I 114th CONGRESS 2d Session H. R. 6022 IN THE HOUSE OF REPRESENTATIVES September 14, 2016 Mr. Denham introduced the following bill; which was referred to the Committee on Natural Resources A BILL To authorize a pilot project for an innovative water project financing program, and for other purposes.

1. Short title; table of contents (a) Short title This Act may be cited as the New Water Available To Every Reclamation State Act or the New WATER Act . (b) Table of contents The table of contents of this Act is as follows: Sec. 1. Short title; table of contents. Sec. 2. Purposes. Sec. 3. Authority to provide assistance. Sec. 4. Applications. Sec. 5. Eligibility for assistance. Sec. 6. Selection criteria. Sec. 7. Federal requirements. Sec. 8. Secured loans. Sec. 9. Program administration. Sec. 10. State, tribal, and local permits. Sec. 11. Regulations. Sec. 12. Funding. Sec. 13. Report to Congress on pilot project implementation. Sec. 14. Definitions. 2. Purposes The purposes of this Act are— (1) to promote increased development of critical water resources infrastructure by establishing additional opportunities for financing water resources projects; (2) to attract new investment capital to infrastructure projects that are capable of generating revenue streams through user fees or other dedicated funding sources; and (3) to leverage private investment in water resources infrastructure. 3. Authority to provide assistance (a) In general For 15 years after the date of the enactment of this Act, the Secretary may provide financial assistance under this Act to carry eligible projects within— (1) any Reclamation State; (2) any other State in which the Bureau of Reclamation is authorized to provide project assistance; and (3) the States of Alaska and Hawaii. (b) Selection In selecting projects to receive financial assistance under subsection (a), the Secretary shall ensure diversity with respect to— (1) project types; and (2) geographical locations. 4. Applications To be eligible to receive assistance under this Act, an eligible entity shall submit to the Secretary an application at such time, in such manner, and containing such information as the Secretary may require. 5. Eligibility for assistance (a) Eligible projects The following projects may be carried out using assistance made available under this Act: (1) Any non-Federal water infrastructure project that— (A) the Secretary determines, through the completion of an appraisal investigation and feasibility study, would contribute to a safe, adequate water supply for domestic, agricultural, environmental, or municipal and industrial use; and (B) is otherwise eligible for assistance under this Act. (2) A project for enhanced energy efficiency in the operation of a water system. (3) A project for accelerated repair and replacement of an aging water distribution facility. (4) A brackish or sea water desalination project. (5) Acquisition of real property or an interest in real property for water storage, reclaimed or recycled water, or wastewater, if the acquisition is integral to a project described in paragraphs (1) through (5). (6) A combination of projects, each of which is eligible under paragraphs (1) through (6), for which an eligible entity or group of eligible entities submits a single application. (b) Eligible costs Assistance made available under this Act (as paid by or for the account of an obligor) may be used to cover the following costs with respect to an eligible project: (1) Development-phase activities, including planning, feasibility analysis, revenue forecasting, environmental review, permitting, preliminary engineering and design work, and other preconstruction activities. (2) Construction, reconstruction, rehabilitation, and replacement activities. (3) Acquisition of real property (including water rights, land relating to the project, and improvements to land), environmental mitigation, construction contingencies, and acquisition of equipment. (4) Capitalized interest necessary to meet market requirements, reasonably required reserve funds, capital issuance expenses, and other carrying costs during construction. (5) Refinancing interim construction funding, existing long-term project obligations, or a secured loan or loan guarantee made under this Act. (c) Additional eligibility requirements To be eligible to receive financial assistance under this Act, a project shall meet the following criteria, as determined by the Secretary: (1) Creditworthiness (A) In general Subject to subparagraph (B), the project shall be creditworthy, as determined by the Secretary, who shall ensure that any financing for the project has appropriate security features, such as a rate covenant, if applicable, and adequate coverage requirements, to ensure repayment. (B) Opinion letter (i) Preliminary rating opinion letter The Secretary shall require each applicant to provide a preliminary rating opinion letter from at least one rating agency indicating that the senior obligations of the project (which may be the Federal credit instrument) have the potential to achieve an investment-grade rating. (ii) Final rating opinion letters The Secretary or the Administrator, as applicable, shall require each project applicant to provide, prior to final acceptance and financing of the project, final rating opinion letters from at least one rating agency indicating that the senior obligations of the project have an investment-grade rating. (2) Eligible project costs The eligible project costs of a project shall be reasonably anticipated to be not less than $20,000,000. (3) Dedicated revenue sources The Federal credit instrument for the project shall be repayable, in whole or in part, from dedicated revenue sources that also secure or fund the project obligations. (4) Public sponsorship of private entities In the case of a project carried out by an entity that is not a State or local government or an agency or instrumentality of a State or local government, the project shall be publicly sponsored as demonstrated by certification of the same by an agency of the relevant State, inclusion in the relevant State’s official improvement plan or by other means acceptable to the Secretary. (d) Receipt of other Federal funding Receipt of a Federal grant or contract or other Federal funding to support an eligible project shall preclude the project from being eligible for assistance under this Act. 6. Selection criteria (a) Establishment The Secretary shall establish criteria for the selection of one or more projects that meet the eligibility requirements section 5 in accordance with paragraph (2). The Secretary may enter into a master credit agreement for a projects secured by a common security pledge on terms acceptable to the Secretary. (b) Criteria The selection criteria shall include the following: (1) The extent to which the project is nationally or regionally significant. (2) The extent to which assistance under this section would foster innovative public-private partnerships and attract private debt or equity investment. (3) The likelihood that assistance under this section 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 Federal credit instrument made available under this Act. (6) The extent to which the project helps maintain or protect the environment. 7. Federal requirements (a) Effect of section Nothing in this section supersedes the applicability of other requirements of Federal law (including regulations). (b) Nepa A Federal action carried out regarding a loan or loan guarantee provided under this Act shall not be considered to be a Federal action for purposes of the National Environmental Policy Act of 1969 ( 42 U.S.C. 4321 et seq. ). 8. Secured loans (a) Agreements (1) In general Subject to paragraphs (2) through (4), the Secretary may enter into agreements with one or more obligors to make secured loans, the proceeds of which shall be used— (A) to finance eligible project costs of any project selected under section 6; (B) to refinance interim construction financing of eligible project costs of any project selected under section 6; or (C) to refinance long-term project obligations or Federal credit instruments, if that refinancing provides additional funding capacity for the completion, enhancement, or expansion of any project that is selected under section 6. (2) Limitation on refinancing of interim construction financing A secured loan under paragraph (1) shall not be used to refinance interim construction financing under paragraph (1)(B)— (A) if the maturity of such interim construction financing is later than 1 year after the substantial completion of the project; and (B) later than 1 year after the date of substantial completion of the applicable project. (3) Risk assessment Before entering into an agreement under this subsection for a secured loan, the Secretary, in consultation with the Director of the Office of Management and Budget shall determine an appropriate capital reserve subsidy amount for the secured loan, taking into account each such preliminary rating opinion letter. (4) Investment-grade rating requirement The execution of a secured loan under this section shall be contingent on receipt by the senior obligations of the project secured by the same revenue pledge of an investment-grade rating from at least one rating agency. (b) Terms and limitations (1) In general A secured loan provided for a project under this section shall be subject to such terms and conditions, and contain such covenants, representations, warranties, and requirements (including requirements for audits), as the Secretary determines to be appropriate. (2) Maximum amount The amount of a secured loan under this section shall not exceed the lesser of— (A) an amount equal to 49 percent of the reasonably anticipated eligible project costs; and (B) if the secured loan does not receive an investment-grade rating, the amount of the senior project obligations of the project. (3) Payment A secured loan under this section— (A) shall be payable, 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 relevant project; (B) shall include a rate covenant, coverage requirement, or similar security feature supporting the project obligations; and (C) may have a lien on revenues described in subparagraph (A), subject to any lien securing project obligations. (4) Interest rate The interest rate on a secured loan under this section shall not be less than a rate equal to the yield on United States Treasury securities of a similar maturity to the maturity of the secured loan on the date of execution of the loan agreement. (5) Maturity date The final maturity date of a secured loan under this section shall be not later than the earlier of— (A) 35 years after the date of substantial completion of the relevant project; and (B) the final day of the useful life of the capital asset being financed. (6) Nonsubordination A secured loan under this section shall not be subordinated to the claims of any holder of project obligations in the event of bankruptcy, insolvency, or liquidation of the obligor. (7) Fees The Secretary may establish fees, as provided for in section 10(b), at a level sufficient to cover all or a portion of the costs to the Federal Government of making a secured loan under this section. (8) Non-federal share The proceeds of a secured loan under this section may be used to pay any non-Federal share of project costs required if the loan is repayable from non-Federal funds. (9) Maximum federal involvement For each project for which assistance is provided under this Act, the total amount of Federal assistance from all sources, including the assistance provided under this Act, shall not exceed 80 percent of the total project cost. (c) Repayment (1) Schedule The Secretary shall establish a repayment schedule for each secured loan provided under this section, based on the projected cash flow from project revenues, other repayment sources, and the useful life of the project. (2) Commencement Scheduled loan repayment of principal or interest on a secured loan under this section shall commence not later than 5 years after the date of substantial completion of the project. (3) Deferred payments (A) Authorization If, at any time after the date of substantial completion of a project for which a secured loan is provided under this section, the project is unable to generate sufficient revenues to pay the scheduled loan repayments of principal and interest on the secured loan, the Secretary may allow the obligor, subject to subparagraph (C), to add unpaid principal and interest to the outstanding balance of the secured loan. (B) Interest Any payment deferred under subparagraph (A) shall— (i) continue to accrue interest in accordance with subsection (b)(4) until fully repaid; and (ii) be scheduled to be amortized over the remaining term of the secured loan. (C) Criteria (i) In general Any payment deferral under subparagraph (A) shall be contingent on the project meeting such criteria as the Secretary may establish. (ii) Repayment standards The criteria established under clause (i) shall include standards for reasonable assurance of repayment. (4) Prepayment (A) Use of excess revenues Any excess revenues that remain after satisfying scheduled debt service requirements on the project obligations and secured loan and all deposit requirements under the terms of any trust agreement, bond resolution, or similar agreement securing project obligations may be applied annually to prepay a secured loan under this section without penalty. (B) Use of proceeds of refinancing A secured loan under this section may be prepaid at any time without penalty from the proceeds of refinancing from non-Federal funding sources. (d) Sale of secured loans (1) In general Subject to paragraph (2), as soon as practicable after the date of substantial completion of a project and after providing a notice to the obligor, the Secretary may sell to another entity or reoffer into the capital markets a secured loan for a project under this section, if the Secretary determines that the sale or reoffering can be made on favorable terms. (2) Consent of obligor In making a sale or reoffering under paragraph (1), the Secretary may not change the original terms and conditions of the secured loan without the written consent of the obligor. (e) Loan guarantees (1) In general The Secretary may provide a loan guarantee to a lender in lieu of making a secured loan under this section, if the Secretary determines that the budgetary cost of the loan guarantee is substantially the same as that of a secured loan. (2) Terms The terms of a loan guarantee provided under this subsection shall be consistent with the terms required under this section for a secured loan, except that the rate on the guaranteed loan and any prepayment features shall be negotiated between the obligor and the lender, with the consent of the Secretary. 9. Program administration (a) Requirement The Secretary shall establish a uniform system to service the Federal credit instruments made available under this Act. (b) Servicer (1) In general The Secretary may appoint a financial entity to assist the Secretary in servicing the Federal credit instruments provided under this Act. (2) Duties; fee A servicer appointed under paragraph (1) shall— (A) act as the agent for the Secretary; and (B) receive a servicing fee, subject to approval by the Secretary. (c) Assistance from experts The Secretary may retain the services, including counsel, of any organization or entity with expertise in the field of municipal and project finance to assist in the underwriting and servicing of Federal credit instruments provided under this Act. 10. State, tribal, and local permits The provision of financial assistance for a project under this Act shall not— (1) relieve any recipient of the assistance of any obligation to obtain any required State, local, or tribal permit or approval with respect to the project; (2) limit the right of any unit of State, local, or tribal government to approve or regulate any rate of return on private equity invested in the project; or (3) otherwise supersede any State, local, or tribal law (including any regulation) applicable to the construction or operation of the project. 11. Regulations The Secretary may promulgate such regulations as the Secretary determines to be appropriate to carry out this Act. 12. Funding (a) In general There is authorized to be appropriated to each of the Secretary and the Administrator to carry out this Act, to remain available until expended— (1) $20,000,000 for fiscal year 2017; (2) $25,000,000 for fiscal year 2018; (3) $35,000,000 for fiscal year 2019; (4) $45,000,000 for fiscal year 2020; and (5) $50,000,000 for fiscal year 2021. (b) Administrative costs Of the funds made available to carry out this Act, the Secretary may use for the administration of this Act not more than $2,200,000 for each of fiscal years 2017 through 2021. 13. Report to Congress on pilot project implementation Not later than 2 years after the date of enactment of this Act, and every 2 years thereafter, the Secretary shall submit to the Committee on Energy and Natural Resources of the Senate and the Committee on Natural Resources of the House of Representatives a report summarizing the financial performance of the projects that are receiving, or have received, assistance under this Act, including an assessment of whether the objectives of this Act are being met. 14. Definitions In this Act: (1) Eligible entity The term eligible entity means— (A) a corporation; (B) a partnership; (C) a joint venture; (D) a trust; (E) a State, local or non-Federal governmental entity, agency, or instrumentality; and (F) a conservancy district, irrigation district, canal company, mutual water company, water users’ association, Indian tribe, agency created by interstate compact, or any other entity that has the capacity to contract with the United States under Federal reclamation law. (2) Eligible project costs The term eligible project costs means the total cost of activities deemed eligible for assistance in section 6(b) of this Act. (3) Federal credit instrument The term Federal credit instrument means a secured loan or loan guarantee authorized to be made available under this Act with respect to a project. (4) Investment-grade rating The term investment-grade rating means a rating of BBB minus, Baa3, bbb minus, BBB (low), or higher as assigned by a rating agency to project obligations. (5) Lender (A) In general The term lender means any non-Federal qualified institutional buyer (as defined in section 230.144A(a) of title 17, Code of Federal Regulations (or a successor regulation) (commonly 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. ))). (B) Inclusions The term lender includes— (i) a qualified retirement plan (as defined in section 4974 of the Internal Revenue Code of 1986) that is a qualified institutional buyer; and (ii) a governmental plan (as defined in section 414 of the Internal Revenue Code of 1986) that is a qualified institutional buyer. (6) Loan guarantee The term loan guarantee means any guarantee or other pledge by the Secretary to pay all or part of the principal of, and interest on, a loan or other debt obligation issued by an obligor and funded by a lender. (7) Master credit agreement The term master credit agreement means an Agreement to extend credit assistance for one or more projects secured by a common security pledge (which shall receive an investment-grade rating from a rating agency), or for a single project that would— (A) make contingent commitments of one or more secured loans or other Federal credit instruments at future dates, subject to the availability of future funds being made available to carry out this Act; (B) establish the maximum amounts and general terms and conditions of the secured loans or other Federal credit instruments; (C) identify the one or more dedicated non-Federal revenue sources that will secure the repayment of the secured loans or secured Federal credit instruments; (D) provide for the obligation of funds for the secured loans or secured Federal credit instruments after all requirements have been met for the projects subject to the master credit agreement, including— (i) completion of an environmental impact statement or similar analysis required under the National Environmental Policy Act of 1969 ( 42 U.S.C. 4321 et seq. ); (ii) compliance with such other requirements as are specified in this Act, and (iii) the availability of funds to carry out this Act; and (E) require that contingent commitments result in a financial close and obligation of credit assistance not later than 3 years after the date of entry into the master credit agreement, or release of the commitment, unless otherwise extended by the Secretary. (8) Obligor The term obligor means an eligible entity that is primarily liable for payment of the principal of, or interest on, a Federal credit instrument. (9) Project obligation (A) In general The term project obligation means any note, bond, debenture, or other debt obligation issued by an obligor in connection with the financing of a project. (B) Exclusion The term project obligation does not include a Federal credit instrument. (10) Rating agency The term rating agency means a credit rating agency registered with the Securities and Exchange Commission as a nationally recognized statistical rating organization (as defined in section 3(a) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78c(a) )). (11) Reclamation state The term Reclamation State means any of the following States: (A) Arizona; (B) California; (C) Colorado; (D) Idaho; (E) Kansas; (F) Montana; (G) Nebraska; (H) Nevada; (I) New Mexico; (J) North Dakota; (K) Oklahoma; (L) Oregon; (M) South Dakota; (N) Texas; (O) Utah; (P) Washington; and (Q) Wyoming. (12) Secretary The term Secretary means the Secretary of the Interior. (13) Secured loan The term secured loan means a direct loan or other debt obligation issued by an obligor and funded by the Secretary in connection with the financing of a project under this Act. (14) Subsidy amount The term subsidy amount means the amount of budget authority sufficient to cover the estimated long-term cost to the Federal Government of a Federal credit instrument, as calculated on a net present value basis, excluding administrative costs and any incidental effects on Governmental receipts or outlays in accordance with the Federal Credit Reform Act of 1990 ( 2 U.S.C. 661 et seq. ). (15) Substantial completion The term substantial completion , with respect to a project, means— (A) the initial operation of a project (after completion of any startup tests), resulting in producing, storage, delivery, receiving, or conserving water; or (B) a comparable event, as determined by the Secretary and specified in the master credit agreement.