Two years and counting, the TIFIA

program is in full swing.

As regular IFQ readers know, TIFIA

stands for the Transportation Infrastructure Finance and Innovation Act,

which was enacted in June 1998 as part

of the Transportation Equity Act for

the 21st Century (TEA-21). The

TIFIA program offers loans, loan guarantees, and lines of credit to sponsors

of large surface transportation projects

through a periodic application and

selection process.

To date, the U.S. Department of Transportation (DOT) has:

❖ Awarded $1.6 billion in credit assistance to the five projects selected in

its first round of application in FY

1999;

❖ Solicited and received a second

round of applications for FY 2000,

with announcements of project

selections expected in September

2000; and

❖ Solicited a third round of applications

for FY 2001, for which formal applications are due September 6, 2000.

Schedule for Round Three

The third round of TIFIA assistance will

provide credit assistance from the funding authorized for FY 2001. Applicants

needed to submit letters of interest by

Thursday, August 17, 2000, and formal

applications are due by Wednesday, September 6, 2000, as shown on the schedule below.

The U.S. DOT is authorized to award

up to $2.2 billion in TIFIA credit support in FY 2001. Potential applicants

for this next round of TIFIA assistance

are encouraged to consult the TIFIA

web site (http://tifia.fhwa.dot.gov) or

contact the U.S. DOT directly for further information.

New Rules

Concurrent with the third solicitation

for applications, the U.S. DOT published revised rules governing the

TIFIA program. While most of the

regulations remain the same as those

appearing in the initial TIFIA rulemaking of June 1999, prospective

applicants should be aware of a few significant changes. The U.S. DOT made

these revisions to the regulations on the

basis of experience to date, Administration priorities, and Congressional

intent. The revisions:

❖ Clarify that funds will be disbursed

based on the project’s anticipated

cash flow needs;

❖ Clarify that the borrower must

obtain ongoing credit surveillance

for the life of the TIFIA credit

instrument;

❖ Specify that loan servicing fees are

to be paid by the borrower;

❖ Modify the time period for audited

financial statements from 120 days

to within no more than 180 days;

❖ Provide that administrative offsets

will be employed only in cases of

fraud, misrepresentation, or criminal acts, and will not be employed

as a result of revenue shortfalls; and

❖ Assign weights to the eight evaluation

criteria established in statute, as

shown in the chart at the top of

page 2.

The revised regulations were published

in the Federal Register dated July 19,

2000 (Volume 65, Number 139) and

are codified at 49 CFR Part 80.

Applying for TIFIA Assistance

While a wide variety of entities and

projects are potentially eligible for

TIFIA assistance, the TIFIA statute sets

forth several threshold criteria and

other requirements as prerequisites for

an award of TIFIA assistance. The

TIFIA Program Guide, available at

Quarterly

FHWA's

VOLUME 6, NUMBER 2 SUMMER 2000

July 19, 2000

September 6, 2000

Fall/Winter 2000

August 17, 2000

Publication of solicitation for new applications 

(see Federal Register, Volume 65, Number 139)

Deadline for submission of formal applications

Anticipated announcement of selections

Deadline for submission of letters of interest

Schedule for Upcoming TIFIA Solicitation (FY 2001)

Also in this issue ...

Six TIFIA Applications Received . 2

GARVEEs Across the Map . . . . . 4

Innovative Finance Primer . . . . . 4

NCHRP’s Innovative Financing

Clearinghouse Project . . . . . . . . 5

SIBs Demonstrate 

Their Effectiveness . . . . . . . . . . . . 6

SIB Best Practices Review . . . . . . 8

Pocahontas Parkway: 

The 63-20 Financing Option . . . 9

New Team Members . . . . . . . . 10

FEDERAL CREDIT PROGRAM

A New Round of Solicitations and Revised Regulations

continued on page 2
Quarterly

FHWA's

2

http://tifia.fhwa.dot.gov, includes the TIFIA

application and describes the types of projects, costs, sponsors, and regulatory or

statutory requirements upon which TIFIA 

is conditioned. 

Please refer to the Winter/Spring 2000 issue

of IFQ for a comprehensive overview of key

considerations in determining whether your

project is ready to apply for TIFIA assistance. Prospective applicants are encouraged

to contact U.S. DOT prior to submitting

applications to ascertain the eligibility and

readiness of their proposed projects.

A New Round of Solicitations, continued from page 1

Reduced Federal Grant Assistance

5.0%

Environmental Benefits

20.0%

Consumption of 

Budget Authority

5.0%

Project Acceleration

12.5%

Significance

20.0%

National or Regional

Use Of New Technologies

5.0%

Credit Worthiness

12.5%

Private Participation

20.0%

Weights for TIFIA Evaluation and Selection Criteria

Six TIFIA Applications Received Under FY 2000 Solicitation

In response to the solicitation for FY 2000 TIFIA credit

assistance, the U.S. DOT received 15 letters of interest and

six applications. The applicants for FY 2000 TIFIA assistance are summarized in the following table, and the projects

are described below. The Secretary of Transportation is

expected to announce selections in September 2000.

Project Descriptions

Central Texas Turnpike Project

❖ Construction and operation by the Texas Turnpike

Authority (TTA), a division of Texas DOT, of a 122-mile

tolled highway network in the vicinity of the Interstate 35

corridor between Austin and San Antonio.

❖ The $3.2 billion project consists of four connecting highway segments that would operate under a single toll system.

Tacoma Narrows Bridge Project

❖ Construction and operation by United Infrastructure

Washington (UIW), a Bechtel Enterprises subsidiary, of a

suspension bridge that would parallel the existing Tacoma

Narrows crossing.

❖ The $835 million project would also include repair of the

existing facility, which would be tolled in conjunction

with the new bridge.

❖ The Washington State DOT selected UIW as part of its

Public-Private Partnership initiative.

Project

Estimated Cost

(in millions)

TIFIA Request

(in millions)

Type of

Instrument

$ 3,220

835

$ 5,507

$ 800

220

50

$1,551

Central Texas Turnpike

(Austin to San Antonio, TX)

Tacoma Narrows Bridge

(Tacoma, WA)

Cooper River Bridges 650 215

(Charleston, SC)

Staten Island Ferries and Ferry Terminal 463 153

(New York City, NY)

Reno Transportation Rail Access Corridor 242 80

(Reno, NV)

97 25

7

25%

32%

28%

33%

33%

33%

33%

Direct loan

Direct loan

Line of credit

Direct loan or

loan guarantee

Direct loan

Direct loan

Direct loan

Line of credit

Washington Monument Visitor's Facility

(Washington, DC)

Total

Percent of

Total Cost

FY 2000 TIFIA Project Applications

continued on page 3
Quarterly

FHWA's

3

In our last issue, IFQ initiated a “TIFIA Trivia” box.

This feature provides the U.S. DOT Credit Working

Group’s responses to questions posed by our readers and

other observers. We hope you find this “TIFIA Trivia”

section useful and that you will submit questions to either

of the IFQ co-managing editors (Max Inman or Suzanne

Sale, FHWA, at 202/366-0673).

Question

The U.S. DOT requires each TIFIA applicant to provide

information on the potential for the project’s senior obligations to attain an investment-grade rating from at least

one nationally recognized rating agency. Moreover, by

the time of disbursement, the project sponsor must provide U.S. DOT with at least one letter from a major

credit rating agency that conveys an investment grade rating on the project’s senior debt obligations and expresses

an opinion on the default risk for the TIFIA component.

How does U.S. DOT use this information? How does

the agency translate a credit rating on a project’s senior

debt obligations into a rating on the TIFIA obligation for

the purposes of assigning a subsidy rate to a given project?

And what if different revenue streams are backing the

senior obligations and the TIFIA instrument?

Answer

Based on the preliminary opinion letter and the U.S.

DOT’s assessment of the project, the U.S. DOT will

make an initial capital allocation for the project’s “subsidy

cost” at the time the term sheet is signed. Generally, the

less developed the project financing plan and greater the

number of rating agency qualifications, the more conservatively the U.S. DOT will set this initial subsidy reserve.

When providing the final credit rating of the senior debt

obligations, the rating agencies will also provide a direct

assessment of the credit risk of the TIFIA instrument.

Differences in the credit quality of the revenue streams

backing the senior debt obligations and the TIFIA instrument will be reflected in the rating agency assessments.

Based on the final credit ratings, the U.S. DOT will revise

its initial capital allocation. (The strength of the revenue

stream may affect both the probability of default and the

potential for recoveries in the event of a default.) The

final subsidy reserve will reflect the default risk assessment

of the TIFIA instrument provided by the rating agencies.

Since the U.S. DOT’s use of its TIFIA budget authority

will be based on the final capital allocation, adjustments

to the initial subsidy reserve will affect the funding available to support other TIFIA projects.

TIFIA Trivia 

The U.S. DOT Responds to Your Questions

Cooper River Bridges

❖ Under the sponsorship of the South

Carolina Transportation Infrastructure Bank (SCTIB), construction by

the South Carolina DOT of a bridge

to replace two existing crossings

between Charleston and Mount

Pleasant, SC.

❖ The project, estimated to cost up to

$650 million, would receive significant funding from the SCTIB,

which proposes to borrow the TIFIA

funds and repay them from truck

registration fees and repayments of

SCTIB loans.

Staten Island Ferries and 

Ferry Terminals

❖ Acquisition by New York City acting

through its agencies of new passenger

ferries connecting Staten Island and

Manhattan.

❖ The $463 million project would also

refurbish the ferry terminals at

St. George (Staten Island) and

Whitehall (Manhattan).

❖ The TIFIA loan would be secured by

the City’s Tobacco Flexible Amortization Bonds.

ReTRAC: Reno Transportation 

Rail Access Corridor

❖ Construction by the City of Reno of

a two-mile railroad trench that

would eliminate 13 rail/highway

grade crossings in the center of

downtown Reno, enhancing safety

and speed for both freight and passenger rail travel.

❖ The $242 million project, funded

through a combination of local taxes

and revenues, would construct

bridges over the trench at the crossings in order to preserve the local

street network.

Washington Monument Visitor Facility

❖ Construction under the sponsorship

of the Nation’s Capital Bicentennial

Celebration (NCBC), a non-profit

organization, of an underground visitor center adjacent to the Washington Monument.

❖ The $97 million facility would provide interpretative services and 

other amenities for visitors to the

Monument.

❖ Several heritage travel activities have

been proposed to provide revenues to

repay the TIFIA debt.

Contacts:

Stephanie Kaufman,

Office of the Secretary,

U.S. DOT,

202/366-9649 or

Mark Sullivan, FHWA, 

202/366-5785.

Six TIFIA Applications, continued from page 2
Quarterly

FHWA's

4

The Grant Anticipation Revenue Vehicle (GARVEE) financing mechanism

continues to gain popularity as a tool

to supplement “pay-as-you-go” financing methods. The latest developments

in GARVEEs are highlighted below.

The Arizona Department of Transportation (ADOT) recently completed its first GARVEE financing in

July 2000 with the issuance of $39.4

million in Grant Anticipation Notes

(GANs), Series 2000A. The notes will

be repaid with a portion of the state’s

Federal-aid revenue. The sale of the

notes provides funds for the advancement of a major urban transportation

interchange at I-10 and Pecos Road in

Phoenix. The interchange is a joint

project between ADOT and the City

of Phoenix, with the city providing a

portion of the interest cost on the

GANs. This issue is the first in a

planned financing program that anticipates the issuance of $450 million

over the FY 2000-2004 period to

accelerate completion of the freeway

program in Maricopa County.

In May 2000, the Colorado Department of Transportation sold $537

million of Transportation Revenue

Anticipation Notes, its first GARVEE

issue to finance a planned $1.7 billion

bond program for high-priority projects, including improvements to the

Denver area I-25 Southeast Corridor.

The Corridor is being improved as

part of an innovative partnership with

the Denver area Regional Transit District, which will reduce congestion

and expand light rail with a separately

funded bond issue.

Oklahoma’s Governor signed legislation in June 2000 that authorizes the

sale of up to $700 million of new

bonds backed by Federal-aid highway

funds. The state could potentially

reserve up to $110 million of Oklahoma’s approximately $350 million

in annual apportionments for 10

years to pay debt service on an issue

of that size. While the state has not

finalized the list of projects to be

advanced with the GARVEE tool,

possible projects include widening

U.S. 169 near Tulsa, as well as U.S.

70 from Idabel to Valliant.

California is working on draft guidelines for its authorized GARVEE program. These guidelines will help

determine how to select projects that

will be able to make use of the bonding

authority already authorized by the

Legislature in the last session.

Alaska’s Legislature gave serious consideration to the GARVEE vehicle, but

ultimately failed to pass legislation that

would enable a bond issue repaid with

Federal-aid funds. The Legislature

may reconsider this initiative in its

next session. 

The map shows the state of the states

on GARVEEs. 

GARVEE ROUNDUP

GARVEEs Across the Map

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Have issued GARVEEs

Have authority to issue GARVEEs

Considering or seeking authority to issue GARVEEs

As reported in the Winter/Spring 2000 issue of IFQ, FHWA is completing work on a comprehensive resource guide, or

primer, describing innovative financing techniques. The Project Finance Primer will provide Federal, state, local, and private

agencies with detailed information on new project finance mechanisms for surface transportation projects. It will also showcase practical, case-oriented information relating to emerging financial strategies, as well as overviews of best practices.

In addition, a companion brochure highlighting innovative finance techniques and best practices will soon be available via the

FHWA’s web site at http://www.fhwa.dot.gov/innovativefinance. Availability of both the primer and brochure will be posted

on FHWA’s innovative finance web site and reported in the next issue of IFQ.

Innovative Finance Primer Nears Completion

Contact:

Jennifer Mayer, FHWA,

Western Resource Center,

415/744-2634.
Quarterly

FHWA's

5

The Second National Conference on

Transportation in Scottsdale, Arizona

from August 20-23, 2000 marks the

kickoff of the National Cooperative

Highway Research Program’s

(NCHRP’s) Innovative Financing

Clearinghouse project. The Clearinghouse will be an Internet-based

resource providing current information on innovative surface transportation finance techniques, programs,

and practices, as well as the latest,

most cutting-edge events and trends

in the industry. 

Given the rapid pace of developments

in transportation finance, the challenge

for transportation decision-makers is

how best to share information and best

practices and to provide for continued

learning and knowledge transfer. The

Administrative Subcommittee on

Transportation Finance of the American Association of State Highway and

Transportation Officials (AASHTO)

recognized the importance of improving the understanding of innovative

financing and initiated the development of the clearinghouse under the

auspices of NCHRP. The initial impetus for this project came from the

Transportation Research Board’s (TRB)

April 1997 Conference on Transportation Finance for the 21st Century. 

The scope of this project is intended to

include issues related to Federal, state,

regional, local, and private funding of

surface transportation (highways, passenger rail and bus systems, intermodal

links, intelligent transportation systems, and related facilities), with an

emphasis on innovative alternatives to

traditional funding methods. The definition of innovative funding includes

the application of alternative contracting mechanisms when coupled with

innovative financing methods.

The Clearinghouse will fulfill a vital

function in meeting the information

needs of transportation departments in

the area of innovative finance by sharing information and lessons learned. It

will present up-to-date, stateof-the-practice knowledge,

highlight the most current

developments in the field, and

offer a forum for disseminating background information,

success stories, current events,

and best practices. The Clearinghouse will also include

information on legislation,

events, publications, projects,

techniques, and application

guidance. In addition, it will

address the project development process and institutional

issues germane to all transportation modes.

As a web-based resource, the

Clearinghouse is intended to

facilitate an interactive exchange of

questions, ideas, and collective experience of its users. Users from around

the country and around the world will

be able to exchange information on

project development trends, practices,

and ideas to create new synergies fostering innovative financing practices.

The challenges of the project are many:

❖ To go beyond the mere provision of

information that is otherwise available and capitalize on interactive

electronic communication to transfer knowledge among a wider group

of stakeholders; 

❖ To foster dialogue and discussion

among stakeholders who would not

otherwise have the opportunity to

share ideas; 

❖ To increase the participation of

financial, development, technology,

and service stakeholders into the

transportation arena; and

❖ To stimulate continuing innovation

in transportation finance.

Current plans call for the Clearinghouse to be available on the Internet in

spring 2001. Initial tasks involve the

identification of user groups, definition

of the information and services to be

made available, identification of information sources, preparation of a marketing plan, and studies of information

clearinghouse best practices. These

various tasks will then be folded into a

recommended initial structure, content, and implementation plan.

Awarded by NCHRP to Parsons

Brinckerhoff Infrastructure Development Company, in association with

Sharon Greene and Associates and José

Gómez-Ibañez, both the project team

and the NCHRP project oversight

panel are seeking to involve interested

stakeholders in the development of the

Clearinghouse. Readers of IFQ and

other interested stakeholders are

invited to visit a pilot web site at

http://www.pbworld.net/nchrp/ to

provide suggestions and comments

that will help guide the development

of the Clearinghouse. 

AASHTO and TRB look forward to

your involvement in the development

of the Clearinghouse and to the benefits that this important tool will bring

to the transportation finance community. Updates on the Clearinghouse

will be provided in future issues of IFQ. 

NEW INITIATIVES

NCHRP’s Innovative Financing Clearinghouse Project is Launched

Topics in Infrastructure Finance

Calendar of Events

Organizations

Publications

Glossary of Terminology

Project Database

Toolbox

Meet the Industry Leaders

Discussion and Forum

Clearinghouse Features

Contact:

Christopher Hedges,

National Cooperative

Highway Research 

Program, 202/334-1472.
As of August 2000, based on information reported to FHWA, 31 states have

entered into 162 loan agreements with

a dollar value of $765.6 million. Five

states with very active programs –

Florida, Arizona, Ohio, Missouri, and

Texas – account for nearly 80 percent

of State Infrastructure Bank (SIB)

loans nationwide. Florida’s SIB will

see increased activity as a result of a

major transportation funding package

passed by the 2000 legislature. As part

of this comprehensive legislation, state

funding of $150 million ($50 million

annually over three years) will be

appropriated for Florida’s SIB.

This issue of IFQ highlights the

progress being made in implementing

SIB programs in Oregon and Maine.

Both state programs demonstrate

the flexibility and diversity possible

in structuring SIBs to best meet

state needs.

Oregon SIB

As one of the initial 10 SIB pilot

states, Oregon’s road to success hit a

few speed bumps. Obtaining state

funds to match the Federal funds,

developing rules, policies, and materials to implement the program, and

launching an effective outreach program were all early challenges. Fortunately, the learning curves did not

create any significant roadblocks. The

Oregon Transportation Infrastructure

Bank (OTIB) to date has closed and

funded eight agreements with an

aggregate value of over $11 million.

There has been great diversity in the

size, scope, and repayment sources of

OTIB’s loans. The Oregon bank thus

far has funded two transit projects,

three bridge retrofits, a significant

right-of-way purchase, new street construction, and a reconstruction project

resulting from a series of landslides.

OTIB’s borrowers include transit

providers; port authorities; one of the

state’s least populated counties as well

as a county l6 times larger; and two

cities, Portland and another city about

one percent of the size of Portland.

The OTIB has been opportunistic.

When TEA-21 high-priority project

awards were announced in 1998, all

local project sponsors were given the

opportunity to advance their projects

by using a SIB loan, with repayment

schedules set to match TEA-21 disbursements. Similarly, one of the

OTIB loans allowed a city to repair a

bridge in advance of Highway Bridge

Rehabilitation or Replacement

(HBRR) funding, avoiding an

extended period of load limits on a

critical route. Other repayment

sources utilized by OTIB have been

gas taxes and bridge tolls.

Because Oregon’s Constitution strictly

limits the use of gas taxes, Oregon’s

State Infrastructure Bank Loan Agreements by State

As of August 2000

Quarterly

FHWA's

6

SIB UPDATE

SIBs Demonstrate Their Effectiveness in Funding Transportation Infrastructure

Number of Loan Agreement Disbursements

State Agreements Amount ($000) to Date

Alaska 1 $2,737 $0

Arizona 8 168,956 66,779

Arkansas 1 20 0

Colorado 2 400 400

Delaware 1 6,000 6,000

Florida 15 219,184 30,542

Indiana 1 3,000 0

Iowa 1 739 739

Maine 22 1,768 759

Michigan 22 16,444 12,174

Minnesota 2 21,560 10,532

Missouri 8 56,008 41,770

Nebraska 1 1,500 0

New Mexico 1 541 541

New York 1 125 125

North Carolina 1 1,575 1,575

North Dakota 2 3,565 *1,565

Ohio 25 112,965 58,855

Oregon 4 5,960 5,735

Pennsylvania 8 6,103 393

Puerto Rico 1 15,000 15,000

Rhode Island 1 1,311 1,311

South Dakota 1 992 992

Tennessee 1 1,875 0

Texas 19 49,789 39,338

Utah 1 2,888 2,888

Vermont 3 1,030 0

Virginia 1 18,000 18,000

Washington 1 700 0

Wisconsin 2 1,188 1,188

Wyoming 4 43,681 **22,928

162 $765,604 $340,129

* North Dakota has repaid $1,376 of first loan.

** Wyoming has repaid $13,000 of first loan.

Note: Table reflects data reported to FHWA as of August 15, 2000.

continued on page 7
Quarterly

FHWA's

7

continued on page 8

ability to fund a match for the Transit

Account was impaired. However, Oregon DOT management was successful

in obtaining a portion of the state’s

Stripper Well (energy) funds, enabling

OTIB to capture transit allocations.

In spring 2000, OTIB took on a

unique role as the administrator of a

state grant program authorized by the

Oregon Legislature. As a means of

assisting local governments with their

transportation systems, $30 million

will be awarded on a competitive basis

to cities, counties, and other agencies

for projects that relieve pressure or

help manage access on the state highway system or support compact urban

development. Nearly 100 applications

were received requesting funds in

excess of $100 million. It is expected

that additional demand for OTIB

loans will be created by this large,

unfunded need.

Similar to other SIBs nationwide,

OTIB’s creation was possible because

of existing statutes that covered a

broad range of intergovernmental relations and cooperative agreements. In

1997, the program was specifically recognized in state law and, in 1999, the

Legislature expanded the program’s

capabilities by authorizing a pledge of

gas taxes to back OTIB loan guarantees. The Legislature also created a

mechanism for the bank to issue up to

$200 million in bonds for relending.

Loan repayments or gas tax revenues

would support such bonds.

Based upon recent feedback from

municipal transportation managers,

this new bonding capacity may

become a primary vehicle for the

development of local streets in some of

the state’s growth areas. It is anticipated that such loans will be repaid

from sources such as local improvement district assessments, system

development charges, tax increment

financing, or traffic impact fees. The

state’s ability to put future revenue

streams “on the table” today will allow

for a more efficient and cost-effective

approach to solving local infrastructure problems. 

Loan amounts during the past four

years have ranged from $225,000 to

cover the design and engineering costs

of an intermodal center for a coastal

city, to $4.4 million for a new bridge,

including bike lanes and sidewalks, in

the Portland metropolitan area. While

loan rates have generally been in the

3.5-5.0 percent range, two loans were

priced at less than one percent. Loan

maturities have ranged from two to 20

years, with several loans set for four

years, reflecting the TEA-21 drawdown schedules.

The most recent loan to close reflects

several elements of the diversity of the

program. A small county (population

about 25,000) on Oregon’s northern

coast was required to purchase some

right-of-way to allow for the reconstruction of nearly eight miles of highway in a heavily-used recreation area.

The project involves building a new

bridge to enhance fish passage, eliminating several dangerous sections of

roadway, replacing deteriorating base

and paving, and adding some bike

lanes. The total cost of the project will

be in excess of $12 million with all of

the funding for design and construction coming from the Federal Lands

Highway Program. The county

needed $1.25 million to acquire

needed right-of-way, otherwise the

project would be cancelled; however,

the county’s entire capital outlay budget for roads of $400,000 was committed to other essential projects. 

An OTIB loan provided a timely and

feasible solution to the financial problem. By allowing the county to commit a portion of its allocation of gas

taxes for annual debt service, it was

possible to keep the project on track

and retain the significant Federal contribution; for the next 20 years, the

county will spend about five percent of

its gas tax revenues for payments on

this loan. In recognition of the

county’s limited financial resources,

OTIB set the loan rate at 0.5 percent.

Projects such as these serve as a convincing reminder that there are transportation financing gaps at virtually

every level of local government. OTIB

has shown that it can fill those 

gaps by functioning as a flexible 

source of funding. 

Maine SIB

The SIB established by the Maine

Department of Transportation is outpacing many other states in the number of loans, even though its

capitalization level is just over $3 million. To date, Maine has capitalized its

SIB program with $2,540,000 of Federal funds and $635,000 of state

funds. 

Maine’s SIB has been used to help

fund projects on the state’s major collector roads, largely ignored over the

last few years. Currently, 22 projects

have been funded through a partnership of the SIB, state, and Federal

funding sources. These projects were

submitted for consideration by municipalities and have been selected on a

competitive basis.

Each municipality submitting a project for consideration was required to

provide up to 25 percent of the funding. In addition, these municipalities

agreed to fund up to 25 percent of

cost overruns up to 10 percent of the

original estimate of the project cost.

The SIB provided loans to the municipalities in an amount equal to the local

share. The loans are interest free and

can be repaid in one to 10 years.

Repayments can be in the form of an

annual or quarterly bill, a quarterly

deduction from Local Road Assistance

Payments (LRAP), or through upSIBs Demonstrate Their Effectiveness, continued from page 6

Contact:

Paul Cormier,

Oregon Department of

Transportation,

503/986-3921.
Quarterly

FHWA's

8

front contributions from the municipality. Terms and repayment choices

have been summarized into a simple,

single-page agreement form. The

municipalities are administering some

of the projects. 

The Maine Department of Transportation, in coordination with the Regional

Transportation Advisory Committees,

prioritized projects as they were submitted for consideration. Criteria used to

prioritize projects included economic

impact of the project, contribution to

the movement of people and freight,

and the effect the project would have

on the character of the community.

For the 22 projects under agreements,

loan obligations total slightly more than

$1.6 million, funding total project costs

of just under $8.4 million. This translates into a leveraging ratio of 5:1.

Some of those projects would not have

been undertaken without the funding

assistance of the SIB and all were

advanced by several years. The balance

of SIB funds, along with any interest

earned and repayments to the SIB, will

be used to advance similar projects in

the future. 

Maine’s SIB program clearly demonstrates that a relatively small bank can

be of significant value to a state in making more highway projects viable at an

earlier date.

Since the President’s Executive Order

for investment in infrastructure in

1994, the SIB program has evolved as

one of several significant tools that

complement the traditional reimbursement-based transportation grants program. Subsequent to its authorization

by Congress in the National Highway

System Designation Act of 1995, the

SIB program has been influenced by

some major legislative milestones that

have changed the shape of the program. The original pilot program, first

limited to only 10 states, was made

available to all interested states in 

the 1997 appropriations act, and 

then was extended for only four 

states in TEA-21. 

Many states have participated at various stages in the short history of the

program, and each has differed in its

approach. While some SIB states have

not pursued the program beyond

receiving Federal-aid Highway Program “seed” money, other SIB states

have active and more mature programs

with portfolios of loans assisting both

transit and highway projects.

Recognizing that SIBs will continue to

play an important role in the changing

arena of transportation finance, the

Federal-Aid Financial Management

Division at FHWA is conducting a

review of the SIB program.

A primary goal of the review is to

monitor states’ recent experience with

the SIB program, to pinpoint areas

where improvements are possible, to

focus attention on practices that have

worked well, and to identify new

opportunities for the SIB program

today and in the future. The SIB

review is being undertaken as part of

the Quality Financial Management

Initiative, an important element in

FHWA’s continuing efforts to increase

the effectiveness of Federal-aid financial management.

The review team will gather information from the states through distribution of a questionnaire to FHWA

Division Offices in every state with an

active SIB. Financial managers in the

Division Offices will work with financial staff at their respective state DOTs

to complete the five-page questionnaire. The questionnaire addresses a

range of SIB operational elements,

including organizational structure,

financial policies, and outreach efforts.

Additionally, the questionnaire will

provide states an opportunity to give

unstructured feedback on issues of

importance to them. Selected on-site

visits will also be conducted to supplement the questionnaire.

As part of this review, a loan agreement summary form has been distributed to active SIB states. The team will

use this information in the aggregate

to document the dollar value of SIB

assistance both within a given state

and nationwide. 

The culmination of the review will be

a report providing a nationwide snapshot of the SIB program with highlights of best practices and key issues.

This information will help FHWA in

its continuing efforts to improve the

SIB program. 

The Federal-Aid Financial Management Division is planning to complete

the SIB review in the fall of 2000.

SIB BEST PRACTICES

FHWA Conducting “Best Practices” Review of State Infrastructure Banks

Contact:

Tim Varney,

Maine Department of

Transportation,

207/287-2560.

SIBs Demonstrate Their Effectiveness, continued from page 7

Contacts:

Phyllis Jones, FHWA,

202/366-2854 or

Ian Carroll, FHWA,

Western Resource Center,

415/744-2650.
Quarterly

FHWA's

9

The Pocahontas Parkway (Route 895

Connector), a new 8.5-mile, four-lane

toll road connecting I-95 and I-295

east of Richmond International Airport, is the first construction project

approved under the Commonwealth

of Virginia’s Public-Private Transportation Act (PPTA). Through an

innovative partnership between the

Virginia Department of Transportation (VDOT) and the private sector, a

not-for-profit corporation known as

the Pocahontas Parkway Association

(PPA) was established to finance the

Pocahontas Parkway project. PPA has

attracted investors for a $354 million

bond, to be repaid solely by tolls from

users of the parkway.

Virginia’s Public-Private

Transportation Act

In 1995, the Commonwealth of Virginia General Assembly enacted the

PPTA to allow public entities such as

VDOT to authorize private entities to

acquire, construct, improve, operate,

and maintain qualifying transportation facilities. 

While the Commonwealth of Virginia

Transportation Board is an active and

well received issuer in the tax exempt

bond market, one of the public policy

goals of the PPTA was to provide

access to new sources of capital in

accelerating the delivery of needed

transportation facilities. Further, debt

issuance by the Transportation Board

requires legislative approval and must

be managed within the constraints of

the Commonwealth of Virginia’s overall debt capacity limits. 

To achieve the lowest cost of capital

and improve the financial feasibility

of PPTA project proposal submissions, private entities have consistently sought to access the tax exempt

bond market to finance proposed

road projects.

IRS Revenue Ruling 63-20

In order to meet its financing needs,

Virginia has explored issuance of tax

exempt toll revenue bonds through

either established conduit issuers or creation of not-for-profit corporations

pursuant to Internal Revenue Service

(IRS) Revenue Ruling 63-20. While

VDOT would prefer to utilize an established entity for conduit issues, IRS

Revenue Ruling 63-20 provides a viable

alternative and was the option selected

for financing the Pocahontas Parkway.

In July 1998, VDOT completed the

financing for the construction of the

Pocahontas Parkway through the sale

of toll revenue bonds by a newly created not-for-profit private corporation.

The PPA was established as a Virginia

non-stock, not-for-profit corporation

to sell $354 million in toll revenue

bonds. The transaction was structured

in conformity with the requirements

of IRS Revenue Ruling 63-20, thereby

achieving the tax exempt status on the

bonds and providing the lowest cost

financing possible without direct

issuance by the Commonwealth Transportation Board. Additional funding

for the project of $27 million was provided by the state through a SIB loan

($18 million) and Federal funding for

roadway design ($9 million).

VDOT did not proceed with this concept without fully weighing, among

other considerations, the potential

impact on the Commonwealth’s and

Commonwealth Transportation

Board’s credit ratings as a result of debt

issued on behalf of VDOT by the

PPA. Among the requirements for tax

exemption under the 63-20 rule is that

the governmental unit must approve

both the nonprofit corporation and

the issuance of the bonds. VDOT, as

the responsible public entity under the

PPTA process, was the appropriate

approving governmental unit for the

Pocahontas Parkway project. 

VDOT officials met with the three

major rating agencies to assess the

potential impact on the Commonwealth’s and Commonwealth Transportation Board’s credit ratings as a

result of debt issued by a 63-20 entity.

Generally, the rating agencies perceived no adverse impact on either the

Commonwealth’s or the Commonwealth Transportation Board’s credit

ratings as a result of the debt issuance

on behalf of VDOT for a VDOTowned facility by this newly created

private entity. However, one rating

agency did caution that the expectation would be that Virginia, as a tripleA rated state, would not provide

approval for project debt of a 

speculative nature.

While IRS Revenue Ruling 63-20 has

been in existence for 37 years, its use

as a financing mechanism for transportation projects is still in its infancy.

The Pocahontas Parkway was only the

second transportation project nationwide to be financed through this concept, the first being the Southern

Connector in South Carolina, also

financed in 1998.

Potential Expansion of 

63-20 Corporations

As construction proceeds on the Pocahontas Parkway, the first project of its

kind in Virginia, VDOT is still

encountering the intricacies of utilizing the 63-20 concept. Recognizing

these challenges, VDOT is carefully

evaluating this financing approach

prior to expanding its use on other

projects. While IRS Revenue Ruling

63-20 provides a new avenue for funding transportation projects, this option

should be pursued carefully, given

issues related to overall debt burden,

project essentiality, and potential

impact of this type of issuance on the

credit rating of the approving governmental unit.

TECHNICAL CORNER

Pocahontas Parkway: The 63-20 Financing Option

Contacts:

Chandra Shrestha,

Virginia Department of

Transportation,

804/786-9847 or

Deborah Brown, FHWA,

Southern Resource Center,

404/562-3929.
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.

10

Quarterly

FHWA's

Contributors to Vol. 6, No. 2 

of IFQ include:

Roger Berg, Cambridge Systematics, Inc.

Deborah Brown and Frederick Werner, FHWA, Southern Resource Center

Kim H. Burke, and Janet L. Rice, Ernst & Young

Paul Cormier, Oregon Department of Transportation

Max Inman, FHWA

Phyllis Jones, FHWA

Jennifer Mayer and Ian Carroll, FHWA, Western Resource Center

Benjamin G. Perez, Parsons Brinckerhoff Infrastructure Development Company

Miriam Roskin, Roskin Consulting 

Suzanne H. Sale, FHWA

Mark Sullivan, FHWA

Tim Varney, Maine Department of Transportation

The Southern Resource Center welcomes two new members to the FHWA

Finance Team!

Ms. Gina Laney joined the finance team on May 8th as a Financial Specialist. Prior to joining the team, Gina worked in the U.S. DOT Office of

Inspector General for almost 11 years. Gina specializes in providing technical assistance and training on the Federal-aid program, and can be reached

at 404/562-3919.

Ms. Deborah Brown, formerly a Debt and Innovative Finance Manager for

the Commonwealth of Virginia, joined the team on August 2nd. Deborah

brings a depth of experience in using Public-Private Partnerships and Public

Benefit 63-20 Corporations to implement innovative finance techniques.

Deborah can be reached at 404/562-3929.

Please join us in welcoming these two outstanding individuals to the

FHWA family.

Southern Resource Center 

Welcomes New Team Members

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)