On June 2, 1999, the final rule (49

CFR 80) for the Transportation

Infrastructure Finance and Innovation

Act of 1998 (TIFIA) was published in

the Federal Register. As reported in the

Summer 1998 issue of IFQ, TIFIA is a

new Federal credit program for large

surface transportation projects, included

as part of the Transportation Equity Act

for the 21st Century (TEA-21) reauthorization bill last year. Under TIFIA,

USDOT may provide direct Federal

loans, Federal loan guarantees, and

standby lines of credit to large projects

meeting certain eligibility criteria. The

complete text of the rule, as well as the

program guideline booklet and application forms, may be accessed at the

TIFIA website: (http://tifia.fhwa.dot.gov).

Accompanying the rule was a Notice of

Funding Availability setting forth the

key dates for FY 1999 program activity.

Applications for TIFIA assistance this

year may be submitted between July 7,

1999 and August 2, 1999. USDOT

anticipates selecting projects in August

and negotiating term sheets and/or

credit agreements with project sponsors

by September 30, 1999. At the beginning of each fiscal year through 2003,

USDOT will publish a notice in the

Federal Register indicating the key dates

for applying for funds for that year. 

For the current fiscal year, USDOT has

available $70.6 million of net budget

authority to support the subsidy costs of

up to $1.6 billion face amount of credit

assistance. An additional $450 million

of budget authority and $9 billion face

amount of credit instruments is authorized over the next four fiscal years,

through FY 2003.

The final rule responded to questions

that had been submitted to USDOT

from a dozen commenters, following

the publication of a Notice of Proposed

Rulemaking (NPRM) for TIFIA on

February 8, 1999. Summarized below

are several of the key issues that the final

rule addressed.

Application Process

The final rule, program guidelines, and

accompanying application forms indicate the type of information to be submitted at the time of applying for

TIFIA assistance. A preliminary opinion letter from a rating agency (or an

actual rating) indicating that the project's senior debt obligations have the

potential of being investment grade is

required at the time of application.

("Investment grade" is a bond rating of

BBB-, Baa3, or higher.) For projects

that are selected, the preliminary rating

letter can be sufficient to obligate funds.

However, no funds may be disbursed

until an actual credit agreement has

been executed and the project’s senior

obligations have obtained a formal

investment-grade rating.

Eligible Costs

The total amount of credit assistance

may not exceed one-third of eligible

project costs, as measured on a nominal

or "year-of-expenditure" basis.

Developmental and right-of-way costs

incurred up to three years prior to a

project sponsor’s submission of an

application may be included, with the

approval of the Secretary of

Transportation. USDOT may assess

Quarterly

FHWA's

VOLUME 5, NUMBER 1 SPRING 1999

Also in this issue ...

GARVEE Roundup . . . . . . 2

New Legislative

Initiatives . . . . . . . . . . . . . 3

SIB Highlights . . . . . . . . . . 4

Late-Breaking

GARVEE News . . . . . . . . .8

continued on page 7

FEDERAL CREDIT PROGRAM

Final Rule Published on TIFIA Program

1.

Sponsor Submits 

Letter of Interest

2.

Sponsor Submits 

Application to 

Working Group

3.

Working Group 

Evaluates Application 

& Arranges Project 

Sponsor Presentation

5.

Steering Committee 

Selects Projects & 

Authorizes 

Negotiation of Terms

6.

USDOT Ratifies Term 

Sheet and Obligates 

Funds

7.

Working Group & 

Sponsor Negotiate 

Formal Credit 

Agreement

8.

USDOT Ratifies 

Credit Agreement & 

Disperses Funds

4.

Working Group Ranks 

Applications and Makes 

Recommendations to 

Steering Committee

Summary of the TIFIA Application Process
GARVEE ROUNDUP

New Financing Mechanism Gains Momentum

Grant Anticipation Revenue Vehicles

(GARVEEs) have been test-driven by

several states, and a notable number of

other states are considering taking them

for a spin.

As described in IFQ’s Fall 1997 issue

(Volume 3, Number 2), GARVEEs are

debt financing instruments that are

secured with a pledge of Federal-aid

highway funds. Prior to the National

Highway System Designation Act of

1995 (the NHS Act), these transactions

were difficult because of limitations on

the eligibility of bond issuance and

interest costs for reimbursement. The

NHS Act revised Section 122 of Title

23, making interest and issuance costs

eligible for Federal-aid reimbursement.

The passage of TEA-21 removed other

hurdles to issuing debt against future

Federal-aid, by guaranteeing funding

levels through FY 2003 and including

an "equity" provision which ensures

that each state receives a share of highway funding equivalent to 90.5 percent

of its percentage contribution to the

Highway Trust Fund.

As reported in IFQ’s Summer 1998

issue (Volume 4, Number 3), three

states – New Mexico, Ohio, and

Massachusetts – have already taken

advantage of this flexible mechanism by

issuing debt backed by pledges of

Federal aid. Although they are all considered GARVEEs, the structure of each

is as varied as the geography and landscape of the states involved.

(Mississippi sold its first issue of

GARVEE bonds on June 17, 1999.

See “Late-Breaking GARVEE News”

on page 8.)

Of significance is the flexibility provided by the GARVEE concept which

enables each issuer to tailor the financing to accommodate state fiscal and

legal conditions. New Mexico issued

direct, insured GARVEEs for a single

project, with no recourse to alternative

sources of funding. Massachusetts

issued indirect GARVEEs, securing the

notes that were issued with Federal-aid

reimbursements from other non-debt

financed projects. In addition, the state

agreed to pay the interest and, under

certain limited circumstances, provided

a backstop of gas tax revenues for principal repayment. Finally, Ohio’s issue,

also intended to fund multiple projects,

included a triple-barreled structure that

provides several alternative sources of

funding in the event of a shortfall. 

Differences in the structure and security provisions of the three financings

have influenced the ratings for the

issues. The table above shows a comparison of the ratings for the three

GARVEE transactions.

Emerging GARVEE Programs

In the wake of these successful issues,

more states are examining GARVEEs’

potential. In addition to Mississippi,

enabling legislation has been passed in

Arkansas, Florida, and Colorado (voter

approval is still required in Colorado.)

In California, legislators are currently

evaluating the potential of GARVEEs.

Arizona, which is positioned to bring its

first GARVEE-type issue to market in

late summer, had authorizing legislation

in place, but amended its statutes this

year to strengthen the security for this

financing mechanism. Based on market

reception and the growing interest

among states in advancing projects

using this new financing mechanism,

GARVEEs appear to fulfill an important niche in the states’ "toolbox" of

innovative approaches to maximizing

Federal transportation dollars.

First Transit GARVEEs

In another application of the GARVEE

tool, the New Jersey Transit

Corporation issued $151.5 million in

debt backed solely by a pledge of future

Federal Transit Administration (FTA)

funding. The debt, which was sold in

March 1999, and insured by AMBAC

Corporation, will be used to purchase

500 new buses for the mass transit

agency. The issue obtained underlying

credit ratings of A1, A, and A from

Moody’s, Standard and Poor’s, and

Fitch, respectively.

Quarterly

FHWA's

Ohio $70 million None AA- Aa3 AA- -

$600 million MBIA ($45 

million) - Aa3 AA AAA

New Mexico $100.23 million AMBAC AAA 

(insured) A- A3 - -

State Initial Issuance Size

Bond 

Insurance

Underlying Ratings

Moody‘s 

Investors 

Service

Standard and 

Poor‘s Fitch IBCA Duff & Phelps

Massachusetts

continued on page 7

2

GARVEE Rating Scorecard
3

Quarterly

FHWA's

New legislation under consideration in

both the Senate and House may create

a pilot program establishing a new

class of tax-exempt, private activity

bonds issued to finance certain qualified highways. Senator John Chafee

(R-Rhode Island) and Representative

Jennifer Dunn (R-Washington) introduced identical versions of the

Highway Innovation and Cost Savings

Act (HICSA) in the House (H.R.859)

and Senate (S.470) in February 1999.

The legislation would provide

Congress and the transportation community with an opportunity to evaluate the potential benefits of increased

private sector participation in the provision, maintenance, and operation of

highway infrastructure. 

Under HICSA, the Secretary of

Transportation may select fifteen projects to participate in the pilot. The

project sponsors could then issue taxexempt bonds up to $15 billion in

aggregate. The projects would involve

private entities that develop, finance,

operate, and maintain highways,

bridges, and tunnels. 

To participate in the pilot, projects

would have to be part of a state

approved transportation plan, serve

the general public, and be located on

publicly owned right-of-way. In addition, the projects must be publiclyowned or revert to public ownership

upon retirement of the project’s

financing. Projects may be either toll

or non-toll facilities. 

Even with increased grant funding

under TEA-21, transportation needs

still outstrip available resources.

Existing tax law discourages private

investment in highway infrastructure

by prohibiting lower cost tax-exempt

financing for projects involving private

equity investment and private sector

operating contracts. Because issuance

of fully taxable debt results in higher

interest payments, private entities typically find the increased cost of capital

makes public-private partnerships less

attractive to public sector sponsors

than conventional approaches.

Passage of HICSA would provide the

opportunity to evaluate whether the

removal of this financing disincentive

attracts more private investment and

ultimately benefits the traveling public. Pilot projects will be selected based

on the degree to which they use new

technologies, construction techniques,

and/or innovative cost controls.

HICSA follows on the heels of a similar

proposal, the Highway Infrastructure

Privatization Act (HIPA). Although

the Senate Finance Committee favorably reported out HIPA in 1997, it

was not included in the final version

of TEA-21. (See the Fall 1997 issue of

IFQ for more information.)

Most recently, HICSA has been

referred to the Senate Finance Committee and to the House Committee on

Ways and Means for further consideration. It is anticipated that the measure

will be considered by the full Congress

as part of broader tax legislation.

NEW LEGISLATIVE INITIATIVES

Highway Innovation and Cost Savings Act

Surface Transportation Act of 1999

On May 27, 1999, Senator George

Voinovich (R-OH), Transportation

and Infrastructure Subcommittee

Chairman, introduced the Surface

Transportation Act of 1999 (S. 1144).

Co-sponsoring the legislation are

Senators John Chafee (R-RI),

Environment and Public Works

Committee Chairman, and Jim

Jeffords (R-VT), Daniel Patrick

Moynihan (D-NY), John Warner (RVA), Kay Bailey Hutchinson (R-TX),

Harry Reid (D-NV), Frank

Lautenberg (D-NJ), and Patrick

Leahy (D-VT). The bill provides

additional flexibility to states and

localities in implementing the Federal

transportation programs. TEA-21

funding levels and formulas are not

affected by the bill. S. 1144 includes

several key provisions:

❖ Authorizes all 50 states to participate in the State Infrastructure

Bank (SIB) program, restoring the

program as it existed prior to

TEA-21 and extending it through

FY 2003 (Section 2); 

❖ Allows states to accelerate construction of their “high priority” projects by borrowing funds from

other categories such as NHS, STP,

and CMAQ (Section 3); 

❖ Provides funding flexibility for

High Speed Rail Corridors

(Section 4);

❖ Eliminates a spending cap on

Historic Bridge demolition costs

(Section 5); and 

❖ Simplifies accounting for the minimum guarantee program by making

all obligation authority available as

multi-year funding (Section 6).

Contact:

David Seltzer, FHWA

202/366-0397.
Quarterly

FHWA's

HIGHWAY OBLIGATIONS HIGHWAY OUTLAYS TRANSIT

SPECIAL SPECIAL

OBLIGATION: 

SPECIAL 

OUTLAYS:

SPECIAL

STATE

FEDERAL-AID

HIGHWAY FUNDS APPROPRIATIONS TOTAL APPROPRIATIONS TOTAL

Alaska

Arizona

Arkansas

California

Colorado

Delaware

Florida

Indiana

Iowa

Maine

Michigan

Minnesota

Missouri

Nebraska

New Jersey

New Mexico

New York

North Carolina

North Dakota

Ohio

Oklahoma

Oregon

Pennsylvania

Rhode Island

South Carolina

South Dakota

Tennessee

Texas

Utah

Vermont

Virginia

Washington

Wisconsin

Wyoming

Puerto Rico

Total

$ -

33,996,663

-

-

3,200,000

3,300,000

38,815,438

-

-

-

-

-

33,000,000

-

-

4,827,348

-

-

-

75,000,000

-

8,973,000

4,000,000

-

-

8,322,719

-

159,288,804

-

560,000

18,000,000

-

-

14,301,720

10,748,588

416,334,280 119,809,700

11,050,000

12,000,000

12,000,000

2,490,000

6,700,000

1,500,000

3,000,000

1,500,000

1,500,000

8,650,000

3,390,000

870,000

2,540,000

-

-

2,830,000

1,500,000

8,140,000

480,000

2,540,000

5,100,000

4,700,000

2,589,700

2,090,000

1,500,000

3,000,000

2,830,000

1,500,000

2,310,000

1,500,000

3,000,000

1,500,000

1,500,000

2,510,000

1,500,000

2,490,000

40,696,663

1,500,000

3,000,000

4,700,000

4,800,000

47,465,438

3,390,000

870,000

2,540,000

11,050,000

33,000,000

2,830,000

1,500,000

12,967,348

12,000,000

480,000

2,540,000

80,100,000

4,700,000

11,562,700

6,090,000

1,500,000

3,000,000

11,152,719

1,500,000

171,288,804

2,310,000

2,060,000

21,000,000

1,500,000

1,500,000

16,811,720

12,248,588

536,143,980

33,996,663

3,300,000

38,815,437

25,000,000

4,827,348

75,000,000

8,973,000

8,322,719

159,288,804

560,000

18,000,000

14,301,720

10,748,588

401,134,279

2,091,600

39,624,663

1,260,000

4,800,000

46,081,437

591,600

2,133,600

9,282,000

25,000,000

11,664,948

2,133,600

78,180,000

9,799,500

1,755,600

1,020,000

2,040,000

10,699,919

1,260,000

169,368,804

1,580,000

18,000,000

1,260,000

16,008,520

12,008,588

467,744,379

$ -

-

-

-

-

-

-

-

630,000

-

-

3,960,000

7,410,000

-

-

-

-

1,020,000

-

6,900,000

2,920,300

1,300,000

-

-

-

-

-

-

-

-

-

-

-

-

24,140,300

$ --

-

-

-

-

-

-

428,400

-

-

2,692,800

6,224,400

-

-

-

-

1,020,000

-

6,900,000

2,920,300

1,092,000

-

-

-

-

-

-

-

-

-

-

-

-

21,277,900

2,091,600

5,628,000

1,260,000

-

-

1,500,000

7,266,000

-

591,600

2,133,600

9,282,000

-

-

-

6,837,600

100,000

-

2,133,600

3,180,000

-

826,500

1,755,600

1,020,000

2,040,000

2,377,200

1,260,000

10,080,000

-

1,020,000

-

-

1,260,000

1,706,800

1,260,000

66,610,100

-

APPROPRIATIONS APPROPRIATIONS

FEDERAL-AID

HIGHWAY

 FUNDS

$ $ $ $ $ 

$ $ $ $ $ $ $ $ 

State DOTs are continuing to make

notable progress in advancing projects

through the SIB financing mechanism.

As of May 31, 1999, $560.2 million in

Federal funds had been deposited into

the highway and transit accounts of

state banks as shown in the table above.

Twenty-six states have loaned a total of

$372.5 million to assist in the financing of 93 projects. These loans have

supported over $2.8 billion in construction, a leveraging factor of 7.6.

Since the last report on loan activity in

the Fall 1998 issue of IFQ, loan disbursements have doubled, increasing

from $184.7 million to $372.5 million. The table on page 5 details the

status of SIB loan agreements and disbursements as of May 31, 1999.

In this issue of IFQ, we are showcasing

SIB programs in two states: Texas and

Missouri. Both states have demonstrated leadership in implementing the SIB

financing mechanism to fund critical

transportation projects. Special thanks

are extended to the Texas DOT and

Missouri DOT staff for their contributions to this article.

Texas

The Texas SIB, one of the first 10 SIB

pilot programs approved in 1996, is

under the authority of the Texas

Transportation Commission. Since

launching the program in 1997, following passage of enabling legislation,

the Texas DOT has received applications from 18 sponsors for loans totaling over $48 million. The size of loan

requests has ranged from $30,000 to

$29.4 million. 

As of April 30, 1999, the Texas

Transportation Commission had

approved eight loans, totaling $33.2

million. This article spotlights three

Texas SIB loans which exemplify the

spectrum of projects and loan parameters which can be employed under the

umbrella of a state SIB. 

SIB Highlights

SIB UPDATE

continued on page 6

State Infrastructure Bank Pilot Program: Federal Financial Transactions

(cumulative through May 31, 1999) 

4
Quarterly

FHWA's

5

STATE PROJECT

TOTAL PROJECT

COST ($000) 

LOAN AGREEMENT 

AMOUNT ($000) 

DISBURSEMENTS 

TO DATE REPAYMENT SOURCE

Alcona County Road Commission Hubbard Lake Improvements

TOTAL 2,844,728 372,528 223,140

Earmarked sales tax revenues

State funds

State DOT District funds (deriving mainly from gas tax receipts)

State DOT District funds

State DOT District funds

State DOT District funds

State DOT District funds

State DOT District funds

Future federal transit funds

State funds

Local Road Assistance payments

Local Road Assistance payments

Local Road Assistance payments

Local Road Assistance payments

Local Road Assistance payments

Local Road Assistance payments

Local Road Assistance payments

Local Road Assistance payments

Local Road Assistance payments

Local Road Assistance payments

Local Road Assistance payments

Local Road Assistance payments

Local Road Assistance payments

Local Road Assistance payments

Local funds

Local funds

Local funds

Act 51 Funds

TEA-21 High Priority Funds

TEA-21 High Priority Funds, Local Funds

Local funds

TEA-21 High Priority Funds

Local funds

Local funds

Local funds

Local funds

Local funds

Local funds, Federal STP

Local funds

Local funds

TEA-21 High Priority Funds

Local dedicated sales tax incr. financing and State Highway Fund

State and future federal funds

Local sales tax

Earmarked local sales tax revenues and State Highway Funds

Nebraska Department of Roads

NYSTWY

State funds

Bond proceeds

Parking fees

Future city income and sales tax

County sales tax

Payment in lieu of property taxes (TIF)

City's capital improvement fund (primarily income tax)

Loan was canceled 

Local sales tax

TIF, MPO funds

Airport revenues

City-pledged excess revenues (primarily income tax)

Private revenues

Land sales

MPO Funds

MPO Funds

Future federal highway funds, city revenues

Special Tax District

Township Tax Revenue

Township Tax Revenue/State Funds

Township Tax Revenue

(Loan to reserve fund for bond issue) 

Rhode Island Bridge Authority Revenue

Future Federal Funds

State DOT District funds

Toll revenues

Future federal highway funds and state road and bridge funds

Ad valorem taxes

Sales tax revenue

Geneal Fund Revenue

Sales and property taxes

Utility revenue

Utility revenue

State Funds

Property Taxes

Charge of Fuel put through facility

Freight transport fees

Gross Revenue Pledge on toll collections

County Appropriations

TIF

Future federal highway funds and state highway funds

Earmarked sales tax revenues

State DOT District funds

56,600

60,400

20

24,394

36,255

27,046

20,448

20,523

14,888

1,900

989

80

440

345

345

350

290

300

160

427

400

302

525

590

263

2,100

776

890

1,200

185

1,772

540

1,200

2,100

2,606

1,019

784

413

1,360

2,100

2,025

7,501

39,360

102,198

27,900

37,544

5,112

541

125

1,891

150,000

7,825

150,000

25,000

3,225

833

950

2,647

11,030

4,457

370

12,469

6,000

850

26,945

730

174

95

60,000

1,311

19,125

61,400

482

605

40,000

957

1,500

114

308

1,327,175

200

625

437

323,000

838

15,000

65,000

11,529

26,000

24,000

20

5,028

13,406

5,598

4,366

9,782

6,953

720

3,000

739

20

110

86

86

88

73

75

38

107

100

123

195

148

66

700

504

260

800

133

1,300

486

559

360

381

140

249

2,135

1,000

1,000

841

1,776

2,870

28,000

10,900

6,000

15,000

541

125

1,891

35,000

7,825

20,000

6,945

2,025

335

20

2,425

1,530

2,303

370

1,200

2,425

528

2,000

1,000

735

3,910

124

174

95

15,000

1,311

992

1,875

29,400

47

600

2,700

47

77

114

247

2,888

180

500

350

18,000

388

15,000

4,600

8,365

7,033

0

0

0

0

0

0

1,521

318

720

0

592

20

0

0

64

0

0

63

6

107

67

0

0

0

0

700

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

2,870

28,000

10,900

0

0

541

125

1,565

35,000

7,825

20,000

6,945

2,025

335

20

2,425

1,530

2,303

370

1,200

2,425

0

0

0

735

0

124

174

95

15,000

1,311

992

27,000

33

600

2,700

47

77

114

247

2,888

0

0

0

18,000

388

15,000

0

0

City of Mackinac Island Grand Avenue and Hoban Road

Eastern Upper Peninsula Transportation Authority Ferry 

Lake Erie Transportation Commission New Transit Facility

Isabella County Transportation Commission New Facility

Price Corridor Segments

Red Mountain Freeway Segments

Hackett Creek Str. & Apprs. (S)

Branan Field Road Construction - Clay Cty.

Branan Field Road Construction - Duval Cty.

SR77 Reconstruction

SR80 Improvements

SR44 Widening and Rehabilitation

Recker Hwy, US17 to Winterlake Construction

Lee County Trolley Purchase

Jefersonville/Clarksville Inter-City Road

Roadway Weather Information System

Route 32 Road Improvement

Route 24 Road Improvement

Route 104 Road Improvement

Route 104 Road Improvement

Route 91 Road Improvement

Route 5 Road Improvement

Route 3 Road Improvement

Route 148 Road Improvement

Hermon Center Bridge Road Improvement

Route 222 Road Improvement

High Street Road Improvement

Allen Avenue Road Improvement 

Route 164 Road Improvement

Route 9 Road Improvement

Center Street Reconstruction

Village of Holly, Phase 1 Major Street Impv.

City of Taylor, Rancho Road

Manistee Co. Road Comm, Coates Hwy

Village of Suttons Bay Elm & Broad Streets

Delta County Road Commission Highway Re-Route

Village of New Lothrop Genesee Street Improvement

Cass County Road Commission

Otter Lake Road Project

Clarksville Main Street

City of Jackson Fourth St./S. West Ave. Connector

City of Utica Van Dyke Road Reconstruction

Springfield Transportation Projects

Cape Girardeau Bridge

Gateway Multimodal Center, St. Louis

Cole County Highway 179

Northern Plains Project (EACNH-26-2(107)

City of Moriarty Intersection Signal

Sterling Forest Interchange Feasibility Study

Pembins County Surface Reconstruction

Butler Regional Highway

Great Lakes Science Center Parking Facility

Fort Washington Way Relocation

Cleveland Transit Viaduct

(Marion, OH) LTV Steel

Cincinnati Industrial Park Access Rd Improvements

Brower Road Improvements, Lima MPO

Eastlake Industrial Park

Putnam Street Bridge, Washington County

Steubenville SR 43 widening, Sunset Blvd.

Jefferson County Airport Improvements

Market Street Improvements (Canton, OH)

Ann Arbor Intermodal Facility

Trimor/Maple Heights Industrial Park Road

Clark County (Leffel Lane & Mitchell Blvd. ROW)

Clark County (Mitchell Blvd. Construction)

Ash Creek Bridge Replacement

Pittsburgh Intl. Airport Cagro Interchange

Potter Co. Local Bridge Replacement

Huntingdon Co. Local Bridge Replacement

Westmoreland Co. Traffic Signal Installation

Highway Improvements

Resurfacing Route 136 fr. Bristol/Warren

 Northern Plains project (Hell Canyon)

SR 104 Construction

Laredo Bridge #4

Motley County Off-system Bridge

W. Columbia utility re-location/SH35

Sugar Land road construction/US 59

Hall Co. - 3 off system bridges

Spur 6 ROW purchase

Dawson utility re-location/improvement/SH31

Utility re-location/FM 1960

I-15: 10800 South. To 600 North

Town of Holland

McIntyre Fuels

Green Mtn. Railroad

Route 895 Connector, Richmond

LaCrosse Co. Trunk Highway

Cody to Yellowstone Park Improvement 

Whitier Access Project

Congress/Australian Connector

South Dakota 

Alaska

Arizona

Arkansas

Florida

Indiana

Iowa

Maine

Michigan

Missouri

Nebraska

New Mexico

New York

North Dakota

Ohio

Oregon

Pennsylvania

Puerto Rico

Rhode Island

Tennesee

Texas

Utah

Vermont

Virginia

Wisconsin

Wyoming

$$ $

$$ $

State Infrastructure Bank Loans and Loan Agreements

(as of May 31, 1999) 
Quarterly

FHWA's

6

Laredo Toll Bridge

The largest loan awarded to date by

the Texas Transportation Commission

in the amount of $29.4 million is

helping to finance the Laredo Northwest International Bridge. This facility, estimated to cost $66.5 million,

will be an eight-lane vehicular and

pedestrian toll bridge between Laredo,

Texas and Nuevo Laredo, Tamaulipas,

Mexico. The bridge will be owned and

operated by the City of Laredo and

consists of a toll plaza, export lot, a

customs station, import lot, and related roadways. The project will alleviate

congestion on the existing toll bridge

system and within the City of Laredo.

It also supports increased trade and

traffic resulting from the implementation of the North American Free Trade

Agreement (NAFTA).

The loan carries an interest rate of 4.1

percent, compounded annually.

Repayments are scheduled to begin in

October 2005. The total payback on the

loan is over $43 million structured with

two maturity periods. Of the loan

total, $4.2 million has a five-year term

and $25.2 million has a 23-year term. 

SH-35 Utilities Relocation

The second Texas SIB loan illustrates

how a relatively small loan can be leveraged to facilitate completion of a large

construction project. In May 1998, the

Texas Transportation Commission

approved a $600,000 loan to finance

the relocation of utilities on State

Highway 35 within the city limits of

West Columbia, Texas. The loan facilitates advancement of major improvements on SH-35. This project, estimated to cost $32.2 million, is on the

National Highway System designated as

a Federal Demonstration Project as well

as a Congressional High Priority.

When completed, this project will provide consistent pavement life, increased

safety, improved traffic flow, and greater

efficiency of the state’s highway system.

The borrowing rate for this loan is

three percent for the first five years,

escalating to 4.5 percent for the next

10 years. Repayments begin in

February 2004. The City of West

Columbia has pledged ad valorem taxes

for repayment of the loan.

US 59 Expansion

The third loan is an example of a partnership project between the City of

Sugar Land, Texas and TXDOT. In

order to finance their $3.9 million

share of the $44 million cost of

expanding US 59 from South

Kirkwood Drive to Sugar Creek

Boulevard, the city applied and

received approval for a $2.7 million

SIB loan. This regionally significant

project will improve not only the

mobility of the Sugar Land area, but

also the segment of the US 59 corridor

that serves the Houston area.

This short-term loan of three years carries an interest rate of 4.5 percent compounded annually. Repayments are

scheduled to begin in July 2000.

Missouri

Missouri, one of the first 10 states to be

approved as a SIB pilot, has been very

progressive in the implementation of

the program. The Missouri SIB is distinguished among the 39 SIB programs

in its institutional structure. To implement the program in 1996, the

Missouri Highway Commission used

existing legislation to establish the

Missouri Transportation Finance

Corporation (MTFC) as a non-profit

lending entity. The MTFC has the

authority to lend funds, issue revenue

bonds, and offer other assistance to

support transportation projects. The

Missouri DOT provides administrative

support to the MTFC.

Since 1996, four major projects have

been advanced with SIB loans: the

Springfield Transportation Project, the

Cape Girard Bridge, the Cole County

Highway 179, and the Gateway

Multimodal Center in St. Louis – a

joint FHWA/FTA project. The total

cost of these four projects is approximately $207 million, and SIB-assisted

financing totals $48 million. 

With its designation as one of the four

new pilot states under TEA-21,

Missouri is well-positioned to build on

its successes. An amended State

Infrastructure Bank Cooperative

Agreement with FHWA, FTA, and the

Federal Railroad Administration (FRA)

has been signed by the USDOT

Secretary. The Missouri SIB has been

capitalized with $8 million of new

TEA-21 funds.

Acceleration of the I-55 overpass will

be the first project financed with the

TEA-21 SIB capitalization monies.

The City of Festus, Missouri requested

this SIB loan to accelerate the replacement of an existing overpass at I-55

and Route A with a new five-lane

structure. This project was originally

programmed for construction in FY

2001, but under the city’s proposal,

construction will be advanced two

years through the SIB loan. The city

will finance the project construction

costs, estimated to be $6.3 million,

through a short-term MTFC SIB construction loan. The city will contribute

two percent of the project costs (one

percent for each year the project is

accelerated), and will be responsible for

the interest costs. The balance of the

repayment will come from highway

funds allocated to the region. The loan

interest rate of 4.8 percent was established, based on a comparable U.S.

Treasury rate. The loan repayment will

be a lump sum repayment in FY 2001. 

Contact:

Dorn Smith, TXDOT,

512/463-8684.

Contact:

Patty Purves, MODOT

573/526-2412.

SIB HIGHLIGHTS, continued from page 4
The agency will repay the debt with

FTA formula funds, which it is slated to

receive at a level of approximately $200

million each year through 2003.

Although the bonds mature in 2008,

five years beyond the current transportation funding authorization bill,

the issue relies on anticipated future

transit funding at levels equal to or

higher than current ones.

In the future, more states may explore

financing transit projects either

through GARVEEs repaid with FTA

formula or grant funds, or through

Federal-aid apportionments available to

transit projects.

Looking Ahead

In response to the widespread interest

in GARVEE bonds, FHWA and the

American Road and Transportation

Builders’ Association (ARTBA) are

coordinating a workshop on

GARVEEs; the workshop will also

include sessions on TIFIA. The workshop will be held in Washington D.C.

on November 2, 1999 in conjunction

with the ARTBA Public-Private

Ventures Conference. 

States that are interested in this new

financing mechanism may wish to contact the rating agencies for copies of the

credit reports on GARVEE issues.

These reports include key information

related to the rating agency considerations. The FHWA Resource Centers

and the Innovative Finance Team in

Washington are available to work with

states in advancing this new financing

approach. Also FHWA plans to issue

new guidelines on GARVEE financings

in July 1999. 

Quarterly

FHWA's

7

various fees, including an Application

Initiation Charge ($5,000 in FY 1999)

and a Credit Processing Fee ($0 in FY

1999); USDOT may adjust these

amounts in future years. In addition, if

there is insufficient budget authority

available to cover the subsidy cost of a

TIFIA credit instrument, the project

sponsor may contribute such amounts

from other sources. However, none of

these costs may be included in calculating

eligible project costs.

Threshold Criteria

The rule clarifies several of the threshold

eligibility criteria for projects. First, both

general obligation and general corporate

promissory pledges can satisfy the legislative requirement that projects be secured

at least in part by "dedicated revenue

streams." However, Federal grants,

regardless of funding source, are not eligible to serve as pledged security of the

TIFIA instrument. The Secretary may

also take into account other forms of

security and collateral pledged to secure a

TIFIA instrument. Second, projects

extending across state lines (like a bridge)

would determine the threshold size criterion against the state with the smaller

level of Federal-aid. Finally, the requirement that the project be included in the

public transportation planning process

can be demonstrated if the project is consistent with the transportation plan of a

state (or metropolitan planning organization, if applicable) at the time of application, and if it is included in the fiscallyconstrained State Transportation

Improvement Program at the time funds

are obligated. 

Rating Requirement

The rule clarifies that the statutory

requirement for an investment-grade rating on the project's senior debt should

not reflect the presence of bond insurance, unless such credit enhancement

also extends to the TIFIA component.

The rating should reflect the underlying

credit-worthiness of the senior debt. No

funds may be disbursed until the formal

rating is issued. 

Conditional Commitments

It is expected that, in many cases, project

sponsors and USDOT will first execute a

term sheet to allow the obligation of

funds and credit

amounts, and

thereafter draft

the formal credit

agreement for a

loan, loan guarantee, or line of

credit. For those

projects lacking

certain prerequisites at the time of

application (such

as a final environmental Record of

Decision) or for large projects with

extended construction periods, the

Secretary may elect to make a contingent

commitment in the form of a

Conditional Term Sheet. This conditional agreement would not formally obligate

funds at the time of execution. However,

it would reflect the Secretary’s intention

to obligate funds in a subsequent fiscal

year, provided specified conditions were

satisfied by designated dates. The

Secretary can administratively reserve, or

set-aside, up to one-half of a future year’s

budget authority pursuant to such contingent term sheets. Each year’s obligation of funds would be tied to distinct,

clearly identified project segments, stages,

or milestones set forth in the term sheet.

Generally, projects will have to be sufficiently advanced at the time of application to have at least published their draft

Environmental Impact Statement.

Over the next four years, USDOT

expects to receive applications for TIFIA

assistance from project sponsors of highway, mass transit, passenger rail, and

intermodal facilities. The statute requires

USDOT to report to Congress by June

of 2002 regarding the financial performance of the TIFIA projects, along with

a recommendation as to whether the program should be continued in its current

form or not.

TIFIA, continued from page 1

Contact:

David Seltzer, FHWA,

202/366-0397.

Contact:

Jennifer Mayer, FHWA,

Western Resource Center,

415/744-2634.

GARVEE Roundup, continued from page 2

Fiscal Year Subsidy Spending Authority

(Budget Authority) Maximum Credit Assistance

FY 1999

FY 2000

FY 2001

FY 2002

FY 2003

Total

$80 M1

$90 M

$110 M

$120 M

$130 M

$530 M

$1,600 M

$1,800 M

$2,200 M

$2,400 M

$2,600 M

$10,600 M

1 FY 1999 obligation limitation reduced TIFIA budget authority to $70.6 million
8

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/

innovative finance/

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)

SUZANNE H. SALE, FHWA

CO-MANAGING EDITOR

602/379-4014

FAX: 602/379-3608

SUZANNE.SALE@FHWA.DOT.GOV

MAX INMAN, FHWA

CO-MANAGING EDITOR

202/366-0673

FAX: 202/366-7493

LAURIE L. HUSSEY, CS MANAGING EDITOR

CAMBRIDGE SYSTEMATICS, INC.

617/354-0167

FAX: 617/354-1542

LLH@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.

Quarterly

FHWA's

Suzanne H. Sale has joined the FHWA Innovative Finance Team. Ms. Sale will serve

as Senior Financial Advisor to FHWA and will assist in developing new project

finance techniques as well as providing expertise with existing programs such as State

Infrastructure Banks (SIBs), Grant Anticipation Revenue Vehicle (GARVEE) bonds,

and the Quality Program. Prior to joining the team, Ms. Sale served as the Chief

Financial Officer for the Arizona Department of Transportation (ADOT). Over her

23-year career at ADOT which she began as an Economist, Ms. Sale held increasingly

responsible positions and served as CFO since August 1988. Ms. Sale led the

Department’s bond financing activities and she was instrumental in establishing

Arizona’s SIB program and advancing the GANS (i.e., GARVEE) financing mechanism. Her degrees include a Bachelor’s in Chemistry from Manhattanville College, a

Master of Science in Teaching from Boston College, and a MBA from Arizona

State University. She is an active member of a number of national transportation

groups, including the Transportation Research Board’s Taxation and Finance

Committee, and the AASHTO Subcommittee on Transportation Finance.

A New Team Member

Mississippi Sells First GARVEE Bonds 

LATE-BREAKING GARVEE NEWS

Mississippi accepted bids on June 17, 1999 for $200 million of GARVEE bonds

to accelerate a four-lane road building program. The goal of this program is to

provide every resident in the state access to four-lane facilities within a 30-minute

drive and with increased mobility to enhance rural economic development.

Proceeds of the GARVEE issue will pay off short-term notes issued earlier in the

year. The Mississippi GARVEE bonds are secured by both Federal highway reimbursements and dedicated state taxes.

Arkansas Voters Pass Bond Issue

On June 15, 1999, Arkansas voters approved, by a 4 to 1 margin, a plan to issue

$575 million in GARVEE bonds for repairs to 372 miles of interstate routes. It

was the first time in 50 years for Arkansas to approve going into debt for highways. The state will be paying off the bonds over 10 to 12 years with the authorizations from TEA-21 and future highway bills and dedicated revenues from a 4

cent diesel tax passed earlier in the year. The Arkansas Highway and

Transportation Department anticipates that the first interstate repair contract

under this program should start in early 2000.

Contributors to Vol. 5, No. 1 of IFQ include:

Roger Berg, Cambridge Systematics, Inc.

Max Inman, FHWA

Phyllis Jones, FHWA

Jennifer Mayer, FHWA, Western Resource Center

Suzanne H. Sale, FHWA

David Seltzer, FHWA

Esther Strawder, FHWA