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USACE Infrastructure Financing Potential   Gary Loew   Asst to Director, Civil Works   HQUSACE   13 October 2011US Army Co...
Questions What does Recapitalization mean? What is USACE doing? Legislation?                     2        BUILDING STRO...
Life Cycle Asset Management(Senior Oversight Group (SOG)) Create Asset (Capitalization) Operate and Maintain Recapitali...
Life Cycle Asset Management   CAPITALIZATION                   Enablers    ►   Planning—More deliberate selection of stud...
RECAPITALIZATION OF USACE CW                   INFRASTRUCTURE                  OBSERVATIONS (1/3)•Funding potential is spe...
RECAPITALIZATION OF USACE CW                  INFRASTRUCTURE                 OBSERVATIONS (2/3)•All PPP solutions require ...
RECAPITALIZATION OF USACE CW                  INFRASTRUCTURE                 OBSERVATIONS (3/3)•Solutions might range from...
RECAPITALIZATION OF USACE CW                   INFRASTRUCTURE                INFRASTRUCTURE TYPES•NAVIGATION (Recapitaliza...
RECAPITALIZATION OF USACE CW      INFRASTRUCTURE CURRENT SOURCES OF FUNDS                     CAP         Coastal         ...
RECAPITALIZATION OF USACE CW                         INFRASTRUCTURE                       STATUS OF SOLUTIONS       INFRAS...
RECAPITALIZATION OF USACE CW INFRASTRUCTURE      ALTERNATIVE FUNDING SOLUTIONS AND THEIR       APPLICABILITY TO USACE INFR...
Examples of Financing Alternatives   Working: HMTF, IWTF, Hydropower Contributions, Hydropower ESPCs,    Retention of Rec...
RECAPITALIZATION OF USACE CW                    INFRASTRUCTURE                        SUMMARY•Beneficiaries of each infras...
The Way Ahead Continue to Engage Industry and Stakeholders   ►   CH2M Hill/Shaw Group/Industry Forums   ►   NRC Colloquiu...
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USACE Infrastructure Financing Potential TWCA 10/13/2011

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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

Published in: Business, Economy & Finance
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Transcript of "USACE Infrastructure Financing Potential TWCA 10/13/2011"

  1. 1. USACE Infrastructure Financing Potential Gary Loew Asst to Director, Civil Works HQUSACE 13 October 2011US Army Corps of EngineersBUILDING STRONG®
  2. 2. Questions What does Recapitalization mean? What is USACE doing? Legislation? 2 BUILDING STRONG®
  3. 3. Life Cycle Asset Management(Senior Oversight Group (SOG)) Create Asset (Capitalization) Operate and Maintain Recapitalize or Divest (Deauthorize) 3 BUILDING STRONG®
  4. 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 4 BUILDING STRONG®
  5. 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 inexcess 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 5 BUILDING STRONG®
  6. 6. RECAPITALIZATION OF USACE CW INFRASTRUCTURE OBSERVATIONS (2/3)•All PPP solutions require a long term, low risk source of funds torepay 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 andMaintenance•There are other incentives to enable Recap e.g. the EnergySavings Performance Contracts (ESPCs—enable PPP for energysaving projects and operations) •The savings generally cover 100% of costs •Federal revenue is still required to repay the PPP capital 6 BUILDING STRONG®
  7. 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 andbeneficiaries; 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 7 BUILDING STRONG®
  8. 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•RECREATIONNotes: •Most projects are multiple purpose •Users Pay Principle implies that funding solutions are specific to beneficiaries of each infrastructure type—no silver bullet 8 BUILDING STRONG®
  9. 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&MFRM CAP (50%) Inland O&M CAP CAP (100%) (~30%)Hydro Recreation O&M O&M (100%) (~30%) CAPWater (100%)Supply O&M 9 BUILDING STRONG® (100%)
  10. 10. RECAPITALIZATION OF USACE CW INFRASTRUCTURE STATUS OF SOLUTIONS INFRASTRUCTURE TYPE COMMENTS STATUSNAV-COASTAL (CAP) No solution at this time (O&M) Cost 100% funded; Industry proposed HMTF solutionNAV-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/AFRM 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 timeHYDROPOWER (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 moreWATER 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; 10 BUILDING STRONG®
  11. 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. 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 12 BUILDING STRONG®
  13. 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 asopposed to authorities that dictate solutions, e.g. option to contribute funds.•Multiple use FRM projects are the challenge—to define potential revenuesources that could repay loans•Some USACE activities are already 100% funding (hydropower, watersupply, coastal navigation O&M). Users will not agree to these solutions inthe 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 13 BUILDING STRONG®
  14. 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 14 BUILDING STRONG®
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