Glossary

63-20 Corporations	Corporations established under IRS Revenue Rule 63 which permits non-profit corporations other than solely governmental bodies to issue tax exempt debt.
Advance Capitalization (ACAP)	Relates to the SIB pilot program only.   A Federal-aid funding procedure that permits each SIB pilot state to notify FHWA when it has identified an amount of Federal assistance that it may ultimately convert to a SIB capitalization grant.  ACAP simply establishes a baseline from which to calculate the maximum amount of Federal funding that may be deposited into a SIB during succeeding years.  The ACAP process is not used in capitalizing transit accounts.  Instead, a similar process, in which grantees commit an amount of grant funds to SIB capitalization, is employed.
Advance Construction (AC)	States or local governments independently raise up-front capital required for a Federally approved project and preserve eligibility for future Federal-aid reimbursement for that project.  At a later date, the state can obligate Federal-aid highway funds for reimbursement of the Federal share.  This tool allows states to take advantage of access to a variety of capital sources, including its own funds, local funds, anticipation notes, revenue bonds, bank loans, etc., to speed project completion.
Authorization Act	Basic substantive legislation that establishes or continues Federal programs or agencies and establishes an upper limit on the amount of funds for the program(s) for a certain period (historically, four to six years).  The current authorization act for surface transportation programs is the Transportation Equity Act for the 21st Century (TEA‑21).
Bond Counsel	A lawyer or law firm, with expertise in bond law, retained by the issuer to render an opinion upon the closing of a municipal bond issue regarding the legality of issuance and other matters, including the description of security pledged and an opinion as to the tax-exempt status of the bond.
Bond Insurance	A financial guarantee provided by a major insurance company (usually AAA rated) as to the timely repayment of interest and principal of a bond issue.
Budget Authority	Authority provided by law to enter into financial obligations that will result in immediate or future outlays of Federal government funds.  Budget authority includes the credit subsidy costs for direct loan and loan guarantee programs.  Basic forms of budget authority include appropriations, borrowing authority, contract authority, and authority to obligate and expend offsetting receipts and collections
Capitalization	Process of depositing various funds as seed capital into a SIB to enable financial assistance.
Capitalized Interest	A specified portion of the original bond proceeds which will be used to pay interest on the bonds until revenue from planned sources becomes available upon completion of construction
Cooperative Agreement (SIB)	Written consent between a state and the Federal government used to define the process of SIB implementation.  The agreement outlines the basic structure and purpose of the SIB and roles of each party, and sets forth how the funds of the SIB will be administered.
Credit Enhancement	Financial guarantees or other types of assistance that improve the credit of underlying debt obligations.  Credit enhancement has the effect of lowering interest costs and improving the marketability of bond issues
Credit Ratings	Credit quality evaluations of bonds and notes made by independent rating services.  A higher bond rating generally lowers the interest rate that the borrower must pay and, therefore, overall capital costs.
Debt Service	The amount of money necessary to pay principal and interest on a debt instrument.
Debt Service Coverage	The margin of safety for payment of debt service on a revenue bond, reflecting the number of times (e.g.,1.2) by which annual revenues after operations and maintenance costs exceed annual debt service.
Equity	Commitment of money from public or private sources for project finance, with a designated rate of return target.
Flexible Match	Any non-Federal match that is allowed under FHWA laws and regulations other than state and local cash contributions to a project.  Flexible matches permitted under new regulations include use of private cash and in-kind contributions, publicly owned right-of-way, and funds from other Federal agencies.
Full Faith and Credit	The pledge of the full taxing and borrowing powers of a government to pay its debt obligations.
General Obligation (G.O.) Bond	A security backed by the full faith and credit of a state, locality, or other governmental authority.  In the event of a default, holders of general obligation bonds have the right to compel a tax levy, other borrowing, or legislative appropriation in order to satisfy the debt obligation.
Grant Anticipation Notes (GAN)	Short-term debt that is secured by grant money expected to be received after debt is issued.  A GARVEE is a special type of GAN that is repaid with Federal highway funds (see GARVEE).
Grant Anticipation Revenue Vehicle (GARVEE)	A GARVEE is any bond or other form of debt repayable, either exclusively or primarily, with future Federal-aid highway funds under Section 122 of Title 23 of the United States Code.  Although the source of payment is Federal-aid funds, GARVEEs cannot be backed by a Federal guarantee, but are issued at the sole discretion of, and on the security of, the state issuing entity.
Junior Debt	Debt having a subordinate or secondary claim on an underlying security or source of payment for debt service, relative to another issue with a higher priority claim. (See Subordinate Claim).
Letter of Credit	An instrument or document issued by a bank guaranteeing debt holder payment by enabling the bond trustee to draw from the bank the full amount of principal and interest due on each debt payment date.
Long-Range Transportation Plan	The transportation plan covers a 20-year period and includes both short- and long-term actions that develop and maintain an integrated, intermodal transportation system.  The plan must conform to regional air quality implementation plans.
Municipal Bonds	Interest bearing obligations issued by state or local governments to finance operating or capital costs.  The principal characteristic that has traditionally set municipal bonds apart from other capital market securities is the exemption of interest income from Federal income tax.
Non-Federal Match	The commitment of state or other non-Federal funds required to receive Federal funds.
Obligation	The Federal government's legal commitment (promise) to pay or reimburse the states or other entities for the Federal share of a project's eligible costs.
Outlay	Actual cash payment made to the states or other entities.  Outlays are provided as reimbursement for the Federal share for approved highway program activities.
Parity Debt	Debt obligations issued or to be issued with an equal claim to other debt obligations on the source of payment for debt service.
Partial Conversion of Advance Construction(PCAC)	Process allowing states to begin a project with their own source of funding, and then incrementally obligate Federal funds.
Pay-As-You-Go Financing	Describe government financing of capital outlays from current revenues or grants rather than by borrowing.
Preliminary Rating	A credit opinion from a rating agency based on a preliminary assessment assigned to a proposed bond issue.
Ramp-up Phase	The phase in a project's life cycle immediately following construction.  It is during this phase, the early years of operation, that a project's revenue stream is established.
Rating Agency	An organization that assesses and issues opinions regarding the relative credit quality of bond issues.
Revenue Bonds	Bonds whose principal and interest are payable exclusively from earnings of a public enterprise.
Revolving Fund	Financing tool that recycles funds by providing loans, receiving loan repayments, and then providing further loans.
Section 129 Loan	Section 129 of Title 23 of U.S. Code permits states to use Federal-aid funds to make loans to any Federally eligible project.  The loans must be repaid with a dedicated, non-Federal source.
Senior Debt	Debt obligations having a priority claim on the source of payment for debt service.
Start-up Project	A separate, free-standing and new facility dependent on its own revenue stream to generate earnings to cover operating and capital costs.
State Infrastructure Bank	A state or multi-state revolving fund that provides loans, credit enhancement, and other forms of financial assistance to surface transportation projects.
State Transportation Improvement Program (STIP)	A short-term transportation planning document covering at least a three-year period and updated at least every two years.  The STIP includes a priority list of projects to be carried out in each of the three years.  Projects included in the STIP must be consistent with the long-term transportation plan, must conform to regional air quality implementation plans, and must be financially constrained (achievable within existing or reasonably anticipated funding sources).
Subordinate Claim	A claim on an underlying source of payment for debt service which is junior or secondary to that securing another debt obligation.  (See Junior Debt).
Subsidy Cost	The estimated long-term cost to the Federal government of providing credit assistance (e.g., direct loans or loan guarantees), calculated on a net present value basis at the time of disbursement and excluding administrative costs.
Tapered Match	Permitting the Federal/non-Federal share of payments to vary over the life of a project, as long as the appropriate matching ratio is achieved by the end of the project.
TEA‑045 Innovative Finance Initiative	A research program begun by FHWA in 1994 in response to Executive Order 12893.  This finance initiative is designed to increase investment, accelerate projects, promote the use of existing innovative finance provisions, and establish the basis for future initiatives by waiving selected Federal policies and procedures, thus allowing specific transportation projects to be advanced through the use of non-traditional finance mechanisms.
Title 23 of the United States Code	Highway title that includes many of the laws governing the Federal-Aid Highway Program.  The title embodies substantive provisions of law that Congress considers permanent and need not be reenacted in each new highway authorization act.
Title 49 of the United States Code	Transportation title that includes laws governing various transportation related programs and agencies, including the Department of Transportation, general and intermodal programs, interstate commerce, rail and motor vehicle programs, aviation programs, pipelines, and commercial space transportation.
Toll Credits	Section 1044 of the Intermodal Surface Transportation Efficiency Act permitted states to apply the value of certain highway expenditures funded with toll revenues toward the required state match on current Federal-aid projects.  States may only substitute toll credits for state match if they demonstrate a "maintenance of effort" (MOE).  The MOE test requires that a state's prior-year highway spending equaled or exceeded the average of the previous three years' expenditures.
Transportation Infrastructure Finance and Innovation Act (TIFIA)	A new Federal transportation credit program authorized as part of TEA‑21 that provides direct Federal loans, lines of credit, and loan guarantees provided through U.S. DOT to large projects of national significance, under criteria developed by Congress.
Value Pricing	Using pricing of parking and road usage to manage congestion; encouraging users to vary usage by increasing user costs during peak periods