From the Bond Buyer 12/19/2025:

Like the water advocacy groups’ October letter, this one is mostly ‘standard narrative’ about the importance of the WIFIA loan program and how Trump 2.0 is delaying loans — not a bad thing in itself, as long as it doesn’t distract from more fundamental issues, as discussed in a prior post. The senators’ letter, with my comments, here.

The two letters look coordinated, both with each other and likely with a flurry of related water news articles (most focused on the approval of the Ft. Worth loan). I get the impression that a sort of campaign is underway, probably originating with some large WIFIA applicants that are suddenly in hurry to get their loan commitments closed. They’d push the advocacy groups, and I’m guessing the advocacy groups wrote a letter, cranked up some water sector publicity and pushed the Senators, who wrote another letter and cranked up their own political publicity — everyone just doing their job.

Okay — But Why Now?

But why now? Current WIFIA UST rates don’t look at all good compared to tax-exempt bond indices — why are the applicants pushing to close loan commitments with those fixed UST rates, high in historical terms and high relative to bonds?

I think there are two reasons. First, maybe they’re nervous that some ideologues in the Trump 2.0 administration will effectively shut down the Program altogether, and the commitments will never be forthcoming. Hard to imagine such extremism succeeding — but you never know nowadays.

Second, and I think much more likely, is related to WIFIA’s practice of resetting loan commitment rates lower if rates fall, which makes getting an inked commitment on any terms very valuable. Large, sophisticated water authorities with big long-term capex programs absolutely know how it can be used – get the commitment regardless of then-current rates, keep undrawn for years, hold if rates rise, reset if rates fall, and use short-term finance for actual construction draws. In effect, a kind of free interest rate hedge with option characteristics (since there are no cancellation penalties).

If it were certain that the reset would always be available, applicants could be patient about closing – hence no pushback earlier this year against the OMB pause.

But perhaps the certainty of future resets has become increasingly questionable? The reset is not statutory, nor even a rule, but subject to bureaucratic decision and revision. Yes, there are at least twelve precedents of WIFIA loan resets, mostly in 2020. But the reset practice could – without any difficulty – be discontinued by Vought’s OMB, which obviously doesn’t GAF about precedent. It could happen — tomorrow.

If curtailment of WIFIA’s rate reset is the concern, then the motivation behind the Zeldin letters is a bit more complex — yes, to get the commitments closed ASAP, but also to demonstrate to OMB that political pressure can be brought to bear in other WIFIA areas as well. For obvious optical reasons, the big water authorities can’t openly object that a ‘non-statutory feature for free interest rate options’ might be discontinued. But they and their advocates can complain righteously and very publicly that Trump’s OMB is slow walking loans and delaying critical water project construction (latter not necessarily true but sounds good), all in line with orthodox narratives. Readiness to defend the rate reset is only implied.

Note that this underling motivation likely resides only at the big water authorities themselves, who understand the value of the reset. I’m sure the Dem senators have no idea what the reset is or what is does, and don’t care anyway — the opportunity to take a shot at Trump’s EPA and OMB about ‘delaying critical American water infrastructure’ is sufficient bait. The water advocacy groups might know a bit more but again won’t care — big players in their membership are making a reasonable-sounding request to organize a pro-WIFIA campaign, and that sort of thing is an advocacy group’s day job.

I’m quoted in the Bond Buyer article about the Zeldin letters possibly having a more complex motivation:

“It’s mainly the upheaval in federal funding that caused the slowdown this year under Trump,” said John Ryan, principal at InRecap LLC. “In a sense it’s a very simple story, and the water advocacy groups were doing their job in pushing Zeldin to get the loans closed, and the political folks were doing the same.”

“Ryan said the larger story could be that some of the larger issuers are asking water lobbyists and lawmakers to push the EPA because of worries the administration may tamper with or even eliminate the program.

“For example, a popular feature of the program, which is not written into statute, is a rate reset term that lowers the loan’s rate if interest rates tick down. “The Zeldin letters might in fact be directed at OMB to close loans faster, as stated, but maybe also to indicate that some big water agencies aren’t going to be happy if WIFIA features get curtailed and that they’ve started to organize political and interest group pressure,” Ryan said”

Related to the Surfacing of Huge WIFIA Mandatory Spending?

Why, apart from ideological zealotry, would OMB want to curtail WIFIA’s interest rate reset? Maybe this — WIFIA Mandatory Spending. The rate reset is a primary mechanism in allowing WIFIA loans to be utilized as relatively efficient interest rate options, thereby triggering higher FCRA interest rate re-estimates.

The big mandatory spending numbers were always latent in WIFIA’s current portfolio, but I think they only officially and/or publicly surfaced earlier this year in the WH FY26 Budget Technical Appendix. Perhaps questions are being asked loudly enough to come to the attention of big WIFIA applicants? Or assumptions are being made that they will be asked?

Will a political campaign to bulletproof the reset feature, if that’s what the Zeldin letters were in part about, succeed? I don’t know — the question is above my pay grade. But if OMB chooses to fight, for whatever reason, they’ll have ammunition based on an equally accessible and proven political ‘narrative’: WIFIA’s Solyndra-Scale Timebomb?

Perhaps the applicants and their advocates should consider an additional, and frankly more substantive, approach — To Preserve WIFIA’s Interest Rate Management Features, Enact the 55-Year Loan Term.