The TIFIA program, which was enacted in 1998 as part of TEA-21, allows U.S. DOT to provide direct credit assistance to sponsors of major transportation projects.[23] The TIFIA credit program offers three distinct types of financial assistance-direct loans, loan guarantees, and standby lines of credits. These instruments are designed to address the varying requirements of projects throughout their life cycles. The amount of Federal credit assistance may not exceed 33 percent of total eligible project costs. The 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 eligible for Federal assistance through existing surface transportation programs (both highways and transit) is eligible for TIFIA assistance. In addition, the following types of projects are eligible: international bridges and tunnels; intercity passenger bus and rail facilities and vehicles; and publicly-owned intermodal freight transfer facilities on or adjacent to the National Highway System.
Projects must meet certain threshold criteria to apply for TIFIA assistance. The project's estimated eligible costs must be at least $100 million or 50 percent of the State's annual Federal-aid highway apportionments, whichever is less, or at least $30 million for intelligent transportation systems (ITS) projects. The project must be supported in whole or part from user charges or other non-Federal dedicated funding sources and be included in the State's Transportation Improvement Plan. The project is subject to all Federal requirements.
Qualified projects are evaluated and selected based on eight criteria. Before TIFIA assistance can be committed, the project must receive an investment grade rating on its senior obligations and have completed the Federal environmental review process.
TIFIA assistance provides improved access to capital markets, flexible repayment terms, and potentially more favorable interest rates than can be found in private capital markets for similar instruments. The TIFIA can help advance expensive projects that otherwise might be delayed or deferred because of size, complexity, or uncertainty over the timing of revenues. While TIFIA has been a valuable tool in developing projects, some TIFIA recipients have expressed concern that the credit approval process is too long and cumbersome.
The ability to use the TIFIA to partner with the Federal government for essential and costly projects improves access to the capital markets. Large, complex projects frequently encounter market resistance as a result of investor concerns about risk, particularly in the case of subordinate and secondary sources of capital. However, with the TIFIA, the government can be a flexible, patient investor by providing subordinate capital that may not be available through the capital markets on attractive terms. The flexibility provided by the TIFIA can then enable the senior debt to demonstrate higher coverage margins and attain investment-grade bond ratings. By facilitating the borrower's access to the capital markets through the TIFIA, major projects that might be delayed or accomplished with less efficiency can be advanced. Because TIFIA funding or credit assistance comes directly from U.S. DOT, projects built with TIFIA funding are subject to the Federal requirements applicable to regular Federal-aid projects. These Federal requirements also apply because of specific provisions in the TIFIA statute.[24]
Approved TIFIA projects range in cost from a $217 million intermodal facility improvement project to a $3.7 billion start-up toll road project. The TIFIA assistance is also being provided to transit and ferry systems, as well as bridge and rail corridor projects. Two of the approved projects are new toll facilities, including the 9.2-mile SR 125 South Toll Road in southern California and the toll road in central Texas that will span 122 miles. For these projects, the TIFIA credit assistance offers the project sponsors a way to boost debt service coverage and enhances senior obligations at an affordable cost. Also, flexible repayment terms will facilitate these toll financings, enabling a better match of loan repayments to expected revenue flows.
Because of their size, many of the approved TIFIA projects would have been either unfunded in the near term or had large funding gaps without TIFIA funding. For some projects, the TIFIA assistance enhanced market access and reduced borrowing costs; for others, it provided an alternative to grant funding, enabling the project sponsor to conserve regular Federal funds for smaller projects that could not be supported through user charges or dedicated revenue streams.
As of June 2004, $3.5 billion in TIFIA credit assistance has been made available to 11 projects, supporting over $15 billion in project costs.