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###### Department of Transportation

###### Office of the Secretary 

          - 49 CFR Part 80 
          - [OST Docket No. 2000-7401] 
          - RIN 2105-AC84 

# AGENCY:

Office of the Secretary, Department of Transportation (DOT). 

# ACTION:

Notice of proposed rulemaking (NPRM); request for comments. 

# SUMMARY:

The DOT proposes to revise certain provisions of the regulations concerning the Transportation Infrastructure Finance and Innovation Act of 1998 (TIFIA) as follows: Assign specific weights to each of the eight statutory selection criteria; specify that loan servicing fees are to be paid by the borrower; modify the time period for audited financial statements from 120 days to 180 days; provide that, consistent with the statutory intent of the TIFIA program, administrative offsets will be employed only in cases of fraud, misrepresentation, or criminal acts, but will not be employed as a result of revenue shortfalls; clarify that funds will be disbursed based on the project's financing needs; clarify that the borrower must satisfy the statute's investment grade rating requirement prior to both the execution of a credit agreement and the funding of each secured loan disbursement; and clarify that the borrower must obtain ongoing credit surveillance for the life of the TIFIA credit instrument. These proposed revisions are made at the DOT's initiative to clarify certain aspects of the regulations based on experience from the first year of program implementation. 

# DATES:

Comments must be submitted on or before June 29, 2000. 

# ADDRESSES:

Your signed, written comments must refer to the docket number appearing at the top of this document and must be submitted to the Docket Clerk, US DOT Dockets, Room PL-401, 400 Seventh Street, SW., Washington, DC 20590-0001. All comments received will be available for examination at the above address between 9 a.m. and 5 p.m., e.t., Monday through Friday, except Federal holidays. Those desiring notification of receipt of comments must include a self-addressed, stamped envelope or postcard. 

# FOR FURTHER INFORMATION CONTACT:

Mr. Bryan Grote, Office of the Assistant Secretary for Budget and Programs, (202) 366-9656; Ms. Stephanie Kaufman, Office of Budget and Programs Performance, (202) 366-9649; or Mr. Terence Carlson, Office of the General Counsel, (202) 366-9161. Department of Transportation, 400 Seventh Street, SW., Washington, DC, 20590. Office hours are from 7:45 a.m. to 4:15 p.m., e.t., Monday through Friday, except Federal holidays. Hearing-and speech-impaired persons may access this number via TTY by calling the Federal Information Relay Service at 1-800-877-8339. 

# SUPPLEMENTARY INFORMATION: 

## Electronic Access 

Internet users may access all comments received by the US DOT Dockets, by using the universal resource locator (URL) http://dms.dot.gov. It is available 24 hours each day, 365 days each year. Please follow the instructions on-line for more information and help. An electronic copy of this document may be downloaded using a modem and suitable communications software from the Government Printing Office's Electronic Bulletin Board Service at (202) 512-1661. Internet users may reach the Office of the Federal Register's home page at http://www.nara.gov/​fedreg and the Government Printing Office's web page at http://www.access.gpo.gov/​nara. 

Additional general information on the TIFIA program and credit assistance for surface transportation projects is available on the TIFIA web site at http://tifia.fhwa.dot.gov. 

## Background 

The Transportation Equity Act for the 21st Century (TEA-21), Public Law 105-178, 112 Stat. 107, created the Transportation Infrastructure Finance and Innovation Act of 1998 (TIFIA). The TIFIA, as amended by section 9007, Public Law 105-206, 112 Stat. 685, 849 and codified at 23 U.S.C. 181-189, authorizes the Department of Transportation (DOT) to provide credit assistance in the form of secured direct loans, lines of credit, and loan guarantees to public and private sponsors of eligible surface transportation projects. The TIFIA regulations (49 CFR part 80) provide specific guidance on the program requirements. In addition, the TIFIA Program Guide is available for more general information. Both funding (budget authority) and credit assistance authority for this program are limited, and projects seeking assistance are evaluated and selected by the DOT on a competitive basis. Following selections, term sheets are issued and credit agreements are developed through negotiations between the project sponsors and the DOT. 

                    The TIFIA authorizes annual levels for both credit assistance (as measured by the principal amounts of the secured loans, guaranteed loans, or lines of credit) and subsidy amounts (                    *i.e.,*                     the amounts of budget authority available to cover the estimated present value of the Government's expected losses associated with the provision of credit instruments, net of any fee income). Funding for the subsidy amounts is provided in the form of budget authority appropriated from the Highway Trust Fund, other than the Mass Transit Account.                 

Total Federal credit assistance amounts authorized for the TIFIA program are $1.8 billion in FY 2000; $2.2 billion in FY 2001; $2.4 billion in FY 2002; and $2.6 billion in FY 2003. These amounts lapse if they are not awarded by the end of the fiscal year for which they are provided. 

To support these credit assistance amounts, the TIFIA provides budget authority to fund the required subsidy amounts of $90 million in FY 2000; $110 million in FY 2001; $120 million in FY 2002; and $130 million in FY 2003. Of these amounts, the Secretary may use up to $2 million for each of the fiscal years for administrative expenses. Any budget authority that is not obligated in the fiscal year for which it is authorized remains available for obligation in subsequent years. 

The TIFIA budget authority is subject to an annual obligation limitation that may be established in appropriations law. Like the funding for certain other administrative or allocated programs (not apportioned to the States) that are subject to the annual Federal-aid highway obligation limitation, the amount of TIFIA budget authority that is available to fund credit instruments in a given year may be less than the amount originally authorized for that year. The extent of any budget authority reduction will depend on the ratio of the obligation limitation, which is determined annually in the appropriations process, to the contract authority for the Federal-aid highway program, which was established in TEA-21. For FY 2000, this reduction is 12.9 percent, or $11.6 million. The credit assistance amounts authorized in the TIFIA are not subject to this annual reduction. 

                    The DOT expects that approximately $81 million in net budget authority will be available in FY 2000 to fund the TIFIA credit assistance program. This approximation takes into account unused FY 1999 budget authority, the                           ( print page 34429)                        reduction in FY 2000 budget authority due to the annual obligation limitation, and administrative expenses authorized by the TIFIA statute. The amount of net budget authority available for new TIFIA commitments in FY 2000 may also be affected by credit subsidy adjustments to obligations for prior TIFIA commitments.                 

The total amount of Federal credit assistance available for new TIFIA commitments in FY 2000 is about $1.673 billion, which is less than the $1.8 billion authorization level as a result of TIFIA contingent commitments made in FY 1999. The size of the annual TIFIA program may be limited by either budget authority or credit assistance authorization, depending on the risk assessments made for individual projects selected for that fiscal year's program. 

### Credit Instruments 

Three types of credit instruments are permitted under the TIFIA: secured direct loans, loan guarantees, and lines of credit, as provided for generally at 23 U.S.C. 183 and 184. More specific terms for individual projects will be determined during negotiations between the DOT and successful applicants. 

### Eligible Projects 

Highway, rail, transit, and intermodal projects may receive credit assistance under the TIFIA. See the definition of “project” in 23 U.S.C. 181(9) and 49 CFR 80.3 for a description of eligible projects. 

### Threshold Criteria 

Certain threshold criteria must be met by projects seeking TIFIA assistance. These eligibility criteria are detailed in 23 U.S.C. 182(a) and 49 CFR 80.13. 

### Limitations on Assistance 

The amount of credit assistance that the DOT may provide to a project under the TIFIA is limited to not more than 33 percent of eligible project costs. 

### Rating Opinions 

A project sponsor must submit a preliminary rating opinion letter from one or more of the nationally recognized credit rating agencies with its application, as detailed in 23 U.S.C. 182(b)(2)(B) and 49 CFR 80.11. The preliminary rating opinion letter will confirm the potential for the project's senior debt obligations to achieve an investment grade rating and provide an assessment of the default risk on the requested TIFIA credit instrument. Projects selected for TIFIA credit assistance must obtain an investment grade rating on the senior debt obligations and a revised opinion of the default risk on the TIFIA credit instrument before the DOT will execute a credit agreement and disburse funds. 

### Application Process 

Detailed application information is contained in the TIFIA Program Guide and the TIFIA Application for Credit Assistance, which are posted on the TIFA web site at http://tifia.fhwa.dot.gov or which may be obtained through one of the DOT program contacts listed in this notice. From time to time, the TIFIA Program Guide and Application may be revised to reflect program clarifications. Applicants are encouraged to refer to the TIFIA web site or to TIFIA program contacts for information regarding recent program clarifications. 

### Fees 

                    The DOT requires payment of a non-refundable fee with each credit assistance application under the TIFIA. For FY 2000, the DOT will assess an application fee of $5,000 for each project applying for credit assistance; however, there will be no additional credit processing fee for FY 2000. For fiscal years 2001 and beyond, the DOT may adjust the amount of the application fee and will determine the appropriate amount of any potential credit processing fee or any other fee based on program implementation experience. The DOT will publish these amounts in each                     **Federal Register**                     solicitation for applications.                 

## Proposed Clarifications 

### The Timing of Loan Disbursements 

                    The DOT clarifies that for each TIFIA credit instrument, the DOT will execute a credit agreement (                    *i.e.,*                     loan agreement, guarantee agreement, or line of credit agreement) with the project sponsor. The credit agreement will specify the total amount of credit assistance to be made available, the timing of the loan disbursements, and the terms and conditions, including security provisions, pursuant to which the funding is provided. Secured loan funds will be advanced according to a project schedule included in the credit agreement based on the project's financing needs.                 

### Loan Servicing Fees 

                    The TIFIA statute allows the Secretary to “establish fees at a level sufficient to cover all or a portion of the costs to the Federal Government” of providing credit instruments. Under this clarification, the DOT will require each borrower to pay servicing fees for each credit instrument approved for funding. Separate fees will apply for each type of credit instrument (                    *e.g.,*                     a loan guarantee, a secured loan with a single disbursement, a secured loan with multiple disbursements, or a line of credit), depending on the costs of the credit instrument, as determined by the Secretary.                 

### Administrative Offset 

Some State and local government representatives as well as private project sponsors have informally indicated to the DOT that they would be reluctant to enter into a TIFIA credit agreement because they believe that the DOT would administratively offset amounts owed to the DOT should a project go into default. This proposed rulemaking clarifies that, consistent with the statutory intent of the TIFIA program, administrative offsets will be employed only in cases of fraud, misrepresentation, false claims, or similar criminal acts or acts of malfeasance or wrongdoing, and will not be employed as a result of revenue shortfalls. 

While an administrative offset of Federal funds for moneys otherwise due a State or local government or private entity is available to the DOT under Federal common law, the DOT believes that use of an administrative offset to insure against project-related credit losses would substantially interfere with or defeat the purposes of the TIFIA program. 

### Investment Grade Ratings 

The DOT clarifies that the requirement that the project's senior debt obligations have an investment grade rating from a major credit rating agency is a condition both for the DOT's execution of the credit agreement and for its funding of each loan disbursement under a secured loan agreement. The DOT also wishes to clarify that the borrower must provide for ongoing credit surveillance from a major credit rating agency throughout the life of the TIFIA credit instrument. Borrowers will provide any credit surveillance reports to the DOT as soon as they become available. 

## Proposed Changes 

### Selection Criteria 

                    The current TIFIA rule specifies, in § 80.15(c), that “the Secretary shall evaluate each project's distinct public benefits and contribution to program goals according to each of the selection criteria specified in this section.” With this rulemaking, the DOT assigns specific weights to the eight selection criteria established in 23 U.S.C.                           ( print page 34430)                        182(b)(2). The DOT proposes to give the highest weight, 20 percent, to each criterion it believes is most closely aligned with the objectives of the program: Demonstration of national or regional significance; extent of private participation; and environmental impacts. The next two criteria, each of which is assigned a weight of 12.5 percent, are also critical to achieving the objectives of the program: Project creditworthiness and project acceleration. Given that this program already has a threshold requirement for creditworthiness, the DOT considers 12.5 percent to be an adequate weight. (For a project to be selected to receive TIFIA assistance, it must first obtain a preliminary rating opinion letter from a nationally recognized rating agency indicating that the project has the potential of achieving an investment grade rating. Once selected, a project must obtain and maintain an investment grade credit rating on its senior debt obligations prior to the release of TIFIA funds.) Finally, the DOT proposes to assign a weight of 5 percent to each of the remaining criteria: Use of new technologies; consumption of budget authority; and reduction of Federal grant assistance.                 

## Reporting Requirements 

The DOT proposes to increase the number of days for submitting an annual project performance report and audited financial statements from 120 days to 180 days following the recipient's fiscal year-end for each year during which the recipient's obligation to the Federal Government remains in effect. The 180-day reporting requirement is consistent with industry practice for financial reporting. 

## Rulemaking Analysis and Notices 

The 30-day comment period is necessary to help ensure that these rule modifications can be implemented in time for the application cycle anticipated to begin before the end of the current fiscal year. Given the need for the DOT to solicit and evaluate applications, make selections, negotiate term sheets and obligate funds, the usual 60-day comment period is both impracticable and contrary to public interest and Congressional intent. 

All comments received before the close of business on the comment closing date indicated above will be considered and will be available for examination using the docket number appearing at the top of this document in the docket room at the above address. The DOT will file comments received after the comment closing date in the docket and will consider late comments to the extent practicable. The DOT may, however, issue a Final Rule at any time after the close of the comment period. In addition to late comments, the DOT will also continue to file in the docket relevant information becoming available after the comment closing date. Interested persons should continue to examine the docket for new material. 

## Executive Order 12866 (Regulatory Planning And Review) and DOT Regulatory Policies and Procedures 

The DOT has determined that issuance of a rule is necessary to implement the TIFIA, and has concluded that this action does not represent a “significant regulatory action” within the meaning of DOT's Regulatory Policies and Procedures (44 FR 11034, February 26, 1979) and Executive Order 12866. 

This section summarizes the estimated economic impact of the proposed rule. This regulation would affect only those entities that voluntarily elect to apply for TIFIA assistance and are selected to receive assistance through a Federal credit instrument. It would not impose any direct involuntary costs on non-participants. These proposed changes would have a minimal economic impact. The DOT requests comments, information, and data from the public and potential users concerning the economic impact of the proposed changes to this rule and the TIFIA program. 

## Regulatory Flexibility Act 

The Regulatory Flexibility Act of 1980 (Public Law 96-354, 5 U.S.C. 601-612) requires an assessment of the extent to which proposed rules will have an impact on small business or other small entities. Consistent with the Regulatory Flexibility Act, the DOT has evaluated the effects of this rule on small business or other small entities. The NPRM proposes to clarify certain provisions of the Federal credit assistance program for surface transportation projects. As noted above, the proposed revisions would have minimal economic impact. The DOT hereby certifies that this action would not have significant economic impact on a substantial number of small entities. The DOT invites public comment on this determination. 

## Unfunded Mandates Reform Act of 1995 

The Unfunded Mandates Reform Act of 1995 (Public Law 104-4) requires agencies to prepare a written assessment of the costs, benefits and other effects of proposed or final rules that include a Federal mandate likely to result in the expenditure by State, local or tribal governments, in the aggregate, or by the private sector, of more than $100 million annually. This proposed rule would not impose a Federal mandate resulting in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year. This rule clarifies certain provisions of a Federal credit assistance program. 

## Executive Order 12372 (Intergovernmental Review) 

Given that projects receiving assistance under the TIFIA may fall under the programmatic jurisdiction of the Federal Highway Administration, the Federal Railroad Administration, or the Federal Transit Administration, the relevant Catalog of Federal Domestic Assistance Program Numbers are: 20.205 highway planning and construction; 20.310 rail rehabilitation and improvement; and 20.500 transit capital improvement grants. The regulations implementing Executive Order 12372 regarding intergovernmental consultation on Federal programs and activities apply to this program. 

## Paperwork Reduction Act 

                    This document does not contain information collection requirements for the purposes of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501*et seq.*).                 

## National Environmental Policy Act 

                    As specified under section 1503 of the TIFIA, and codified under section 182(c)(2) of title 23, U.S.C., each project obtaining assistance under this program is required to adhere to the National Environmental Policy Act of 1969, as amended (42 U.S.C. 4321*et seq.*). This rulemaking simply proposes to clarify the procedures to apply for credit assistance and therefore, by itself, will not have any effect on the quality of the environment.                 

## Executive Order 13132 (Federalism) 

This action has been analyzed in accordance with the principles and criteria contained in Executive Order 13132 dated August 4, 1999, and it has been determined this action does not have substantial direct effect or sufficient federalism implications on States that would limit the policy-making discretion of the States. Nothing in this document directly preempts any State law or regulation. 

## Executive Order 12988 (Civil Justice Reform) 

                    This action meets applicable standards in section 3(a) and 3(b)(2) of                           ( print page 34431)    Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden.                 

## Executive Order 13045 (Protection of Children) 

The DOT has analyzed this action under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not concern any environmental risk to health or safety that may disproportionately affect children. 

## Executive Order 12630 (Taking of Private Property) 

This rule will not effect a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights. 

## Regulation Identification Number 

A regulation identification number (RIN) is assigned to each regulatory action listed in the Unified Agenda of Federal Regulations. The Regulatory Information Service Center publishes the Unified Agenda in April and October of each year. The RIN contained in the heading of this document may be used to cross-reference this action with the Unified Agenda. 

# List of Subjects in 49 CFR Part 80

      - Credit programs-transportation
      - Highways and roads
      - Mass transit
      - Railroads
      - Investments
      - Reporting and recordkeeping requirements

In consideration of the foregoing, the Office of the Secretary of Transportation proposes to amend 49 CFR part 80 as set forth below: 

# PART 80—[AMENDED] 

1. The authority citation for part 80 continues to read as follows: 

Authority:                            Secs. 1501                             *et seq.*, Pub.L. 105-178, 112 Stat. 107, 241, as amended; 23 U.S.C. 181-189 and 315; 49 CFR 1.48, 1.49, and 1.51.                         

                        2. Amend § 80.3 by adding the definition                         *administrative offset*                         and by placing it in alphabetical order to read as follows:                     

§ 80.3 

* * * * *

*Administrative offset*                            means the right of the government to apply moneys held by the government and otherwise owed to a debtor for the extinguishment of claims due the government from the debtor.                         

* * * * *

3. Add § 80.5(g) to read as follows: 

§ 80.5 

* * * * *

(g) The Secretary shall fund a secured loan based on the project's financing needs. The timing of such loan disbursements shall be established in the credit agreement. 

4. Revise § 80.11 to read as follows: 

§ 80.11 

(a) At the time a project sponsor submits an application, the DOT shall require a preliminary rating opinion letter. This letter is a conditional credit assessment from a rating agency that provides a preliminary indication of the project's overall creditworthiness and that specifically addresses the potential of the project's senior debt obligations (those obligations having a lien senior to that of the TIFIA credit instrument on the pledged security) to achieve an investment-grade rating. 

(b) The DOT shall disburse funds under a secured loan or line of credit or extend a loan guarantee only after the project's senior obligations have obtained an investment grade rating and a credit agreement has been executed. In cases where the TIFIA credit instrument has a senior lien on the pledged security, an investment grade rating must be assigned to the TIFIA obligations. For a secured loan, the execution of a credit agreement and the funding of each loan disbursement thereunder shall be conditioned on the receipt of an investment grade rating on the project's senior debt obligations by a nationally recognized credit rating agency. 

(c) * * * 

(d) The project sponsor must provide, at its own expense, ongoing credit surveillance of its project and debt obligations from a nationally recognized credit rating agency throughout the life of its TIFIA credit instrument. The project sponsor will share any credit surveillance reports with the DOT as soon as they are available. 

5. Amend § 80.15 by revising paragraph (a), by removing paragraphs (c) and (d); and by redesignating paragraph (e) as paragraph (c) to read as follows: 

§ 80.15 

(a) The Secretary shall assign weights as indicated to the following eight selection criteria in evaluating and selecting among eligible projects to receive credit assistance: 

(1) The extent to which the project is nationally or regionally significant, in terms of generating economic benefits, supporting international commerce, or otherwise enhancing the national transportation system (20 percent); 

(2) The creditworthiness of the project, including a determination by the Secretary that any financing for the project has appropriate security features, such as a rate covenant, to ensure repayment (12.5 percent); 

(3) The extent to which such assistance would foster innovative public-private partnerships and attract private debt or equity investment (20 percent); 

(4) The likelihood that such assistance would enable the project to proceed at an earlier date than the project would otherwise be able to proceed (12.5 percent); 

(5) The extent to which the project uses new technologies, including Intelligent Transportation Systems (ITS), that enhance the efficiency of the project (5 percent); 

(6) The amount of budget authority required to fund the Federal credit instrument made available (5 percent); 

(7) The extent to which the project helps maintain or protect the environment (20 percent); and 

(8) The extent to which such assistance would reduce the contribution of Federal grant assistance to the project (5 percent). 

* * * * *

6. Revise § 80.17 to read as follows: 

§ 80.17 

                            (a) The DOT will require a non-refundable application fee for each project applying for credit assistance under the TIFIA. The DOT may also require an additional credit processing fee for projects selected to receive TIFIA assistance. Any required application initiation or credit processing fee must be paid by the project sponsor applying for TIFIA assistance and cannot be paid by another party on behalf of the project sponsor. The proceeds of any such fees will equal a portion of the costs to the Federal Government of soliciting and evaluating applications, selecting projects to receive assistance, and negotiating credit agreements. For FY 2000, the DOT will require payment of a fee of $5,000 for each project applying for credit assistance under the TIFIA, to be submitted concurrently with the formal application. The DOT will not impose any credit processing fees for FY 2000. For each application and approval cycle in FY 2001 and beyond, the DOT may adjust the amount of the application fee and will determine the appropriate amount of the credit processing fee based on program implementation experience. The DOT                                   ( print page 34432)                                will publish these amounts in each                             **Federal Register**                             solicitation for applications.                         

(b) Applicants shall not include application initiation or credit processing fees or any other expenses associated with the application process (such as fees associated with obtaining the required preliminary rating opinion letter) among eligible project costs for the purpose of calculating the maximum 33 percent credit amount referenced in § 80.5(a). 

(c) If, in any given year, there is insufficient budget authority to fund the credit instrument for a qualified project that has been selected to receive assistance under TIFIA, the DOT and the approved applicant may agree upon a supplemental fee to be paid by or on behalf of the approved applicant at the time of execution of the term sheet to reduce the subsidy cost of that project. No such fee may be included among eligible project costs for the purpose of calculating the maximum 33 percent credit amount referenced in § 80.5(a). 

                            (d) The DOT will require borrowers to pay servicing fees for each credit instrument approved for funding. Separate fees may apply for each type of credit instrument (                            *e.g.,*                             a loan guarantee, a secured loan with a single disbursement, a secured loan with multiple disbursements, or a line of credit), depending on the costs of servicing the credit instrument as determined by the Secretary. Such fees will be set at a level to enable the DOT to recover all or a portion of the costs to the Federal Government of TIFIA credit instruments.                         

7. Revise § 80.19 to read as follows: 

§ 80.19 

At a minimum, any recipient of Federal credit assistance under this part shall submit an annual project performance report and audited financial statements to the DOT within 180 days following the recipient's fiscal year-end for each year during which the recipient's obligation to the Federal Government remains in effect. The DOT may conduct periodic financial and compliance audits of the recipient of credit assistance, as determined necessary by the DOT. The specific credit agreement between the recipient of credit assistance and the DOT may contain additional reporting requirements. 

8. Add § 80.21 to read as follows: 

§ 80.21 

The DOT will not apply an administrative offset to recover any losses to the Federal Government resulting from project risk the DOT has assumed under a TIFIA credit instrument. The DOT may, however, use an administrative offset in cases of fraud, misrepresentation, false claims, or similar criminal acts or acts of malfeasance or wrongdoing. 

Issued on: May 15, 2000. 

Rodney E. Slater, 

Secretary of Transportation. 

[FR Doc. 00-13271 Filed 5-26-00; 8:45 am] 

BILLING CODE 4910-62-P