Overview
TIFIA Enhancements with SAFETEA-LU
TIFIA Credit Facilities
TIFIA Requirements and Threshold Criteria
Pairing TIFIA Credit Enhancements with Private Activity Bonds
TIFIA Joint Program Office
TIFIA Application Process
TIFIA Program Fees
TIFIA Documentation Requirements
TIFIA Credit Program Activity in FY 2005
TIFIA Resources
TIFIA Legislation
TIFIA Projects & Case Studies

The Transportation Infrastructure Finance and Innovation Act of 1998 (TIFIA), enacted as part of the Transportation Equity Act for the 21st Century (TEA-21), established a new Federal program under which the U.S. Department of Transportation (USDOT) provides credit assistance to major surface transportation projects of national or regional significance. TEA-21 authorized up to $10.6 billion in TIFIA credit assistance over the FY 1999-2003 period.   This was continued at a rate of $2.4 billion per year prior to the passage of SAFETEA-LU in August 2005.   

SAFETEA-LU continues the TIFIA credit program established under TEA-21. The TIFIA program provides Federal credit assistance to nationally or regionally significant surface transportation projects, including highway, transit, and rail. The program is designed to fill market gaps and leverage substantial private co-investment by providing projects with supplemental or subordinate debt. A total of $610 million is authorized through 2009 to pay the subsidy cost of supporting Federal credit under TIFIA.

While most of the TIFIA provisions established under TEA-21 remain substantially unchanged in SAFETEA-LU, there are several significant enhancements that increase access to TIFIA and provide for flexibility for borrowers:

• One of the most notable amendments to the TIFIA program allows the use of TIFIA loan and loan guarantee proceeds to refinance long-term project obligations or Federal credit instruments if such refinancing provides additional funding capacity for the completion, enhancement, or expansion of new transportation infrastructure.
• The annual credit assistance limitation is removed and the annual budgetary limitation, which represents the cost to the government of providing TIFIA credit assistance, is set at $122 million per year. The TIFIA office estimates that these budget resources can fund up to $2.5 billion of credit assistance annually.
• The TIFIA eligibility threshold is lowered from $100 million to $50 million generally, or from 50 percent to 33 percent of a state’s annual Federal-aid apportionment for highway projects, whichever is lower.
• The threshold for Intelligent Transportation System projects is also lowered from $30 million to $15 million.
• Eligibility for TIFIA credit assistance is extended to public freight rail facilities, private freight rail facilities providing public benefits, intermodal freight transfer facilities and port improvements necessary for intermodal access.
• The usefulness of the line of credit is improved by allowing draws prior to tapping a project’s reserve funds and removing the 20 percent annual draw limitation.

The strategic goal of the TIFIA program is to leverage limited Federal resources and stimulate capital investment in transportation infrastructure by providing credit rather than grants to projects of critical importance to the nation's transportation system.

The TIFIA credit program offers three distinct types of financial assistance, designed to address the varying requirements of projects throughout their life cycles:

• Secured (Direct) Loan : Maximum term of 35 years from substantial completion. Repayments must start 5 years after substantial completion.
• Loan Guarantee : Guarantees a project sponsor’s repayments to non-Federal lender. Loan repayments to lender must commence no later than 5 years after substantial completion of project.
• Line of Credit: Contingent loan available for draws as needed up to 10 years after substantial completion of project.

TIFIA assistance provides a number of benefits to public and private project sponsors:

• Improved access to capital markets,
• Flexible repayment terms,
• Potentially more favorable interest rates than can be found in private capital markets for similar instruments,
• Earlier completion of large, capital intensive projects that otherwise might be delayed or not built at all because of their size and complexity and the market's uncertainty over the timing of revenues

• Large surface transportation projects ($50 M and up, $15M for intelligent transportation systems)
• TIFIA contribution limited to 33 percent of project cost
• Senior project debt must be rated Investment grade
• Dedicated revenues must be pledged to repay the TIFIA loan
• Federal requirements (Civil Rights, NEPA, Uniform Relocation, Titles 23/49) of the appropriate U. S. DOT grant program apply to the use of TIFIA loan proceeds

The amount of Federal credit assistance may not exceed 33 percent of total costs for TIFIA projects. TIFIA project sponsors may be public or private entities, including state and local governments, special purpose authorities, transportation improvement districts, and private firms or consortia.

Any type of project that is eligible for Federal assistance through existing surface transportation programs (highway projects and transit capital projects) is eligible for TIFIA credit assistance. In addition, the following types of projects are eligible: international bridges and tunnels; inter-city passenger bus and rail facilities and vehicle;  public freight rail facilities, private freight rail facilities providing public benefits, intermodal freight transfer facilities and port improvements necessary for intermodal access.

Unlike other innovative financing instruments, TIFIA assistance involves a Federal application process. Each project must meet certain objectively measurable threshold criteria to qualify. The project's estimated eligible costs must be at least $50 million or 33 percent of the state's annual Federal-aid highway apportionments, whichever is less, or at least $15 million for Intelligent Transportation Systems (ITS) projects. The project must also be supported in whole or part by user charges or other non-Federal dedicated funding sources and included in the state's Transportation Plan. The project is subject to all Federal requirements and at the time of application must have circulated a Draft Environmental Impact Statement or received either a Finding of No Significant Impact (FONSI) or Categorical Exclusion.

Qualified projects meeting the initial eligibility criteria are evaluated and selected based on eight statutory criteria, which include the extent to which they generate economic benefits, leverage private capital, promote innovative technologies, and meet other program objectives. Before the USDOT can commit TIFIA assistance or fund a credit instrument, the project must receive an investment grade rating on its senior debt obligations and have a Record of Decision, FONSI, or Categorical Exclusion, as appropriate.

The U.S. DOT anticipates that applicants for an allocation of exempt facility bond (also known as “private activity bond”) authority will, in many cases, also apply for TIFIA credit assistance. TIFIA applicants who previously might have had to consider senior-lien taxable financing now will be able to combine the benefits of senior-lien tax-exempt financing with subordinate TIFIA debt.

Under the U.S. DOT’s new private activity bond authority, as provided in Section 11143 of Title XI of SAFETEA-LU, any surface transportation project which receives U.S. Title 23 assistance is a qualified facility. Because projects that receive TIFIA credit assistance are Title 23 projects, this means that TIFIA projects are also eligible to receive this tax-exempt bonding authority. This provision therefore extends eligibility to TIFIA-assisted public transportation, intercity bus or rail facilities and vehicles, including vehicles and facilities owned by Amtrak, public freight rail facilities or private facilities providing public benefit for highway users, and intermodal freight transfer facilities.

Passage of the private activity bond legislation reflects the Federal Government’s desire to increase private sector investment in U.S. transportation infrastructure. Providing private developers and operators with access to tax-exempt interest rates lowers the cost of capital significantly, enhancing investment prospects. Increasing the involvement of private investors in highway and freight projects generates new sources of money, ideas, and efficiency.

U.S. DOT is accepting applications from sponsors interested in receiving authority to use a portion of the $15 billion in exempt facility.  Together with TIFIA, these financing tools should provide substantial incentives for private equity investment in highway and freight projects.

In January 2001 U.S. DOT established a Joint Program Office (JPO) to consolidate TIFIA administration within a single entity. Consistent with Congressional intent in the Transportation Equity Act for the 21st Century (TEA-21), the creation of the TIFIA JPO supports U.S. DOT's goal of efficient program administration of TIFIA projects and credit instruments. The TIFIA JPO is located organizationally within the Federal Highway Administration (FHWA) and receives policy direction from the Assistant Secretary for Budget and Programs (U.S. DOT's Chief Financial Officer). The dual reporting structure acknowledges the TIFIA JPO's lead role in facilitating communication and enhancing multimodal coordination for TIFIA projects and credit matters.

The TIFIA application office is summarized the flow chart presented below. The TIFIA JPO can accept letters of interest from potential applicants at any time. Projects that the U.S. DOT find meet can then apply for credit assistance based on their scheduling needs. U.S. DOT posts a Notice of Funding Availability

(NOFA) announced in the Federal Register each year. Letters of interest should include the following information:

• Brief project description
• Description of proposed financing
• List of project participants
• Summary of project benefits
• Summary of the status of environmental reviews

The letters of interest are limited to 10 pages. The TIFIA JPO must confirm that projects are eligible before TIFIA applications may be submitted.

Relative to capital market or commercial bank transactions, the fees associated with TIFIA credit assistance are modest.

• The TIFIA JPO requires each applicant to pay a non-refundable application fee of $30,000.
• In addition each borrower will be required to pay a credit processing fee equal to a portion of the costs incurred by the TIFIA JPO in negotiating the credit agreement. This fee typically range from $100,000- $300,000.
• Borrowers are also be required to pay a $11,000+ loan servicing fee annually.

These fees cannot be included among eligible project costs.  Once eligibility has been confirmed, TIFIA applications may be submitted. Sponsors are asked to make presentations on their projects. Projects are scored according to the following weighted selection criteria:

• Significance - 20 percent
• Environment - 20 percent
• Private Participation - 20 percent
• Creditworthiness - 12.5 percent
• Project Acceleration - 12.5 percent
• Use of Technology - 5 percent
• Budget Authority - 5 percent
• Reduced Grant Assistance - 5 percent

Major documentation requirements and their corresponding application and approval milestones are shown in the graphic below. Additional application materials and guidance is available on the TIFIA website.

Fiscal year 2005 was a productive time for the TIFIA program with the passage of SAFETEA-LU, the closing of loans for two award-winning projects, and the receipt of one application and six Letters of Interest from sponsors considering the use of TIFIA credit assistance.

TIFIA-Assisted Financings Closing in FY 2005

Two TIFIA-assisted financings were honored as regional “deals of the year” in early December by The Bond Buyer, a long-established daily newspaper covering the municipal finance market. These are the 183-A Turnpike project in Texas and the LA-1 project in Louisiana.

In March 2005, the TIFIA program closed on a direct loan of up to $66 million with the Central Texas Regional Mobility Authority (CTRMA) for the 183-A Turnpike Project in the Austin, Texas metropolitan area. The project will be an 11.6-mile tollway constructed utilizing a fixed-price contract. The CTRMA is the first of the regional authorities established under Texas law to advance a tollway project. The $331 million project includes $168 million in senior lien tax-exempt bonds and $66 million in short-term debt, which would be refinanced via the TIFIA loan at the end of construction.

In May 2005, the TIFIA program closed on a direct loan of up to $66 million (coincidentally, the same amount as the 183-A project) with the Louisiana Transportation Authority, a subsidiary of the Louisiana Department of Transportation and Development (LADOTD), for phase one of the LA-1 Project. The new road will be an eight-mile, elevated two-lane highway from Leeville south to Port Fourchon, including a new bridge and toll facility at Leeville. LA-1 is the only access route to Grand Isle and Port Fourchon, the leading supply hub to Gulf of Mexico oil and gas platforms. A critical hurricane evacuation route with no highway alternative, the existing road suffers from subsidence and periodic flooding, and the existing bridge has low structural and sufficiency ratings. Project funding includes $94 million in senior lien tax-exempt bonds and $66 million of short-term debt, which would be refinanced via the TIFIA loan at the end of construction.

TIFIA Applications Submitted in FY 2005

The Port of Anchorage submitted a Letter of Interest in FY 2004, followed by an application in FY 2005 for its Marine Terminal Redevelopment Project. The completed Marine Terminal Redevelopment project will include new ship berths, new rail access, and more efficient intermodal freight transfer facilities. The total eligible costs of the project are estimated at $366 million, and the Port is seeking a direct loan of $50 million from the TIFIA program.  This was the only application for TIFIA assistance received in FY 2005.

New Applications for FY 2005 TIFIA Assistance
($ millions)

TIFIA Letters of Interest Submitted in FY 2005

Demonstrating the truly multimodal nature of the TIFIA program, the six FY 2005 Letters of Interest received include transit, bridges, and toll roads. The TIFIA credit program received Letters of Interest for the Florida High-Speed Rail Project, the Dulles Metrorail Project, the Trans Texas Corridor (SH 130 Segments 5 and 6), I-95 High-Occupancy Toll (HOT) Lanes Project, the Knik Arm Crossing Project, and most recently, the Intercounty Connector Project.

FY 2005 TIFIA Letters of Interest
($ millions)

TIFIA Program Guide and Application
FHWA’s TIFIA Program Guide and Application Fiscal Year 2003 ( April 9, 2003) provides the most comprehensive information on the TIFIA project oversight and credit monitoring process. Although the guide does not reflect the SAFETEA-LU legislative changes noted above, it remains the current guide and application used by the program.

TIFIA Project Oversight and Credit Monitoring Guidance, January 2005
The purpose of this guidance is to establish the framework for TIFIA project oversight and credit monitoring. This document provides background information on the TIFIA program, sets forth the overarching goal and key objectives for the process, describes the process for oversight and monitoring to accomplish the objectives, defines the content and scope of an oversight and monitoring plan for a TIFIA project, and delineates the roles and responsibilities of the TIFIA JPO and the responsible operating administration.

The development of the guidance for TIFIA project oversight and credit monitoring was a collaborative effort between the TIFIA JPO and DOT operating administrations. The input gathered during site visits and meetings with the program and field office representatives within DOT was an essential element of this development process. Outreach also extended to credit rating agencies, banks, and bond insurers, to draw upon their experience and expertise in credit surveillance and portfolio monitoring.

The guidance encompasses the following elements:

• Formal Oversight Team for each TIFIA project;
• Comprehensive monitoring and reporting requirements in each TIFIA credit agreement;
• Modal oversight procedures appropriate for the project;
• Development of a tailored oversight and monitoring plan for each project with the level of oversight related to the risk profile for the project;
• Annual review and acceptance of an updated financial plan;
• Regular project status report;
• Annual surveillance report;
• Periodic status meetings with project sponsor, site visits, and project inspections;
• Review of engineering reports and credit market surveillance reports; and
• Review of project management and operating plans.

The TIFIA Credit Program Website
Site provides links to reference documents cited above, as well as:

• TIFIA Legislation
• Public Notices
• Information on Credit Risk Assessment
• A Data Base organized by year providing information on TIFIA applications received and funded projects
• The TIFIA Report to Congress
• All Issues of the TIFIA Times Newsletter

Recent postings to the site include:

• FY 2005 Applications ( September 13, 2005)
• FY 2005 TIFIA Letters of Interest ( August 22, 2005)
• Latest Issue of TIFIA Times ( June 1, 2005)
• Innovative Loan For The Miami Intermodal Center Will Lower Costs, Speed Construction And Reduce Congestion (Also available in PDF 25 KB) ( May 6, 2005)
• Updated: TIFIA Background Slides (March 21, 2005)
• U.S. Transportation Secretary Mineta Announces Innovative Loan To Help Launch Central Texas Turnpike ( March 2, 2005)

Other Resources

• TIFIA Springs into Action
  As part of Fitch IBCA Duff & Phelps' Project Finance Special Report, Analysts William Streeter and Cherian George address the credit implications of this surface transportation program.

• Fitch: TIFIA Financing May Never Reach Top Speed
  A press release authored by international rating agency Fitch explains why the TIFIA program still represents an important new funding source for surface transportation projects, though it is unlikely to robustly enhance the credit quality of below investment grade project debt.

• Recent Developments in Federal Project Finance
  Authored by David Seltzer, formerly a senior advisor to the Federal Highway Administration (FHWA) on Project Finance and investment banker in Public Finance, this article discusses the benefits of alternative funding mechanisms introduced under TEA-21. Seltzer looks in some detail at Grant Anticipation Revenue Vehicle (GARVEE) bonds and the TIFIA program and the concept of financing projects by leveraging Federal assistance and accessing the public capital markets. This article is available on the Turner-Fairbank Highway Research Center website.

• FY 2000 TIFIA Credit Program Update
  The following article from the Fall 2000 issue of FHWA's Innovative Finance Quarterly provides descriptions of the projects that were approved to receive TIFIA funding in 2000.

Legislation

• Federal Rulemaking: Final Rule to Implement the Transportation Infrastructure Finance and Innovation Act-July 19, 2000 (Adobe PDF Format)
  The USDOT continues to implement TIFIA under which the USDOT may provide secured direct loans, lines of credit, and loan guarantees to public and private sponsors of eligible surface transportation projects. The USDOT published original implementing regulations for the TIFIA on June 2, 1999 (see below). With this July 2000 rule, the USDOT revises certain of these prior regulations as follows: clarifies that the funds will be disbursed based on the project's anticipated financing needs; clarifies that the borrower must obtain ongoing credit surveillance for the life of the TIFIA credit instrument; assigns specific weights to each of the eight statutory selection criteria; specifies that loan servicing fees are to be paid by the borrower; modifies the time period for audited financial statements from 120 days to within no more that 180 days; and provides that administrative offsets will be employed only in cases of fraud, misrepresentation, or criminal acts, and will not be employed as a result of revenue shortfalls. This final rule was made effective on August 18, 2000.

• TEA-21/Transportation Infrastructure Finance and Innovation Act (TIFIA)
  TEA-21 delineates the goals and objectives of the U.S. Congress in attracting non-traditional sources of capital to infrastructure projects nationwide. Section 1502 addresses TIFIA, a program established under TEA-21 to provide Federal credit for projects of national significance. Click here to read the full legal framework for the TIFIA program.

• TEA-21 Restoration Act (Technical Corrections/Title IX)
  The Technical Corrections document amends the original TIFIA legislation by increasing the maximum amount of credit under the program from its original cap.
  

As of January 2006, USDOT has approved over $3.2 billion in credit assistance in the forms of direct loans, lines of credit, and guarantees for 12 projects with a combined construction value of over $12.7 billion. The TIFIA assistance has played a critical role in the financing of these projects and without it their implementation would be delayed.   As of January 2006, the TIFIA program has four active commitments,  nine current credit agreements, and two credits that have been repaid to the program in full.

TIFIA Projects – Credit Subsidies

January 2006