An initiative launched by the U.S.

Department of Transportation (DOT)

in the 1990s to increase investment in

the nation’s transportation infrastructure

by creating new funding tools and

expanded flexibility in the Federal-aid

highway program is yielding measurable

benefits, according to a report published

by the Federal Highway Administration

(FHWA) in July 2002.

The report, Performance Review of U.S.

DOT Innovative Finance Initiatives,

indicates that at least $29.1 billion in

projects have been advanced with

innovative financing over the last

decade. These projects were supported

by $8.6 billion in Federal-aid funding,

resulting in co-investment of $3.40 on

each Federal dollar invested. That coinvestment represents a significant

increase over the $1.25 for every Federal

dollar invested from the traditional

grant program.

This "leveraging ratio" is an important

indicator of the effectiveness of Federalaid funding. Greater leveraging means

that each Federal dollar invested 

has gone further – building more

projects for the same amount of Federalaid funding. And the benefits go far

beyond leveraging.

Increased Private Investment

Certain tools advanced under U.S.

DOT’s initiative were aimed at

expanding flexibility in the Federal-aid

highway program, such as allowing

dollars contributed from private sources

to count as part of the local match. The

report estimates that some $48 million

in private investment was contributed to

VOLUME 9, NUMBER 1 WINTER 2003

INNOVATIVE FINANCE ACCOMPLISHMENTS

Benefits of U.S. DOT’s Innovative Finance Initiatives Quantified

Also in this issue ...

SR 125 Project

Changes Ownership . . . . . . . . .3

T.F. Green Airport 

Approved for TIFIA Loan . . . . . .3

SIB Highlights . . . . . . . . . . . . . .5

Florida’s SIB . . . . . . . . . . . . . . .5

GARVEEs Advance

to Territories . . . . . . . . . . . . . . .7

Alaska GARVEE . . . . . . . . . . . .7

Ballot Measure Results . . . . . . .9

Resources . . . . . . . . . . . . . . . . .9

Note: Based on data as of spring 2001.

Leveraging Leveraging ratio of $3.40, based on $29 billion in 

projects supported by $8.6 billion Federal investment

Private Investment $48 million in flexible match private investment

New Revenue Streams $6.3 billion in revenue-backed bonds; $1.8 billion in 

revenue-backed loans

Project Acceleration Acceleration from six months to 26 years over 

traditional program

Economic Impacts Total employment impacts of 827,000 job years

Total output impacts of $91 billion

Total labor income impacts of $30 billion

Summary of Performance Review Results

continued on page 2

The U.S. DOT is responsible for the

oversight and credit monitoring of 

all transportation projects assisted with

TIFIA funds. Formal guidance for this

oversight and monitoring has been

developed by the TIFIA Joint Program

Office (JPO), in collaboration with 

U.S. DOT modal agencies. In developing this guidance, the TIFIA JPO

conducted extensive outreach to U.S.

DOT field offices, credit rating agencies,

and bond insurers.

Development of the TIFIA project

oversight and credit monitoring

guidance was based on the following

principles:

❖Develop an integrated process that is

seamless for project sponsors and U.S.

DOT field offices;

❖Rely on existing modal oversight

processes to the maximum extent

possible, augmented to manage TIFIA

credit risks;

❖Piggyback on credit reports, independent engineers’ reports, and other

market-based requirements; and

❖Ensure compliance with the requirements of the Federal Credit Reform

Act, Office of Management and Budget

guidance and laws, and prudent

financial and operational practices.

FEDERAL CREDIT PROGRAM

TIFIA Project Oversight and Monitoring 

Guidance Developed

continued on page 2
2

Benefits of U.S. DOT’s Innovative Finance Initiatives Quantified, continued from page 1

TIFIA Project Oversight and Monitoring Guidance Developed, continued from page 1

Federally supported transportation projects through flexible

match provisions, which gained approval as a standard Federalaid practice with enactment of the National Highway System

Designation (NHS) Act in 1995. Other projects are receiving

significant private equity contributions, most notably State

Route 125 in California, advanced under the Transportation

Infrastructure Finance and Innovation Act (TIFIA) Federal

credit program. Additional private capital has been used

through bonding techniques, such as grant anticipation

revenue vehicles, or GARVEEs.

New Revenue Streams

Innovative finance also can expand the level of investment in

transportation projects by lowering barriers to debt financing

in cases where the principal revenue pledged to repay the

borrowed funds derives from new user-based charges and/or is

generated from the project itself. It is estimated that $6.3

billion in revenue-backed bonds will be repaid by new fees or

charges, with the TIFIA Federal credit program playing the

dominant role in fostering these new revenue streams. Another

$2.0 billion in revenue-backed loans is expected to be repaid by

new fees and charges.

Project Acceleration

A key impetus for U.S. DOT’s innovative finance initiative was

the need expressed by states to build more projects more

quickly than would otherwise be possible on a traditional payas-you-go basis. Acceleration means that project benefits are

enjoyed by the traveling public sooner, and that inflation costs

are avoided. Of 62 projects studied, 50 reported acceleration

ranging from six months to 24 years through the use of

innovative finance tools as compared to the schedule that

would be expected under the traditional Federal-aid program.

Economic Impacts

The infusion of Federal and local matching dollars through the

construction of new and expanded transportation facilities can

be expected to generate economic impacts for a region. These

include both short-term impacts associated with direct

spending on construction (suppliers, workers) and long-term

impacts generated by increased productivity afforded by the

transportation improvement. An analysis of the short-term

economic impacts of the projects advanced under U.S. DOT’s

innovative finance initiative estimated that 827,000 job years,

$91 billion in output, and $30 billion in labor income will be

generated once these projects are completed.

The report, which was prepared for FHWA by Cambridge

Systematics, Inc., provides the first comprehensive evaluation

of U.S. DOT’s innovative finance program since its inception.

The results should help guide both Federal policy-makers, as

they continue to improve and enhance Federal surface

transportation programs, and state and local officials, as they

continue to make use of these programs to advance critical

transportation projects.

Contact:

Max Inman, 

FHWA, 

202/366-2853.

The goal for TIFIA project oversight and

credit monitoring is to protect the Federal

interest by managing risks to project

delivery and loan repayment. TIFIA

project oversight and credit monitoring

encompasses the entire life cycle of a

project, from execution of the credit

agreement through the final maturity of

the credit instrument.

Following execution of the credit

agreement for a TIFIA-assisted project,

the U.S. DOT will initiate the formal

project oversight and credit monitoring

process. The process integrates existing

operating administration procedures,

such as FHWA’s and the Federal Transit

Administration’s (FTA) major project

oversight requirements, into a comprehensive framework that ensures effective

and efficient oversight.

The TIFIA project oversight and credit

monitoring process encompasses the

following elements:

❖Formal Oversight Team for each

TIFIA project;

❖Comprehensive monitoring and

reporting requirements in each TIFIA

credit agreement;

❖Modal oversight procedures appropriate for the project;

❖Development of a tailored oversight

and monitoring plan for each project

with the level of oversight related to

the risk profile for the project;

❖Annual review and acceptance of an

updated financial plan;

❖Regular project status report;

❖Annual surveillance report;

❖Periodic status meetings with project

sponsor, site visits, and project

inspections;

❖Review of engineering reports and

credit market surveillance reports; and

❖Review of project management and

operating plans.

The central element of this process is the

Project Oversight and Credit Monitoring

Plan, which serves as the management

tool for each project. The plan is

tailored to meet the specific oversight

and monitoring requirements for the

project, based on the project’s risk profile

and modal agency requirements.

The Oversight Team is responsible for

developing this plan prior to the

execution of the TIFIA credit agreement.

In developing the tailored TIFIA project

continued on page 3
3

TIFIA Project Oversight and Monitoring Guidance Developed, continued from page 2

U.S. DOT has accepted a change

in the ownership and management of California Transportation Ventures, Inc., (CTV)

and San Diego Expressway

Limited Partnership, (SDELP),

and potential modifications to

the approved plan of finance for

the SR 125 Project, a proposed

9.3-mile San Diego County toll

facility. The Department also has

approved an increase from $127

million to $140 million in TIFIA

credit assistance to this project.

Parsons Brinckerhoff Infrastructure Development Co., Inc.

(PB) and Egis Projects S.A.

(Egis), the sole and equal

shareholders of CTV and

beneficial owners of 82 percent

of the Limited Partnership Units

of SDELP, have sold 100 percent

of their interest in CTV and

SDELP to Macquarie Infrastructure Group (MIG). The

acquisition of CTV was completed in September 2002. The

TIFIA JPO and Macquarie 

are now moving forward with

credit agreement negotiations.

Currently, Macquarie plans to

close both the senior financing

and TIFIA loan in the first

quarter of 2003.

On November 8, 2002, a $58 million direct TIFIA loan was

approved for the Rhode Island Economic Development

Corporation’s (RIEDC) new $215 million intermodal facility

at T.F. Green Airport in Warwick, RI. This is the first project

to be selected for TIFIA credit assistance in FY 2003. The

intermodal facility will be constructed as a public/private

partnership among the Rhode Island Department of

Transportation (RIDOT), the Rhode Island Airport

Corporation (RIAC), which is a semi-autonomous subsidiary

of RIEDC, and the nine rental car companies serving airport

customers. RIEDC will serve as issuer for the project’s senior

debt and as borrower for the subordinate TIFIA loan.

The objectives of the project are to provide greater access to

the T.F. Green Airport via public transportation; remove cars

and shuttle buses from the surrounding airport access roads;

create a more efficient rental car facility at the airport, and

reduce commuter automobile traffic on I-95. In addition,

RIDOT has entered into an agreement with the Massachusetts

Bay Transportation Authority (MBTA) to provide commuter

train service from Boston to the proposed station in Warwick,

allowing T.F. Green to serve as a more efficient alternative to

Boston’s Logan Airport.

TIFIA UPDATE

U.S. DOT Approves Change in Ownership of SR 125 Project

TIFIA, a provision of the Transportation

Equity Act for the 21st Century (TEA 21),

authorizes an innovative financing program

under which U.S. DOT provides credit

assistance rather than grants to public and

private sponsors of major surface

transportation projects. U.S. DOT has

selected 11 projects to benefit from TIFIA at a

budgetary cost of slightly more than $182

million to the Federal government, providing

$3.5 billion in credit assistance supporting

transportation investments worth more than

$15 billion. Approximately $2.6 billion in

credit assistance is available in FY 2003.

TIFIA Credit 

Assistance Available

continued on page 4

oversight and credit monitoring plans,

each Oversight Team will identify risks

specific to the given project and establish

the appropriate measures to ensure

effective monitoring to manage those

risks. In assessing the risks, the team will

consider, but not be limited to, rating

agency/bond insurer reports, traffic and

revenue studies, independent engineer’s

project evaluation, project management

plan, funding controls established by the

project sponsor, and the adequacy of

contingencies for schedule and budget.

Each plan will be updated, as needed, to

address any changes in the project’s

credit status.

The TIFIA project oversight and credit

monitoring process is a cooperative and

systematic effort between the TIFIA JPO

and the modal agencies intended to

proactively manage construction and

credit risk. Open and timely

communication among all participants

will be critical to the effectiveness of the

monitoring process. Through the team

approach, the U.S. DOT will be able to

direct resources cost-effectively and

enhance the communication of

information on the status of TIFIA

projects. The team will measure its

success by a standard of no surprises.

The TIFIA project oversight and credit

monitoring guidance will be available on

the TIFIA web site in spring 2003.

Contact:

Suzanne H. Sale, 

TIFIA JPO, 

602/379-4014.

T.F. Green Airport Approved for TIFIA Loan
The project has two components: 

❖The intermodal facility, consisting of 1) a multi-level

Amtrak and commuter train station and platforms; 2) a

3,000 space parking garage for rental car companies and

commuters using the train station; 3) a rental car mall and

quick turnaround system for refueling; 4) a bus terminal;

and 5) an elevated automated people mover connecting the

project to the Airport – a distance of approximately 1,200

feet.

❖Commuter rail equipment, comprised of 1) a train set for

the MBTA to provide commuter service from Boston to the

T.F. Green Airport; and 2) the purchase of used diesel

engines and cars for a shuttle train between the airport and

Providence, RI.

The senior bonds and the subordinated TIFIA loan would be

repaid by a pledge of all rental car Customer Facility Charges,

now collected at $3.75 per transaction day and scheduled to

escalate to $5.00 per transaction day by 2007. In addition, the

rental car companies would pledge $725,000 per year directly

from their own funds. All operation and maintenance costs

would be paid by RIAC using concession and lease rental

revenues from the facility.

The project would be financed through a new revenue bond

indenture under which senior tax-exempt and taxable bonds

will be issued. TIFIA would be a subordinate bond holder

under the proposed indenture.

Over 70 percent of the design of the project is complete. The

project will be built with a date-certain guaranteed maximum

price contract. 

4

T.F. Green Airport Approved for TIFIA Loan, continued from page 3

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

What types of project financings can or will U.S. DOT participate in through TIFIA?

Answer

❖The TIFIA program was designed to facilitate project financings (in which user-based revenues created by the project

secure the debt obligations), but its legislative authorization encompasses other types of deals, including those

secured by tax-backed revenues. In fact, six tax-backed financings, with a combined value of $6.6 billion, have been

approved to date.

❖Project financings directly fit the program goals of encouraging new revenue streams and private participation as 

well as filling capital market gaps for secondary and subordinate capital. 

❖U.S. DOT closely examines proposals for non-project financings with respect to the project’s financial needs, the

type of assistance requested, and other aspects of the credit structure. In some cases, U.S. DOT may choose to make

available a loan guarantee, as opposed to direct loan, to support a tax-based financing.

TIFIA Trivia 

The U.S. DOT Responds to Your Questions

Contact:: 

Cheryl E. Jones, 

TIFIA JPO, 

202/366-0317.

Change is ever constant, and the TIFIA program now must wish a sad and fond farewell to senior credit analyst Stephanie

Kaufman, leaving the Federal government after 20 years to pursue a different form of public service: teaching English as a

second language to immigrant students in the public school system of Montgomery County, Maryland. A former Peace

Corps volunteer, Stephanie came to U.S. DOT in 1996 from the Office of Management and Budget. Working with the

TIFIA program since its legislative beginnings in 1998, her expertise in Federal credit budgeting and accounting has been

essential for meeting the challenge of establishing new administrative procedures and controls. The TIFIA program and all its

borrowers owe Stephanie a great debt of thanks for her tireless work behind the scenes. In January, she will enter a 

Master’s degree program in education at George Washington University prior to her assignment in the public schools. The

students’ gain will be our loss!

Stephanie Kaufman Departs TIFIA JPO 
5

The volume of State Infrastructure Bank (SIB)

activity nationwide has surpassed $4 billion,

providing critical funds for more than 300 needed

projects. As shown in the table to the right, 32

states have entered into 310 SIB loan agreements

with a dollar value of over $4.1 billion as of

September 30, 2002. 

Florida continues to be a pace-setter in the use of

its SIB to meet urgent transportation investment

needs. This issue of IFQ spotlights the state’s

recent efforts and future plans to further expand

the capacity and flexibility of Florida’s SIB.

Florida is taking steps to further increase the

ability of its SIB program to support needed

investments throughout the state. In June 2000,

Governor Bush signed Senate Bill 862 into law

creating and providing up to $150 million for a

state-funded SIB. To date, a total of $93.5 million

in state funds has been deposited in the SIB; the

remainder has been deferred, due to budget

constraints and a general revenue shortfall. To add

still further flexibility to the state-funded Florida

SIB, Governor Bush signed House Bill 261 into law in April 2002. House Bill 261 expands the SIB program to include possible

projects that provide for connectivity between the State Highway System and airports, seaports, rail facilities, transportation

terminals, and other intermodal options for the increased accessibility and movement of people, cargo, and freight.

This legislation means that the Florida Department of Transportation (FDOT) currently operates a SIB program with both a

Federal-funded account and a state-funded account. As of June 2002, approximately $238.7 million has been capitalized

(including interest earnings and repayments) in the combined SIB: $137.6 million in the Federal-funded account

and $101.1 million in the state-funded account. SIB funds may be loaned to a variety of public and private entities, and may

be used for various forms of financial assistance such as subordinated loans, interest subsidies, letters of credit, capital reserves for

bond financing, and construction loans. FDOT plans to further capitalize the SIB program with $58.3 million in Federal funds

and $45.8 million in state funds through fiscal year 2007.

At This Level: Accomplishments to Date

Florida’s SIB program has established sound guidelines for project application, selection, and award that have enabled the

program to be responsive and flexible in meeting project demand. Each application is reviewed from both the statewide and local

perspective to evaluate the project benefits; the Department’s Secretary makes selection after this screening process is completed

with award processed within an average of 45 days.

Through its SIB program, the FDOT charge is to provide transportation services to the public, not to serve as a private bank that will

charge market rate interest on loans. Therefore, below market rate loans are a subsidy FDOT has been willing to provide to further

develop transportation projects that can be delivered earlier or that may not otherwise be built to better serve the traveling public. 

SIB HIGHLIGHTS

SIBs Provide Needed 

Funds and Flexibility

State Infrastructure Bank Loan Agreements by State

As of September 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 36 489,500 214,200

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 67,801 61,801

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 40 168,164 145,232

Oregon 12 17,471 17,471

Pennsylvania 25 18,900 18,000

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 41 252,656 243,099

Utah 1 2,888 2,888

Vermont 4 1,049 1,016

Virginia 1 18,000 18,000

Washington 2 1,900 385

Wisconsin 3 1,814 1,814

Wyoming 8 77,977 42,441

310 $4,110,866 $2,244,651

continued on page 6

Taking Florida’s SIB 

Program to the Next Level
In order to better utilize existing SIB

resources to meet demand, Florida has

begun researching options to leverage

the existing loan portfolio repayment

stream to create a self-funded program.

The following criteria are critical to the

long-term success of this leveraging

proposal:

❖Continuing the program under the

existing laws and guidelines;

❖Maintaining the program’s flexibility

in meeting project needs;

❖Leveraging only the existing

portfolio’s repayment stream; and

❖Applying the SIB as a resource to fill

funding gaps, to bring projects 

to completion.

Legislative action will be required to

allow leveraging of the SIB program.

The approach to leveraging the SIB

program was driven by researching

previous leveraging models and the

current demands on the state’s economy.

Florida is not unique in these

challenging economic times: Transportation needs outweigh funding

sources. The model developed for the

SIB leveraging effort is similar in

structure to the water/sewer revolving

fund approach that has been utilized in

a number of states, including Florida,

over the past few years. The existing and

future SIB program loan repayments

would be the sole revenue stream for the

leveraged SIB debt service.

Based on FDOT research, the existing

loan portfolio has matured and is of

sufficient credit quality to support a

leveraging program of $100 million

dollars in SIB loans each year beginning

in fiscal year 2004 and extending well

beyond 2010. This assumes that a mix

of short, medium, and long-term SIB

loans will continue to be awarded in the

future. The average loan amount of the

existing portfolio is $13.6 million

dollars, with a repayment profile

averaging 15 years. This approach

enables SIB funds to be revolved more

readily to meet more projects needs.

The basic principle behind this program

is the revolving of current repayments

into debt service and the use of

leveraged funds to support new projects,

which in turn create future repayments

for the program. Flexibility also will be

achieved, with leveraging occurring as it

is needed and on a schedule that takes 

best advantage of the capital borrowing

market. There is no requirement to

leverage in any year other than to meet

needs as defined by applicant projects. 

FDOT has prepared draft language for

consideration during the 2003 legislative

session that would allow SIB leveraging.

The existing loans have been awarded

with specific contract language allowing

for the future leveraging of the

repayment. The completion of this

effort will fully evolve the SIB program

into a flexible, long-term project finance

support tool for the Department.

Other flexible options allow SIB loans to be

subordinated to senior debt, disbursed as a

lump sum payment, or cash flowed over the

production cycle of the project. In addition,

repayments can be deferred to allow for

project revenue streams to mature or for

funds to be accumulated before repaying the

debt. 

As of June 2002, FDOT has approved 36

project applications with total SIB assistance

of $489.6 million that leverages $3.149

billion in total project investment. After a

sluggish start in 1997 to 2000, both

programs have fully developed to the point

that available capital (existing capitalization,

planned future capitalization, and future

repayments) has been fully committed to

projects through fiscal year 2007. A key item

in the success of the Florida SIB is the use of

the SIB primarily as gap funding for projects where the SIB provides only a portion of the overall funding for the project.

Florida’s existing SIB portfolio leverages six dollars of product for each dollar lent, and has assisted in advancing projects to

completion by as much as 10 years.

The Next Level: Leveraging Options Considered

$328.9 million

awarded ($2.355

billion leveraged

24 projects)

Florida’s SIB Boosts Leverage and Acceleration 

Federal State

$160.7 million

awarded ($0.794

billion leveraged

12 projects)

+ = $3.149 billion

leveraged

❖ A $7.96 million SIB loan to the LYNX Orlando Intermodal Center in

downtown Orlando advanced completion of the project by five years.

❖ A $20 million SIB loan to the Miami-Dade County Expressway

Authority’s Miami SR 836 Extension accelerated project completion

by 10 years.

6

Taking Florida’s SIB Program to the Next Level, continued from page 5

Contact:

Gene Branagan,

Florida DOT,

850/414-4421.

Florida’s existing SIB portfolio

leverages six dollars of 

product for each dollar 

lent, and has assisted in

advancing projects to 

completion by as 

much as 10 years.
In October 2002, the Virgin Islands sold $20.8 million in

GARVEEs secured by future Federal highway reimbursements.

This bond issue was enabled by a 1999 Congressional action

that allows the Virgin Islands to issue debt, and enactment of

Act Number 6359 in October 2000 by the Territorial

Legislature, specifically authorizing the Territorial Government

to pledge future Federal-aid highway funds for repayment of

GARVEE bonds.

The GARVEEs will advance two significant transportation

infrastructure projects:

❖ The Enighed Pond Cargo Facility is needed to

alleviate congestion at the St. John Cargo Dock.

This new $16 million cargo port facility to be

constructed by the Virgin Islands Port Authority on

the south side of Cruz Bay will significantly increase

the opportunity for direct destination calls from

cargo vessels on St. John, while reducing the volume

of St. John-bound cargo that will have to 

be transshipped from the Crown Bay Cargo Dock 

in St. Thomas.

❖ The Red Hook Ferry and Marine Terminal on St.

Thomas will be upgraded to improve accommodations for the traveling public. The $2.5 million

project expands the dock to allow for berthing of six

vessels simultaneously, rather than the current three,

as well as construction of a roll-on roll-off cargo

facility. This project also includes construction of a

passenger terminal building, a passenger pick-up

area, 150 parking spaces, a restaurant, and expansion

of a passenger ferry dock.

The Virgin Islands GARVEE issuance brings the total amount

of GARVEE bonds sold to nearly $2.7 billion, as of December

2002. The figure below shows the volume of total GARVEE

transactions by year.

7

Alaska Voters Approve Combined GARVEE and State General 

Obligation Bond Issue

Dollars (millions)

GARVEE ROUNDUP

GARVEEs Advance to Territories

continued on page 8

GARVEE Transactions To Date

Total: $2.7 Billion

The Alaska Department of Transportation and Public Facilities

(ADOT&PF) is responsible for Alaska’s

transportation infrastructure. Even

though Federal funding of highway

projects has been increasing, ADOT&PF

faces formidable challenges as it seeks to

satisfy growing public demand for

highway construction within the

constraints placed on the agency by

annual state appropriations of limited

available funds. To meet these

challenges, Alaska voters approved a

$227 million portfolio of critical

transportation projects in the November

2002 statewide election (see related

Ballot Measures article on page 9). A

combined GARVEE and general

obligation bond issue will finance the

projects, chosen from local communities’

most critically needed priorities.

GARVEEs will support eight projects

costing $102.8 million. The remainder

of the program will be financed through

state general obligation bonds, repaid

with state revenues. 

The transportation bond measure passed

by a large margin, gaining approval from

67.75 percent of the electorate. Most of

the projects have been needed for years,

but the state lacked capital to construct

them. These projects address congestion

relief at some bottlenecks such as C

Street in Anchorage, the most populous

city in Alaska, and safety improvement

on the Richardson Highway. The

projects also include environmental and

economic development benefits. For

example, the work on Ptarmigan Street

in Bethel, Alaska is essential to reducing

maintenance costs and reducing dust

that in turn will improve the

environment and the health of people in

those communities.

Before putting the bond issue before the

voters, ADOT&PF contracted with an

economic consultant to perform a

comprehensive cost benefit analysis to

Calendar Year

$20.0

$952.8

751.4 $779.1

$170.2

1998 2002 1999 2000 2001

$1,200

$1,000

$800

$600

$400

$200

$0

Contact:

Jim Hatter,

FHWA, Southern Resource Center,

404/562-3929.
8

GARVEE “Questions of the Quarter”

Each issue of IFQ features questions and answers on the GARVEE program. This issue focuses on debt-related 

costs eligible for reimbursement. 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

What Kinds of Interest and Issuance Costs Can Be Reimbursed? 

Issuance costs include the following: underwriters discount; rating agency fees, printing, publication, or advertising

expenses with respect to the bonds; all fees, expenses, and costs of registrars and paying agents; and all fees, expenses,

and costs of attorneys, financial advisors, bond counsel, accountants, feasibility consultants, computer programmers,

or other experts employed to aid in the sale and issuance of bonds. Credit enhancement fees include bond insurance,

premiums, and letter or line of credit fees. 

Can Federal-Aid Funds be Used to Reimburse the Cost of Reserve Accounts or Contingency Funds? 

The capitalization from bond proceeds of a reserve account or contingency fund required by (incidental to) the debt

issuance is considered an eligible Federal-aid expense. The funds deposited in such an account, along with any interest

earnings, must be used for project costs – either on a current basis (including interest) or as a final payment to the

bondholders. They cannot be released and disbursed to any other party for any other purpose. If the reserve account

is to be liquidated to make the final debt service payment, it will not be eligible for Federal-aid reimbursement.

Likewise, if unused bond proceeds are applied to pay principal and/or interest, such payments will not be eligible for

reimbursement. 

Are Arbitrage Penalties Eligible for Reimbursement? 

No, arbitrage penalties are not considered eligible interest or issuance costs.

Would Bonds Issued by a State Infrastructure Bank (SIB) be Considered an Eligible Debt Financing Instrument? 

Could a State be Reimbursed for Principal and Interest on SIB bonds? 

Yes, a SIB would be an eligible debt-financing instrument, and debt service costs would be eligible for reimbursement.

Contact:

Jennifer Mayer, 

FHWA, Western Resource Center, 

415/744-2634;

Karen Tennison, 

FHWA Alaska Division, 

907/586-7421;

or Nancy Slagle, 

Alaska Department of Transportation and Public Facilities, 

907/465-8974..

Alaska Voters Approve Combined GARVEE and State General Obligation Bond Issue, continued from page 7

assist the department in making solidly informed choices as it

strives to meet Alaska’s highway construction needs. The

analysis compared the pay-as-you-go financing option with the

GARVEE bond financing over an 18-year period. Regardless

of the economic assumptions used, the GARVEE approach

provided a higher benefit/cost ratio, at lower state cost, than

the pay-as-you-go approach. According to the analysis,

performed by Information Insights, Inc., overall economic

benefits of the GARVEE approach averaged two percent

higher; transportation benefits were eight percent higher; while

the present value of state costs averaged eight percent lower

under the GARVEE scenario.

The study showed that the State of Alaska could receive

substantial budget benefits from use of GARVEE bonding, at

relatively small costs. Estimated benefits include:

❖State general fund savings of an estimated $63 million over

the course of the bond issue;

❖Construction cost savings of an estimated $39 million from

avoidance of construction cost inflation;

❖$58 million in interest earnings from GARVEE bond

proceeds; and

❖Far quicker completion of projects and consequently, earlier

availability of these improvements to both the traveling

public and commercial highway users.

Additional costs of the GARVEE approach include a net

reduction of one to two percent in total projects that can be

constructed over the next 18 years, as portions of Federal

funding received are used to pay debt service instead of

funding new projects.

The state plans a GARVEE bond issuance in spring 2003, and

is now determining how to structure the issue, and whether to

combine it with other planned state debt issuances. 
9

Voters cast their ballots on three

innovative finance-related measures in

November 2002 statewide elections, with

good news for surface transportation

projects in two states.

As reported in the Winter/Spring 2001

issue of IFQ, the Alaska State

Legislature had been weighing a bill

allowing the issuance of GARVEEs for

projects across the state. Voters

overwhelmingly approved the transportation proposition in November

2002, which will allow the state to issue

nearly $103 million in GARVEE bonds

for eight highway projects and $124

million in state-backed revenue bonds

for highway and harbor improvements.

This will be Alaska’s first transportation

related bond issue since 1980, with the

first of two bond issuances occurring in

spring 2003 (see Alaska GARVEE article

on page 7).

Similarly, Maine voters passed a

constitutional amendment approving

the use of short-term grant anticipation

notes (GANs), backed by Federal-aid

reimbursements, to fund transportation

projects. The GANs are limited to 50

percent of the previous year’s Federal-aid

funds, and the notes are limited to a

maximum maturity of 12 months. The

GANs would permit the expediting of

projects, in part in response to Maine’s

short construction season. (Relatedly,

the Maine Legislature recently approved

annual gas tax indexing. The index,

which is linked to the Portland, Maine

consumer price index, is the first indexed

gas tax in the nation. The Legislature is

provided an annual opportunity to repeal

the indexed increase.)

In Utah, however, voters rejected a

ballot measure that would have permitted local governments to sell assets to

private companies, and subsequently

lease them back – a fairly standard

practice in the transit industry. The upfront capital generated would have

raised funds for light rail projects.

Outcome of Innovative Finance Ballot Measures 

Contact:

Prabhat Diksit,

FHWA,

303/969-5772, ext. 323.

The Transit Cooperative Research Program (TCRP) will be

releasing a new resource document in the coming months

entitled Financing Capital Investment: A Primer for the Transit

Practitioner. The work was sponsored by the Federal Transit

Administration.

The primary objective of the primer is to help transit managers

identify and evaluate financing options for public

transportation capital projects. While the emphasis of the

primer is on approaches that take advantage of access to the

public capital markets, the document also addresses the

tradeoffs of pay-as-you-go approaches versus approaches that

borrow against future resources. The primer includes

descriptive sections that lay out the basic financing approaches

and structures available to transit systems, as well as sections

that help system managers and public officials decide when it

is most appropriate to apply alternative financing techniques.

The primer is intended for both transit system managers and

state and local officials involved in the oversight and

management of transit operations. It will be of value to

managers of transit systems of all sizes, particularly for smalland mid-sized systems given their more limited financing

experience and unique financing challenges.

The primer will be published by the Transit Cooperative

Research Program as TCRP Report 89 by late spring.

Contacts:

Paul Marx, 

FTA, 

202/366-1675, 

or Dianne Schwager, 

TRCP, 

202/334-2969.

RESOURCES

Transit Funding Primer to Be Released

FHWA is pleased to announce that Prabhat Diksit has joined the Lakewood, Colorado Administrative Service Team

(LAST) as an Innovative Finance Specialist. Prabhat brings a decade of experience working with Colorado

municipalities on all aspects of financial management, including financial planning, master planning, rate design,

budgets, and bond issuances. Prior to his municipal experience, he worked for 10 years in the private sector

performing business planning and fiscal and economic analysis. Mr. Prabhat graduated from Oregon State University

with a B.S. in chemical engineering and holds an MBA in finance from the University of Oregon. 

Please join us in welcoming Prabhat to the FHWA Finance Team. He can be reached at 303/969-5772, extension

323, or via e-mail at prabhat.diksit@fhwa.dot.gov.

New Finance Team Member in the West
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. 9, No. 1 of IFQ include:

Roger Berg, Cambridge Systematics, Inc.

Gene Branagan, Florida Department of Transportation

Duane Callender, TIFIA JPO

Prabhat Diksit, FHWA

Jim Hatter, FHWA, Southern Resource Center

Tamar Henkin, Trans Tech Management, Inc.

Laurie Hussey, Cambridge Systematics, Inc.

Cheryl E. Jones, TIFIA JPO

Phyllis Jones, FHWA

Jennifer Mayer, FHWA, Western Resource Center

Suzanne H. Sale, TIFIA JPO

Mark Sullivan, TIFIA JPO

Web pages

Federal Highway Administration. Innovative Finance Home Page.

http://www.fhwa.dot.gov/innovativefinance

National Cooperative Highway Research Program. Innovative 

Financing Clearinghouse.

http://www.innovativefinance.org

US Department of Transportation, TIFIA Home Page.

http://tifia.fhwa.dot.gov

Publications

Federal Highway Administration. Innovative Finance Newsletter 

(October 1996 - June 1997) and Innovative Finance Quarterly

(September 1997 - present).

http://www.fhwa.dot.gov/innovativefinance/ifpubs.htm

Federal Highway Administration. Innovative Finance Brochure, May 2002.

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

Federal Highway Administration. Innovative Finance Primer, April 2002.

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

Federal Highway Administration. State Infrastructure Bank Review, 

February 2002.

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

Federal Highway Administration. Financing Federal-aid Highways, 

August 1999.

http://www.fhwa.dot.gov/reports/fifahiwy/finfahwy.pdf

Federal Highway Administration. An Evaluation of the TE-045 Innovative

Finance Research Initiative, October 1996.

http://www.fhwa.dot.gov/innovativefinance/ifresrch.htm

Federal Transit Administration. Innovative Finance Techniques for 

America's Transit Systems, September 1998.

http://www.fta.dot.gov/library/policy/IFT/iftcov.htm

Federal Transit Administration. Innovative Finance Handbook, May 1996.

http://www.fta.dot.gov/library/money/inovhnbk.html

Selected Innovative Finance Resources