The current focus here is of course on federal infrastructure loan programs, not tax-oriented investments. But I do see an important and innovative role for specialized capital tranches in large loan program financings when they can unlock additional value from basic public infrastructure. As described in prior posts, P3 private equity and impact investment appear to be especially well-suited for this role.

New or complex tax benefits that a public authority can’t directly utilize could also benefit from a specialized tranche. For example, when a major water system’s service area includes an Opportunity Zone, as frequently occurs, there may be a pretty good case to consider adding a tax-oriented investment tranche into a Wifia loan program financing.

A Washington think tank known for mixing structured finance and public policy (and whose underlying objectives in that area are no better than they should be) recently called out for ideas about resilient infrastructure and Opportunity Zones. Responding seemed like an opportunity to crystallize some ideas, although the two-page format does concentrate the mind wonderfully: