Infrastructure Financing



High-quality drinking water and wastewater systems are essential to public health, business and quality of life. AWWA and others have documented that water and wastewater infrastructure in North America is aging and that many communities must significantly increase their levels of investment in its repair and rehabilitation to protect public health and safety and to maintain environmental standards.

Local role

AWWA believes the public is best served by water and wastewater systems that are self-sustaining through rates and other local charges. In 2005 the United States invested $84 billion to build, operate and maintain water and wastewater infrastructure, with more than 95 percent of those funds representing state and local monies without federal assistance or subsidies, according to the US Conference of Mayors.

The US Department of Commerce Bureau of Economic Analysis estimates that for every dollar spent on water infrastructure, about $2.62 is generated in the private economy, and for every job added in the water workforce, about 3.68 jobs are added to the national economy.

Federal role

While local rates and charges are the key to maintain water infrastructure, the US government can play an important role in facilitating increased local spending on this infrastructure by lowering the cost of capital for water and wastewater projects.

Almost 70 percent of American communities use bonds to finance local infrastructure. They pay billions of dollars in interest costs each year. Lowering the cost of borrowing for infrastructure projects represents an important way to leverage local funding and help America rebuild its aging water infrastructure. Simply put, lowering the cost of capital can offer significant cost savings to the utility and its customers.

For example, lowering the cost of borrowing by 2.5% on a 30- year loan can reduce total project cost by more than 26%. In this way, low-interest financing has the same effect as making a grant to cover part of the project's costs – except that the financing will be repaid to the federal government and will not add to the long-term deficit. The savings for local borrowers can significantly accelerate water infrastructure investment by making it more affordable for utilities and their customers.

 

Water Infrastructure Finance & Innovation Authority


President Obama signs legislation authorizing WIFIA into law


President Obama on June 10 signed into law the Water Resources Reform and Development Act, which includes the Water Infrastructure Finance and Innovation Act that AWWA and other groups have been seeking for about three years.

The US House of Representatives approved the bipartisan measure on a 412-4 vote on May 20, followed two days later by a 91-7 vote in the Senate.

Technically, the votes were on House Report 113-449 that accompanies WRRDA (H.R. 3080). Most of the bill concerns Army Corps of Engineers projects. However, one section reauthorizes the wastewater state revolving loan fund program and expands the types of projects the SRF may fund. Another section of the bill establishes WIFIA.

The WIFIA provision would establish a five-year WIFIA pilot program, much along the lines AWWA has advocated (but with two serious limitations described below).

As agreed to by House and Senate conferees, who met over a period of six months to reconcile differing House and Senate versions, the bill establishes WIFIA as a low-interest loan program administered by EPA, with a parallel program administered by the Corps of Engineers for flood control projects. The EPA program:

  • Will support water and wastewater-related infrastructure projects, including pipe replacement or rehabilitation, construction or rehabilitation of treatment plants, desalination projects, groundwater replenishment projects, energy efficiency improvements, and others.
  • Is aimed at larger projects, in which eligible projects must cost at least $20 million ($5 million for communities serving no more than 25,000 people).
  • Provides loan guarantees and direct loans at long-term Treasury rates. Projects must be deemed creditworthy, with loans repayable from a dedicated revenue source within 35 years of substantial project completion.
  • Gives states the “right of first refusal” to fund any project. No project can be funded by WIFIA if within 60 days, the state indicates an intention to support the project and the state enters a support agreement within 180 days at rates and terms no less favorable than WIFIA. These deadlines are measured from the date of EPA’s notice to the state that it has received a WIFIA application. EPA must give such notice within 30 days of receiving a WIFIA application.
  • Limits WIFIA support of a project to 49% of the project’s costs, with an overall limitation of 80% for all federal assistance in any project (with an exception for certain federally funded projects in Indian tribal communities), and provides that tax-exempt debt cannot be used to pay the non-federal share of project costs. However, in any year the EPA Administrator can use up to 25% of appropriated funds in projects exceeding the 49% limitation.
  • Reserves 15% of appropriated funds each year for projects in communities with a population of no greater than 25,000. By June 1 of each year, any such reserved funds that have not been obligated shall be available for projects in communities of any size.
  • Authorizes $20 million in the first year, which should support at least $200 million in loan guarantees or low-interest loans. The authorization level rises to $50 million in year five, which should support up to $1.65 billion in assistance, according the Office of Management and Budget. Appropriated funds achieve this significant leverage because they only have to cover the risk of WIFIA project defaults, and the history of default in water projects is only 0.04%, according to AWWA research.

AWWA is very proud of its role in conceiving, designing and encouraging the enactment of WIFIA, and issued a joint press release with the Water Environment Federation hailing its arrival. We believe it will prove to be a useful addition to the infrastructure finance toolbox. At the same time, we are very aware of the need to remove the serious limitations noted above, so that WIFIA can fund up to 100% of eligible project costs and any non-federal share can be paid with tax-exempt debt. AWWA is committed to achieving those reforms.

AWWA Buried No Longer Report


Buried No Longer Report

To get more realistic data on the scope of the US water infrastructure investment needs, in 2011 AWWA commissioned an important new study that produced the ground-breaking report, "Buried No Longer: Confronting America's Water Infrastructure Challenge" (PDF, 2.3MB). It methodically analyzes a variety of data and finds that the nation must invest $1 trillion over the coming 25 years if we are to maintain our current level of drinking water service. Other key findings include:

  • Household water bills will go up.The size of the increase varies with community and is influenced by existing local rate structures, methods of finance, etc.
  • There are important regional differences because of the different patterns of population growth and infrastructure investment over the history of the United States.
  • Important differences exist based on system size. Small communities in particular may find steeper challenges ahead.
  • Postponing water infrastructure investment only makes the problem worse when the bill inevitably comes due.

Join the Buried No Longer™ campaign!


  • Define the national challenge using the Buried No Longer report.
  • Tell your local story using the Buried No Longer Pipe Replacement Modeling Tool.
  • Advocate for a Water Infrastructure Finance and Innovation Authority to lower the cost of fixing water infrastructure.

Learn more and download your free materials.

Watch the Buried No Longer video