Proposed Rule2022-12050
Credit Assistance and Related Fees for Water Resources Infrastructure Projects
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Published
June 10, 2022
Issuing agencies
Defense DepartmentEngineers Corps
Abstract
The U.S. Army Corps of Engineers (Corps) is soliciting comments on a proposed rule implementing a new credit assistance program consistent with the funding provided under Subtitle C of Title V of the Water Resources Reform and Development Act of 2014 (WRRDA), often referred to as the Water Infrastructure Finance and Innovation Act of 2014 (WIFIA), for safety projects to maintain, upgrade, and repair dams identified in the National Inventory of Dams with a primary owner type of state, local government, public utility or private and the process by which the Corps will administer such credit assistance including the assessment of fees. The proposed rule sets forth the policies and procedures that the Corps will use for receiving, evaluating, approving applications, and servicing and monitoring direct loans and loan guarantees.
Full Text
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<title>Federal Register, Volume 87 Issue 112 (Friday, June 10, 2022)</title>
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[Federal Register Volume 87, Number 112 (Friday, June 10, 2022)]
[Proposed Rules]
[Pages 35473-35489]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-12050]
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DEPARTMENT OF DEFENSE
Department of the Army, U.S. Army Corps of Engineers
33 CFR Part 386
[Docket Number: COE-2022-0004]
RIN 0710-AB31
Credit Assistance and Related Fees for Water Resources
Infrastructure Projects
AGENCY: U.S. Army Corps of Engineers, Department of Defense (DoD).
ACTION: Proposed rule.
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SUMMARY: The U.S. Army Corps of Engineers (Corps) is soliciting
comments on a proposed rule implementing a new credit assistance
program consistent with the funding provided under Subtitle C of Title
V of the Water Resources Reform and Development Act of 2014 (WRRDA),
often referred to as the Water Infrastructure Finance and Innovation
Act of 2014 (WIFIA), for safety projects to maintain, upgrade, and
repair dams identified in the National Inventory of Dams with a primary
owner type of state, local government, public utility or private and
the process by which the Corps will administer such credit assistance
including the assessment of fees. The proposed rule sets forth the
policies and procedures that the Corps will use for receiving,
evaluating, approving applications, and servicing and monitoring direct
loans and loan guarantees.
DATES: Comments must be received on or before August 9, 2022.
ADDRESSES: Submit your comments, identified by Docket Number COE-2022-
0004, at <a href="https://www.regulations.gov">https://www.regulations.gov</a>. Follow the online instructions
for submitting comments. Once submitted, comments cannot be edited or
withdrawn. The Corps may publish any comment received to its public
docket. Do not submit electronically any information you consider to be
Confidential Business Information (CBI) or other information whose
disclosure is restricted by statute.
FOR FURTHER INFORMATION CONTACT: Aaron Snyder, Corps Water
Infrastructure Financing Team, 441 G. Street NW, CECW-I Attn: Aaron
Snyder 3K87, Washington, DC 20314; telephone number: (612) 518-0355;
email address: <a href="/cdn-cgi/l/email-protection#5f1c0816190f1f2a2c3e3c3a713e2d322671323633"><span class="__cf_email__" data-cfemail="c0839789869080b5b3a1a3a5eea1b2adb9eeada9ac">[email protected]</span></a>. The phone number above may also be
reached by individuals who are deaf or hard of hearing, or who have
speech disabilities, through the Federal Relay Service's teletype
service at 800-877-8339.
SUPPLEMENTARY INFORMATION:
I. Background
II. Water Resources Infrastructure Needs
III. Program Information
A. Funding
B. Borrower Eligibility
C. Project Eligibility
D. Project Cost Eligibility
E. Statutory Requirements
F. Application Process
G. Creditworthiness
H. Fees
I. Credit Assistance
J. Rating Requirement
K. Federal Requirements
L. American Iron and Steel Requirements
M. Labor Standards (Davis-Bacon Act of 1931)
N. Reporting Requirements
O. Selection Criteria
IV. Statutory and Executive Order Reviews
I. Background
The U.S. Army Corps of Engineers (Corps) is publishing for public
comment a proposed rule to implement a program authorized under
Subtitle C of Title V of the Water Resources Reform and Development Act
of 2014 (WRRDA), often referred to as the Water Infrastructure Finance
and Innovation Act of 2014 (WIFIA). The program was provided funding
and further statutory direction in Division D Title 1 of the
Consolidated Appropriations Act of 2021 and Division J, Title III of
the Infrastructure Investment and Jobs Act. WIFIA authorizes the Corps
to provide secured (direct) loans and guaranteed loans to eligible
water resources infrastructure projects. The only eligible project
type--under Division D, Title 1 of the Consolidated Appropriations Act
of 2021 and Division J, Title III of the Infrastructure Investment and
Jobs Act are: ``. . . . safety projects to maintain, upgrade, and
repair dams identified in the National Inventory of Dams with a primary
owner type of state, local government, public utility, or private:
Provided, That no project may be funded with amount provided under this
heading for a dam that is identified as jointly owned in the National
Inventory of Dams and where one of those joint owners is the Federal
Government . . . . . .''--and this rule would limit implementation to
only those project types listed in the Acts. WIFIA authorizes the Corps
to charge fees to recover all or a portion of the Corps' cost of
providing credit assistance and all costs of conducting engineering
reviews and retaining expert firms, including financial and legal
services, in the field of municipal and project finance to assist in
the underwriting and servicing of Federal
[[Page 35474]]
credit instruments. WIFIA also authorizes the borrower to pay part or
all of the credit subsidy cost and this authority would be implemented
under this rule. Projects will be evaluated and selected by the
Secretary of the Army (the Secretary) based on the requirements and the
criteria described in this rule. Following the selection of projects,
individual credit agreements will be developed through negotiations
between the borrowers and the Corps.
Congress enacted the Water Infrastructure Finance and Innovation
Act of 2014 (WIFIA) (Pub. L. 113-121) as part of the Water Resources
Reform and Development Act of 2014, as amended by section 1445 of
Public Law 114-94, section 5008 of Public Law 114-322, and section 4201
of Public Law 115-270 (see 33 U.S.C. 3901-3914). These amendments were
minor changes primarily focused on the Administrator of the
Environmental Protection Agency (EPA) and other changes regarding State
Infrastructure Financing Authorities, removing limitations on use of
tax exempt funding sources, changes to project eligibility for the EPA,
and allowance of fees as an eligible cost which is included elsewhere
in this proposed rule. Title I, Division D of the Consolidated
Appropriations Act, 2021 provided $12 million in budget authority for
the cost of direct loans and guaranteed loans (``credit subsidy cost'')
for safety projects to maintain, upgrade, and repair dams identified in
the National Inventory of Dams with a primary owner type of State,
local government, public utility, or private. Title 1, Division D also
provided that the $12 million credit subsidy appropriation, is
available to subsidize gross obligations for the principal amount of
direct loans, including capitalized interest, and total loan principal,
including capitalized interest, any part of which is to be guaranteed
not to exceed $950,000,000. Division J, Title III of the Infrastructure
Investment and Jobs Act provided for an additional amount for Water
Infrastructure Finance and Innovation Program Account, $75,000,000, to
remain available until expended provided, that of the amounts provided
under Division J, Title III of the Act, $64,000,000 shall be for the
cost of direct loans and for the cost of guaranteed loans, for safety
projects to maintain, upgrade, and repair dams identified in the
National Inventory of Dams with a primary owner type of State, local
government, public utility, or private: provided further, that no
project may be funded with amounts provided under Division J, Title III
for a dam that is identified as jointly owned in the National Inventory
of Dams and where one of those joint owners is the Federal Government:
provided further, that of the amounts provided under Division J, Title
III of the Act, $11,000,000 shall be for administrative expenses to
carry out the direct and guaranteed loan programs, notwithstanding
section 5033 of the Water Infrastructure Finance and Innovation Act of
2014. The U.S. Army Corps of Engineers (Corps) is proposing to
establish its new WIFIA program limited to safety projects to maintain,
upgrade, and repair dams identified in the National Inventory of Dams
with a primary owner type of State, local government, public utility,
or private.
A primary objective for Federal credit programs is to help correct
a capital market imperfection. Municipal, regional, state-level and
other infrastructure project sponsors generally do not market debt
sales used to fund infrastructure projects beyond 30-year terms through
public bond markets due to existing market conventions. Proceeds from
bond sales are available immediately, not according to cash flow needs
during project construction. In addition, debt sold through multiple
issuances during an infrastructure project's construction period
exposes project sponsors to debt interest rate risk. Congress provided
the Corps WIFIA program the legal authority to help address these
factors that otherwise may impede affordable infrastructure investment
through the prospective terms of WIFIA credit assistance.
WIFIA, authorized the Corps to provide both loans and loan
guarantees to eligible entities: corporations; partnerships; joint
ventures; trusts; State or local governmental entities, agencies, or
instrumentalities; tribal governments or consortiums of tribal
governments; or State infrastructure finance authorities.
While WIFIA authorizes the Corps to provide for a wide variety of
eligible projects this draft proposed rule is implementing a credit
assistance program for safety projects to maintain, upgrade, and repair
dams identified in the National Inventory of Dams with a primary owner
type of State, local government, public utility, or private (referred
to here after as ``non-Federal dams''). As applied to credit assistance
for non-Federal dam projects under Title 1, Division D or the
Consolidated Appropriations Act, 2021, Division J, Title III of the
Infrastructure Investment and Jobs Act, Sections 3902, 3905, and 3907
of Title 33 of the U.S.C., describe the conditions that govern a
project's eligibility. Projects must have eligible costs of not less
than $20 million. 33 U.S.C. 3907(a)(2)(A). Eligible borrowers, eligible
projects, and other statutory requirements are further described in
detail in the sections below and summarized in 33 CFR part 386 and 85
FR 39189. As used throughout this SUPPLEMENTARY INFORMATION section and
part 386 of the rule, ``borrower'' is synonymous with ``obligor''.
WIFIA defines an ``obligor'' as ``an eligible entity that is primarily
liable for payment of the principal of, or interest on, a Federal
credit instrument.'' 33 U.S.C. 3901(7). ``Obligor'' is used in place of
``borrower'' whenever ``obligor'' appears in a corresponding section of
WIFIA.
II. Water Resources Infrastructure Needs
The American Jobs Plan estimates that in 2020, weather and climate
disasters cost the United States $95 billion in damages to homes,
businesses, and public infrastructure.\1\ The Administration has made
investment in U.S. infrastructure a priority to increase resiliency in
the face of such threats.
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\1\ The White House Briefing Room. ``FACT SHEET: The American
Jobs Plan'' at <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2021/03/31/fact-sheet-the-american-jobs-plan">https://www.whitehouse.gov/briefing-room/statements-releases/2021/03/31/fact-sheet-the-american-jobs-plan</a>. March 13,
2021.
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Non-Federal dams account for roughly 87,000 of the 90,580 dams as
reported in the National Inventory of Dams. Over 14,000 non-Federal
dams are now classified as ``high hazard potential,'' meaning that they
would likely result in loss of life if they were to fail.\2\ According
to a 2019 cost estimate conducted by the Association of State Dam
Safety Officials (ASDSO), the cost to rehabilitate (repair, replace or
remove) all non-Federal dams is estimated at over $66 billion with high
hazard potential dams accounting for over $20 billion.\3\ Funding
requirements are only projected to increase as infrastructure continues
to age, risk awareness progresses, and design standards evolve.\4\
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\2\ U.S. Army Corps of Engineers, ``National Inventory of
Dams,'' at <a href="https://nid.usace.army.mil">https://nid.usace.army.mil</a>. 2020 partial update.
\3\ Association of State Dam Safety Officials (ASDSO), ``The
Cost of Rehabilitating Our Nation's Dams: A Methodology, Estimate,
and Proposed Funding Mechanisms.'' revised 2019.
\4\ Congressional Research Service, ``Dam Safety Overview and
the Federal Role,'' October 24, 2019.
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While almost half of the States have created a state-funded grant
or low-interest revolving loan program to assist dam owners with
repairs, the ASDSO indicates that these programs vary significantly in
the financial assistance available.\5\ Another Federal infrastructure
financing program, WIFIA, administered by the EPA
[[Page 35475]]
provides credit financing for non-Federal water and wastewater
infrastructure project. Similar to the Corps WIFIA program, the maximum
portion of eligible project costs are 49% or 80% for small communities.
The EPA WIFIA program can finance dam projects however those projects
compete against a wide range of water and wastewater type projects. In
FY 2021 the EPA WIFIA program had an appropriation of $55 million,
allowing WIFIA to lend approximately $5.5 billion. In 2021, the EPA
made it possible for dam projects to receive funding under the Federal
Drinking Water State Revolving Fund (DWSRF), administered by the EPA,
provided that the dam's primary purpose is for drinking water supply
and that the dam must be owned by the public water system. Through the
DWSRF program the EPA will make available $1.8 billion in
capitalization grants for drinking water infrastructure needs, a
portion of which could go towards drinking water supply dam projects,
depending on the priorities of the States. The Federal Watershed
Rehabilitation Program administered by the Natural Resources
Conservation Service (NRCS) helps project sponsors rehabilitate aging
dams that are reaching the end of their design lives. This
rehabilitation addresses critical public health and safety concerns.
Division J, Title I of the Infrastructure Investment and Jobs Act
provides $118M for projects under the Watershed Rehabilitation Program.
The Federal Rehabilitation of High Hazard Potential Dam (HHPD) Program,
administered by Federal Emergency Management Agency (FEMA), provides
grants for repair, removal, or rehabilitation of eligible non-Federal,
high hazard potential dams. Projects can receive a maximum grant of the
lesser of $7.5 million or 12.5% of the total appropriated amount. The
program was appropriated $10 million in both FY 2019 and FY 2020, $12
million in FY 2021, and $585 million in Division J, Title V of the
Infrastructure Investment and Jobs Act ($75 million of which must go to
dam removal projects). Despite these programs and their funding
capacity, the available funding for dam safety infrastructure falls
short of the $66 billion need cited by ASDSO. The Corps WIFIA program
helps to bridge that gap by providing non-Federal entities with an
additional means to invest in dam safety infrastructure, which will
help communities withstand future weather and climate events. As
communities become more resilient, all else being equal, this is
expected to assist in limiting Federal disaster spending associated
with such events.
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\5\ ASDSO, ``The Cost of Rehabilitating''.
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III. Program Information
A. Funding
The Federal Credit Reform Act of 1990 (FCRA), Title V of Public Law
101-508, codified at 2 U.S.C. 661-661f, requires that agencies estimate
the long-term cost of providing direct loans and loan guarantees on a
net present value basis and requires that agencies have the necessary
budget authority appropriated before entering into an obligation for a
loan. To date, $76 million in appropriations have been provided to the
Corps for the cost of credit assistance for non-Federal dams under
WIFIA.
B. Borrower Eligibility
Section 3904 of Title 33 of the U.S.C., defines entities that are
eligible for WIFIA assistance. To be eligible under this program, a
borrower must be one of the following:
1. A corporation;
2. A partnership;
3. A joint venture;
4. A trust;
5. A State, or local governmental entity, agency, or
instrumentality;
6. A tribal government or consortium of tribal governments; or
7. A State infrastructure financing authority.
While Section 3904(5) includes ``Federal'' entities in the list of
entities that are eligible to receive assistance, this program will not
issue credit assistance to ``Federal'' entities or activities because
recording credit assistance to a Federal entity or activity on a net
present value basis would be inconsistent with 31 U.S.C. 1501, existing
Government-wide guidance, and a cash budget. As required by Title 1,
Division D of the Consolidated Appropriations act of 2021 and Division
J, Title III of the Infrastructure Investment and Jobs Act, the credit
assistance program covered by this proposed rule must be administered
in accordance with the WIFIA criteria published on June 30, 2020 (85 FR
39189). Please review the criteria published at 85 FR 39189 for
additional background and information regarding project eligibility.
C. Project Eligibility
Section 3905 of Title 33 of the U.S.C. defines projects eligible
for assistance. To be eligible under this program, a project must fall
under one of the following four categories:
1. Safety projects to maintain, upgrade, and repair dams identified
in the National Inventory of Dams with a primary owner type of State,
local government, public utility, or private; and which meet the
statutory requirements of Title 1, Division D of the Consolidated
Appropriations Act 2021 and be in accordance with the criteria outlined
in 85 FR 39189.
2. Any project that meets the criteria under C.1. above must also
be a project for flood damage reduction, hurricane and storm damage
reduction, environmental restoration, coastal or inland harbor
navigation improvement, or inland and intracoastal waterways navigation
improvement that the Secretary determines is technically sound,
economically justified, and environmentally acceptable, including--
a. A project to reduce flood damage;
b. A project to restore aquatic ecosystems;
c. A project to improve the inland and intracoastal waterways
navigation system of the United States; and
d. A project to improve navigation of a coastal inland harbor of
the United States, including channel deepening and construction of
associated general navigation features.
3. Acquisition of real property or an interest in real property for
a project that meets the criteria under C.1. above--
a. If the acquisition is integral to a project eligible for WIFIA
credit assistance; or
b. Pursuant to an existing plan that, in the judgment of the
Secretary, would mitigate the environmental impacts of water resources
infrastructure projects that are otherwise eligible for WIFIA credit
assistance.
4. A combination of projects, each of which is eligible for WIFIA
credit assistance, for which a single application is submitted and
which is secured by a common security pledge.
Title I, Division D of the Consolidated Appropriations Act, 2021
and Division J, Title III of the Infrastructure Investment and Jobs Act
limited use of the appropriated funding to safety projects to maintain,
upgrade, and repair dams identified in the National Inventory of Dams.
Dam removal is an eligible project under this authorization.
In addition, as noted above, Title I, Division D of the
Consolidated Appropriations Act, 2021 stipulates that ``none of the
direct loans or loan guarantee authority made available under this
heading shall be available for any project unless the Secretary and the
Director of the Office of Management and Budget have certified in
advance in writing that the direct loan or loan guarantee, as
applicable, and the project
[[Page 35476]]
comply with the criteria. . .'' published in the Federal Register on
June 30, 2020 (85 FR 39189).
The Corps will closely coordinate with the EPA on overlapping
project eligibility to ensure proposed borrowers utilize the program
best suited for their project considering agency technical expertise.
The Corps agrees to partner closely with EPA during the project
selection process for eligible projects and to work together to ensure
that funding allocated either by EPA or Corps WIFIA programs will use
the most appropriate program relative to the project's scope, purpose,
and benefits. The Corps solicits public comment on how best to assist
applicants to utilize the program best suited for a project in such
instances.
D. Project Cost Eligibility
Section 3906 of Title 33 of the U.S.C. defines eligible activities
with respect to eligible projects as the following four types of
project costs:
1. 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 pre-
construction activities.
2. The cost of construction, reconstruction, rehabilitation, and
replacement activities.
3. The cost of 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, construction
contingencies, and acquisition of equipment; and
4. The cost of capitalized interest necessary to meet market
requirements, reasonably required reserve funds, capital issuance
expenses, and other carrying costs during construction.
In addition to the statutory project cost eligibility requirements
listed above, the Corps program allows for fees associated with
obtaining WIFIA funds to be considered as part of eligible project
costs, as authorized by 33 U.S.C. 3908(b)(7), limited to the
Application, Transaction Processing, and Servicing fees as described
below in Section III.H (Fees). Proceeds from the WIFIA credit
assistance shall not be utilized to provide cash contributions to the
Corps for project-related costs, except for such fees as allowed by 33
U.S.C. 3908(b)(7). The ``Optional Credit Subsidy Fee'' is not an
eligible cost. The Corps solicits public comment on whether additional
clarification is needed on project cost eligibility, such as whether a
list of what costs are expressly ineligible would be helpful or whether
that may result in additional confusion as opposed to limiting the list
to only include those which are eligible, as proposed.
E. Statutory Requirements
WIFIA contains the following requirements, as paraphrased below,
which are restated in the proposed rule:
<bullet> Public or private applicants for credit assistance would
be required to submit applications to the Corps in order to be
considered for approval (33 U.S.C. 3903).
<bullet> Project financing would be required to be repayable, 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 project; to include a rate covenant, coverage
requirement, or similar security feature supporting the project
obligations; and may have a lien on revenues subject to any lien
securing project obligations (33 U.S.C. 3908 (b)(3)).
<bullet> In the case of a project that is undertaken 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 that the entity is undertaking would be
required to be publicly sponsored. Public sponsorship means that the
obligor can demonstrate, to the satisfaction of the Secretary, that it
has consulted with the affected State, local, or tribal government in
which the project is located, or is otherwise affected by the project,
and that such government supports the proposed project. Support could
be shown by a certified letter signed by the approving municipal
department or similar agency, mayor or other similar designated
authority, local ordinance, or any other means by which local
government approval can be evidenced (33 U.S.C. 3907(a)(4)).
<bullet> To be eligible for financing, a prospective borrower would
be required to have developed an operations and maintenance plan that
identifies adequate revenues to operate, maintain, and repair the
project during its useful life (33 U.S.C. 3907(a)(6)).
Additionally, projects receiving WIFIA credit assistance would not
be able to use that assistance for operations and maintenance
activities.
F. Application Process
For each fiscal year that Congress appropriates funds for credit
assistance under this program, the Corps will provide detailed
instructions for submitting preliminary applications and applications,
as well as the due dates for submissions. It will advise prospective
borrowers of the estimated amount of funding available to support
Federal credit instruments and information required in a preliminary
application and application not detailed in this rule.
The application process has two steps. The first step requires the
submission of a preliminary application. No fees are established for
this preliminary application step. The Corps will review these
preliminary applications and determine which applicants will be invited
to continue in the application process and submit applications. An
invitation to submit an application does not imply an obligation by the
Corps to enter into a Loan Agreement or Loan Guarantee Agreement. Those
applicants that choose to submit an application will be required to
include an application fee, if applicable. Consequently, the Corps
anticipates that the fees established in this rule will only apply to
those projects. See Paragraph III.H. below for more information on
fees.
The purpose of the preliminary application is to provide the Corps
with the information necessary to determine whether a given project is
eligible under the WIFIA statute, appropriations, and regulations. This
serves to provide the Corps with sufficient information to evaluate
preliminary applications and to invite prospective borrowers to submit
applications.
The purpose of the application is to provide the Corps with
materials necessary to underwrite the proposed WIFIA assistance. The
application will require similar information to the preliminary
application, but with a greater level of detail and more fully
developed information in support of the applicant's proposal.
The application must include sufficient information to allow the
Secretary to make the determination required by 33 U.S.C. 3905(1) that
the project is technically sound, economically justified, and
environmentally acceptable. The information required to support this
determination will depend on various factors, including but not limited
to the purpose and scope of the activity proposed for WIFIA assistance.
Applicants for WIFIA assistance should refer to any prior analysis that
could assist the Corps in confirming the determination required by 33
U.S.C. 3905(1). The Corps does not expect the application to provide
the level of analysis required for traditional Corps feasibility
studies. Applicants should provide information to enable the Corps to
determine that the project will meet
[[Page 35477]]
all applicable engineering, safety, and other technical standards; that
it is economically justified; and that it will satisfy all necessary
environmental requirements to include requirements associated with the
Corps Programmatic Environmental Assessment prepared for this rule
under the National Environmental Policy Act (NEPA). In addition, the
application must include a description of the extent to which the
project financing plan includes any other form of Federal assistance
(including grants), in addition to WIFIA credit assistance. This
information directly relates to the total Federal risk exposure across
all Federal programs and will require information on all possible
sources of Federal support. The Corps will also be coordinating with
other Federal agencies, such as the Federal Emergency Management Agency
(FEMA), on other Federal programs that may be used to fund or finance
projects under this rule. Additional information regarding the
requirements for an applicant's submittal would be described in the
application materials.
The application also should address any connection between the
proposed WIFIA assistance and other Federal activities. In order for
non-Federal flood risk management projects to be eligible for future
Federal repair or rehabilitation assistance following storm events
under 33 U.S.C. 701n, applicants would need to satisfy requirements
from that program. Applicants can consult with the Corps WIFIA office
to assist in understanding whether activities proposed for WIFIA
assistance might implicate other Federal authorities and funding.
G. Creditworthiness
As provided in WIFIA, the Secretary must determine that every
funded project is creditworthy. 33 U.S.C. 3907(a)(1). An overarching
goal of the creditworthiness determination process is to ensure that
each project that is ultimately offered credit assistance advances the
WIFIA program's mission while providing a level of risk exposure that
is acceptable to the Corps. Therefore, the WIFIA program will evaluate
applications for financial assistance based on credit risks over the
repayment period of the WIFIA credit assistance. As required by 33
U.S.C. 3907(a)(1), the creditworthiness determination will be based on
a review of the following:
<bullet> Terms, conditions, financial structure, and security
features of the proposed financing;
<bullet> Dedicated revenue source(s) securing the financing;
<bullet> Financial assumptions upon which the project is based; and
<bullet> Financial soundness and credit history and outlook of the
borrower.
H. Fees
Sections 3908(b)(7), 3909(b), and 3909(c)(3) of 33 U.S.C. allow the
Corps to collect user fees from applicants to cover some or all of the
costs associated with administering the program. The Corps is proposing
to establish fees associated with the provision of Federal credit
assistance under the WIFIA program. As specified under 33 U.S.C.
3908(b)(7), 3909(b), and 3909(c)(3), Congress authorizes the Corps to
charge fees to recover all or a portion of the Corps' cost of providing
credit assistance and the costs of conducting engineering reviews and
retaining expert firms, including financial and legal services in the
field of municipal and project finance to assist in the underwriting
and servicing of Federal credit instruments. The Corps is proposing to
establish an application fee, transaction processing fee, annual
servicing fee, optional credit subsidy fee, and enhanced monitoring fee
to cover these costs to the extent not covered by Congressional
appropriations. As described in greater detail below, the types of fees
the Corps is proposing to establish are consistent with other Federal
credit programs.
The rationale for establishing fees associated with the provision
of credit assistance is to cover the Corps' cost of administering the
program to the extent these costs are not covered by appropriations. To
effectively administer the program, the Corps will incur both internal
administrative costs (staffing, program support contracts, and other
costs) as well as costs associated with conducting engineering reviews
and retaining expert firms, including financial and legal services in
the field of municipal and project finance, to assist in the
underwriting of the Federal credit instrument.
The Water Infrastructure Improvements for the Nation Act of 2016,
Public Law 114-332, in section 5008(c), amended WIFIA to allow, at the
request of an applicant, the financing of some fees as eligible costs
as defined below. Borrowers are permitted to finance eligible fees as
part of the WIFIA credit assistance. The Corps is soliciting public
comment on all aspects of the fees discussed below as well as the
associated assumptions.
1. Application Fee
The Corps will require a non-refundable application fee for each
project that is invited to submit an application (second step following
submission of a preliminary application) for credit assistance under
WIFIA, if applicable. The application fee will be due upon submission
of the application. This application fee supports the Corps' planning
efforts by helping to ensure that the program invites only the
appropriate number of applicants that it has the capacity to fund. In
the event that the prospective borrower has not completed and submitted
a full application within one-year of the Corps' invitation to apply
for credit assistance, the prospective borrower must submit to the
Corps a request for extension prior to the expiration year that sets
forth the prospective borrower's rationale for an extension, summarizes
the prospective borrower's progress achieved on the project to date,
and provides an updated schedule of project development activities,
including submission of the WIFIA application. The Corps may grant this
extension after evaluating the progress of the prospective borrower's
application and its readiness to apply.
The application fee will be waived for applications from public
entities for projects serving small communities or economically
disadvantaged communities. See Paragraph III.I. below for the
definitions of small communities and economically disadvantaged
communities for the purpose of this credit assistance program. For all
other project applications, the application fee is $25,000. This
$25,000 application fee represents an amount equal to 0.125 percent of
the minimum threshold project cost ($20 million, 33 U.S.C.
3907(a)(2)(A)), which the Corps considers to be sufficient to begin the
financial, engineering, and legal analysis of the project while
providing assurance that the applicant intends to proceed to closing.
The Corps will undertake significant costs to evaluate applications and
hire expert firms for underwriting and considers an application fee
essential for applicants to show good faith in applying for credit
assistance, to help cover the agency's administrative costs in
processing applications, and to ensure effective administration of the
program. The application will not be reviewed without fee payment. The
Corps will only invite projects to submit an application and
application fee if the Corps believes there is a reasonable expectation
that the project could receive financing. However, an invitation to
submit an application does not guarantee that a project will proceed to
financial close.
[[Page 35478]]
2. Transaction Processing Fees
For projects invited to submit an application, the Corps will
require payment of transaction processing fees at the time of closing,
or at the time the application is withdrawn or denied (in the event the
project does not proceed to closing). The proceeds of any such fees
will be used to pay the remaining portion of the Corps' cost of
processing the application for credit assistance, including the costs
of conducting engineering reviews and retaining expert firms to assist
in underwriting, drafting and negotiating the terms of the Federal
credit instrument. In procuring the services of third-party firms, the
Corps may issue task orders with $0 funding (i.e., no Federal funds).
In such situations, at the direction of the Corps, payments to the
contractor for services will be paid (i) by or on behalf of the Corps
or (ii) directly by the applicant for services rendered in accordance
with the terms of a sponsor payment letter/agreement executed by the
applicant (or its affiliate) and the contractor. In all instances, when
a contractor is engaged to represent the Corps or its representative on
a WIFIA matter and is paid by the applicant (or its affiliate), the
Corps or its representative, as applicable, will remain the client of
the contractor.
The Corps estimates these costs would generally be in the range of
approximately $125,000 to $300,000 per project, with the expectation
that more complex projects could exceed this range. However, prior to
the transaction processing fees being incurred, the Corps will develop
a more precise estimate based on its understanding of the project and
associated financial and legal structure. The application fee described
above will be credited to the transaction processing fee. For example,
if the total transaction processing fees are $300,000 and the applicant
pays $25,000 with the application, $275,000 will be due at closing, or
earlier if the project does not proceed to closing, e.g., if the
application is withdrawn or denied. The total transaction processing
fee for each project will be set based on the costs incurred by the
Corps for that specific project. Due to the nature of the transaction
processing, the amount is expected to vary among applicants. This
variation reflects the amount of time taken to process a loan, which
may not directly correlate with the size of the loan. More complex
transactions with lengthy negotiations will have higher costs.
The Corps may waive a portion of the fee for public applicants if
appropriations are available to pay for the Corps' cost of
administering the WIFIA program and to pay for loan processing. Funds
appropriated to the program may pay for the administration of the
program, including internal administrative costs of staffing, program
support contracts (separate from the expert services described
previously), and other internal administrative needs.
To the extent appropriations are available in excess of those
needed for the Corps' internal administrative costs, the Corps may use
the remaining available administrative allowance (less any amount
needed for future years' administration) to reduce fees. The Corps may
allocate additional administrative funds by reducing fees by an equal
amount per loan for those projects serving economically disadvantaged
communities, with public applicants. If additional administrative funds
remain, the Corps may reduce fees by an equal amount for each remaining
loan, with public applicants.
3. Servicing Fee
The Corps will charge an annual servicing fee after closing of the
loan. The fee will be dependent upon the costs of servicing the credit
instrument (e.g., collecting and processing loan principal and interest
payments) as determined by the Secretary. Such fees will be set at a
level to enable the Corps to recover all or a portion of the costs to
the Federal Government of servicing WIFIA credit instruments and will
be determined at the time of closing. The Corps expects such fees to
range from $10,000 to $50,000 annually per loan and to be adjusted for
inflation.
4. Optional Credit Subsidy Fee
The Corps may charge a fee, with agreement of the applicant, to
reduce the budget authority required to fund the credit instrument. The
Corps anticipates scenarios where assessing such a fee will provide
flexibility to allow an applicant to ``buy down'' the budget authority
required for the credit instrument. This could allow an applicant to
proceed to approval if sufficient budget authority would not otherwise
be available. Such a fee will only be charged upon agreement by an
applicant and shall not be considered an eligible project cost.
Utilization of this fee will only be in rare instances.
5. Enhanced Monitoring Fee
The Corps may charge a fee to cover extraordinary expenses if a
borrower experiences difficulty relating to technical, financial, or
legal matters or other events (e.g., engineering failures or financial
workouts) that require the Corps to incur time or expenses beyond
standard monitoring. The Corps will be entitled to payment in full from
the borrower of additional fees in an amount determined by the Corps
and of related fees and expenses of its independent consultants and
outside counsel that are incurred directly by the Corps and not paid
directly by the borrower. Such fees shall not be considered an eligible
project cost.
I. Credit Assistance
Two types of credit instruments are permitted under WIFIA secured
(direct) loans and loan guarantees. The second credit instrument under
33 U.S.C. 3908 (e), referred to as loan guarantees are defined under
the Federal Credit Reform Act of 1991 as a binding agreement by a
Federal agency to make a loan guarantee when specified conditions are
fulfilled by the borrower, the lender, or any other party to the
guarantee agreements.
Statutory requirements applicable to this credit instrument appear
at 33 U.S.C. 3908 and 3909. Additional Terms and conditions for loans
and loan guarantees will be negotiated between the Corps and successful
applicants.
In general, WIFIA limits the amount of credit assistance that may
be provided to a project to 49% or less of reasonably-anticipated
eligible project costs. However, the statute authorizes the Corps to
use up to 25% of its budget authority to provide credit assistance to
one or more projects of up to 80% (statutory cap on Federal
participation) of the total costs of any given project. The 80%
statutory cap on Federal participation would be determined by adding
the total loan proceeds, direct appropriations, grants, or other
applicable Federal funding. Following credit assistance issuance,
future direct appropriations, grants, or other applicable Federal
funding may be modified to maintain compliance with the 80% statutory
cap. Note, however, that projects receiving direct Federal
appropriations or other Federal funding may not be eligible to receive
WIFIA credit assistance based on the eligibility criteria outlined in
this rule as well as at 85 FR 39189, as they may be determined to be
Federal in nature. The Corps would limit its budget authority to
extending credit assistance to eligible entities for those entities'
use in directly carrying out activities eligible for assistance under
33 U.S.C. 3906. The Corps would not extend credit assistance or allow
loan proceeds to be used by any entity to provide cash contributions to
the Corps for project related costs, except for such fees as allowed by
33 U.S.C. 3908(b)(7). The
[[Page 35479]]
Corps would generally use its budget authority to provide credit
assistance for greater than 49% of eligible project costs to projects
serving economically disadvantaged communities that would otherwise not
be able to obtain WIFIA credit assistance. For the purposes of this
program, the Corps is proposing to preliminarily define economically
disadvantaged communities as those that experience low-income,
persistent poverty, or high unemployment. The implementation of this
definition may be modified as appropriate in response to updated tools
and resources as they become available. The Corps is soliciting comment
on whether this is the most appropriate criteria to use to identify
economically disadvantaged communities.
Additionally, the Corps may use its budget authority to provide
credit assistance for greater than 49% of eligible project costs when a
project would be unable to proceed to closing without such additional
assistance due to unforeseen events. 33 U.S.C. 3912. Unforeseen events
that could prevent a project from going to closure may include:
unexpected loss of other sources of financing, increased cost of
capital, or acts of nature. In such an event, the Corps would reexamine
the creditworthiness of the project and only provide funding if the
project can still meet all requirements of the program.
Costs incurred, and the value of any integral in-kind contributions
made before receipt of credit assistance may be considered in
calculating eligible project costs upon approval of the Secretary. Such
costs and integral in-kind contributions must be directly related to
the development or execution of the project and must be eligible
project costs per 33 U.S.C. 3907(a)(2). In addition, such costs,
excluding the value of any integral in-kind contributions, are payable
from the proceeds of the Federal credit instrument and would be
considered incurred costs. Capitalized interest on the Federal credit
instrument would not be eligible for calculating eligible project
costs.
The Corps would not obligate funds for a project that has not
received an environmental Categorical Exclusion, Finding of No
Significant Impact, or Record of Decision under the NEPA.
The credit agreement would include the anticipated schedule for
loan disbursements. However, actual disbursements would be based on
costs incurred in accordance with the approved construction plan. This
requirement would protect the Corps in the event of non-performance.
As required by section 3908(b)(4) of Title 33 of the U.S.C., the
interest rate on a secured loan would be equal to or greater than the
yield on U.S. Treasury securities of comparable maturity on the date of
execution of the credit agreement. The base interest rate can be
identified through use of the daily rate tables published by the Bureau
of the Fiscal Service for the State and Local Government Series (SLGS)
investments. The WIFIA program would estimate the yield on comparable
Treasury securities by adding one basis point to the SLGS daily rate
with a maturity that is closest to the weighted average loan life of
the WIFIA credit assistance.
As allowed by statute at 33 U.S.C. 3908(c)(2), scheduled loan
repayments of principal and interest on a secured loan or loan
guarantee shall commence not later than 5 years after the projected
date of substantial completion of the project at the time of execution
of the Loan Agreement or Loan Guarantee Agreement, as determined by the
Secretary. However, scheduled loan repayments of principal and interest
on a secured loan or loan guarantee to a State infrastructure financing
authority would commence not later than 5 years after the date on which
amounts are first disbursed. The final maturity of the credit agreement
shall be in no instance later than 35 years after the projected date of
substantial completion of the project at the time of execution of the
Loan Agreement or Loan Guarantee Agreement.
As required by section 3908(b)(5) of Title 33 of the U.S.C., the
final maturity date of a secured loan would be the earlier of the date
that is (1) 35 years after the date of substantial completion of the
project, as determined by the Secretary, or (2) the useful life of the
project, as determined by the Secretary. However, the final maturity
date of a secured loan to a State infrastructure financing authority
would be not later than 35 years after the date on which amounts are
first disbursed. In determining the useful life of the project, for the
purposes of establishing the final maturity date of the Federal credit
instrument, the Secretary would consider the useful economic life of
the asset(s) being financed, as required under Office of Management and
Budget (OMB) Circular A-129.\6\
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\6\ At the time of publication of this rule, the OMB circular
may be accessed electronically at <a href="https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/circulars/A129/a-129.pdf">https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/circulars/A129/a-129.pdf</a>.
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As required by statute, the Corps' Federal credit instrument may
have a junior claim to other debt issued by the obligor in terms of its
priority interest in the project's pledged security. However, the
Corps' claim on pledged security would not be subordinated to the
claims of any holder of the project obligations in the event of a
bankruptcy, insolvency, or liquidation of the obligor of the project.
The Corps' interest may include collateral other than pledged revenues.
J. Rating Requirement
The Corps, as required by 33 U.S.C. 3907(a)(1)(D)(i), would require
each applicant to furnish a preliminary rating opinion letter as part
of the application process. The applicant would be responsible for
identifying and approaching one or more Nationally Recognized
Statistical Rating Organizations (NRSROs) to obtain such a letter. This
letter must indicate that the applicant project's senior obligations
(which may be the Federal credit instrument), have the potential of
attaining an investment-grade rating. As required by Section
3907(a)(1)(D)(ii) of the WIFIA, 33 U.S.C. 3901 et seq., the Corps would
require each applicant to provide, prior to final acceptance and
financing of the project, final rating opinion letters from at least
two rating agencies indicating that the senior obligations of the
project have an investment-grade rating. If the Federal credit
instrument is the project's senior obligation, these ratings must apply
to all project obligations with claims at parity to that of the Federal
credit instrument on the security pledged to the Federal credit
instrument, including the Federal credit instrument. The Corps would
also require as a matter of policy, prior to final execution of the
loan agreement or loan guarantee agreement, that the applicant provide
at least one final rating opinion letter which provides a credit rating
on the final negotiated direct loan or loan guarantee that does not
include consideration of the full faith and credit of the United States
of America.
K. Federal Requirements
Recipients of WIFIA credit assistance would be required to comply
with Federal requirements applicable to all federally-financed
projects. The proposed rule provides a non-exhaustive list of these
requirements in Section IV (Statutory and Executive Order Reviews).
L. American Iron and Steel Requirements
Recipients of WIFIA credit assistance would be required to comply,
per 33 U.S.C. 3914(a), with American Iron and Steel (AIS) requirements,
which requires that if any WIFIA assistance is
[[Page 35480]]
provided for construction, alteration, maintenance, or repair of a
project, all of the iron and steel products used in the project must be
produced in the United States. These products include lined or unlined
pipes and fittings, manhole covers and other municipal castings,
hydrants, tanks, flanges, pipe clamps and restraints, valves,
structural steel, reinforced precast concrete, and construction
materials. 33 U.S.C. 3914(b). This requirement applies to all iron and
steel products used in the project, not only those paid for with
proceeds from the WIFIA credit assistance.
M. Labor Standards (Davis-Bacon Act of 1931)
The WIFIA requires recipients of WIFIA credit assistance to pay all
laborers and mechanics employed by contractors or subcontractors' wages
at rates not less than those prevailing for the same type of work on
similar construction in the immediate locality, as determined by the
Secretary of Labor. 33 U.S.C. 3909(h) (cross-referencing Title VI of
the Federal Water Pollution Control Act); 33 U.S.C. 1372. This is
commonly referred to as Davis-Bacon wage requirements. This requirement
applies to all laborers and mechanics working on a project, not only
those paid from proceeds of the WIFIA credit assistance.
N. Reporting Requirements
The Corps proposes to require, at a minimum, that any recipient of
WIFIA credit assistance must make available to the Corps an annual
project performance report and audited financial statements to the
Corps within the time period stated in the credit agreement following
the recipient's fiscal year-end for each year during which the
recipient's obligation to the Federal Government remains in effect. The
Corps proposes that they may conduct periodic financial and compliance
audits of the recipient, as determined necessary by the Corps. The
specific credit agreement between the recipient of credit assistance
and the Corps may contain additional reporting requirements. This would
be a necessary and important requirement in order to allow the Corps to
provide proper and sufficient oversight of federally-financed projects.
O. Selection Criteria
Congress enacted WIFIA with the goal of accelerating investment in
our nation's water infrastructure by providing credit assistance to
creditworthy projects of major importance to the water sector. Only
eligible projects will be selected. The project priorities as proposed
under this rule are as follows: Projects serving small, rural
communities and economically disadvantaged communities and projects
serving Tribal communities.
The program's goal is to enable local investment in projects that
enhance community resilience to flooding, while supporting the Corps'
policy initiatives by prioritizing the projects listed above.
Section 3907(b)(2) of Title 33 of the U.S. Code establishes 11
criteria, at a minimum, for selecting among eligible projects to
receive credit assistance, but does not prohibit the Corps from
identifying additional selection criteria and requirements. As such,
the Corps is proposing the following 12 selection criteria.
1. The extent to which the project is nationally or regionally
significant, with respect to the generation of public benefits, such
as--
a. The reduction of flood risk;
b. The improvement of water quality and quantity, including aquifer
recharge;
c. The protection of drinking water, including source water
protection;
d. The support of domestic and international commerce; and
e. The restoration of degraded aquatic ecosystem structures.
2. The extent to which the project financing plan includes public
or private financing, in addition to WIFIA credit assistance.
3. The likelihood that WIFIA credit assistance would enable the
project to proceed at an earlier date than the project would otherwise
be able to proceed.
4. The extent to which the project uses new or innovative
approaches.
5. The amount of budget authority required to fund the WIFIA
Federal credit instrument.
6. The extent to which the project--
a. Protects against extreme weather event, such as floods or
hurricanes; or
b. Helps maintain or protect the environment.
7. The extent to which a project serves regions with significant
clean energy exploration, development, or production areas.
8. The extent to which a project serves regions with significant
water resource challenges, including the need to address--
a. Water quality concerns in areas of regional, national, or
international significance;
b. Water quantity concerns related to groundwater, surface water,
or other water sources;
c. Significant flood risk;
d. Water resource challenges identified in existing regional,
State, or multistate agreements; or
e. Water resources with exceptional recreational value or
ecological assistance.
9. The extent to which the project addresses identified municipal,
State, or regional priorities.
10. The readiness of the project to proceed toward development,
including a demonstration by the obligor that there is a reasonable
expectation that the contracting process for construction of the
project can commence not later than 90 days after the date on which a
Federal credit instrument is obligated for the project under WIFIA.
11. The extent to which WIFIA credit assistance reduces overall
Federal contributions to the project.
12. The extent to which the project serves economically
disadvantaged communities and spurs economic opportunity for, and
minimally adversely impacts, disadvantaged communities and their
populations.
Criterion (5) is directly related to a project's creditworthiness,
financial viability, and the Corps' capacity to make a loan. This
criterion would be used to assess projects separate from the assessment
under the other selection criteria. In particular, it would inform the
Corps' ability to provide funding in an equitable manner to prospective
borrowers seeking financing. The amount of budget authority used by a
project would be an important consideration when selecting projects.
The greater the budget authority used by a project, which is a function
of both project size and creditworthiness, the less budget authority is
available to finance other projects. Selecting projects would be at the
discretion of the Secretary who may decide that a project that uses a
disproportionally high level of budget authority provides essential
public safety benefits and deserves greater consideration.
The Corps added criterion (12) to reflect the Corps' intention to
address the needs of economically disadvantaged communities where
obtaining financing for critical water resources infrastructure
presents additional difficulties and to further current Administration
priorities as expressed in E.O. 13985, E.O. 13990, and E.O. 14008.\7\
While the
[[Page 35481]]
creditworthiness requirement, as well as the requirement to obtain an
investment-grade rating on senior obligations, may be a challenge for
economically disadvantaged communities, the flexibility and low
interest rates of the Federal credit instrument may improve overall
financial feasibility and burden to the community.
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\7\ Executive Order 13985 of January 20, 2021. Advancing Racial
Equity and Support for Underserved Communities Through the Federal
Government.
Executive Order 13990 of Jan 20, 2021. Protecting Health and the
Environment and Restoring Science to Tackle the Climate Crisis.
Executive Order 14008 of January 27, 2021. Tackling the Climate
Crisis at Home and Abroad.
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IV. Statutory and Executive Order Reviews
A. Executive Order 12866: Regulatory Planning and Review & Executive
Order 13563: Improving Regulation and Regulatory Review
Executive Order 12866, ``Regulatory Planning and Review,'' and
Executive Order 13563, ``Improving Regulation and Regulatory Review,''
require that significant regulatory actions be submitted for review to
the Office of Information and Regulatory Affairs (OIRA) in the Office
of Management and Budget (OMB). These orders also direct agencies to
assess the costs and benefits of available regulatory alternatives and,
if the regulation is necessary, to select regulatory approaches that
maximize net benefits. This rule has been determined significant under
Executive Order 12866. In accordance with Executive Order 12866 and
Executive Order 13563, this significant regulatory action was submitted
to OMB for review. The costs to the public of implementing the Corps
WIFIA program include: the fees charged to applicants and loan
recipients, as well as any remaining costs of administering the program
that are not fully covered by the user fees and instead require support
by Federal appropriations. The benefits of implementing the Corps WIFIA
program include: (1) the value of the benefits provided by non-Federal
dam safety projects enabled by future the Corps WIFIA credit assistance
(for example, flood damages prevented by dam safety improvement
projects), and (2) the savings realized by the borrowers from the lower
lending rates of the Corps WIFIA credit assistance.
B. Executive Order 11988: Floodplain Management
Projects funded under this rule will meet or exceed applicable
State, local, tribal, and territorial standards for flood risk and
floodplain management, as well as Executive Order 11988, which directs
Federal agencies to avoid, to the extent possible, long-and short-term
adverse impacts associated with the occupancy and modification of the
floodplain as well as to avoid direct and indirect support of
floodplain development wherever there is a practicable alternative.
All projects under this rule are considered Federal actions under
E.O. 11988 and thus, project applicants shall determine whether the
proposed project will occur in the floodplain. If the project is
located within the floodplain, the applicant must determine whether the
action is critical or not and what floodplain standard to follow.
Further guidance on implementation of E.O. 11988 can be found in the
Corps Engineer Regulation 1165-2-26 (30 March 1984).
C. Paperwork Reduction Act (PRA)
The information collection activities in this final rule have been
submitted for approval to the Office of Management and Budget (OMB)
under the Paperwork Reduction Act (PRA). Per the PRA, the agency cannot
collect any information until the information collection request has
been approved by OMB.
D. Regulatory Flexibility Act (RFA)
The RFA requires Federal agencies to consider the impact of
regulations on small entities (small businesses, small organizations,
or small government jurisdictions) in developing the proposed and final
regulations. The RFA applies to the Corps WIFIA program rule since
notice and comment are required as part of this rulemaking process.
Congress has provided authority and funding required for the Corps
to make direct loans and loan guarantees for safety projects to
maintain, upgrade, and repair dams identified in the National Inventory
of Dams with a primary owner type of State, local government, public
utility, or private. The Corps is proposing to establish its new WIFIA
program within the limitations set by Congress. The proposed rule sets
forth the policies and procedures that the Corps will use for
receiving, evaluating, approving applications, and servicing and
monitoring direct loans and loan guarantees.
Small entities that would be impacted by this rule will be non-
Federal dam owners who own dams that require loans in excess of
$20,000,000. This includes small government jurisdictions and
organizations who voluntarily submit a preliminary application and are
subsequently invited to submit a full application. The Corps will only
invite potential borrowers to submit an application and application fee
if the Corps believes there is a reasonable expectation that the
project could receive financing. The application fee will be waived for
small communities and economically disadvantaged communities. Based on
data derived from the EPA's WIFIA program since its implementation in
2017, the Corps anticipates receiving approximately 50 preliminary
applications each year from eligible entities per year, and of these
entities, the Corps estimates five will be considered small entities.
There are approximately 87,000 non-federally owned dams in the US
(some of which are owned by the same entity). Of the NAICS
classifications, the most applicable industry classification for these
entities is the ``Water Supply and Irrigation Systems'' industry
subsector. Information on this industry is provided in the tables
below. Based on the Small Business Administration's (SBA) Size
Standard/Small Entity Threshold and the average annual receipts, the
Water Supply and Irrigation Systems industry has 684 firms that qualify
as small entities.
----------------------------------------------------------------------------------------------------------------
SBA size standard/small
NAICS code Industry subsector entity threshold (average Total small
description annual receipts) businesses
----------------------------------------------------------------------------------------------------------------
221310.................................. Water Supply and $36.0 M................... 684
Irrigation Systems.
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Annual payroll Receipts
Enterprise size ($1,000) Firms Establishments Employment ($1,000) ($1,000)
----------------------------------------------------------------------------------------------------------------
01: Total................... 3,334 4,131 36,836 2,346,769 11,712,605
02: <100.................... 684 684 1,088 9,494 35,768
03: 100-499................. 1,30 1,300 3,420 87,118 336,983
04: 500-999................. 569 570 2,676 106,172 402,485
05: 1,000-2,499............. 448 455 3,492 165,793 694,133
06: 2,500-4,999............. 143 151 1,968 104,614 482,800
[[Page 35482]]
07: 5,000-7,499............. 54 67 1,208 67,701 322,787
08: 7,500-9,999............. 29 38 705 40,656 219,741
09: 10,000-14,999........... 25 40 1,035 58,494 277,199
10: 15,000-19,999........... 12 17 416 29,630 166,138
11: 20,000-24,999........... 9 19 501 25,101 99,781
12: 25,000-29,999........... 5 14 424 27,005 84,788
13: 30,000-34,999........... 5 9 282 15,409 117,611
14: 35,000-39,999........... 5 30 701 36,112 123,970
15: 40,000-49,999........... 6 11 678 60,553 179,170
16: 50,000-74,999........... 8 68 1,605 96,580 392,037
17: 75,000-99,999........... 5 24 904 76,175 303,054
18: 100,000+................ 27 634 15,733 1,340,162 7,474,160
----------------------------------------------------------------------------------------------------------------
Eligible small entities that qualify for WIFIA credit assistance
and plan to utilize debt financing such as bank loans, bonds, or a
WIFIA credit assistance to fund an eligible project, will incur
compliance costs associated with any such debt instrument. As such, the
compliance costs to obtain a WIFIA credit assistance noted below in
most instances represents a meaningful savings compared to alternative
capital market debt financing options. WIFIA compliance costs likely
include the following:
<bullet> Fees: The WIFIA application fee of $25,000 will be waived
for small and/or disadvantaged communities. All WIFIA credit assistance
recipients will be charged a transaction processing fee, likely between
$125,000 and $300,000, at the time of loan closing to cover the costs
incurred by the Corps for the processing each loan. The cost of the fee
will depend on the complexity of the transaction (more complex
transactions will have higher transaction processing fees). If
administrative funds are available, this fee may be refunded to the
borrower(s). Additionally, all WIFIA credit assistance recipients will
be charged an annual servicing fee, likely between $10,000 and $50,000.
This cost of this fee will depend on the costs of servicing the credit
instrument. The transaction processing fee and the annual servicing fee
will be determined at the time of loan closing. To facilitate access to
the funding, all applicants have the option to use loan proceeds to pay
for all consulting reports and application fees. This amount is less
than the underwriting fees incurred for alternative debt financings,
which are usually 1.0% of the borrowed amount.
<bullet> Rating letters: The Corps WIFIA program will require
borrowers to provide credit rating letters before closing on the WIFIA
credit assistance. Credit ratings typically cost approximately $50,000
to obtain. Credit ratings are a standard practice for alternative debt
financings and as such, the cost to obtain one for Corps financing does
not materially change the costs for small entities.
<bullet> Reading the regulation: The regulation other related
documents are not expected to take more than a typical 8-hour workday
to read and comprehend. Assuming an average hourly rate of $100/hour,
reading the regulation would cost approximately $1,600 for 2 employees
to read the regulation.
<bullet> Consulting fees: Consultants are not required to
participate in the WIFIA program. However, eligible entities may opt to
utilize support from consultants to prepare financial, legal, and
technical documents required to support an application. The Corps
estimates that should an entity opt to utilize such support, the cost
is anticipated to be less than $75,000. This amount is less than the
consulting fees incurred for alternative debt financings, which are
usually in excess of $100,000.
<bullet> Reporting: WIFIA requires that borrowers submit financial
audit or financial condition reports, so that the program can monitor
the status of the project and identify any changes to the credit risk
posed to the Federal Government. These reports are already produced
regularly by borrowers, so the added cost to borrowers is anticipated
to be less than $5,000 per year.
<bullet> Record-keeping: It is anticipated that record-keeping
costs for WIFIA credit assistance will not exceed $5,000 per year.
The estimated costs to small business associated with the program
are summarized in the table below.
------------------------------------------------------------------------
$125,000-$350,000 plus $10,000-
Fees $50,000 annually
------------------------------------------------------------------------
Rating letters..................... $50,000.
Loan interest...................... Based on loan amount and duration.
Reading the regulation............. $800-$1,600.
Consulting fees.................... $0-$75,000.
Reporting.......................... $0-$5,000.
Record-keeping..................... $5,000 annually.
------------------------------------
Total.......................... $175,800-$481,600 Plus $15,000-
$55,000 annually.
------------------------------------------------------------------------
These costs do not represent a significant economic impact. The
only reason entities would proceed with the program is if there is a
benefit compared to other alternative debt financings. The total
estimated costs are anticipated to be between approximately $175,000
and $500,000, plus an annual cost between $10,000 and $50,000. For the
affected industries, the maximum of these costs represents less than 2%
of the revenue threshold for small entities. Further, participation in
the WIFIA program is voluntary and the Corps anticipates inviting
approximately 5 small, non-Federal entities to apply for Federal credit
assistance through the program.
Because (1) participating in the program is voluntary and
undertaken by small entities to affordably finance eligible projects,
and (2) the cost of obtaining a WIFIA credit assistance is likely lower
than the alternative forms
[[Page 35483]]
of debt financing necessary to undertake a project, of the small
entities that seek a WIFIA credit assistance through the program, none
will experience a significant economic impact. Further, because the
WIFIA program expects to invite approximately five small entities per
year to apply for Federal credit assistance through the program, the
rule is not anticipated to have a significant or adverse impact on
small entities.
E. Unfunded Mandates Reform Act (UMRA)
This action does not contain an unfunded mandate of $100 million or
more as described in UMRA, 2 U.S.C. 1531-1538, and does not
significantly or uniquely affect small governments. The action imposes
no enforceable duty on any State, local, or tribal governments or the
private sector.
F. Executive Order 13132: Federalism
This action does not have federalism implications. It will not have
substantial direct effects on the States, on the relationship between
the National Government and the States, or on the distribution of power
and responsibilities among the various levels of government.
G. Executive Order 13175: Consultation and Coordination With Indian
Tribal Governments
This action does not have tribal implications as specified in E.O.
13175. While a tribal government, or a consortium of tribal
governments, may apply for WIFIA credit assistance, this action does
not have substantial direct effects on one or more Indian tribes, on
the relationship between the Federal Government and Indian tribes, or
on the distribution of power and responsibilities between the Federal
Government and Indian tribes.
H. Executive Order 13045: Protection of Children From Environmental
Health and Safety Risks
This action is not subject to E.O. 13045 because it is not
economically significant as defined in E.O. 12866, and because this
action does not address environmental health or safety risks. This
rulemaking provides the procedure to apply for credit assistance and
establishes the fees related to the provision of Federal credit
assistance under the WIFIA. The selection criteria used for evaluating
and selecting among eligible projects to receive credit assistance
contained in this SUPPLEMENTARY INFORMATION section of the preamble
includes the extent to which the project generates public safety
benefits.
I. Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use
This action is not a ``significant energy action'' because it is
not likely to have a significant adverse effect on the supply,
distribution, or use of energy. This rulemaking simply provides the
procedure to apply for credit assistance and establishes the fees
related to the provision of Federal credit assistance under the Corps
WIFIA program.
J. National Technology Transfer and Advancement Act of 1995 (NTTAA)
This action is not subject to the NTTAA, Public Law 104-113,
because it does not establish an environmental health or safety
standard.
K. National Environmental Policy Act (NEPA)
This action of promulgating this rule will not have a significant
effect on the human environment. Each project obtaining assistance
under this program is required to adhere to the National Environmental
Policy Act of 1969 (NEPA), as amended (42 U.S.C. 4321 et seq.). These
requirements apply at the time of application for assistance. The Corps
has completed a Programmatic Environmental Assessment and associated
Finding of No Significant Impact in support of this rule. These
documents are available at <a href="https://www.usace.army.mil/Missions/Civil-Works/Infrastructure/revolutionize/CWIFP/">https://www.usace.army.mil/Missions/Civil-Works/Infrastructure/revolutionize/CWIFP/</a>.
L. Executive Order 12898: Federal Actions To Address Environmental
Justice in Minority Populations and Low-Income Populations
Executive Order 12898 directs Federal agencies to identify and
address the disproportionately high and adverse human health or
environmental effects of their actions on minority and low-income
populations. This action does not cause disproportionately high and
adverse human health environmental effects on minority or low-income
populations.
M. Congressional Review Act (CRA)
This action is subject to the CRA, and the Corps will submit a rule
report to each House of the Congress and to the Comptroller General of
the United States. Pursuant to the CRA (5 U.S.C. 801 et seq.), the
Office of Information and Regulatory Affairs designated this rule as
not a ``major rule'', as defined by 5 U.S.C. 804(2).
List of Subjects in 33 CFR Part 386
Administrative practice and procedure, Intergovernmental relations,
Waterways.
0
For the reasons stated in the preamble, the Corps proposes to amend 33
CFR chapter II by adding part 386 to read as follows:
PART 386--CREDIT ASSISTANCE FOR WATER RESOURCES INFRASTRUCTURE
PROJECTS
Sec.
386.1 Purpose and scope.
386.2 Definitions.
386.3 Limitations on assistance.
386.4 Application process.
386.5 Federal requirements.
386.6 Federal flood risk management standard.
386.7 American iron and steel.
386.8 Labor standards.
386.9 Investment-grade ratings.
386.10 Threshold criteria.
386.11 Selection criteria.
386.12 Term sheets and approvals.
386.13 Closing on the Loan Agreement or Loan Guarantee Agreement.
386.14 Reporting requirements.
386.15 Fees.
Authority: 33 U.S.C. 3901 et seq.
Sec. 386.1 Purpose and scope.
The Water Infrastructure Finance and Innovation Act of 2014 (WIFIA)
authorized a new Federal credit program for water resources
infrastructure projects to be administered by the U.S. Army Corps of
Engineers (Corps). Title 1, Division D of the Consolidated
Appropriations Act, 2021, and Division J, Title III of the
Infrastructure Investment and Jobs Act limits the program to safety
projects to maintain, upgrade, and repair dams identified in the
National Inventory of Dams with a primary owner type of State, local
government, public utility or private.
Sec. 386.2 Definitions.
The following definitions apply to this part:
(a) Application means the form and attachments submitted by
prospective borrowers that have been selected to apply for credit
assistance after the review of letters of interest.
(b) Borrower means any entity that enters into a direct loan or
Loan Guarantee Agreement with the Corps that is primarily liable for
payment of the principal or interest on a Federal credit instrument.
``Borrower'' is synonymous with ``obligor.'' ``Obligor'' is used in
place of borrower in this part whenever ``obligor'' appears in a
corresponding section of WIFIA.
(c) Clean energy means systems, processes, and best practices for
[[Page 35484]]
producing, converting, storing, transmitting, distributing, and
consuming energy that avoid, reduce, or sequester the amount of
greenhouse gas (GHG) emitted to, or concentrated in, the atmosphere.
(d) Community means a collection of people in a geographic area
having one or more characteristic in common. The geographic area may be
contained within or cross political subdivisions of States.
(e) Credit assistance means a secured loan or loan guarantee under
33 U.S.C. 3908.
(f) Credit agreement means a contractual agreement (or agreements)
between the Corps and a borrower (and the lender, if applicable)
establishing the terms and conditions, rules, and requirements of a
secured loan or loan guarantee.
(g) Credit subsidy shall have the same meaning as ``cost'' under
section 502(5) of the Federal Credit Reform Act of 1990 (2 U.S.C.
661a(5)), which is the net present value at the time the Loan Agreement
or Loan Guarantee Agreement is executed. The credit subsidy cost for a
given project is the net present value, at the time the Loan Agreement
or Loan Guarantee Agreement is executed of the following estimated cash
flows, discounted to the point of disbursement:
(1) Payments by the Government to cover defaults and delinquencies,
interest subsidies, or other payments; less
(2) Payments to the Government including origination and other
fees, penalties, and recoveries including the effects of changes in
loan or debt terms resulting from the exercise by the borrower,
eligible lender, or other holder of an option included in a Loan
Agreement or Loan Guarantee Agreement.
(h) Economically disadvantaged community refers to a community that
experiences low-income, persistent poverty, or high unemployment.
(i) Economically justified means that the anticipated benefits to
the community(ies) will exceed the costs.
(j) Eligible entity means one of the following:
(1) A corporation;
(2) A partnership;
(3) A joint venture;
(4) A trust;
(5) A State, or local government entity, agency, or
instrumentality;
(6) A tribal government or consortium of tribal governments; or
(7) A State infrastructure financing authority.
(k) Eligible project costs means the amounts, which are paid by, or
for the account of, a borrower in connection with a project, including
the cost of:
(1) 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 pre-
construction activities.
(2) Construction, reconstruction, rehabilitation, and replacement
activities.
(3) Acquisition of real property or an interest in real property
(including water rights, land relating to the project, and improvements
to land), environmental mitigation, construction contingencies, and
acquisition of equipment; and
(4) Capitalized interest necessary to meet market requirements,
reasonably required reserve funds, capital issuance expenses, and other
carrying costs during construction. Capitalized interest on the Federal
credit instrument is not an eligible project cost.
(l) Environmentally acceptable means the project satisfies all
necessary environmental requirements, including requirements associated
with the Corps Programmatic Environmental Assessment prepared for this
program under the National Environmental Policy Act (NEPA).
(m) Federal credit instrument means a secured loan or loan
guarantee authorized to be made available under 33 U.S.C. 3901-3914
with respect to a project.
(n) High unemployment means the unemployment rate in a community
is, for the most recent 24-month period for which data is available, at
least 1% greater than the national average unemployment rate.
(o) Investment-grade rating means a rating category of BBB minus,
Baa3, bbb minus, BBB (low), or higher assigned by a nationally
recognized statistical rating organization (NRSRO) to project
obligations offered into the capital markets.
(p) Iron and steel products means the following products made
primarily of iron or steel: lined or unlined pipes and fittings,
manhole covers and other municipal castings, hydrants, tanks, flanges,
pipe clamps and restraints, valves, structural steel, reinforced
precast concrete, and construction materials.
(q) Low-income community means a community in a geographic area
that meets any of the following criteria:
(1) Individuals whose household income is at or below 200 percent
of the poverty line, as defined by the Bureau of the Census, constitute
more than 50 percent of the population;
(2) The percentage of individuals whose household income is at or
below 200 percent of the poverty line, as defined by the Bureau of the
Census, in the community is twice that as the county or State as a
whole; or
(3) The community or territory has a per capita income of 80
percent or less of the national average.
(4) For U.S. territories for which Bureau of the Census American
Community Survey data is not available, low-income community means a
community in a geographic area that is located within a territory that
has a poverty rate greater than 20%.
(r) Loan guarantee means any guarantee or other pledge by the
Secretary of the Army (Secretary) to pay all or part of the principal
of and interest on a loan or other debt obligation issued by a borrower
and funded by a lender.
(s) Lender means any non-Federal qualified institutional buyer (as
defined in 17 CFR 230.144A(a), 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.)), including:
(1) A qualified retirement plan (as defined in section 4974(c) of
the Internal Revenue Code of 1986, 26 U.S.C. 4974(c)) that is a
qualified institutional buyer; and
(2) A governmental plan (as defined in section 414(d) of the
Internal Revenue Code of 1986, 26 U.S.C. 414(d)) that is a qualified
institutional buyer.
(t) Nationally recognized statistical rating organization (NRSRO)
means a credit rating agency identified and registered by the Office of
Credit Ratings in the Securities and Exchange Commission under 15
U.S.C. 78c.
(u) Non-Federal means an organization that is not an agency or
instrumentality of the Federal Government, including State, interstate,
Indian tribal, or local government, as well as private organizations.
(v) Persistent poverty means that 20% or more of the population has
been living in poverty over the prior two decennial censuses for which
data is available and the most recent Small Area Income and Poverty
Estimates.
(w) Preliminary application means the form and attachments
prospective borrowers submit to the Corps to be considered for credit
assistance following the announcement of available funding.
(x) Project means:
(1) Safety projects to maintain, upgrade, and repair dams
(including dam removal) identified in the National
[[Page 35485]]
Inventory of Dams with a primary owner type of State, local government,
public utility, or private; and which meets the statutory requirements
of Title 1, Division D of the Consolidated Appropriations Act 2021,
meet the criteria outlined in 85 FR 39189 (see division D of the
Further Consolidated Appropriations Act, 2020 (Pub. L. 116-94)).
(2) Any project that meets the criteria in paragraph (x)(1) of this
section must also be a project for flood damage reduction, hurricane
and storm damage reduction, aquatic environmental restoration, coastal
or inland harbor navigation improvement, or inland and intracoastal
waterways navigation improvement that the Secretary determines is
technically sound, economically justified, and environmentally
acceptable, including--
(i) A project to reduce flood damage;
(ii) A project to restore aquatic ecosystems;
(iii) A project to improve the inland and intracoastal waterways
navigation system of the United States; and
(iv) A project to improve navigation of a coastal inland harbor of
the United States, including channel deepening and construction of
associated general navigation features.
(3) Acquisition of real property or an interest in real property
for a project that meets the criteria under paragraph (x)(1) of this
section--
(i) If the acquisition is integral to a project eligible for WIFIA
credit assistance; or
(ii) Pursuant to an existing plan that, in the judgment of the
Secretary, would mitigate the environmental impacts of water resources
infrastructure projects otherwise eligible for WIFIA credit assistance.
(4) A combination of projects secured by a common security pledge,
each of which is eligible for WIFIA credit assistance, for which an
eligible entity, or a combination of eligible entities, submits a
single application.
(y) Project obligation means any note, bond, debenture, or other
debt obligation issued by a borrower in connection with the financing
of a project, other than a Federal credit instrument.
(z) Prospective borrower means an eligible entity seeking credit
assistance.
(aa) Projected substantial completion date means the expected date
as determined by the Secretary, at which the stage in the progress of
the project when the project or designated portion thereof is
sufficiently complete in accordance with the contract documents so that
the project or designated portion thereof can be used for its intended
use.
(bb) Publicly sponsored means the obligor can demonstrate, to the
satisfaction of the Secretary, that it has consulted with the affected
State, local, or tribal government in which the project is located, or
is otherwise affected by the project, and that such government supports
the proposed project. Support can be shown by a certified letter signed
by the approving municipal department or similar agency, mayor or other
similar designated authority, local ordinance, or any other means by
which local government approval can be evidenced.
(cc) Secured loan means a direct loan or other debt obligation
(including a note, bond, debenture, and sale or lease financing
arrangement) issued by a borrower funded by the Secretary in connection
with the financing of a project under 33 U.S.C. 3908.
(dd) Small community means a community of not more than 25,000
individuals.
(ee) State means any of the fifty States, the District of Columbia,
Puerto Rico, or any other territory or possession of the United States.
(ff) 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).
(gg) Subsidy amount means the dollar amount of budget authority
that is sufficient to cover the estimated long-term cost to the Federal
Government of a Federal credit instrument, calculated on a net present
value basis, excluding administrative costs and any incidental effects
on the governmental receipts or outlays in accordance with the
provisions of the Federal Credit Reform Act of 1990 (2 U.S.C. 661 et
seq.).
(hh) Substantial completion means the stage in the progress of the
project when the project or designated portion thereof is sufficiently
complete in accordance with the contract documents so that the project
or designated portion thereof can be used for its intended use.
(ii) Technically sounds means the project will meet all applicable
engineering, safety, and other technical standards.
(jj) Term sheet means a contractual agreement between the Corps and
the borrower (and the lender, if applicable) that sets forth the key
business terms and conditions of a Federal credit instrument.
(kk) Territory means each of the commonwealths, territories, and
possessions of the United States established in Title 48 of the U.S.C.
(ll) Treatment works has the meaning given the term in section 212
of the Federal Water Pollution Control Act (33 U.S.C. 1292).
(mm) WIFIA means the Water Infrastructure Finance and Innovation
Act of 2014 (Pub. L. 113-121), as amended.
Sec. 386.3 Limitations on assistance.
(a) The total amount of credit assistance offered to any project
under this part shall not exceed 49% of the reasonably anticipated
eligible project costs, or, if the secured loan does not receive an
investment grade rating, the total amount of credit assistance shall
not exceed the amount of the senior project obligations of the project
(33 U.S.C. 3908(b)(2)(B)).
(b) Notwithstanding paragraph (a) of this section, the Secretary
may offer credit assistance in excess of 49% of the reasonably
anticipated eligible project costs as long as such excess assistance
combined for all projects does not require greater than 25% of the
subsidy amount made available for the fiscal year, per 33 U.S.C.
3912(d).
(1) Use of the authority to offer credit assistance in excess of
49% of the anticipated eligible project costs shall be considered on a
case by case basis.
(2) In the event this authority is used, all other criteria and
requirements described in this part must be met and adhered to.
(c) For each project receiving credit assistance, total Federal
assistance may not exceed 80% of the total project costs, except for
certain rural water projects 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 80%, and in accordance
with 85 FR 39189 (see division D of the Further Consolidated
Appropriations Act, 2020 (Pub. L. 116-94)).
(d) Proceeds from the credit assistance shall not be utilized to
provide cash contributions to the Corps for project related costs,
except for such fees as allowed by 33 U.S.C. 3908(b)(7), limited to the
application, transaction processing, and servicing fees as described in
Sec. 386.15.
(e) Costs incurred, and the value of any integral in-kind
contributions made, before receipt of credit assistance may be
considered in calculating eligible project costs only upon approval of
the Secretary. Such costs and integral in-
[[Page 35486]]
kind contributions must be directly related to the development or
execution of the project and must be eligible project costs as defined
in Sec. 386.2. In addition, such costs, excluding the value of any
integral in-kind contributions, are payable from the proceeds of the
Federal credit instrument and shall be considered incurred costs for
purposes of paragraph (h) of this section. Capitalized interest on the
Federal credit instrument is not eligible for calculating eligible
project costs.
(f) No costs financed internally or with interim funding may be
refinanced under this part later than a year following substantial
completion of the project.
(g) The Secretary shall not obligate funds for a project that has
not received an environmental Categorical Exclusion, Finding of No
Significant Impact, or Record of Decision under the National
Environmental Policy Act (NEPA), 42 U.S.C. 4321 et seq.
(h) The Secretary shall fund a secured loan based on the project's
financing needs. The credit agreement shall include the anticipated
schedule for such loan disbursements. Actual disbursements will be
based on incurred costs, and in accordance with the approved
construction plan, as evidenced by invoices or other documentation
acceptable to the Secretary.
(i) The interest rate on a secured loan will be equal to or greater
than the yield on U.S. Treasury securities of comparable maturity on
the date of execution of the credit agreement as identified through use
of the daily rate tables published by the Bureau of the Fiscal Service
for the State and Local Government Series (SLGS) investments. The yield
on comparable Treasury securities will be estimated by adding one basis
point to the SLGS daily rate with a maturity that is closest to the
weighted average loan life of the Federal credit instrument, per 33
U.S.C. 3908(b)(4).
(j) The final maturity date of a secured loan will be the earlier
of the date that is 35 years after the date of substantial completion
of the project, as determined by the Secretary and identified in the
credit agreement, or if the useful life of the project, as determined
by the Secretary, is less than 35 years, the useful life of the
project; however, the final maturity date of a secured loan to a State
infrastructure financing authority will be not later than 35 years
after the date on which amounts are first disbursed. In determining the
useful life of the project, for the purposes of establishing the final
maturity date of the Federal credit instrument, the Secretary will
consider the useful economic life of the asset(s) being financed.
(k) A secured loan will not be subordinated to the claims of any
holder of project obligations in the event of bankruptcy, insolvency,
or liquidation of the borrower of the project (33 U.S.C. 3908(b)(6)).
(l) The Corps will establish a repayment schedule for a secured
loan or loan guarantee based on the projected cash flow from project
revenues and other repayment sources. Scheduled loan or loan guarantee
repayments of principal and interest on a secured loan or loan
guarantee will commence not later than 5 years after the projected date
of substantial completion of the project at the time of execution of
the Loan Agreement or Loan Guarantee Agreement, as determined by the
Secretary (33 U.S.C. 3908(c)(A)); however, scheduled loan or loan
guarantee repayments of principal and interest on a secured loan to a
State infrastructure financing authority will commence not later than 5
years after the date on which amounts are first disbursed. The final
maturity of the credit agreement shall be in no instance later than 35
years after the projected date of substantial completion of the project
at the time of execution of the Loan Agreement or Loan Guarantee
Agreement.
Sec. 386.4 Application process.
(a) Each fiscal year for which budget authority is made available
by Congress, the Corps shall publish a solicitation to announce the
availability of credit assistance. It will specify how to
electronically submit a preliminary application, the estimated amount
of funding available to support Federal credit instruments, contact
name(s), and other details for submissions and funding approvals.
(b) Prospective borrowers seeking credit assistance under this part
will be required to follow an application process requiring submission
of the preliminary application as designated in the solicitation to
announce the availability of credit assistance. In addition, the extent
to which the project financing plan includes any other form of Federal
assistance (including grants), in addition to WIFIA credit assistance,
will be required to be provided in the application.
(c) Following approval of the term sheet, and/or negotiation of
satisfactory terms and conditions of the Federal credit instrument, the
prospective borrower will proceed to closing, as described in Sec.
386.13.
Sec. 386.5 Federal requirements.
All projects receiving credit assistance under this part shall
comply, where applicable, with:
(a) Environmental authorities. (1) The National Environmental
Policy Act of 1969, 42 U.S.C. 4321 et seq.;
(2) Archeological and Historic Preservation Act, 16 U.S.C. 469-
469c;
(3) Clean Air Act, 42 U.S.C. 7401 et seq.;
(4) Clean Water Act, 33 U.S.C. 1251 et seq.;
(5) Coastal Barrier Resources Act, 16 U.S.C. 3501 et seq.;
(6) Coastal Zone Management Act, 16 U.S.C. 1451 et seq.;
(7) Endangered Species Act, 16 U.S.C. 1531 et seq.;
(8) Federal Actions to Address Environmental Justice in Minority
Populations and Low-Income Populations, Executive Order 12898, 3 CFR,
1994 Comp., p. 859;
(9) Floodplain Management, Executive Order 11988, 3 CFR, 1977
Comp., p. 117;
(10) Protection of Wetlands, Executive Order 11990, 3 CFR, 1977
Comp., p. 121, as amended by Executive Order 12608, 3 CFR, 1987 Comp.,
p. 245;
(11) Farmland Protection Policy Act, 7 U.S.C. 4201 et seq.;
(12) Fish and Wildlife Coordination Act, 16 U.S.C. 661-666c, as
amended;
(13) Magnuson-Stevens Fishery Conservation and Management Act, 16
U.S.C. 1801 et seq.;
(14) National Historic Preservation Act, 16 U.S.C. 470 et seq.;
(15) Safe Drinking Water Act, 42 U.S.C. 300f et seq.; and
(16) Wild and Scenic Rivers Act, 16 U.S.C. 1271 et seq.
(b) Economic and miscellaneous authorities. (1) Debarment and
Suspension, Executive Order 12549, 3 CFR, 1986 Comp., p. 189;
(2) New Restrictions on Lobbying, 31 U.S.C. 1352;
(3) Prohibitions relating to violations of the Clean Water Act or
Clean Air Act with respect to Federal contracts, grants, or loans under
42 U.S.C. 7606 and 33 U.S.C. 1368, and Executive Order 11738, 3 CFR,
1971-1975 Comp., p. 799; and
(4) The Uniform Relocation Assistance and Real Property Acquisition
Policies Act of 1970, 42 U.S.C. 4601 et seq.
(c) Civil rights, nondiscrimination, equal employment opportunity
authorities. (1) Age Discrimination Act, 42 U.S.C. 6101 et seq.;
(2) Equal Employment Opportunity, Executive Order 11246, 3 CFR,
1964-1965 Comp., p. 339;
(3) Section 504 of the Rehabilitation Act, 29 U.S.C. 794,
supplemented by
[[Page 35487]]
Executive Orders 11914, 3 CFR, 1976 Comp., p. 117, and 11250, 3 CFR,
1964-1965 Comp., p. 351; and
(4) Title VI of the Civil Rights Act of 1964, 42 U.S.C. 2000d et
seq.
(d) Others authorities. Other Federal and compliance requirements
as may be applicable.
Sec. 386.6 Federal flood risk management standard.
(a) In making WIFIA funding decisions under this part, the Corps
will follow the requirements of Executive Order (E.O.) 11988 and
Engineering Regulation (ER) 1165-2-26, ``Implementation of E.O. 11988
on Floodplain Management''. Applicants shall submit information
regarding the project that is sufficient for the Corps to determine
that the project is in compliance with the requirements of E.O. 11988
and ER 1165-2-26.
(b) Projects funded under this part will meet or exceed applicable
State, local, tribal, and territorial standards for flood risk and
floodplain management, as well as E.O. 11988.
(c) All projects under this part are considered Federal actions
under E.O. 11988 and thus, project applicants shall determine whether
the proposed project will occur in the floodplain. If the project is
located within the floodplain, the applicant must determine whether the
action is critical or not and what floodplain standard to follow.
Further guidance on implementation of E.O. 11988 can be found in the
Corps ER 1165-2-26 (30 March 1984).
Sec. 386.7 American iron and steel.
(a) All projects receiving credit assistance under this part for
construction, alteration, maintenance, or repair of a project shall use
only iron and steel products produced in the United States, unless
waiver of the requirement in this paragraph (a) is granted by an
official authorized to do so.
(b) Consistent with 33 U.S.C. 3914(b), ``iron and steel products''
means the following products made primarily of iron or steel: lined or
unlined pipes and fittings, manhole covers and other municipal
castings, hydrants, tanks, flanges, pipe clamps and restraints, valves,
structural steel, reinforced precast concrete and construction
materials. Equipment employed in construction that does not become part
of the project is not an ``iron and steel product'' for the purpose of
this section.
Sec. 386.8 Labor standards.
All laborers and mechanics employed by contractors or
subcontractors on projects receiving credit assistance under this part
shall be paid wages at rates not less than those prevailing for the
same type of work on similar construction in the immediate locality, as
determined by the Secretary of Labor.
Sec. 386.9 Investment-grade ratings.
(a) At the time a prospective borrower submits an application, the
Corps shall require a preliminary rating opinion letter. The letter is
a conditional credit assessment from a NRSRO that provides a
preliminary indication of the project's overall creditworthiness and
that specifically addresses the potential of the project's senior debt
obligations, which may include, or be limited to, the Federal credit
instrument to achieve an investment-grade rating, and address the
rating of obligations similar to those proposed for the Federal credit
instrument when the Federal credit instrument is not a senior debt
obligation. The requirement of this paragraph (a) may be met, on a
case-by-case basis, by accepting a recent credit rating of obligations
that have a lien on the revenues pledged for repayment. This rating
should be based on an unenhanced analysis of the underlying pledged
source of repayment and not give any credit to any prospective loan
guarantee provided by the U.S. Government.
(b) Consistent with 33 U.S.C. 3907(a)(D)(ii), the full funding of a
Federal credit instrument shall be contingent on:
(1) The assignment of investment-grade ratings by NRSROs to all
project obligations that have a lien on the pledged security senior to
that of the Federal credit instrument on the pledged security; or
(2)(i) In the event that the Federal credit instrument is:
(A) A senior debt obligation;
(B) Pari passu with the senior project obligations; or
(C) A general obligation of the prospective borrower, to the
Federal credit instrument.
(ii) The applicant must provide at least one final rating opinion
letter which provides a credit rating on the direct loan or the
unenhanced Federal credit instrument. This rating should be based on an
unenhanced analysis of the underlying pledged source of repayment and
not give any credit to the loan or loan guarantee provided by the U.S.
Government.
(c) Neither the preliminary rating opinion letter nor the final
ratings should reflect the effect of bond insurance, unless that
insurance provides credit enhancement that secures WIFIA obligation.
Sec. 386.10 Threshold criteria.
(a) To be eligible to receive Federal credit assistance under this
part, a project shall meet the following threshold criteria:
(1) The project and prospective borrower shall be creditworthy.
(2) A project shall have eligible project costs that are reasonably
anticipated to equal or exceed $20 million.
(3) A Federal credit instrument:
(i) Shall be repayable, 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 project;
(ii) Shall include a rate covenant, coverage requirement, or
similar security feature supporting the project obligations; and
(iii) May have a lien on revenues subject to any lien securing
project obligations.
(4) In the case of a project that is undertaken 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 that the entity is undertaking shall be
publicly sponsored.
(5) The prospective borrower shall have developed an operations and
maintenance plan that identifies adequate revenues to operate,
maintain, and repair the project during its useful life. If the
borrower is a State infrastructure financing authority, it shall have
ensured and will ensure that its borrowers have a plan for the eligible
projects they are undertaking that identifies adequate revenues to
operate, maintain and repair such projects during the useful life of
such projects. The requirement in this paragraph (a)(5) may be met
through the development of a written plan or a financial model.
(b) With respect to paragraph (a)(3) of this section, the Secretary
may accept general obligation pledges or general corporate promissory
pledges and will determine the acceptability of other pledges and forms
of collateral as dedicated revenue sources on a case-by-case basis. The
Secretary shall not accept a pledge of Federal funds, regardless of
source, as security for the Federal credit instrument.
(c) The provision at 33 U.S.C. 3907(c) provides that nothing in
section 3907(c) (which includes eligibility requirements and selection
criteria for projects and entities receiving WIFIA assistance) is
intended to supersede the applicability of other requirements of
Federal law, including regulations.
[[Page 35488]]
Sec. 386.11 Selection criteria.
The selection criteria in paragraphs (a) through (l) of this
section will be used for evaluating and selecting among eligible
projects to receive credit assistance:
(a) The extent to which the project is nationally or regionally
significant, with respect to the generation of economic and public
benefits, such as-
(1) The reduction of flood risk;
(2) The improvement of water quality and quantity, including
aquifer recharge;
(3) The protection of drinking water, including source water
protection;
(4) The support of domestic and international commerce; and
(5) The restoration of degraded aquatic ecosystem structures.
(b) The extent to which the project financing plan includes public
or private financing, in addition to WIFIA credit assistance.
(c) The likelihood that WIFIA credit assistance would enable the
project to proceed at an earlier date than the project would otherwise
be able or likely to proceed.
(d) The extent to which the project uses new or innovative
approaches.
(e) The amount of budget authority required to fund the WIFIA
Federal credit instrument.
(f) The extent to which the project--
(1) Protects against an extreme weather event, such as a flood or
hurricane; or
(2) Helps maintain or protect the environment.
(g) The extent to which a project serves regions with significant
clean energy exploration development, or production areas.
(h) The extent to which a project serves regions with significant
water resource challenges, including the need to address--
(1) Water quality concerns in areas of regional, national, or
international significance;
(2) Water quantity concerns related to groundwater, surface water,
or other water sources;
(3) Significant flood risk;
(4) Water resource challenges identified in existing regional,
State, or multistate agreements; or
(5) Water resources with exceptional recreational value or
ecological assistance.
(i) The extent to which the project addresses identified municipal,
State, or regional priorities.
(j) The readiness of the project to proceed toward development,
including a demonstration by the obligor that there is a reasonable
expectation that the contracting process for construction of the
project can commence not later than 90 days after the date on which a
Federal credit instrument is obligated for the project under WIFIA.
(k) The extent to which WIFIA credit assistance reduces the overall
Federal contributions to the project.
(l) The extent to which the project serves economically
disadvantaged communities and spurs economic opportunity for, and
minimally adversely impacts, economically disadvantaged communities and
their populations.
Sec. 386.12 Term sheets and approvals.
(a) The Corps, after review and evaluation of an application, and
all other required documents submitted by a prospective borrower, may
offer to such prospective borrower a written term sheet and/or a credit
agreement, including detailed terms and conditions that must be met.
(b) The issuance of a term sheet, upon execution by the Secretary,
does not constitute a commitment by the Secretary to enter into the
Loan Agreement or Loan Guarantee Agreement. Execution of the Loan
Agreement or Loan Guarantee Agreement represents obligation by the
Secretary.
Sec. 386.13 Closing on the Loan Agreement or Loan Guarantee
Agreement.
(a) Only a Loan Agreement or Loan Guarantee Agreement executed by
the Secretary can obligate the Corps to issue a loan or loan guarantee.
The Corps is not bound by oral representations. Each Loan Agreement or
Loan Guarantee Agreement shall contain the following requirements and
conditions, and shall not be executed until the Corps determines that
the following requirements and conditions are satisfied:
(1) Except if explicitly authorized by an Act of Congress, no
Federal funds, proceeds of Federal loans, or proceeds of loans
guaranteed by the Federal Government may be used by a borrower to pay
for credit subsidy costs, administrative fees, or other fees charged by
or paid to the Corps relating to the WIFIA program; however, proceeds
of the Federal credit instrument may be used to pay for such
administrative or other fees but may not be used to pay an ``Optional
Credit Subsidy Fee''.
(2) At closing, the Corps will ensure that the following
requirements and conditions are or will be satisfied pursuant to the
credit agreement or otherwise:
(i) The project qualifies as an eligible project under WIFIA;
(ii) The face value of the credit agreement is limited to no more
than 49 percent of reasonably anticipated eligible project costs, or if
credit assistance in excess of 49 percent has been approved, no more
than the percentage of eligible project costs agreed upon, not to
exceed 80 percent of total project costs;
(iii) If the credit instrument is a loan guarantee, the loan
guarantee does not finance, either directly or indirectly, tax exempt
debt obligations, consistent with the requirements of section 149(b) of
the Internal Revenue Code;
(iv) The amount of the credit agreement, when combined with other
funds, will be sufficient to carry out the project, including adequate
contingency funds;
(v) The borrower is pledging collateral and/or providing a general
obligation pledge, determined by the Corps to be necessary to secure
the repayment of the credit agreement;
(vi) The credit agreement and related documents include detailed
terms and conditions necessary and appropriate to protect the interest
of the United States in the case of default;
(vii) There is satisfactory evidence that the applicant is willing,
competent, and capable of performing the terms and conditions of the
credit agreement, and will diligently pursue the project;
(viii) The applicant has taken and is obligated to continue to take
those actions necessary to perfect and maintain liens on assets which
are pledged as security for the credit agreement, as allowed under
State or local law;
(ix) The Corps or its representatives have access to the project
site at all reasonable times in order to monitor the performance of the
project;
(x) The Corps and the applicant agree as to the information that
will be made available to the Corps and the information that will be
made publicly available;
(xi) The applicant will file or has filed applications for or
obtained any required regulatory approvals for the project and is in
compliance, or promptly will be in compliance, where appropriate, with
all Federal, State, and local regulatory requirements;
(xii) The applicant has no delinquent Federal debt, including tax
liabilities, unless the delinquency has been resolved with the
appropriate Federal agency in accordance with the standards of the Debt
Collection Improvement Act of 1996;
(xiii) Loan proceeds provided under the agreement shall not be
utilized by the applicant to provide cash contributions to the Corps
for project
[[Page 35489]]
related costs, except for such fees as allowed by 33 U.S.C. 3908(b)(7),
limited to the application, transaction processing, and servicing fees
as described in Sec. 386.15;
(xiv) Costs incurred with loan proceeds under the agreement shall
not be eligible for reimbursement or for the transfer of credit toward
the non-Federal cost share of another federally authorized project;
(xv) The credit agreement and related agreements contain such other
terms and conditions as the Corps deems reasonable and necessary to
protect the interests of the United States, including without
limitation provisions for:
(A) Such collateral and other credit support for the credit
agreement; and
(B) Such collateral sharing, priorities and voting rights among
creditors and other intercreditor arrangements as, in each case, the
Corps deems reasonable and necessary to protect the interests of the
United States; and
(3) The credit agreement must contain audit provisions which
provide, in substance, as follows:
(i) The applicant must keep such records concerning the project as
are necessary to facilitate an effective and accurate audit and
performance evaluation of the project; and
(ii) The Corps and the Inspector General, or their duly authorized
representatives, must have access, for the purpose of audit and
examination, to any pertinent books, documents, papers, and records of
the applicant. Examination of records may be made during the regular
business hours of the applicant, or at any other time mutually
convenient.
(4) OMB has reviewed and approved the Corps calculation of the
Credit Subsidy Cost of the Loan or Loan Guarantee.
(b) The Corps will set a closing date. By the closing date, the
prospective borrower must have satisfied all of the detailed terms and
conditions required by the Corps and all other contractual, statutory,
and regulatory requirements. In addition, the prospective borrower must
have provided at least one final rating opinion letter which provides a
credit rating on the final negotiated direct loan or Loan Guarantee
Agreement that does not take into account the full faith and credit of
the United States of America. The prospective borrower must submit this
final credit rating letter to the Corps prior to closing. If the
prospective borrower has not satisfied all such terms and conditions by
the closing date, the Secretary may set a new closing date or reject
the application.
(c) The execution of a Loan Agreement or Loan Guarantee shall
represent approval of the application for credit assistance and shall
represent the legal obligation of budget authority.
Sec. 386.14 Reporting requirements.
The borrower will provide annual audited financial statements, a
public benefits report, and other reports to the Corps in the form and
manner agreed upon in the credit agreement. These other reports may
include, but are not limited to, an updated financial model and
construction reports. The Corps may conduct periodic financial and
compliance reviews or audits of the borrower and its project, as
determined necessary by the Corps.
Sec. 386.15 Fees.
(a) Application fee. The Corps will require a non-refundable
application fee for each project applying for credit assistance under
the WIFIA program. The application fee will be due upon submission of
the application. For public applicants with projects serving small
communities or economically disadvantaged communities, the total
application fee will be $0. For all other applications, the total
application fee will be $25,000. The total application fee will be
credited to the transaction processing fee required under paragraph (b)
of this section.
(b) Transaction processing fee. Except as otherwise provided in
paragraph (f) of this section, the Corps will require an additional
transaction processing fee for projects selected to receive WIFIA
assistance upon closing, or if the project does not proceed to closing,
e.g., if the application is withdrawn or denied. The proceeds of any
such fees will be used to pay the remaining portion of the Corps' cost
of providing credit assistance and the costs of conducting engineering
reviews and retaining expert firms, including financial and legal
services, to assist in the underwriting of the Federal Credit
instrument.
(c) Servicing fee. The Corps will require borrowers to pay a
servicing fee for each credit instrument approved for funding. Separate
fees may apply for each type of credit instrument (e.g., a secured loan
with a single disbursement, or a secured loan with multiple
disbursements), depending upon the costs of servicing the credit
instrument as determined by the Secretary. Such fees will be set at a
level sufficient to enable the Corps to recover all or a portion of the
costs to the Federal Government of servicing WIFIA credit instruments.
(d) Optional credit subsidy fee. If, in any given year, there is
insufficient budget authority to fund the credit instrument for a
qualified project that has been selected to receive assistance under
WIFIA, the Corps and the approved applicant may agree upon a
supplemental fee to be paid by or on behalf of the approved applicant
at the time of execution of the term sheet to reduce the subsidy cost
of that project. No such fee may be included among eligible project
costs.
(e) Reduced fees. To the extent that Congress appropriates funds in
any given year beyond those needed to cover internal administrative
costs, the Corps may utilize such appropriated funds to reduce fees for
a State or local governmental entity, agency, or instrumentality, a
tribal government or consortium of tribal governments that would
otherwise be charged under paragraph (c) of this section.
(f) Enhanced monitoring fee. The Corps may require payment in full
by the borrower of additional fees, in an amount determined by the
Corps, and of related fees and expenses of its independent consultants
and outside counsel, to the extent that such fees and expenses are
incurred by or on behalf of the Corps and to the extent such third
parties are not paid directly by the borrower, in the event the
borrower experiences difficultly relating to technical, financial, or
legal matters or other events (e.g., engineering failure or financial
workouts) which require the Corps to incur time or expenses beyond
standard monitoring. No such fee may be included among eligible project
costs.
Approved by:
Michael L. Connor,
Assistant Secretary of the Army (Civil Works).
[FR Doc. 2022-12050 Filed 6-9-22; 8:45 am]
BILLING CODE 3720-58-P
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</html>Indexed from Federal Register on June 10, 2022.
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