From Western Drought to the Flint Crisis: New Innovative Federal Water Supply Funding and

Financing Tools on the Horizon

Texas Water Conservation AssociationThe Woodlands, Texas

March 3, 2016

White House Water Summit 2016• Increase resilience of Nation’s water supplies– Boost water sustainability through water-efficient and water

reuse technologies– Promote and invest in breakthrough R&D on new water

supply technologies that reduce costs and energy consumption

• Summit on March 22, 2016 in Washington– Public private partnerships – Private sector investments– Research, development and application of science and

technology in water management

Innovative Federal Tools

• Water Infrastructure Finance and Innovation Act (WIFIA)

• Natural Resource Investment Center – Department of the Interior

• Drought Legislation– RIFIA– WaterSMART– Title XVI Reform

WIFIA

• Authorized in WRRDA 2014 – pilot program based on popular TIFIA (Transportation)

• EPA and Army Corps of Engineers - $175M each in budget authority – five years

• EPA WIFIA program – Program stood up in FY2016 - $2.2M budget– FY2017 Budget request - $20M ($15M for loans/$5M

admin)– $15M appropriation translates to $980M in federal

financing (subsidy rate = 1.53% - EPA budget request)

WIFIA Details• Direct (Treasury) loans and guarantees – Annual appropriations start at $20M – increased to $50M by

FY2019– Finance not more than 49% of total project costs– Up to 25% of projects can exceed 49% financing – 35-year repayment terms– 5-year grace period for debt service upon completion– Low interest rate (2.69% for loans closed today)– Total federal assistance (grants and loans) capped at 80% of a

project’s cost– Must coordinate and not compete with SRF financing

WIFIA Eligibility

• Eligible Projects– Projects developed by both private and government entities– Total project costs must exceed $20M– Smaller projects can be bundled together– Rural (<25K pop.) projects larger than $5M eligible – SRF eligible projects – wastewater and drinking water– Desalination/water recycling/aquifer storage projects– Environmental restoration– Based on creditworthiness and revenue sources– Can now match with tax exempt municipal bond financing

(FAST Act)

Natural Resource Investment Center

• Interior Secretary Jewell announces NRIC December 2015

• NRIC to support water, species, and habitat conservation– Partnerships with the private sector– Develop creative financing opportunities– Increase investments in water conservation,

critical water infrastructure and habitat conservation

Western Drought

• Federal legislation – California drought– H.R. 2898 Rep. Valadao (R-CA) – Passed House– S. 2533 (S. 1894) Sen. Feinstein (D-CA) introduced

• Senate Energy and Natural Resources (ENR)– Chairman Lisa Murkowski (R-AK) wants west-wide

drought legislation considered– ENR Committee expected to take up drought

legislation within next two months

Senate Drought Bill

• Sen. Feinstein’s S. 2533 proposes– Reclamation Infrastructure Finance and Innovation

Act (RIFIA)– WaterSMART cost shared grant expansion– Title XVI water recycling and reuse grant reform– Desalination project grants– Additional budget authority ($600M) to fund new

water storage projects – California and west-wide• 50% cost of federal project• 25% cost of state/local project

RIFIA• Similar to WIFIA pilot program (WRRDA 2014)

– Authorize the Bureau of Reclamation to implement a direct loan and loan guarantee program to finance new water supply infrastructure

– $200M in new budget authority = $13.1B in loans ($26.6B in new projects)

– Non-federally developed and owned water infrastructure• Surface water storage• Groundwater storage• Hydropower• Delivery systems• Reuse and recycling• Desalination

RIFIA Benefits

• If RIFIA was in place today:– RIFIA interest rate = 2.69% (AA rated muni bond = 3.4%)– 35- vs. 30-year repayment – 5-year grace period– No requirement to borrow debt service reserve fund

(approx. 6% reserve required for muni bonds)– Annual cash flow savings = approximately 20% - 30% on

debt service– Ability to refinance existing infrastructure– “Cost” to federal government = 1.53% of loan principle

• EPA calculated risk of default on WIFIA loans for water projects

WaterSMART Expansion

• New 25% cost shared competitive grant– Maximum $20M federal share– Non-federal projects– Wide range of eligible projects would include:• Small water storage• Groundwater recharge• Conveyance and interconnections• Other water management improvements

WaterSMART Expansion

• Criteria for prioritizing new projects – Water supply benefits to ag/urban uses– Integrated regional projects– Hydroelectric/flood/recreational benefits– Environmental benefits

Title XVI Reform

• Title XVI water reuse and recycling grants program– Currently requires congressional authorization for

a reuse project to compete for grants (25% up to $20M max.)

– S. 2533 proposes to allow all eligible projects to compete for new grant funding• No congressional project authorization necessary• Would require a completed federal feasibility study

For more information aboutRIFIA and other innovative funding tools:

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www.WesternWaterPriorities.org

Upcoming Legislation• Senate Energy Bill (S. 2012)• Water Resources Development Act (WRDA)– House and Senate oversight hearings are ongoing in support of

new WRDA legislation– Corps Sec. 7001 process

• Earmark ban still in place– Technical fixes to WRRDA 2014

• FY2017 Appropriations process– Regular order vs. Omnibus

• Lame Duck session after election best hope for most controversial legislation this Congress

THANK YOUQuestions?