Indiana Will Not Seek New Federal Water Infrastructure Loan Due to Funding Windfall

The state will use federal infrastructure windfall for funding water infrastructure projects instead of seeking new federal water loan, according to the Indiana Finance Authority.
December 21, 2021

Despite an invitation from the U.S. Environmental Protection Agency, the Indiana Finance Authority said the state would not participate in a new round of federal loans and instead would use existing and incoming federal money to fund water infrastructure projects.

The decision comes as the state has become the recipient of hundreds of millions of dollars in federal aid to help Hoosiers improve water and other infrastructure despite a vast majority of the state’s elected representatives voting against the funding.

Water infrastructure projects are increasing in importance as climate change impacts worsen.

Due to climate change, the average annual rainfall in the state has increased by 5.6 inches, with the steepest increases occurring in the latter half of the 20th century.

Rainfall is happening in briefer, more intense events, dumping large amounts of rain in short periods of time. The change is adding stress to the state’s aging and overworked water systems and will increase its reliance on federal funds to upgrade the systems and make them resilient to climate change effects.

A state audit found that many service lines in Indiana are nearing or are already at the end of their service life and need to be replaced. The audit also found that even after water facilities are built or expanded, $815 million will be needed annually to maintain the utilities.

The EPA invited the Indiana Finance Authority, the state’s funding agency, to apply for a $118 million Water Infrastructure Finance and Innovation Act loan for clean water and drinking water infrastructure projects.

WIFIA loans are low-interest loans with flexible repayment schedules that allow borrowers, like the IFA, to spread out the cost of the loan over decades, avoiding disruptive budget impacts.

The IFA said the state would not take on a new WIFIA loan, but instead use money remaining from a $465 million WIFIA loan it received in 2019 and $100 million in federal Coronavirus State and Local Fiscal Recovery Funds, part of the American Rescue Plan of 2021 signed into law in the early days of the Biden administration, to help fund infrastructure projects.

“Because the IFA is the first and only state entity to have a closed WIFIA loan, and is continuing to draw on that loan to fund needed utility infrastructure projects in Indiana, the IFA is not participating in this current round of WIFIA loans,” the agency said in an email.

The IFA identified dozens of water infrastructure projects that would receive funding from the loan, along with other funding from the State Revolving Fund Loan Program, a state program that uses EPA grants to distribute loans to Indiana cities, towns, counties regional sewer and water districts, conservancy districts and other eligible water systems.

The state depends heavily on federal money to fund water infrastructure projects in the state.

The State Revolving Fund Loan Program is primarily funded by EPA grants, which the state leverages on the municipal bond market.

The state also instituted State Water Infrastructure Fund Program grants to help communities fund their water infrastructure projects.

The SWIF program uses $50 million appropriated by the state and $100 million in federal Coronavirus State and Local Fiscal Recovery Funds to help finance wastewater, drinking water and stormwater projects that either protect or improve public health or water quality.

The IFA awarded $63 million in SWIF program funding to 22 municipalities in its first of four quarterly phases of funding, only a small portion of the almost 500 applications for SWIF grants the agency received in 2021 totaling more than $700 million in assistance.

More help is on the way for Hoosier communities that need to improve their water infrastructure in the form of $751 million over five years from the Infrastructure Investment and Jobs Act, informally known as the bipartisan infrastructure bill.

This bill received bipartisan support, but, like the American Rescue Plan, was opposed by all of the state’s Republican officials elected to represent Indiana in the U.S. Congress, including both senators and seven of nine total representatives.

The IFA told the Indiana Environmental Reporter it was waiting on the funding allocations and guidance associated with the new funding, but would use the funding to address the water infrastructure needs based on project priority lists the agency has compiled.

Indiana Will Not Seek New Federal Water Infrastructure Loan Due to Funding Windfall