May 14, 2004 marked the one-year anniversary of the unveiling by Secretary Mineta of the Bush Administration's reauthorization bill - the Safe, Accountable, Flexible, and Efficient Transportation Equity Act of 2003 (SAFETEA). This bill proposed fundamental changes in the way America invests in its transportation infrastructure and included provisions to better leverage transportation dollars by taking advantage of innovative financing and public-private partnership options. SAFETEA provided an excellent framework to tackle the surface transportation challenges that lie ahead, providing a blueprint for investment in the nation's surface transportation system. Now the Senate and House have both approved reauthorization measures. The next step is for a House-Senate conference committee to address the differences between the two bills. While there is no predicting the final outcome, the U.S. DOT is encouraged to see several innovative finance provisions in the approved Senate bill (S.1072, Safe, Accountable, Flexible, an Efficient Transportation Equity Act of 2004) and in the approved House bill (H.R. 3550, Transportation Equity Act: A Legacy for Users).

Both bills authorize State Infrastructure Banks (SIBs) for all states and territories. The Senate bill simply extends the TEA-21 provisions allowing banks to be capitalized with funds from the major Federal funding categories. The House version tracks more closely with the pilot program authorized in 1995 by establishing a 10 percent limit on funding from any category and creating separate accounts for highways, transit, and rail. The Senate bill, on the other hand, does not include a limit on Federal funds to capitalize a SIB. Both the Senate and House versions apply Federal requirements to all projects financed from the bank.

Both bills provide for the continuation of the Federal credit assistance program, TIFIA, and both lower the minimum project cost threshold allowing $50 million projects (down from $100 million) to qualify for TIFIA assistance. In addition the House bill lowers the threshold for Intelligent Transportation System (ITS) projects to $15 million from the $30 million level in current law. The Senate bill also makes certain private freight rail facilities that provide a public benefit eligible for TIFIA assistance and allows projects to be " bundled" for eligibility. The House bill retains existing eligibility. In terms of funding, the House bill authorizes $900 million in contract authority to support $15.6 billion in credit assistance. In comparison, the Senate bill authorizes contract authority of $780 million, but has no limit on credit assistance.

Similar to the Administration's SAFETEA proposal, the Senate bill modifies the private activity bond provisions of the Internal Revenue Code by including highway facilities and surface freight transfer facilities as exempt facilities. This would allow more private activity on these projects without losing the authority to issue tax-exempt debt to finance the projects. Bonds are not subject to the annual volume cap for private activity bonds, but may not exceed $15 billion in aggregate. The Senate bill, however, adds a requirement that the project(s) funded with the bond proceeds must be receiving Federal assistance under Title 23. No comparable provision for private activity bonds is included in the House bill.

In the area of improved grant management, the Senate bill simplifies the calculation of the sliding scale Federal share and extends authority for transferring funds. States can receive a higher Federal share on projects based on the percentage of their land that is classified as public lands, Indian lands, national forests, or national parks or monuments. The Senate bill provides for a single calculation (currently three different rates are authorized) of this increased Federal share, known as sliding scale. The Senate bill also allows a state to request that its Federal funds be transferred to another state or to a Federal agency including the FHWA. This will simplify the administration of jointly funded projects.

Questions have arisen about the need to reauthorize GARVEE bonds. Since the GARVEE bond program is codified in Title 23, United States Code, no new legislation is needed to continue the program.

For more information on the House and Senate bills, including information on other innovative approaches such as tolling, visit FHWA's reauthorization web site at http://www.fhwa.dot.gov/reauthorization/index.htm.