The U.S. Army Corps of Engineers is considering a major change in how it manages its dams, reservoirs, and waterways. The change could affect hundreds of billions of dollars in federal funding for water infrastructure projects across the country.
What is the proposed change?
The Army Corps is proposing to create a new program called the Water Infrastructure Financing and Innovation Act (WIFIA) Loan Program. The program would offer low-interest loans to state, local, and private entities that own or operate dams, reservoirs, and waterways that are regulated by the Army Corps. The loans would help finance the repair, rehabilitation, or replacement of aging or deficient water infrastructure.
The WIFIA Loan Program would be modeled after a similar program that the Environmental Protection Agency (EPA) administers for water and wastewater projects. The EPA’s WIFIA program has been successful in leveraging federal funds to attract private capital and accelerate project delivery. The Army Corps hopes to replicate that success with its own WIFIA program.
Why is the change needed?
The Army Corps oversees more than 700 dams, 14,000 miles of levees, and 12,000 miles of inland waterways that provide flood control, navigation, hydropower, irrigation, water supply, recreation, and environmental benefits to millions of Americans. However, many of these water infrastructure assets are aging and deteriorating, posing safety and operational risks. The Army Corps estimates that it would cost more than $100 billion to address the backlog of maintenance and repairs for its water infrastructure portfolio.
The Army Corps relies on annual appropriations from Congress to fund its water infrastructure projects. However, the federal budget process is often unpredictable and insufficient to meet the growing needs of the nation’s water infrastructure. The Army Corps also faces competition from other federal agencies and programs for limited funding resources.
The WIFIA Loan Program would provide an alternative and complementary source of funding for water infrastructure projects. The program would leverage federal dollars to attract private investment and lower the cost of borrowing for project sponsors. The program would also allow the Army Corps to prioritize and expedite projects that have high economic, environmental, and social benefits.
What are the potential benefits and challenges of the change?
The WIFIA Loan Program could offer several benefits for the Army Corps and its stakeholders, such as:
- Enhancing the financial viability and sustainability of water infrastructure projects. The program would offer low-interest, long-term loans that could cover up to 49% of the project cost. The loans would have flexible repayment terms and could be combined with other federal, state, local, or private funds. The program would also reduce the reliance on annual appropriations and increase the predictability and stability of funding.
- Accelerating the delivery and completion of water infrastructure projects. The program would streamline the application and approval process for loans and reduce the administrative burden for project sponsors. The program would also enable the Army Corps to delegate some of its regulatory and oversight functions to qualified project sponsors, such as issuing permits, conducting environmental reviews, and managing contracts.
- Improving the performance and resilience of water infrastructure assets. The program would encourage the use of innovative technologies and practices that could enhance the efficiency, reliability, and safety of water infrastructure. The program would also support the adaptation and mitigation of water infrastructure to climate change and extreme weather events.
However, the WIFIA Loan Program could also face some challenges and limitations, such as:
- Securing sufficient and consistent funding for the program. The program would require an initial appropriation from Congress to establish a credit subsidy reserve that would cover the potential losses from loan defaults. The program would also need annual appropriations to cover the administrative and operational costs of the program. The program would compete with other federal programs and priorities for funding, and could be subject to budget cuts or delays.
- Ensuring the eligibility and feasibility of water infrastructure projects. The program would only apply to water infrastructure projects that are regulated by the Army Corps and that meet certain criteria, such as having a public benefit, being creditworthy, and being ready to proceed. The program would also require project sponsors to demonstrate their ability and willingness to repay the loans and to comply with the federal laws and regulations that apply to the projects.
- Balancing the interests and expectations of various stakeholders. The program would involve multiple parties, such as the Army Corps, the project sponsors, the private lenders, the Congress, and the public. The program would need to coordinate and communicate effectively with these stakeholders and address their concerns and feedback. The program would also need to ensure the transparency and accountability of the program and the projects.
What are the next steps for the change?
The Army Corps is currently seeking public comments on the proposed WIFIA Loan Program until April 30, 2023. The Army Corps will review and analyze the comments and incorporate them into the final rulemaking for the program. The Army Corps expects to publish the final rule and launch the program by the end of 2023.
The Army Corps is also preparing to implement the program by developing the policies, procedures, and systems for the program. The Army Corps is also planning to conduct outreach and education activities to inform and engage potential project sponsors and other stakeholders about the program.
The WIFIA Loan Program is a significant and ambitious change for the Army Corps and its water infrastructure mission. The program could offer a new and innovative way to finance and deliver water infrastructure projects that are vital for the nation’s economy, environment, and security.
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