Financing Climate Resilient Water Infrastructure Sanjiv K. Sinha, P. E Financing Climate Resilient Water Infrastructure Sanjiv K. Sinha, P.E., Ph.D. Webinar – Great Lakes and St. Lawrence Cities Initiative & Mayors Innovation Project Greeting. Thank Yous. Intro to individuals The assignment requested by Pittsburgh requires a diverse set of skills, and experienced professionals that can look beyond traditional public works financing and delivery. The ECT Team bring those skills to Pittsburgh by: Experience in identical assignments Agnostic to financing methods but able to evaluate various financing set ups for least cost Recognition of the “municipal view” of the challenge Unbiased - Unencumbered by expectations of being the ultimate delivery contractor. February 21, 2019

P3GreatLakes: A Team Focused on Alternative Delivery/Financing Frameworks www.P3GreatLakes.Org

Outline Status and needs Alternative financing frameworks Status of water infrastructure Past funding levels Needs Resilience impacts Federal programs: SRF and WIFIA Alternative financing frameworks Rating agencies, Environmental, Social and Governance (ESG) criteria, resilience, and the future The assets of the city remain with the city The goals for the program are clearly understood and articulated by the city The program is established with goals that are aligned between the city and the private partner through incentives associated with attaining various goals, and could include workforce development and other social goals, as well as the performance of stormwater control systems The management of the partnership is controlled by the city, and The financial benefit to both the city and the private entity is well defined at the onset

Water Infrastructure: Diversity and Needs

Water Sector Diversity Water Resources Sector Challenges and Considerations Funding sources Affordability issues Aging infrastructure/deferred maintenance Resiliency Operational efficiency Regulatory requirements Life-cycle asset management New technologies and green infrastructure Financing and delivery constraints

ASCE’s Infrastructure Report Card Estimated needs at over $3.6 Trillion by 2020 ($4.7T by 2025) just to keep pace with GDP (OECD/WEF). Every dollar of deferred maintenance costs taxpayers $4-5 in future capital expenditures. The assets of the city remain with the city The goals for the program are clearly understood and articulated by the city The program is established with goals that are aligned between the city and the private partner through incentives associated with attaining various goals, and could include workforce development and other social goals, as well as the performance of stormwater control systems The management of the partnership is controlled by the city, and The financial benefit to both the city and the private entity is well defined at the onset Source: ASCE Infrastructure Report Card,2017

Clear Need for Investment in Resilient Water Infrastructure $472.6 billion 20-year capital need for drinking water EPA’s 2015 Drinking Water Infrastructure Needs Survey and Assessment (2015$) $271.0 billion 20-year capital need for wastewater EPA’s 2012 Clean Watersheds Needs Survey (2012$) $448 - $994 billion needed to prepare water infrastructure for the impacts of climate change 2009 estimate from the National Association of Clean Water Agencies (NACWA) and the Association of the Metropolitan Water Agencies (AMWA)

Infrastructure Investment Gap is Growing Public Spending on Transportation and Water Infrastructure, by Level of Government, 1956 to 2014

And the Challenges Go Beyond Funding . . . Infrastructure delivery system is flawed Limited life-cycle asset considerations Lack of incentivized performance Taxpayers and ratepayers deserve a better deal Alternative finance and delivery options Pay for performance Community co-benefits Of all of the world’s megaprojects, 9 out of 10: Overrun their budget Are delayed Don’t deliver the expected benefits The assets of the city remain with the city The goals for the program are clearly understood and articulated by the city The program is established with goals that are aligned between the city and the private partner through incentives associated with attaining various goals, and could include workforce development and other social goals, as well as the performance of stormwater control systems The management of the partnership is controlled by the city, and The financial benefit to both the city and the private entity is well defined at the onset Source: Bent Flyvbjerg, University of Oxford Said Business School

Climate Resilient Water Infrastructure

Climate Reality The assets of the city remain with the city The goals for the program are clearly understood and articulated by the city The program is established with goals that are aligned between the city and the private partner through incentives associated with attaining various goals, and could include workforce development and other social goals, as well as the performance of stormwater control systems The management of the partnership is controlled by the city, and The financial benefit to both the city and the private entity is well defined at the onset Source: “The Midwest Is Getting Drenched, And It’s Causing Big Problems” by Ella Koeze, fivethirtyeight.com

Design Challenge National Oceanic and Atmospheric Administration’s Atlas 14 Provides widely used precipitation estimates for most of the country How much rain qualifies a storm as a “10-year,” “50-year” or “hundred-year” rainstorm in each area — that is, storms that might be expected to occur only once in each of those timespans Water infrastructure in Minnesota Atlas 14 was updated in and released for Minnesota in 2013 Until then the most recent estimates available for Minnesota had been last updated in the ’70s => Problem The assets of the city remain with the city The goals for the program are clearly understood and articulated by the city The program is established with goals that are aligned between the city and the private partner through incentives associated with attaining various goals, and could include workforce development and other social goals, as well as the performance of stormwater control systems The management of the partnership is controlled by the city, and The financial benefit to both the city and the private entity is well defined at the onset

Water Infrastructure Funding/Finance: State Revolving Loan Funds

Drinking Water & Clean Water State Revolving Funds: Eligible Projects Drinking Water SRF Drinking water treatment Transmission & distribution Source water Finished water storage System consolidation or creation Water security Water infrastructure energy & water efficiency Clean Water SRF Wastewater treatment Stormwater management Agricultural best management practices Watershed management Pollution prevention Wastewater infrastructure energy & water conservation Aquifer recharge Desalination

Cumulative SRF Assistance Agreements $126B cumulative CWSRF assistance $35B cumulative DWSRF Source: Natural Resources Defense Council, 2018 Presentation at Great Lakes Adaptation Forum.

Cumulative SRF Assistance Agreements DWSRF CWSRF $473B drinking water need $271B wastewater need Source: Natural Resources Defense Council, 2018 Presentation at Great Lakes Adaptation Forum.

Water Infrastructure Finance: WIFIA

The Water Infrastructure Finance & Innovation Act (WIFIA) Operation since 2017 Provides long-term, low-cost, supplemental credit assistance to creditworthy water and wastewater projects Can lend money to corporations, trusts, partnerships, joint ventures, Clean Water SRF and Drinking Water SRF programs, and local, state, tribal, and federal government entities, Limits support to 49% of project cost, with exemptions for certain projects, such as those built in Indian tribal communities The assets of the city remain with the city The goals for the program are clearly understood and articulated by the city The program is established with goals that are aligned between the city and the private partner through incentives associated with attaining various goals, and could include workforce development and other social goals, as well as the performance of stormwater control systems The management of the partnership is controlled by the city, and The financial benefit to both the city and the private entity is well defined at the onset

Authorized & Appropriated Funding Each Fiscal Year Appropriated Total Expenses (million $) Total Amount of Credit Assistance 2015 2016 2017 30 2,300 2018 63 5,500 2019 68a 7,000a The assets of the city remain with the city The goals for the program are clearly understood and articulated by the city The program is established with goals that are aligned between the city and the private partner through incentives associated with attaining various goals, and could include workforce development and other social goals, as well as the performance of stormwater control systems The management of the partnership is controlled by the city, and The financial benefit to both the city and the private entity is well defined at the onset Source: “What we have learned in the two years of WIFIA’s existence” by Vedachalam & Lindquist, March 2018, Journal AWWA

WIFIA’s Strategic Objectives as Identified by U.S. EPA Are Evolving FY2017 FY2018 Extreme weather and climate change infrastructure Included Not listed Enhanced energy efficiency Green infrastructure Clean and safe drinking water Repair and rehabilitate old infrastructure The assets of the city remain with the city The goals for the program are clearly understood and articulated by the city The program is established with goals that are aligned between the city and the private partner through incentives associated with attaining various goals, and could include workforce development and other social goals, as well as the performance of stormwater control systems The management of the partnership is controlled by the city, and The financial benefit to both the city and the private entity is well defined at the onset Source: “What we have learned in the two years of WIFIA’s existence” by Vedachalam & Lindquist, March 2018, Journal AWWA

Distribution of WIFIA Criteria Weights Are Also Evolving 15% 5% 32% 34% 80% The assets of the city remain with the city The goals for the program are clearly understood and articulated by the city The program is established with goals that are aligned between the city and the private partner through incentives associated with attaining various goals, and could include workforce development and other social goals, as well as the performance of stormwater control systems The management of the partnership is controlled by the city, and The financial benefit to both the city and the private entity is well defined at the onset 34% Source: “What we have learned in the two years of WIFIA’s existence” by Vedachalam & Lindquist, March 2018, Journal AWWA

WIFIA 12 projects selected in first year of program Some examples: Median cost for large community project = $253 Million Only one small community project Some examples: City of Baltimore planned to receive $200 Mil in WIFIA funds for wastewater treatment upgrade/repairs, and stormwater management systems Indiana Finance Authority used use SRF balance of $453 Mil, and was able to issue $890 Mil in projects across the state The assets of the city remain with the city The goals for the program are clearly understood and articulated by the city The program is established with goals that are aligned between the city and the private partner through incentives associated with attaining various goals, and could include workforce development and other social goals, as well as the performance of stormwater control systems The management of the partnership is controlled by the city, and The financial benefit to both the city and the private entity is well defined at the onset

2019 Omnibus Appropriations Bill

Appropriations for U. S. Department of Interior & U. S Appropriations for U.S. Department of Interior & U.S. Environmental Protection Agency Clean Water State Revolving Fund — $1.7 billion Equal to the 2018 enacted level and $300 million above the President’s budget request Direct 10% of funds to be used for green infrastructure, water & energy efficiency improvements, or other environmentally innovative activities Safe Drinking Water State Revolving Fund — $1.2 billion The assets of the city remain with the city The goals for the program are clearly understood and articulated by the city The program is established with goals that are aligned between the city and the private partner through incentives associated with attaining various goals, and could include workforce development and other social goals, as well as the performance of stormwater control systems The management of the partnership is controlled by the city, and The financial benefit to both the city and the private entity is well defined at the onset Source: Feb 14-2019 Stormwater Newsletter, Water Environment Federation.

Appropriations for the U. S. Department of Interior & the U. S Appropriations for the U.S. Department of Interior & the U.S. Environmental Protection Agency Water Infrastructure Finance and Innovation Act (WIFIA) Grants — $68 million $5 million above the FY 2018 enacted level and $48 million above the President’s budget request Forecasts total potential loan capacity at greater than $7 billion in water infrastructure projects Directs the EPA to prioritize funding to address lead and emerging contaminants, including PFOA and PFAS The assets of the city remain with the city The goals for the program are clearly understood and articulated by the city The program is established with goals that are aligned between the city and the private partner through incentives associated with attaining various goals, and could include workforce development and other social goals, as well as the performance of stormwater control systems The management of the partnership is controlled by the city, and The financial benefit to both the city and the private entity is well defined at the onset Source: Feb 14-2019 Stormwater Newsletter, Water Environment Federation.

Conclusions There is a massive funding gap Funding gap is only part of the problem Climate change is exacerbating the challenge of the funding gap SRF and WIFIA can be further enhanced to address climate resiliency needs Rating agencies will have a say in how it all plays out Alternative sources of finance are needed, and are rapidly emerging The assets of the city remain with the city The goals for the program are clearly understood and articulated by the city The program is established with goals that are aligned between the city and the private partner through incentives associated with attaining various goals, and could include workforce development and other social goals, as well as the performance of stormwater control systems The management of the partnership is controlled by the city, and The financial benefit to both the city and the private entity is well defined at the onset

Water Infrastructure Finance: 2.0

ssinha@ectinc. com 734-272-0859 www. P3GreatLakes. Org www. twitter ssinha@ectinc.com 734-272-0859 www.P3GreatLakes.Org www.twitter.com/P3GreatLakes