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City to apply for WIFIA loan to fund water/wastewater CIP; staff says flexible federal loan could reduce long-term costs
Summary
City staff said Feb. 18 they will apply for a U.S. EPA WIFIA loan of up to $770,970,583.07 to help finance major water and wastewater capital projects, and told council the program’s flexible drawdown and repayment terms could reduce long-term financing costs.
Denton’s water utilities leadership told City Council Feb. 18 they will apply for a multi-hundred-million-dollar Water Infrastructure Finance and Innovation Act (WIFIA) loan from the U.S. Environmental Protection Agency to help finance the city’s five-year water and wastewater capital improvement plan.
Stephen Gay, general manager of Water Utilities and Street Operations, said the city intends to seek up to $770,970,583.07 under the WIFIA program. The phase-one portion of the application would fund major projects including the Pecan Creek treatment-plant expansion, Clear Creek and Ray Roberts treatment projects, and major distribution and collection upgrades; a second application phase would address lift-station and collection-system projects.
Why the city is pursuing WIFIA: Gay and city financial staff said WIFIA offers flexible drawdown timing, longer repayment terms, deferred payments until projects are substantially complete, and the ability to include a contingency within the loan (EPA recommended a 20% contingency for unforeseen costs). The city’s financial team told council that flexibility could reduce near-term rate pressures because repayment schedules can be aligned with revenue growth associated with the completed infrastructure.
Timing and process: staff said the city submitted a letter of intent and received an EPA invitation to apply. The formal WIFIA application deadline noted in materials was May 10, 2025; staff said EPA approval is expected in the third quarter of 2025 if the application proceeds. The city budget includes a $100,000 nonrefundable application fee, which staff recommended approving so the city can complete and file the formal application.
Financial context and questions: council members asked whether a WIFIA loan would affect the city’s credit rating and how the loan would interact with other funding sources including Texas Water Development Board financing and municipal bonds. City staff said WIFIA should not negatively affect the city rating and can be structured alongside other funding sources; staff also said the program can serve as a portion of the city’s funding strategy and that savings for other communities using WIFIA have ranged widely.
Next steps: council approved staff proceeding with the WIFIA application and paying the required application fee. Staff said they will return with final loan terms and any recommended structural decisions after EPA’s review.
Ending: City staff said pursuing WIFIA is intended to secure long-term financing flexibility for a large CIP while seeking to limit rate impacts to residents; council discussion focused on how WIFIA fits in a multi‑source financing plan that may include state loans and traditional municipal debt.
