The federal government often provides part of the funding for transportation projects. On federal aid projects, federal laws control how much states must contribute and restrict how states can match federal dollars. Federal laws have established several programs to help states finance projects for highways, transit, rail and intermodal facilities. Federal credit and financing programs include Transportation Infrastructure Finance and Innovation Act, Grant Anticipation Revenue Vehicles bonds, Transit Grant Anticipation Notes bonds and other programs. Federal laws also have helped establish or promote other funding mechanisms, such as state infrastructure banks (SIBs), private activity bonds and tolling.
SAFETEA-LU changed or expanded many of the federal financing options. The law expanded eligibility for the Transportation Infrastructure Finance and Innovation Act, broadened loan policies for state infrastructure banks, and changed policies for private activity bonds and tolling used to finance transportation infrastructure improvements. This section describes federal transportation financing programs and changes to those programs created by SAFETEA-LU.
• TIFIA-The Transportation Infrastructure Finance and Innovation Act of 1998 established a credit program administered by the U.S. Department of Transportation to provide federal credit assistance to major surface transportation programs-including highway, transit and rail projects-of national or regional significance. The program was intended to leverage federal resources and stimulate public and private investment by providing projects with supplemental or subordinate debt. TIFIA assistance can be provided through direct loans for construction and capital costs, loan guarantees for project investors, and standby lines of credit.
States that apply for TIFIA assistance must go through a competitive process. Eligible projects must cost at least $50 million (or $15 million for intelligent transportation system [ITS] projects),37 and TIFIA contributions cannot exceed 33 percent of the total project costs. In 2005, Congress expanded TIFIA eligibility to include public freight rail facilities or private facilities that provide public benefit for highway users; intermodal freight transfer facilities; access to such freight facilities; and service improvements to such facilities, including capital investment for intelligent transportation systems. The U.S. DOT evaluates projects that meet the initial eligibility thresholds and selects TIFIA recipients based on criteria established by statute, including the project's ability to generate economic activity, leverage private investment and promote innovative technologies.
As of May 2005, the Federal Highway Administration had approved 13 TIFIA projects and provided $3.6 billion in credit support under the program. Two projects-the Cooper River Bridge in South Carolina and the Tren Urbano rail line in Puerto Rico-are at or near completion. Other examples of TIFIA projects include a $70 million Reno rail corridor project in Nevada, a $450 million project on the San Francisco-Oakland Bay Bridge, the $917 million Central Texas Turnpike project, and the $432 million Miami Intermodal Center. More information about TIFIA is available on the FHWA Web site at http://tifia.fhwa.dot.gov/.
• GARVEE Bonds-Grant anticipation revenue vehicles (GARVEEs) are bonds issued by states and backed by anticipated federal aid funding. GARVEEs allow states to receive up-front capital for major projects that otherwise might not be funded through traditional methods. Future federal aid funds can be used to service the debt associated with the up-front costs on highways and can be used to make interest payments, retire principal, and pay any other costs associated with the bond issue.
Voter or legislative approval often is required for states to issue GARVEE bonds. According to FHWA, as of November 2005, 14 states, Puerto Rico and the Virgin Islands had issued more than $4.8 billion in GARVEE bonds since 1997.38 In 2005 alone, four states-Montana, Kentucky, Oklahoma and North Dakota-issued GARVEE bonds. Montana issued $122.8 million in GARVEE bonds to help finance work on U.S. 93 north of Missoula. Kentucky issued $139.6 million in GARVEE bonds in 2005 to help finance widening projects on I-65, I-75 and I-74. Maturity dates of the notes range from 2005 through 2017.
Oklahoma issued nearly $50 million in GARVEE bonds in 2005 as part of a larger transportation financing program authorized by the Legislature in 2000. Under the legislation, the state will spend nearly $800 million to improve 12 corridors of economic significance in the state. Nearly $500 million for the projects is expected to come from GARVEE issues.39
• Transit Grant Anticipation Notes-Transit grant anticipation notes (GANS) are used to help transit agencies receive up front funding for transit projects. Similar to GARVEE bonds for highway projects, GANs allow transit agencies to issue bonds that are secured by a pledge of future federal money. In most examples, transit agencies have used the pledge of future federal funds as one source of revenue used to guarantee bond payments, but not as the sole source of revenue. Examples of GANs use can be found in California and New York.40