House Transportation & Infrastructure Committee's Panel on Public-Private Partnerships Release Recommendations

On September 17, the House Transportation & Infrastructure Committee’s Panel on Public-Private Partnerships (P3s) released its report and recommendations.  The group, empaneled in February of this year, was tasked with examining “issues regarding public-private partnerships across all aspects of the Committee’s jurisdiction.”  The panel held two hearings and seven roundtable discussions in addition to other meetings and briefings. The report recognizes that the nation’s infrastructure needs are extraordinary and P3s in certain situations can provide innovative solutions, and in some ways, incentives for projects to be delivered on-time and on-budget.

Under three broad areas, the panel makes a series of recommendations:

  1. Improving Public Sector Capacity;
  2. Breaking Down Barriers to Consideration; and
  3. Ensuring Transparency and Accountability.

Improving Public Sector Capacity:

The panel recommends directing the U.S. Department of Transportation (USDOT) to create a “Transportation Procurement Office” to work with federal funding recipients to implement best practices for design-bid-build, design-build, and P3 procurements, including P3 model contracts. The Transportation Procurement Office would also develop and institute project delivery performance standards for the same three types of procurements. It would also “issue best practices on standardizing state P3 authorities and practices.” The report also recommends directing USDOT to require State Departments of Transportation (State DOTs) to submit annual reports on project procurement performance as measured against the Transportation Procurement Office’s standards. USDOT should also “encourage the simplification and standardization of P3 contracts,” act as a clearinghouse for “lessons learned,” and encourage inter-state coordination in creating legislation to authorize P3 procurements so that states successfully using P3s can share their expertise. 

In background notes on these recommendations, the panel observes that because State DOTs currently contract for most design work and project construction, they are already engaging in P3s. But missing in these current contract structures are the incentives for on-time and on-budget performance.

Breaking Down Barriers to Consideration:

The panel supports a continuation of the Transportation Infrastructure Finance and Innovation Act (TIFIA) program and encourages “Congress to review Private Activity Bond (PAB) eligibility to support infrastructure P3s across the jurisdiction of the Committee.”  It also makes specific recommendations to USDOT and other federal agencies to encourage the use of P3s, such as clarifying the “statutory authority to allow states to use federal-aid highway funds to ensure robust competition in P3 procurements.”  It encourages federal agencies currently implementing TIFIA to share lessons learned as the federal government begins to implement the new Water Infrastructure Finance and Innovation Act (WIFIA). Additionally, it recommends changes in budgetary scoring rules and fully utilizing existing lease authorities as they relate to property leases.

Ensuring Transparency and Accountability:

The panel makes several recommendations that would provide additional information to the public about components of P3s that use federal grants, loans and tax incentives. The Panel recommends that USDOT be directed to require P3 project sponsors using federal funds to make publicly available a Value for Money (VfM) analysis before advancing the project via a P3 procurement.  The panel also recommends directing agencies to provide a “detailed summary” of federal investment in the project at the time federal funds are committed. The report suggests that key terms and conditions of P3s using federal funds be made available to the public “at an appropriate time in the decision-making process.” Further, the panel recommends requiring public project sponsors to conduct a review of P3 projects that utilized federal funds within three years of construction completion or revenue service and make publicly available information about whether the private partners are living up to the goals of the agreement.

In background notes on these recommendations, the panel observes that VfM analyses currently vary in “quality and content” and are not always publicly available. The panel also heard concerns that the public should be made aware of all factors involved in the P3 delivery method to make a fully informed decision about an agreement that could last for 30 years or more.

Florida Department of Transportation Reaches Commercial and Financial Close on I-4 Ultimate Project

The Florida Department of Transportation reached commercial and financial close on the I-4 Ultimate Project in the urban Orlando area.  The $2.3 billion deal is the third transportation P3 project in Florida developed through an availability payment structure, and is the largest availability payment transaction ever undertaken in the United States.

FDOT entered into an agreement with I-4 Mobility Partners OpCo LLC, a consortium led by Skanska Infrastructure Development Inc. and John Laing Investments Limited.  The Concessionaire will design, construct, finance, maintain and operate the Project for 40 years.

The I-4 Ultimate Project involves reconstruction of 21 miles of I-4 from west of Kirkman Road in Orange County to east of State Road 434 in Seminole County.  Along with developing a signature corridor with aesthetics and landscaping to convey the “Florida Experience,” the Project will provide a choice to motorists by adding four variable tolled Express Lanes to I-4 while maintaining the existing free general use lanes.  The design phase of the Project will begin within the next month and FDOT anticipates construction will begin in early 2015.  Through the P3 delivery model, the Concessionaire was able to provide significant technical enhancements, including direct connections from the Express Lanes to SR 408, additional auxiliary lanes and an additional pedestrian bridge along the facility.

FDOT and the Concessionaire worked expeditiously toward financial close with lenders including a consortium of six commercial banks and the Federal Highway Administration through the TIFIA credit assistance program.  This allowed FDOT to benefit from the low interest rate environment which resulted in a $68.7 million (net present value in 2014 dollars) decrease when compared to the I-4 Mobility Partners financial proposal.  I-4 Mobility Partners invested $104 million in the Project and commercial banks and TIFIA are lending $486 million and $949 million, respectively, to the Project.  The TIFIA is the largest loan ever undertaken under the TIFIA program.

Moody's assigned a provisional Baa1 rating to Concessionaire’s senior construction bank loan, short term Tranche A TIFIA loans, and long term Tranche B TIFIA loans.  S&P assigned a preliminary BBB issue rating to the proposed construction loan facility and TIFIA loan.  An S&P Analyst, Dhaval Shah, noted that “[t]he rating reflects our view of the project's contractual structure, which appropriately allocates risk between the project and FDOT, and our assessment of the project's risks in completing construction on time and within budget, and in operating the project over the long-term concession.”

FDOT Secretary Ananth Prasad said: “This is a monumental milestone for one of the most congested corridors of the state, which draws millions of tourists and is an important mid-point in Florida for commerce and commuters.  The project gives us the opportunity to show how a successful Public-Private Partnership works, through construction and beyond, benefitting those who count on great infrastructure, which feeds a robust economy.”

Congressman Daniel Webster said the following regarding the benefit of structuring the I-4 Ultimate project as a P3 transaction: “Transportation is the economic engine that fuels Florida’s economy.  As a public private partnership, the I-4 Ultimate project will save hardworking taxpayers’ dollars while delivering the project nearly two decades sooner than could otherwise be expected. It will provide critical infrastructure that will enable us to continue to expand our business development, cultivate growth, and create jobs.  This is a big win for Central Florida.”

The FDOT press release can be found on the Project website.

Nossaman advised FDOT on the procurement, financing and contracts for the I-4 Ultimate Project.

Tae Yeon Do co-authored this post.

Port of Miami Tunnel Open for Traffic

On August 3, 2014, the Florida Department of Transportation (FDOT) and the Port of Miami achieved an important milestone when the est. $1 billion Port of Miami Tunnel opened for traffic.  The project consists of twin tunnels under Biscayne Bay linking Port facilities on Dodge Island with a widened MacArthur Causeway and I-395.  One of the first public-private partnerships in the United States to use an availability payment contracting structure, the tunnel improves access for freight trucks and cruise passengers, reducing traffic congestion in downtown Miami and improving air quality.

Under the concession agreement, FDOT made milestone payments to the concessionaire during the construction period, upon the achievement of contractual milestones.  With the operating period now underway, FDOT will make availability payments to the concessionaire, contingent upon lane availability and service quality. The project was awarded to a Concessionaire headed by Meridiam (approx. 90% equity) and Bouygues Construction (approximately 10% equity) and reached financial close in October, 2009, at the height of the recession following the collapse of Lehman Brothers.  

In March, President Obama toured the construction site for the new tunnel while promoting a new initiative intended to encourage more projects like the Port of Miami Tunnel.  The president emphasized the important role of partnerships between public and private sectors as a part of the solution to the critical need to rebuild and upgrade the nation’s roads, bridges and ports. 

Financed with the combination of bank loans and a TIFIA loan, the project has received numerous awards, including The Bond Buyer’s 2010 “Nontraditional Financing Deal of the Year,” “Global Deal of the Year” and “P3 Deal of the Year” from Project Finance Magazine in 2009, Project Finance International’s 2009 “North American P3 Deal of the Year” and the 2007 “Project of the Year” by the American Road and Transportation Builders Association.

EPA Won't Require Formal Rulemaking for WIFIA Program

During the “Use of WIFIA” breakout session at the NCPPP P3 Connect conference this week in Denver, Elizabeth Corr, Associate Division Director for the EPA, confirmed that the agency will not need to complete the formal federal rulemaking process to implement the Water Infrastructure Finance and Innovation Act.  The Act, or WIFIA, was recently enacted by Congress to make low cost loans and loan guarantees available to public and private sponsors of water projects and is based on the highly successful TIFIA program for transportation projects.  Ms. Corr mentioned that EPA conducted its first listening session and plans several others around the country to hear from interested parties about how to best implement the program.  EPA has also setup a website,, to provide information about the program.  Jordan Dorfman, Attorney-Advisor for EPA, acknowledged that there were unique challenges to implementing the program, including the prohibition on the use of tax exempt financing in conjunction with WIFIA assistance and the need to deal with the so-called “springing lien” provision.

The Maryland "Purple Line" Transit Project Releases its Final Request for Proposals

On July 28, 2014, the Maryland Transit Administration (MTA) and Maryland Department of Transportation (MDOT) issued the final request for proposals for a public-private partnership to design, build, finance, operate and maintain the “Purple Line” light rail transit project using an availability payment approach.  The Purple Line is a 16-mile route extending from New Carrollton in Prince George’s County to Bethesda in Montgomery County, with 21 stations and three links to the Washington DC, Metro and MARC commuter train systems.  The Purple Line has estimated project value of $2.37 billion, with the private sector expected to invest between $500 million and $900 million.  The winning concessionaire will be expected to operate and maintain the project for 30 years after construction (roughly 35 years overall).

Legislative and regulatory efforts to kick off the procurement began in earnest in mid 2013, with release of a request for qualifications issued in November 2013.  Four consortia were shortlisted and initial industry review of the proposal documents and draft contract began in February 2014.

The Purple Line has, as among its champions, Lt. Governor Anthony Brown.  MTA/MDOT also enjoys considerable federal support for the Purple Line, with the Obama Administration allocating $100 million toward construction costs in its March 2014 budget submission to Congress.  A full funding grant agreement is expected from the Federal Transit Administration and the Purple Line is seeking further federal funding support through FTA’s “New Starts Program.”

Proposals are due in January 2015, with the preferred proposer selected as the concessionaire in spring 2015.  Subject to approval by the Maryland Board of Public Works, the concessionaire would likely begin construction by the end of 2015.

More information can be found on MDOT’s website including the primary RFP documents located under “Public-Private Partnerships.”

Simon Santiago and Katherine Bourdon contributed to this post.

Congress Passes WIFIA Pilot Program

Following the 412-4 vote in the U.S. House on Tuesday and the 91-7 vote in the U.S. Senate yesterday, the president is expected to quickly sign into the law the Water Resources and Reform Development Act of 2014 (WRRDA).  In addition to $12.3 billion earmarked for 8 current and 34 new water projects, a key provision of the WRRDA is the Water Infrastructure Finance and Innovation Act (WIFIA) which establishes a 5 year pilot program administered by the EPA and Corp of Engineers to provide low cost loans for water, waster\water and flood control infrastructure projects. 

Modeled after the popular Transportation Infrastructure Finance and Innovation Act (TIFIA), the program aims to stretch federal dollars by leveraging nonfederal funds by providing loan guarantees and direct loans at long-term Treasury rates. WIFIA funds can achieve a significant leverage because they only have to cover the risk of project defaults, and the history of default in water projects is only 0.04%, according to the American Water Works Association.

In order to be eligible for WIFIA, projects must be deemed creditworthy, with loans repayable from a dedicated revenue source within 35 years of substantial project completion.  The program generally limits WIFIA support of a project to 49% of the project’s costs, with an overall limitation of 80% for all federal assistance in any project (with an exception for certain federally funded projects in Indian tribal communities), and provides that tax-exempt debt cannot be used to pay the non-federal share of project costs. However, in any year, up to 25% of appropriated funds may be used in projects exceeding the 49% limitation.

While sharing many similarities with TIFIA, WIFIA will start out on a much smaller scale.  Whereas the 2014 authorization for TIFIA under MAP-21 is $1 billion, funding for the WIFIA program totals $350 million over the entire 5-year pilot.  Despite the funding limitations development of the program is viewed as an important victory by the water industry.

“The imminent creation of the Water Infrastructure Finance and Innovation Authority is a significant breakthrough in confronting the U.S. water infrastructure challenge,” said David LaFrance, Chief Executive Officer of the American Water Works Association. “WIFIA will reduce the financing costs of critical infrastructure projects, allowing communities to fix and expand water systems at a lower cost to their customers. Our elected representatives and senators deserve our gratitude.”

USDOT Official Comments on P3s

Victor Mendez, Acting Deputy Secretary at the U.S. Department of Transportation, participated this morning in a Bloomberg Government panel entitled “America on the Move: Investing in U.S. Infrastructure.” In a wide-ranging discussion, he addressed the issue of long-term funding for U.S. infrastructure.

He commented that there is a need for many funding options and we need the private sector in the mix. The TIFIA program has been successful, financing 40 or so projects so far with the private sector, many of them toll roads.  Some of the projects are very long term, up to 50 years.

Mendez was asked specifically about the House Transportation and Infrastructure Committee’s panel on public-private partnerships and what USDOT thinks about P3s. He repeated that the private sector has to be engaged, as we do not have enough public sector funding to do what we need to for U.S. infrastructure, and the Department supports P3s.  He commented that we have not figured out completely how to advance P3s and bring the private sector to the table, and we need to keep working on it. He spoke directly to the private sector, saying that “your ideas are critical.”  He said that through TIFIA, successful loans have been made, but getting through the negotiations can be onerous, with every deal different, and some of them very complex.  Getting the negotiations done in a more streamlined fashion will be important for all players.

He also talked about the importance of streamlining the permitting process for infrastructure.  He noted that while much of the discussion about infrastructure is focused on funding, there are other policy areas, like the permitting process, to be addressed.

Tappan Zee Receives $1.6 Billion TIFIA Loan

The New York State Thruway Authority has received federal approval of a 35-year low interest loan for the $4.8 billion Tappan Zee bridge replacement project through the federal government’s Transportation Infrastructure Finance and Innovation Act (“TIFIA”).  As previously reported, the Authority originally applied for credit assistance for up to 49% of eligible project costs under the expanded MAP-21 TIFIA credit assistance program.  The final loan amount only covers 33% of eligible project costs, but is still the largest award in the history of the TIFIA program.  The estimated price tag for the project includes a $3.1 billion fixed price design-build contract, approximately $800 million in financing costs, and costs of environmental, planning, right-of-way acquisition and other project development work.
The TIFIA loan approval marks a major step forward for the project, and closely followed commencement of bridge construction in mid-October when Tappan Zee Constructors, LLC started installation of the first permanent piles for the bridge foundation.  
The project is scheduled for completion in less than five years -- greatly accelerated from the timeline that would have applied had the project proceeded  using a design-bid-build approach.  New York Governor Andrew Cuomo has announced that the project is currently on budget and on schedule, and has already created nearly 600 jobs and benefitted over 500 businesses, 220 of which are local contractors, consultants, and suppliers located within 60 miles of the project. 
For the latest news on the TIFIA loan program, including loan announcements, see the TIFIA program website.

How To Fix RRIF (If Congress Wanted To)

Last week I attended an invitation only round table organized by Karen Hedlund, Deputy Administrator for the Federal Railroad Administration.  The round table was held in conjunction with the High Speed Rail Conference held at LA Metro's headquarters in Los Angeles, California.  With the House T&I Committee expected to begin marking up a rail bill, Ms. Hedlund sought ideas about how to expand the Railroad Rehabilitation Improvement Financing credit program to be a more useful source of low cost debt capital for commuter rail projects.  Around for a number of years, RRIF has been primarily used by short-haul freight rail companies to improve, expand, refinance, and acquire freight rail facilities and equipment.  With the success of the TIFIA program for highways, there is an opportunity of transforming RRIF into a source of financing for large commuter rail projects around the country, including several sponsored by LA Metro and Metrolink, the southern California commuter rail agency.

All agreed that RRIF needed to recognize "collateral" not just in the form of hard assets, but a dedicated, creditworthy stream of revenues, such as sales taxes.  Also, Congress should consider seeding RRIF with funds to pay the credit risk premium, similar to what it did for the TIFIA program.  And for the next round of TIGER grant funding, allow TIGER grants to be used to pay the credit risk premium ala TIGER TIFIA.  In order to expedite processing of credit applications, RRIF would need funds to staff up and bring on a bench of financial and legal consultants.

This holiday season we can only wish that Congress will see the benefits to the economy and the country's passenger rail system from an expanded RRIF program, and, as with MAP21, find a bi-partisan approach to fixing RRIF.

TIFIA Program Office Releases Updated Program Guidance and Templates

In other TIFIA news . . .  

Yesterday, the TIFIA Program Office released updated TIFIA program guidance and loan document templates that purport to reflect the July 6, 2012 enactment of MAP-21.  Among other revisions, the TIFIA Program Guide has been updated to reflect MAP-21’s endorsement of a rolling application process and the imposition of specific statutory deadlines on processing applications.

While the updated TIFIA guidance documents offer welcome support to current and prospective TIFIA applicants, there appears to be at least some additional work to be done to update the materials to properly reflect MAP-21 enhancements.  For example, the updated TIFIA Loan Term Sheet and TIFIA Loan Agreement sample templates continue to reflect a maximum 33% loan amount ceiling - a limit that Congress raised in MAP-21 in order to authorize TIFIA loan amounts of up to 49% of eligible project costs.

The updated Program Guide and templates can be found on the TIFIA website.

The TIFIA Letter of Interest and Application forms remain open for review and public comment until August 5, 2013.

TIFIA Joint Program Office to Move?

In addition to taking testimony from public agency project sponsors and industry leaders during the July 24, 2013 oversight hearing on TIFIA conducted by the Senate Committee on Environment and Public Works, the Committee heard from the Secretary of Transportation, Anthony Foxx, regarding the U.S. Department of Transportation’s (“USDOT”) implementation of the TIFIA Program since the July 6, 2012 enactment of MAP-21. 

While touting the overall success of the TIFIA program and detailing USDOT’s efforts to move projects through the TIFIA pipeline, Secretary Foxx also announced preliminary plans to move the TIFIA Joint Program Office from its current home under the Federal Highway Administration to the Office of the Secretary.  Citing a need to create a “more streamlined management approach” to address increasingly large and complex loan requests, Secretary Foxx indicated his belief that such a move would allow for more effective implementation of the TIFIA program.  It remains to be seen whether this change will occur and, if it does, whether it will expedite the TIFIA process and approval time.

Click here for Secretary Foxx’s full testimony.

Senate Committee on Environment and Public Works Holds Oversight Hearing on TIFIA, Nossaman Partner Testifies

Showing concern for the TIFIA JPO’s slow pace of credit approvals for major US transportation, on July 24, 2013, the Senate Committee on Environment and Public Works conducted an oversight hearing on the implementation of the TIFIA Program following MAP 21’s expansion of the program almost a year ago.  We are aware of only one project that has received credit approval in that time frame.

Geoff Yarema, a partner in the Infrastructure Practice Group and a member of the National Surface Transportation Infrastructure Financing Commission, provided testimony today at the hearing.

In his testimony, Geoff pointed to the importance of the TIFIA program in supporting large scale infrastructure projects by allowing applicants to leverage fewer federal dollars to maximize local, state and private funds.  The passage of MAP-21, he said has greatly enhanced the availability of TIFIA loans from approximately $122 million a year to $750 million in FY 2013 and $1 billion in FY 2014.  States and regional governments have been increasingly looking to the TIFIA program as a key component of their transportation funding and financing plans.  

However, Geoff noted that the U.S. Department of Transportation (“USDOT”) faces certain challenges that need to be resolved to accelerate TIFIA’s approval process: (a) streamlining the pre-application process, (b) enhancing bidding competition with earlier TIFIA commitments to public sponsors, (c) accelerating financial closing, (d) preserving TIFIA’s value proposition to maintain flexible loan terms, (e) enhancing transparency, (f) processing higher quality credits more quickly and efficiently, and (g) implementing the authorization of loans up to 49% of eligible project costs, as approved by MAP-21.

James Bass, CFO of the Texas Department of Transportation, D.J. Gribbin of Macquarie Capital, Arthur Leahy, CEO of Los Angeles County Metropolitan Transportation Authority and James Roberts, President and CEO of Granite Construction Incorporated also provided their testimony to the committee.

Click here for Geoff's full testimony or click here to watch video of the full Committee hearing.

Update: Geoff Yarema provided supplemental testimony to the Committee in response to follow-up questions posed by Senators Boxer and Vitter.

FHWA Holds P3 Model Contract "Listening Sessions" and Beta-tests "P-3 VALUE Toolkit"

As part of its effort to meet MAP-21’s legislative requirement to develop “standard public-private partnership transaction model contracts for the most popular types of public-private partnerships,” the Federal Highway Administration held a “listening session” with representatives from the transportation industry at the U.S. Department of Transportation in Washington D.C. on January 16.  Representatives from state departments of transportation, general contractors, trade associations, legal advisors and others were in attendance, and solicited to provide FHWA with the P3 community’s view of what the model contracts should be. 

In her introductory remarks, the Hon. Beth Osborne, Deputy Assistant Secretary of Transportation for Policy, saw the effort as “compiling best practices” of the P3 community, but one for which FHWA did not have “pre-conceived notions.”  FHWA and USDOT representatives spent the better part of four hours hearing out the industry’s hopes for, expectations about and cautionary recommendations regarding FHWA’s final product.  The resounding theme of the audience comments was that “every P3 is different,” FHWA’s effort should tilt toward educating public sponsors as to the project-specific risk-sharing and “value-for-money” considerations that makes a P3 an effective delivery tool, and FHWA should refrain from prescribing risk allocations or other contract terms.

In a companion effort, FHWA is also beta-testing an interactive model, which intends both to help educate public sponsors in alternative procurement strategies (like the public-private partnership (“P3”)) “apples to apples” comparison with conventional procurements).  The “P3-VALUE Toolkit” collects project sponsors’ (and their consultants’) project-specific risks, quantifies their value, and, with other financing assumptions and project-specific parameters considered, produces a snapshot of the value-for-money that a P3 strategy may or may not present for that project.  FHWA held an initial roll-out “webinar” of the draft toolkit on January 10, with a follow-up webinar session on January 24.

FHWA has set up a docket, Federal Register No. FHWA-2012-0126, to collect industry comments by May 31, to keep pace with the rigorous requirement of MAP-21 to produce and promulgate model contracts by December 31, 2013.

Fred Kessler co-authored this entry.

Knik Arm Crossing Files $500 Million TIFIA Letter of Interest

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.

Evan Caplicki co-authored this entry.

U.S. Department of Transportation Launches Historic Expansion of TIFIA Program

On July 27 U.S. Transportation Secretary Ray LaHood announced the availability of over $16 billion in TIFIA credit assistance for critical infrastructure projects across the country as a result of the recently enacted MAP-21.  The notice of funding availability can be found here.  The TIFIA Joint Program Office is conducting a web conference tomorrow, August 1, on its plans for TIFIA implementation under the new law.

MAP-21’s TIFIA amendments provide $1.75 billion in budget authority over two years for the TIFIA credit assistance program and will be the largest transportation infrastructure finance fund in the USDOT’s history.  Each dollar of federal funds (except funds to pay program administrative costs) can provide approximately $10 in TIFIA credit assistance (or approximately $16.1 billion) and can leverage up to $20-$30 billion in transportation infrastructure investment.  As a whole, the federal loan program could support up to $50 billion in Federal, state, local and private sector investment.

To date, the TIFIA program has used $9.2 billion in funding to leverage more than $36.4 billion in capital to help build 27 major transportation projects around the country.  The new funding will build on this impressive record and stimulate the development of necessary highways, bridges, tunnels, passenger rail projects and other transportation projects and provide a significant boost to the American economy.

A variety of transportation projects are eligible for the funding and many qualified, large-scale projects that where previously postponed may be able to progress due to the flexibility provided by the TIFIA program.

Although the TIFIA amendments do not take effect until October 1, the USDOT is acting with urgency to encourage early submissions of letters of interest, which start the process for obtaining TIFIA financing.  The USDOT has adapted its form of letter of interest to the amended eligibility criteria.  However, the notice also requires a preliminary rating opinion on senior and TIFIA debt and a $100,000 fee in order to conduct a robust initial screening of projects before inviting the project sponsor to submit a formal application.  The USDOT intends to retain financial and legal advisors at this early stage to help determine whether the eligibility criteria, especially creditworthiness, are satisfied.

MAP-21 ushers in a paradigm shift in the TIFIA program, from a merit-based project selection and evaluation system to a system of objective eligibility criteria under a rolling application process.  Nevertheless, the USDOT seemingly is unable to complete this shift and still clings to the role of arbiter of what projects deserve TIFIA support and in what amount.  The notice of funding availability requires that the letter of interest include quantitative or qualitative information on the project’s “public benefit” so that the USDOT can “evaluate each Letter of Interest to determine whether it would be in the public interest to provide credit assistance to the proposed project.”  The letter of interest also must contain the rationale for the amount of TIFIA credit assistance requested to “help DOT ensure that it allocates TIFIA’s budget authority effectively.”  Apparently, the USDOT intends to place the burden on the project sponsor to justify assistance greater than 33% of eligible capital costs, even though Congress expressly authorized loans up to 49%.  These provisions in the notice may generate controversy.

Secretary LaHood also announced the creation of the Project Finance Center (“PFC”), which will help state and local government project sponsors analyze financial options for highway, transit, rail, intermodal and other surface transportation projects facing funding challenges.  Through the PFC, the USDOT will have an opportunity to provide technical assistance to state and local sponsors of surface transportation projects seeking financial support and make the development process easier for all parties involved.

The notice of funding availability invites public comments by September 1.  The comments may broadly address any aspects of USDOT’s implementation of the TIFIA amendments in MAP-21.

Barney Allison co-authored this entry.

Surface Transportation Reauthorization Ushers in Significant Changes to TIFIA

On June 29, 2012 Congress passed the Moving Ahead for Progress in the 21st Century Act (MAP-21), a compromise measure to reauthorize transportation funding through the end of 2014.  A bipartisan and bicameral measure, MAP-21 contains meaningful reforms that, although marred by some missed opportunities, collectively represent a significant improvement in federal surface transportation law.

We foresee continued heavy demand for TIFIA credit assistance, particularly given the more attractive features of the reenacted TIFIA program.  We have some concern that the combination of the increase in coverage from 33% to 49%, the significant simplification of eligibility criteria, the removal of FHWA discretionary selection authority, the rolling application process, the availability of master credit agreements to obtain early conditional commitments, and the fairly forgiving project readiness eligibility requirement will result in a race to submit applications prematurely.  Government sponsors of large transportation development projects will need to develop timely, proactive strategies to take advantage of the new TIFIA program.

To continue reading, click here

U.S. Department of Transportation Announces Fourth Round of TIGER Discretionary Grants

The U.S. Department of Transportation (USDOT) announced a much-anticipated fourth round of funding for USDOT’s popular TIGER Discretionary Grants program, totalling $500 million for capital investments in surface transportation infrastructure.

Pre-applications must be submitted by Feb. 20, 2012 and final applications must be submitted by March 19, 2012.  Previous rounds of competitive TIGER grants were heavily over-subscribed.  The last round attracted 848 applications with funding requests for $14.29 billion, while USDOT awarded funds in December 2011 for 46 capital projects totaling $511 million.

USDOT did not make many substantive changes in this week's notice to the TIGER application and selection process as compared to previous TIGER funding rounds.  Authorizing legislation for this round allows for an amount not to exceed $175 million of the $500 million total to be used to pay the subsidy and administrative costs for a project receiving credit assistance under the Transportation Infrastructure Finance and Innovation Act of 1998 (TIFIA) program.  Applicants for these TIGER TIFIA payments must submit a TIGER application and a separate TIFIA letter of interest.

USDOT will also specifically make up to $100 million in TIGER funds available to high speed and intercity passenger rail projects, which have fallen out of favor in Congress but remain an Obama Administration priority.

More detailed information can be found in USDOT’s Notice of Funding Availability published in the Jan. 31, 2012 Federal Register.

Will there be a TIFIA Loan for Your Project in 2012? Letters of Interest Are at 12 Times Availability

On Nov. 3, 2011 the TIFIA Joint Program Office announced availability of limited funding for TIFIA credit assistance for fiscal year 2012 and invited submission of letters of interest (LOIs) by Dec. 30, 2011.  While we are aware of no official announcement, sources inform us that the TIFIA JPO received LOIs from 26 project sponsors seeking over $13 billion in credit assistance to finance almost $36 billion in new infrastructure investment.

This current interest continues a three-year trend in strong demand for TIFIA credit assistance, and, so far anyway, a limited amount of available subsidies.  The TIFIA program only has $110 million in TIFIA subsidies available for fiscal year 2012, capable of supporting approximately $1.1 billion in credit assistance.  According to our math, the LOIs represent demand of almost twelve times the available appropriation for the program.

The pending Senate federal reauthorization bill would increase annual TIFIA subsidies to $1 billion.  Reports indicate that the House Transportation and Infrastructure Committee will include the same sharp increase in the TIFIA program in its reauthorization bill.

A multimodal working group is evaluating the LOIs.  Transportation Secretary Ray LaHood reportedly wants decisions issued on the LOIs in March or April.  Unfortunately, once again the vast majority of projects will be turned down or invited to apply for far less support than requested.

USDOT Announces TIGER III Grantees

This morning, U.S. Department of Transportation (USDOT) Secretary Ray LaHood announced the winners of the extremely competitive TIGER III grant application cycle.  Forty-six projects in 33 states will share $511 million in grant funds.  The announcement was made several months earlier than the originally scheduled date.

As has been the case with the previous two rounds of TIGER grants, this cycle was wildly oversubscribed.  According to the announcement, USDOT received 848 project applications from all 50 states, Puerto Rico, and Washington, DC, requesting a total of $14.29 billion, far exceeding the amount available under the TIGER III program. 

“The overwhelming demand for these grants clearly shows that communities across the country can’t afford to wait any longer for Congress to put Americans to work building the transportation projects that are critical to our economic future,” said Secretary LaHood. “That’s why we’ve taken action to get these grants out the door quickly, and that is why we will continue to ask Congress to make the targeted investments we need to create jobs, repair our nation’s transportation systems, better serve the traveling public and our nation’s businesses, factories and farms, and make sure our economy continues to grow."

Of the grants awarded, only three included payments to support TIFIA loans.  The projects that will receive TIFIA payments are the SR-91 Corridor Improvement Project managed lanes being developed by the Riverside County Transportation Commission; Virginia DOT’s I-95 HOT Lanes; and Dallas Area Rapid Transit’s Orange Line Extension.

TIGER grants are awarded to transportation projects that have significant national or regional impact.  USDOT allocated the TIGER III funds to transportation projects in both urban and rural areas.  The funding was distributed between a broad array of road and bridge, transit, port and freight rail projects.  The three rounds of TIGER grants have resulted in an award of over $2.6 billion for critical transportation funding.

Big Changes Proposed for TIFIA

Moving Ahead for Progress in the 21st Century (MAP-21), the draft reauthorization bill unanimously voted out of the Senate Environment and Public Works Committee, contains major improvements to the TIFIA program that many, including those of us at Nossaman, have been advocating.  These changes, if enacted, will greatly expand availability and eliminate much of the uncertainty over whether a project will be selected.

  • The bill eliminates virtually ALL of the selection criteria, converting availability from a discretionary competitive selection process to a simple objective determination of project eligibility.
  • It adopts a rolling basis for applications and availability.  No more waiting for annual notices of funding availability; it is up to the project sponsor to decide when to apply.
  • The bill gives applicants the right to pay the subsidy from other sources, included federal grant funds, if budget authority runs out.
  • Alternatively, if budget authority runs out, the bill allows an applicant to enter into a master credit agreement to obtain budget authority in a later year when available.
  • The bill increases the size of the TIFIA credit assistance from a maximum of 33 percent to a maximum of 49 percent of eligible project costs.
  • The Senate EPW Committee recommends an annual TIFIA budget authority of $1 billion.

Other features of the bill's amendments include:

  • Beefed up credit standards, including "an investment grade rating from at least two rating agencies on debt senior to the Federal credit instrument; and a rating from at least 2 rating agencies on the Federal credit instrument."   For small projects (up to $75 million, rural projects, and ITS), only one rating agency rating is required.
  • As a requirement for project eligibility, the applicant must first submit a letter of interest (LOI), followed by an application.  Presumably, the LOI and application requirements will get a lot simpler and quicker with fewer eligibility criteria.
  • The bankruptcy springing lien has an exception for senior debt that is for an agency's program and is secured by tax revenues or system revenues.
  • 50 percent of unused annual budget authority (if any) can be carried forward; the balance is returned to the states via federal share.
  • Administrative fees for the program are set at 1 percent of the annual budget authority.  At $1 billion of annual budget authority, annual administrative fees will be $10 million, a large increase from the $2.2 million under existing law.

There are a few issues that cause us concern.

  • Project readiness is not a prerequisite for TIFIA eligibility.  Such a requirement seems especially needed given the new first-come, first-served approach to budget authority allocation.
  • Improved and expedited procedures are needed to overcome the inordinate processing delays that characterize the TIFIA program.  We are quite concerned that applications, credit processing and loan documentation will get bogged down, and bureaucracy rather than budget authority will be the new constraint on TIFIA expansion.
  • The exponential increase in TIFIA demand that will occur if this bill comes to fruition has real potential to overwhelm the TIFIA JPO, particularly because applicants can pay in subsidies on top of the $1 billion budget authority.  The bill’s increase in the annual administrative budget to $10 million may not be enough. Consideration should be given to increasing the administrative budget so that the TIFIA JPO can staff up to handle in a timely manner the growth in demand.
  • There is no provision calling on the TIFIA JPO to process LOIs, applications, term sheets and loan documentation during the period it will be rolling out regulations for carrying out the amended program.  It would be quite detrimental to the states if things grind to a halt while USDOT goes through a long procedure to adopt regulations.

There is reason to believe that the House reauthorization bill will contain comparable improvements to this vital federal credit assistance program.

TIFIA Office Hiring Lead Negotiator and Financial Analyst

USDOT’s TIFIA Office is hiring a new lead negotiator/financial policy advisor and a financial analyst.  Both positions are based in Washington, DC, and applications are due September 21st. 

The ideal candidate for the lead negotiator position will be a senior finance expert who has negotiated transportation finance and/or infrastructure project finance credit agreements as practiced in domestic and international capital markets.

For the financial analysts role, the ideal candidate is a mid-level professional with experience in the financial operations and practices of corporate business organizations, U.S. capital markets and transportation finance.  

Questions about either position should be directed to

GDOT's Northwest Corridor Project Invited to Apply for TIFIA Loan

On July 19, 2011, the Georgia Department of Transportation issued a press release stating that GDOT was invited to apply for a TIFIA loan in the amount of $270 million for the Northwest Corridor Project – a project to add managed lanes along I-75 and I-575 in the metro Atlanta region with approximately $968 million in capital costs.  The press release followed an announcement by Governor Nathan Deal that the procurement of the Northwest Corridor Project will proceed to the next phase through the issuance of a final Request for Proposals.  Three consortia – consisting of major national and international companies – have been shortlisted to submit proposals to design, build, finance, operate and maintain the Northwest Corridor Project.

The Northwest Corridor Project will be the largest transportation infrastructure project in Georgia to date and is expected to generate over 9,700 jobs statewide.  The Northwest Corridor Project is the cornerstone of GDOT’s Managed Lanes System Plan, which is a plan to construction a $16.2 billion managed lanes network in the metro Atlanta region.

Transportation Agencies Pen Letter to Congress on TIFIA Program

The fiscally conservative House majority continues to pursue reductions in federal spending, and federal transportation spending is part of the mix.  Further use of the general fund to supplement the Highway Trust Fund motor fuel taxes, as well as increases in fuel taxes, are opposed by the House majority.  Cuts could come in several forms, including cuts in Title 23 programs overall or cuts to specific programs.

Given the diminishing role of the Highway Trust Fund in funding future transportation investment, federal credit assistance under the TIFIA program needs to grow in significance.  But concerns are rising that TIFIA will be among the U.S. Department of Transportation programs targeted for substantial cuts in the current and next fiscal years.  Such cuts would put in jeopardy the financial feasibility of most of the large, complex projects that are being delivered via public-private partnerships in the U.S.

In response, leaders of transportation agencies from across the country delivered a letter to Congress on Feb. 14 urging against such action.  The letter, signed by 21 leaders of state and regional transportation agencies, states:

"The TIFIA program remains one of the critical methods available in this country to advance major transportation projects by leveraging private sector funding. While we would like to see the program’s capacity increased and are working to do so as part of the SAFETEA-LU authorization process, it is critical that Congress provide the authorized level of $122 million this fiscal year.  Given the fact that this authorized level can be leveraged to over a billion dollars of infrastructure investment, there are few federal programs that provide this return-on-investment for the American taxpayer and the economy as a whole."

The letter is a summons to all in the surface transportation sector to make the case to Congress and the Administration to preserve, if not expand, the TIFIA program.

FHWA Extends TIFIA LOI Deadline; Tolling/Pricing Counts Toward "Sustainability"


FHWA has extended the deadline for FY2011 TIFIA Letters of Interest (LOI) to March 1, 2011. The previous Notice of Funding Availability (NOFA), issued on January 19, had allowed less than a month for interested applicants to prepare and submit LOIs. 

The January 25 revised NOFA included a new phrase addressing the role of tolling and pricing programs in enhancing environmental sustainability. Under the revised selection criteria, applicants can demonstrate that their projects help preserve and protect the environment through “the use of tolling or pricing structures to reduce or manage high levels of congestion on highway facilities and encourage the use of alternative transportation options.” 

This new tweak to the TIFIA selection criteria may indicate the Administration’s acceptance of pricing as a gateway to “greener” highways.   FHWA has found that managed lanes, which set tolls according to traffic demand, provide environmental benefits: “By reducing the number of vehicles traveling on the road and by smoothing traffic flow and maintaining freeway speeds, managed lanes help to reduce air pollution and may also contribute to a decrease in greenhouse-gas emissions.

There is still no indication of how much funding will be available for TIFIA in FY2011, so this may not be the last revision to the NOFA. FHWA also intends revise/replace the August 2010 template, and will likely update the template language on environmental sustainability.

Financing Completed for the Largest U.S. Greenfield Transportation P3 Deal of All-time

On June 22, 2010 the Texas Department of Transportation’s I-635 project became the first U.S. highway public-private partnership (P3) to achieve financial close in 2010. LBJ Infrastructure Group - a Cintra-led consortium - will build, finance, maintain and operate a 17-mile corridor which includes managed lanes in the congested Dallas-Fort Worth area. This project along with the North Tarrant Express (NTE), one of three U.S. transportation P3s to close in 2009, are nationally significant for advancing the use of managed lanes to address congestion.

The projects are notable not only for their magnitude and the method in which they will be developed, but also for their unique tolling and financial characteristics. Specific precedent setting-features include:

  • The projects are valued as the largest transportation greenfield P3 projects in the United States and include construction costs of $2.7 billion for the I-635 and $2 billion for the NTE.
  • The projects confirm the importance of Transportation Infrastructure Finance and Innovation Act (TIFIA) and private activity bonds (PABs) as financing mechanisms. The I-635 includes the largest amount of PABs for a U.S. toll road concession. The TIFIA loans of $850 million for I-635 and $650 million for NTE are the second and third largest to close.
  • The Dallas Police and Fire Pension System is an equity partner in the private developer for both projects, making it the first pension fund to invest directly in infrastructure development in the U.S.
  • They are the first two projects to obtain federal tolling authorization under the United States Department of Transportation’s Express Lanes Demonstration Program.
  • To the extent that toll revenues exceed specified levels, the private developer will share up to 75% of the excess toll revenues with the Texas DOT.

The I-635 and NTE validate toll concession P3s as a viable method for delivering needed transportation projects in the United States.  For example, with the I-635, Texas DOT was able to leverage $489 million in public funds to deliver a project worth over $4 billion including costs for design, construction, operations and maintenance.  If past is prologue, the P3 market can expect more P3 toll concessions, as well as managed lanes projects, in the future.

Alternative Financing - the New Mainstream?

State and local strategies to bridge the gap between traditional funding and current needs – which has been referred to as alternative finance – are now becoming mainstream. 

Consider Los Angeles Mayor Antonio Villaraigosa’s plan to speed up the development of LA’s transit infrastructure, which the LA Times reports would include financing from ‘a combination of private financing and bonds, such as Build America Bonds, established in the economic recovery bill to cut interest costs for local and state infrastructure projects.’ 

In fact, this model has already been used in several states for highway projects (see Texas and Florida for recent examples).  Recent changes in TIFIA rules and the Obama administration’s so-called ‘livability’ criteria may indicate the federal credit program’s shift of emphasis toward funding transit programs.  And enhanced versions of existing credit programs, such as the proposal to establish and capitalize a National Infrastructure Bank, could present a new vehicle to make these financing options available.

Public agencies responsible for developing high speed rail will also have to consider alternative financing methods.  The ARRA grant funds allocated for these projects, although impressive, will only make up a portion of the monies necessary to provide a viable service.  The choice comes down to this: wait years or even decades for the federal government to dole out enough funds on a pay-as-you-go basis to build the infrastructure we need, or creatively finance critical deals using low cost federal credit, bonds, and private equity so that we can reap the benefits of increased mobility sooner.  After sitting in L.A. traffic this morning, I can certainly tell you which option I would prefer.