The Wichita city council will consider borrowing $280 million from the federal government, and also consider issuing bonds of up to $331 million to repay the loan.
Tomorrow the Wichita City Council will consider approving a large portion of the financing for the new Northwest Water Facility (NWWF).
The financing comes from the United States Government through a program called Water Infrastructure Finance and Innovation Act (WIFIA), which is administered by the Environmental Protection Agency (EPA). The amount of financing is $280,860,714, which is 49 percent of the total cost of the plant. A loan from the State of Kansas is expected to cover 48 percent of the cost of the plant, so between these two sources, nearly the entire plant is financed. The state loan is expected to be considered by the council in August or September.
Repayment of the WIFIA loan will begin in 2029 and continue until 2059. Because of the attractive terms of the loan program, EPA estimates the city will save $69,069,005 over regular municipal bond financing.
City documents state that the interest rate on the WIFIA loan is set “by adding 0.01% to the rate for state and local government securities with a similar length of repayment.” This contradicts information from EPA and CRS, with CRS stating, “WIFIA provides credit assistance, namely direct loans, at U.S. Treasury rates, potentially lowering the cost of capital for borrowers.” See EPA summary and the Congressional Research Service in Water Infrastructure Financing: The Water Infrastructure Finance and Innovation Act (WIFIA) Program.
Of note, while the summary documents provided by the city cite a loan amount of $280,860,714, it is important to realize that this is “capitalized interest excluded.” In an ordinance the council will consider Tuesday, there is this language: “… the City proposes to issue and deliver to the WIFIA Credit Provider a revenue bond in the principal amount not to exceed $331,000,000 (the ‘WIFIA Bond’).” The difference between the two amounts, about $50 million, is capitalized interest. The $331 million figure is not mentioned in the agenda report or the executive summary.
The city has provided these documents in the agenda packet:
- Agenda Report No. V-1 (Revised).docx (link)
- Executive Summary for NWWF Financing 4-14-2020.pdf (link)
- Basic Docs 2020B (WIFIA).pdf (link)
- WIFIA Credit Agreement 4.7.20 – to City.pdf (link)
For an archive of documents related to the water plant, see Wichita water plant resource center.Learn how you can support the Voice for Liberty. Click here.