As states look to applying innovative finance tools, they are recognizing the benefits of combining tools to advance either a single

project or a major transportation program initiative. The Ohio Department of Transportation (ODOT), the first state DOT to

bring a Grant Anticipation Revenue Vehicle (GARVEE) bond issue to market, is using toll credits as the state matching share for

GARVEE bond reimbursements to maximize transportation resources.

Under the toll credit technique (codified by Section 1111(c) of TEA-21), a state may

apply the use of excess toll revenues as a credit toward the non-Federal matching share

of Federally assisted transportation projects. Toll credits do not provide cash to the project to which they are applied, but their use effectively raises the Federal share to up to

100 percent on projects receiving toll credits. See http://www.fhwa.dot.gov/innovativefinance/ifguidnc.htm for more information on toll credits.

Out of the $653 million Ohio has earned in toll credits to date from excess expenditures generated by the Ohio Turnpike Authority system, the state has used $286

million toward the non-Federal matching share of eligible projects. Ohio is using

these toll credits at the state level to match GARVEE bonds and also sharing its

credits with local government agencies for both highway and transit projects.

Toll credits have provided the state matching share of Federal bond reimbursements

for the Spring-Sandusky Corridor, a group of nine major improvement projects to

As the most intermodal of the U.S.

Department of Transportation’s (U.S.

DOT) financial programs, the Transportation Infrastructure Finance and

Innovation Act (TIFIA) credit program

has benefited from the direct involvement

of its highway, transit, and railroad

administrations operating under the coordination of the Office of the Secretary.

Having incubated the program during its

first 30 months under this “Articles of

Confederation” approach, U.S. DOT in

January 2001 established a Joint Program

Office (JPO) to consolidate TIFIA

administration within a single entity.

Consistent with Congressional intent in

the Transportation Equity Act for the

21st Century (TEA-21), the creation of

the TIFIA JPO will support U.S. DOT’s

goal of efficient program administration

of TIFIA projects and credit instruments.

The TIFIA JPO is located organizationally within the Federal Highway Administration (FHWA) and receives policy

direction from the Assistant Secretary for

Budget and Programs (U.S. DOT’s Chief

Financial Officer). The dual reporting

structure acknowledges the TIFIA JPO’s

lead role in facilitating communication

and enhancing multimodal coordination

for TIFIA projects and credit matters.

A new TIFIA Credit Council will assist

the Secretary in establishing overarching

policy direction for the program and

selecting project applicants based on the

analyses and recommendations of the

TIFIA JPO.

The TIFIA JPO, working with its loan

servicer, is nearing completion of a new

servicing and reporting system to track a

portfolio of TIFIA commitments currently worth more than $3 billion. In

addition to tracking disbursements, calculating debt service, and billing borrowers

for repayment, the system will catalog relevant project information in order to produce multiple formal and ad hoc reports.

As the TIFIA portfolio grows, this new

system will enable U.S. DOT to provide

effective financial oversight and quick

response to requests for information.

Quarterly

FHWA's

VOLUME 7, NUMBER 1 WINTER/SPRING 2001

FEDERAL CREDIT PROGRAM

New Joint Program Office Unites the State of TIFIA Administration

Contact:

Bryan Grote, 

FHWA, TIFIA JPO, 

202/366-9656

TECHNICAL CORNER

Ohio Maximizes Its Transportation Resources With Toll Credits

continued on page 3

Also in this issue ...

TIFIA Capital Allocation 

Framework . . . . . . . . . . . . . . . . 2

More States Pursue GARVEEs . . .4

New Mexico Pioneers Another

New GARVEE Financing . . . . . .5

SIB Activity Tops $2.4 Billion . . . .6

Project Financing Ideas 

For Reauthorization . . . . . . . . . .7

Events and Resources . . . . . . . . .9

Federal Credit, continued on page 2
Quarterly

FHWA's

2

In implementing the TIFIA credit program, the U.S. DOT developed a capital

allocation framework to ensure that sufficient Federal resources are set aside to cover

the Government’s expected credit risk.

The TIFIA Capital Allocation Framework

utilizes external credit ratings to assess risk

and allocate budgetary resources.

Federal Capital Allocation 

Terminology 

The Federal Government requires its

agencies to allocate capital to cover risk

associated with their credit portfolios.

The Federal Credit Reform Act of 1990

(FCRA) requires agencies to allocate capital for each new credit instrument (e.g.,

a direct loan, loan guarantee, or line of

credit). A primary purpose of FCRA is

to put Federal credit programs on an

equal budgetary basis with other forms of

Federal assistance. Hence, agencies are

required to allocate capital equal to the

expected present value cost of extending

credit assistance, excluding operating

costs. In addition to expected credit

losses, the capital allocation reflects the

cost of any interest subsidies and fees collected, resulting in an estimate of the net

“subsidy cost” to the Government. The

basic subsidy cost calculation is: 

Subsidy cost = present value of [estimated

credit losses + interest subsidies - fees].

The “subsidy rate” is the subsidy cost

expressed as a percentage of the credit

instrument at origination. TEA-21

authorized $530 million to cover the

estimated subsidy costs of TIFIA credit

instruments provided by U.S. DOT during the program authorization period

(FY 1999-2003).

TIFIA Capital Allocation Framework 

U.S. DOT developed the TIFIA Capital

Allocation Framework to identify the

risk-based capital requirements for individual TIFIA credit instruments. For

the purposes of the model, risk is

defined as the probability that a credit

instrument will default, the severity (or

magnitude) of that default, and the

expected recoveries that will be collected

in the event of a default. 

Probability of Default 

In estimating default risk, U.S. DOT

relies upon the credit opinions of one or

more of the major rating agencies. 

Preliminary Opinion Letter. When applying for TIFIA assistance, project sponsors

are required to submit a preliminary

opinion letter from at least one major

rating agency. That letter should provide

a preliminary assessment of the overall

project strength, including the default

risk associated with the proposed TIFIA

credit instrument and the potential for

the project to receive an investment

grade rating on its senior debt. The

opinion letter will serve as the basis for

U.S. DOT’s initial estimate of the

required allocation of capital for the proposed TIFIA credit instrument.

Credit Rating. A TIFIA-supported project must receive a formal investment

grade rating on its senior debt obligations before U.S. DOT can extend credit

assistance. In conjunction with the

assignment of this rating, U.S. DOT will

revise its initial capital allocation based

on an updated rating agency assessment

of the Government’s default risk on the

TIFIA credit instrument. 

In the event that a TIFIA project receives

different credit opinions from the rating

agencies, U.S. DOT will take the average

of those ratings. As a proxy for the

TIFIA Capital Allocation Framework

continued on page 3

Credit Assessments of TIFIA Projects − Results of TIFIA Capital Allocation Model (as of 2/16/01)

($ in Millions)

Project

Project

Type

Project

Cost

Instrument

Type

Credit

Amount

Primary

Revenge

Pledge

Initial

Subsidy

Financial

Subsidy

Subsidy

Amount

Capital Reserve Requirement
Quarterly

FHWA's

3

default probability of a given credit opinion, ratings are linked to annually reported

historical default experience on corporate

bonds. In order to estimate the severity of

default, default rates are applied against the

outstanding balance of principal and

accrued interest.

Expected Recovery 

U.S. DOT drew upon a rating agency

bond insurer capital adequacy model to

develop its recovery matrix for TIFIA projects. The TIFIA recovery matrix distinguishes among ports, toll facilities, and

rail/transit projects. In addition, the matrix

recognizes the stronger recovery potential

on projects involving existing facilities as

compared to projects involving new facilities. Finally, the matrix factors in the effect

of the nature of the pledged revenue stream

on the recovery potential. Recovery expectations for a typical junior-lien TIFIA

instrument range from 32 percent for new

rail/transit projects to 65 percent for fully

tax-backed projects.

TIFIA Quick Score Model 

U.S. DOT has created a web-based TIFIA

Quick Score Model to provide interested

parties with an understanding of how certain credit terms and characteristics affect

the capital allocation reserve amount, or

subsidy cost, for a direct loan. This simplified model is not the official scoring

model used by U.S. DOT to allocate capital, and it is intended only to illustrate the

relative effect of certain key factors on the

subsidy cost of TIFIA instruments. It can

be found on the TIFIA website at

http://tifia.fhwa.dot.gov.

Contact:

Stephanie Kaufman,

FHWA, TIFIA JPO,

202/366-9654

The “TIFIA Trivia” box 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

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

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. A few applicants (primarily sponsoring project financings) have coupled a line of credit with a

direct loan. One applicant has requested a loan guarantee.

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 intend to structure it to

support senior debt only indirectly for tax purposes.

U.S. DOT does not charge credit enhancement fees for these

instruments (there are certain administrative fees, such as an

application 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).

TIFIA Trivia 

The U.S. DOT Responds to Your Questions

TIFIA Capital Allocation Framework, continued from page 2

Ohio Maximizes Resources, continued from page 1

be financed with the proceeds of an estimated $130 million in

GARVEE bonds. These bonds are being sold in three tranches.

The first issue was $90 million in May 1998, the second issue

of $20 million was brought to market in August 1999, with the

third issue of $30 million remaining. Both Interstate and

National Highway System (NHS) funds are being used to pay

principal and interest on the Spring-Sandusky GARVEE

bonds. To bring the Federal share to 100 percent, it is estimated that ODOT will use toll credits of about $15.6 million

for the entire corridor project. To date, ODOT has billed

FHWA and been reimbursed $31.4 million for debt service, of

which $3.9 million was attributable to toll revenue credit.

ODOT has on the drawing board two other major GARVEE

bond financing initiatives that will utilize toll credits to bring

the Federal share to 100 percent:

❖A $158 million issuance of GARVEE bond to finance the

Maumee River Crossing. The first tranch of bonds, estimated

at $150 million, will be sold in May 2001. ODOT plans to

apply about $20 million in toll credits for this project.

❖Construction of the Southeast Ohio Plan, a combination of

eight projects in the southeast part of the state, will be accomplished through a series of eight GARVEE bond issues, estimated to total $183 million. The first issue of $33 million is

planned for spring 2001. An estimated total of $36.7 million

in toll credits will be used to advance the Southeast Ohio Plan.

The toll credit option has been of significant value to ODOT,

enabling the Department to more effectively leverage existing

resources and increase capital investment in transportation

infrastructure. By combining two innovative finance tools,

GARVEEs and toll credits, ODOT has optimized limited

transportation dollars.

Contact:

Thomas M. McPherson,

ODOT,

614/446-3599
Quarterly

FHWA's

4

GARVEE finance initiatives continue

to gain momentum throughout the

country. In the next year, issuance of

GARVEEs may increase significantly

pending the outcome of new legislation

introduced in Alaska, Georgia, and

Texas. Legislative proposals in the

three states are summarized in the table

and highlighted below.

Alaska

The Alaska State Legislature is weighing

a bill to authorize the sale of $442 million in GARVEE bonds. Projects identified in the bill serve the entire state,

from Southeast Alaska to the North

Slope. The bill includes $147 million

for projects in Anchorage, with the

largest portion – $58.2 million – allocated to widening a major highway

accessing the city. The Fairbanks and

Mat-Su boroughs would each receive

$67 million, with another $70 million

to finance two high-speed ferries. While

most of the proceeds would go to street

repairs and highway improvements, millions would be allocated to rural villages

to pave roads. In the bill transmittal,

Alaska Governor Tony Knowles stressed

the need to do everything possible to

keep up with critical transportation

needs and identified GARVEE bonds as

an “opportunity to build statewide

transportation infrastructure sooner

than would be possible under the conventional program alone.”

Pending passage of the bill, the state

plans to sell the full $442 million as a

single issue. Debt service requirements

are anticipated to account for 11 percent

of Alaska’s roughly $350 million annual

Federal highway apportionments.

Georgia

In Georgia, a bill approved by the General Assembly will facilitate Governor

Roy Barnes’ plan to accelerate hundreds

of millions of dollars for four-lane highway projects throughout the state. The

Georgia State Senate and House have

passed and adopted legislation authorizing the State Road and Tollway Authority to issue bonds for highways and

mass transportation facilities, secured

by revenues of the authority, including

moneys received as Federal highway or

transit funds and reimbursements.

Proceeds from the sale of the bonds

will be targeted to projects that are part

of the Developmental Highway System

in Georgia. The system includes the

South Georgia Parkway, the Metro

Atlanta Outer Perimeter, and the EastWest Highway. The state currently

receives approximately $1 billion in

Federal highway apportionments.

Texas

Members of the Texas legislature filed

three separate constitutional amendments that would authorize the Texas

Transportation Commission to issue

GARVEE bonds. Similar measures –

House Joint Resolution No. 13 and

Senate Joint Resolution No. 7 – propose

that proceeds from the sale of the bonds

would be utilized to fund improvements

to the state highway system. Under

both bills, projects relating to the North

America Free Trade Agreement

(NAFTA) would be given the highest

GARVEE ROUNDUP

More States Pursue GARVEEs

continued on page 5

State Res/ Summary Status Session 

Bill # Adjourns

Alaska HB 168 Authorizes sale of $442.9 million in GARVEEs In House Transportation May 8 to finance costs of 44 specified projects. Committee.

Georgia SB 134 Authorizes sale of GARVEEs to finance projects Passed in House March 21

in the Developmental Highway System. and Senate.

Texas HJR 13 Authorizes sale of GARVEEs to finance projects Referred to House Transportation May 8 

that exceed $50 million with priority given Committee; No further action.

to projects relating to NAFTA corridors.

SJR 7 Authorizes GARVEEs to finance improvements Referred to Senate Business 

to state highway system with priority given to and Commerce subcommittee 

NAFTA-related projects and completion of the on Border Affairs; No action

Texas highway trunk system. in subcommittee.

SJR 10 Authorizes GARVEEs to fund improvements Passed by Senate; 

to the state highway system considering the in House Transportation 

potential cost savings, economic and Committee.

environmental benefits, and other benefits 

associated with completing the project earlier

than would be possible using traditional 

methods of funding.

Pending GARVEE Legislation
Quarterly

FHWA's

5

More States Pursue GARVEEs, continued from page 4

priority. The House bill was referred to

the Transportation Committee in January 2001 with no further action to date.

The Senate bill was referred to the Senate Business and Commerce Subcommittee on Border Affairs and no further

action has been taken.

Lastly, but presumably with more

momentum, Senate Joint Resolution

No. 10 proposes a constitutional

amendment to authorize the sale of

GARVEEs. As introduced, proceeds

from the sale of the bonds were to be

used to fund improvements to transportation projects in the three border

transportation districts of Pharr,

Laredo, and El Paso. A substitute measure has been passed by the full Senate

and is now in the House Transportation Committee. This substitute measure permits use of the proceeds to

fund statewide improvements to the

highway system based on the following

criteria: 1) potential cost savings, economic and environmental benefits, and

other benefits associated with completing the project earlier than would be

possible using traditional methods of

funding; and 2) the effect on the state’s

transportation system. Further, the

substitute measure limits annual debt

service to not more than five percent of

the state’s annual Federal-aid spending

limit. Texas’ Federal aid apportionments for 2001 total $2.2 billion.

If this legislation is enacted, GARVEE

bonds could fund approximately $975

million in highway construction. Any

of the proposed constitutional amendments, if passed, will be subject to

voter approval in November 2001.

New Market Issues

In addition to the various legislative

initiatives across the country, three

states – Alabama, Arizona, and Michigan – may be headed to the market 

this year with GARVEE and quasiGARVEE transactions: 

❖Alabama is expected to sell approximately $200 million in GARVEE

bonds in the spring to finance

county bridge replacements. 

❖Proceeds of an upcoming $150 million

GARVEE issue, along with designbuild contracting, will enable Arizona

to accelerate widening of approximately 12 miles of U.S. 60 in the

Phoenix metropolitan area. The issue

will be priced in April or May and

includes funding for an extension of

the Red Mountain Freeway in Mesa.

❖Michigan is taking steps to issue the

first $400 million in a series of variable rate note issues. The notes will

be secured by Federal-aid reimbursements received for projects other than

those financed by the note proceeds

(sometimes referred to as an indirect

GARVEE financing). The note

issuance program will expedite funding for road and bridge construction

projects through out the state.

To date, GARVEE bonds have provided nearly $1 billion to accelerate

priority transportation projects.

Upcoming sales and transactions that

may result from pending legislation

could bring the total to nearly $2.0 billion by year end. 

Contact:

Deborah Brown,

FHWA, Southern Resource Center,

404/562-3929

In February 2001, the New Mexico State Highway and Transportation Department (NMSHTD) issued $18.5 million of

Federal Grant Anticipation Revenue Bonds through the New

Mexico Finance Authority (NMFA). Although New Mexico

has issued a total of $100 million in GARVEE bonds, bringing

its first issue to market in September 1998, this issue is unique

in that it is the first GARVEE issue in the country to be repaid

with Federal Forest Highway funding (PLH-FH). The bonds

will finance the U.S. 70 Corridor reconstruction project within

the Lincoln National Forest – a project of major significance to

economic development in the south central part of the state.

This project is one of 17 project corridors identified by the Citizens Highway Assessment Task Force (CHAT) and approved

in April 1999 as an innovative financing project under TE-045.

The NMSHTD, FHWA, and the Forest Service entered into a

Cooperative Agreement that specified the use of PLH-FH

funding for U.S. 70 bond debt service. The segment of U.S.

70 that runs through the Lincoln National Forest was designated a forest highway, making it eligible to receive PLH-FH

funds and providing a new revenue source for debt service payments. The Cooperative Agreement provides for the obligation of $25 million in total PLH-FH funding, with $2.5

million of PLH-FH funds obligated annually through 2011

for payment of debt service.

The bonds were issued on a parity with the GARVEE bonds

sold by the NMFA in 1998, with a few differences in security

and structure. As with the Series 1998A GARVEE bonds, no

state revenues are pledged to payment of the bonds. The bonds

are secured by New Mexico’s Federal-aid revenues, comprising

National Highway System, Surface Transportation Program,

Bridge Program, and Minimum Guarantee funds. In addition,

the bonds are secured by the stream of Forest Highway revenues provided under the Cooperative Agreement.

New Mexico’s Corridor 44 GARVEE financing in 1998 paved

the way for GARVEE issues in other states. The structure of

NMSHTD’s most recent issue further exemplifies the opportunities and flexibility states have to tailor GARVEE programs

to best meet their transportation needs.

New Mexico Pioneers Another New GARVEE Financing

Contacts:

Charlie Trujillo,

Deputy Secretary,

NMSHTD,

505/827-5258

Reuben Thomas,

FHWA New Mexico Division,

505/820-2022

or
Quarterly

FHWA's

6

Each issue of IFQ features questions and answers on the GARVEE program. This issue focuses on questions relating to eligible

projects and sponsors. 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, or the GARVEE contacts listed in the Fall 2000 issue of IFQ. GARVEE guidance is also available at

www.fhwa.dot.gov/innovativefinance/garguid1.htm.

GARVEE “Questions of the Quarter”

Eligible Projects

Can GARVEEs be used for any Federal-aid project? 

Yes. GARVEEs are not limited to any type of project or funds. As

the guidance states: “the project must be eligible for Federal-aid

funding under one or more program categories as set forth in Title

23, Section 115 (e.g., NHS, STP, etc.). Any reimbursements of

debt-related costs must be made with obligations of eligible categories of Federal-aid funds. The AC [advance construction]

amount designated at the time of project approval must consist of

some combination of eligible funding categories, although the

State each year retains the flexibility to decide which category(ies)

to obligate for AC conversion. The State retains the right to use

non-Federal funds in lieu of Federal-aid for debt service costs.”

Can GARVEEs be used for transit projects? 

Any Federal-aid highway funds that could be used to pay for

transit projects through “flex funds” provisions or other funding flexibilities could also be used to repay debt instruments

used to finance transit projects. Since “flex funds” are transferred to the Federal Transit Administration (FTA), their use

for debt service is subject to Title 49 requirements and FTA

guidelines. Not all Federal-aid highway funding categories

can be used for transit, which could affect debt capacity levels

and coverage ratios.

Eligible Sponsors

Who can issue GARVEEs?

Under Section 122 of Title 23, an eligible issuer is a state or political subdivision of a state or a public authority. State law may

also specify authorized entities for GARVEE debt issuance.

Can GARVEEs be issued by local governments? 

Local governments are not prohibited from issuing GARVEEs;

however, their ability to do so may be limited by their lack of

control over future funding (and the market’s perception of

their ability to handle changes in local funding formulas).

Can GARVEEs be issued by a 63-20 Public Benefit Nonprofit Corporation? 

Yes, debt instruments issued by 63-20 corporations may be repaid

with Federal-aid funds, as long as the bonds are issued on behalf

of the state and the proceeds are used for Title 23 eligible projects.

State Infrastructure Bank (SIB) activity continues to grow. As

of March 2001, 32 states have entered into 204 loan agreements

with a dollar value of over $2.4 billion (see table on following

page). This represents an increase of 32 new loan agreements

since October 2000 valued at over $156 million. The Ohio SIB

accounted for a third of this new activity.

This issue of IFQ spotlights the Pennsylvania Infrastructure Bank,

which is supporting a unique project to rehabilitate the historic

Harrisburg Transportation Center.

Pennsylvania SIB Supports Rehabilitation 

of Historic Station

The Pennsylvania Infrastructure Bank was established in 1997

following passage of enabling legislation, and is managed by the

Pennsylvania Department of Transportation (PennDOT). 

PennDOT is utilizing the bank as an innovative project financing tool to accomplish the following objectives:

❖Leverage Federal and state revenues by attracting local and

private financial participation in projects;

❖Accelerate priority projects; 

❖Spur economic development;

❖Facilitate non-traditional projects, including intermodal

facilities and intelligent transportation systems; and

❖Quickly respond to emergencies such as floods or other disasters.

From the bank’s inception, PennDOT has made direct loans to a

variety of customers, including municipal governments and

authorities, economic development agencies, and developers.

The types of projects have included bridges, roadway widenings,

traffic signals, and new interchanges. To date, the Pennsylvania

SIB has loaned $14.6 million to 15 projects.

One of the more innovative projects assisted by the Pennsylvania Infrastructure Bank is the multimodal Harrisburg Transportation Center. This $2.9 million rehabilitation of an historic

train station and landmark received approval for a $1.4 million

loan, which will be repaid with funds designated by Congress

over the life of TEA-21 (high priority project funds are received

in annual increments). As a result of the loan, the Harrisburg

Transportation Center will benefit from up-front financing for

an earlier project start date. The loan was also instrumental in

attracting other sources of funding to the project.

The Pennsylvania Railroad built the Harrisburg Transportation

Center in 1885 in downtown Harrisburg. The station is listed on

SIB UPDATE

SIB Activity Tops $2.4 Billion

continued on page 7
Quarterly

FHWA's

7

State Infrastructure Bank Loan Agreements by State

As of March 2001

Loan 

Number of Agreement Disbursements

State Agreements Amount to Date

($000)

Alaska 1 $2,737 $2,737

Arizona 14 205,976 147,778

Arkansas 1 31 31

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 23 17,034 13,033

Minnesota 3 36,560 16,966

Missouri 8 56,008 41,770

Nebraska 1 1,500 0

New Mexico 1 541 541

New York 2 12,000 12,000

North Carolina 1 1,575 1,575

North Dakota 2 3,565 1,565

Ohio 35 146,624 102,550

Oregon 8 11,181 11,181

Pennsylvania 15 14,600 14,600

Puerto Rico 1 15,000 15,000

Rhode Island 1 1,311 1,311

South Carolina 5 1,502,289 510,428

South Dakota 1 11,740 11,740

Tennessee 1 1,875 1,875

Texas 25 75,581 65,736

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 5 49,090 32,614

204 $2,421,715 $1,065,547

the National Register of Historic Places and is also designated as a National Engineering Landmark. Many of

the architectural features, such as traditional stonework

and lighting, and much of the infrastructure of the

Center are scheduled for repair or replacement as part

of this project. The Pennsylvania Infrastructure Bank

will provide initial funding for this work.

The project sponsor, the Harrisburg Redevelopment

Authority, assembled a funding plan for the upgrades

including funding from TEA-21, PennDOT, the

Pennsylvania Historical and Museum Commission,

the Pennsylvania Department of Community and

Economic Development, the City of Harrisburg, and

Amtrak. The Authority also has plans for revenues

from leases to develop retail space within the center,

including a news and convenience store and commercial office space.

The Harrisburg Transportation Center will continue

to be an important statewide transportation link.

Amtrak and two intercity bus lines occupy the Transportation Center, connecting the state capital to Pittsburgh and Philadelphia, as well as points beyond

Pennsylvania’s borders. The local Harrisburg transit

organization, Capital Area Transit, also links long distance travelers to points around town.

Contacts:

Phyllis Jones,

FHWA,

202/366-2854

Jim Smedley,

PennDOT,

717/772-1772

or

Federal transportation reauthorization debates historically have centered over how large the transportation funding “pie” should be

(spending levels), and how it should be sliced up (distribution formulas). Yet of at least equal importance is deciding which ingredients should be put into the pie (new programs). In the next reauthorization, Federal policy will address the nation’s transportation

challenges through a variety of regulatory, tax, and credit initiatives. Four major emerging trends in the transportation sector that

may provide a useful structure for considering reauthorization issues and the policy tools used to address them are discussed below.

Theme I – New Approaches to Project Delivery and Management

There is growing recognition among public officials that building, financing, and operating major transportation projects can be

enhanced through public-private partnerships (PPPs). Under a PPP, the private sector assumes certain responsibilities for design,

construction, financing, or management, but the asset typically remains under governmental ownership.

The developmental stage is by far the riskiest phase in a transportation project’s life cycle, for that is when the proposal is being

environmentally assessed and politically vetted. It has become increasingly evident that the private sector cannot absorb what

essentially are “political” risks, and not commercial risks, during this developmental stage. To encourage the private sector to

bring forward new development proposals, governmental partners could bear much of these early project risks, or actively devise

ways to mitigate them (such as through a development risk insurance program).

PPPs have the potential of bringing benefits to projects by incorporating life-cycle costing principles, such as: 

❖Combining design-build procurement with long-term operating concessions. The new Hudson-Bergen light rail line is an

example of a design-build-operate-maintain concession.

❖Contracting for long-term warranties, as the State of New Mexico did on its Corridor 44 project.

❖Using techniques such as “shadow tolling” to incorporate a life-cycle perspective into highway financing decisions. Under

SPOTLIGHT ON REAUTHORIZATION

Project Financing Ideas For Reauthorization

SIB Activity Tops $2.4 Billion, continued from page 6

continued on page 8
Quarterly

FHWA's

8

continued on page 9

shadow tolls, a governmental entity makes annual

payments from general revenues to a private operator

based upon traffic levels on the road. The private party is

responsible for designing, financing, and maintaining the

facility to meet defined service standards.

Theme II – New Linkages and Synergies 

Among Modes

In the past, Federal reauthorization acts for transportation

have categorized funding into discrete programs for specific

classes of projects, typically along modal lines. Because the

old modal boundaries are becoming increasingly blurred at

critical nodes and along key corridors, there are opportunities to change such a compartmentalized approach.

Intermodal Nodes. Major investments such as the Alameda

Corridor (ship-to-rail freight transfer), the Miami Intermodal

Center (ground-to-air access), and the Farley-Penn Station

Project (intercity rail-to-transit interchange) reflect the importance of building linkages between modes originally developed

independently. Broadening the rules as to what types of costs

are eligible for Federal funding could significantly benefit these

types of intermodal facilities.

Multimodal Corridors. Freight and passenger mobility in certain key travel corridors could be improved by allowing more

freedom to states in allocating funds among programs and

uses. Freight rail carriers have already broached the concept

of gaining access to highway funds to improve their own

rights-of-way, as cheaper alternatives to widening Interstate

highways for reducing congestion. On the passenger rail

side, legislative proposals recently have been advanced to provide Federal subsidies to high-speed rail projects (including

Amtrak) through the use of tax credit bonds.

Theme III – New Technologies for 

Increasing Capacity

Given the time and expense of constructing new highway, transit, and airport facilities, the most cost-effective way to expand

capacity in congested areas is to use technology to increase

throughput from existing assets. For instance, the technology

now exists to collect highway user fees in a frictionless fashion,

through devices such as transponders and debit cards. Similarly,

on the transit side, new intelligent transportation systems (ITS)

can be employed to better meet demand for travel services.

Consideration could be given to rolling out a technological

version of the highly successful 1994 financial policy test and

evaluation (TE-045) program. This initiative allowed states to

explore using new financial techniques not specifically authorized under current law. Many of these ideas were incorporated into subsequent legislation. A similar call for proposals

from ITS providers or facilitators may prove equally useful on

the technological front.

Theme IV – New Mechanisms for Raising Capital

Recent Federal policy initiatives such as GARVEE bonds and

TIFIA have offered new ways for project sponsors to securitize revenue streams. Yet there is more that could be done to

assist sponsors in capitalizing both grant-based revenue

streams and project-based revenue streams.

Aviation Transit Highways 

Regulatory

Incentives

Tax

Incentives

Credit 

Incentives

Potential New Federal Incentives For Reauthorization

Broaden project eligibility for 

multimodal facilities

Expand use of PFCs to assist

in ground access

Encourage Design-Build 

for major airport projects

Initiate Air GARVEE bonds

Set up national loan revolving fund

for small and non-hub airports

Broaden project eligibility for 

passenger and freight rail 

Confirm eligibility for 

reimbursement of long-term 

warranty payments

Initiate test and evaluation 

program to encourage 

ITS innovation

Lift volume cap on transit 

private activity bonds

Reduce threshold speed 

requirement for high-speed 

rail private activity bonds

Authorize tax credit bonds 

for Amtrak

Expand SIBs

Introduce a development risk 

insurance program

Extend TIFIA

Broaden project eligibility for 

intermodal facilities and 

multimodal corridors

Confirm eligibility for 

reimbursement of long-term 

warranty payments

Initiate test and evaluation 

program to encourage 

ITS innovation

Allow private activity highway

bonds and/or allow incentivebased management contracts

Expand SIBs

Introduce a development risk 

insurance program

Extend TIFIA

Encourage shadow tolls

Project Financing, continued from page 7
Quarterly

FHWA's

9

Project Financing, continued from page 8

Monetizing Federal Revenues – Air GARVEEs. There may be

merit in applying this mechanism to the aviation sector through

the formula entitlement portion of the Airport Improvement

Program (AIP). This could be accomplished by expanding the

eligibility of AIP funds to include the payment of debt-related

costs, thereby establishing Air GARVEEs.

Leveraging Federal Grants – Infrastructure Revolving Funds.

The National Highway System Designation Act demonstrated

how Federal transportation funds could capitalize loan revolving funds under the SIB program. In addition to reinstating

the SIB program for highways and transit, consideration

could be given to creating an aviation version.

The nearly 350 small hub and non-hub airports around the

country are a vital link in the nation’s air system, and have the

physical capacity to accommodate substantial growth. But

because of their size, most of these airports do not have ready

access to the capital markets. Many do, however, have the

financial resources to repay a subsidized rate borrowing.

The capital needs of these airports could be addressed by establishing a loan revolving fund – perhaps using a portion of the

formula entitlement grants that major airports must turn back

to FAA if they increase their passenger facility charges (PFCs).

Similar to the SIB program, this Aviation Infrastructure

Revolving Fund would be empowered to use its contributed

capital to fund low-interest rate loans to airports otherwise

unable to access the public capital markets. But unlike SIBs,

this program probably would be more effectively administered

at the national level as there generally is an insufficient concentration of airports located in any one state with ready-to-go

projects to justify the creation of a state-level revolving fund.

Assessing Federal Credit – Building on TEA-21 and AIR-21.

TEA-21 authorized the TIFIA and RRIF credit programs to

assist surface transportation and rail projects, respectively, and

AIR-21 authorized a regional jet acquisition credit program.

Congress should evaluate the success of these new programs

and consider extending them in the next reauthorization.

Rationalizing Tax Code Provisions. New legislation could eliminate the inconsistencies among the modes in their access to taxexempt debt financing. A glaring omission is highways; unlike

airports, seaports, and transit, there is no existing provision

allowing public highway projects with private participation to

issue tax-exempt bonds. The Highway Innovation and Cost

Savings Act, a proposed 15 project, $15 billion pilot program,

failed to be included in the final version of TEA-21. However,

a similar proposal may come before the current Congress.

In summary, there is a continuing and important role in framing new policies to help meet the nation’s future transportation investment needs.

Contact:

David Seltzer, 

Transport and Infrastructure,

215/546-6801

Work is nearing completion on the National Cooperative Highway Research Program’s (NCHRP) Innovative Financing Clearinghouse, which is scheduled to be launched in April 2001. As

described in previous issues of IFQ, the Clearinghouse will provide finance practitioners with web-based information on the

wide range of innovative revenue sources, finance mechanisms,

and grants management techniques that can be used to finance

surface transportation improvements. 

The Clearinghouse, which is being developed by Parsons

Brinckerhoff under the direction of the NCHRP Project Panel,

presents innovative techniques being used to finance all types of

surface transportation investments. From Pickle leases to revenue bonds, Mello-Roos districts to shared resource arrangements, TIFIA, GARVEEs, SIBs, GANs, RRIF, and more – the

entire spectrum of possibilities is addressed. 

The Clearinghouse provides concise descriptions of the different tools, programs, and techniques, and includes:

❖links to related legislation;

❖technical resources (articles, papers, and legal opinions, etc.); and

❖fact sheets and case studies of projects that are being financed

by innovative means, with links to more detailed project-specific information.

The Clearinghouse also provides in-depth coverage of Federal,

state, and local legislation facilitating the use of innovative

finance. Legislative updates will be available, allowing users to

track new legislation affecting transportation finance. This will

be a valuable resource as TEA-21 reauthorization approaches.

The NCHRP Project Panel hopes to use the Clearinghouse to

develop an ongoing dialogue on legislative best practices. 

The Clearinghouse includes an extensive resource library with

annotated links to hundreds of other web sites addressing

related topics. A search engine and a glossary of finance and

transportation terms is also available. 

Readers of IFQ will be invited to preview the Clearinghouse

and are urged to take advantage of this opportunity to offer

comments and suggestions.

EVENTS AND RESOURCES

NCHRP Innovative Financing Clearinghouse Readies for Launch

Contacts:

Stephen Lockwood, 

Parsons Brinckerhoff,

301/816-1848 

lockwoods@pbworld.com

or Benjamin Perez, 

Parsons Brinckerhoff,

212/465-5302,

perez@pbworld.com

This article is based on a resource paper prepared by David Seltzer, Jeffrey Parker,

and Bryan Grote for the Transportation Research Board’s Second National 

Conference on Transportation Finance held in Phoenix in August 2000.
10

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

Contributors to Vol. 7, No. 1 

of IFQ include:

Roger Berg, Cambridge Systematics, Inc.

Deborah Brown, FHWA, Southern Resource Center

Ian Carroll, FHWA, Western Resource Center

Lisa Driesner, Dain Rauscher, Inc.

Bryan Grote, FHWA, TIFIA JPO

Phyllis Jones, FHWA

Stephanie Kaufman, FHWA, TIFIA JPO

Benjamin G. Perez, Parsons Brinckerhoff

Thomas M. McPherson and Julie Ray, Ohio Department of Transportation

Suzanne H. Sale, FHWA, TIFIA JPO

David Seltzer, Transport and Infrastructure

Mark Sullivan, FHWA, TIFIA JPO

Jim Smedley, Pennsylvania Department of Transportation

Reuben Thomas, FHWA, New Mexico Division

The 2001 State/Federal Financial Management Conference to be held at the

Westin in Seattle, Washington from June 17-21, 2001 will bring together state

DOT and FHWA financial managers in a conference exclusively focused on the

financial management area. This conference, jointly sponsored by the Washington State DOT, FHWA, and the AASHTO Subcommittee on Transportation

Finance, provides a unique opportunity to explore topics of mutual interest

involving new financing approaches, e-business, innovations in program delivery, and financial strategies for the future. The AASHTO Subcommittee on

Transportation Finance will hold their annual business meeting on Monday,

June 18, in conjunction with the conference.

Additional information on the conference will be available on the FHWA innovative finance web site at http://www.fhwa.dot.gov/innovative finance/.

A Reminder: Mark Your Calendar for the 2001

State/Federal Financial Management Conference

Contact:

Niki L. Pavlicek, 

Washington State Department of Transportation,

360/705-7400