On April 1, 2020, the Portland Water Bureau submitted our application to the U.S. Environmental Protection Agency (EPA) for a low-cost Water Infrastructure and Finance and Innovation Act (WIFIA) loan to build the Bull Run Treatment Projects. Wednesday April 8, City Council will consider an ordinance authorizing water revenue bonds to finance the projects. Council members are expected to vote for the ordinance at a second reading the following week.
“Council approval of the finance plan for the Bull Run Treatment Projects will lock in significant benefits for our ratepayers,” said Commissioner Amanda Fritz. “Based on rate projections, the WIFIA loan will provide an estimated $350 million of debt service savings to ratepayers over the term of the loan.”
A WIFIA loan will help us finance improvements to Portland’s water system needed to comply with federal and state drinking water regulations, including building improved corrosion control treatment, a new filtration facility, and related pipelines.
Borrowers have up to 35 years after substantial completion of a project to repay a loan, saving ratepayers money by allowing for smaller payment amounts over the life of the loan. Along with providing consistent, high-quality water, we estimate the Bull Run Treatment Projects will create 7,500 direct construction jobs. As part of our commitment to a sustained, vibrant Oregon economy, the construction contracts will include Community Benefits Agreements that incorporate workforce equity goals and expanded training and work opportunities for minorities and women.
What is WIFIA?
WIFIA is a federal program that provides long-term, low-cost supplemental loans for regionally and nationally significant projects like the Bull Run Treatment Projects that support public health and the economy.
“WIFIA financing is a huge opportunity for us to reduce costs for ratepayers while we make these important investments in the future of our water system.” Mike Stuhr.
Oregon Senator Jeff Merkley introduced the legislation for the WIFIA program, which was passed by Congress in 2014, to create jobs and accelerate investment in upgrades and repairs to our nation’s critical water infrastructure.
How does WIFIA work?
WIFIA offers flexible repayment schedule to allow for water rate increases to be phased in over a longer period of time. The interest rate will be fixed at the U.S. Treasury bond rate for a similar maturity on the date our loan closes, and we’ll be able to keep that low rate locked in.
We applied for the total allowable loan amount which was calculated using cost estimates submitted to City Council in 2019 ($820 million for the filtration facility and pipelines, and $20 million for improved corrosion control). Other eligible costs include project contingency, inflation, indirect costs, bond reserves and interest costs, and a contingency amount.
How will WIFIA benefit Portland?
With a WIFIA loan, we can take advantage of a long repayment period and wait to start making payments until after the improved corrosion control facility is online in 2022 and the filtration facility is substantially completed in 2027, which means nearly all the project costs will be paid after customers are getting the benefits of the new facilities.
Within two years, improved corrosion control treatment will further reduce the potential for home plumbing to contribute to lead in our water. By September 2027, the new filtration facility will remove the microorganism Cryptosporidium and other potential contaminants from Bull Run water providing added protection for our customers.
A low-cost WIFIA loan with a long-term repayment option will significantly reduce the cost to ratepayers and secure our vision of keeping our water safe and abundant for generations to come.
“The City is grateful to Senator Merkley for his leadership in creating the WIFIA program, and to Senator Ron Wyden, and Representatives Earl Blumenauer and Suzanne Bonamici for their support of the City’s efforts to secure the WIFIA loan for the Bull Run Treatment Projects,” added Commissioner Fritz.
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