Infra Insight Blog : written by Nossaman LLP Infrastructure attorneys, covers infrastructure project delivery, including Public-Private Partnerships, Operations & Management Agreements, policy, and news.

USDOT has published interim guidance on its new “TIGER II” competitive grant program, a $600M successor to the popular $1.5B TIGER program included in the American Recovery and Reinvestment Act (ARRA).  The guidance outlines application deadlines, eligibility and project selection criteria, and indicates a shift in the focus of the program from near-term job creation to long-term outcomes.  

TIGER II is not constrained by ARRA’s focus on “shovel ready” projects and immediate job creation (funds must be awarded by 9/30/2012, but there is no deadline for expenditure or project completion).  Instead, TIGER II seeks long-term outcomes, though these outcomes fall in the same general areas as TIGER I: safety, economic competitiveness, livability, sustainability, and state of good repair (the extent to which a project improves the condition of existing infrastructure and minimize life-cycle costs).

Click below for additional details about the focus and requirements of TIGER II.

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USDOT Announces $1.5 Billion in TIGER Grants – $60M in TIFIA Allocations

On February 17, the one year anniversary of the landmark American Recovery and Reinvestment Act, USDOT announced the final list of TIGER grant recipients. Grants range in size from $3.15M for a roadway rehabilitation/reconstruction in Burlington, VT to a $105M grant for construction of two new intermodal facilities in Memphis, TN and Birmingham, AL to support freight rail service from the Gulf Coast to the Mid-Atlantic.  

When combined with state and private funds, the TIGER funds will support approximately $4 billion in transportation investment, according to AASHTO, which estimates that States have already started or completed 12,250 recovery projects worth $26.4 billion.  

Shortly after releasing the final list of grantees, USDOT released a statement outlining key areas for investment, which included:

• Freight Rail: 11 national freight projects to help get freight off America’s highways and onto rail.

• Road and Bridge Repair: 13 highway infrastructure projects to make critical repairs to roads and bridges that are in dire condition.

• Community Livability: 22 livability projects aimed at giving Americans more choices about how they travel and improving access to economic and housing opportunities in their communities.

These investments may be signaling a shift in federal policy, and build upon the HUD-EPA-DOT partnership to promote livability and sustainability which the Obama Administration announced last June. Each project was evaluated for its ability to help achieve the following goals:

• A state of good repair for our existing transportation facilities;
• Enhanced economic competitiveness;
• Safer streets and communities;
• Environmental sustainability; and
• Enhanced community livability.

The Administration seems to be applying these principles to other discretionary programs as well, notably the Transportation Infrastructure Finance and Innovation Act (TIFIA) program, which received $60M in new funding under the TIGER grant program, nearly half of the $122M annual apportionment it had been receiving under SAFETEA-LU. 

Five grantees will be eligible for the TIGER TIFIA Payment program, which allows grantees to pay the subsidy and administrative costs of the TIFIA credit assistance program using TIGER grant funds. 

The TIFIA TIGER payments will be leveraged with state and other funds to support several larger projects. The largest of these grants – $20M allocated to the North Texas Toll Authority for improvements to a high-growth corridor near Dallas-Ft. Worth – could support a federal loan of approximately $300-$400M. 

The TIGER TIFIA allocation fell short of the statutory cap, which would have allowed USDOT to apply up to $200M of the TIGER funds to federal credit assistance. In the past year, competition for TIFIA funds has intensified and USDOT has reinstated the competitive application process it abandoned in 2002. 

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USDOT has published new program guidance for the TIFIA Program which clarifies project selection criteria and processes. The new guidance is the product of long deliberation at USDOT, which withdrew an earlier proposal last spring. [See USDOT Withdraws Proposed Changes to the TIFIA Program.]

The notice:

• Announces a change in TIFIA selection criteria and processes going forward – rather than the current first come, first served basis for project submission, the new process would pool all letters of interest and apply weighting criteria to choose the “best” projects.

• Requests comments on a potential pilot program that would allow the borrower to pay the government’s subsidy cost for the project.

• Announces funding availability for 2010 (beyond what has been reserved for projects already pending approval).

New selection criteria would weigh projects according to projected impacts on safety, livability, sustainability, economic competitiveness and state of good repair. The new process will implement application deadlines to allow staff time to evaluate projects according to the clarified criteria, prior to submission to the Credit Council for final selection.  For consideration in the FY 2010 funding cycle, Letters of Interest must be submitted by December 31, 2009, using the revised form on the TIFIA website. 

The proposed pilot program could greatly expand the reach of the TIFIA program.   By allowing borrowers the option to pay the full subsidy cost of TIFIA assistance, USDOT hopes to extend credit to qualified projects that would otherwise be denied assistance solely due to funding constraints. Comments regarding the potential pilot program must be submitted by December 31, 2009.

Nossaman will provide a detailed analysis of the notice, which will be available via E-Alert or on the firm’s website.  

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The Florida Department of Transportation (FDOT), announced at a press conference in Miami today that it has reached financial close on the Port of Miami Tunnel Project. 

FDOT, in partnership with Miami-Dade County and the City of Miami, entered into an agreement with MAT Concessionaire, LLC (MAT) which includes Meridiam Infrastructure Finance, S.a.r.l. and Bouygues Travaux Publics as equity members. The $900 million public-private partnership (PPP) deal uses an availability payment structure that provides for payment to MAT over 30 years after completion of construction, which is expected to occur in five years. This is the second transportation infrastructure project in the United States to use an availability payment structure, following the recently closed FDOT I-595 Corridor Improvements Project. 

Financing for the project includes a $341 million low-cost federal loan through the Transportation Infrastructure Finance and Innovation Act, equity contributions from MAT, and $330 million in loans from the following senior lenders:

• BNP Paribas
• Banco Bilbao Bizcaya Argentina
• RBS Citizens
• Banco Santander
• Bayerische Hypo
• Calyon, Dexia
• ING Capital
• Societe Generale
• WestLB

The Port of Miami Tunnel will link the Port of Miami facilities on Dodge Island with MacArthur Causeway and I-395 via twin 42’ diameter tunnels under Biscayne Bay, increasing the Port’s competitiveness and relieving congestion in downtown Miami by diverting passenger and freight traffic to I-395 and improving access to I-95. The project also includes widening of MacArthur Causeway and other roadway improvements.

Bouygues Civil Works Florida, Inc. will design and construct the project with engineering assistance from Jacobs Engineering Group, Inc. VMS, Inc. will serve as the lead operations and maintenance contractor. In addition to Nossaman, FDOT’s advisors include Jeffrey Parker & Associates (financial), Parsons Brinkerhoff and T.Y. Lin (technical), and Marsh (insurance).

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USDOT is weighing 1400 TIGER grant applications (11 of which requested TIFIA funding) totaling $57 billion in funding requests. The TIGER (Grants for Transportation Investment Generating Economic Recovery) program provides for $1.5 billion in discretionary grants to high impact transportation projects, and could fund up to $200 million in TIFIA assistance. 

Applications were due on September 15. Secretary LaHood has assembled a team to expedite application review, and plans to announce grants in January 2010 – a month ahead of the statutory deadline.  

The program gives priority to “shovel ready” projects that can be completed on or before February 17, 2012. Selection criteria favor high-impact projects that lower life cycle costs, and enhance safety, sustainability, livability, and economic competitiveness. Grants can range in size from $20 – 300 million.

USDOT is required to ensure an equitable geographic distribution of funds, and may adjust its list of recommended projects after applying the program selection criteria described above. No state can receive more than $300 million in funds, and multi-state applications must allocate project costs to assist USDOT in determining funding levels for each participant.

TIFIA could significantly boost the program’s impact. TIFIA offers credit assistance (loan guarantees and direct loans) to states and their partners, and can leverage funding and help attract private investment as a way to fill a gap in the financial system between the risk-averse municipal bond markets and the high-interest loans available to the private sector. 

The Federal Highway Administration has estimated that allocating the full $200 million in TIGER TIFIA grants could support $2 billion in credit assistance, more than tripling the funding outcome for the TIGER program. While USDOT has not released an official estimate of TIGER TIFIA funding requests, fully utilizing the TIFIA allocation would amplify the TIGER program’s impact by drawing on infrastructure investment in high-traffic congested urban corridors, consistent with the program’s focus on high impact projects. 

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In addition to the recent passage of comprehensive P3 legislation in Arizona and California, the newly created Massachusetts Department of Transportation (MassDOT) has also been authorized to utilize public private partnerships for transportation projects. Provisions for design-build-operate-maintain (DBOM) and design-build-finance-operate-maintain (DBFOM) procurements are included in Senate Bill 2087, commonly known as the "Transportation Reform Act," under which MassDOT was formed. Under the Act, P3’s may be used for a new or existing highway, road, bridge, tunnel ferry, airport, parking facility, seaport, rail facility or other transportation facilities.

Massachusetts has opted to take markedly different approaches to funding DBOM and DBFOM projects. Payments under DBOM contracts must come in whole or in part from funds appropriated prior to award of the contract or must be secured by tolls or other user charges. In contrast, for DBFOM projects, no public funds may be appropriated to pay for the services provided by the contractor.  These restrictions could prove to be a significant hurdle to financing some projects.

Another notable feature of MassDOT’s new P3 program is the establishment of a P3 Infrastructure Oversight Commission which will comment on and approve all requests for proposals (RFPs) for DBOM or DBFOM services. The seven member commission will be composed of experts with experience in the fields of transportation law, public policy, public finance, management consulting, transportation or organizational change. At least one of the commission members will be a representative from the Massachusetts Organization of State Engineers and Sciences.

The P3 portion of the Transportation Reform Act also includes provisions for:

• Asset sales and leases
• Procurement method and evaluation factors
• Stipends
• Funding
• Confidentiality
• Contents of the concession agreement
• Creation of a public-private partnership oversight commission.

Click here to view the entire Tranportation Reform Act.

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A recent survey conducted by KPMG International confirms what many in the infrastructure industry already knew: current infrastructure investment is insufficient to support economic growth and politics frequently influences infrastructure development in the United States.  In this global survey, KPMG surveyed 455 infrastructure executives, including 118 from the United States.

While much of the recent industry press has focused on the lack of available financing as the primary challenge to delivering infrastructure, a vast majority of the respondents indicated that governmental effectiveness and current economic conditions are bigger hurdles than available financing.  The respondents expressed specific concerns over what they viewed as an overly politicized process, changing public policy, and excessive government bureaucracy.  When asked how governmental agencies could enhance their effectiveness in delivering infrastructure, respondents suggested making infrastructure delivery less influenced by political considerations, increasing transparency in infrastructure spending, and expanding the use of public-private partnerships (PPPs). 

Recent examples of PPP projects played out in the political arena include the SH 121 project in Texas and the proposed long-term leases of the Pennsylvania Turnpike and Alligator Alley.  California, which had pioneered PPPs in the early 1990s, only recently overcame objections from various political stakeholders in the intervening years.  We are hopeful that California’s new legislation authorizing design-build and PPPs for Caltrans and regional transportation authorities is a step toward improved transportation infrastructure delivery.  Given the current administration’s focus on infrastructure, Congress and the administration may now act to address the long-term needs for a stable means of funding infrastructure development and maintenance, without the political roadblocks.

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