In March 2007, the Federal Highway

Administration (FHWA) received a

Special Experimental Project No. 15

(SEP-15) application from the Knik Arm

Bridge and Toll Authority (KABATA) for

the Knik Arm Crossing in Anchorage,

Alaska. KABATA is seeking waivers and

variances under FHWA’s SEP-15 authority which derives from Section 502 of

Title 23, United States Code, allowing

the Secretary to waive the requirements

and regulations under Title 23. The

waivers would be to the Transportation

Infrastructure Finance and Innovation

Act (TIFIA) loan process similar to those

that have been granted to TxDOT (see

Winter 2007 issue of IFQ). KABATA

intends to develop the project which

would connect the municipality of

Anchorage with the Matanuska-Susitna

Borough through a PPP. The Authority

is seeking a private partner to build, operate, and collect tolls on the facility and

wishes to offer TIFIA assistance to each

competitive entity. In March, the

KABATA pre-qualified two consortia to

bid on the final concession and seeks to

make a conditional TIFIA commitment

available to both firms prior to the final

proposal deadline.

The current TIFIA loan process begins

when a private developer submits an

application for Federal credit assistance to

the TIFIA credit program after its selection by the public owner. Working with

this single applicant, the TIFIA office

evaluates the application and, if

approved, issues a term sheet, negotiates

detailed terms and conditions, and executes a TIFIA credit agreement.

FEDERAL CREDIT PROGRAM

VOLUME 13, NUMBER 2 SPRING 2007

Revised TIFIA Loan Process Reaches Last Frontier

PPP UPDATE

Also in this issue...

GARVEE Roundup . . . . . . . . . . . . . . .3

West Virginia U.S. 35 . . . . . . . . . . . .4

FTA’s Penta P . . . . . . . . . . . . . . . . . .5

Congestion Pricing and TRUCE . . . . .6

What’s New in Toll Credits . . . . . . . .8

continued on page 3

The Safe, Accountable, Flexible, Efficient Transportation Equity

Act: A Legacy for Users (SAFETEA-LU) permitted the U.S.

Department of Transportation (DOT) to allocate up to $15 billion in Private Activity Bonds (PABs) among qualified highway

and surface freight transfer facilities. PABs allow the bonds to

retain tax-exempt status despite a greater level of private involvement than is ordinarily allowed for these types of bonds. This

allows public-private partnerships (PPPs) to obtain lower

financing rates, eliminating one barrier to private sector participation in transportation finance.

As of June 2007, the U.S. DOT has awarded PAB allocations for

three different projects.

• The Missouri DOT (MoDOT) applied for a $600 million

allocation for the “Missouri Safe and Sound” bridge

improvement project. A provisional PAB allocation of up to

$600 million was approved in May 2007. The allocation will

be made available to two prospective short-listed teams, and

ultimately to the successful bidder. The Missouri

Development Finance Board issued an inducement resolution

in March 2007, allowing it to serve as a conduit issuer for the

bonds. Final proposals are due from both short-listed teams in

June. The source of repayment will be availability payments

from the state DOT that are keyed to the availability and

condition of the bridges at specified standards. Forty percent

of the scoring will be based on the lowest level of availability

payments that bidders will accept.

• In March 2007, two provisional allocations – one for up to

$900 million and one for $1.4 billion – were approved for the

Port of Miami Tunnel project, which will be constructed under

a long-term availability payment arrangement. These

allocations for the $1.1 billion project were made available to

the two bidders who applied conditional, among other things,

on being selected by the Florida DOT as the concessionaire.

The Miami Access Tunnel (MAT) consortium was named the

selected concessionaire in May.

• MAT proposed the lowest annual maximum availability

payment, at $33.2 million. The Miami-Dade County

Industrial Development Authority will serve as the conduit

issuer for the $900 million in PABs, with a medium tranche of

PABs used for bridge financing during five years of

construction, and a second long-term tranche for the 35 year

concession period.

• In October 2006, the Texas DOT (TxDOT) received a

provisional allocation of up to $1.866 billion for the SH 121

project, which was made available to all three short-listed

$3.37 Billion in Conditional Private Activity Bond Allocations Made

continued on page 2
PABs, continued from page 1

bidders. Also under a SEP-15 experiment with TxDOT, in November 2006 the U.S. DOT conditionally approved up to $700

million in TIFIA credit assistance for the project. On February 28, the Texas Transportation Commission (TTC) selected Cintra

to develop the project. However, based on recent actions by the North Texas Regional Transportation Council and the TTC, the

project has been awarded to the North Texas Tollway Authority, subject to certain conditions being met. Neither TIFIA nor PABs

will be utilized for the project, and the PABs allocation will be made available to other qualified facilities.

The table below summarizes PAB allocations to date.

Summary of Private Activity Bond Allocations

Project Allocation Project Description Revenue Source Notes

Missouri Bridge Safe and Up to $600 million – Reconstruct or rehabilitate Availability payments MoDOT made 

Sound Improvement Project expires in March 2008 802 of Missouri’s most from MoDOT application; both 

deficient bridges short-listed bidders will

be eligible for allocation

Miami Port Tunnel Project Up to $900 million Construct Availability payments Both Miami Access Tunnel

to MAT, expiring Miami Port Tunnel from Florida DOT (MAT) consortium and Miami

October 2007 Mobility Group (MMG) 

received allocations 

Up to $1.4 billion to MMG conditional on winning

bid; MAT selected

Texas SH 121 Up to Complete construction Toll revenues $200 million extended to 

$1.866 billion (expires of new 26.5-mile open allow time for completion

October 2007; $200 road toll facility of NEPA on optional 

million extended through Segment 5 of project 

September 2008) (which TxDOT has option

to include in concession)

The Finer Points of TIFIA

The “Finer Points of TIFIA” box provides responses to questions posed by our readers and other observers. We hope you

find this section useful and that you will submit questions to Mark Sullivan, Director, TIFIA JPO, (202) 366-5785 or

mark.sullivan@dot.gov.

Question

Does the U.S. DOT provide approaches to TIFIA repayment that help the borrower manage uncertain cash flows?

Answer

In a number of TIFIA transactions, the U.S. DOT has allowed alternative repayment schedules in the form of

simultaneous scheduled debt service (due if funds are available) and mandatory debt service (a lower amount

established to reduce the likelihood of payment default, see Fall 2006 IFQ) to address the vulnerability of project financings to uncertain activity and revenue performance. The flexible amortization structure, used in

Florida DOT’s TIFIA loan for the Miami Intermodal Center Rental Car Facility, takes this approach a step further. In this loan, repayments of principal are based on a percentage of funds available rather than a fixed

schedule of amortization. To ensure the loan will be repaid within its 35-year maturity, the parties calculate

annually a forward-looking project life coverage ratio (PLCR), defined as the net present value of project

resources divided by project obligations, to determine whether rate increases or additional revenues are needed.

The unique nature and strength of this structure obviates traditional minimum coverage requirements and thus

the back loading of loan obligations. This represents an “ultimate recovery” loan structure, a departure from the

traditional capital market standard of full and timely payment. By avoiding the back loading of debt, the project

sponsor anticipates considerable interest expense savings while minimizing the risk of payment default. This

approach may have a broader application for future TIFIA financings as this concept gains acceptance in the

capital markets.

Two applications received in May 2007 are under review. The

first is an application from CenterPoint, an owner/developer of

industrial real estate in the metropolitan Chicago area, for an

allocation of up to $505 million for the CenterPoint Intermodal

Center in Crete, IL. The second pending application is from

KABATA, which is requesting a $600 million PAB allocation for

the Knik Arm Crossing project.

Contact: 

Jack Bennett, Office of the Secretary, U.S. DOT

202/366-6222,

jack.bennett@dot.gov

New Applications

2
3

The proposed KABATA procurement

process would accelerate the loan process

for the two potential concessionaires prequalified in March 2007. KABATA plans

to issue a Request for Proposals in the fall

asking the two proposers to submit final

detailed proposals for the project that

include financial proposals with loan and

equity commitments. Each potential

concessionaire that elects to use TIFIA

would have to identify the amount, terms,

and conditions of available TIFIA credit

assistance prior to making a financial offer

to the KABATA. This process would

allow the KABATA to compare the value

to the state of each financial proposal, and

assure that the winning concessionaire

could execute all financing documents

shortly after award.

The project area is in Upper Cook Inlet in

the Knik Arm north of the Port of

Anchorage and south of the confluence of

the Knik River and the Knik Arm. The

Knik Arm separates the Municipality of

Anchorage from the Mat-Su Borough by

about two miles in this area. The estimated construction cost of the project is

$600 million. Costs will be refined as the

design process is further developed. The

Knik Arm project would be another example of how through the Secretary’s SEP-15

authority, the U.S. DOT is able to experiment with departmental policies and procedures to further its goals of reducing

congestion and preserving our transportation infrastructure.

The SEP-15 acceptance letter for this project was issued in early June. The next

step is execution of the early development

agreement, which is expected in early July.

Letters of Interest Received

The TIFIA credit program has received

two Letters of Interests in 2007, one for a

rental car facility in Massachusetts and a

second for a toll road in the Dallas area.

The Massachusetts Port Authority

(Massport) submitted a Letter of Interest

for the Consolidated Rental Car/

Commercial Parking Facility (ConRAC)

project seeking up to a $150 million

direct loan for the $453 million project

at Logan International Airport in

Boston. The project includes the construction of a consolidated rental car

facility, a commercial parking facility,

and a passenger bus system connecting

airline passengers with both parking and

rental car facilities. 

TxDOT submitted a Letter of Interest

for the IH 635 Managed Lanes Project

in the Dallas-Fort Worth metropolitan

area. The project consists of reconstruction of general purpose lanes, new construction of managed lanes and frontage

roads, and the tolling operation of the

expanded existing interim managed lanes

for approximately 22 miles along the IH

635 (LBJ Freeway) and IH 35E corridors

in Dallas County. This is one of the

three projects initially proposed under

the TIFIA SEP-15 experiment with

TxDOT. The first project advanced

under this experiment was the SH 121

project. Under the provisions of the

SEP-15 Early Development Agreement,

TxDOT has the flexibility to substitute

other projects.

Contact: 

Mark Sullivan, Director, 

TIFIA JPO

202/366-5785,

mark.sullivan@dot.gov

TIFIA Recap, continued from page 1

GARVEE ROUNDUP

GARVEEs Continue to Help States Meet Infrastructure Needs

Since January 2007, three states have

brought Grant Anticipation Revenue

Vehicle (GARVEE) issues to market –

Oklahoma, West Virginia, and

Maryland. The combined total of these

three issues is $453.9 million, bringing

the total amount of GARVEEs issued

(excluding refunding issues) since enactment of the NHS Act of 1995 to nearly

$6.6 billion. By leveraging Federal dollars through bonding, states have made

significant strides in meeting critical

surface transportation needs.

In March 2007, the Oklahoma

Department of Transportation (ODOT)

issued $95.7 million in Grant

Anticipation Notes (i.e., GARVEEs), the

third issue sold by the Department. The

proceeds will be used on corridors of

economic significance, selected by

ODOT, and approved by the Oklahoma

Transportation Commission. ODOT

anticipates issuance of approximately

$300 million of additional notes to fund

highway projects and improvements

through 2010.

Following this issue, in April 2007,

West Virginia sold $33.2 million in

GARVEEs, its second GARVEE sale.

West Virginia’s issue is featured in this

issue of IFQ.

In May 2007, the Maryland

Transportation Authority brought its

inaugural GARVEE issue to market, the

first of two anticipated GARVEE issues.

The proceeds of this $325 million issue

will be used to fund the initial construction costs of the Intercounty Connector

(ICC) Project. The Authority expects

to issue in total $750 million of

GARVEE bonds in two issues to fund

this project with the second issuance

planned for 2008. The ICC, a high

transportation priority for Maryland,

will be an 18.8-mile controlled-access

tolled highway connecting Interstate

270 with Interstate 95. The project’s

financial plan includes a range of funding sources, including a $516 million

TIFIA loan.

Contact: 

Jennifer Mayer,

FHWA Resource Center

415/744-2637,

jennifer.mayer@dot.gov
4

Number Total Issuance Projects

State of Issues (in Millions) Financed Insurance

Alabama 1 $200.0 County bridge program Yes

Alaska 1 $102.8 Eight road and bridge projects No

Arizona 5 $460.4 Maricopa freeway projects 2001 and 2004 issues only

Arkansas 3 $575.0 Interstate highways No

California 1 $614.9 Eight road projects Yes, except 2005 series

Colorado 5 $1,666.0 Projects in the Statewide Strategic Yes

Transportation Project Investment

Program, including T-Rex project

Georgia 1 $360.0 Projects in the Governor’s Fast Forward Yes

Program that provide congestion relief and

economic development improvements

Idaho 1 $194.3 Various expansion projects Yes

Kentucky 1 $139.6 Three Interstate widening and Yes

rehabilitation projects

Maine 1 $48.4 Replacement of the Waldo-Hancock Bridge Yes

Maryland 1 $325.0 Intercounty Connector No

Montana 1 $122.8 44 miles of U.S. 93 improvements Yes

New Mexico 2 $118.7 New Mexico SR 44 and Yes

U.S. 70 Corridor Reconstruction

North Dakota 1 $51.4 Highway and bridge projects Yes

Ohio 7 $718.1 Various projects including: Only 2006 issues

Spring-Sandusky and

Maumee River improvements

Oklahoma 3 $192.2 Projects in 12 corridors 2005 and 2007 issues

Puerto Rico 1 $139.8 Various transportation projects Yes

Rhode Island 2 $401.4 Freeway, bridge, and freight Yes

rail improvement projects

Virgin Islands 1 $20.8 Enighed Pond Port Project and Red Hook Yes 

Passenger Terminal Building

West Virginia 2 $109.2 Route 35 enhancements Yes

Total 41 $6,560.8

GARVEE Transactions

As of June 2007

West Virginia is advancing the U.S. 35

project in large part through Grant

Anticipation Revenue Vehicle (GARVEE)

bond financing. Importantly, this project

is the first in the state to be financed with

GARVEEs; the state issued its initial

GARVEE bond for the project in late

2006 with a second issuance in early

2007. The U.S. 35 project is approximately 37 miles long, and is located in

Putnam and Mason Counties. Because

the U.S. 35 corridor is one of the state’s

“Life in the Fast Lane” – West Virginia Accelerates U.S. 35

“It’s hard to believe how far we have come in just one year. Much of

the success can be attributed to a strong partnership and sense of

teamwork that exists between the West Virginia Division of

Highways and the FHWA Division Office. In this case, FHWA’s

Resource Center and Headquarters also joined the “team” and

played a critical role, helping with the project’s successful acceleration

through technical assistance in innovative finance and contracting.” 

– Tom Smith, WV Division Administrator

Note: Table excludes refunding issues.

continued on page 7
5

The Finer Points of GARVEEs

Each issue of IFQ features questions and answers on the GARVEE program. This issue focuses on the eligibility of

arbitrage penalties for Federal-aid reimbursement.

Note that answers to these questions are not regulatory or legislative, but represent FHWA’s current administrative interpretations. If you have questions or want to confirm any of this information, please contact your local FHWA Division office.

GARVEE guidance also is available at: http://www.fhwa.dot.gov/innovativefinance/garguid1.htm.

If a GARVEE issuer receives an arbitrage penalty, is the cost associated with that penalty eligible for Federal-aid

reimbursement as a project cost?

In the case of government-issued debt, arbitrage occurs when a government entity issues bonds obligating it to pay one rate

of interest, and is able to invest the bond proceeds at a higher rate of interest. For example, a bond might be issued at 4.5

percent interest, but a government entity might be able to earn 5 percent interest on the bond proceeds. The resulting gain

is referred to as arbitrage earnings. 

The arbitrage earnings on tax-exempt bonds are constrained by Federal tax laws. Arbitrage earnings that exceed limits

imposed by Federal regulations must be rebated to the Federal government. Generally, a government issuer can avoid rebating interest earnings on construction bonds if it expends 10 percent of the proceeds and earnings within six months, 45

percent within one year, 75 percent within 18 months, and 100 percent within two years. The IRS exception provisions

also permit an issuer to pay a penalty rather than a rebate if these schedules are not satisfied. 

Any arbitrage penalty incurred by a GARVEE issue is not eligible for Federal-aid reimbursement in accordance with Federal

policy, and must be covered from other sources. This exclusion from allowable costs is addressed in the March 2004

GARVEE guidance (see website above). Specifically, 2 CFR Appendix B to Part 225 (Selected Items of Cost) (formerly

OMB Circular A-87), Section 16 states that “Fines, penalties, damages, and other settlements resulting from violations (or

alleged violations) of, or failure of the governmental unit to comply with, Federal, state, local, or Indian tribal laws and regulations are unallowable except when incurred as a result of compliance with specific provisions of the Federal award or

written instructions by the awarding agency authorizing in advance such payments.” 

Section 3011 of SAFETEA-LU authorized the Secretary of

Transportation to establish and implement a pilot program

to demonstrate the advantages and disadvantages of PPPs

for certain fixed-guideway capital projects. The PublicPrivate Partnership Pilot Program, known as “Penta P,” will

allow the U.S. DOT to study whether the arrangement

speeds completion, allows more reliable projections of project costs and benefits, and improves project performance.

Transit PPP Approaches

Transit agencies have increasingly turned to PPP project delivery approaches to procure new or expanded transit services.

Design-build (DB) contracts have been one of the most common approaches, combining the design and construction

phases into one, fixed-fee contract. Under a design-build contract, the design-builder, not the transit agency, assumes the

risk that the drawings and specifications are free from error.

Since the late 1990s, five fixed-guideway transit New Starts

projects have been procured using the DB approach: the

Denver Regional Transportation District (RTD) Southeast

Corridor Light Rail (LRT) project; the South Florida

Commuter Rail Upgrades; the Minneapolis Hiawatha LRT

Line; the Bay Area Rapid Transit (BART) Extension to the San

Francisco International Airport; and the Washington

Metropolitan Area Transit Authority (WMATA) Largo

Metrorail Extension. An additional project not supported by

New Starts funds is the Portland MAX Airport Extension.

Another delivery approach is design-build-operate-maintain

(DBOM). Under a DBOM, the selected contractor is responsible for the design, construction, operation, and maintenance

of the facility for a specified time and must meet established

performance standards. Since the late 1990s, three transit projects have been procured as DBOMs: the New Jersey Transit

Hudson-Bergen LRT Minimum Operable Segment (MOS)-1

and MOS-2; and the JFK Airtrain.

In comparison to traditional approaches, the primary benefits

that have been associated with DB, DBOM, and other PPP

approaches include:

• Time saving, resulting from earlier contractor involvement in

the design phases, the ability to work concurrently on design

and construction activities, and the elimination of multiple

bidding processes.

U.S. DOT Launches Transit PPP Pilot Program

continued on page 7
6

Researchers at FHWA recently used a modeling program called

the Tool for Rush Hour User Charge Evaluation (TRUCE) to

estimate the potential costs, benefits, and revenues from a new

system of financing involving operation of high performance

highways. The planning tool is available on FHWA’s web site at

www.ops.fhwa.dot.gov/tolling_pricing/value_pricing

/tools/index.htm.

High performance highways involve the application of variable

tolls on all lanes of existing tollways and toll-free limited-access

facilities to manage traffic flow. Tolls vary by level of demand,

either on a fixed schedule by time of day or in real time to reflect

changes in congestion levels, and are charged on congested highway segments to manage traffic flow. The concept also involves

promotion of carpools and vanpools, park-and-ride facilities,

and provision of express bus services, to provide travel alternatives to transportation system users.

The potential of the high performance highway concept was

assessed using TRUCE for five metropolitan areas, representing

the most heavily congested freeway networks in the U.S. – Los

Angeles, Chicago, San Francisco, Washington DC, and Atlanta.

These five areas have a total population of approximately 32

million and freeway networks comprising a total of 15,260 lane

miles. Input data for TRUCE for 2003 were obtained from the

Texas Transportation Institute's (TTI) Urban Mobility Study.

Inputs included:

• The peak-period “travel time index” (i.e., ratio of average peak

period travel time to free-flow travel time), which, along with a

free flow freeway speed of 60 mph, was used to calculate

average freeway network speeds.

• Total daily freeway vehicle miles of travel (VMT), which was

used to calculate peak period VMT, based on the number of

rush hours identified by the TTI study and the share of travel

in the AM and PM peak periods from the U.S. DOT's 2001

National Household Travel Survey.

• Number of freeway lane miles, which was used to calculate the

average hourly traffic volume per lane over the peak periods,

for both directions.

Using the TRUCE software, the FHWA researchers estimated

the toll revenues, benefits, and costs associated with a multimodal pricing package that includes transit and park-and-ride

services. They determined that benefit/cost ratios would average

6.6 for the five metropolitan areas. There would be huge reductions in congestion delay, averaging 33 person hours per peak

period traveler annually. Annual reductions in fuel consumption would average 82 gallons per peak period traveler. Total

benefits for the five cities would exceed $11.5 billion annually,

and net social benefits after accounting for public costs for highway, transit, and park-and-ride facility operations would amount

to almost $10 billion. “Because the TRUCE model uses conservative assumptions to project benefits, these estimates are on the

low end,” says Jack Wells, chief economist at the U.S. DOT.

“The model does not account for environmental and safety benefits, benefits to businesses and the economy, and increases in

energy security.”

The toll revenue estimates for the five metropolitan areas suggest

that implementing the concept could provide sufficient revenue

to replace the fuel tax with revenues from congestion pricing on

the limited-access highway system. New toll revenues would

bring in over $10 billion annually, and a surplus of over $8 billion would be available after paying for all highway, transit, and

park-and-ride costs. By comparison, estimated total current fuel

tax receipts in these five areas is less than $5 billion annually.

In addition to the huge highway efficiency benefits, replacing

the fuel tax with congestion pricing is likely to be fairer to highway users. “You pay 2 or 3 cents per mile, wherever you drive,

in gas tax” notes Mike Krusee, a Texas State legislator. “But if

you live in the urban core, you drive mostly on city streets, and

none of the tax you pay goes toward those city streets, while the

guy who lives in the suburbs is driving 40 miles each day on

superhighways that cost billions and he's paying only pennies...

You pay 2 cents to drive a rural highway that costs very little to

construct ...And, yet, you pay the same 2 cents when you cross

an interstate interchange that costs $300 million.”

High performance highway networks represent one approach

to curbing the growing burden of traffic congestion. Tools

such as TRUCE can help inform the local decision making

process and attain public understanding and acceptance for

this innovative approach.

CONGESTION PRICING

Contact: 

Patrick DeCorla-Souza, FHWA

202/366-4076,

patrick.decorla-souza@dot.gov

Annual Benefits Five City Total

Highway Benefits $11,225

Transit Benefits $283

Mulitmodal Benefits $11,506

Annual Costs to Transportation Network

Highway Costs $1,123

Transit Costs $626

Multimodal Costs $1,749

Multimodal Benefit/Cost Ratio 6.6

Annual Toll Revenues Versus Costs

Toll Revenues $10,330

Multimodal Costs $1,749

Surplus $8,581

Annual Fuel Tax Receipts $4,896

TRUCE Estimates Costs, Benefits, and 

Revenues from High Performance Highways
7

• Cost savings, resulting from the

shortened project timeline resulting

from the above, as well as enhanced

communication, reduced inspection

requirements, and fewer change orders.

• Shared risks, assigned to the party best

able to handle them.

• Improved quality, related to the

involvement of the design team

throughout project development.

Pilot Projects Selected

In January 2007, the Secretary established

and solicited applications for Penta P. For

New Starts projects selected under this

program, ratings will be adjusted to

account for the private sector participation. For any selected projects not seeking

New Starts funds, FTA may provide regulatory relief for certain project development activities.

Four applications were received for up to

three pilot projects to be selected by the

FTA. On May 16, the $400 million

Oakland Airport Connector (OAC) was

the first Penta P project selected. The

OAC is a 3.2-mile automated people

mover to be developed by BART with

support from a private partner to partially finance, build, operate, and maintain the project in exchange for

availability payments over 35 years. The

proposed availability payments can total

no more than $18.7 million per year,

adjusted for inflation. Actual payments

could be higher if ridership is higher

than expected. Monthly payments will

be reduced if the private partner fails to

meet performance and operations

requirements.

Three teams were short-listed by BART

with proposals due in fall 2007. The private partner is expected to invest about

$170 million, including $46 million in

financing costs. As part of its Penta P

designation, BART will pursue Federal

funding and expedited reviews from

FTA.

On May 25, the Secretary announced that

the North Corridor and Southeast

Corridor Bus Rapid Transit (BRT)

Projects in Houston also had been

selected for Penta P participation. The

projects, which constitute a single project

designation under Penta P, will provide

improved access to the Houston central

business district (CBD). The North

Corridor is a 5.4-mile BRT line extending

from a planned intermodal terminal at the

existing Hardy rail yard north of the CBD

to the Northline Mall Transit Center.

The project is a first phase of a planned

24-mile rapid transit line from the CBD

to George H. Bush Intercontinental

Airport.

The Southeast Corridor is a BRT line

extending from the current Main Street

Light Rail system in the CBD to the

Palm Center park-and-ride near Dr.

Martin Luther King Jr. Boulevard. The

BRT line would provide service to the

University of Houston-Downtown, Texas

Southern University, and the Texas

Medical Center. The project is the first

phase of a planned 13-mile rapid transit

line from the CBD to William P. Hobby

Airport. 

The pilot will study, among other things,

the benefits of procurement methods

that integrate risk-sharing and streamline

project development, engineering, construction, operation, and maintenance.

The amount and terms of private investment in such projects is a significant factor in selecting projects to participate in

the program. 

Contact: 

David Horner, 

Office of the Secretary, U.S. DOT

202/496-4800,

david.horner@dot.gov

Penta P, continued from page 5

most heavily traveled highways, it was critical for the state to

accelerate the project due to safety concerns, as well as expand

economic development opportunities. Designated as part of the

National Truck Network and the National Highway System,

U.S. 35 is a critical regional corridor – providing passenger and

freight movement to cities and markets primarily in the

Southeast and Midwest.

The West Virginia DOT has the authority to issue up to $200

million in bond financing for the U.S. 35 project, and has

received very favorable interest rates for the first two bond issues.

Interest rates received to date are between 3.75 percent and 5.0

percent. The third and final bond issue for the project is anticipated in late fall 2007.

The other significant aspect to this project and another first for

West Virginia is the use of design-build contracting. In March

2007, West Virginia awarded a $73.8 million design-build contract to E.L. Robinson Engineering (Charleston, WV) and

Kokosing Construction Co. Inc. (Columbus, OH) to design and

construct a 6.28-mile stretch of Route 35 between State Route

34 and Hurricane Creek Road.

In total, five construction contracts are progressing on an accelerated schedule in Putnam County near Interstate 64. During

late 2007 and 2008, the focus will turn to the northern end of

the project in Mason County.

West Virginia GARVEE, continued from page 4

Contact: 

Joe Werning, 

FHWA Resource Center, U.S. DOT

304/347-5929,

joseph.werning@dot.gov
8

Toll credits, first authorized in the Intermodal Surface

Transportation Efficiency Act of 1991 (ISTEA), are being

used extensively by states with toll facilities. As of May 31,

2007 over $18 billion in toll credits had been approved in 22

states and Puerto Rico. Toll credits are designed to encourage

states to increase capital investment in transportation infrastructure and enable states to simplify program administration. To the extent toll credits are available, a state may use

up to 100 percent Federal funds to construct some projects,

while using the state or local funds that would have been

required to match Federal funds to construct other projects

with 100 percent state or local funds. In effect, by using toll

credits to substitute for the required non-Federal share on a

Federal-aid project, up to 100 percent Federal funding may

be used on a project.

Toll credits are earned when the state, a toll authority, or a private entity funds a capital highway investment with toll revenues earned on existing toll facilities. The amount of the

credit earned is based on the amount of toll revenues used to

build, improve, or maintain highways, bridges, or tunnels that

serve interstate commerce. To utilize this tool, the state must

certify that its toll facilities are properly maintained and must

pass an annual maintenance of effort (MOE) test. The MOE

determination is an assessment of a state’s non-Federal transportation capital expenditures over a four-year period. The

expenditures in the last year of the four-year period must

exceed the annual average of the expenditures in the preceding

three years of the four-year period.

SAFETEA-LU included only two modifications to the toll

credit requirements as codified in Section 120(j) of Title 23,

United States Code (U.S.C.):

• The Appalachian Development Highway System (ADHS)

program under Section 14501 of Title 40 is now

specifically prohibited from using toll credits toward the

non-Federal share of an ADHS project. Prior to

SAFETEA-LU, the only statutory exception to the use of

toll credits was for the emergency relief program authorized

by Section 125 of Title 23.

• Toll credits can now be earned from projects paid for with

Federal-aid funding. However, SAFETEA-LU requires that

the toll credit amount earned from expenditures paid for

with Federal funds (except for loans of Federal funds or

other financial assistance that must be repaid to the Federal

government) shall be reduced by a percentage equal to the

percentage of the total cost of building, improving, or

maintaining the facility that was derived from Federal

funds. Prior to SAFETEA-LU, a state’s toll credit

calculation could only be based on toll revenues expended

on facilities that were built, improved, or maintained

without the use of Federal funds.

The MOE determination requirements were not revised by

SAFETEA-LU.

In February 2007, FHWA issued new information on implementing toll credits, which is posted online at:

http://www.fhwa.dot.gov/specialfunding/020807.cfm.

This information supplements FHWA’s previous memorandum “Toll Credit for Non-Federal Share, Section 1111(c) of

TEA 21, Implementing Guidance,” dated August 7, 1998.

TECHNICAL CORNER

Contact: 

Greg Wolf, FHWA

202/366-4655,

greg.wolf@dot.gov

How States Use Toll Credits

• Florida has been applying toll credits on a statewide

basis since 1993. Today the state is using toll credits

on almost every new Federal-aid project, so that most

of its Federal highway program is 100 percent

Federally funded, freeing up state dollars for stateadministered projects.

• Pennsylvania is using toll credits to increase Federal

funding to 100 percent for betterment projects. Toll

credits are also used as a match for the construction

phase of Transportation Enhancement projects where

the sponsor has completed the engineering and rightof-way phase with 100 percent local funds.

• Missouri reserves its toll credits for situations where

project matching funds are unavailable in order to

increase Federal funding to 100 percent of project costs.

• Ohio uses toll credits as a match on GARVEE projects

and also shares its toll credits with local government

agencies for both highway and transit projects.

What’s New in Toll Credits
9

EVENTS

ARTBA to Host 19th Annual Public-Private 

Ventures in Transportation Conference

The American Road & Transportation Builders Association’s (ARTBA)

Public-Private Ventures Conference is viewed by the transportation industry as the premier U.S. conference focusing exclusively on public-private

partnerships in transportation. This year’s conference will feature speakers

such as U.S. Secretary of Transportation Mary Peters (invited) and Robert

Darbelnet, President of the American Automobile Association (AAA).

With the growing interest in and popularity of PPPs, the 2007 conference

is expected to provide important information on the principles, best practices, and recent examples of these partnerships. This year’s conference is

scheduled to take place November 1 and 2, 2007 at the Hilton

Washington in Washington, DC. The registration fee for public sector

attendees is $100. To register for the conference, or to find out more

information, please visit www.artbappvconference.org or contact Laura

Spitz, ARBTA, at 202/289-4434.

A REMINDER TO READERS

FHWA DOES NOT MAINTAIN A MAILING

LIST AND DOES NOT DISTRIBUTE IFQ

DIRECTLY. IFQ IS AVAILABLE AS AN

INSERT TO THE AASHTO JOURNAL,

AND IS AVAILABLE ELECTRONICALLY

THROUGH FHWA’s www HOME PAGE:

http://www.fhwa.dot.gov/

innovativefinance/

IFQ IS ALSO PROVIDED TO THE FOLLOWING ORGANIZATIONS FOR REDISTRIBUTION AND/OR AS INFORMATION FOR

THEIR MEMBERSHIP:

• American Public Works Association

(APWA)

• Surface Transportation Policy

Project (STPP)

• NationalGovernor’sAssociation(NGA)

• National Association of State

Treasurers (NAST)

• National Association of State

Auditors, Controllers, and

Treasurers (NASACT)

• National Association of Regional

Council’s (NARC’s) Association of

MPOs (AMPO)

JOE DAILEY, FHWA

CO-MANAGING EDITOR

202/366-1616

FAX: 202/366-7493

JOSEPH.DAILEY@DOT.GOV

SUZANNE H. SALE, FHWA

CO-MANAGING EDITOR

602/379-4014

FAX: 602/379-3608

SUZANNE.SALE@DOT.GOV

LAURIE L. HUSSEY, CS MANAGING EDITOR

CAMBRIDGE SYSTEMATICS, INC.

617/354-0167

FAX: 617/354-1542

LHUSSEY@CAMSYS.COM

Reproduction (in whole or in part)

and broad distribution of IFQ is

strongly encouraged. Permission

from FHWA, the editor, or any

other party is not necessary.

Contributors to Vol. 13, No. 2 of IFQ include:

Jack Bennett, Office of the Secretary, U.S. DOT

Roger Berg, Cambridge Systematics, Inc.

Keith Bishop, FHWA National Resource Center

Duane Callender, TIFIA Credit Program

Patrick DeCorla-Souza, FHWA

Paul Griffo, FTA

Jennifer Mayer, FHWA National Resource Center

Suzanne Sale, TIFIA Credit Program

Mark Sullivan, TIFIA Credit Program

Greg Wolfe, FHWA

New Home for U.S. DOT 

The U.S. Department of Transportation and FHWA have moved!

The new address is:

1200 North Jersey Avenue, S.E.

Washington, DC 20590

The new building is located across from the Navy Yard station on the

Washington Metro Metro Green Line. Telephone and fax numbers have

not changed.