Sec. 10001 Short title
This title may be cited as the “Water Infrastructure Finance and Innovation Act of 2013”.
Title X — Innovative financing pilot projects
X Innovative financing pilot projects
Sec. 10002 Purposes
The purpose of this title is to establish a pilot program to assess the ability of innovative financing tools to—
promote increased development of critical water resources infrastructure by establishing additional opportunities for financing water resources projects that complement but do not replace or reduce existing Federal infrastructure financing tools such as the State water pollution control revolving loan funds established under title VI of the Federal Water Pollution Control Act (33 U.S.C. 1381 et seq.) and the State drinking water treatment revolving loan funds established under section 1452 of the Safe Drinking Water Act (42 U.S.C. 300j–12);
attract new investment capital to infrastructure projects that are capable of generating revenue streams through user fees or other dedicated funding sources;
complement existing Federal funding sources and address budgetary constraints on the Corps of Engineers civil works program and existing wastewater and drinking water infrastructure financing programs;
leverage private investment in water resources infrastructure;
align investments in water resources infrastructure to achieve multiple benefits; and
assist communities facing significant water quality, drinking water, or flood risk challenges with the development of water infrastructure projects.
Sec. 10003 Definitions
In this title:
Administrator— The term “Administrator” means the Administrator of the Environmental Protection Agency.
Community water system— The term community water system has the meaning given the term in section 1401 of the Safe Drinking Water Act (42 U.S.C. 300f).
Federal credit instrument— The term Federal credit instrument means a secured loan or loan guarantee authorized to be made available under this title with respect to a project.
Investment-grade rating— The term investment-grade rating means a rating of BBB minus, Baa3, bbb minus, BBB (low), or higher assigned by a rating agency to project obligations.
Lender—
In general— The term lender means any non-Federal qualified institutional buyer (as defined in section 230.144A(a) of title 17, Code of Federal Regulations (or a successor regulation), known as Rule 144A(a) of the Securities and Exchange Commission and issued under the Securities Act of 1933 (15 U.S.C. 77a et seq.)).
Inclusions— The term lender includes—
a qualified retirement plan (as defined in section 4974(c) of the Internal Revenue Code of 1986) that is a qualified institutional buyer; and
a governmental plan (as defined in section 414(d) of the Internal Revenue Code of 1986) that is a qualified institutional buyer.
Loan guarantee— The term loan guarantee means any guarantee or other pledge by the Secretary or the Administrator to pay all or part of the principal of, and interest on, a loan or other debt obligation issued by an obligor and funded by a lender.
Obligor— The term obligor means an eligible entity that is primarily liable for payment of the principal of, or interest on, a Federal credit instrument.
Project obligation—
In general— The term project obligation means any note, bond, debenture, or other debt obligation issued by an obligor in connection with the financing of a project.
Exclusion— The term project obligation does not include a Federal credit instrument.
Rating agency— The term rating agency means a credit rating agency registered with the Securities and Exchange Commission as a nationally recognized statistical rating organization (as defined in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a))).
Rural water infrastructure project— The term “rural water infrastructure project” means a project that—
is described in section 10007; and
is located in a water system that serves not more than 25,000 individuals.
Secured loan— The term secured loan means a direct loan or other debt obligation issued by an obligor and funded by the Secretary in connection with the financing of a project under section 10010.
State— The term State means—
a State;
the District of Columbia;
the Commonwealth of Puerto Rico; and
any other territory or possession of the United States.
State infrastructure financing authority— The term State infrastructure financing authority means the State entity established or designated by the Governor of a State to receive a capitalization grant provided by, or otherwise carry out the requirements of, title VI of the Federal Water Pollution Control Act (33 U.S.C. 1381 et. seq.) or section 1452 of the Safe Drinking Water Act (42 U.S.C. 300j–12).
Subsidy amount— The term subsidy amount means the amount of budget authority sufficient to cover the estimated long-term cost to the Federal Government of a Federal credit instrument, as calculated on a net present value basis, excluding administrative costs and any incidental effects on governmental receipts or outlays in accordance with the Federal Credit Reform Act of 1990 (2 U.S.C. 661 et seq.).
Substantial completion— The term substantial completion, with respect to a project, means the earliest date on which a project is considered to perform the functions for which the project is designed.
Treatment works— The term treatment works has the meaning given the term in section 212 of the Federal Water Pollution Control Act (33 U.S.C. 1292).
Sec. 10004 Authority to provide assistance
In general— The Secretary and the Administrator may provide financial assistance under this title to carry out pilot projects, which shall be selected to ensure a diversity of project types and geographical locations.
Responsibility—
Secretary— The Secretary shall carry out all pilot projects under this title that are eligible projects under section 10007(1).
Administrator— The Administrator shall carry out all pilot projects under this title that are eligible projects under paragraphs (2), (3), (4), (5), (6), and (8) of section 10007.
Other projects— The Secretary or the Administrator, as applicable, may carry out eligible projects under paragraph (7) or (9) of section 10007.
Sec. 10005 Applications
In general— To receive assistance under this title, an eligible entity shall submit to the Secretary or the Administrator, as applicable, an application at such time, in such manner, and containing such information as the Secretary or the Administrator may require.
Combined projects— In the case of an eligible project described in paragraph (8) or (9) of section 10007, the Secretary or the Administrator, as applicable, shall require the eligible entity to submit a single application for the combined group of projects.
Sec. 10006 Eligible entities
The following entities are eligible to receive assistance under this title:
A corporation.
A partnership.
A joint venture.
A trust.
A Federal, State, or local governmental entity, agency, or instrumentality.
A tribal government or consortium of tribal governments.
A State infrastructure financing authority.
Sec. 10007 Projects eligible for assistance
The following projects may be carried out with amounts made available under this title:
A project for flood control or hurricane and storm damage reduction that the Secretary has determined is technically sound, economically justified, and environmentally acceptable, including—
a structural or nonstructural measure to reduce flood risk, enhance stream flow, or protect natural resources; and
a levee, dam, tunnel, aqueduct, reservoir, or other related water infrastructure.
1 or more activities that are eligible for assistance under section 603(c) of the Federal Water Pollution Control Act (33 U.S.C. 1383(c)), notwithstanding the public ownership requirement under paragraph (1) of that subsection.
1 or more activities described in section 1452(a)(2) of the Safe Drinking Water Act (42 U.S.C. 300j–12(a)(2)).
A project for enhanced energy efficiency in the operation of a public water system or a publicly owned treatment works.
A project for repair, rehabilitation, or replacement of a treatment works, community water system, or aging water distribution or waste collection facility (including a facility that serves a population or community of an Indian reservation).
A brackish or sea water desalination project, a managed aquifer recharge project, or a water recycling project.
Acquisition of real property or an interest in real property—
if the acquisition is integral to a project described in paragraphs (1) through (6); or
pursuant to an existing plan that, in the judgment of the Administrator or the Secretary, as applicable, would mitigate the environmental impacts of water resources infrastructure projects otherwise eligible for assistance under this section.
A combination of projects, each of which is eligible under paragraph (2) or (3), for which a State infrastructure financing authority submits to the Administrator a single application.
A combination of projects secured by a common security pledge, each of which is eligible under paragraph (1), (2), (3), (4), (5), (6), or (7), for which an eligible entity, or a combination of eligible entities, submits a single application.
Sec. 10008 Activities eligible for assistance
For purposes of this title, an eligible activity with respect to an eligible project includes the cost of—
development-phase activities, including planning, feasibility analysis (including any related analysis necessary to carry out an eligible project), revenue forecasting, environmental review, permitting, preliminary engineering and design work, and other preconstruction activities;
construction, reconstruction, rehabilitation, and replacement activities;
the acquisition of real property or an interest in real property (including water rights, land relating to the project, and improvements to land), environmental mitigation (including acquisitions pursuant to section 10007(7)), construction contingencies, and acquisition of equipment;
capitalized interest necessary to meet market requirements, reasonably required reserve funds, capital issuance expenses, and other carrying costs during construction; and
refinancing interim construction funding, long-term project obligations, or a secured loan or loan guarantee made under this title.
Sec. 10009 Determination of eligibility and project selection
Eligibility requirements— To be eligible to receive financial assistance under this title, a project shall meet the following criteria, as determined by the Secretary or Administrator, as applicable:
Creditworthiness—
In general— Subject to subparagraph (B), the project shall be creditworthy, which shall be determined by the Secretary or the Administrator, as applicable, who shall ensure that any financing for the project has appropriate security features, such as a rate covenant, to ensure repayment.
Preliminary rating opinion letter— The Secretary or the Administrator, as applicable, shall require each project applicant to provide a preliminary rating opinion letter from at least 1 rating agency indicating that the senior obligations of the project (which may be the Federal credit instrument) have the potential to achieve an investment-grade rating.
Special rule for certain combined projects— The Administrator shall develop a credit evaluation process for a Federal credit instrument provided to a State infrastructure financing authority for a project under section 10007(8) or an entity for a project under section 10007(9), which may include requiring the provision of a preliminary rating opinion letter from at least 1 rating agency.
Eligible project costs—
In general— Subject to subparagraph (B), the eligible project costs of a project shall be reasonably anticipated to be not less than $20,000,000.
Rural water infrastructure projects— For rural water infrastructure projects, the eligible project costs of a project shall be reasonably anticipated to be not less than $5,000,000.
Dedicated revenue sources— The Federal credit instrument for the project shall be repayable, in whole or in part, from dedicated revenue sources that also secure the project obligations.
Public sponsorship of private entities— In the case of a project carried out by an entity that is not a State or local government or an agency or instrumentality of a State or local government or a tribal government or consortium of tribal governments, the project shall be publicly sponsored.
Limitation— No project receiving Federal credit assistance under this title may be financed or refinanced (directly or indirectly), in whole or in part, with proceeds of any obligation—
the interest on which is exempt from the tax imposed under chapter 1 of the Internal Revenue Code of 1986; or
with respect to which credit is allowable under subpart I or J of part IV of subchapter A of chapter 1 of such Code.
Selection criteria—
Establishment— The Secretary or the Administrator, as applicable, shall establish criteria for the selection of projects that meet the eligibility requirements of subsection (a), in accordance with paragraph (2).
Criteria— The selection criteria shall include the following:
The extent to which the project is nationally or regionally significant, with respect to the generation of economic and public benefits, such as—
the reduction of flood risk;
the improvement of water quality and quantity, including aquifer recharge;
the protection of drinking water; and
the support of international commerce.
The extent to which the project financing plan includes public or private financing in addition to assistance under this title.
The likelihood that assistance under this title would enable the project to proceed at an earlier date than the project would otherwise be able to proceed.
The extent to which the project uses new or innovative approaches.
The amount of budget authority required to fund the Federal credit instrument made available under this title.
The extent to which the project—
protects against extreme weather events, such as floods or hurricanes; or
helps maintain or protect the environment.
The extent to which a project serves regions with significant energy exploration, development, or production areas.
The extent to which a project serves regions with significant water resource challenges, including the need to address—
water quality concerns in areas of regional, national, or international significance;
water quantity concerns related to groundwater, surface water, or other water sources;
significant flood risk;
water resource challenges identified in existing regional, State, or multistate agreements; or
water resources with exceptional recreational value or ecological importance.
The extent to which assistance under this title reduces the contribution of Federal assistance to the project.
Special rule for certain combined projects— For a project described in section 10007(8), the Administrator shall only consider the criteria described in subparagraphs (B) through (I) of paragraph (2).
Federal requirements— Nothing in this section supersedes the applicability of other requirements of Federal law (including regulations).
Sec. 10010 Secured loans
Agreements—
In general— Subject to paragraphs (2) through (4), the Secretary or the Administrator, as applicable, may enter into agreements with 1 or more obligors to make secured loans, the proceeds of which shall be used—
to finance eligible project costs of any project selected under section 10009;
to refinance interim construction financing of eligible project costs of any project selected under section 10009; or
to refinance long-term project obligations or Federal credit instruments, if that refinancing provides additional funding capacity for the completion, enhancement, or expansion of any project that—
is selected under section 10009; or
otherwise meets the requirements of section 10009.
Limitation on refinancing of interim construction financing— A secured loan under paragraph (1) shall not be used to refinance interim construction financing under paragraph (1)(B) later than 1 year after the date of substantial completion of the applicable project.
Financial risk assessment— Before entering into an agreement under this subsection for a secured loan, the Secretary or the Administrator, as applicable, in consultation with the Director of the Office of Management and Budget and each rating agency providing a preliminary rating opinion letter under section 10009(a)(1)(B), shall determine an appropriate capital reserve subsidy amount for the secured loan, taking into account each such preliminary rating opinion letter.
Investment-grade rating requirement— The execution of a secured loan under this section shall be contingent on receipt by the senior obligations of the project of an investment-grade rating.
Terms and limitations—
In general— A secured loan provided for a project under this section shall be subject to such terms and conditions, and contain such covenants, representations, warranties, and requirements (including requirements for audits), as the Secretary or the Administrator, as applicable, determines to be appropriate.
Maximum amount— The amount of a secured loan under this section shall not exceed the lesser of—
an amount equal to 49 percent of the reasonably anticipated eligible project costs; and
if the secured loan does not receive an investment-grade rating, the amount of the senior project obligations of the project.
Payment— A secured loan under this section—
shall be payable, in whole or in part, from State or local taxes, user fees, or other dedicated revenue sources that also secure the senior project obligations of the relevant project;
shall include a rate covenant, coverage requirement, or similar security feature supporting the project obligations; and
may have a lien on revenues described in subparagraph (A), subject to any lien securing project obligations.
Interest rate— The interest rate on a secured loan under this section shall be not less than the yield on United States Treasury securities of a similar maturity to the maturity of the secured loan on the date of execution of the loan agreement.
Maturity date—
In general— The final maturity date of a secured loan under this section shall be not later than 35 years after the date of substantial completion of the relevant project.
Special rule for State infrastructure financing authorities— The final maturity date of a secured loan to a State infrastructure financing authority under this section shall be not later than 35 years after the date on which amounts are first disbursed.
Nonsubordination— A secured loan under this section shall not be subordinated to the claims of any holder of project obligations in the event of bankruptcy, insolvency, or liquidation of the obligor of the project.
Fees— The Secretary or the Administrator, as applicable, may establish fees at a level sufficient to cover all or a portion of the costs to the Federal Government of making a secured loan under this section.
Non-Federal share— The proceeds of a secured loan under this section may be used to pay any non-Federal share of project costs required if the loan is repayable from non-Federal funds.
Maximum federal involvement—
In general— Except as provided in subparagraph (B), for each project for which assistance is provided under this title, the total amount of Federal assistance shall not exceed 80 percent of the total project cost.
Exception— Subparagraph (A) shall not apply to any rural water project—
that is authorized to be carried out by the Secretary of the Interior;
that includes among its beneficiaries a federally recognized Indian tribe; and
for which the authorized Federal share of the total project costs is greater than the amount described in subparagraph (A).
Repayment—
Schedule— The Secretary or the Administrator, as applicable, shall establish a repayment schedule for each secured loan provided under this section, based on the projected cash flow from project revenues and other repayment sources.
Commencement—
In general— Scheduled loan repayments of principal or interest on a secured loan under this section shall commence not later than 5 years after the date of substantial completion of the project.
Special rule for State infrastructure financing authorities— Scheduled loan repayments of principal or interest on a secured loan to a State infrastructure financing authority under this title shall commence not later than 5 years after the date on which amounts are first disbursed.
Deferred payments—
Authorization— If, at any time after the date of substantial completion of a project for which a secured loan is provided under this section, the project is unable to generate sufficient revenues to pay the scheduled loan repayments of principal and interest on the secured loan, the Secretary or the Administrator, as applicable, subject to subparagraph (C), may allow the obligor to add unpaid principal and interest to the outstanding balance of the secured loan.
Interest— Any payment deferred under subparagraph (A) shall—
continue to accrue interest in accordance with subsection (b)(4) until fully repaid; and
be scheduled to be amortized over the remaining term of the secured loan.
Criteria—
In general— Any payment deferral under subparagraph (A) shall be contingent on the project meeting such criteria as the Secretary or the Administrator, as applicable, may establish.
Repayment standards— The criteria established under clause (i) shall include standards for reasonable assurance of repayment.
Prepayment—
Use of excess revenues— Any excess revenues that remain after satisfying scheduled debt service requirements on the project obligations and secured loan and all deposit requirements under the terms of any trust agreement, bond resolution, or similar agreement securing project obligations may be applied annually to prepay a secured loan under this section without penalty.
Use of proceeds of refinancing— A secured loan under this section may be prepaid at any time without penalty from the proceeds of refinancing from non-Federal funding sources.
Sale of secured loans—
In general— Subject to paragraph (2), as soon as practicable after the date of substantial completion of a project and after providing a notice to the obligor, the Secretary or the Administrator, as applicable, may sell to another entity or reoffer into the capital markets a secured loan for a project under this section, if the Secretary or the Administrator, as applicable, determines that the sale or reoffering can be made on favorable terms.
Consent of obligor— In making a sale or reoffering under paragraph (1), the Secretary or the Administrator, as applicable, may not change the original terms and conditions of the secured loan without the written consent of the obligor.
Loan guarantees—
In general— The Secretary or the Administrator, as applicable, may provide a loan guarantee to a lender in lieu of making a secured loan under this section, if the Secretary or the Administrator, as applicable, determines that the budgetary cost of the loan guarantee is substantially the same as that of a secured loan.
Terms— The terms of a loan guarantee provided under this subsection shall be consistent with the terms established in this section for a secured loan, except that the rate on the guaranteed loan and any prepayment features shall be negotiated between the obligor and the lender, with the consent of the Secretary or the Administrator, as applicable.
Sec. 10011 Program administration
Requirement— The Secretary or the Administrator, as applicable, shall establish a uniform system to service the Federal credit instruments made available under this title.
Fees—
In general— The Secretary or the Administrator, as applicable, may collect and spend fees, contingent on authority being provided in appropriations Acts, at a level that is sufficient to cover—
the costs of services of expert firms retained pursuant to subsection (d); and
all or a portion of the costs to the Federal Government of servicing the Federal credit instruments provided under this title.
Servicer—
In general— The Secretary or the Administrator, as applicable, may appoint a financial entity to assist the Secretary or the Administrator in servicing the Federal credit instruments provided under this title.
Duties— A servicer appointed under paragraph (1) shall act as the agent for the Secretary or the Administrator, as applicable.
Fee— A servicer appointed under paragraph (1) shall receive a servicing fee, subject to approval by the Secretary or the Administrator, as applicable.
Assistance from experts— The Secretary or the Administrator, as applicable, may retain the services, including counsel, of organizations and entities with expertise in the field of municipal and project finance to assist in the underwriting and servicing of Federal credit instruments provided under this title.
Applicability of other laws— Section 513 of the Federal Water Pollution Control Act (33 U.S.C. 1372) applies to the construction of a project carried out, in whole or in part, with assistance made available through a Federal credit instrument under this title in the same manner that section applies to a treatment works for which a grant is made available under that Act.
Sec. 10012 State, tribal, and local permits
The provision of financial assistance for project under this title shall not—
relieve any recipient of the assistance of any obligation to obtain any required State, local, or tribal permit or approval with respect to the project;
limit the right of any unit of State, local, or tribal government to approve or regulate any rate of return on private equity invested in the project; or
otherwise supersede any State, local, or tribal law (including any regulation) applicable to the construction or operation of the project.
Sec. 10013 Regulations
The Secretary or the Administrator, as applicable, may promulgate such regulations as the Secretary or Administrator determines to be appropriate to carry out this title.
Sec. 10014 Funding
In general— There is authorized to be appropriated to each of the Secretary and the Administrator to carry out this title $50,000,000 for each of fiscal years 2014 through 2018, to remain available until expended.
Administrative costs— Of the funds made available to carry out this title, the Secretary or the Administrator, as applicable, may use for the administration of this title, including for the provision of technical assistance to aid project sponsors in obtaining the necessary approvals for the project, not more than $2,200,000 for each of fiscal years 2014 through 2018.
Sec. 10015 Report to Congress
Not later than 2 years after the date of enactment of this Act, and every 2 years thereafter, the Secretary or the Administrator, as applicable, shall submit to the Committee on Environment and Public Works of the Senate and the Committee on Transportation and Infrastructure of the House of Representatives a report summarizing for the projects that are receiving, or have received, assistance under this title—
the financial performance of those projects, including a recommendation as to whether the objectives of this title are being met; and
the public benefit provided by those projects, including, as applicable, water quality and water quantity improvement, the protection of drinking water, and the reduction of flood risk.
Sec. 10016 Use of American iron, steel, and manufactured goods
In general— Except as provided in subsection (b), none of the amounts made available under this Act may be used for the construction, alteration, maintenance, or repair of a project eligible for assistance under this title unless all of the iron, steel, and manufactured goods used in the project are produced in the United States.
Exception— Subsection (a) shall not apply in any case or category of cases in which the Secretary finds that—
applying subsection (a) would be inconsistent with the public interest;
iron, steel, and the relevant manufactured goods are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality; or
inclusion of iron, steel, and manufactured goods produced in the United States will increase the cost of the overall project by more than 25 percent.
Public notice— If the Secretary determines that it is necessary to waive the application of subsection (a) based on a finding under subsection (b), the Secretary shall publish in the Federal Register a detailed written justification as to why the provision is being waived.
International agreements— This section shall be applied in a manner consistent with United States obligations under international agreements.