The Water Infrastructure Finance and Innovation Act of 2014: Structure and Effects

Abstract

Many US municipalities confront serious challenges due to aging water and wastewater infrastructure. Many systems require immediate repairs, upgrades, and replacement, but available funding is scarce. Readily available low‐interest financing is of great help to such municipalities. The Water Infrastructure Finance and Innovation Act (WIFIA) approved by Congress in 2014 was a step in that direction. WIFIA is a five‐year pilot program focused on supporting large‐scale projects that may be under‐served by existing state revolving funds (SRFs). The authors examine the structure and implementation of WIFIA and its impact on existing financing mechanisms. The cost of debt service in four representative communities in New York was compared under WIFIA, SRFs, and tax‐exempt municipal bonds. Although WIFIA financing offered the lowest debt service cost, savings from WIFIA depended on the spread between US Treasury rates and borrowing rates of the SRF‐administering agency.

Fluid Financing of Water Utility Infrastructure With WIFIA

“…The minimum project sizes are $5 million for communities serving 25,000 people or fewer, and $20 million for communities serving more than 25,000 people. Borrowers can meet these requirements by combining multiple smaller projects under a single loan with a common security pledge (EPA 2024(EPA , 2023(EPA , 2020Gebhardt et al 2022;Humphreys 2020;Ryan 2023Ryan , 2020OECD 2017;Vedachalam & Geddes 2017).…”

“…The Water Infrastructure Finance and Innovation Act (WIFIA) program (PL 113-121 2014) supplements SRFs with broader project eligibility and annual federal funding sufficient to support loans for much larger projects. (EPA 2024(EPA , 2023(EPA , 2020Gebhardt et al 2022;Humphreys 2020;Vedachalam & Geddes 2017)…”

Water governance in the USA

“…Researchers have suggested that PPP-enabling laws have the effect of increasing private investment in infrastructure (Albalate et al , 2018). Examples include the recently-introduced Water Infrastructure Finance and Innovation Act (WIFA) in the USA (Vedachalam and Geddes, 2017). Researchers have suggested that PPPs have been utilised as a vehicle of economic rationalisation in the public-service utilities infrastructure space (Greve and Hodge, 2018).…”

“…The funding and government capital constraints led to the passage in 2014 of the WIFA. This act explicitly calls for increased federal funding for PPPs undertaking projects in water infrastructure (Vedachalam and Geddes, 2017). The legislation underlines the extent to which funding for new water infrastructure and repairs ultimately comes from the public sector, even when it involves private-sector financing.…”

“…The legislation underlines the extent to which funding for new water infrastructure and repairs ultimately comes from the public sector, even when it involves private-sector financing. The main sources of funding cash flow to service this financing are water charges and tax revenue (Vedachalam and Geddes, 2017).…”