Water Infrastructure Finance Authority of Arizona 2013 Annual Report July 1, 2012 ‐ June 30, 2013 OUR VISION To guide our resources to communi es with the greatest need to maintain and enhance Arizona’s quality of life. OUR MISSION To maintain and improve water quality in Arizona by providing financial and technical assistance for basic water infrastructure. OUR COMMITMENT To ensure that we can con nue to carry out our mission, WIFA manages each of the State Revolving Funds in a manner that fosters con nued long‐term growth of program assets and promotes pla orm stability. This strategy provides long‐term viability to meet Arizona’s water financing needs. 2 WIFA Board (12 members) Execu ve Director Administra ve Services Financial Services/Opera ons Fiscal/Loan Servicing Creation and Purpose The Arizona Legislature established the Water Infrastructure Finance Authority of Arizona (WIFA) in 1992. WIFA, an independent agency of the state of Arizona, works to maintain and improve water quality in the state by financing the construction, rehabilitation and improvement of drinking water and wastewater facilities. Maintaining water quality in Arizona requires communities to make large investments in drinking water and wastewater infrastructure. State revolving funds are the primary resources for helping communities meet their continuing and significant water infrastructure needs. WIFA maintains Arizona’s revolving loan fund programs, capitalized by the Environmental Protection Agency (EPA), to provide low cost financing for water quality infrastructure projects. Cash Flow WIFA operates as a “bond bank” and is able to issue water quality bonds on behalf of communities for water and wastewater infrastructure. Through an active portfolio and sound financial management, WIFA provides significant savings to borrowers by offering loans with below market interest rates. WIFA’s principal means for providing low interest financial assistance include the Clean Water Revolving Fund (for publicly-held wastewater treatment facilities) and the Drinking Water Revolving Fund (for both publicly and privately-held drinking water systems). Both funds were established by the EPA and are funded by federal capitalization grants, state matching funds, loan repayments and WIFA bond proceeds. In addition to loans, WIFA also offers a Technical Assistance (TA) program. The TA program provides planning and design grants to eligible wastewater and drinking water systems. The purpose of the TA program is to help prepare water and wastewater facilities for future infrastructure project construction. 3 Sustainable Infrastructure The effective management of water infrastructure is one of the main challenges faced by water systems across the nation and in Arizona. Sustainable infrastructure and systems are essential to ensuring the environmental and economic sustainability of communities. The goal can be achieved through strong infrastructure planning and management practices. To help communities in Arizona, WIFA provides low-interest loans and grants for drinking water and wastewater projects designed to ensure safe, reliable drinking water and proper wastewater treatment. Most of WIFA’s funding is directed toward its loan program which can assist with design, improvement, construction and acquisition. WIFA’s grant program is available for the planning and design phase. A wide variety of drinking water and wastewater projects can be funded through WIFA (see Example projects, upper right). Strength of WIFA’s Loan Portfolio $400 Millions of Dollars $350 $300 Example projects include storage tanks, meters, wells and booster pumps, arsenic treatment systems, water and sewer distribution line replacement, solar, wastewater plant upgrades, and upgrades for reclaimed water. WIFA can also fund stormwater management and green infrastructure projects. $301 $315 $250 $200 $150 $100 FY12 FY13 Figure 1: Funds Invested Dollars invested are primarily used to provide security for WIFA’s bond por olio and can be used to originate loans to WIFA borrowers. Interest generated from the invested funds helps subsidize WIFA borrower rates. Non Rated $202,579,595 19% A $235,459,005 22% BBB $117,729,503 11% WIFA maintained “AAA” credit ratings (the highest level of ratings) from Moody’s, Standard and Poor’s, and Fitch. The ratings are based on:  Program structure that provides significant overcollateralization to the bonds  Strong credit quality of the local borrowers  Loan portfolio and investments (Figure 1) with the ability to withstand substantial losses to revenue  Large size and diversity of loan portfolio  Strong management practices and policies These ratings reduce WIFA’s cost of borrowing from investors when WIFA issues bonds. In turn, this allows WIFA to pass on the benefit to its borrowers and the citizens of Arizona in the form of low interest loans. WIFA is able to maintain a diverse portfolio of borrowers by balancing the needs of low-credit borrowers with highcredit borrowers (Figure 2). The presence of strongly rated borrowers within the portfolio benefits all program participants. AA $504,858,047 48% Figure 2: Pledged Loan Por olio by Ra ng Category Total Ac ve Pledged Loans = 170 Total Principal Outstanding = $1,060,626,50 (Non‐pledged loans principal outstanding = $54,686,232) Another indicator of WIFA’s responsible fiscal fund management is the annual audit performed by EideBailly. WIFA’s 2013 Audited Financial Statements are attached and available on WIFA’s website www.azwifa.gov/publications. 4 50 Financing Water & Wastewater Projects 45 40 35 30 25 Highlights: 20  15 10 5 0 Number of Loans 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 ARRA 2010 2011 2012 2013 21 15 23 29 28 13 18 21 19 37 20 46 35 18 16 19 Figure 3: Number of Loan Origina ons by FY 350 WIFA provides grants and below-market interest rate loans for water and wastewater infrastructure improvements to ensure safe, reliable drinking water and proper wastewater treatment.  WIFA is making a difference in Arizona. Over $2 billion has been invested in the state since WIFA’s inception in 1992.  WIFA has funded more than 400 projects across the state, which has resulted in the creation of thousands of jobs. In 2013... 300  250 200  150 100  50 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Loans (in millions) 13.4 36 65.5 120 147 39 164 114.5 201 303.3 161 330.9 93.5 37.2 55.3 Figure 4: Amount of Loan Origina ons by FY $90 $83.6 $80 Millions of Dollars $70    $68.8 $60  $50 $40 $30  $20 $10 $- FY12 (252 disbursements) FY13 (243 disbursements) Figure 5: Dollar Amount and Number of Disbursements Approved for FY 2012 & 2013  Approved 19 new loans and provided more than $55 million in financial assistance to cities, towns, districts and private water companies (Figures 3 & 4) Maintained “AAA” credit ratings (the highest level of ratings) due to demonstrated commitment to responsible fiscal fund management Funded three sustainable (“green”) construction projects focused on energy and water efficiency (over $8 million) Co-financed nine projects with contributions from other agencies and local entities Processed loans, on average, in less than one week from Board action (loan resolution approval) to distribution of loan documents Processed $83.6 million in disbursements (Figure 5) and administered disbursement requests, on average, in five business days Provided $46.3 million in funding to maintain or achieve compliance, including a loan to achieve compliance with arsenic water quality standards Assisted disadvantaged communities by providing $2 million in forgivable principal for four projects totaling $8 million Provided outreach and assistance to small rural communities - 60% ($7.9 million) of clean water loans for wastewater projects (Figure 6) and 57% ($6.2 million) of drinking water loans (Figure 7) were provided to communities serving fewer than 10,000 people 100% 90% 80% 100% 50.0% 60.0% 70% 60% 80% 50% Less than 3,500 14.3% 70% 42.9% 21.4% 3,500 to 9,999 40% 30% 7.1% 90% 50.0% 10,000 to 99,999 60% 100,000 and above 50% 40.0% 20% 40% 10% 21.4% 28.6% 30% 0% FY12 FY13 Figure 6: Clean Water Assistance by Popula on All clean water loans were provided to communi es serving less than 100,000. 20% 7.1% 10% 14.3% 42.9% Less than 501 501 to 3,300 3,301 to 10,000 10,001 to 100,000 100,001 and above 0.0% 0% FY12 FY13 Figure 7: Drinking Water Assistance by Popula on 5 Loans Executed in FY 2013 Borrower Buckskin Sanitary District City of El Mirage Big Park Domestic Wastewater Improvement District Town of Buckeye Town of Springerville City of Show Low City of El Mirage Eagletail Water Company, LLC Livco Water Company Town of Payson Southland Utilities Company, Inc. Town of Clarkdale Sunland Water Company City of Prescott Metro Domestic Water Improvement District Town of Buckeye Town of Buckeye Town of Springerville East Slope Water Company Project Title Loan Amount Executed in FY 13 Buckskin Sanitary District Area 4-6 Improvements Water Reclamation Facility Efficiencies New Wastewater Treatment Plant Reclaimed Water System Improvements Sewer System Rehabilitation - Line Replacement and East Lift Station and Monitor System Private Water Companies Acquisition Automated Meter Reading & Line Replacement Pump Replacement Refurbish Exterior of Water Tank #1 Payson Cragin Project Phase II Well Improvements and Meters Twin 5s Water Main Replacement New Well and Blending Plan for Arsenic Compliance Zone 12, 19 and 27 Water Infrastructure Improvements Equip Riverside Well Downtown to Sundance 16" Waterline Interconnect Airport Well Water System Improvements System Improvements (Storage, Booster Pumps, Well Improvements, Main Replacement) Total Clean Water Total Drinking Water Total DW & CW Table 1: Executed Clean Water and Drinking Water Financial Assistance Agreements (loans) in FY 2013 Green projects Green Project Reserve WIFA reserves a portion of the EPA capitalization grant for sustainable construction efforts such as water efficiency, energy efficiency, green stormwater infrastructure or other environmentally innovative activities. WIFA offers a financial incentive for projects, or a portion of a project, that qualify as green according to EPA guidelines. $1,650,000 $500,000 $5,505,900 $4,870,000 $696,000 $2,000,000 $4,550,000 $65,000 $30,000 $6,250,000 $1,045,941 $1,600,000 $122,050 $15,921,582 $400,000 $5,065,000 $3,617,450 $1,107,218 $282,748 $13,221,900 $42,056,989 $55,278,889 6 Grants Awarded in FY 2013 Grantee Town of Superior Lake Havasu City City of San Luis Livco Sewer Company City of Peoria Town of Wellton Holiday Water Company Monte Vista Water Company Maricopa Mountain DWID Town of Star Valley Harrisburg Utility Company, Inc. Vail Water Company Brooke Water, LLC NTUA Fort DefianceWindow Rock-St. Michaels Tonto Village Water Company, Inc. Queen Valley DWID City of Benson Grant Award Project Wastewater Treatment Plant Repairs, Rehabilitation, Upgrades Effluent Disposal Planning Study Lift Station and Force Main Design Create Water Improvement District Butler Drive WRF Reclaimed Water System Expansion-Phase II $34,800 $35,000 $30,150 $15,050 $35,000 Water Loss Study Water Distribution, Storage, Solar Energy Improvements, and DWID Formation $34,500 Arsenic Removal System Design, Permitting Groundwater Well Siting Study and Technical Specifications Water System Mapping and Master Plan Planning and Design for Replacement of Failing Water Storage Tank Energy Audit and Pump Efficiency Study Water Loss Investigation: Moovalya Keys and Lakeside Water Systems Water Treatment Plant Improvements (TTHM compliance) PER for System Improvements (water lines and storage tanks) New Source Engineering and Design SCADA Design $30,865 Total Clean Water Total Drinking Water Total CW & DW $34,850 $26,900 $22,885 $12,000 $35,000 $34,200 $34,200 $10,500 $4,650 $35,000 $150,000 $315,850 $465,850 Table 2: Planning and Design Assistance Grants Awarded in FY 2013 Green projects Led by WIFA, the Rural Water Infrastructure Committee (RWIC) is an informal partnership of various federal and state agencies who provide loans, grants and technical assistance to Arizona’s rural communities. RWIC serves as a “One-Stop Shop” for rural communities with a population of less than 10,000. In FY 2013, WIFA developed a new website, resource matrix, information sheet and project information form, which provides a process for communities to request assistance from partners. RWIC is also holding regular quarterly meetings utilizing a new meeting format where small systems present about their project needs and Executive Committee members discuss and follow-up with how they can provide assistance. One‐Stop Shopping in Arizona ‐ A resource for applicants to locate federal, state and local financial assistance programs. ‐ Affordable funding solu ons and technical assistance to small, rural communi es throughout Arizona. RWIC core members include: WIFA, Arizona Department of Environmental Quality, USDA Rural Development (USDA-RD), North American Development Bank (NADBank), Border Environment Cooperation Commission (BECC), Rural Community Assistance Corporation (RCAC), Governor’s Office of Energy Policy and U.S. Department of Housing & Urban Development (HUD). 7 WIFA provides funds for both rural and urban communi es, and has financed projects all over the state. In FY 2013, WIFA executed five clean water loans (wastewater projects) for a total of $13,221,900 and 14 drinking water loans for a total of $42,056,989. Projects of the Year Mt. Lemmon Domes c Water Improvement District Middle Sabino 6 Mt. Lemmon’s $1.2 million loan provided financing to replace a 1‐inch water main with a 6‐inch water main line to resolve water pressure problems. The community suffered major fire damage in the 2003 Aspen fire and subsequent flood events and lost 75% of its rate base. A er pu ng FEMA funds to use in recovering from these catastrophes, the District persisted in making improvements to the system. This project was selected for award based on the excellent system and project management demonstrated by the Domes c Water Improvement District staff. City of Casa Grande Water Reclama on Facility Expansion With funding provided by a $62.5 million loan, the City of Casa Grande was able to expand the capacity of the Water Reclama on Facility from six to 12 million gallons per day. The project included significant improvements to all stages of the treatment process, upgrading the treatment level to A+ quality water suitable for open‐access irriga on uses. Comple on of the facility expansion is part of the City’s long term planning goal to maximize use of its reclaimed water. Casa Grande was selected based on the ability to reuse more water, project cost‐effec veness and excellent project management. Awards are presented in recogni on of exemplary project management and commitment to the protec on of public health through improvements in drinking water and wastewater infrastructure. 8 WIFA Staff Sandy Sutton Trish Incognito Mike Clark Susan Craig Julie Flores Melanie Ford Rebecca Gomez Brenda Guerra Rodney Held Ruby Hernandez Sara Konrad James Manalac Yolanda Mendoza Dean Moulis Stuart Peckham Angelica Romero Chris Unnewehr Angie Valenzuela Executive Director Chief Financial Officer Controller Communications Director Accounting Supervisor Technical Program Supervisor Accountant Administrative Assistant Senior Loan Officer Loan Processing Coordinator Env Program Supervisor Database Administrator Business Manager Infrastructure Engineer Env Program Specialist Accountant Network Administrator Senior Loan Officer WIFA’s friendly and helpful staff has broad state and local government experience as well as private sector business and finance experience. WIFA’s staff is committed to providing exceptional service to Arizona’s communities. WIFA Board Members Henry Darwin, Chairman Paul Gardner, Vice Chairman Ron Doba Kevin Donnellan Tiffany Frechette William Garfield Stanley Gibson Mark Heberer Michael Lacey Steve Olea *There are two current vacancies. WIFA’s 12-member Board of Directors* provides leadership in setting WIFA’s administrative policies and approving loans and other assistance for borrowers. WIFA’s Board of Directors offer expertise on environment, finance, business, and government policies.