USACE Infrastructure Financing Potential presented by Gary Loew Asst to Director, Civil Works HQUSACE (US Army Corps of Engineers) at TWCA Fall Conference 10/13/2011 - www.twva.org

1. USACE Infrastructure
Financing Potential
Gary Loew
Asst to Director, Civil Works
HQUSACE
13 October 2011
US Army Corps of Engineers
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2. Questions
 What does Recapitalization mean?
 What is USACE doing?
 Legislation?
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3. Life Cycle Asset Management
(Senior Oversight Group (SOG))
 Create Asset (Capitalization)
 Operate and Maintain
 Recapitalize or Divest (Deauthorize)
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4. Life Cycle Asset Management
 CAPITALIZATION
Enablers
► Planning—More deliberate selection of studies to meet program objectives.
More efficient studies, esp for navigation
► Engineering—Improved Program and Project Management (See IWUB Report
for list of 18 improvements
 OPERATIONS AND MAINTENANCE
► Risk-Informed, Systems-based Asset Management to prioritize work
 RECAPITALIZATION
► More funds—long term
► Stakeholder and Partner relations
► Development of a Long Term Capital Budget Plan
• NOTE: Capital Plans exist now for Dams (Dam Safety Report), Inland Waterways (IWUB Report) and
Hydropower (HMI Report)
► Review of projects, esp. reservoirs, for updated needs and uses
 DIVESTITURE
► Legislation to create a process to deauthorized operating projects no longer
required. It can mirror existing legislation used to deauthorize projects never
constructed and not funded for 5 years
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5. RECAPITALIZATION OF USACE CW
INFRASTRUCTURE
OBSERVATIONS (1/3)
•Funding potential is specific to Infrastructure type
•Consider funding both for recapitalization and for O&M
•Recapitalization costs include planning, design, construction
•Alternative financing must consider change in traditional cost share
•Funding solutions must consider both local/partner cost and federal costs
•Assisting local costs implies increase in federal cost-share
•Alternative financing may include advanced contributions, contributions in
excess of existing cost share amount, donations, credits, loans, grants,
infrastructure bank loans, bonding authority
•Loan incentives include direct loans and loan guarantees
•States have bonding authority now
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6. RECAPITALIZATION OF USACE CW
INFRASTRUCTURE
OBSERVATIONS (2/3)
•All PPP solutions require a long term, low risk source of funds to
repay the capital loaned. Loan period may be 10-30+ years.
Examples:
•Highway tolls to repay cost of construction and/or maintenance
•Tipping fees for disposal of dredged material, use of port facilities
•Recreation, Water Supply, Electricity fees
•Bonds that fund state/local cost of facility construction or O&M
•USACE will likely need to revisit boundary between Recap and
Maintenance
•There are other incentives to enable Recap e.g. the Energy
Savings Performance Contracts (ESPCs—enable PPP for energy
saving projects and operations)
•The savings generally cover 100% of costs
•Federal revenue is still required to repay the PPP capital
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7. RECAPITALIZATION OF USACE CW
INFRASTRUCTURE
OBSERVATIONS (3/3)
•Solutions might range from cash to complete facility transfer
•General solutions should enable local variations
•Give Districts authority to negotiate local solutions
•As a incentive for Districts to generate project savings, allow them to
reallocate funds to high priority requirements at the District or MSC.
•Recapitalized projects may be „repurposed‟
•Revenue possibilities should include current uses and
beneficiaries; not just currently „authorized‟ purposes
•Multiple purpose projects present a challenge
•Life cycle solutions include:
•Careful selection of new projects (planning, design and construction)
•Financing/Alternative Financing for
•Recapitalization
•O&M
•Divestiture of projects that no longer serve authorized purposes or are
no longer consistent with national priorities
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8. RECAPITALIZATION OF USACE CW
INFRASTRUCTURE
INFRASTRUCTURE TYPES
•NAVIGATION (Recapitalization & O&M)
•COASTAL
•INLAND
•FLOOD RISK MANAGEMENT
•COASTAL
•INLAND
•ACQUATIC ECOSYSTEM RESTORATION
•Not Applicable—projects are self-sustaining
•HYDROPOWER
•WATER SUPPLY
•RECREATION
Notes:
•Most projects are multiple purpose
•Users Pay Principle implies that funding solutions are specific to beneficiaries
of each infrastructure type—no silver bullet
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9. RECAPITALIZATION OF USACE CW
INFRASTRUCTURE
CURRENT SOURCES OF FUNDS
CAP
Coastal
O&M
(100%)
NAV
CAP
(50%)
Inland
O&M 8 of 14 Infrastructure Types are already
funded to either repay capital costs or
CAP pay for O&M or both
Coastal
O&M
FRM
CAP
(50%)
Inland
O&M
CAP CAP
(100%) (~30%)
Hydro Recreation
O&M O&M
(100%) (~30%)
CAP
Water (100%)
Supply O&M 9 BUILDING STRONG®
(100%)

10. RECAPITALIZATION OF USACE CW
INFRASTRUCTURE
STATUS OF SOLUTIONS
INFRASTRUCTURE TYPE COMMENTS STATUS
NAV-COASTAL (CAP) No solution at this time
(O&M) Cost 100% funded;
Industry proposed HMTF solution
NAV-INLAND (CAP) Range of projects is 103 (max) – 26(min) Capital costs 50% funded
Need to clarify Recap/O&M Admin and Industry proposals active.
Include user fees, increased fuel tax
(O&M) Admin proposal includes O&M?
FRM-COASTAL (CAP) No solution at this time
(O&M) N/A N/A
FRM INLAND (CAP) About 300+ projects? No solution at this time
Need to clarify Recap/O&M
Need to improve prioritization methodology
(O&M) No solution at this time
HYDROPOWER (CAP) PMA concurrence req’d Cost 100% reimbursed
N/A to Bonneville System PMA’s verbal to fund more
Pvt Firm seeking ESPC legislation
(O&M) PMA concurrence req’d Cost 100% funded now; not to USACE.
N/A to Bonneville System PMA’s already funding some and verbal to
fund more
WATER SUPPLY Emerging payee; esp in southwest/west Cost ~ 30% reimbursed now;
AQUATIC ECOSYSTEM RESTORAION N/A for CAP – Projects are self sustaining N/A
(Some O&M)
RECREATION User fees collected, but into Treasury; other Legislation has been proposed
Fed agencies retain 50% collections;
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11. RECAPITALIZATION OF USACE CW INFRASTRUCTURE
ALTERNATIVE FUNDING SOLUTIONS AND THEIR
APPLICABILITY TO USACE INFRASTRUCTURE
NAV* FRM* HYDRO WATER AER
SUPPLY
ADVANCED
CONTRIBUTIONS
DONATIONS (Miami, Corpus) (PMAs)
BONDING AUTHORITY
RECAP BANK
LOAN GUARANTEE
GRANTS
USER FEES HMTF 100% for 100% - 100%
Coastal Nav O&M reimbursed reimbursed for
IWTF 50% for CAP for CAP and CAP and O&M
O&M
SPECIAL TAXING
DISTRICT
CREDITS
ASSUMPTION OF
PLNG/DESIGN/CONTRUC
TION/O&M
PPP-(LOAN) ESPC
could fully
fund some
projects
REVISE COST SHARE
REPURPOSE PROJECT;
REVISE COST SHARE
DIVESTITURE
* Need to identify potential revenue sources and determine how to 11 BUILDING STRONG®
apply to multiple purpose projects

12. Examples of Financing Alternatives
 Working: HMTF, IWTF, Hydropower Contributions, Hydropower ESPCs,
Retention of Rec User Fees
 Hydropower: Take Hydropower off-line, e.g. Bonneville Power, TVA
 “Donations” (Miami Harbor, Corpus Christi)
 Credits for WIK or for Plng/Design/Construction in excess of cost-share
 Water Supply: Non-federal-funded studies
 Water Supply: Contributions towards Recap Projects that would extend
project life]
 Water Supply: Expand authority for USACE to execute projects for
sedimentation management and dredging
 Water Supply: Refine, clarify cost of storage methodology to enable
reallocation
 Multiple Purpose: Authorize USACE to provide credit to non-fed sponsors
for work related to O&M acivities
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13. RECAPITALIZATION OF USACE CW
INFRASTRUCTURE
SUMMARY
•Beneficiaries of each infrastructure type vary
•Funding solution for each type is different
•Some funding initiatives would work for several types (e.g. advanced funding,
contributed funds, donations, etc.)
•DA should seek authorities that provide options whenever possible as
opposed to authorities that dictate solutions, e.g. option to contribute funds.
•Multiple use FRM projects are the challenge—to define potential revenue
sources that could repay loans
•Some USACE activities are already 100% funding (hydropower, water
supply, coastal navigation O&M). Users will not agree to these solutions in
the future unless they retain control of the use of funds (e.g. PMAs)
•The corollary is that users will want complete control or oversight of any voluntary
or legislated solution that involves their money.
•USACE will need to identify what it must control and what it can let go.
•FRM/Multiple Purpose Projects are the challenge
•Suite of solutions/funding authorities/funding sources will be required
•Divestiture of infrastructure is an important part of the total program
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14. The Way Ahead
 Continue to Engage Industry and Stakeholders
► CH2M Hill/Shaw Group/Industry Forums
► NRC Colloquium
► Workshops with interagency partners
► LBG Workshop and White Paper on PPP Alternatives
 State of USACE Infrastructure Report
 Synchronize with CW Transformation/FY13 and FY14
Budgets
 Go to Next Level and Propose
► Legislation
► Policy and Program Management Changes
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