The Wifia Program’s one-page benefit summary makes the point that a Wifia loan can include a ‘customized repayment schedule’. That may not sound like much of a benefit to highly-rated public water systems with efficient access to the tax-exempt bond market (the vast majority of Wifia borrowers) since they can structure bond series with almost infinite flexibility.

But what the Program is really getting at is something that’s actually quite valuable: non-pro-rata amortization (the Program informally calls it ‘sculpting’) that allows the 51% bond tranche of a Wifia financing to amortize first and faster. This does two things. First, it means that over its term the average Wifia share of the financing is higher than the initial statutory 49% — closer to about 60%. Second, sculpting allows more utilization of a Wifia loan’s sweet spot, the US Treasury curve’s generally less positive slope (relative to munis, especially after 10 years) and specifically flat-forward rate beyond the 30-year market.

Here’s a one-page summary of a refinement to the basic leveraged impact story (outlined in prior post). The idea is that the impact investment tranche in a large infrastructure financing would specifically support development of social programs associated with the project (e.g. workforce training or affordability reserves) and receive a return contingent on the programs’ success or lack thereof. More subtly, once fully developed the programs would be explicitly eligible to be included in the capitalized cost of the project for long-term federal infrastructure loan financing (e.g. Wifia). In effect, the development impact loan would be a kind of construction financing taken out by subsidized term financing and amortized over, well, a really long time. So popular social programs can help sell the boring-but-necessary project and it all gets paid for in the long-term capital budget. The impact investor is critical to help ensure that the programs really work (which is their stated mission) but also to amplify the buzz (which they’re also really good at).