States Want ‘Meaningful’ Steps From Water Loan Applicants

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By Amena H. Saiyid

Oct. 28 — States aren’t content with just being informed that public water utilities are seeking to finance infrastructure projects under a new financing scheme, an official representing state environmental agencies told Bloomberg BNA.

They want a more “meaningful” right-of-first-refusal over projects that the Environmental Protection Agency may approve for financing under the yet-to-be implemented Water Infrastructure Financing Innovations Act, or WIFIA program, Alexandra Dunn, executive director for the Environmental Council of States, told Bloomberg BNA in a telephone interview Oct. 28.

That means the states want to receive not only applications for project financing under WIFIA, but also applications for financing the same project under the drinking water and clean water state revolving fund programs. This is to ensure that both states and the EPA get the “same opportunity” to respond to projects seeking financing.

Congress passed WIFIA as part of the Water Resources Reform and Development Act of 2014 (Pub. L. No. 113-121). The program is intended to allow water utilities to obtain Treasury-backed credit to secure loans for infrastructure projects worth at least $20 million.

Dunn is echoing the perceptions of states concerned that the newly created, yet-to-be implemented WIFIA program would supplant the existing state revolving fund programs and take away their appropriations. To appease states, Congress inserted “right-of-first-refusal” language that would require the EPA to notify states when water utilities seek funding under WIFIA, and states would then have 60 days to decide whether to fund the project under the state revolving fund programs or to let it be funded under WIFIA.

Check-Off Notice

Utilities shouldn’t merely be required to check off on a form or letter of interest to the EPA, which would be charged with providing loans under the WIFIA program. They should be required to wait for a response from the states, according to Dunn.

The EPA told Bloomberg BNA that the agency plans to send the entire letter of interest with all the attachments to the state revolving fund program, where the project will be located, unless the WIFIA prospective borrower indicates they don’t want the agency to send its entire letter of interest.

“Even if the prospective borrower indicated it does not want us to send the entire Letter of Interest, EPA will still send a notification to the SRF with basic details, such as the prospective borrower’s name, contact information,” the EPA said in an e-mail, adding “this notification will happen within 30 days of receiving a Letter of Interest.”

Dunn said EPA’s statement to Bloomberg BNA is at odds with the rule (RIN: 2040-AF63) the EPA is proposing to issue credit under the WIFIA program. This rule, which was due out this month, is currently under review at the White House Office of Management and Budget.

“The notification to the state fund in the proposal under review at OMB, as it has been described to us, appears to be notice to, but does not seek a response from, the state fund,” Dunn said, adding that the EPA response is short of the meaningful right-of-first-refusal the states anticipate.

“WIFIA was designed to work with the SRFs—this passive approach runs the risk of not accomplishing that clear legislative intent. The first refusal was the subject of much discussion and correspondence during the open discussions to develop the WIFIA legislative provisions,” Dunn said.

States Spell Out ‘Meaningful’ Response

In a December 2014 letter to Andrew Sawyers, director of the EPA’s Office of Wastewater Management, and Peter Grevatt, director of the EPA’s Office of Groundwater and Drinking Water, state water and financing officials made their position clear to the EPA on the “meaningful” response issue.

The states said they want water and wastewater utility applicants to be required to submit the same project to the SRF program that is to be submitted for WIFIA funding, together with required SRF application information; and that the SRF program (if it chooses to participate) only be required to match the funding amount requested in the WIFIA application. That is set at 49 percent, unless the SRF program wishes to fund a larger portion of the project.

Moreover, states said the EPA should notify them again if the applicant changes the schedule of the project or financing amount.

Water utility representatives say the EPA already is going beyond what is required in the statute by sharing the letter of intent.

“There is no requirement that water utilities seek financing under state revolving fund programs or that they submit applications for the same project to state revolving fund programs,” Dan Hartnett, director of legislative affairs for the Association of Metropolitan Water Agencies, told Bloomberg BNA in an Oct. 28 interview.

To contact the reporter on this story: Amena H. Saiyid in Washington at asaiyid@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com

For More Information

The state officials letter to EPA is available at http://src.bna.com/jJb

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