Glossary

Corporations established under IRS Revenue Rule 63 which permits non-profit corporations other than solely governmental bodies to issue tax exempt debt.

Relates to the SIB pilot program only. A Federal-aid funding proce-dure that permits each SIB pilot state to notify FHWA when it has identified an amount of Federal assistance that it may ultimately con-vert 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 proc-ess is not used in capitalizing transit accounts. Instead, a similar proc-ess, in which grantees commit an amount of grant funds to SIB capitalization, is employed.

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, antici-pation notes, revenue bonds, bank loans, etc., to speed project completion.

Basic substantive legislation that establishes or continues Federal pro-grams 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 pro-grams is the Transportation Equity Act for the 21^st Century (TEA-21).

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.

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.

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.

Process of depositing various funds as seed capital into a SIB to enable financial assistance.

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.

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.

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 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.

The amount of money necessary to pay principal and interest on a debt instrument.

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.

Commitment of money from public or private sources for project finance, with a designated rate of return target.

Any non-Federal match that is allowed under FHWA laws and regula-tions 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.

The pledge of the full taxing and borrowing powers of a government to pay its debt obligations.

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.

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).

A GARVEE is any bond or other form of debt repayable, either exclu-sively 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.

The application of advanced electronics and communication technolo-gies to enhance the capacity and efficiency of surface transportation systems, including traveler information, public transportation, and commercial vehicle operations.

The net present value cost of providing credit assistance (e.g., direct loans or loan guarantees) at a rate below the rate of U.S. Treasury secu-rities issued for a comparable term.

Describes the top four rating categories of relatively secure bonds suit-able for a conservative investor. Standard & Poor's rating service looks upon all bonds between the AAA and BBB ratings as investment grade. Generally speaking, any bonds rated below BBB are considered to have speculative features and are deemed subinvestment grade or junk bonds.

Debt having a subordinate or secondary claim on an underlying secu-rity or source of payment for debt service, relative to another issue with a higher priority claim. (See Subordinate Claim).

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.

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.

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 secu-rities is the exemption of interest income from Federal income tax.

The commitment of state or other non-Federal funds required to receive Federal funds.

The Federal government's legal commitment (promise) to pay or reim-burse the states or other entities for the Federal share of a project's eli-gible costs.

Actual cash payment made to the states or other entities. Outlays are provided as reimbursement for the Federal share for approved high-way program activities.

Debt obligations issued or to be issued with an equal claim to other debt obligations on the source of payment for debt service.

Process allowing states to begin a project with their own source of funding, and then incrementally obligate Federal funds.

Describes government financing of capital outlays from current reve-nues or grants rather than by borrowing.

A credit opinion from a rating agency based on a preliminary assess-ment assigned to a proposed bond issue.

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.

A contractual agreement in the legal documentation of a bond issue requiring the issuer to charge rates or fees for the use of specified facilities or operations at least sufficient to achieve a stated minimum debt service coverage level.

An organization that assesses and issues opinions regarding the rela-tive credit quality of bond issues.

Bonds whose principal and interest are payable exclusively from earnings of a public enterprise.

Financing tool that recycles funds by providing loans, receiving loan repayments, and then providing further loans.

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.

Debt obligations having a priority claim on the source of payment for debt service.

A separate, free-standing and new facility dependent on its own reve-nue stream to generate earnings to cover operating and capital costs.

A state or multi-state revolving fund that provides loans, credit enhancement, and other forms of financial assistance to surface trans-portation projects.

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).

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).

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.

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.

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.

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.

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.

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.