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Agency says WIFIA reluctant to allow easement funding; updated rate model shows improved debt-service coverage
Summary
Agency staff reported that WIFIA officials have indicated reluctance to allow remaining WIFIA funds to pay for easement acquisitions for phases 1b and 2; separately, the agency’s updated rate model shows better debt-service coverage due to higher connection fees, lower project costs, and lower borrowing costs.
Agency staff told board members that WIFIA officials are reluctant to allow the agency to use remaining WIFIA loan funds to pay for easement acquisitions for upcoming project phases, creating uncertainty about how the agency will finance right-of-way purchases for phase 1b and phase 2.
"Initial feedback we're getting and we're having some back and forth with them asking them to reconsider it is we don't have construction funding. That's the reason that they're blocking at that," Executive Director Dan Hoynes said. Hoynes told the board he planned to meet with Tim Gay in Lincoln on May 8 to request additional funding and to continue discussing options for acquiring easements.
Hoynes said staff view acquiring easements as important for cost and schedule certainty regardless of WIFIA’s position and that the agency will pursue alternate funding if the loan cannot be used for that purpose.
Separately, agency treasurer Mark Sedout presented an updated rate model that incorporated higher-than-expected connection-fee revenue, lower project expenses produced by value engineering, and a lower effective WIFIA borrowing rate. Sedout said the model now projects a $2.2 million surplus in connection fees relative to the prior model, that lower project costs reduced the amount borrowed year-over-year, and that the reduced WIFIA borrowing lowered annual debt-service by roughly $500,000 per year in the next five years leading to the previously anticipated debt-service covenant “pinch point.”
"There are three major financial drivers to note within the agency. One: we're projecting $2,200,000 surplus in connection fees versus the budget and rate model projections. Two: actual project expenses were lower than budgeted in the rate model. Three: the agency borrowed WIFIA funds at a lower rate than forecasted," Sedout said.
Sedout said the updated model raises the agency’s debt-service coverage ratio compared with April 2024 projections and provides some relief from approaching the covenant floor of 1.1 projected for February 2031. He cautioned that the model remains conservative and will be refined as operational data are gathered.
Board members asked whether the full $45,000,000 WIFIA loan had been drawn. Sedout replied the model still considers the full $45,000,000 but that the agency has taken portions of the loan at different times. Hoynes and staff emphasized that any change in WIFIA’s determination about allowable uses could require the agency to shift to cash funding or return to the board with alternatives.
Why this matters: The lender’s position on allowable uses of WIFIA proceeds affects how the agency can fund easement acquisitions and the timing of design and permitting for later phases. The updated rate model’s stronger projections reduce short-term covenant risk but still rely on several assumptions that staff are monitoring.
What’s next: Staff will continue negotiations with WIFIA, meet with state contacts to seek funding, finalize rate-model updates with finance staff, and present a reimbursement-policy draft and recommendations to agency administrators before bringing policy language to the board for future action.
