Rule2023-10520
Credit Assistance and Related Fees for Water Resources Infrastructure Projects
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
May 22, 2023
Effective
June 21, 2023
Issuing agencies
Defense DepartmentEngineers Corps
Abstract
This final rule implements a new credit assistance program administered by the U.S. Army Corps of Engineers (Corps). 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), credit assistance is available 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. This final rule establishes the process by which the Corps will administer such credit assistance, including the assessment of fees, and also 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 88 Issue 98 (Monday, May 22, 2023)</title>
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[Federal Register Volume 88, Number 98 (Monday, May 22, 2023)]
[Rules and Regulations]
[Pages 32661-32681]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-10520]
[[Page 32661]]
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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: Final rule.
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SUMMARY: This final rule implements a new credit assistance program
administered by the U.S. Army Corps of Engineers (Corps). 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),
credit assistance is available 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. This final rule establishes the process by which the Corps
will administer such credit assistance, including the assessment of
fees, and also 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: This rule is effective on June 21, 2023.
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#d596829c938595a0a6b4b6b0fbb4a7b8acfbb8bcb9"><span class="__cf_email__" data-cfemail="fab9adb3bcaaba8f899b999fd49b889783d4979396">[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. Summary of Comments
IV. 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
V. Statutory and Executive Order Reviews
I. Background
The U.S. Army Corps of Engineers (Corps) is publishing this final
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. . .''. The appropriations
language also specifies that any project ``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'' is ineligible to receive
the funding provided by these appropriations. This rule limits
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 credit instruments. WIFIA
also authorizes the borrower to pay part or all of the cost of direct
loans and guaranteed loans (``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 WIFIA as part of WRRDA, 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 final rule. Title I, Division D of the Consolidated
Appropriations Act, 2021 provided $12 million in budget authority for
the 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 an additional
$64,000,000 in budget authority for the cost of direct loans and
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.\1\
Division J, Title III also provided the $64 million credit subsidy
appropriation cannot be used to fund a project 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. As described in
the proposed rule ``Credit Assistance and Related Fees for Water
Resources Infrastructure Projects'' (87 FR 35473), the Corps is
establishing its new WIFIA program limited to safety projects to
maintain, upgrade, and repair dams identified in the National Inventory
of Dams with a primary
[[Page 32662]]
owner type of State, local government, public utility, or private.
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\1\ Until 2021, Tribally owned dams have been listed in the
National Inventory of Dams under the primary ownership title of
either ``Private'' or ``Federal''. In 2021, the National Inventory
of Dams added a ``Tribal Government'' primary ownership type,
however not all Tribally owned dams have been transitioned to the
correct primary ownership type at the date of this Rule. Regardless
of National Inventory of Dams primary ownership classification, all
Tribally owned dams are eligible for this program.
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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 final rule is limited to 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 this document 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.\2\ The Administration has made
investment in U.S. infrastructure a priority to increase resiliency in
the face of such threats.
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\2\ 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.\3\ 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.\4\ Funding
requirements are only projected to increase as infrastructure continues
to age, risk awareness progresses, and design standards evolve.\5\
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\3\ 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.
\4\ Association of State Dam Safety Officials (ASDSO), ``The
Cost of Rehabilitating Our Nation's Dams: A Methodology, Estimate,
and Proposed Funding Mechanisms.'' revised 2019.
\5\ 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.\6\ Another Federal infrastructure
financing program, WIFIA, administered by the EPA 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). In
addition, Section 40333 of the Infrastructure and Jobs Act of 2021
appropriated $553,600,000 until expended for EPAct 2005 Section 247:
Maintaining and Enhancing Hydroelectricity Incentives to the US
Department of Energy (DOE) for making incentive payments to owners and
authorized operators of qualified hydroelectric facilities for capital
improvements directly related to improving grid resilience, improving
dam safety, and related to environmental improvements. Such incentive
payments are limited to 30% of the costs of the applicable capital
improvement(s) and not more than one incentive payment can be made to a
single qualified hydroelectric facility in any fiscal year, the amount
of which shall not exceed $5,000,000. For details refer to the draft
application guidance for the Maintaining & Enhancing Hydroelectricity
Incentives Program (EPAct 2005 Section 247) released by the DOE's Grid
Deployment Office on February 8, 2023 for public comment to inform the
implementation. In addition,
[[Page 32663]]
USDA's Rural Development Water and Waste Disposal programs provide over
$2 billion in grants and low-interest loans for water and waste
infrastructure. These funds help provide rural Americans access to
drinking water and sanitation, promoting economic development in rural
areas. Dam construction and repair projects are eligible for these
funds. 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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\6\ ASDSO, ``The Cost of Rehabilitating''.
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III. Summary of Comments
In response to the proposed rule, the Corps received 12 letters
submitted to the docket. Combined, these letters provided approximately
45 individual comments on the proposed rule. The Corps received
comments from prospective applicants, trade associations, and
individual private citizens. The Corps has considered all of these
comments in the development of the final rule. Docket comments and
summaries of the Corps' analyses and determinations are discussed as
follows.
A. Discussion of General Comments
This section provides a discussion of each of the four major
categories raised by commenters in response to the rulemaking, along
with Corps' analysis and resolution.
1. Project Eligibility
Several commenters expressed support for expanding the scope of the
program to allow credit assistance for additional eligible projects
authorized for assistance under 33 U.S.C. 3905. Upon review and
consideration of the comments, the Corps believes that it is important
to note that Congress narrowed the scope of projects eligible for
credit assistance by appropriating funds solely for non-federal dam
safety projects, despite broad authority under WIFIA to fund water
infrastructure projects. As a result, the Corps will not be expanding
the scope of project eligibility under this rulemaking.
One commenter suggested that the Corps should clarify eligibility
and application process and include a list of ineligible projects along
with clarifying the differences between the Corps and the Environmental
Protection Agency (EPA) WIFIA. Another commenter suggested that
fragmented federal financing and unclear guidelines risk deterring
applicants and delaying critical upgrades to high-risk infrastructure.
Separately, the commenter recommended that the Corps should clarify
eligibility and application steps for prospective applicants by (a)
delineating between the Corps and the EPA WIFIA programs and (b)
including a clear list of eligibility requirements. As evidence for
this recommendation, the commenter stated that Corps anticipated the
difficulty that applicants will have with (a) understanding eligibility
requirements and (b) understanding which financing program best suits a
project's scope, purpose, and needs.
The Corps and EPA intend to partner closely during the project
selection process for eligible projects 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. It is important to note that both programs share the same
authorizing legislation, and Congress provided a list of projects
eligible for assistance under EPA's WIFIA program which also may be
eligible as non-Federal dam safety projects. As a matter of efficiency
of government resources, projects that include non-Federal dam safety
work in addition to infrastructure outside of the scope of dam safety
work, but eligible under EPA WIFIA, are ineligible for Corps WIFIA
financing assistance. Any project whose application has been rejected
for credit assistance by EPA will not be considered for assistance
under the Corps program.
The application form has been submitted to the Office of Management
and Budget (OMB) for approval under OMB Control Number 0710-0026,
titled ``Corps Water Infrastructure Financing Program (CWIFP)
Preliminary Application.''
The Corps sought public comments 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 include only those which are eligible, as proposed. Although
two commenters suggested they preferred a list of what costs are
expressly ineligible, the commenters did not provide justification as
to why such a list would not result in additional confusion among
prospective applicants. Eligibility is dependent on several factors
such as whether the costs were incurred through federally compliant
contracts and whether costs are allocable and reasonable. As such, the
Corps does not plan to include a list of expressly ineligible costs in
this final rule. For information on specific costs, a prospective
borrower can contact the Corps by emailing <a href="/cdn-cgi/l/email-protection#3b786c727d6b7b4e485a585e155a49564215565257"><span class="__cf_email__" data-cfemail="7a392d333c2a3a0f091b191f541b08170354171316">[email protected]</span></a>.
One commenter provided comments that all dam safety projects are
potential flood risk projects and should be considered eligible. The
Corps agrees; however, each individual project is different and will
require appropriate considerations based on the project conditions and
verification of potential flood risks. To receive clarification on any
unique project conditions, a prospective borrower can contact the Corps
by emailing <a href="/cdn-cgi/l/email-protection#df9c8896998f9faaacbebcbaf1beadb2a6f1b2b6b3"><span class="__cf_email__" data-cfemail="1152465857415164627072743f70637c683f7c787d">[email protected]</span></a>.
2. Credit Assistance for Economically Disadvantaged Communities
Several commenters provided comments about the approach to defining
economically disadvantaged communities and allocation of credit
assistance to such communities. The Corps is utilizing the term
``economically disadvantaged'' to be generally consistent with the
direction provided in Section 160 of the Water Resources Development
Act of 2020 (Pub. L. 116-260) for the term as well as the Biden
Administration's policies for identifying disadvantaged communities.
This definition may be modified in the future as appropriate in
response to updated guidance, tools and resources. A number of
commenters wrote to expressly support inclusion of a selection
criterion and prioritization for economically disadvantaged
communities, and no commenters expressly opposed such a criterion. As
stated in this rule, to be considered economically disadvantaged, a
community only needs to meet one of the following criteria: (a) low-
income, (b) unemployment rate above national average, (c) Indian
country as defined in 18 U.S.C. 1151 or in the proximity of an Alaska
Native Village, (d) U.S. Territories, or (e) identified as
disadvantaged by the Climate and Economic Justice Screening Tool.
One commenter requested that the rule establish static metrics for
how the selection criterion related to economically disadvantaged
communities is considered relative to other criteria. Weights will not
be included in the rule, as they may change with each funding
availability opportunity. The weights used for each selection criterion
will be provided to the public upon the solicitation to
[[Page 32664]]
announce the availability of credit assistance. The priorities as
indicated are as follows: Projects serving small, rural communities and
economically disadvantaged communities and projects serving Tribal
communities.
One commenter recommended that the Corps align the content of the
rule with Executive Order (E.O.) 14008 (Justice40 Initiative) and then
report on its progress toward achieving a 40% distribution of funds to
disadvantaged communities. Although the WIFIA program is not a covered
program under the Justice40 Initiative, the program will support
priorities consistent with the Justice40 Initiative, including projects
serving small, rural communities and economically disadvantaged
communities and projects serving Tribal communities. Via its publicly
accessible website, the Corps intends to report on its lending
activities, including those lending activities which support priorities
consistent with the Justice40 Initiative.
3. Procedures for Determining Eligibility Under 85 Federal Register
39189 (June 30, 2020)
Two commenters expressed concerns about the transparency, accuracy,
and fairness of the eligibility screening procedures for WIFIA projects
under 85 FR 39189 and suggested that the Corps consider either
eliminating the requirement that projects receiving WIFIA credit
assistance should be subject to such procedures or revising the
procedures and concepts contained within it.
The Environmental Protection Agency's (EPA) fiscal year 2020
appropriation for the WIFIA program required EPA, OMB, and the
Department of the Treasury (Treasury) to jointly develop and publish
criteria in the Federal Register for limiting federal participation in
projects receiving WIFIA loans and loan guarantees, including for WIFIA
loans issued by the Corps. The appropriation did not provide the Corps
a role in developing such criteria. The criteria required by the
appropriation were published on June 30, 2020, in 85 Federal Register
39189.
The Corps notes that funds made available by Congress for the
Corps' WIFIA program have required that WIFIA credit assistance must be
in accord with the criteria in 85 FR 39189. As such, the Corps cannot
alter the applicability or requirements of the criteria nor procedures
and content prescribed in 85 FR 39189.
4. Fees and Loan Administration
Two commenters requested that the Corps provide applicants and
borrowers estimates for transaction processing and servicing fees as
early as practicable. The Corps will provide an estimate for
transaction fees to applicants as part of initial coordination once the
Corps has adequate data points to reference the transaction's relative
complexity but expects the ranges for transaction processing fees
provided in the rule to accurately reflect the expected costs for
applicants. The Corps will update servicing fees due under the credit
agreement annually adjusted in proportion to the percentage change in
Consumer Price Index for All Urban Consumers (or its successors)
calculated by the Bureau of Labor Statistics for the calendar year
immediately preceding the calendar year during which such fee is due.
One commenter recommended that the Corps provide more detail on the
optional credit subsidy fee, including how this fee will be calculated.
As mentioned in the rule, utilization of this fee will only be in rare
instances where budget authority is insufficient to fund the credit
instrument and with the agreement of Corps and the borrower.
Calculation of this figure is based on a number of dynamic factors
including but not limited to the loan's relative risk, default and
recovery assumptions, and interest rates. However, it is reasonable for
applicants to assume loans with higher credit risk would result in a
higher credit subsidy fee.
One commenter recommended that the Corps establish a reserve fund
to pay for extraordinary expenses related to loan administration.
However, the Corps does not have authority to establish such a fund.
One commenter asked for clarification of the treatment of changes
in project scope and budget after credit agreement execution. Although
the approach for changes to project scope and budget will be dependent
on the relative risk and structure of the transaction's financing
arrangements, the Corps intends to ensure that the project remains
fully funded and in compliance with all Federal requirements at all
times.
B. Discussion of Other Comments
1. Determination of the WIFIA Interest Rate
One commenter noted that the proposed rule stated that ``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 commenter proposes removing the ability to charge
interest rates greater than the yield on U.S. Treasury securities of
comparable maturity on the date of execution of the credit agreement to
ensure access to the lowest borrowing cost possible for applicants.
The Corps does not concur with this proposal because it would limit
the ability of applicants to pay the optional credit subsidy fee
through an interest rate premium in the rare instance budget authority
is unavailable in a sufficient amount to extend credit assistance to an
applicant. For other applicants, the Corps will set the interest rate
based on the yield on U.S. Treasury securities of comparable maturity
on the date of execution of the credit agreement, which per 31 CFR part
344 is the SLGS rate plus one basis point.
2. Blanket Payment and Performance Bond Requirements
One commenter suggested that the Corps impose blanket payment and
performance bond requirements for all projects receiving WIFIA credit
assistance irrespective of the borrower or project type, suggesting
that such a requirement provides important protections in the event of
contractor non-performance. After consideration, the Corps has
determined that the proposal could introduce uncertainty and confusion
among prospective applicants, as well as delay closings and financial
assistance to these regionally and nationally significant water
infrastructure projects.
The Corps expects that the bulk of WIFIA applicants will be
comprised of non-Federal governmental entities, which in nearly all
instances are subject to well-established State and local payment and
performance bond requirements that provide appropriate protections for
contractor non-performance. As a result, the proposal as it applies to
non-Federal governmental entities may conflict or be redundant.
For other prospective WIFIA applicants which are not already
subject to State and local payment and performance bond requirements,
the Corps will carefully evaluate an applicant's proposed procurement
methodology, and negotiate appropriate payment and performance bond
requirements as necessary to ensure
[[Page 32665]]
project completion and/or mitigate credit risk, while also meeting the
program's mission to stimulate investment in important regionally and
nationally significant non-Federal dam safety projects.
3. Build America, Buy America Requirements
The Corps received two comments regarding the applicability of the
Build America, Buy America Act (BABAA) to WIFIA credit assistance. The
first comment expressed concerns about the fairness of applying BABAA
requirements to WIFIA credit assistance. The second comment encouraged
Corps to issue a waiver for projects that have initiated design
planning prior to May 14, 2022, consistent with a waiver issued by the
EPA under its WIFIA program. The commenter suggested that such a waiver
would help minimize adverse cost and schedule impacts from implementing
BABAA requirements for water infrastructure projects already in design.
As part of President Biden's Infrastructure Investment and Jobs Act
(IIJA), beginning with awards received on or after May 14, 2022, any
infrastructure project receiving federal funding, including any credit
assistance provided under the WIFIA program, must source their iron,
steel, manufactured products and construction materials from the United
States. The Corps is committed to successful implementation of BABAA to
build a resilient supply chain and manufacturing base for critical
infrastructure products. As a result, the Corps will administer the
BABAA requirements for WIFIA credit assistance consistent with existing
law. The Corps will consider the need and public interest for waivers
of the BABAA requirements following the procedures outlined in the
IIJA.
4. Disbursement Requirements and Procedures
Several commenters requested clarification regarding the program's
disbursement requirements and procedures. Two commenters also expressed
concern that disbursements would not be available until a project
entered civil construction and requested a detailed description of
expressly ineligible costs. Prior to any disbursement, all conditions
precedent to funding specified in the credit agreement must be
satisfied. The borrower may begin submitting eligible project costs for
reimbursement following closing. To receive a disbursement, borrowers
must submit a requisition form that will require borrowers to verify
continued compliance with the loan agreement. The requisition form
includes certification that the disbursements are being made against
incurred eligible project costs and in accordance with the terms of the
credit agreement.
It may also include confirmation that there have been no changes to
the construction plan or any material events and that the
representations and warranties included in the loan agreement are still
true and correct, among other items. Each request for disbursement must
include supporting documentation to ensure that the Corps can evaluate
the costs for program eligibility, project allocability, and
reasonableness. The Corps cannot provide a complete description of
expressly ineligible costs because eligibility is dependent on a number
of factors such as whether the costs were incurred through federally
compliant contracts.
Costs incurred prior to civil construction (such as for project
planning and design) are eligible for disbursement regardless of the
project's current stage of development at the time of the disbursement
request consistent with the construction plan identified in the credit
agreement. Borrowers may request WIFIA funds disbursements as
frequently as once per month. The Corps' goal is to have disbursement
available in the borrower's account 15 calendar days after receiving a
disbursement request.
5. Emergency Action Plan
One commenter suggested that the Corps should require all credit
assistance applicants to have an Emergency Action Plan (EAP) to be
eligible for credit assistance and submit an updated EAP every 10
years. As evidence for the recommendation, the commenter noted that the
Federal Emergency Management Agency (FEMA) requires all applicants for
the Rehabilitation of High Hazard Potential Dam Grant Program (RHHPDGP)
to have an EAP.
In Title IV, Section 5006 of Public Law 114-322, the Water
Infrastructure Improvements for the Nation Act (WIIN) which authorized
the Rehabilitation of High Hazard Potential Dam Grant Program, Congress
made an EAP approved by the relevant state dam safety agency a
condition for receipt of grant assistance. Consequently, the
requirement for an EAP to be eligible for HHPDGP is due to legislation
and not regulation or policy alone. Conversely, in legislation
authorizing the WIFIA program and the appropriations acts funding the
WIFIA program to date, Congress has not included this requirement as a
condition for eligibility for WIFIA credit assistance. As a result, the
Corps will rely on any applicable State requirements and will not adopt
the proposed change.
6. Borrower Eligibility
One commenter requested that the Corps explore ways to provide
access to WIFIA credit assistance to private individuals who may own
non-Federal dams that may pose a hazard to downstream communities.
While Corps acknowledges the importance of mitigating the risks posed
by dams owned by private individuals, Section 3904 of Title 33 of the
U.S. Code defines entities that are eligible for WIFIA assistance and
does not include private individuals as an eligible borrower. However,
privately held corporations remain eligible for WIFIA credit
assistance.
7. Reporting Requirements and Reviews
Two commenters expressed concerns about the need for the Corps to
mitigate the burden of project level reviews to an appropriate level.
The Corps notes that technical documents will not be provided to any
Corps Divisions or Districts for review and approval; all reviews
necessary to complete the loan underwriting and construction oversight
process will be completed by the WIFIA program. Each WIFIA project will
be required to meet applicable construction and regulatory standards of
the State in which the project is located.
The Corps does not anticipate requiring additional reporting beyond
annual project performance report (public benefits report), audited
financial statements, and construction reports identified in this rule.
For loans and/or projects which represent unusual risk, the Corps will
retain the ability to augment its standard reporting requirements while
recognizing the need to mitigate unnecessary burden on borrowers.
An additional commenter asked the Corps to clarify how it intends
to determine the project is economically justified, such as through a
benefit/cost ratio calculation. Under the rule, ``economically
justified'' means that the anticipated benefits will exceed the costs.
Although OMB Circular A-94 does not apply to non-Federal recipients of
loans and, to be accordance with the criteria outlined in 85 FR 39189,
all projects funded under this rule are not Federal activities, A-94
provides useful guidance on measuring benefits and costs. Consistent
with that guidance, Corps will determine whether collateral provided
for the CWIFP credit assistance, which functions as a proxy
[[Page 32666]]
for the value beneficiaries receive from the project, exceed applicable
project costs.
IV. 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 final 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,\7\ including--
---------------------------------------------------------------------------
\7\ The Corps' new definition (provided below at Sec. 386.2(l)),
in conjunction with the timing provisions of Sec. 386.3(g),
clarifies that when making a final determination regarding whether a
project is environmentally acceptable, the Corps will consider the
project's environmental impacts in their entirety, as required by
NEPA.
---------------------------------------------------------------------------
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
with a primary owner type of state, local government, public utility,
or private. 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 comply with the criteria . . .'' published
in the Federal Register on June 30, 2020 (85 FR 39189).
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 IV.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.
E. Statutory Requirements
WIFIA contains the following requirements, as paraphrased below,
which are restated in the final 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).
[[Page 32667]]
<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 document, which has been
submitted to OMB for approval under OMB Control Number 0710-0026,
titled ``Corps Water Infrastructure Financing Program (CWIFP)
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 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
[[Page 32668]]
Corps is establishing 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 establishing
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 will
charge 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.
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. in the regulatory text
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.
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
[[Page 32669]]
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. While the extent of the loan guarantee will vary based on
the financing requirements and risk characteristics of a transaction,
loan guarantees are not expected to cover more than 80% of any third-
party debt obligation. Any 100% guaranteed obligation(s) must be
financed by the Federal Financing Bank (FFB) unless a waiver is granted
by Treasury.
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 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 defining
economically disadvantaged communities as those that meet one of the
following criteria: (a) low-income, (b) unemployment rate above
national average, (c) Indian country as defined in 18 U.S.C. 1151 or in
the proximity of an Alaska Native Village, (d) U.S. Territories, or (e)
identified as disadvantaged by the Climate and Economic Justice
Screening Tool (developed by the Council on Environmental Quality).\8\
The implementation of this definition may be modified as appropriate in
response to updated tools and resources as they become available.
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\8\ Currently available at <a href="https://screeningtool.geoplatform.gov">https://screeningtool.geoplatform.gov</a>.
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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 in the form of a loan or loan
guarantee for a project prior to (1) to issuance of a determination
that the Federal action is eligible for a Categorical Exclusion, (2)
issuance of a Finding of No Significant Impact, or (3) issuance of a
Record of Decision.
The credit agreement would include the anticipated schedule for
loan disbursements. However, actual disbursements would be based on
costs incurred in accordance with the
[[Page 32670]]
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 OMB Circular A-129.\9\
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\9\ 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 final rule provides a non-exhaustive list of these
requirements in Section V (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 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 will 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 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
[[Page 32671]]
importance to the water sector. Only eligible projects will be
selected. The project priorities established 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 will utilize 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.\10\
While the 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.
---------------------------------------------------------------------------
\10\ 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.
---------------------------------------------------------------------------
V. Statutory and Executive Order Reviews
A. Executive Order 12866: Regulatory Planning and Review & Executive
Order 13563: Improving Regulation and Regulatory Review
E.O. 12866, ``Regulatory Planning and Review,'' and E.O. 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 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 E.O. 12866. In accordance with E.O. 12866
and E.O. 13563, this significant regulatory action was submitted to OMB
for review. The costs to the public of implementing the Corps WIFIA
program, are demonstrated in Section D. Regulatory Flexibility Act
below. The costs to large and small entities will be the same and
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 total estimated costs are anticipated to be between
approximately $175,000 and $500,000, plus an annual cost between
$20,000 and $60,000. 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. The transfer
effects of this rule are the credit subsidy costs for loans or loan
guarantees issued to support safety projects to maintain, upgrade, and
repair non-federal dams. To date, Congress has appropriated $81
[[Page 32672]]
million in credit subsidy funding for the Corps WIFIA program.
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 E.O. 11988, as amended by E.O. 13690,
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. The
Corps will implement the Federal Flood Risk Management Standard
(FFRMS), where appropriate, which is a flood standard established by
E.O. 13690, that aims to build a more resilient future through the
encouragement of consideration of current and future risk when Federal
investments are used to build or rebuild near floodplains. The Corps
will ensure unwise uses are avoided, where possible, including the
increase or transfer of flood risks, resulting in adverse impacts to
human health, safety, welfare, property, natural resources, or
functions of floodplains. Further guidance on implementation of E.O.
11988 can be found in the Corps Engineer Regulation 1165-2-26 (30 March
1984). Further information on FFRMS can be found at <a href="https://www.iwr.usace.army.mil/Missions/Flood-Risk-Management/Flood-Risk-Management-Program/About-the-Program/Policy-and-Guidance/Federal-Flood-Risk-Management-Standard/">https://www.iwr.usace.army.mil/Missions/Flood-Risk-Management/Flood-Risk-Management-Program/About-the-Program/Policy-and-Guidance/Federal-Flood-Risk-Management-Standard/</a>.
C. Paperwork Reduction Act (PRA)
It has been determined that 33 CFR part 386 does impose reporting
or recordkeeping requirements under the Paperwork Reduction Act of
1995. These reporting requirements have been submitted to OMB for
approval under OMB Control Number 0710-0026, titled ``Corps Water
Infrastructure Financing Program (CWIFP) Preliminary Application.''
D. Regulatory Flexibility Act (RFA)
The RFA (5 U.S.C. 601) 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 establishing its new WIFIA program
within the limitations set by Congress. This 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
communities governed by small governmental jurisdictions (small
communities) and economically disadvantaged communities. The Corps
anticipates receiving approximately 50 preliminary applications each
year from eligible entities per year, five of which are expected to be
considered small entities. This estimate is derived from EPA's WIFIA
program, which has received 118 applications in total, of which 4 were
from small communities, since the program's implementation 2017.
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'' (NAICS code
221310) and the ``Administration of Air and Water Resource and Solid
Waste Management Programs'' (NAICS code 924110). Information on these
industries is provided in the tables below. Based on the U.S. Small
Business Administration's (SBA) Size Standard/Small Entity Threshold
and the average annual receipts, the Water Supply and Irrigation
Systems industry has 3,283 firms that qualify as small entities. Small
business size standards are not established for the Public
Administration sector. According to the SBA, ``concerns performing
operational services for the administration of a government program are
classified under the NAICS private sector industry based on the
activities performed.'' The closest private sector industry fulfilling
the functions of potential the Corps WIFIA borrowers within the Public
Administration sector is the ``Water Supply and Irrigation Systems''
subsector, therefore the small business estimates for that subsector
are used in this analysis.
----------------------------------------------------------------------------------------------------------------
SBA size standard/small
NAICS code Industry subsector entity threshold (average Total small
description annual receipts) businesses
----------------------------------------------------------------------------------------------------------------
221310.................................. Water Supply and $36.0 M................... 3,283
Irrigation Systems.
924110.................................. Administration of Air and Small business size n/a
Water Resource and Solid standards are not
Waste Management Programs. established for this
Sector.
----------------------------------------------------------------------------------------------------------------
[[Page 32673]]
Water Supply and Irrigation Systems
[NAICS code 221310]
----------------------------------------------------------------------------------------------------------------
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................. 1,300 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
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
----------------------------------------------------------------------------------------------------------------
Source: U.S. Census Bureau 2017 SUSB Data Table ``Number of Firms and Establishments, Employment, Annual
Payroll, and Receipts by Industry and Enterprise Receipts Size: 2017''.
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). Fees would
first be reduced 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.
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 and 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 $76.43/hour
(the average hourly rate for architectural and engineering managers
according to the Bureau of Labor Statistics' Occupational Employment
and Wages data from May 2021), reading the regulation would cost
approximately $1,300 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. Based on the
eligible costs submitted by communities with executed EPA WIFIA loans
to date, 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> Completing applications and corresponding with the Corps:
Based on EPA figures from communities with executed EPA WIFIA loans, it
is estimated that borrowers will spend approximately 50 hours per year
completing required paperwork and correspondence with the Corps.
Assuming an hourly wage of $76.43/hour (the average hourly rate for
architectural and engineering managers according to the Bureau of Labor
Statistics' Occupational Employment and Wages data from May 2021), this
is estimated to cost applicants and borrowers approximately $4,000 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.
[[Page 32674]]
------------------------------------------------------------------------
$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............. $700-$1,300.
Consulting fees.................... $0-$75,000.
Reporting.......................... $0-$5,000.
Completing applications and $4,000 annually.
corresponding with the Corps.
Record-keeping..................... $5,000 annually.
------------------------------------
Total.......................... $175,700-$481,300 Plus $19,000-
$59,000 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 $20,000 and $60,000. For the
affected industries, these costs range from 20% to 50% of average
annual receipts (note: most costs included here are one-time costs;
annually recurring costs range from 2% to 6% of average annual receipts
for affected industries). 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 of debt financing necessary to undertake a
project, very few of the potentially affected small entities will
experience a significant impact. Further, the WIFIA program eligibility
will apply to 3,283 small entities, but the Corps expects only five to
experience full impacts described above. The remainder will experience
little to no impact from the rule. Therefore, the percentage of
affected entities experiencing a significant impact is approximately
0.15%. Based on this result, the Corps certifies that this rule will
not have a significant economic impact on a substantial number of 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 as a voluntary
action, 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.
The Corps invited 18 Tribal Governments identified in the NID with
any primary owner type, except those identified as Federal, that owned
dams of sufficient size to likely be interested in the program to two
information sessions in 2023. The Corps will hold additional specific
sessions for Tribes after issuance of this final rule to expand program
awareness.
H. Executive Order 13045: Protection of Children From Environmental
Health and Safety Risks
This action is not subject to E.O. 13045 because it does not
address environmental health or safety risks that would
disproportionately affect children. 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 Section IV.O
(Selection Criteria) of the 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 and has not been designated by the OIRA
Administrator as a significant energy action. 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
E.O. 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
and
[[Page 32675]]
environmental effects on minority or low-income populations. The Corps
anticipates that most of the adverse effects associated with projects
would occur during construction and would be temporary, such as
construction noise, air emissions from construction vehicles, erosion
from disturbed surfaces and construction vehicle traffic or traffic
detours. Impacts to communities from construction are not expected to
be disproportionate to any identified environmental justice populations
with the implementation of identified BMPs and as required by E.O.
12898. The Corps will address environmental justice for all projects
receiving credit assistance consistent with the requirements of the
NEPA review further described in Sec. 386.5(a) and CEQ guidance.
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.
Approved by:
Michael L. Connor,
Assistant Secretary of the Army, (Civil Works).
0
For the reasons stated in the preamble, the Corps is amending 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 Floodplain management.
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. The purpose of this rule is to
establish the process by which the Corps will administer such credit
assistance, including the assessment of fees, and to set forth the
policies and procedures that the Corps will use for receiving,
evaluating, approving applications, and servicing and monitoring direct
loans and loan guarantees.
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
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 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.
(f) Credit assistance means a secured loan or loan guarantee under
33 U.S.C. 3908.
(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
meets one of the following criteria:
(1) Low-income;
(2) Unemployment rate above national average;
(3) Indian country as defined in 18 U.S.C. 1151 or in the proximity
of an Alaska Native Village;
(4) U.S. Territories; or
(5) Identified as disadvantaged by the Climate and Economic Justice
Screening Tool (developed by the Council on Environmental Quality).\1\
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\1\ Currently available at <a href="https://screeningtool.geoplatform.gov">https://screeningtool.geoplatform.gov</a>.
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(i) Economically justified means that the anticipated benefits 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.
[[Page 32676]]
(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 will satisfy all
applicable and necessary environmental requirements to include those
identified in Sec. 386.5(a), such as 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) 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.
(o) 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.
(p) 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;
(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; and
(3) The Federal Financing Bank.
(q) 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.
(r) Low income means the area has a per capita income of 80 percent
or less of the national average.
(s) 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.
(t) 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.
(u) 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.
(v) Project means:
(1) Safety projects to maintain, upgrade, and repair dams
(including dam removal) identified in the National 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 (v)(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 (v)(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.
(w) 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.
(x) 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.
(y) Prospective borrower means an eligible entity seeking credit
assistance.
(z) 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.
(aa) 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.
(bb) Small community means a community of not more than 25,000
individuals.
(cc) State means any of the fifty States, the District of Columbia,
Puerto Rico, or any other territory or possession of the United States.
(dd) 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).
(ee) Subsidy amount means the dollar amount of budget authority
that is sufficient to cover the estimated long-term cost to the Federal
Government of
[[Page 32677]]
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.).
(ff) 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.
(gg) Technically sound means the project will meet all applicable
engineering, safety, and other technical standards.
(hh) 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.
(ii) Territory means each of the commonwealths, territories, and
possessions of the United States established in Title 48 of the U.S.C.
(jj) Treatment works has the meaning given the term in section 212
of the Federal Water Pollution Control Act (33 U.S.C. 1292).
(kk) Unemployment rate above national average means the area has an
unemployment rate that is, for the most recent 24-month period for
which data are available, at least 1 percent greater than the national
average unemployment rate.
(ll) 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-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 in the form of a loan or
loan guarantee for a project prior to:
(1) To issuance of a determination that the Federal action is
eligible for a Categorical Exclusion:
(2) Issuance of a Finding of No Significant Impact; or
(3) Issuance of a 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
[[Page 32678]]
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, as amended by
Executive Order 13690;
(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, 54 U.S.C. 300101 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 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 Floodplain management.
(a) In making WIFIA funding decisions under this part, the Corps
will follow the requirements of Executive Order (E.O.) 11988, as
amended by E.O. 13690, 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. The
Corps will implement the Federal Flood Risk Management Standard
(FFRMS), where appropriate, which is a flood standard established by
E.O. 13690, that aims to build a more resilient future through the
encouragement of consideration of current and future risk when Federal
investments are used to build or rebuild near floodplains. The Corps
will ensure unwise uses are avoided, where possible, including the
increase or transfer of flood risks, resulting in adverse impacts to
human health, safety, welfare, property, natural resources, or
functions of floodplains. Further guidance on implementation of E.O.
11988 can be found in the Corps ER 1165-2-26 (30 March 1984). Further
information on FFRMS can be found at <a href="https://www.iwr.usace.army.mil/Missions/Flood-Risk-Management/Flood-Risk-Management-Program/About-the-Program/Policy-and-Guidance/Federal-Flood-Risk-Management-Standard/">https://www.iwr.usace.army.mil/Missions/Flood-Risk-Management/Flood-Risk-Management-Program/About-the-Program/Policy-and-Guidance/Federal-Flood-Risk-Management-Standard/</a>.
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.
[[Page 32679]]
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.
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.
[[Page 32680]]
(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 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.
[[Page 32681]]
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.
[FR Doc. 2023-10520 Filed 5-19-23; 8:45 am]
BILLING CODE 3720-58-P
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</html>Indexed from Federal Register on May 22, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.