Two of the three applications received in

2006 for credit assistance under the

Transportation Infrastructure Finance

and Innovation Act (TIFIA) represent

innovative public-private partnerships

(P3s) that may influence the direction of

the program. The three applications are

from the Texas Department of

Transportation (TxDOT) for the SH

121 Toll Project, the Maryland

Transportation Authority (MdTA) and

Maryland State Highway Administration

for the Intercounty Connector Project,

and Transurban (895) U.S. Holdings

LLC for the Richmond Airport

Connector Project. The SH 121 Toll

Project and Richmond Airport

Connector Project are seeking to make

use of the FHWA’s Special Experimental

Project No. 15 (SEP-15) authority to

advance P3s. 

The SEP-15 derives from Section 502

of Title 23, United States Code and it

allows the Secretary to waive the

requirements of Title 23 and the regulations under Title 23 on a case-bycase basis. The SEP-15 allows the

FHWA to experiment in four major

areas of project delivery – contracting,

right-of-way acquisition, project

finance, and compliance with the

National Environmental Policy Act

(NEPA) of 1969, 42 U.S.C. §4321 et

seq, and other environmental requirements. The SEP-15 allows the U.S.

DOT and the FHWA to explore

Georgia Governor Sonny Perdue’s FastForward initiative – a

program to accelerate the delivery of congestion-relieving transportation projects – has sparked the unique implementation of

a creative and critical timesaving Grant Anticipation Revenue

Vehicle (GARVEE) bond program. With GARVEEs as a key

element of the program, $15.5 billion of projects will be implemented in six short years rather than the 18 years that simple

pay-as-you-go financing would allow. In total, Georgia plans to

issue $3 billion of both direct and indirect GARVEEs.

The first $450 million of GARVEE bonds was issued in June

2006, which included $360 million in direct GARVEEs (using

Guaranteed Anticipated Revenue Bonds) and $90 million in

indirect GARVEEs (using Revenue Reimbursement Bonds).

This 80/20 split follows the Federal Highway Administration’s

(FHWA) local match requirements for the two Federal-aid categories that back the bonds: National Highway System and

Interstate Maintenance.

Accompanying these two bond instruments, Georgia was the

first state to issue Commercial Paper (CP) under the Federal

GARVEE program. With a short maturity of 270 days, the

$150 million CP issuance enables the Georgia Department of

Transportation (DOT) to implement the top priority projects in

a very short timeframe. The CP also serves a line-of-credit function, allowing Georgia DOT optimal flexibility with its cash

FEDERAL CREDIT PROGRAM

VOLUME 13, NUMBER 1 Winter 2007

TIFIA Program Feels the Emergence of Public-Private Partnerships

Georgia is Moving FastForward with GARVEEs

continued on page 2

GARVEE ROUNDUP

Also in this issue...

Recent GARVEE Issues . . . . . . . . . . . . .2

Ohio DOT Creates Bond Fund . . . . . .6

Kansas Transportation 

Revolving Fund . . . . . . . . . . . . . . . . .7

FTA Debt Service 

Reserve Pilot Program . . . . . . . . . . . .9

Tax Increment Financing . . . . . . . . . .9

continued on page 3

Fund Sources for Georgia’s 

FastForward Program 

$3.00 billion − GARVEE Program

$11.05 billion − Georgia DOT’s

 Regular Program

Total Proposed Program 2005-2010 

$15.57 Billion 

$1.52 billion − General Obligation/ 

Guaranteed Revenue 

Bond Program 
flow management. The first of three equal tranches of $50 million was offered on parity with the GARVEE bond issuances in

June 2006. 

Projects Funded

The projects funded were chosen for their ability to expedite traffic congestion relief in the Atlanta metropolitan

area. Within the Governor’s FastForward program, these

projects include ramp metering at congested interchanges,

signal timing on critical arterial roads, additional lanes on

surface-level roads, park-and-ride lots for commuter transit,

high-occupancy vehicle (HOV) lanes, interstate upgrades

and capacity additions, and implementation of commuter

transit in underserved corridors.

An expansion of Georgia’s Intelligent Transportation System

(NaviGAtor) and Highway Emergency Response Operators

(“HERO” units) also will be partially funded by GARVEEs.

This will allow Georgia to safely and efficiently clear traffic

incidents that disrupt the flow of traffic and cause delays. The

expansion also will provide traffic control for emergency

responders, assistance to stranded motorists, expansion of

peak-hour HERO coverage from 164 miles to 286 miles, and

44 additional HERO personnel. With this investment, it is

estimated that Georgia can reduce peak-hour delays by as

much as 30 percent.

Other than the ability of the FastForward program to provide

much needed traffic congestion relief, implementing these projects in the short term will save millions of dollars by avoiding

inflation pressures currently experienced in the construction of

transportation infrastructure. Georgia DOT currently is experiencing estimated materials cost inflation around 28 percent

per year, which dwarfs the interest costs of the GARVEEs in

the four percent per year range.

Features of GARVEE Issuance

The GARVEEs encumber no obligation on the State of Georgia

or its existing toll facility. Under the bond indenture, at the

beginning of each Federal fiscal year, the State Road and Tollway

Authority (SRTA, which is Georgia’s transportation bond

issuer) will request that Georgia DOT convert an amount of

advance construction sufficient for the payment of the entire

debt service and other bond-related costs on the Federal

Highway Grant Anticipation Revenue Bonds coming due in the

current Federal fiscal year. This ensures that the conversion of

advance construction will be the first obligation in that Federal

fiscal year of funds legally available for that purpose.

These tax-exempt investments were sold in $5,000 increments

and interest will be paid to investors semiannually. Maturity is

12 years and the average coupon yield is 4.08 percent for the

bonds. While the state is not required to insure the bonds,

those maturing in 2010 through 2018 are insured. The bond

ratings are as follows: 

Liquidity advisor services resulted in the highest ratings possible for the Commercial Paper issuance.

Various bond-related costs are eligible for reimbursement such as

principal and interest payments, issuance costs, insurance, and

other costs incidental to a financing. Annual debt service for

this 2006 issuance ranges between $33 million and $41 million.

For the entire GARVEE program, annual debt service is limited

to approximately 20 percent of Georgia’s projected Federal aid.

The SRTA has ensured an open and competitive process for

GARVEE debt financing.

Since the last issue of IFQ, three states have brought GARVEE

issues to market. In September 2006, Ohio sold $180 million

of grant anticipation vehicles or GARVEEs to accelerate the

construction of six highway and bridge projects. Included in

the projects to be financed with bond proceeds are three

widening and rehabilitation projects on Ohio’s Interstate

System. This sale, the second in 2006, brought the total

GARVEE issuance for Ohio to $718 million. Looking ahead,

Ohio plans to accelerate its GARVEE program with the

issuance of an additional $600 million in GARVEE bonds

over the next three years.

West Virginia launched its first GARVEE bond issue in

October 2006 selling $76 million in notes to finance the

design and construction of approximately 15 miles of widening work on U.S. 35 in Putnam and Mason Counties. These

projects along U.S. 35, one of the state’s most heavily traveled

highways, are designated as “special initiative” projects, part of

a program to accelerate critical safety improvements and

expand economic development in this corridor. A second

issue of $124 million is planned in 2007, representing the balance of the state’s authorized $200 million of GARVEE bonds.

Also in October 2006, New Jersey issued its first GARVEE

bond in the amount of $131.6 million. Revenues from this

2

Georgia Moving FastForward, continued from page 1

Earl Mahfuz, Georgia DOT

404/656-5224,

earl.mahfuz@dot.state.ga.us

Sally Charles, SRTA

404/893-6100,

scharles@georgiatolls.com

Contacts:

Jannine Miller, SRTA

404/893-6106,

jmiller@georgiatolls.com

Source: Official Statement, Georgia 2006 Grant Anticipation Revenue Bonds, and

Revenue Reimbursement Bonds, and Offering Memorandum, Georgia 

Series A Federal Highway Reimbursement Revenue Commercial Paper Notes.

continued on page 8

Recent GARVEE Issues

Instrument Fitch Moody’s Standard & Poor’s

GARB and RRB AA- Aa3 AACommercial Paper F-1+ P-1 A-1+

or
3

changes in current laws, regulations,

and practices that impede private

investment in transportation improvements and to develop approaches to

remove these impediments. For more

information, see “The Finer Points of

TIFIA” on page 5.

SH 121 Toll

TxDOT is advancing the SH 121 Toll

Project in the Dallas-Fort Worth metropolitan area under a competitive procurement process through which it will

select a private concessionaire to complete construction and operate the facility for 50 years. The TIFIA

commitment will be made available to

all of TxDOT’s qualified proposers,

enabling them to factor TIFIA into

their financial plans with the assurance

that a credit agreement could be executed within the timeframe established

by TxDOT, assuming the Federal

requirements are satisfied.

The preliminary financial plan developed by TxDOT (subject to revision

based on the selected concessionaire’s

project financing structure) includes the

issuance of approximately $1.163 billion of senior lien, tax-exempt Private

Activity Bonds (PABs), and a requested

TIFIA loan of $700 million. The estimated project cost is $2.13 billion.

On November 14, 2006, the Secretary of

Transportation approved the requested

$700 million in TIFIA credit assistance

for the SH 121 Toll Project with conditions. This conditional assistance is

being made available to TxDOT under

the provisions of a SEP-15 Early

Development Agreement (EDA) executed in June 2006, and is subject to the

ultimate borrower meeting all terms and

conditions set forth in the Conditional

Term Sheet with TxDOT.

The SH 121 Toll Project consists of the

construction of six main lanes with

interchanges at major cross streets and

direct connection interchanges at main

expressway I-35E, the Dallas North

Tollway, and U.S. 75. TxDOT has

divided the project into five segments,

with Segments 1-4 expecting final

NEPA approval for toll road operations

by April 2007 and Segment 5 (the

interchange with the Dallas North

Tollway) 12 months later. 

TxDOT has completed construction of

Segment 1 and is currently building

Segment 2; both are in Denton County.

The selected concessionaire will be

responsible for the design and construction of the Collin County portion

(Segments 3-5) of the project as well as

the design and installation of electronic

toll facilities for the entire project. The

concessionaire will operate and maintain the entire constructed project as a

single facility.

Richmond Airport Connector

Similar to the SH 121 Project,

Transurban, an Australian toll road

developer, is seeking to advance the

Richmond (Virginia) Airport

Connector Project by experimenting

with the new TIFIA refinancing provisions through the SEP-15 program.

Section 1601 of the Safe, Accountable,

Flexible, Efficient Transportation

Equity Act: a Legacy for Users

(SAFETEA-LU, Pub. L. 109-59, 119

Stat. 1144) amended TIFIA to allow

secured loan proceeds to “refinance

long-term project obligations or Federal

credit instruments if such refinancing

provides additional funding capacity for

the completion, enhancement, or expansion of any project that (i) is selected

under section 602; or (ii) otherwise

meets the requirements of section 602.”

Transurban would like to refinance a

portion of its $611 million acquisition

of the Pocahontas Parkway from the

Virginia Department of Transportation

(VDOT) as well as its construction of

an additional highway connector from

the Parkway to the Richmond

International Airport through the use of

a $150 million TIFIA direct loan.

The Parkway, also known as Route 895,

is an 8.8-mile toll road outside the

Greater Richmond Area which was

completely opened to traffic in

September 2002 and financed by a

combination of tax-exempt revenue

bonds ($354 million), a State

Infrastructure Bank loan ($18 million),

and Federal funding for roadway design

($9 million). Transurban has established a special purpose company

(“T895”) that acquired the rights to

enhance, manage, operate, maintain,

and collect tolls on the Pocahontas

Parkway. The Richmond Airport

Connector is envisaged to be a 1.58-

mile, four-lane roadway that will provide motorists with direct access to the

Richmond International Airport.

Intercounty Connector

The Secretary of Transportation also has

approved $516 million in TIFIA credit

assistance for the Intercounty

Connector (ICC) Project. The ICC

will be an 18-mile, six-lane, access-controlled, congestion-managed toll highway located in Prince George’s and

Montgomery counties, Maryland. The

project, which will have 100 percent

electronic open road tolling, will link

the I-270 and I-95/U.S. 1 corridors.

The estimated project cost is projected

to be $2.4 billion.

The requested TIFIA loan will be

secured by a pledge of MdTA system

revenues. The MdTA system includes

seven existing toll facilities throughout

Maryland and is one of the highestrated U.S. toll credits. The project will

be funded from a combination of state

funds, GARVEE bonds, and the TIFIA

credit assistance.

Letters of Interest

The Central Texas Regional Mobility

Authority (CTRMA) submitted a Letter

of Interest for the U.S. 290 East Toll

Project seeking up to a $172 million

direct loan for the $522 million project

in central Texas. The project includes

the reconstruction of approximately six

miles of the U.S. 290 East corridor

from U.S. 183 to just east of State

Highway 130. 

In addition, the North Carolina

Turnpike Authority (NCTA) submitted

a Letter of Interest for the Triangle

Turnpike Project seeking a $317.3 million direct loan for the $966 million

project in Raleigh, North Carolina.

TIFIA, continued from page 1

continued on page 4
4

The Finer Points of GARVEEs

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

tribal governments to issue GARVEEs.

Note that answers to these questions are not regulatory or legislative, but represent the 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 is also available at: http://www.fhwa.dot.gov/innovativefinance/garguid1.htm.

Can GARVEEs be Issued by Tribal Governments?

Under Section 122 of U.S. Code Title 23, Federal-aid funds, including tribal allocations from the Indian Reservation

Roads (IRR) program, may now be used to pay the interest and issuance costs of bonds issued to advance eligible IRR

projects. While tribal governments may use Federal-aid funds to repay debt service, the Federal government does not

guarantee the tribally issued bonds. The Bureau of Indian Affairs (BIA) uses the term “flexible financing” rather than

“innovative financing” to describe bonding and other financing arrangements. 

Example: A tribal government receives an annual IRR allocation of $150,000. The tribal government could pledge this

amount towards a project costing $1 million, and issue a bond with a 10-year term, assuming a six percent interest rate.

The tribal government could use the bond proceeds to begin the $1 million project immediately, and pay the debt service

(approximately $136,000 annually) on the bond with its future IRR allocations. The remaining amount of the annual IRR

allocation could be used for other projects.

Tribal governments also may be eligible to apply to states for financial assistance through a State Infrastructure Bank (SIB)

program to advance eligible IRR projects. As has been discussed in IFQ previously, a number of states have active SIB programs, ranging in size from under $100,000 to $80 million or more. These banks can provide loans, lines of credit, and

loan guarantees for eligible transportation projects. The maximum term for loans is 35 years, but initial repayments do not

have to begin until five years after project construction. Interest rates and exact loan terms are set by the state DOT

involved, and/or by the SIB itself, if it has a separate governing body. Federal-aid funds, including IRR funds, may be used

to repay these loans.

Example: A tribal government’s IRR allocation is $100,000, and it plans to begin a project that will cost $300,000. The

tribal government could apply to the state DOT’s SIB to provide them a five-year loan for the project. The tribal government would pledge to use approximately $71,000 of its IRR allocation each year to repay the loan at six percent interest.

The remainder of the annual IRR allocation, or $29,000, would be available for other projects. 

Example: A tribal government receives an annual IRR allocation of $150,000. The tribal government could pledge this

amount towards a project costing $1 million, and issue a bond with a 10-year term. The tribal government could use the

bond proceeds to begin the $1 million project immediately, and pay the debt service of the bond with its future IRR allocations. If the capital markets demand a higher interest rate than six percent, the tribal government could apply to the state

to use a SIB line of credit to provide additional guarantee of repayment of the bond. The tribal government could then

negotiate a lower interest rate, because the SIB line of credit would be available in the event of a temporary shortfall.

The proposed Triangle Turnpike is part of an overall beltway

system planned to encircle the Raleigh area and is comprised of three sections: the Triangle Parkway which would

extend NC 147 further south by 4.7 miles; I-540P which is

a 2.8-mile long segment currently under construction that

extends from NC 45 to NC 55; and the Western Wake

Parkway which covers a distance of 12.4 miles.

A Letter of Interest also was submitted prior to the SH 121

application as well as a Letter of Interest from the

Container Intermodal Distribution (CID) for the Inland

Systems Logistics Network Development (ISLND) project.

Web Site Update

The TIFIA Joint Program Office (JPO) is enhancing the

TIFIA web site. An updated program guide and application form will be posted shortly. In addition, for the first

time, an on-line form will be available for submission of

letters of interest. The new materials are intended to reflect

changes made to the TIFIA program in SAFETEA-LU as

well as various U.S. DOT credit policies and procedures.

Following the posting of the guide, application, and letter

of interest the JPO will be making other changes to the site

over the following weeks.

TIFIA, continued from page 3

Contact:

Mark Sullivan, Director

TIFIA JPO

202/366-5785,

mark.sullivan@dot.gov
5

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

How does the TIFIA program intend to adapt to the trend among state DOTs to offer concessions to multiple

private bidders?

Answer

The standard TIFIA loan process assumes the applicant already has control of the project seeking to be

financed. Under the private concession model, however, multiple bidders could seek TIFIA assistance in order

to obtain rights to the same project. This possibility requires the TIFIA program to rethink its loan process,

and a significant effort in this regard is an experiment with TxDOT to modify the TIFIA application process in

order to provide equal and transparent access to TIFIA assistance for all concession bidders.

Using the FHWA’s SEP-15 authority, TxDOT and the TIFIA JPO have agreed to modify the standard TIFIA

loan process for three project solicitations, beginning with the SH 121 toll road, to allow TxDOT to obtain a

conditional TIFIA credit commitment for use by each potential concessionaire. The revised process recognizes

the need to align TIFIA with state competitive procurements for private concessions. If successful, the U.S.

DOT would revise its TIFIA loan process to give all states the option to select this approach for obtaining

TIFIA assistance.

The key steps in the modified TIFIA loan process are:

• TxDOT submits a project application to the TIFIA JPO on behalf of all potential concessionaires;

• The TIFIA JPO project team evaluates the project based on the information submitted by TxDOT

in its application;

• The TIFIA JPO then seeks Credit Council recommendation and Secretarial approval of the project

and the credit terms and conditions;

• Subject to Secretarial approval, the U.S. DOT issues TxDOT a conditional term sheet and a standard form of credit agreement;

• The credit agreement and term sheet are included in TxDOT’s final request for detailed proposals

(RFDP) to the proposers;

• The proposers submit to TxDOT their offers, including detailed financial plans, which may utilize

TIFIA credit assistance;

• The TIFIA JPO project team reviews and evaluates all proposals, which include TIFIA credit assistance, for their ability to meet TIFIA program requirements and terms and conditions;

• TxDOT selects a concessionaire based on best monetary value; and

• Within a TxDOT specified time period, the concessionaire finalizes all financing, including TIFIA,

if it is part of the financing package.

Given that each proposer is likely to have a different project financial plan, a TIFIA application under this

experiment will include a pro forma plan of finance (based on internal assumptions and input from prospective

proposers) addressing project costs, forecast revenues, the senior lien debt, principal amount of TIFIA credit

assistance, and repayment terms. Also the requirement to submit a preliminary rating opinion letter at the time

of application will be deferred. Each competing entity under the state’s procurement process, if they elect to use

TIFIA assistance, is required to submit the letter as evidence of its ability to secure the investment grade rating

required for TIFIA credit assistance.

Further information regarding the features under this TIFIA SEP-15 experiment can be found at

http://www.fhwa.dot.gov/ppp/sep15.htm. 
Ohio continues to be a leader in developing and implementing statewide innovative financing programs which

target economic and infrastructure development. Most

recently, the Ohio Department of Transportation

(ODOT) with the assistance of the Ohio Treasurer's office

established an investment-grade bond financing program that

issues bonds on behalf of eligible Ohio political subdivisions.

With its “State Transportation Infrastructure Bond Fund”

(STIBF), Ohio joins four other states in the nation that have

leveraged their SIB. As opposed to leveraging all future SIB

direct loan repayments with one large bond issue, the STIBF

allows bonds to be issued as needed, on a project-by-project

basis. Projects can range from $2 million to $20 million and

do not require any additional state resources. The program is

expected to generate an additional $100 to $150 million of

financing for transportation projects in Ohio.

With the assistance of its financial advisor, the program was

established in July 2006 and is now available to political subdivisions in Ohio. All bonds are issued by the Ohio Treasurer.

Eligible projects include highway, transit, airports, waterway,

roads, bridges, railroad, and any other transportation infrastructure projects. It is expected the bond fund program will

be utilized by cities, towns, villages, port authorities, and other

political subdivisions or public agencies in order to achieve a

lower cost of capital. Depending upon the credit quality of

the borrower, this financing program can frequently take a

specific revenue pledge (i.e., gas taxes, sales taxes, or income

taxes) towards a project rather than requiring a full general

obligation pledge which preserves debt capacity.

The STIBF Program is rated “AA-” by Fitch Ratings. This

rating is based upon the credit quality of all borrowers, as

well as the available program reserves. One key element of

this program is the pledge of the revolving SIB loan repayments as a reserve for the program. Established in 1996, the

SIB direct loan program makes direct loans to Ohio political

subdivisions for transportation related projects ranging in size

from $100,000 to $20 million. The SIB direct loan program

was originally capitalized with $40 million in state General

Revenue funds, $87 million in Federal funds, and $10 million

in state Motor Fuel Tax funds. To date, the program has made

28 loans from state sources and 68 loans from Federal sources

totaling $38 million and $156 million, respectively. 

The STIBF greatly increases the resources available to meet the

needs of transportation projects in Ohio. In fact, because the

program only leverages the future SIB direct loan repayments

as a reserve, these same loan repayments can continue to be

loaned out by ODOT. It is expected that future requests to

the SIB may also be met with a combination of a STIBF bond

and a SIB direct loan. The resulting blended, effective interest

cost is often expected to be lower than a political subdivision

SIB Loans Top $6 Billion

By the end of September 2006, the nation’s State

Infrastructure Banks (SIBs) had reached a major milestone, with the issuance of $6 billion in loans. As

shown in the table to the right, 32 states and Puerto

Rico have made 520 loans, using their SIBs to leverage

other available funds and complete plans of finance for

transportation projects across the nation.

This issue of IFQ provides updates on Ohio, a SIB pioneer, and Kansas, which has created its own statefunded Transportation Revolving Fund. The

experiences of both states illustrate how the SIB concept can be expanded to create other financing options

for needed transportation investment.

6

SIB HIGHLIGHTS

Contact: 

Phyllis Jones, FHWA

202/366-2854,

phyllis.jones@dot.gov

Loan 

Number of Agreement Disbursements

State Agreements Amount ($000) to Date ($000)

Alaska 1 $2,737 $2,737

Arizona 55 598,090 509,707

Arkansas 1 31 31

California 2 1,120 1,120

Colorado 4 4,400 1,900

Delaware 1 6,000 6,000

Florida 55 940,000 471,000

Indiana 2 6,000 6,000

Iowa 2 2,879 2,879

Maine 23 1,635 1,635

Michigan 41 27,788 27,888

Minnesota 17 106,676 106,244

Missouri 23 137,171 92,198

Nebraska 2 6,792 6,792

New Mexico 4 25,216 17,815

New York 10 27,700 27,700

North Carolina 2 1,746 1,746

North Dakota 2 3,891 3,891

Ohio 82 258,832 194,179

Oregon 19 34,394 25,052

Pennsylvania 61 38,794 28,406

Puerto Rico 1 15,000 15,000

Rhode Island 1 1,311 1,311

South Carolina 13 3,311,000 2,430,000

South Dakota 3 28,776 28,776

Tennessee 1 1,875 1,875

Texas 62 294,281 287,672

Utah 1 2,888 2,888

Vermont 4 1,805 1,427

Virginia 1 18,000 17,989

Washington 3 2,376 487

Wisconsin 7 3,051 3,051

Wyoming 14 112,332 112,332

TOTAL 520 $6,024,587 $4,437,728

State Infrastructure Bank Loan Agreements by State

As of September 30, 2006

Ohio DOT Creates Innovative

“Bond Fund” Financing Program

continued on page 7

Note: State-funded SIBS not included.
The Kansas Department of Transportation

(KDOT) is doing its job to enhance every

day life in communities throughout the

state and the Transportation Revolving

Fund (TRF) is part of the process. The

TRF is designed to provide low cost, flexible financing to local governmental units

for transportation projects, on or off the

state highway system.

The TRF accepted its first application

from Franklin County in December

2003. Since then, it has closed 39 loans

totaling $51.8 million for projects all over

the state. Twenty-one of the closed loans

are in completed status, meaning that the

projects are completed and all proceeds

have been drawn. The TRF currently has

eight pending applications for another

$11.1 million. There are three approved

applications in the negotiation phase of

the loan agreement.

The TRF has disbursed over $37 million

in loan proceeds to help finance 45 projects since inception. 

The term or life of a TRF loan is determined by the design life of the project.

Terms are limited to the lesser of the design

life of the project or 20 years. Currently,

loans range from three to 20 years.

The Kansas Development Finance

Authority, in partnership with KDOT,

issued $32.6 million in bonds on

September 1, 2005 to increase the loan

capacity of the TRF. A second bond issue

for $24.7 million closed on December 20,

2006 to continue funding the program.

Projects financed by the TRF vary widely.

The majority of projects are non-KDOT

projects. The TRF also has financed the

local match portion of several KDOT projects, including geometric improvement,

economic development, and KLINK (City

Connecting Links) projects. 

Cities and counties throughout the state

have used the program for many different

types of projects. For example, the City of

Marysville replaced 29,000 feet of curb

and guttering with TRF financing. Clay

County is replacing a bridge. Barber

County is building a new road to the gypsum mine that is the county’s largest

employer. Phillips County has been

approved for a loan to build a road to an

ethanol plant, which is under construction

east of Phillipsburg. Morris County used

the TRF for short-term financing on an

economic development project in which

KDOT participated. The City of Pratt

used the TRF for two local projects. 

Sometimes an applicant has a multiphase

project in which design and construction

will extend more than two years. KDOT

limits the proceeds withdrawal period to

two years to comply with the safe harbor

rules for use of bond proceeds. In these

situations, TRF financing should be done

in one loan per year for the duration of the

project. For example, a project that will

take five years to construct should be

financed in five incremental loans. In

addition, an applicant who wants to

finance the design and right-of-way acquisition phases should consider segmented

loans to make it easier to comply with the

disbursement policy that is outlined in the

TRF Program Guide. An example of this

type of financing arrangement is the City

of Gardner’s Moonlight Road project.

This project will cost about $14 million

and take five years to complete. The City

of Gardner and KDOT are working on the

second of five loans for this project. 

The initial application should identify

the entire project when applying for a

multiphase project. This effort will be

very helpful in planning and cash flow

projections. In addition, this is an

important consideration when the project is evaluated.

Although a project does not have to be on

a local government's five-year plan to

qualify for TRF financing, the TRF can

finance city or countywide highway

improvement plans. Kingman County,

Franklin County, and the City of Junction

City are some of the borrowers who have

used TRF loans for this purpose. The

TRF can combine several road projects

under one loan agreement if they are similar and have the same design life. All projects under these plans must be designed

by a licensed professional engineer and

inspected by a certified inspector. 

7

could achieve by issuing bonds on its own. The program is

structured with an open bond indenture which allows for each

future series of bonds to be issued in both a timely and cost

efficient manner.

The first STIBF issue was completed in October 2006 to fund

the initial $5 million Program Reserve. The first project

financing was completed for the Akron-Canton Regional

Airport in December 2006. This 10-year, $7 million transaction received an “AA-” rating from Fitch Ratings and had an

average borrowing cost fixed under four percent.

Contact: 

Melinda Lawrence, ODOT

614/644-7255,

melinda.lawrence@dot.state.oh.gov

Ohio STIBF, continued from page 6

Kansas Transportation Revolving Fund 

Provides Flexible Financing for Communities

continued on page 8

Transportation Revolving Fund 

Loan Summary as of December 26, 2006

Amount

Loan Status Number of Loans in Thousands

Active Loans 18 $25,883

Completed Loans 21 25,920

Loan Agreements Pending 3 6,774

Application Under Review 8 11,128

Total Loans and Applications 50 $69,705
8

issue will be used to fund replacement of the Route 52 causeway bridges and roadway section between Somers Point and Ocean

City, a project estimated to cost $400 million. Future use of GARVEEs will provide funding for other specific major projects, on

a limited basis, where need for such funding has been fully investigated and shown to be warranted, as is the case for the bridge

replacement project.

At the end of December 2006, the cumulative value of GARVEE bond issues reached $6.2 billion, financing projects in 18 states,

Puerto Rico, and the Virgin Islands. The largest state issuer to date is Colorado, which issued over $1.6 billion in GARVEEs over

the 2000-2004 period. Of this amount, $0.7 billion financed a portion of the $1.7 billion T-REX project in the Denver metropolitan area, a multimodal project along the southeast corridor of Interstates 25 and 225 that added 19 miles of light rail and

improved 17 miles of highway infrastructure.

In 2006, seven GARVEE bond issues were sold, totaling $1.2 billion. The largest GARVEE issue was the $360 million issue

advanced by the Georgia State Road and Tollway Authority, which is featured in this issue of IFQ.

Recent GARVEE Issues, continued from page 2

Cumulative GARVEE Bond Issues (Dollars in Millions)

6,000

5,000

4,000

3,000

2,000

1,000

0

1998 1999 2000 2001 2002 2003 2004

$170.2 $190.2 

$941.6 

$2,102.7 

$2,673.5 

$3,332.3 

$5,120.9 

7,000

2005 2006

$6,238.5

GARVEE Transactions

As of January 2007

Contact:

Jennifer Mayer, FHWA National Resource Center

415/744-2634,

jennifer.mayer@dot.gov

The TRF also is an option available for emergency funding. In

case of an emergency, KDOT may expedite processing for that

application. An example of an emergency loan has arisen lately

when a bridge failed in north central Kansas and the road was

closed. KDOT worked with this applicant to speed up the loan as

much as possible. The result was a closed loan in 30 days.

Construction on the replacement bridge began immediately.

A realistic estimate of project cost is very important particularly

given the tendency for project cost increases. Loan agreements

can be amended but the process is time-consuming because

amendments must go through the complete review process when

the borrower is changing the scope of the project or increasing the

dollar amount of the loan. 

The annual maximum any city or county can borrow from the

TRF is $6 million. This can be in one loan or several loans. The

limit applies to the state fiscal year in which the application is submitted. There is no minimum amount. 

The project must be for a road or bridge as defined by the statute.

All applications are subject to the approval of the Kansas Secretary

of Transportation.

KDOT recommends that all applicants involve their attorney

and licensed professional engineer throughout the application

process and project period because the application becomes a

contract between KDOT and the applicant when the application is approved by the Secretary of Transportation. All TRF

loans must comply with IRS rules for tax-exempt debt. 

KDOT advises applicants to carefully review and complete the

loan application and all the supporting documents. The application form, disbursement form, the rules and regulations, and

the TRF Program Guide are available on the KDOT web site

at www.ksdot.org. 

Contact: 

Evelyn Fitzpatrick, KDOT

785/296-4782,

evelynf@ksdot.org

Kansas TRF, continued from page 7
9

FTA Announces Debt Service 

Reserve Pilot Program

SAFETEA-LU allows up to 10 Urban Area Formula Grant (49

USC 5307) recipients to seek reimbursement for bond proceeds deposited in a Debt Service Reserve (DSR). The Federal

Transit Administration (FTA) announced this pilot program

on December 29, 2006.

The Pilot Program

A DSR is a fund that is established as additional security for a

bond. It is usually funded by a portion of the bond proceeds

(about 10 percent), and remains unused until the last year of

the bond term. At that time, it is used to make some or all of

the last year’s debt service payment. However, the DSR

reduces the effectiveness of the bond issue by keeping the

funds unused for a significant time, sometimes as long as 20

years in the case of municipal bond issues.

Section 5323(d), as amended by SAFETEA-LU authorized

immediate grant reimbursement of bond proceeds deposited in

a DSR with funds made available under the Discretionary

Capital Grant Program (Section 5309). However, it created a

pilot program to allow up to 10 Section 5307 recipients to reimburse bond proceeds deposited in a DSR. In addition, Section

5323 requires that FTA submit a report on the experience of the

pilot program. This report is due on July 31, 2008.

FTA has drafted a Federal Register Notice (FRN) seeking

applications from eligible Section 5307 recipients who plan to

support an eligible project with bond financing. If selected by

FTA, the grantee would be allowed to seek reimbursement of

the bond proceeds deposited in a DSR on the day after such a

deposit was made. For the usual bond issuance, this would

mean that the grantee would be reimbursed for as much as

eight percent of the bond issue on the day after it was sold.

(DSRs are usually funded to cover one year’s debt service,

which equates to about 10 percent of the face value of the

bonds. Reimbursement with Section 5307 funds would be 80

percent of the DSR.) On a $1 million bond issuance, this

would amount to $80,000 of avoided cost1 for the grantee –

funds that could be used to advance another capital project.

The DSR reimbursement is an eligible capital expense for

bonds secured by a local revenue source or by grant funds

(i.e., Grant Anticipation Bonds). However, the total Federal

share of a grant-supported project may not exceed 80 percent, so the DSR reimbursement simply accelerates repayment by something between two and 20 years. That is, the

final debt service payment, made by the DSR, would have

been reimbursable in the last year of the bond’s term, but

now it is being reimbursed as soon as created.

During the 10 years ending in 2003, public transit agencies (primarily the largest 30 agencies) issued between $3 billion and $6

billion in new bonds each year. This does not include any

refunding issues. Between 1999 and 2006, public transportation agencies issued over $3.2 billion in grant anticipation

bonds, secured with either Urban Formula or Discretionary

Capital funds or a combination of both. However, the number

of transit bond issuances might not exceed 10 in any one year, so

FTA has left the program open for the term of SAFETEA-LU,

NEW PROGRAM

1 The cost is actually avoided opportunity cost. Assuming a 4.5 percent APR, over 20 years, the opportunity cost is closer to $116,437 (less some accrued interest on the DSR).

TOOLS IN PRACTICE

Tax Increment Financing: Generating Revenues by Generating Benefits

Not all successful innovations in project financial assistance originate from Federal program initiatives. State and local governments have implemented several innovative techniques to raise funds to finance transportation projects. Tax increment

financing (TIF) is one such technique and it has been used successfully to finance public transportation projects in several

cities, including Chicago, San Francisco, Houston, and Portland, Oregon. TIF also has been proposed as a possible funding

mechanism for large scale infrastructure projects such as the extension of the New York City Number 7 subway line.

TIF Characteristics: A Brief History

Several factors have contributed to the recent growth and interest in the use of TIF by state and local governments, including

the dwindling availability of Federal economic development grants, the need to develop strategies to address urban blight, and

a political sensitivity to constituent desires to minimize the imposition of additional taxes. The first state law to authorize TIF

was passed by California in 1952. Today, all states but Arizona and including the District of Columbia have enacted TIF legislation.

Tax increment financing relies upon future additional tax revenues generated from the proposed project or increased property

valuations within a TIF district with specific geographic boundaries to pay for economic development or other improvements.

It differs from an assessment area by relying upon anticipated future revenues; an assessment area by comparison taxes existing

property at a higher rate to fund an infrastructure improvement.

continued on page 10

continued on page 10
10

to take maximum advantage of the pilot program. However,

FTA hopes to have a significant number of requests for the

authority during 2007, so there can be sufficient information

to meet the requirement to submit a report to Congress.

How It Will Work

FTA will receive the proposals from eligible Urban Formula

Grant recipients, and evaluate them on the basis of the

expressed need for the financing and the benefit they seek to

derive from the bond issue. The transit agency is asked to

provide a context for the bonds − how debt has been used

previously, and the function of the current bond issue in relation to the overall capital program. And, of course, FTA

wishes to know the terms and projected interest rate(s) on

the bonds. There is no limitation on the amount of bonds

that can be issued at one time − only a limitation of 10 pilot

issuers. That is, each separate issuance by the same transit

agency (say, 2007A and 2007B) will count as one of the 10

pilot issuances authorized. FTA will then send a letter of

approval to the successful proposer, which will make their

deposit of bond proceeds into a DSR immediately reimbursable with Urban Formula Program funds.

This authority does not apply to projects funded under the

Discretionary Capital Grant Program or to bonds for which

no DSR is required. In these two instances, SAFETEA-LU

already provides authority to reimburse financing costs under

normal grant approval procedures.

DSR Program, continued from page 9

Contact: 

Paul Marx, FTA

202/366-1675,

paul.marx@dot.gov

Since TIF districts provide specific revenue sources, they may

be used in conjunction with other U.S. DOT innovative

finance and lending programs. For example, a TIFIA credit

instrument or a SIB may include pledged TIF funds as a

repayment source for a transportation project loan.

Advantages

TIF financed projects offer several advantages to project

sponsors. Although these benefits may differ among states

and municipalities, some key TIF benefits are as follows:

• No additional taxes are levied upon the community; all of

the development is paid from additional revenue generated from increasing property values within the district

boundaries.

• TIF bonds are not counted against the municipality’s

constitutional debt or against a general obligation debt

limit in some states. To minimize issuance costs, many

states do not secure their TIF bonds with the “full faith and

credit” of the issuing municipality which may make the

debt appear riskier to investors.

• No voter approval is required to issue TIF bonds or to

establish a TIF district.

• TIF districts enable more project flexibility and better

local control.

• Once the TIF district expires, all of the additional tax

revenue will be pooled for use throughout the municipality.

Potential Challenges

Actual challenges associated with using TIF are primarily

related to the timing and yield of the revenues, and equity:

• Investments in the TIF district may not result in the

anticipated increases in property valuations and therefore,

the necessary pledged tax revenues. The increases also take

time to materialize.

• TIF districts have the potential to displace existing residents

who may be unable to afford the increasing taxes resulting

from the planned economic development initiatives.

Similarly, the new district, if successful, could redistribute

development resulting in a potential overall decline in the

total amount of tax revenues collected by the municipality.

• Many TIF districts rely upon public services located outside

of the redevelopment zone, such as police, fire, and water

service; TIF funds do not financially support these services.

In contrast, if the TIF district is established for a project

with regional benefits, such as a commuter rail line, many

may benefit from the project but will not contribute to

cover the project costs, since they are not included in the

TIF district.

TIF, continued from page 9

continued on page 11

Chicago Transit Issued GANs in 2005.
11

TIF Experience in Chicago 

TIF legislation was first enacted in

Illinois in 1977 in order to provide economic development funds for areas of

Chicago containing aging, obsolete,

dilapidated, or other environmentally

deficient structures or land use strategies.

The first TIF district was not created

until 1984, after which more than 100

TIF districts were created. The city credits its TIF program as a viable method to

attract industrial revitalization.

Under the city’s TIF legislation, TIF

revenues may be used to fund public

transportation infrastructure but not

operating expenses. Projects supported

by TIF include:

• The Randolph/Washington Station

($13.5 million in TIF funds);

• The Dearborn Subway-Lake/Wells

($1.2 million in TIF funds);

• Miscellaneous Central Loop transit

projects ($24 million in TIF funds);

and

• The Block 37 Transit Center (aka 108

North State Street; $42.4 million in

TIF funds).

Although it is possible to issue bonds to

provide upfront financing to a TIF district, Chicago initially decided not to

issue general obligation bonds for this

purpose and used a “pay-as-you-go”

approach. Recently, more “mature”

and financially established TIF districts

have qualified for bond insurance,

although insurers usually require additional credit enhancements, such as an

expanded TIF district size or additional

or higher coverage ratios.

The combination of TIF and transit-oriented development (TOD) is another

technique to support public transportation projects. For example, the Chicago

suburb of Arlington Heights committed

$45 million over 15 years to support two

TIF districts designed to invest in projects around a commuter rail station.

The projects include parking garages,

streetscapes, and expanded green space.

Today, the City of Chicago has 130

designated TIF districts comprising

nearly 30 percent of the land area of

the city. The city estimates that it has

invested $526 million in TIF funds,

but attracted more than $2.82 billion

in private investment.

Examples of Other Public

Transportation TIF Projects

In addition to the successful use of TIF

to support public transportation

improvements in Chicago, there are several examples of other TIF financed public transportation projects, including the

following projects:

• A $30 million BART parking

structure and a $75 million BART

station in Fremont, California;

• A $7.5 million investment in the

Central City Streetcar project in

Portland, Oregon;

• The $350 million Interstate Avenue

Light Rail, also in Portland, Oregon; and

• Elements of the $324 million Metro

Rail Red Line in Houston, Texas.

TIF, continued from page 10

Contact: 

Robena Reid, FTA

202/366-1973,

robena.reid@fta.dot.gov

Heavy-Duty Engine Emissions Reductions Funding Forum

Building on the successful partnership between the Oregon SIB and Cascade Sierra Solutions (see the Fall 2006 issue

of IFQ), the West Coast Collaborative, a public-private partnership working to reduce diesel emissions along the West

Coast, is sponsoring a funding forum in Long Beach, California on financing heavy-duty diesel emissions reduction.

Diesel emissions reduction is an increasingly important topic for metropolitan planning organizations, state DOTs, and

others involved in the transportation planning and funding process. Frequently, diesel emissions are “low-hanging fruit”

where emissions reductions can be attained at a much lower cost per ton than for other types of vehicles. The new

Congestion Mitigation and Air Quality (CMAQ) guidance enables these kinds of projects to qualify for credit assistance

under Title 23, including the SIB and TIFIA programs.

Participants in this free forum will learn about ways in which various private and public funding sources can be used

to reduce emissions from heavy-duty engines, as well as the eligibility and how to apply for these sources. The funding

forum will be held on Thursday, March 1, 2007 at the Bannings Landing Center in Wilmington, California.

EVENT

Contact: 

Kristin Riha, EPA

415/947-4140,

riha.kristin@epa.gov
12

ANNOUNCEMENT

Joe Dailey Named Director, 

Office of Financial Management

On March 20, 2006, Joe Dailey joined FHWA as Director of the Office

of Financial Management, within the Office of the Chief Financial Officer

(OCFO). As Director, Joe is responsible for the administration and execution of the Federal-aid Highway Program. He provides executive direction to ensure the efficient and effective execution of the program, and is

responsible for the FHWA’s Internal Control Program and execution of

the Financial Integrity Review and Evaluation (FIRE) Program, as well as

the operation of the Fiscal Management and Information System (FMIS)

and FHWA’s Managerial Cost Accounting (MCA) System. With Max

Inman’s retirement, Joe’s responsibilities now cover FHWA’s innovative

financing initiatives, including SIBs and GARVEEs.

Prior to this appointment, Joe served as the Chief, Military Personnel

Division, in the Army Budget Office, and previously served on the Army’s

Transformation of Installation Management Task Force. During his

financial management career, Joe has held various positions at installation,

Major Command and Headquarters Department of the Army as well as a

tour with the Navy’s Bureau of Personnel.

Joe has a Master’s of Business Administration from Syracuse University,

and Bachelor’s degrees from both the University of Louisville (Education),

and The Ohio State University (Computer Science). He served for 10

years in the U.S. Army.

Mr. Dailey is a Certified Governmental Financial Manager, Association

of Government Accountants and a Certified Defense Financial Manager,

American Society of Military Comptrollers. Additionally, he is a

Member of the Board of Directors for the Northern Virginia affiliate of

Habitat for Humanity.

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)

• National Governor’s Association (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. 1 of IFQ include:

Roger Berg, Cambridge Systematics, Inc.

Duane Callender, TIFIA Credit Program

Evelyn Fitzpatrick, KDOT

Dale Gray, FHWA

Phyllis Jones, FHWA

Melinda Lawrence, ODOT

Paul Marx, FTA

Jennifer Mayer, FHWA National Resource Center

Jannine Miller, SRTA

Robena Reid, FTA

Suzanne Sale, TIFIA Credit Program

Mark Sullivan, TIFIA Credit Program