Federal loan programs for large-scale public infrastructure are focused on specific sectors.  And since the US doesn’t have a federal ‘Department of Infrastructure’, infrastructure loan programs are also situated in, and largely managed by, the non-financial federal agencies responsible for their sector.  Much of this makes sense in terms of specific policy objectives and for some aspects of program operational efficiency.

Infrastructure sectors have dedicated federal advocacy organizations and think tanks.  These are of course the primary source for proposing and developing loan programs designed for their respective sectors.  This natural arrangement has much to be said for it, too, especially with respect to energizing the sectoral stakeholders.

Common Elements Across Sectors

The current sectoral focus of federal infrastructure loan programs, however, should not be seen to reflect any fundamental uniqueness in their central activities. The programs have many common non-sectoral elements as well.  Most fundamentally, this is because they all make big, long-term secured loans to large creditworthy entities capable of building and operating large-scale projects. Four major programs also share the same basic statutory framework, defined originally for TIFIA and then more or less replicated for WIFIA and the Army Corps’ CWIFP, and more recently for CIFIA.  Their loans have similar financial features (fixed interest rate determination, prepayment flexibility, non-subordination, etc.) and are subject to the same FCRA budgetary treatment, OMB oversight and federal crosscutter requirements.  They are all funded by the US Treasury.

Program borrowers face common challenges in financing large-scale infrastructure projects, including:

• Long planning and construction periods during which interest rate risk on the project’s permanent long-term permanent financing must be hedged or otherwise managed.

• The need to source a significant amount of long-term debt and other capital, since program infrastructure loan amounts are statutorily limited to a maximum percentage of project cost — usually 49% for TIFIA, WIFIA and CWIFP, and 80% for CIFIA.  The balance of the project’s capitalization will need to come from other sources, primarily the tax-exempt bond market since most program borrowers are public-sector agencies or qualify for PABs. Other sources include SRFs, P3 equity investors and specialty lenders. The project’s lenders and investors will need to work with both the mandatory requirements and optional features of the federal program loan.

• Large-scale, long-lived projects are exposed to intrinsic, difficult-to-manage risks like climate change.  A project’s financing should be designed to help mitigate their impact whenever possible.

Large-scale projects have common stakeholders whose organizations range across infrastructure sectors – labor organizations, engineering & construction firms, state & local governments, legal and financial specialists, etc. In effect, these are common stakeholders of loan programs, too.

Common Issues and Opportunities

The extent of common elements across infrastructure loan programs, borrowers and stakeholders means that there are also many common issues and opportunities related to their loans.  Here’s an illustrative list, based on my own experience (links to relevant posts or articles), of various topics that appear to be relevant, to a greater or lesser extent, for large-scale federal infrastructure program loans: 

The chart below shows what I think to be each topic’s relative importance (reflected by color intensity) across four major loan programs:

A Unified Approach?

Some form of unified approach to solving issues or developing opportunities for infrastructure loan programs’ cross-sectoral capabilities would seem to be useful, for several reasons. The most obvious case is where one program has established a precedent or implemented a statutory refinement that would apply to the others. A less apparent but perhaps more significant reason arises from the fact that many issues and opportunities in program loans involve technical aspects of finance and debt markets. Sectoral agencies don’t have an in-depth level of relevant expertise here — it’s well outside their main mission. Yet all the programs make large loans to sophisticated borrowers who are simultaneously sourcing capital from major markets. A unified approach to the common financial aspects of program loans would benefit from classic scale economies and produce better results.

The most important reason for a unified approach to federal infrastructure loan programs, however, is more far-reaching than improving current implementation with precedents and expertise. The approach can provide a focal point for cross-sectoral stakeholders to view infrastructure loan programs outside of sectoral siloes, resulting in an additional — and more broadly-based — level of advocacy for expanding program capabilities.