Last night the Knik Arm Bridge and Toll Authority, responsible for development of the $750 million Knik Arm Crossing project in the Anchorage, Alaska region, filed a letter of interest with the USDOT for TIFIA credit assistance. It is one of the first, if not the first, letters of interest filed under the USDOT’s July 27 Notice of Funding Availability implementing the MAP-21 amendments to TIFIA.
KABATA filed a letter of interest in November 2011 for a $308 million TIFIA loan. With the changes in MAP-21 authorizing TIFIA credit assistance up to 49% of eligible project costs and expanding what are eligible costs, KABATA has increased its request to $500.5 million.
The Knik Arm Crossing is planned to be a toll project, delivered under an availability payment public-private partnership. The plan is to use toll revenues, together with state appropriations, to fund a reserve for availability payments and other contract obligations. Based on the transaction structure, KABATA expects that both the senior debt and the subordinate TIFIA debt will achieve investment grade rating, something the TIFIA law requires if the principal amount of the TIFIA debt exceeds the senior debt.
The toll revenues are slated to be used in part to help fund future capacity expansions of the project and planned regional transportation needs. As the letter of interest points out, the 49% TIFIA financing will free up more toll revenues to meet these other transportation needs, and in this way effectively leverage much more than the initial project.
As far as we are aware, the Knik Arm Crossing is poised to be the first project to submit a letter of interest to USDOT under MAP-21’s new TIFIA provisions for rural projects. The application indicates that 78% of the project, in terms of lane miles, and 57.6%, in terms of project costs, are in rural areas. The new TIFIA law defines rural areas as those outside a city with 250,000 or more population. Rural treatment for a portion of the project will lower interest costs and enhance the project’s feasibility. The new TIFIA law provides for an interest rate at half the normal rate for credit assistance supported by the 10% of the annual budget authority reserved for rural projects.
KABATA is taking advantage of the new TIFIA rolling application procedures to move quickly to reserve TIFIA budget authority for its project. How the TIFIA JPO processes and handles this letter of interest may tell the industry a lot about the USDOT’s administration of the new TIFIA program.