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Rhode Island Secures $100 Million Funding for Major Sewer Project

Beautiful view of Narragansett Bay, highlighting ongoing infrastructure projects for improved water quality.

News Summary

The Rhode Island Infrastructure Bank has secured $100 million in bond financing to address Combined Sewer Overflow issues in Narragansett Bay. This funding supports the Narragansett Bay Commission’s efforts to enhance the sewer system, promoting environmental health and public safety. With a competitive interest rate and a commitment to sustainable solutions, the project marks a significant step in improving water quality and safeguarding marine ecosystems in the region.

Rhode Island Secures $100 Million Funding for Major Sewer Project

The Rhode Island Infrastructure Bank successfully closed on a $100 million bond financing aimed at tackling the Combined Sewer Overflow (CSO) issues in Narragansett Bay, the largest body of water in the state. This significant funding will benefit the Narragansett Bay Commission’s ongoing efforts to improve the area’s sewer system, addressing environmental concerns and supporting public health.

Details of the Bond Financing

This financial collaboration marks a major milestone, bringing the total financing amounts contributed to the Bay Commission to approximately $1 billion over a span of 30 years. The bond financing deal, which closed in late June 2023, included two series of bonds: $70 million was sold in the open market while the remaining amount was secured as a direct loan. Notably, this transaction also resulted in $7 million of principal forgiveness through the Infrastructure Investment and Jobs Act (IIJA).

The first series of bonds received favorable AAA ratings from both Fitch Ratings and S&P Global Ratings, reinforcing market confidence in the project’s viability. These bonds are classified as green bonds, illustrating their commitment to financing environmentally sustainable initiatives. RBC acted as the lead manager of the transaction, with support from co-managers including Academy Securities, Cabrera Capital Markets, Jefferies, and J.P. Morgan, while HilltopSecurities served as the municipal advisor.

Cost Efficiency and Long-Term Implications

The Rhode Island Infrastructure Bank was able to offer the Narragansett Bay Commission a competitive interest rate of 3.14%. This rate significantly undercuts the estimated 4.5% that would have been incurred if the commission had pursued independent bond issuance. This financial strategy showcases the benefits of collaborative funding approaches that prioritize lower costs for essential infrastructure improvements.

Ongoing and Future Projects

The CSO project, which has been ongoing since 2003, is now in its third and final phase. This phase involves the construction of a 2.2-mile long tunnel with a 30-foot diameter designed to reduce combined sewer overflow volumes by an impressive 98%. The improvements will ensure that stormwater is adequately treated prior to its release into Narragansett Bay, which is vital for maintaining water quality and protecting marine ecosystems.

Looking ahead, the Narragansett Bay Commission plans to issue additional bonds that will focus on the disposal of bio-solids and enhancing facility resiliency. The Rhode Island Infrastructure Bank continues to prioritize financing initiatives that enhance the state’s clean water and drinking water infrastructure while increasingly expanding its funding reach to include projects aimed at road improvements and clean energy development.

Funding Priorities and Future Initiatives

The demand for loans related to PFAS (per- and polyfluoroalkyl substances) contamination has surged, with project priorities reaching nearly $2 billion annually. In addition, the Infrastructure Bank has initiated a resilient infrastructure fund, allocating $10 million from a green bond specifically for flood prevention projects. To this end, the bank has already completed its first loan of $2.5 million under this new resilience fund and plans to announce funding requests for further projects soon.

Conclusion

With the recent funding secured, Rhode Island is on track to significantly improve its sewer infrastructure and protect Narragansett Bay from contamination. The commitment from the Rhode Island Infrastructure Bank and its collaborative partners demonstrates a strong focus on sustainable development and environmental stewardship, ensuring that crucial water resources are preserved for future generations.