I’ve recently been doing a lot of interesting work on a benefit-cost analysis of borrowing under a growing federal infrastructure loan program, the Water Infrastructure Finance and Innovation Act (Wifia). The scope of the BCA is narrow — just a comparison of a Wifia loan to a comparable tax-exempt bond alternative. But since the vast majority of Wifia borrowers and applicants are highly-rated public water systems with plenty of access to the TE bond market, that comparison is the most important one.

The really interesting part is not the comparison of interest rates per se (that’s straightforward — basically UST vs. bond YTM) but evaluating Wifia’s rate lock and optionality in contrast to what it would cost to duplicate with a (hedged, callable) bond.

To demonstrate the various components, I created an Excel educational model. A macro-less version is in the download menu — if you’re interested in a functional model, leave a reply from link at top. The user guide is displayed below.