NARC 53rd Annual Conference June 11, 2019 Omaha, NE

Mission statement The Water Infrastructure Finance and Innovation Act (WIFIA) program accelerates investment in our nation’s water and wastewater infrastructure by providing long-term, low-cost, supplemental credit assistance under customized terms to creditworthy water and wastewater projects of national and regional significance. EPA has been developing the WIFIA program for the past few years. At the outset, we developed a roadmap to guide us in development. This roadmap informs us in all of the decisions we have made, and all of the directions we have taken. In order to convey our intentions, and the direction we would like to take this new program, we put together a mission statement, which I will read right now….. This mission statement isn’t simply a slogan. Each of the words in the statement convey significant meaning. 2 of the most important terms are “accelerates investment” and “supplemental credit assistance.” The intent here is clear. WIFIA is not intended to be the sole source of financing for projects. It’s purpose is to push projects to completion faster, and to provide a cost-effective supplement to other sources of financing. The term National and regional significance, which comes from the statute, indicates a clear purposes of providing financing to projects with a substantial impact, nationally, or regionally. W W W . E P A . G O V / W I F I A | 2

Federal credit program A small amount of federal funds supports a much larger amount of infrastructure investment Congress only appropriates money to cover the estimated losses for projects The remaining loan amount is borrowed from and repaid to Treasury Since WIFIA loans finance up to 49%, they stimulate additional investment in the project $12 BILLION IN INFRASTRUCTURE INVESTMENT $6 BILLION IN LOANS $60 MILLION IN APPROPRIATIONS EPA will make available $60 million in budget authority to cover the subsidy cost of providing WIFIA credit assistance This funding covers the federal government’s anticipated cost of providing approximately $6 billion in loans WIFIA can finance up to 49% of the anticipated project costs Therefore, the $60 million can support a total of $12 billion in water infrastructure investment 2014: Congress passed as part of Water Resources Reform and Development Act (WRRDA) of 2014 which established the WIFIA program 2014-2016: EPA developed its first Federal Credit Program for water infrastructure FY2017: Congress appropriated $25 million for credit subsidy which allowed EPA to select its first 12 projects to invite to apply for loans FY2018: Congress appropriated $55 million for credit subsidy and invited 39 projects to apply for WIFIA financing FY2019: Congress appropriated $60 million for credit subsidy which allows EPA to finance approximately $6 billion. WIFIA program has closed its first 8 loans totaling over $2 billion in financing

Eligibility Eligible borrowers Eligible projects Local, state, tribal, and federal government entities Partnerships and joint ventures Corporations and trusts Clean Water and Drinking Water State Revolving Fund (SRF) programs Projects that are eligible for the Clean Water SRF, not withstanding the public ownership clause Projects that are eligible for the Drinking Water SRF Enhanced energy efficiency projects at drinking water and wastewater facilities Brackish or seawater desalination, aquifer recharge, alternative water supply, and water recycling projects Drought prevention, reduction, or mitigation projects Acquisition of property if it is integral to the project or will mitigate the environmental impact of a project A combination of projects secured by a common security pledge or submitted under one application by an SRF program

Important program features Minimum project size for large communities. Minimum project size for small communities (population of 25,000 or less). Maximum portion of eligible project costs that WIFIA can fund. Maximum final maturity date from substantial completion. Maximum time that repayment may be deferred after substantial completion of the project. Interest rate will be equal to or greater than the U.S. Treasury rate of a similar maturity.  Projects must be creditworthy. NEPA, Davis-Bacon, American Iron and Steel, and all federal cross-cutter provisions apply.

Benefits overview WIFIA’s benefits can serve various borrower needs Cheaper than alternatives Low, fixed interest rate Low fees Flexible financial terms Customized repayment schedule Customized disbursements No penalty for prepayment Flexible co-financing No rate lock or commitment fees Can attract other borrowers and allow for more senior debt Can take a lower lien priority, freeing up coverage for affordable senior debt Improves the position and confidence of other lenders Very low interest rate equivalent to the U.S. Treasury rate of the same maturity based on the weighted average life (WAL) Highly flexible repayment schedule during construction, allowing payment deferral during periods of high capital expenditure Ability to preserve a borrower’s senior debt capacity, allowing borrowers issue future non- WIFIA project related debt at lower interest rates and with more favorable terms Flexibility to sculpt the WIFIA repayment schedule in order to reduce burden on rate payers. WIFIA repayments can be ramped up over time, allowing for small and steady rate increases to satisfy capital expenditures and debt service payments Ability to back load repayments offers significant saving compared to level repayment schedules, because cash outlays that are made sooner cost more than outlays in future years due to lost earning capacity on that cash Presence of low-cost, flexible WIFIA debt improves the position and confidence of other lenders. This may help borrowers obtain other sources of funding at more favorable terms

Project Review, Negotiation, and Closing Application Process Project Selection Notice of Funding Availability Letter of Interest submission Letter of Interest evaluation Invitation to apply Project Review, Negotiation, and Closing Application submission Application evaluation Due diligence Term sheet negotiation Loan agreement negotiation Closing

Project Review, Negotiation, and Closing Summary Project Selection Project Review, Negotiation, and Closing Notice of Funding Availability (NOFA) Letter of Interest Submission Letter of Interest Evaluation Project Selection For the rest of this section, I will talk about Project Selection and the Invitation to Apply. The dates provided in this graphic show the schedule that EPA is following for the 2019 selection round. Administrator Wheeler announced the NOFA in late March and it was officially published in the Federal Register on April 5, 2019. Prospective borrowers have 90 days from the Federal Register publication date to submit a letter of interest—so July 5, 2019 EPA will review the letters of interest received for approximately 3 months- this time may vary depending on the interest in the program this selection round. EPA will publicly announc the selected projects in Fall 2019. In the past, selected projects were given advance notification prior to the public announcement date. April 5, 2019 July 5, 2019 3 months Fall 2019

Project selection is competitive Project selection is a competitive process to identify projects to invite to apply which are: Eligible Creditworthy Technically feasible Meet the public policy goals outlined in the WIFIA statute and regulation Thanks, Jorianne. So, the WIFIA project selection process is competitive. Meaning, we will evaluate projects, based on their eligibility, creditworthiness, technical feasibility, and their ability to meet policy goals outlined in the statute, when we identify which projects are invited to apply for a loan.

General tips Use the letter of interest form available at https://www.epa.gov/wifia/how-apply-wifia-assistance-0#materials Read the instructions in the NOFA and the program handbook prior to completing your letter of interest Answer every question, when relevant provide additional supporting material to support your answer Provide specific references when pointing to supporting documents Remember your audience is learning about your system for the first time and needs contextual information to understand your project Submit early in order to avoid issues with large file sizes at the deadline Attend one of the webinars offered following the NOFA release Ask questions– contact WIFIA program staff at wifia@epa.gov

Invitation to apply EPA intends to loan to the projects that it invites to apply Selected projects Notified in writing of selection Within 30 days of the invitation, EPA will meet with the entity to discuss the application process The application deadline is 365 days from the notification date EPA will publicly announce selected projects Non-selected projects Notified in writing that they were not selected May request a de-brief Must re-submit their LOI to be considered in future rounds

Application Process Each application review is tailored to reflect the complexity and risk of the proposed project Each project is reviewed for: Creditworthiness Engineering due diligence Legal aspects of the proposed project and credit structure

Application Process Example Project Y: $250M low to medium risk capital project Pledge Application evaluation Term sheet & loan agreement development Approval & closing Existing Lien of System Revenues 4 Months WIFIA Fees $250,000 Example Project Z: $1,000M innovative high risk capital project Pledge Application evaluation Term sheet & loan agreement development Approval & closing Public-Private Partnership with Customized Terms 12 Months WIFIA FEES $500,000+ This slide shows that depending on the complexity of the projects and the time it takes to develop and negotiation the term sheet and loan agreement, the credit processing fees can vary. Most of the fees can be attributed to our legal advisors.

Fy 2018 selected projects Information about selected projects is available at: https://www.epa.gov/wifia/wifia-selected-projects

Fy 2018 selected projects Number of projects selected: 39 Total invited loan amount: Approximately $5 billion Total infrastructure investment: Over $10 billion Number of projects reducing lead or other contaminants: 12 Number of projects addressing repair, rehabilitation, or replacement: 37 Population served by the projects: 22 million people in 16 states and Washington, D.C. Types of borrowers: private corporations, public entities, and public-private partnerships Types of projects: wastewater collection and treatment, drinking water distribution and treatment, stormwater management, desalination, and water recycling projects

Lessons learned from First 2 Funding Rounds Process can be fast and relatively easy! Program is willing to take risk, but we need to understand it Be prepared for negotiation if you’re asking WIFIA for highly customized terms Average timeline to loan execution is about 4-8 months from application submission NEPA approval has not been a gating item to reach close Credit quality has ranged from ratings of AAA to BBB Borrowers generally take longer to submit their applications than they expect when initially submitting an LOI

WIFIA for Regional Initiatives We can have creative and innovative loan structuring arrangements One project with two borrowers: one application but with each borrower with its own loan and security pledge. One project, one loan through a JPA: multiple municipalities developing regional infrastructure through a common borrowing entity. One project, one borrower, multiple ‘wholesalers’: regional water supply system with the bigger city acting as borrower and smaller cities as customers. Bundle of projects: WIFIA ‘project’ is the whole 5-year CIP

resources General information https://www.epa.gov/wifia/learn-about-wifia-program Program overview Program benefits Links to laws and regulations Frequently asked questions Application materials https://www.epa.gov/wifia/how-apply-wifia-assistance-0#materials Letter of Interest form Letter of Interest FAQ Letter of Interest checklist Sample financial pro forma Sample Letter of Interest Resources https://www.epa.gov/wifia/wifia-resources Program Handbook Recordings and presentations from past webinars Template Term Sheet

Contact us Website: www.epa.gov/wifia Email: wifia@epa.gov Sign-up to receive announcements about the WIFIA program at https://tinyurl.com/wifianews W W W . E P A . G O V / W I F I A | 19