Legal Reviews: Federal Water Reform Act Spurs Development

  • December 20, 2014
  • • Written by: Mr. Charles Noel Schilke

Volume 39, Number 3
Winter 2014
By Charles Noel Schilke, JD, AM, CRE, FRICS

On June 10, President Obama signed the Water Resources Reform and Development Act (WRRDA) into law. The $12.3 billion WRRDA (U.S. Public Law 113-121) provides broad authorization for U.S. Army Corps of Engineers water infrastructure projects. The act makes funds available for a variety of water projects that facilitate real estate development and enable the water infrastructure of existing communities to function more efficiently.

WRRDA authorizes a Water Infrastructure Finance and Innovation Authority (WIFIA), which provides loans for water projects separate from the long-standing state revolving fund (SRF) program. WIFIA is modeled on the popular Transportation Infrastructure Finance and Innovation Authority.

WIFIA loans will enable municipalities to execute the “repair, rehabilitation, or replacement” of a community water system or treatment works, construct desalination infrastructure, and enhance the energy efficiency of a water system. WIFIA may also fund any project eligible for the SRF program. The program will reduce the so that communities may repair and expand water systems at lower cost to water users and taxpayers than would otherwise have been possible.

WIFIA provides that the Corps and the Environmental Protection Agency (EPA) may each lend $175 million in low-interest loans over five years for water and wastewater projects expected to cost at least $20 million. If fully funded, after selecting borrowers through a competitive process, the Corps and the EPA together could leverage this to offer $3.5 billion worth of loans over a five-year period.

However, Congress provided that WIFIA must deny funding if a state plans to lend an equal or greater amount of SRF funds to a given project in a single year. Congress further mandated that 15 percent of each year’s WIFIA appropriation be reserved for lending to small community water system projects.

Congress also limited WIFIA funding to 49 percent of project costs, and prohibited additional tax-exempt financing, such as general obligation and revenue bonds, for the residual project costs. This prohibition effectively prevents communities from combining WIFIA funds with tax-exempt debt to pay 100 percent of project, reducing the impact of WIFIA in facilitating infrastructure development and repair.

Still, WRRDA and WIFIA constitute the first true appropriations bill for Corps water infrastructure since 2007, and should significantly alleviate the dearth of funding in this area for many communities. ■