On June 28, 2002, the U.S. Department

of Transportation (U.S. DOT) and the

City of Reno, Nevada executed the first

of three Transportation Infrastructure

Finance and Innovation Act (TIFIA)

loan agreements for the Reno Transportation Rail Access Corridor

(ReTRAC). When complete in 2006,

the $283 million project will feature a

below-grade, 2.25-mile rail corridor

through downtown Reno with two

mainline tracks, an access road, and an

Amtrak station stop. Bridges over the

corridor will replace 10 at-grade rail

crossings. Rail service will remain uninterrupted during construction via a temporary “shoofly” track built as part of

the project.

The $50.5 million loan closed in conjunction with the City’s issuance of

$114.2 million in senior project bonds.

Revenues from a county sales tax and a

downtown hotel tax secure both the

senior bonds and the TIFIA loan. This

represents the first public issuance of

senior securities with subordinated

TIFIA debt as well as the first time

TIFIA has participated with a major

bond insurer. Up to $23 million of

additional TIFIA credit assistance will be

provided via two loans to be negotiated

in the coming months.

On July 25, 2002, the U.S. DOT and the

Texas Transportation Commission (TTC)

executed a $917 million loan to support

the $3.6 billion “first phase” of the Central Texas Turnpike Project. The Turnpike is composed of three distinct

elements: Loop 1, a 3.5-mile northsouth route in the Austin vicinity; State

Highway (SH) 45 North, a 13.2-mile

highway connecting Austin, Round

Rock, and Pflugerville; and the northern

segment of SH 130, a 49-mile eastern

bypass of Austin’s congested Interstate 35. 

The Texas Turnpike Authority Division

of the Texas Department of Transportation (TxDOT) is managing the project.

Loop 1 and SH 45 will be constructed

using the traditional design-bid-build

process, while SH 130 is under an

exclusive development agreement with

Lone Star Infrastructure. The Turnpike

will be completed in segments, with the

final segment open to traffic in December 2007.

In conjunction with the TIFIA loan, the

TTC issued $1.2 billion in revenue

bonds and $900 million in Bond Anticipation Notes (BANs). Turnpike toll revenues will secure both the senior bonds

and the subordinate TIFIA debt. The

remainder of the project will be financed

through TxDOT grants and contributions of right-of-way by the surrounding

jurisdictions.

TTC expects to use about $17 million

of the TIFIA loan proceeds to fund project construction costs, with the balance

allocated to retiring the BANs if cost

effective.

VOLUME 8, NUMBER 1 FALL 2002

FEDERAL CREDIT PROGRAM

U.S. DOT Closes $967 Million in TIFIA Loans in Texas and Nevada

Contact:

Mark Sullivan, 

TIFIA JPO, 

202/366-5785.

Over the FY 1999-2003 period,

the Transportation Equity Act for

the 21st Century (TEA-21) authorized TIFIA credit support of $10.6

billion to directly assist major surface transportation projects. To

date, the TIFIA program has 

committed $3.5 billion of credit

assistance to 10 projects representing $15 billion in transportation 

infrastructure investment, at a 

budgetary cost to the Federal Government of only $183 million. Up

to $2.6 billion in credit assistance

will be available in FY 2003.

Under its “rolling” application

process, the TIFIA program will

accept letters of interest from

potential applicants at any time.

TIFIA Credit Assistance Available

Contact:

Max Inman, 

FHWA, 

202/366-2853.

Also in this issue ...

TIFIA Report to Congress . . . . . .2

TIFIA Loan Servicing

System Launched . . . . . . . . . . . .2

SIB Highlights . . . . . . . . . . . . . .3

GARVEE Roundup . . . . . . . . . . .5

Shadow Tolling . . . . . . . . . . . . .7

Tolling Provisions . . . . . . . . . . .8

Events and Resources . . . . . . . .9
2

On Friday, June 7, 2002, the U.S. DOT delivered a Report to Congress regarding the TIFIA Credit Program. The report fulfills

the Congressional requirement to summarize, within four years of the June 9, 1998 enactment of TEA-21, the financial performance of projects assisted by TIFIA and to discuss alternatives for achieving the program objectives in the future. The 42-page

report reviews the policy objectives of TIFIA and implementation of the program by the U.S. DOT. It analyzes the TIFIA project

portfolio in terms of modal, geographic, and financial diversity. The report reviews current TIFIA project commitments in light

of the program’s stated objectives and additional benefits identified by project sponsors. The report also includes a discussion of

credit issues encountered during loan negotiations. Finally, as directed by Congress, the report reviews alternatives for the TIFIA

program administration: continuing the program under the U.S. DOT, establishing a government corporation or governmentsponsored enterprise, or phasing out the program and relying on the capital markets.

The Report to Congress is available on the TIFIA web site at http://tifia.fhwa.dot.gov/.

TIFIA Report to Congress Available

The speeches have been given, the ribbons have been cut, and

the crowds have gone home. Another project is up and running. Now what?

With a typical maturity of 35 years, a TIFIA loan creates a longterm relationship between lender and borrower. Well after agreements are executed, funds disbursed, and projects constructed,

ongoing fiduciary responsibilities remain. Through the loan servicing function, the TIFIA credit program not only collects and

records loan repayments but also generates management, budget,

and accounting information. The U.S. DOT selected the firm of

Riggs & Co. to develop and maintain a comprehensive system

for TIFIA credit accounting, collections, and financial reporting.

Earlier this year, Riggs completed the first phase of a loan servicing system featuring extensive capabilities and flexibility to meet

TIFIA-specific requirements, government-wide financial guidance, and changing management information needs.

Specifically, the TIFIA loan servicing system will:

❖Deliver real time information on TIFIA credit instruments

for general ledger accounting and management reports;

❖Maintain data on each credit agreement, including terms,

borrower information, project description and location, debt

ratings, disbursement and repayment schedules, and a complete transaction history, including payments received, outstanding balances, and delinquency data;

❖Support routine invoicing and collection of TIFIA credit

repayments;

❖Support the management and performance evaluation of the

TIFIA credit portfolio; and

❖Fully comply with U.S. Government agency reporting

requirements for credit programs.

The TIFIA program is planning a second phase of the system

that would allow borrowers and other stakeholders to access the

loan data through a secure Internet web site.

TIFIA Loan Servicing System Launched

Contact:

Stephanie Kaufman,

TIFIA JPO, 

202/366-9649.

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, TIFIA JPO, 202/366-5785.

Question

The TIFIA statute requires that a project’s senior debt be

investment grade. What are issues to be aware of?

Answer

❖The TIFIA application must include at least one preliminary credit opinion letter, which must assess the project’s

overall viability (economic, legal, financial), the potential

for the senior debt to be investment grade, and the

default risk on the TIFIA instrument. This letter must be

current and must specifically address the applicant’s

TIFIA proposal – submission of a prior rating opinion is

not acceptable.

❖Prior to closing the TIFIA agreement, the project sponsor

must receive at least one rating letter that assigns an

investment grade rating to the senior debt and assesses the

default risk on the TIFIA instrument.

❖It is permissible for the TIFIA instrument to have a junior

lien on the same security (revenue stream) pledged to the

senior debt. But if the project debt is secured by multiple

revenue sources of disparate credit quality, then the U.S.

DOT may require a pro rata sharing of the high-quality

revenues with other creditors, or a bifurcation of the

financing into two separate senior-subordinate flows.

❖When a subordinate TIFIA loan shares the same revenues

pledged to the senior debt, the par amount of such debt

must be at least as large as the TIFIA assistance. This

requirement helps ensure that the senior debt rating

reflects a manageable overall risk profile for the project.

The U.S. DOT and the project sponsor must carefully

examine and resolve intercreditor issues during negotiation

of agreements. If the applicant already has an existing bond

indenture, the U.S. DOT must determine whether TIFIA

requirements can be met by folding the TIFIA instrument

into the existing structure.

TIFIA Trivia 

The U.S. DOT Responds to Your Questions
With $4.0 billion in loan activity achieved by the

nation’s SIBs to date, major strides have been made by

states in implementing the SIB program and increasing investment in transportation infrastructure.

While the pace of SIB implementation has been

affected by insufficient capitalization – TEA-21

placed limitations on Federal capitalization, and the

economic downturn has affected the capacity of states

to provide new infusions of capital to existing SIBs – states have the opportunity to enhance SIB funding through leveraging.

Leveraging a revolving loan fund such as a SIB offers significant potential for expanding the pool of projects that can be financed.

Of the 32 states participating in the SIB program today, two states – South Carolina and Minnesota – have issued bonds to leverage

their SIBs. These states have taken different approaches in structuring their programs, demonstrating the flexibility states have in

tailoring SIBs to meet state specific needs.

The South Carolina Transportation Infrastructure Bank (SCTIB) is authorized to issue bonds under the enabling legislation establishing the bank in 1997. The SCTIB is a good example of a large, leveraged SIB. Since its inception, the SCTIB has approved

financing and begun development of over $3.0 billion in projects. SCTIB loans are financing most of the costs of these projects.

The SCTIB has issued over $1.2 billion in revenue bonds to date to provide funds for approved projects. Another $600 million

in a mixture of general obligation and revenue bonds is planned over the next two years to fund loan disbursements. The leveraged SCTIB is helping to compress 27 years of road and bridge projects into a seven-year acceleration program, known as “27 in

7.”

Minnesota’s SIB is a partnership between two state agencies with bonding accomplished through a conduit agency. The Minnesota Public Facilities Authority is responsible for bond issuance and the financial operations of the bank, while the Minnesota

DOT evaluates the technical merits of project applications. Both highway and transit projects are eligible for assistance. Minnesota’s SIB, designated as the Transportation Revolving Loan Fund (TRLF), has been capitalized with $35 million in Federal

funds and $24 million in state funds. These funds have been leveraged through two bond issues, totaling $37.6 million. The first

issue in 1999 in the amount of $17.1 million financed a loan to the Metropolitan Council for transit-related improvements.

Then in 2001 a second issue for $20.5 million funded 11 project loans. Loan repayments are pledged for debt service.

As transportation agencies explore the potential of expanding SIBs through leveraging, they also can look to the experience of

states in financing environmental infrastructure projects through State Revolving Funds (SRFs) the most widely used model of

3

State Infrastructure Banks (SIBs) continue to be an

important tool in the transportation finance toolbox.

As shown in the table to the right, 32 states have

entered into 297 SIB loan agreements with a dollar

value of over $4.0 billion as of June 30, 2002. This

represents growth in the value of loan agreements of

40 percent over the past nine months.

The ability of states to maximize the potential of their

SIBs to help finance transportation investment needs

can be enhanced through leveraging, which refers to the

issuance of bonds against a SIB’s capitalization. This

issue of IFQ highlights the experience of South Carolina and Minnesota in leveraging their SIBs to provide

loan support to needed state transportation projects.

State Infrastructure Bank Loan Agreements by State

As of June 2002

Loan 

Number of Agreement Disbursements

State Agreements Amount to Date

($000)

Alaska 1 $2,737 $2,737

Arizona 40 430,226 236,662

Arkansas 1 31 31

Colorado 2 400 400

Delaware 1 6,000 6,000

Florida 32 465,000 98,600

Indiana 1 3,000 1,122

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 11 73,251 67,801

Nebraska 1 3,360 3,360

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 39 141,231 116,422

Oregon 12 17,471 17,471

Pennsylvania 23 17,403 17,403

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 37 252,013 225,461

Utah 1 2,888 2,888

Vermont 3 1,023 1,000

Virginia 1 18,000 18,000

Washington 1 700 385

Wisconsin 3 1,814 1,814

Wyoming 8 77,977 42,441

297 $4,061,517 $2,087,990

SIB HIGHLIGHTS

SIB Activity Tops $4 Billion

Leveraging Helps Maximize

SIB Potential

continued on page 4

Expanding the Pie

Insights from SRFs
4

revolving loan funds operating at the state level. The SRF program, established in 1987, provides funding assistance to water

pollution abatement projects through Federal matching grants

to capitalize SRFs.

One of the unique features of the SRF program is the capacity

of states to leverage their loan funds through the municipal

bond market. States have used one of two basic structures to

leverage Federal capitalization grants for wastewater and drinking water facilities: the Cash Flow Model or the Reserve Fund

Model. State law and program goals have been determining

factors in the choice of models. The diagrams to the right

describe the two models. Under the cash flow model, loans are

funded from bond proceeds and capitalization grants, while

under the reserve fund model, Federal capitalization grants and

state matching monies are not used to make loans directly. 

Leveraging has made a significant impact on SRF activity. As

of the June 2001, 23 states have leveraged their wastewater

funds, generating almost double the loan dollar volume as the

states, which have not leveraged funds. As shown in the table

below, bonds have added $10.1 billion to SRF funding. 

Recognizing that leveraging is a way to maximize the benefits

of the SIB, Ohio is moving forward with implementation of a

leveraged SIB. Ohio’s SIB program was originally capitalized

with $40 million in State General Revenue funds and $120

million in Federal highway funds. Expansion of Ohio’s SIB

program through bonds will provide additional capital for

transportation projects, enabling the state to accelerate construction and obtain both the system and economic benefits

sooner than otherwise would have been possible. Bond proceeds are expected to be lent to political subdivisions with loans averaging between $3 million and $10 million. The Ohio DOT will issue the bonds and pledge all current and future SIB loan

repayments to secure the bonds issued.

States have the opportunity to learn from the experiences of South Carolina, Minnesota, and Ohio as they evaluate options to

enhance SIB capitalization to meet loan demands. The SRF experience also provides useful insights for maximizing a SIB’s potential through bonding. The Florida DOT currently is evaluating the leveraging of its SIB. In many

states, the lack of legislative authorization has been the primary barrier to SIB bonding. Additional

capitalization though an expansion of the SIB pilot program would provide an asset base to increase

loan resources through leveraging to meet surface transportation infrastructure needs.

Dollar Total Federal Ratio of SRF Dollar Amount 

Amount of Capitalization Loans to Federal Added to Loan

SRF Loans Funds for SRF Capitalization Pool by Leveraging

23 States Which 

Have Leveraged $22,765 $10,200 223% $10.1 Billion

28 States Which 

Have Not Leveraged 11,507 8,073 143%

Totals $34,272 $18,273 188%

Looking to the Future

Contact:

Phyllis Jones,

FHWA,

202/366-2854. 

Source: EPA Office of Wastewater Management.

SRF Leveraging

July 1, 1987 through June 30, 2001

(Dollars in Millions)

Leveraging Helps Maximize SIB Potential, continued from page 3

Leveraging SIBs – The Cash Flow Model

Capitalization

Grants/Monies Borrowers Bond DebtService

Revenue Bond

Proceeds

Debt Service

Reserve Funds Investment Income

Loan

Repayments

Revenue bond proceeds are blended with capitalization funds to

make loans at subsidized rates and to provide debt service

coverage. Debt service reserve is funded from bond proceeds.

Leveraging SIBs – The Reserve Fund Model

Capitalization

Grants/Monies

Debt Service

Reserve Fund

Bond Debt

Service

Revenue Bond

Proceeds Borrowers

Loan Repayments

Investment

Income

All Federal and state capitalization grants/monies fund debt 

service reserve that provides interest rate subsidy and

serves as security for investors.
5

Since January 2002, four new Grant Anticipation Revenue Vehicle (GARVEE) bond issues have been brought to market, including the first issue for Alabama (highlighted on the following page).

❖In July, Arkansas issued $215 million of GARVEEs, the third and final issue in its $575 million program to accelerate Interstate

reconstruction. These monies are enabling the rebuilding of 380 miles or 60 percent of Arkansas’s Interstate system.

❖Ohio sold its fourth and largest GARVEE issue of $135 million in September, bringing the total amount of bonds issued to

$225 million. Ohio’s GARVEE issues are facilitating the advancement of three major infrastructure improvement initiatives:

the Spring-Sandusky Interchange, the Maumee River Bridge, and the Southeast Ohio Plan. Ohio was the first state to leverage

Federal dollars through GARVEEs.

❖Colorado’s $208.3 million issue in June brought its GARVEE total to $1.25 billion, accounting for 47 percent of the

GARVEEs issued nationally to date. Colorado is accelerating construction of 28 priority transportation corridor projects with

an estimated cost of nearly $5 billion with the proceeds of its GARVEEs. This strategic initiative includes advancing the $1.7

billion multimodal Southeast Corridor project (T-REX) with $0.7 billion of GARVEE funding.

Also of note is Colorado’s recent refunding GARVEE bond issue (designated as TRANS). In August, the Colorado Department of Transportation (CDOT) sold a $400 million refunding bond issue. The proceeds will be used to advance refund a portion of the 2000 and 2001 GARVEE series, reducing annual interest costs.

GARVEE ROUNDUP

GARVEE Activity Jumps to $2.7 Billion

State Date Face Amount Ratings Projects Backstop

of Issue of Issue Moody’s/S&P/Fitch Financed

New Mexico Sept-98 $100.2 Million A3/A-/na New Mexico SR 44 No backstop;

Feb-01 $18.5 Million A2/A/na Bond insurance obtained.

Ohio May-98 $70 Million Aa3/AA-/AA- Various projects Moral Obligation pledge to use

Aug-99 $20 Million Aa3/AA-/AA- including: Spring- state gas tax funds and seek

Sep-01 $100 Million Aa3/AA/AA- Sandusky and Maumee general fund appropriations in

Sep-02 $135 Million Aa3/AA/AA- river improvements the event of Federal shortfall.

Arkansas Mar-00 $175 Million Aa2/AA/na Interstate Highways Full faith and credit of state, 

Jul-01 $185 Million Aa2/AA/na plus state motor fuel taxes.

Jul-02 $215 Million Aa2/AA/na

Colorado May-00 $537 Million Aa3/AA/AA Any project financed Federal highway funds as

Apr-01 $506.4 Million Aa3/AA/AA wholly or in part by allocated annually by CDOT;

Jun-02 208.3 Million Aa3/AA/AA Federal funds Other state funds.

Arizona Jun-00 $39.4 Million Aa3/AA-/AA- Maricopa freeway project Certain sub-account transfers.

May-01 $142.9 Million Aa3/AA-/AAAlabama Apr-02 $200 million Aa3/A/na County Bridge Program All Federal construction

reimbursements. Also insured.

TOTAL $2,651.7 Million

GARVEE Transactions

As of September 2002
6

Each issue of IFQ features questions and answers on the GARVEE program. This issue addresses the treatment of

GARVEE debt service in state plans. Note that answers to these questions are not regulatory or legislative, but represent

Federal Highway Administration’s (FHWA) 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

GARVEE “Questions of the Quarter”

How Should GARVEE Debt Service Appear on the STIP?

To comply with the intent of the fiscally constrained planning process, the Federal share of the debt-related costs (e.g.,

interest and principal payments, associated issuance costs, and ongoing debt servicing expenses) anticipated to be reimbursed with Federal-aid funds over the life of the bonds should be designated as advance construction (AC). The planned

amount of Federal-aid reimbursement for debt service (AC conversion) should be included in the State Transportation

Improvement Program (STIP) in accordance with FHWA procedures relating to STIP preparation.

How Should GARVEE Debt Service Appear on the Long-Range Plan?

The full cost of planned GARVEE projects (including interest costs) should appear on the Long-Range Plan.

In April 2000, the Governor of Alabama proposed selling bonds

to raise money to replace some 1,600 county bridges that were

weight-restricted and could not be used for school bus traffic.

The situation created extensive and costly detours around the

weight-restricted bridges. The Governor’s plan involved borrowing against future Federal bridge rehabilitation funds in order to

accelerate bridge replacement projects across the state.

A month later, the Alabama Legislature approved the bond sale

contingent on a constitutional amendment for selling $50 million of general obligation bonds to raise money for the local

matching share. This constitutional amendment required

approval by the state’s voters. In November 2000, voters

approved the constitutional amendment and the bridge rehabilitation program began.

The $250 million program ($50 million of general obligation bonds for the non-Federal share plus $200 million of GARVEE

bonds for the Federal share) will replace approximately 1,300 county bridges in all 67 counties statewide. The state’s general

obligation bonds were sold in November 2001, and the GARVEEs were sold in April 2002 on a competitive basis. The GARVEE

issue was rated A by Standard & Poor’s, and achieved a total interest cost of just over 4.65 percent. The first three GARVEE funded projects were approved for advance construction in

December 2000, and currently there are about $68 million of advance construction projects

underway. Further details about the issue are presented in the table above.

Alabama GARVEE Bond Program Enhances School Bus Safety

Contact:

Lamar McDavid, 

Alabama DOT, 

334/242-6360.

Premium (discount) $3,973,221.10

Bid Price (%) 101.987%

Bid Amount $203,973,221.10

Interest (TIC) 4.650376%

Term 15 years (Series range from 1 to 15yrs)

Rate Rates range from 3.25 to 5.25% 

Low Bidder J.P. Morgan Securities

S & P rating A

Insurance Yes (MBIA Insurance Corp.)

Features of Alabama Bond Issue

Contact:

Jennifer Mayer, 

FHWA Western Resource Center, 

415/744-2634.

In June, Louisiana enacted legislation (SB 80) authorizing the

state to issue GARVEEs. SB 80, signed into law by the Governor on June 25, 2002, allows the State Bond Commission to

issue revenue bonds secured by a pledge of Federal transportation funds, state matching funds, and other revenues. The

aggregate amount of principal and interest on all bonds issued

is limited to 10 percent of annual Federal highway funding.

The bonds will be used to finance the accelerated construction

of certain state transportation projects.

Louisiana Passes GARVEE Legislation
7

Public/private partnerships are an increasingly popular

method of financing transportation projects that benefit both

the general public and the private sector. While there are various forms of public/private partnerships, the agreements generally provide for a segregation of financial and operational

responsibility between the public and private sectors to facilitate the completion of a project. This segregation of responsibility leverages some of the risk associated with constructing,

operating, and maintaining a facility from the public sector to

the private sector. An example of a successful public/private

partnership is the use of shadow tolling in the agreement

between Florida’s Turnpike Enterprise (the “Turnpike”),

Broward County (the “County”), and the Arena Operating

Co., Ltd. and the Arena Development Co., Ltd. (together as

the “Operator/Developer”).

In 1997, the County and the Operator/Developer requested

that the Turnpike build an interchange on the Sawgrass

Expressway, one of the toll facilities owned and operated by

the Turnpike. The interchange would provide expressway

access to a proposed multi-purpose sports and entertainment

complex situated adjacent to the Sawgrass Expressway. Use of

the expressway would alleviate the expected high volumes of

traffic on local roads during arena events. In addition, the

interchange would allow for controlled access entering and

exiting the arena. Based on the request, the Turnpike assessed

the economic viability of the interchange to determine that a

specific transportation need would be met and would be supported by the local community. In addition, the project had

to meet state environmental impact restrictions. Finally, the

projected costs of the construction, maintenance, and operation of the interchange had to be compared to the expected

revenues to evaluate the costs and benefits of the interchange.

Based on the results of the analysis, the Turnpike concluded

that despite the need, local support, and environmental feasibility of the project, the costs of constructing, operating, and

maintaining the interchange significantly exceeded the

expected revenues.

Since the projected cash flows did not support the Turnpike

constructing the interchange on a standalone basis, the Turnpike, the County, and the Operator/Developer entered into

an agreement in which the Turnpike provided the $10 million capital outlay for the construction of the interchange.

The terms of the agreement require the Operator/Developer

to remit annual payments to the Turnpike for the imputed

debt service (calculated by amortizing $10 million over 30

years at 5.91 percent interest) and the operating and maintenance costs ($47,700 in the initial year with a three percent

annual increase), net of gross toll revenue collected from traffic entering the arena during events and from traffic exiting

the arena during non-event periods. Since tolls are suspended for a specified period of time at the completion of an

arena event, the Turnpike requires the Operator/Developer

to pay a shadow toll equal to the lost revenue. Shadow tolls

are tolls paid to the facility operator by someone other than

the facility user.

The shadow tolls at the Broward Arena are assessed to the

Operator/Developer based on a manual count of vehicles exiting the arena factored by the toll rate that would normally be

collected at the toll plaza. The use of shadow tolls has a number of advantages. One of the main advantages is the transfer

of traffic risk from the Turnpike to the Operator/Developer.

Since the collection of tolls at the conclusion of an event

would unnecessarily congest the traffic exiting the arena, it

poses a safety risk normally borne by the Turnpike as operator

of the toll facility. The use of shadow tolls, however, alleviates

the traffic risk to the Turnpike, without the negative financial

impact of a toll suspension. Another advantage of the shadow

toll is the perceived benefit to the facility users. Patrons of the

arena perceive the toll suspension as a benefit to attending the

arena events. As such, the patron’s perception also benefits the

Operator/Developer in the form of increased attendance at

arena events. Due in part to the ease with which patrons can

access the arena, attendance at events is positively impacted.

Total traffic volume on the interchange has nearly doubled

since the first full year of operation, and for the year ended

June 30, 2002 was approximately 570,000. Despite the

increased use of the interchange, toll revenue has not been sufficient to fund the required annual payment of the

Operator/Developer. As such, the Turnpike bills the Operator/Developer for the annual shortfall amount based on the

agreement provisions. The success of the public/private partnership between the Turnpike, Broward County, and the Operator/Developer underscores the fact that public projects that

benefit private interests can be successfully developed and

financed in order to mitigate risks associated with a project as

well as to pool needed resources.

As cash flow limitations continue to require the public sector

to seek innovative ways to finance needed transportation projects, opportunities for strategic alliances in the form of public/private partnerships will increase. For transportation

projects, these alliances may utilize shadow tolling in order to

leverage the risks of financial and operational responsibility

between public and private sectors.

TECHNICAL CORNER

Shadow Tolling the Broward Arena Ramps

A Study in Public/Private Partnerships

Contact:

William F. Thorp,

Florida’s Turnpike Enterprise, 

407/532-3999, ext. 3141.
The Federal-aid highway program, when

created in 1916, did not allow the use of

Federal-aid funds on toll facilities. This

position remained unchanged until 1927

when Congress enacted legislation that

permitted Federal-aid highway funding

to be used to construct toll bridges and

approaches. Subsequent legislation provided more flexibility on using Federalaid highway funds for improvements to

toll facilities with the last significant

changes being made in 1991 with passage of the Intermodal Surface Transportation Efficiency Act.

Currently, toll activities eligible for Federal-aid highway funding include:

❖Initial construction (except on the

Interstate System) of toll highways,

bridges, and tunnels, including

approaches to these facilities.

❖Reconstruction, resurfacing, restoration, and rehabilitation work on existing toll facilities.

❖Reconstruction or replacement of free

bridges or tunnels and conversion to

toll facilities.

❖Reconstruction of a free highway

(except on the Interstate System) and

conversion to a toll facility.

❖Preliminary studies to determine the

feasibility of the above toll construction activities.

If Federal-aid funds are used for construction of, or improvements to, a toll facility

or the approach to a toll facility, or if a

state plans to reconstruct and convert a

free highway, bridge, or tunnel previously

constructed with Federal-aid highway

funds to a toll facility, a toll agreement is

required (see Title 23, United States

Code, Section 129(a)(3)). The toll agreement is executed between FHWA, the

state DOT, and the toll authority.

The toll agreement must require that all

toll revenues are first used for any of the

following: debt service; reasonable

return on private investment; and operation and maintenance, including reconstructing, resurfacing, restoring, and

rehabilitating work.

The agreement also may include a provision regarding toll revenues in excess of

those needed for the required uses outlined

above. This provision would allow these

excess revenues to be used for highway and

transit purposes authorized under Title 23

if the state certifies annually that the toll

facility is being adequately maintained.

The issue of whether a toll facility is to

become free when debt is retired or at

some other future point in time or

whether tolls are to be continued indefinitely is a matter to be determined by

the state.

Decisions regarding the amount of tolls

charged are made by the toll authority

subject to requirements under state and

local laws and regulations. These decisions require no review or input from

FHWA.

Section 1216(b) of TEA-21 established a

new pilot program to allow conversion of

a free Interstate highway to a toll facility

in conjunction with needed reconstruction or rehabilitation of the Interstate

highway that only is possible with the

collection of tolls. The FHWA Headquarters issued a December 24, 1998

memorandum to its division offices soliciting candidate projects from the states

for this pilot. No candidates were submitted. The FHWA Headquarters subsequently issued an April 6, 1999

memorandum to its division offices

advising them that the pilot program

remained available to the states as an

open-ended solicitation and candidates

would be accepted on a first-come basis.

FHWA published a report in February

1999 entitled Toll Facilities in the United

States (Publication No. FHWA-PL-99-

011) which contains selected information on United States toll facilities. 

This report can be viewed online at

www.fhwa.dot. gov/ohim.

8

Tolling Provisions Applicable to Federal-Aid Highways

The Tolling Provisions Tree

Bridge or Tunnel

Reconstruction

Tolling Permitted -

Toll Agreement

Required

Roadway Reconstruction

Tolling Permitted Only Under Interstate 

Pilot Program (Toll Agreement Required) 

or Value Pricing Pilot

Non-Reconstruction

Projects

Tolling Not Permitted 

Except Under Value 

Pricing Pilot Program

Interstate

Non-Interstate

Tolling Permitted - Toll

Agreement Required

Existing Facilities 

Reconstruction

Projects

Interstate

Tolling Not 

Permitted for New

Construction

on Interstate

Non-Interstate

Tolling Permitted -

Toll Agreement

Required

New Facilities 

Contact:

Jack Wasley,

FHWA, Office of Program 

Administration,

202/366-4658.

The International Bridge, Tunnel and

Turnpike Association (IBTTA) maintains an address directory of its membership and serves as an information

clearinghouse and research center. It

also conducts surveys and studies and

publishes a variety of reports, statistics,

and analyses. Their web site is located

at www.ibtta.org.

The American Automobile Association

(AAA) compiles a directory of toll facilities containing such current information as rates, load limits, frequency of

service, etc. Their web site is located at

www.aaa.com.

Other Tolling Resources
9

FHWA has published an innovative finance handbook, or

“primer,” and companion brochure that highlight new

approaches for bridging the funding gap between transportation investment needs and financial resources. The primer and

brochure describe techniques advanced by FHWA in partnership with the states, including innovative management of Federal funds, GARVEEs, and credit assistance, such as SIBs and

the TIFIA Federal credit program. Several case studies illustrating how states have used these techniques to close project

financing gaps are highlighted in the primer. A list of resources

including publications, web sites, and expert technical assistance that can help states and other project sponsors make use

of these techniques also is provided.

The primer and brochure are available at the FHWA innovative finance web site:

http://www.fhwa.dot.gov/innovativefinance/ifp/index.htm

http://www.fhwa.dot.gov/innovativefinance/brochure/index.htm

EVENTS AND RESOURCES

Innovative Finance Primer and Brochure Released

Contact:

Max Inman,

FHWA,

202/366-0673.

A FHWA workshop on project finance will be held in conjunction with the American Road & Transportation Builders Association’s

(ARTBA) 14th Annual Conference on Public-Private Ventures. The workshop and conference will be held at the Four Points Sheraton in Washington, D.C., November 20-21, 2002 and will include sessions on best practices and lessons learned, TIFIA, and future

expansion of the innovative finance toolbox. The FHWA workshop will launch the two-day program

and is scheduled from 9:00 a.m. to noon on November 20.

More information is available on the 2002 Public-Private Ventures Conference web site at:

http://www.artba.org/meetings_events/2002/ppv/2002_public_private_ventures.htm

As part of the Transportation Research Board’s (TRB) 82nd Annual Meeting in Washington, D.C. from January 12-16, 2003,

the TRB Committee on Taxation and Finance and FHWA will co-sponsor a Transportation Finance Workshop on Sunday, January 12. The workshop, which will be held from 1:30 p.m. to 5:00 p.m. at the Hilton Washington Hotel and Towers, Jefferson

East Room, will focus on new developments in innovative finance and the best practice application of

innovative tools and techniques, including an outlook for the future.

More information is available on the TRB 82nd Annual Meeting web site at:

http://www4.trb.org/trb/annual.nsf

FHWA Workshop Announcements

Contact:

Michael Martin,

ARTBA, 

202/289-4434.

Contact:

Mary Kissi, 

TRB, 

202/334-3177.

The Southern Resource Center is pleased to announce that

Jim Hatter (fondly known as the Mad Hatter for his creativity

and resourcefulness) has joined the SRC Finance Team as an

Innovative Finance Specialist. The SRC spirited Jim away

from a private sector firm in sunny California. He is enjoying

North Georgia’s refreshing climate, low real estate prices, and

less harried commutes.

Jim has 27 years of municipal finance experience, including

10 years in the public sector. As an investment banker, Jim

has financed hundreds of infrastructure projects with a wide

variety of tax-exempt and taxable instruments, including general obligation bonds, industrial development revenue bonds,

enterprise revenue bonds, pool revenue bonds, special tax

bonds, grant and loan anticipation notes, and tax and revenue

anticipation notes. While serving in the public sector, he

used loan guarantees, bonds, leases, loan anticipation notes,

and grant anticipation notes to advance Federal and California state programs supporting municipal infrastructure. 

He is a graduate of California State University, Fresno with

both Bachelor’s and Master’s degrees. Over the next several

months, Jim is planning to meet with Division and state personnel throughout the south, southwest, and east. He is

planning this “grand tour” to obtain a better understanding of

customer needs and issues, thereby assisting the SRC Finance

Team in its continuing efforts to meet (and exceed!) customer

expectations. 

Please join us in welcoming Jim to the FHWA Finance Team.

Jim can be reached at 404/562-3929.

New Team Member Joins the Southern Resource Center
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.

Contributors to Vol. 8, No. 1 

of IFQ include:

Roger Berg, Cambridge Systematics, Inc.

Duane Callender, TIFIA JPO

Phyllis Jones, FHWA

Stephanie Kaufman, TIFIA JPO

Jennifer Mayer, FHWA, Western Resource Center

Suzanne H. Sale, FHWA, TIFIA JPO

Mark Sullivan, TIFIA JPO

William F. Thorp, Florida’s Turnpike Enterprise

Frederick Werner, FHWA, Southern Resource Center

The American Association of State Highway and Transportation Officials

(AASHTO) in conjunction with the University of Southern California (USC)

and with support from the U.S. DOT have established a Project Finance Institute. The Institute is offering Professional Development Workshops on project

finance, exploring policy issues and cutting edge practices relating the development and financing of major transportation projects and programs.

The two-and-one-half-day inaugural workshop was held in Los Angeles, California, at USC’s School of Policy, Planning & Development, May 13-15, 2002.

With the additional sponsorship of TRB, a second workshop will be held at TRB’s

building at 500 5th Street, N.W., Washington, D.C. from December 9-11, 2002.

The December workshop will teach participants how to:

❖Develop a framework for assessing non-traditional approaches to project

planning, budgeting, and investment decision-making;

❖Determine when and under what circumstances partnerships with private

sector entities may be appropriate;

❖Explore the role of the capital markets and the determinants of investor

demand for infrastructure securities; and

❖Design plans of finance that incorporate various layers of public and private

funding.

The workshop is designed for public and private sector transportation professionals and draws upon distinguished USC faculty and leading industry practitioners to ensure academic excellence and professional relevance. The workshop

format involves a combination of lecture and case study, with an emphasis on

classroom discussion, drawing upon participants’ professional experiences.

To facilitate interaction, the workshop is limited to 30 participants. The

tuition, including all materials, is $1,595. More information can be found at

the AASHTO web site: http://www.aashto.org/

programs/services.nsf/homepage/overview

New Project Finance Institute Workshop Offered

Contact:

Tammy Sindall,

AASHTO,

202/624-3531.