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Fitch Release On US Water Utilities

by Mike Godfrey, Tax-News.com, Washington

17 December 2015


Recent legislation lifting a ban on the use of tax-exempt bonds in conjunction with federal loans provided by the US Water Infrastructure Finance and Innovation Act (WIFIA) pilot program will result in lower borrowing costs for US water utilities, according to Fitch Ratings.

With utilities facing significant costs to replace, rehabilitate, and improve their aging infrastructure, the American Water Works Association has estimated the cost of maintaining and expanding existing systems will be USD1 trillion over the next 25 years.

Utilities will now benefit from an overall lower cost of financing to the extent they are able to use low-cost loans from the five-year WIFIA pilot program in combination with tax-exempt bond proceeds.

WIFIA allows utilities to borrow up to 49 percent of the project cost at Treasury rates with 35-year amortization periods. The original legislation prohibited issuers from using tax-exempt financing for the remaining 51 percent of the cost, but the recent legislation lifts that ban.

TAGS: tax | public sector | law | capital markets | legislation | United States | tax breaks | Utilities

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