Lot of numbers in the chart above, but for now just focus on the discounted present value of debt service difference (Diff DS PV) for the 55Y and 35Y term cases. That’s how sophisticated issuers would compare long-term financing alternatives (e.g., precisely how muni bond issuers evaluate an advance refunding using DBC software packages).

Current Law: 35Y Post-Construction Term — Good Enough for Reset Games

Tax-exempt bond rates are currently pretty good compared to UST yields (e.g., 30Y UST of 4.85% vs. MBIS Index of 3.63%, for a 74% ratio), so it’s no surprise that under current law, a 49% WIFIA Loan and 51% Bond combination is underwater compared to a similar straight bond. The estimated amount is about 1.6% of project cost — negative, but not by much.

Still, the overall case for a WIFIA/Bond combo might be positive when the value of non-rate features is included. But most of all — by far — is the fact that the WIFIA loan commitment rate can be reset at some point, perhaps years, in the future.

If the reset remains available, the current rates and NPV comparisons don’t matter that much compared to what might become available in the next year or so. Well, let’s see — election year monetary stimulus? Geopolitical crisis liquidity flood? Deflationary recession after the AI bubble bursts? Trump wildcard of some sort — oh I don’t know, something crazy like launching his own quantitative easing through the home mortgage GSEs?

In all these cases, UST yields are likely to fall faster than bond rates — at which point, the reset can capture the value. If things go the other way, the worst case is you’ve got the WIFIA commitment in hand, effectively capping a minor downside.

I think the reset features explains much of why there was rush by WIFIA applicants to close ASAP at the end of 2025 — i.e., when the prospect of an especially ‘interesting’ 2026 was becoming clearer — despite relatively unfavorable numbers for a WIFIA loan.

Of course, this strategy depends on the reset remaining available — another wildcard, as recently discussed in this post, The Zeldin Letters, and (with a good deal more diplomacy) in this WFM article, Is WIFIA’s Interest Rate Reset Feature at Risk?.

Amended Law: 55Y Post-Construction Term — Calmer Waters

Now consider the case if a 55Y post-construction loan term was available in the WIFIA loan. There’s a solid NPV benefit of 4.5% of project cost, all due to the fact that UST post-30-year ‘flat forward’ rates apply to more of the project loan balance, something that market-traded, primarily retail-owned tax-exempt bonds can never match.

For a long-lived project, the ability to capture some of the UST flat-forward curve would be a unique and sustainable capability of a 55Y WIFIA loan. The attitude towards seeking a WIFIA commitment could change — the value is economic and fundamental, ultimately based on intrinsic federal strengths as a lender.

Sure, WIFIA’s interest rate management features would still look good, but they wouldn’t be the central focus, and there’d be more applicants that can’t’ play the arbitrage game (e.g., large, one-off water management and flood control projects that are too idiosyncratic to get good rates or even access to the bond market, maybe someday small project combinations, and so on). WIFIA would have a substantive — and defendable — purpose and role in US water infrastructure renewal, with demonstrable additionality and measurable policy outcomes, not just false narrative. Isn’t that what WIFIA stakeholders should really want as we proceed into ever more turbulent times?