Four Federal Water Infrastructure Funding Programs to Watch

Community and Economic Development – Blog by UNC School of Government

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Four Federal Water Infrastructure Funding Programs to Watch

By Lexi Herndon

Published February 28, 2018

The White House’s Legislative Outline for Rebuilding Infrastructure in America, which was released early this year, outlines the President’s proposed steps to encourage increased State, local, and private investment in infrastructure. And though you’ve probably heard a lot about it, chances are you haven’t had the time to read and reflect on the 55 page document. So what might the President’s plan mean for infrastructure in your community? While the plan outlines programs for infrastructure of all sectors, this post provides a quick overview of the 4 proposed programs with relevance to water infrastructure.

The Need for Water Infrastructure Investment in North Carolina

Every day, the School of Government’s Environmental Finance Center, works with communities who face the very real challenges of paying for infrastructure improvements, especially related to water and wastewater infrastructure. The need for investment in these areas is undeniable. In its most recent report card, the American Society of Civil Engineers gave North Carolina’s drinking water infrastructure a grade of C+, its stormwater infrastructure a grade of C-, and its wastewater infrastructure a grade of C. The North Carolina Department of Environmental Quality’s Statewide Water and Wastewater Infrastructure Master Plan estimates that the state’s water and wastewater infrastructure needs over the next 20 years are estimated to range from $17 billion to $26 billion. At the same time, federal investment in water infrastructure has been on the decline since the 1980s, and states and local governments are now accountable for more than 90% of the capital expenditures in the drinking water and wastewater sector.

While the White House’s Infrastructure plan proposes a significant influx of federal funds, a key principle of the plan is to encourage states, tribes, and localities to “move towards a model of independence” from the federal government. As such, while the proposed programs do make federal funding available, they also require significant investment at the local level. The programs seek to attract non-Federal revenue streams, encourage innovation, and increase involvement from the private sector.

Water infrastructure (including drinking water, wastewater, and stormwater facilities) are identified as eligible infrastructure projects in four of the proposed programs:

1. Incentives Program
2. Rural Infrastructure Program
3. Transformative Projects Program
4. Expansions to Existing Programs (WIFIA and CWSRF)

Incentives Program

The Incentives Program is designed to use grants to encourage increased state, local, and private investment in infrastructure. The goals of the program are to attract significant new, non-Federal revenue streams, leverage Federal investments, and increase economic growth. Projects in water supply, water resources, drinking water facilities, wastewater facilities, and stormwater facilities would be eligible.

Funding: $100 billion to be administered by the Department of Transportation (DOT), US Army Corps of Engineers (USACE), and the Environmental Protection Agency (EPA).

Evaluation Criteria: Key evaluation criteria include a combination of factors that stress the ability of the applicant to secure and commit new, non-Federal revenue for infrastructure investments and for operations, maintenance, and rehabilitation. The dollar value of the project, whether the proposal includes updates to policies and project delivery approaches, and evidence of how the project will spur economic and social returns are also considered.

Requirements: an Incentive Grant would not exceed 20 percent of new revenue, and the recipient would be required to achieve milestones toward obtaining increased revenue prior to receiving the grant award.

Rural Infrastructure Program

The Rural Infrastructure Program would provide targeted investment into rural communities where it is needed to grow economies and enhance the health and safety of residents. The program hopes to close local infrastructure gaps to attract economic growth in rural America. Drinking water, wastewater, and stormwater projects in rural areas with populations of less than 50,000 would be eligible. The plan also includes a proposal to set aside a portion of the funds for investments in Tribal and Territorial infrastructure.

Funding: $50 billion; 80% of funds would be provided to the Governor of each State to be distributed as block grants, 20% of funds would be reserved for rural performance grants to States

Evaluation Criteria: For block grants, Governors would have discretion to select investments that meet the unique needs of each state. States could also apply for rural performance grants; in order to apply, a State would be required to create a comprehensive Rural Infrastructure Investment Plan that details how the intended projects leverage state, local, and private sector investment.

Transformative Projects Program

As its name suggests, the Transformative Projects Program is meant to encourage “bold, innovative, and transformative infrastructure projects that could dramatically improve infrastructure”. The program is intended to support projects that are capable of generating revenue and provide significant public benefits, but that carry risks that would typically deter private sector investment.  This program could be used for projects that improve performance, reduce user costs or introduce new types of services. Clean water and drinking water projects would be eligible.

Funding: $20 billion to be administered by the Department of Commerce, in partnership with other relevant agencies. Funding would be available under 3 tracks: demonstration (30% of eligible costs), project planning (50% of eligible costs), and capital construction (80% of eligible costs). The program would also provide technical assistance from the Federal Government under any of the tracks.

Evaluation Criteria: The Department of Commerce would convene a multi-agency selection committee who would review and evaluate all applications.

Adjustments to Existing Water Infrastructure Programs

In addition to the four programs outlined above, the White House’s infrastructure plan also includes funding to increase the capacity of existing Federal programs, including the Water Infrastructure and Innovation Act (WIFIA), the Clean Water State Revolving Fund (CSWRF).

Expansion of WIFIA would remove the current lending limit of $3.2 billion and would also eliminate the requirement for borrowers to be community water systems. It would reduce the requirement to obtain rating agency opinions from two to one, and allow for reimbursement of costs incurred prior to the loan closing. Expansion of the CWSRF would make funding available for privately owned public-purpose projects (currently, only publicly owned treatment works are eligible).

The above summary is certainly not comprehensive, so I encourage you to take a look at the plan yourself if you haven’t already. Of course, only time will tell which of the suggestions within the plan will become reality, but it does seem clear that the role of States, localities, and the private sector in addressing the nation’s infrastructure needs will continue to grow.