On May 14, U.S. Secretary of Transportation Norman Mineta unveiled the

Bush Administration’s surface transportation reauthorization proposal. The Safe,

Accountable, Flexible and Efficient

Transportation Equity Act of 2003

(SAFETEA) provides funding of $247

billion ($201 million for highway and

safety programs and nearly $46 billion

for public transportation programs) over

the six-year period from fiscal year 2004

through 2009. SAFETEA also expands

innovative financing programs and adds

flexibility for innovative financing

methods, so that states and municipalities

can leverage the power of Federal funds

and encourage greater private sector investment in transportation infrastructure.

SAFETEA features four innovative

finance programs to enhance funding to

meet the budgetary challenges of state

and local communities. Three

programs, the SIB pilot initiative, the

TIFIA credit program, and the toll

program, build on successful measures

authorized in prior legislation, while a

private activity bond proposal would

allow the issuance of tax-exempt debt by

state and local governments for highway

and freight transfer facilities developed

and operated by private entities. These

four programs are highlighted below.

Private Activity Bonds

Current Federal tax law significantly

restricts tax-exempt debt for surface

transportation projects that are privately

owned and/or operated. The proposed

Private Activity Bond Program would

amend the Internal Revenue Code to

add highway facilities and surface freight

transfer facilities to the types of privately

developed and operated projects that can

utilize tax-exempt bond financing.

These two additions would not count

against a state’s private activity bond

volume cap, but would instead be subject

to a separate limitation of $15 billion in

the aggregate. The Secretary of Transportation would allocate the $15 billion

of authority among eligible projects.

Highway facilities eligible for financing

under the program would consist of any

surface transportation project eligible for

Federal assistance under U.S.C Title 23,

or any international bridge or tunnel

project for which an international entity

authorized under Federal or state law is

responsible. Eligible surface freight

transfer facilities would include facilities

for the transfer of freight between truck

and rail, including temporary storage

facilities directly related to those transfers.

Summary of SAFETEA Innovative Financing Provisions

REAUTHORIZATION

VOLUME 9, NUMBER 2 SPRING 2003

SAFETEA Unveiled

Innovative Finance Provisions Enhanced, New Provisions Introduced

Also in this issue...

SR125 TIFIA Loan Executed . . . . .3

TIFIA Chief Named . . . . . . . . . . .4

Arizona HELP Program . . . . . . . .5

Texas SIB Funds Tollways . . . . . . .5

California GARVEEs

Rolling Forward . . . . . . . . . . . . .7

Mississippi GARVEEs

to be Issued . . . . . . . . . . . . . . . .8

Projects Accelerated

in Louisiana . . . . . . . . . . . . . . . .9

Alaska GARVEE Bond Sale . . . .10

continued on page 2

Provision Purpose Funding Requirements

Private Activity Encourage private No separate Highway facilities

Bonds participation in funding and surface freight

surface transportation transfer facilities

infrastructure projects added to list of other

eligible activities

SIB Pilot Support projects No separate Program limited

Program that can be financed funding; states can to five states

by loans or that can contribute up to selected through

benefit from credit 10% of eligible an application

enhancements funding categories process

TIFIA Provide Federal Annual credit Highway, transit, and

Program loans, loan guarantees, authority of $2.6 railway projects in

and lines of credit for billion and annual excess of $50 million

projects of national budget authority are eligible

or regional significance of $130 million

Toll Programs

Interstate Permit states to collect No separate Program limited to

Toll Pilot tolls on the Interstate funding three Interstate

for reconstruction/ facilities in three

rehabilitation purposes states

Variable Pricing Alleviate congestion No separate Tolling may be

Program and reduce emissions funding permitted on any

through value pricing Federal-aid highway,

bridge, or tunnel,

including Interstate
2

SAFETEA Unveiled, continued from page 1

This proposed expansion of the types of projects eligible for

exempt facility bonds would remove major barriers to private

participation in the nation’s highway infrastructure. Issuance of

tax-exempt debt would be less costly and long-term operating

concessions would be allowed that could be extended through

the life of a project without jeopardizing a state’s tax-exempt

bond status. The program should serve to encourage publicprivate partnerships and additional private investment in surface

transportation infrastructure projects.

State Infrastructure Bank Pilot Program

SAFETEA authorizes a new State Infrastructure Bank (SIB)

Program. The proposed pilot would limit participation to five

states, including those that have entered into a cooperative

agreement under the SIB pilot authorized by the Transportation

Equity Act for the 21st Century (TEA-21). States interested in

participating in the program will be required to submit an

application for evaluation based on criteria identified in statute

and established by the Secretary. These would include: 

❖The state’s ability to provide non-Federal funds to capitalize

the bank;

❖The state’s strategy for encouraging non-Federal repayment

sources from project sponsors;

❖The amount of Federal funds the state will commit to the SIB

as a percentage of its Federal-aid apportionments;

❖The state’s eligibility under TEA-21; and

❖The state’s past experience with a SIB, including the

TEA-21 pilot program, or comparable financing mechanisms.

Under the proposed pilot program, funding would be derived

from the highway and transit programs with the amount of

apportioned funds transferred to the SIB limited to 10

percent of eligible funding categories. This is a change from

the TEA-21 SIB pilot that allowed states to transfer the total

amount of funds apportioned to it from the eligible funding

categories. The proposal also eliminates the limitation on the

rate of Federal disbursements.

States participating in the program will be required to establish

separate highway and transit accounts within the SIB. The

requirements of Title 23 and Title 49 of the United States Code

will apply to all projects financed by the SIB.

Transportation Infrastructure Finance and

Innovation Act (TIFIA) Program

SAFETEA continues the TIFIA credit program. Authorized

initially in TEA-21, TIFIA provides attractively priced

subordinate and supplemental capital for surface transportation

infrastructure projects in the form of secured loans, loan

guarantees, and lines of credit. Over the fiscal year 2004

through 2009 period, SAFETEA proposes annual credit

authority of $2.6 billion and annual budget authority of $130

million to pay the costs of providing TIFIA credit assistance.

Most of the TIFIA provisions under TEA-21 remain substantially unchanged in the SAFETEA proposal. As in current

law, the Secretary of Transportation will select projects to receive

TIFIA credit assistance through a competitive process

administered by the TIFIA Joint Program Office. TIFIA

projects are selected on the basis of eight statutory criteria,

including national or regional significance; creditworthiness;

private participation; accelerating project schedules; the use of

technology; the use of budgetary authority; environmental

stewardship; and the reduction of Federal grant assistance. The

amount of Federal credit assistance may not exceed 33 percent of

the anticipated eligible project costs. Repayment of the Federal

credit instruments must be from tolls, user fees, or other

dedicated revenue sources.

Under SAFETEA, access to TIFIA assistance would be increased

by lowering the project cost threshold from $100 million to $50

million and extending eligibility to private rail freight projects.

The proposal would also extend eligibility to a group of

functionally related freight projects, each of which separately

might not meet the project cost threshold. The cost threshold

for projects that principally involve the installation of an

intelligent transportation system (ITS) remains at $30 million.

SAFETEA improves the usefulness of the line of credit, making

it available to a borrower in order to avoid (instead of simply

respond to) an event of default. Also, SAFETEA adds a requirement that the total amount of senior project obligations must

equal or exceed the total amount of the TIFIA instrument.

Other changes are primarily intended to clarify or simplify the

requirements in TEA-21.

Toll Programs

SAFETEA proposes changes to some of the toll provisions for

Federal-aid highways. The Interstate System Rehabilitation and

Reconstruction Pilot Program, established under TEA-21 to

permit states to collect tolls on the Interstate for the purpose of

reconstructing and rehabilitating Interstate highway corridors,

would be modified to ease the eligibility requirement. But most

of the original provisions have been retained. The key provisions

of the pilot program are:

❖ Replaces strict requirement that tolls must be the only way

to improve the facility, with a requirement that tolling be

the most efficient, economical, or expeditious way to

advance the project.

SIB Eligible Funding Categories

Highway Transit

National Highway Urbanized Area

System Formula Grants

Surface Transportation Capital Investment

Programs Grants and Loans

Interstate Maintenance Other than Urbanized

Area Programs

Bridge

Minimum Guarantee

continued on page 3
3

SAFETEA Unveiled, continued from page 2

On May 22, 2003, the U.S. DOT executed a $140 million loan

for the SR 125 South Toll Road project in San Diego,

California. The borrower is the San Diego Expressway Limited

Partnership (SDELP), a private entity whose general partner is

California Transportation Ventures, Inc. (CTV). CTV is a

subsidiary of the Macquarie Infrastructure Group (MIG), an

international fund investing more than $150 million to develop

and operate the toll road. MIG, with headquarters in Sydney,

Australia, is the largest developer of toll roads in the world, with

a portfolio of 26 roads in eight countries. The SR 125 South

Toll Road is MIG’s first project in the United States.

The SR 125 South Toll Road is a key link in the regional

transportation system that will accommodate economic growth

in the southern part of San Diego County and facilitate traffic

and trade across the U.S.-Mexico border at the Otay Mesa

crossing. The project is being advanced under a Development

Franchise Agreement with the California Department of

Transportation (Caltrans) and was one of the first five projects

selected for credit assistance through TIFIA.

The TIFIA loan proceeds, together with bank debt, sponsor

equity, and donated right-of-way, will be used to finance the

design and construction of this 9.2-mile, four-lane toll road in

San Diego County, connecting State Route 905 near the Otay

Mesa port of entry from Mexico to the region’s freeway system

about 1.5 miles south of State Route 54 in Spring Valley. The

current estimated project cost (including preliminary

engineering, development costs, construction, and financing)

for the SR 125 South Toll Road is $642 million. The bank

debt is being provided by Spanish bank Banco Bilbao Vizcaya

Argentaria, S.A. and Irish bank DEPFA BANK plc. These two

experienced international project financiers are the joint lead

arrangers of a $400 million senior secured construction and

term loan facility that is being syndicated.

As the first TIFIA project to attract substantial private equity,

SR 125 marked a significant milestone in the TIFIA credit

program, demonstrating how innovative Federal financing tools

can attract private investment to critical transportation projects.

U.S. DOT Executes $140 Million Loan for SR 125 South Toll Road

❖ Continues provision limiting the number of pilot

projects to three Interstate facilities, which must be in

different states.

❖ Continues requirement that, if a metropolitan area is

affected, the metropolitan planning organization must

be consulted.

❖ Continues limitation on use of toll revenues.

❖ Continues to prohibit the use of Interstate Maintenance

funds on the facility while the facility is being tolled.

A new Variable Toll Pricing program for alleviating congestion

and reducing emissions mainstreams the value pricing concept

initiated in a pilot program under the Intermodal Surface

Transportation Efficiency Act (ISTEA) and TEA-21. The

TEA-21 pilot program is repealed, but a state or public

authority may continue to operate under existing agreements.

Key provisions of the new program are:

❖ The Secretary may permit tolling on any highway, bridge, or

tunnel, including Interstate, to manage existing high levels

of congestion or reduce emissions in a non-attainment or

maintenance area.

❖ States or public authorities are required to identify the goals

to be achieved and associated performance measures.

❖ Tolls must vary in price according to time of day, as

appropriate, to manage congestion or to improve air quality.

❖ States may permit vehicles with fewer than two occupants in

high-occupancy vehicle (HOV) lanes as part of the program.

❖ The Federal share is not to exceed 80 percent.

There is no separate funding provided for these programs. Toll

revenues received under the variable pricing program will first be

used for debt service, reasonable return on private fund investments, and operation and maintenance costs. A state or public

authority may use excess revenues for eligible Title 23 projects

if they certify that the toll facility is being adequately maintained.

Contact:

Max Inman,

FHWA,

202/366-2853

FEDERAL CREDIT PROGRAM

Contact:

Suzanne Sale,

TIFIA JPO,

602/379-4014

U.S. DOT Announces Availability of

FY 2003 TIFIA Funds

With an April 17 publication of a Notice of Funding

Availability (NOFA), the U.S. DOT formally announced the

availability of up to $2.6 billion in credit assistance for TIFIA

project applications for the remainder of Federal fiscal year

2003. Approximately $72 million in budget authority remains

available to fund the subsidy costs of any requested credit assistance. The NOFA, as published in the Federal Register (68 FR,

19067), can be viewed at the Office of the Federal Register’s

home page at http://www.archives.gov. The TIFIA office is

continuing to accept applications on a rolling basis.

Contact:

Mark Sullivan,

TIFIA JPO,

202/366-5785
4

Taking advantage of the current low interest rate environment,

the Puerto Rico Highways and Transportation Authority

(PRHTA) refunded its TIFIA loan with tax-exempt debt on

April 29, 2003. In keeping with the TIFIA objective of

encouraging prepayments when feasible, this loan was paid off

32 years earlier than its scheduled final maturity. The bonds

issued to refund the TIFIA loan have an interest rate of 4.97

percent, or slightly more than 75 basis points lower than the

interest rate on the TIFIA loan. Over the life of the bonds,

PRHTA expects to save $31.7 million on a present value basis.

The U.S. DOT and PRHTA executed the $300 million loan

agreement in August 2000. The loan proceeds funded a

portion of the costs of the first phase of Tren Urbano, a $2.2

billion, 16-km. rapid rail system serving metropolitan San Juan.

Puerto Rico Refunds TIFIA Loan

On March 10, Mark Sullivan assumed the position of chief of

the TIFIA program, as FHWA Federal-aid Financial Management

chief Max Inman stepped aside after 18 months as interim

chief. Mark joined the TIFIA program in September 1999,

where he has been involved in all aspects of project selection,

negotiation, and monitoring. Previously, Mark worked in the

U.S. DOT’s Office of Intermodalism where he helped

negotiate the agency’s groundbreaking $400 million loan to

the Alameda Corridor, the seaport access project in southern

California. Prior to joining U.S. DOT, he held senior

positions with the Port of Seattle and the New York City

Department of Ports. Mark can be reached at 202/366-5785.

On February 24, Theresa Stoll joined the TIFIA program

replacing Stephanie Kaufman who resigned in January 2003 to

pursue a career in teaching. Theresa, who brings substantial

experience in budgeting and economics, comes from the Office

of Management and Budget (OMB) where she provided

analysis and oversight for various international assistance

programs, including the operations of the Agency for

International Development, international food aid, and

international debt restructuring. Prior to OMB, Theresa

worked as an economist at the International Trade

Commission and the Bureau of Economic Analysis. Theresa

can be reached at 202/366-9649.

New Chief and Team Member for TIFIA Program

TIFIA Trivia

The U.S. DOT Responds to Your Questions

The “TIFIA Trivia” box provides 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 Mark Sullivan, Chief, TIFIA JPO, 202/366-5785 or

Mark.Sullivan@fhwa.dot.gov.

Question

TIFIA credit assistance may take the form of direct loans, loan guarantees, and standby lines of credit. Are these different

instruments equally useful? How expensive are they? What are factors to consider in the choice of credit assistance?

Answer

3⁄4 The line of credit is a standby instrument providing a secondary source of capital during a project’s ramp-up phase to

mitigate the risk of uncertain revenues. The direct loan and loan guarantee enhance senior financing through the provision

of functionally subordinate capital (direct or guaranteed) to help fund project construction. Most applicants have

requested only direct loans. As long as the U.S. DOT charges the comparable-term Treasury rate on a direct loan, that

instrument will be cheaper than a guaranteed loan for a project needing up-front capital.

3⁄4 In addition to the 10-year window of availability following project completion, the line of credit has limits on eligible uses and

annual draws. Also, some sponsors have intended to structure it to support senior debt only indirectly for tax purposes.

3⁄4 At the present time, the U.S. DOT does not charge credit enhancement fees for these instruments, although there are

certain administrative fees, such as an application fee, credit processing fee, and a loan servicing fee. Current U.S. DOT

policy is to set interest rates at the statutory minimum, the government’s cost of funds – the estimated yield on

comparable-term Treasury securities (specifically tied to the daily SLGS rates plus five basis points).

3⁄4 More recently, project sponsors are looking to the TIFIA direct loan as a potential take-out financing mechanism for shortterm Tax-exempt debt (such as Bond Anticipation Notes) issued during a project’s construction phase. Under TIFIA,

interim construction financing can be refinanced with a TIFIA loan not later than one year after substantial completion.

Interest rates are the primary consideration in the decision framework on using TIFIA for take-out financings.
5

SIB Loan Agreements Jump by

Seven Percent

SIB HIGHLIGHTS

States continue to use their SIBs to leverage funds for

needed transportation projects. As shown in the table to the

right, 32 states have entered into 333 SIB loan agreements

with a dollar value of over $4.1 billion as of March 31,

2003. This represents 23 new loan agreements valued at

nearly $4.3 million since September 2002.

As described in more detail on page 2, SAFETEA would

authorize a new SIB pilot program building on the

successes of the program under the National Highway

System Designation (NHS)

Act and TEA-21. Two of

these success stories are the

Arizona and Texas SIBs,

spotlighted below.

Arizona’s Highway Expansion and Extension Loan

Program (HELP) has been one of the nation’s most

active SIBs, ranking third nationally in loan activity. A

seven-member HELP Advisory Committee accepts loan

applications, reviews and evaluates requests for financial

assistance, and makes recommendations to the State

Transportation Board on loan and financial assistance

requests. To date, the Transportation Board has

approved 43 loans totaling $436 million.

The program has been used throughout Arizona with

loans in 14 of Arizona’s 15 counties, benefiting both rural and

urban areas. Each of the three major regional areas of the state

– Maricopa County, Pima County, and statewide (the other 13

counties) – have received substantial assistance from HELP.

Loans have ranged from an $80,000 loan to the Town of

Miami for two street widening and resurfacing projects to a

$100 million loan to the Arizona Department of

Transportation (ADOT) for the purchase of right-of-way for

the Regional Freeway System in Maricopa County.

The following chart shows the regional allocation of HELP

loans to date.

While Maricopa County, the largest county in Arizona,

accounts for 51 percent of the dollar value of loans to date, 70

percent of the total number of approved loans have been made

to the 13 rural counties. All of the loans in Maricopa County

have financed the acceleration of freeway projects, enabling the

state to achieve its goal of completing the Regional Freeway

System by 2007. In Pima County, eight projects have been

advanced with the use of HELP loans, including a major

project to reconstruct the I-10/I-19 interchange. The statewide

loans have benefited 30 projects, providing needed funding

where options are limited. The largest rural loan is $13.9

million to fund the acceleration of a segment of SR 89A in

Prescott Valley. Not only have the loans in the rural areas of

the state accelerated projects, but they have allowed

communities to spread the costs over time, making larger

projects more feasible for smaller communities.

Total HELP capitalization is nearly $229 million. In addition

to the initial Federal and state capitalization, HELP has been

capitalized with other state sources. These include a $20 million

state general fund appropriation, a $20 million State Highway

Fund loan, and $140 million in Board Funding Obligations

(BFOs). The BFOs are an innovative funding mechanism that

HELP Loans by Region

Loan 

Number of Agreement Disbursements

State Agreements Amount to Date

Alaska 1 $2,737 $2,737

Arizona 43 436,000 236,662

Arkansas 1 31 31

Colorado 3 1,500 1,500

Delaware 1 6,000 6,000

Florida 36 489,500 90,100

Indiana 2 6,000 5,715

Iowa 2 2,874 2,874

Maine 23 1,758 1,478

Michigan 23 17,034 13,033

Minnesota 15 95,719 41,000

Missouri 12 67,801 67,801

Nebraska 1 3,360 3,360

New Mexico 2 14,133 14,133

New York 5 15,450 12,000

North Carolina 2 1,713 1,713

North Dakota 2 3,565 1,565

Ohio 44 178,728 137,241

Oregon 13 18,321 18,321

Pennsylvania 31 22,600 18,894

Puerto Rico 1 15,000 15,000

Rhode Island 1 1,311 1,311

South Carolina 6 2,382,000 1,124,000

South Dakota 1 11,740 11,740

Tennessee 1 1,875 1,875

Texas 41 252,656 243,578

Utah 1 2,888 2,888

Vermont 4 1,049 1,016

Virginia 1 18,000 12,739

Washington 3 2,375 442

Wisconsin 3 1,814 1,814

Wyoming 8 77,977 42,441

333 $4,153,509 $2,135,002

State Infrastructure Bank Loan Agreements by State

As of March 2003

Successful HELP Program Grows

Arizona’s Highway System

Contact:

Phyllis Jones,

FHWA,

202/366-2854

continued on page 6
6

Since launching its SIB in 1997, the Texas Transportation

Commission has entered into 41 loan agreements, totaling

$252.7 million and supporting $1.8 billion in projects. Cities,

counties, and transportation toll projects are utilizing the SIB

loan program as a means of developing needed turnpike or toll

facility improvements across the state. Loans have funded a

range of toll projects, including upgrades and rehabilitation of

the two city-owned international toll bridges in El Paso and

acquisition of right-of-way for the new State Highway 45. By

offering flexible terms and slightly below market interest rates,

the SIB is enabling roads in Texas to be built faster with

significant benefit to the public. Any public or private entity

that has authority to build, maintain, or finance certain

transportation projects can apply for loans.

SIB funding is an important element of the funding package

for the new 122-mile Central Texas Turnpike Project (CTTP)

that is being developed by the Texas Turnpike Authority, a

division of the Texas Department of Transportation (TxDOT).

The CTTP is comprised of four elements: Loop 1, State

Highway 45 North, U.S. 183A, and SH 130. 

State Highway 45 will provide 15 miles of direct east-west

connection through the rapidly growing commercial and

residential area located in North Austin and neighboring

suburbs, Cedar Park and Round Rock. The design of SH 45

consists of a six-lane roadway with frontage roads and overpasses

at the major thoroughfares and ramps connecting to Interstate

35, facilitating easy access to the Dell Computer Corporation

Headquarters, the La Fronterra Mall, the Super Wal-Mart, and

many other businesses and residential areas. On May 29,

2003, the Texas Transportation Commission approved a $103

million construction contract for the SH 45 North Toll Road.

The Texas SIB loaned the City of Round Rock and its

Transportation System Development Corporation (4B

Corporation) a total of $31 million for State Highway 45. Two

SIB loans were made in the amount of $16 million and $15

million for right-of-way acquisition and utility relocation. The

$16 million loan was made at a 4.6 percent interest rate and is

to be repaid to TxDOT within 15 years; the second loan of

$15 million is at a 4.5 percent interest rate for 20 years. The

loans are the city’s contribution toward the $553 million

estimated cost of the State Highway 45 project.

The President George Bush Turnpike, a 30-mile new toll facility

in the Dallas area, is also benefiting from SIB assistance, receiving

a $144.7 million loan in 2002. The chart below shows the

annual loan activity for the Texas SIB.

Tollways Advance in Texas with SIB Assistance

Texas SIB Loans

Contact:

Dorn Smith,

Texas Department of Transportation,

512/463-8721

allows HELP to use state operating funds from the State

Treasurer. The ability to use BFOs has been particularly useful

to ADOT in accelerating purchases of right-of-way for the

Maricopa County Regional Freeway System.

Generally, loan maturities are less than five years and this has

enabled HELP to quickly recycle funds and increase program

leverage. Seven loans totaling $168 million have been repaid.

These repayments have generated considerable funding that

has been made available for additional loans. Interest and

investment income has also generated over $30 million.

The HELP program is currently facing several funding

challenges that have limited the state’s ability to undertake new

loans. Part of the solution to the state’s projected budget

shortfall in the current fiscal year includes repayment of the

$20 million state general fund appropriation. In addition, the

currently outstanding BFOs must be repaid in 2004. While

state law allows HELP to reborrow these funds, low state operating

fund balances could limit the ability to reborrow. The potential

to reduce HELP’s capitalization could significantly impact the

ability of the HELP program to fund future loans. Despite

these challenges, the Arizona Transportation Board, the HELP

Advisory Committee, and ADOT remain committed to the

long-term success of the program. The HELP program

continues to be a vital tool, accelerating needed projects for

communities throughout Arizona. Additional information on

HELP loans is available on ADOT’s website at

http://www.dot.state.az.us/about/help/index.htm.

Contact:

John Fink,

Arizona Department of Transportation,

602/712-6164

Arizona HELP, continued from page 5
7

In May 2003, the California Transportation Commission

(CTC) approved the final GARVEE guidelines developed by

the California Department of Transportation (Caltrans),

paving the way for the state’s first planned $551 million issue

in January 2004.

Four projects would be funded with the initial GARVEE

issuance: the I-15 Managed Lanes project in San Diego

County, two projects in Santa Clara County (the I-880/Coleman

Interchange and SR 87 (North and South) projects), and the

Route 60/91/215 Interchange project in Riverside County.

The total cost of these projects is estimated at $874 million, of

which $551 million will be financed with GARVEE bonds.

Under the newly approved guidelines, project sponsors

(typically California local governments) apply to the CTC for

programming as a GARVEE project. Next, sponsors are

allocated funds by the CTC for debt service. These allocations

count against regional formula funding specified under

California’s Senate Bill 45, which divides 75 percent of Federal

and state transportation funding by regional formula.

California’s GARVEE legislation sets a maximum limit on

borrowings. Maximum annual debt service cannot exceed 30

percent of the historical annual deposits to the state’s Highway

Account from Federal funding, as determined by an annual

“capacity analysis” performed by the California State

Treasurer’s office. For 2003, the Treasurer’s office estimated

the maximum bonding capacity as between $3.06 to $3.73

billion, depending on the market assumptions chosen. The

state’s initial planned issuance will be less than a sixth of this

cap. The first four projects to be funded are described below.

❖ The I-15 Managed Lanes project in San Diego represents

the cooperative efforts of Caltrans, the San Diego

Association of Governments, and the Metropolitan Transit

Development Board in addressing the high traffic demand

on I-15 through capacity and transit improvements. As

one of three segments of overall improvements being

made to this corridor, the middle segment will result in a

“freeway within a freeway” to be constructed in the median

with a movable barrier that can be adjusted to reconfigure

GARVEE ROUNDUP

California GARVEEs Rolling Forward

Face Amount

Date of Issue Rating Projects

State of Issue (in Millions) Moody’s/S&P/Fitch Financed Backstop

New Mexico Sep. 1998 $100.2 A3/A-/na New Mexico SR 44 No backstop; bond

Feb. 2001 $18.5 A2/A/na insurance obtained

Ohio May 1998 $70 Aa3/AA-/AA- Various projects Moral obligation pledge

Aug. 1999 $20 Aa3/AA-/AA- including: to use state gas funds

Sep. 2001 $100 Aa3/AA/AA- Spring-Sandusky and seek general fund

Sep. 2002 $135 Aa3/AA/AA- and Maumee River appropriations in the

improvements event of Federal shortfall

Arkansas Mar. 2000 $175 Aa2/AA/na Interstate Highways Full faith and credit of

state, plus state motor

fuel taxes

Colorado May 2000 $537 Aa3/AA/AA Any project financed Federal highway funds

Apr. 2001 $506.4 Aa3/AA/AA wholly or in part by as allocated annually by

Jun. 2001 $208.3 Aa3/AA/AA Federal funds CDOT; other state funds

Arizona Jun. 2000 $39.4 Aa3/AA-/AA- Maricopa freeway Certain sub-account

May 2001 $142.9 Aa3/AA-/AA- projects transfers

Alabama Apr. 2002 $200 Aa3/A/na County Bridge Program All Federal construction

reimbursements. Also

insured

Virgin Islands Oct. 2002 $20.8 na/na/AAA Enighed Pond Port Project Insured

and Red Hook Passenger

Terminal Building

Alaska Apr. 2003 $102.8 Aa2/AA/AA Eight road and bridge Full faith and credit

projects of state

Total $2,776.3

GARVEE Transactions

As of December 2002

continued on page 8
8

the number of lanes in the direction of peak demand.

This project was approved for design sequencing, which

will allow Caltrans to initiate construction on critical

features, while other non-critical path components are still

under development. An estimated $171 million in

GARVEE bond proceeds will be needed to fill the funding

shortfall on this $375 million project with a 10-year

repayment term.

❖ The I-880/Coleman Interchange provides access to the

Norman Mineta San Jose International Airport from

I-880, Santa Cruz, and the East Bay. Reconstruction of

the interchange is needed to relieve congestion and is key

to the airport’s planned expansion. GARVEE bond

proceeds will fund $65 million of the $84 million total

project cost. Debt service on the bonds will be repaid

over an 11-year term.

❖ SR 87 provides regional access from Route 101 to the

Mineta International Airport, downtown San Jose, and

the southern end of the Santa Clara Valley. The project

is comprised of improvements between Route 85 and

Route 280 and Route 280 and Julian Street. The total

cost of the project is $122 million, with GARVEE

proceeds of $77 million to be repaid over 11 years.

❖ The Route 60/91/215 Interchange was also approved as a

“design sequencing” pilot project to expedite overall

project delivery. It includes reconstruction of the Canyon

Crest Drive (a main entrance to the University of

California-Riverside campus), widening of the

undercrossing, and realignment of a frontage road.

Mississippi GARVEE Bonds Advance Critical Bridge Program

The Mississippi Development Bank (MDB) in late June will

sell $35 million in GARVEE bonds secured by a pledge of

future Federal-aid bridge funds. The bonds will be variable

rate demand bonds with the interest rate reset on a weekly

basis, providing a lower rate than the conventional fixed rate

instrument. The bond proceeds will be loaned to the

Mississippi Department of Transportation (MDOT) which, in

turn, will loan the funds to the Office of State Aid Road

Construction (State Aid). State Aid will then use the loan

proceeds to eliminate a backlog of critical county bridge projects

through a program of rehabilitation and new construction.

State Aid plans to repay the MDB loan from the annual

allocation of Federal-aid bridge funds received from MDOT

over a 10-year period. FHWA will reimburse principal and

interest along with other eligible debt-related costs in

accordance with FHWA and GARVEE guidelines.

Contact:

Jim Hatter,

FHWA National Resource Center,

404/562-3929

California GARVEEs, continued from page 7

Contacts:

Barbara Lewis,

California Department

of Transportation,

916/324-7623

Jennifer Mayer,

FHWA National

Resource Center,

415/744-2634

or

GARVEE “Questions of the Quarter”

Each issue of IFQ features questions and answers on the GARVEE program. This issue focuses on the legislative basis for

GARVEEs. Note that answers to these questions are not regulatory or legislative, but represent FHWA’s current administrative

interpretations. If you have questions or want to confirm any of this information, please contact your local FHWA Division

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

Where can I find the legislative reference to GARVEES, and are GARVEEs being proposed for reauthorization?

The term GARVEE (Grant Anticipation Revenue Vehicle) was created by FHWA innovative finance experts. It describes a new

type of debt vehicle made possible by changes in the Federal-aid Highway Program. Since it is not a legislative term, it cannot be

found in Title 23 of the U.S. Code, Volume 23 of the Code of Federal Regulations, or in TEA-21.

The legislative change that facilitated GARVEEs occurred with the NHS Act of 1995, which was codified in Section 122 of Title

23 of the U.S. Code. Prior to this change, states could only use Federal-aid funds to pay debt service on a very limited basis.

Section 122 allows states to claim reimbursement for principle, interest, and issuance costs on all eligible Federal-aid projects,

rather than claiming construction reimbursement. Since this provision is now part of the regular Federal-aid Highway Program,

there is not a need to have specific GARVEE provisions in the Administration’s reauthorization proposal, SAFETEA. (For more

detailed information on GARVEEs, please see the Innovative Finance Primer, available on the FHWA website at

http://www.fhwa.dot.gov/innovativefinance/ifp/).
In 1989, the citizens of Louisiana voted to levy an additional

$.04 per gallon gasoline and special fuels tax for the purpose of

improving the state’s transportation infrastructure to promote

economic development. This $3.5 billion multimodal capital

investment initiative, called the Transportation Infrastructure

Model for Economic Development Program or TIMED,

includes widening 500 miles of state highways to four lanes on

11 project corridors, widening and/or new construction of

three major bridges, and improvements to both the port and

airport in New Orleans. Effective on January 1, 1990, the

additional $.04 per gallon tax, referred to as the Act No. 16

Taxes, is dedicated to financing the TIMED Program.

Initially, it was anticipated that the 16 specific projects

included in the TIMED Program would all be let for

construction by 2005 at which time the $.04 per gallon tax

would expire. However, in light of higher project costs, the

Louisiana Department of Transportation and Development

(DOTD) estimated that the TIMED Program would not be

completed until at least 2031 using traditional pay-as-you-go

funding. Recognizing that completion of the TIMED projects

was vital to the state’s economic development, DOTD

commenced a plan to accelerate completion of the remaining

projects of the TIMED program. The goal of this stepped-up

plan is to complete the TIMED Program in 10 years. It is

estimated that the remaining cost of the TIMED Program

from April 2003 is approximately $2.5 billion in 2003 dollars.

The TIMED Acceleration Plan

As part of its implementation strategy to accelerate the

remaining TIMED projects, the DOTD in December 2001

selected the Louisiana TIMED Managers (LTM) as the

consultant team to assist with management of the program.

LTM, serving as an extension of the DOTD staff, is a joint

venture of Parsons Brinckerhoff, Gulf Engineers and

Consultants (GEC), and the LPA Group. The

multidisciplinary LTM team is responsible for the financial

management of the entire program as well as design

management, right-of-way acquisition and relocation,

construction engineering, and inspection. LTM is contractually

obligated with incentives to achieve the TIMED Program

objectives and expedite completion of the TIMED Program.

Key Elements of TIMED Acceleration Plan

The accelerated implementation of the remaining $2.5 billion

TIMED Program will be funded through a combination of

revenue bonds and pay-as-you-go funding. About 83 percent

of the program costs will be funded from revenue bond

proceeds with pay-as-you-go funding accounting for the

remaining 17 percent. The sources of the pay-as-you-go funds

are the monthly collections of the Act No. 16 Taxes and

interest earnings on the TIMED Fund balance. Legislation

passed in 1998 extended the $.04 per gallon tax until all

TIMED projects are complete and all outstanding bonds or

other indebtedness issued for the TIMED projects have been

paid in full, whichever is later.

TIMED Bonds

To support the TIMED acceleration plan, a series of bond sales

will occur periodically through 2009. The size and timing of

the bond issues will depend on the program needs, cash flows,

and market conditions. The first bond issue to accelerate the

construction of TIMED projects was sold in August 2002 at an

all-in borrowing cost of 4.88 percent. This $275 million bond

issue is secured by the $.16 per gallon gasoline and special fuels

tax as well as the Act No. 16 Taxes, but the intent is to use only

the $.04 per gallon tax revenues for debt service. Underlying

investment grade ratings of A1, A+, A+

(Moody’s, Standard & Poor’s, Fitch) were

achieved on the 2002 bond issue. Bond

insurance was provided by AMBAC,

resulting in triple-A ratings from the

three rating agencies. Over $90 million

of the bonds were sold to retail investors.

Debt service on the 2002 bonds is about

$17.8 million annually through 2032.

The 2002 bond issue will enable the

letting of $175 million in projects during fiscal year 2003,

compared to only $50 million on a pay-as-you-go basis. 

Looking Ahead

DOTD and LTM continue to work closely to move the

completion of the TIMED Program forward. By bonding and

taking advantage of low interest rates, this program is saving

money and delivering critical infrastructure projects to the

people of Louisiana much sooner. The optimal mix of pay-asyou-go financing and debt financing is enabling completion of

the remaining TIMED within a 10-year timeframe, helping to

drive Louisiana’s economic development. For more

information about the TIMED Program, please consult the

web site for this project at http://www.timedla.com.

❖ Engage program management team to assist in the development

and delivery process.

❖ Extend dedicated $.04 per gallon tax until all projects are complete

or bonds paid in full.

❖ Finance through periodic issuance of bonds.

❖ Let all projects by 2010 and complete construction by 2012.

9

TECHNICAL CORNER

Accelerating Highway and Bridge Projects in Louisiana

Contact:

John Basilica,

Louisiana Department of Transportation and Development,

225/379-1270
10

Leader Selected for National Finance

Technical Service Team

Ms. Thay Bishop was recently selected for the position of National Finance

Technical Service Team Leader. Thay will ultimately lead a team of eight

finance professionals providing services to FHWA’s Divisions and partners.

The National Finance Technical Service Team (TST) will provide technical

assistance on both innovative finance and more traditional grant

management techniques. The team will be based in Atlanta, but will provide

services nationwide.

Thay joins the FHWA with more than 22 years of financial management

experience in the transportation environment. During her 12-year career with

the Metropolitan Atlanta Rapid Transit Authority, she served in several senior

management positions including the Director of Corporate Finance and

Treasurer, Director of Business Management and Financial Analysis, Deputy

Program Manager of Olympic Spectator Transportation System, Manager of

Budget and Management Analyst, and Chief of Administration. She has

extensive experience in managing Federal grant programs and is a Certified

Public Accountant and Certified Cash Manager.

For more information about the National Finance Technical Service Team,

please contact Thay at 404/562-3695.

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

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. 9, No. 2 of IFQ include:

John Basilica, Louisiana Department of Transportation and Development

Roger Berg, Cambridge Systematics, Inc.

Duane Callender, TIFIA JPO

John Fink, Arizona Department of Transportation

Jim Hatter, FHWA National Resource Center

Phyllis Jones, FHWA

Barbara Lewis, California Department of Transportation

Jennifer Mayer, FHWA National Resource Center

Suzanne H. Sale, TIFIA JPO

Dorn Smith, Texas Department of Transportation

Mark Sullivan, TIFIA JPO

On April 9, 2003 Alaska issued $102.8 million in GARVEE bonds, part of a $461.9

million general obligation bond sale. The GARVEE bonds, Series B of the bond

issue, have maturities extending out to 2013 and have a true interest cost of 3.172

percent. The GARVEE bonds were authorized by the voters in November 2002 to

carry the full faith and credit of the state, but are structured for debt service to be

repaid with Federal highway reimbursements. The bonds were rated by three credit

rating agencies with Standard & Poor’s and Fitch Ratings each giving an AA rating.

Moody’s Investors Service rated the bonds Aa2.

The proceeds of the bonds will be used to accelerate work on eight projects around

the state. Of the $102.8 million, $36.1 million will be allocated in Anchorage for

Phase III of the C Street improvements, including an interchange at O’Malley

Road and a grade separation for the Alaska Railroad near 68th Avenue and C

Street. Another $28 million will fund the Kenai River Bridge project.

Alaska Sells $102.8 Million in GARVEE Bonds