Water Infrastructure Finance and Innovation Act (WIFIA) Award
Water Infrastructure Finance and Innovation Act (WIFIA) Award

Background

In 2021, the Springfield Water and Sewer Commission was chosen among a field of national applicants to receive a $250 million WIFIA loan from the U.S. Environmental Protection Agency (EPA). EPA's WIFIA program provides low-interest, long-term flexible financing to enable upgrades to water and wastewater infrastructure of regional or national importance. With very few loan or grant programs available to support such work in the water sector, the WIFIA program is highly competitive. The Commission received the fifth-largest 2021 award amount in the nation and is the first utility in Massachusetts to receive a WIFIA loan.

(From left to right) Executive Director Josh Schimmel, Acting EPA Region 1 Administrator Deborah Szaro, Congressman Richard Neal (MA-1), EPA Assistant Administrator for Water Radhika Fox, Springfield Mayor Domenic J. Sarno, Commissioner Vanessa Otero (SWSC), MA DEP Commissioner Martin Suuberg, Commissioner Daniel Rodriguez (SWSC), Commissioner William Leonard (SWSC), and Agawam Mayor William Sapelli appear at a funding announcement at the site of the Connecticut River Crossing Project on Bondi’s Island, September 16, 2021.

Benefits

The $250 million WIFIA loan will finance the accelerated design, construction, and implementation of critically important upgrades throughout the Commission's water and wastewater system. These projects, which are a part of the Commission's 6-year, $500 million CIP, are essential to ensuring system reliability, renewing aging infrastructure, meeting regulatory requirements, and building climate resiliency.

WIFIA financing provides several valuable benefits for ratepayers:

Saves ratepayers money

Compared to traditional funding sources such as market-rate bonds, the WIFIA loan will save Commission ratepayers approximately $60 million in borrowing costs over its 30-year lifespan. The interest rate for a WIFIA loan is fixed for the entire life of the loan, and is tied to the U.S. Treasury rate on the day of closing. (The Commission closed on its WIFIA loan on August 19, 2021.)

Accelerates infrastructure renewal

WIFIA financing will support the Commission’s $500 million capital improvement program (CIP). The CIP includes critical upgrades that are unavoidable due to the age of the Commission’s existing infrastructure or evolving regulatory requirements. WIFIA’s flexible loan terms will compress a large portion of the CIP to be implemented within 5 years rather than 20, reducing the risk of infrastructure failure or costly non-compliance with state or federal regulations.

Flexible Financing Terms Support Rate Stability

The WIFIA program allows for utilities to customize the terms of the loan agreement.  This flexibility provides the opportunity for innovative approaches to traditional financing.  The ability to shape principle payments and debt schedules to accommodate other financial obligations can be used to support rate stability, avoiding unpredictable large variations in year-to-year rate setting.

This structure also enables the Commission to leverage traditional financing sources to meet WIFIA match requirements. One such source is the Drinking Water and Clean Water Trust State Revolving Fund (SRF), which is administered through the Massachusetts Department of Environmental Protection (MassDEP).  The Commission secured $46.7 million in low-interest SRF loans in FY21 to support its CIP.

In addition, WIFIA loans recognize a utility’s sound financial position and its portfolio of comprehensively planned or shovel-ready projects. Having a comprehensive capital plan and financial road map also places the Commission in a more competitive position to obtain other grant funding or financing that may materialize in the future, such as through Covid-relief or a new federal infrastructure bill. WIFIA’s flexible loan terms will allow for the substitution of other legislative aid programs, should they become available.

Additional information and details about the benefits of the WIFIA program from EPA can be found here.

SWSC's Water and Wastewater Infrastructure Renewal Program

The Commission's 20-year Capital Improvement Program (CIP), submitted to WIFIA as the "WIFIA Water and Wastewater Infrastructure Renewal Program," includes 27 projects of critical need. All projects are intended to maximize ratepayer dollars by addressing multiple challenges at once, ranging from climate resiliency to infrastructure renewal to regulatory compliance. WIFIA financing supports some of the largest and most mission-critical projects in the Commission’s portfolio of needs, and compresses their execution into 5 years rather than 20.

Featured WIFIA-financed Projects

For a full list of all WIFIA-funded projects, see the FY22 Three-Year Capital Improvement Program (adopted June 23, 2021).