Austin Water approves $600m contract hike and $1b WIFIA loan for Walnut Creek WWTP expansion

Austin Water approves $600m contract hike and $1b WIFIA loan for Walnut Creek WWTP expansionSevere post-COVID inflation and complex site constraints have driven the cost of Austin’s Walnut Creek wastewater plant expansion to $1.5 billion, prompting the utility to secure a massive increase in federal loan funding.

The Austin Water and Wastewater Commission unanimously approved a $600 million contingency increase for MWH Constructors' CMAR contract.

To finance the shortfall, the utility will seek to increase its EPA WIFIA loan from $446.8 million to $1 billion.

Project costs surged due to inflation exceeding 30%, detailed design refinements, and regulatory requirements including a tunneled outfall pipe.

Utility officials anticipate no impact on previously forecasted customer rates due to strategic debt structuring and a reduced upfront cash-funding target.

The Austin Water and Wastewater Commission unanimously approved a $600 million contract amendment on March 11, 2026, raising the total authorized cost of the Walnut Creek Wastewater Treatment Plant expansion to $1.5 billion. To absorb the dramatic cost escalation, the commission also approved a resolution to increase the project’s low-interest loan through the EPA’s Water Infrastructure Finance and Innovation Act (WIFIA) program. The utility will petition to raise its WIFIA borrowing limit from $446.8 million to $1 billion. The generational infrastructure project will expand the 1977-era facility by 25 million gallons per day (MGD) to reach a total capacity of 100 MGD. Beyond capacity, the project includes extensive modernization: transitioning to biological nutrient removal (BNR), implementing ultraviolet (UV) disinfection to eliminate chemical handling, installing advanced odor control, and constructing a flood wall to protect the plant within the 100-year floodplain. Charles Celauro, Assistant Director of Engineering and Technical Services, attributed the 67% cost increase primarily to a dynamic post-COVID market, noting that the escalation of goods and services has exceeded 30% since the preliminary engineering phase. Additional cost drivers include constructability constraints to maintain plant operations during construction, a limited pool of specialized contractors, and a regulatory decision to tunnel the outfall pipe to the Colorado River to save 1,000 trees. Austin Water selected MWH Constructors as the Construction Manager at Risk (CMAR) in May 2024 with an initial authorization of $900 million. The Director noted that the initial figure was based on preliminary engineering before the full weight of inflationary pressures materialized. The CMAR approach was chosen to manage the complex, constrained site by utilizing a single contractor to integrate eight separate guaranteed maximum price (GMP) packages, four of which are currently in construction. Despite the massive budget increase, Austin Water does not expect to alter the forecasted rates submitted in 2025. Joseph Gonzalez, Deputy Director over Business Services, explained that the utility adjusted its financial policy for this specific project. Instead of cash-funding the typical 35% to 50% of the capital cost, Austin Water will target a 20% cash down payment to balance generational equity. The bulk of the new debt repayment will be scheduled after 2029 and 2030, when the utility’s existing debt service naturally falls. In addition to the $1 billion WIFIA loan, the project’s capital stack includes a $59 million Clean Water State Revolving Fund loan approved by the Texas Water Development Board in February 2026, with the remaining $441 million to be covered by Austin Revenue Bonds. The final plant conversion phase is scheduled for completion in 2032.