disruptions.
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