Jacobs and WIFIA: Lessons Learned from Reinvented Water Infrastructure Financing
Bringing communities better water resources and an improved quality of life
Jacobs and the Water Infrastructure Finance and Innovation Act (WIFIA) have reinvented water financing for our clients to accomplish more than just secure low interest loans. Ultimately the purpose of WIFIA, our work, and the investment in communities is to bring better water resources and an improved quality of life for a more connected, sustainable world.
Jacobs Strategic Consulting Business & Finance Leader Dennis Jackson weighs in how with WIFIA funding, we’re helping keep the Great Salt Lake great in this article.
The U.S. Environmental Protection Agency’s (EPA) WIFIA provides direct loans to large water infrastructure projects at U.S. Treasury rates – lowering capital costs and improving water affordability. Jacobs has been helping clients prepare successful WIFIA applications since the program’s introduction in 2017.
While the process of obtaining a WIFIA loan has become increasingly competitive, Jacobs has demonstrated success across a range of projects - assisting clients with obtaining WIFIA funding for more than $1.5 billion in projects since 2017. We’ve helped clients including San Mateo County, California; Salt Lake City, Utah; North Miami Beach, Florida; and others – some of the loans saved the applying agency as much as $100 million in financing and transaction costs.
The benefits of WIFIA go beyond very low interest rates. Unlike traditional financing sources, WIFIA provides a flexible repayment schedule, capitalized interest, delayed repayment (up to 10 years) and the ability to preserve a borrower’s senior debt capacity. Although State Revolving Funds (SRFs) and WIFIA both provide funding for water infrastructure, WIFIA uniquely fills the need for low-cost financing for larger projects, often over $100 million or more. SRF loans are generally designed to benefit smaller projects. Additionally, WIFIA loans can be combined with other co-funding sources including private equity, revenue bonds, corporate debt, grants and more.
WIFIA in Practice: Salt Lake City
In Salt Lake City, Utah, a WIFIA loan was granted that will enable the city to build a new water reclamation plant. This new facility will be among the largest public works projects the city has undertaken and will be done in a way that saves ratepayers money and will help keep the Great Salt Lake great by reducing discharges into the lake. The city closed its $349 million WIFIA loan in September 2020 at an interest rate of 1.34%, which compares favorably to its project revenue bond which closed one month prior at a true interest cost of 2.79%. The city’s WIFIA loan is expected to save an estimated $102 million compared to typical market financing.
In addition to the interest rate benefit, the WIFIA rate lock allows flexible loan drawdowns and capitalized interest accrual during the project’s construction period at the fixed 1.34% rate on disbursed amounts. Since the full loan may be drawn periodically or in a single funding for up to one year after construction completion, the rate lock is an advantageous interest rate hedge should rates rise during the project’s 5-year construction period.
Delayed repayment becomes a highly effective cash flow management tool to optimize the timing of revenue bond debt co-financing and to levelize project fund reserves over the construction period. The city will realize significant savings compared to early drawdowns because cash outlays that are made sooner cost more than outlays in future years due to carrying cost and lost earning capacity on that cash.
The city’s WIFIA success required a dedicated engineering, legal and financial team to complete the loan application process. Led by Public Utilities Finance Administrator Lisa M. Tarufelli, and the supported by Department of Public Utilities staff, Jacobs, Stifel as Municipal Advisor, and GilmoreBell as bond counsel the city was able to close quickly after application approval.
Jacobs and WIFIA have reinvented water financing for our clients to accomplish more than just secure low interest loans. Ultimately the purpose of WIFIA, our work, and the investment in communities like Salt Lake City is to bring better water resources and an improved quality of life for a more connected, sustainable world.
Dennis Jackson is passionate about shaping innovative infrastructure policy and delivery approaches. As a Strategic Consulting Business & Finance Leader at Jacobs, he’s responsible for evaluating and recommending urban infrastructure funding approaches for stand-alone projects and large programs around the globe. Whether providing value-added insight or developing competitive funding applications, he works to unlock efficiency, certainty and cost savings for a wide range of critical infrastructure programs set to transform communities for tomorrow.