These FAQs were updated in July 2013.
Why was the TIFIA Program created?
TIFIA was created because state and local governments that sought to finance large-scale transportation projects with tolls and other forms of user-backed revenue often had difficulty obtaining financing at reasonable rates due to the uncertainties associated with these revenue streams. Tolls and other project-based revenues are difficult to predict, particularly for new facilities. Although tolls can become a predictable revenue source over the long-term, it is difficult to estimate how many road users will pay tolls, particularly during the initial "ramp-up" years after construction of a new facility. Similarly, innovative revenue sources, such as proceeds from tax increment financing, are difficult to predict. TIFIA credit assistance is often available on more advantageous terms than in the financial market, making it possible to obtain financing for needed projects when it might not otherwise be possible.
What types of credit assistance does the TIFIA Program provide?
The TIFIA credit program (the TIFIA Program) offers three distinct types of financial assistance designed to address the varying requirements of projects throughout their life cycles:
The TIFIA credit facility, which must have a lien on par with senior creditors in the event of bankruptcy, liquidation or insolvency, can be subordinate as to cash flows absent such an event. 5 The amount of Federal credit assistance may not exceed 49 percent of anticipated eligible project costs for a TIFIA secured loan 6 and 33 percent for a TIFIA standby line of credit. 7
Who is responsible for implementing the TIFIA Program?
Implementation of the TIFIA Program within the U.S. Department of Transportation (USDOT) is the responsibility of the Secretary of Transportation (Secretary). A thirteen-member USDOT Credit Council provides policy direction and makes recommendations to the Secretary regarding the selection of projects for TIFIA credit assistance. USDOT Credit Council members include six representatives from the Office of the Secretary of Transportation (OST): the Deputy Secretary of Transportation (Chair), the Assistant Secretary for Budget and Programs (Vice-Chair); the Under Secretary of Transportation for Policy; the General Counsel; the Assistant Secretary for Transportation Policy; and the Director of the Office of Small and Disadvantaged Business Utilization. The Administrators of the Federal Highway Administration (FHWA), the Federal Transit Administration (FTA), the Federal Railroad Administration (FRA), and the Maritime Administration (MARAD) also sit on the USDOT Credit Council. Additionally, at-large members to the USDOT Credit Council (USDOT employees designated by the Secretary of Transportation) comprise the other three members.
The Office of the Assistant Secretary for Budget and Programs and Chief Financial Officer oversees the TIFIA Program and the Joint Program Office on behalf of the Secretary, including the evaluation of individual projects, and provides overall policy direction and program decisions for the TIFIA Program. Final approval of TIFIA credit assistance is reserved for the Secretary.
How much funding is available for the TIFIA Program?
The TIFIA Program is governed by the Federal Credit Reform Act of 1990 (FCRA), which requires the USDOT to establish a capital reserve, or "subsidy amount," to cover expected credit losses before it can provide TIFIA credit assistance. Congress places limits on the annual subsidy amount available.
Moving Ahead for Progress in the 21st Century Act (MAP-21) authorizes $750 million in FY 2013 and $1 billion in FY 2014 in TIFIA budget authority from the Highway Trust Fund to pay the subsidy cost of TIFIA credit assistance. Additional funds may also be available from budget authority carried over from previous fiscal years. Any budget authority 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 all funds subject to the annual Federal-aid obligation ceiling, the amount of TIFIA budget authority available in a given year may be less than the amount authorized for that fiscal year. After reductions for administrative expenses and application of the annual obligation limitation, TIFIA will have approximately $690 million available in FY 2013 and $920 million in FY 2014 to provide credit subsidy support to projects. Although dependent on the individual risk profile of each credit instrument, collectively, and based on historic subsidy costs, this budget authority could support approximately $6.9 billion in lending capacity in FY 2013 and $9.2 billion in lending capacity in FY 2014. Given statutory changes in the TIFIA Program under MAP-21, and the need to calculate credit subsidies on a project-by-project basis, actual lending capacity could vary.
What is the maximum maturity of a TIFIA credit instrument?
The maximum maturity of all TIFIA credit instruments is the lesser of: (i) 35 years after a project's substantial completion or (ii) the useful life of the project being financed by TIFIA. 8
Is it possible to defer the payment of debt service on TIFIA credit instruments?
Yes, TIFIA repayments can be deferred for up to five years after substantial completion of a project, but such a deferral is at the discretion of the USDOT. 9 The decision as to whether to grant such a deferral will be based on the projected cash flows, nature of the revenue pledge and overall project economics and financing structure. In many cases TIFIA credit instruments are junior ( i.e., subordinate) to the project's capital markets or commercial bank debt in the project's cash flow. However, in the event of bankruptcy, insolvency, or liquidation, the USDOT is required by statute to have a parity lien with respect to senior creditors. 10 The credit agreement will clearly specify the USDOT's interest in the pledged security relative to other creditors.
The figure below shows a typical repayment structure for a TIFIA credit instrument. In this case, the USDOT has granted a deferral of the first TIFIA payment until five years into the operation of the project and after substantial completion. This is midway through the initial 10-year ramp-up period. The figure shows a maximum TIFIA term, with the credit being repaid in full 35 years after the completion of construction.
What eligible project costs can TIFIA credit instruments be used to support?
The TIFIA statute, codified at 23 U.S.C. §601 et seq, defines eligible project costs as those expenses paid in connection with a project, including the cost of:
Capitalized interest on TIFIA credit assistance may not be included as an eligible project cost. Applicants may not include any of the fees described below - or any expenses associated with the application process (such as charges associated with obtaining the required preliminary rating opinion letter) - among eligible project costs for the purpose of calculating the maximum TIFIA credit assistance. 12
What types of projects may receive assistance through the TIFIA Program?
The USDOT has provided TIFIA credit assistance across a broad range of project types, including a variety of transportation modes and the surface transportation components of multifaceted development and redevelopment projects. Generally, eligible projects include highway projects, passenger rail projects, transit and intermodal projects, private rail facilities providing public benefit to highway users, surface transportation infrastructure modifications necessary to facilitate direct intermodal transfer and access into and out of a port terminal, intelligent transportation systems, surface transportation projects eligible for Federal assistance under title 23 or chapter 53 of title 49 of the U.S. Code, international bridges and tunnels, and intercity passenger bus or rail facilities and vehicles.
Additionally, MAP-21 expands eligibility to include related improvement projects grouped together, so long as the individual components are eligible and the related projects are secured by a common pledge. In addition, surface transportation projects principally involving the installation of intelligent transportation systems are eligible for TIFIA credit assistance. 13
What types of entities are eligible to apply for TIFIA credit instruments?
Public or private entities seeking to finance, design, construct, own, or operate an eligible surface transportation project may apply for TIFIA credit assistance. Examples of such entities include state departments of transportation; local governments; transit agencies; special authorities; special districts; railroad companies; and private firms or consortia that may include companies specializing in engineering, construction, materials, and/or the operation of transportation facilities.
In evaluating an applicant's creditworthiness, the USDOT looks for relevant experience, strong qualifications, a sound project approach, and financial stability, as each of these items ultimately has bearing on the project's creditworthiness. Applicants also must meet various Federal standards as well as modal-specific requirements among other factors to receive TIFIA credit assistance. 14
In the context of a public-private partnership, where multiple bidders may be competing for a concession such that the obligor has not yet been identified, the procuring agency must submit the project's Letter of Interest on behalf of the eventual obligor. 15 The USDOT will not consider Letters of Interest from entities that have not obtained rights to develop the project. 16
Are there specific cost threshold requirements for projects receiving TIFIA credit instruments?
Yes, projects must have eligible costs reasonably anticipated to total at least $50 million ($25 million for rural infrastructure projects) to be considered for TIFIA credit instruments, or alternatively, eligible project costs must equal 33â…“ percent or more of the state's Federal-aid highway apportionments for the most recently completed fiscal year, whichever is less. 17 The USDOT revisits apportionments to states annually, to determine if any states qualify under the alternative test.
MAP-21 sets a lower threshold for rural infrastructure projects, requiring a project to have reasonably anticipated eligible costs of at least $25 million or 33â…“ percent or more of the state's Federal-aid highway apportionments for the most recently completed fiscal year, whichever is less. 18 Rural infrastructure projects are defined in MAP-21 as surface transportation infrastructure projects located in any area other than a city with a population of more than 250,000 inhabitants within the city limits. 19 As much as 10 percent of the TIFIA Program's budget authority can be set aside for rural infrastructure projects 20 at a reduced interest rate of one-half of the Treasury Rate. 21 In reviewing Letters of Interest for rural infrastructure projects, the USDOT may prioritize rural infrastructure projects to receive the reduced rate based on the project's (i) location outside of an urbanized area (as defined in Section 101(a)(34)), (ii) alignment with MAP-21's reduced total minimum eligible project cost requirement of $25 million for rural infrastructure projects, and (iii) readiness to proceed.
For projects that principally involve the installation of an intelligent transportation system (ITS), eligible project costs must be reasonably anticipated to total at least $15 million. 22 This $15 million threshold applies only to projects for which the ITS component is the central component.
In all cases, the principal amount of the requested TIFIA credit assistance must not exceed 49 percent of anticipated eligible project costs for a TIFIA secured loan 23 and 33 percent for a TIFIA standby line of credit. 24 Applicants should calculate and represent all costs, including both eligible project costs and the TIFIA credit assistance request, on a cash (year-of-expenditure) basis. 25
For all projects, the total Federal assistance, including TIFIA credit assistance, provided cannot exceed 80 percent of the total project cost. 26
Are there additional threshold requirements other than project cost that projects must meet before being considered for TIFIA credit assistance?
Yes, there are four other threshold requirements in addition to project cost thresholds that all TIFIA projects must meet to be considered for TIFIA credit assistance.
State transportation plans extend as far as 20 years into the future and are often geared to setting general priorities rather than listing individual projects. Therefore, at the time of submitting an application, each applicant must certify that the proposed project is consistent with the transportation plan(s) of the affected state(s). 29 For projects in metropolitan areas, the applicant must also demonstrate that the project is or can be included in the metropolitan transportation plan. 30
In contrast to the long-range state transportation plan, the STIP focuses on specific projects to be funded in the near term; STIPs typically look ahead from three to five years. The TIFIA statute requires that the project satisfy planning and programming requirements of §134 ("Metropolitan Planning") and §135 ("Statewide Planning") of title 23, at such time as a TIFIA credit agreement is executed. 31 Therefore, the applicant must demonstrate that the proposed project is part of the appropriate STIP(s) before the USDOT will select the project, issue a term sheet, and obligate funds. 32
What environmental requirements must be met for a project to qualify to receive TIFIA credit assistance?
To comply with the National Environmental Policy Act (NEPA), each proposed TIFIA project must be evaluated to determine its impact on the environment. The USDOT will not obligate funds for a project until it has received a final agency decision, including (if necessary) a Record of Decision (ROD). 36 The three scenarios for addressing NEPA requirements are outlined below.
A variety of agencies and the public at large have the opportunity to comment on the draft EIS. These comments are addressed during the preparation of the final EIS. This second iteration ensures that adequate consideration has been given to public comments and the anticipated effects of the project. Depending on the nature of the project, the FHWA, FRA, FTA, or MARAD issues a ROD to signify Federal approval of the final EIS.
To ensure project readiness 37, the applicant must have circulated a draft EIS at the time it submits an application, unless the project has received either a FONSI or a Categorical Exclusion. The USDOT will not obligate funds for a project before a ROD (if required, or the equivalent final agency decision) has been issued for that project. 38
Are rating opinions required for a project receiving TIFIA credit assistance?
Yes, the TIFIA statute requires each project sponsor to provide a preliminary rating opinion letter from at least one Nationally Recognized Statistical Rating Organization (NRSRO), indicating that the project's senior obligations (which may be the TIFIA credit instrument) have the potential to achieve an investment grade rating. 39 The statute also requires a preliminary rating opinion on the TIFIA credit instrument. 40 Before the USDOT completes reviewing a Letter of Interest and rendering a determination of eligibility, the USDOT will request that a project sponsor provide a preliminary rating opinion letter.
Prior to execution of a TIFIA credit instrument, the senior debt obligations for each project receiving TIFIA credit assistance must obtain investment grade ratings from at least two NRSROs, and the TIFIA debt obligations must obtain ratings from at least two NRSROs, unless the total amount of the debt is less than $75 million, in which case only one investment grade rating is required for the senior debt obligations and one rating for the TIFIA debt obligations. 41 The TIFIA debt cannot exceed the amount of the senior obligations unless the TIFIA credit assistance receives two investment grade ratings. 42 If the TIFIA credit instrument is proposed as the senior debt, then it must receive two investment grade ratings, unless the total amount of the debt is less than $75 million, in which case only one investment grade rating is required. 43
According to title 23, "the term 'rating agency' means a credit rating agency registered with the Securities and Exchange Commission as a nationally recognized statistical rating organization (as that term is defined in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a))).". 44
Throughout the life of the TIFIA credit instrument, the borrower must obtain annually, at no cost to the Federal Government, current credit evaluations of the project, the project obligations, and the Federal credit instrument. 45 The current credit evaluations must be performed by a NRSRO. 46 By "current credit evaluation," the USDOT means: (i) in the case of a project with a published rating, either a current rating or the borrower's certification stating that the rating and outlook are unchanged from the previous year and (ii) in the case of a project without a published rating, a current rating of the project obligations and the Federal credit instrument.
Does the TIFIA Program require reimbursement for certain of its expenses?
Yes, the USDOT currently requires TIFIA participants to reimburse the government for its out-of-pocket costs for its outside legal counsel and financial advisors needed to negotiate and close the credit agreement. Such fees are not considered as eligible project costs. 47
The USDOT announces periodic changes to the types and amounts of fees for the TIFIA Program in the Federal Register. Check to ensure that you are paying the correct fee in the event that this FAQ is not up to date.
What does the TIFIA application process involve?
All projects wishing to apply for TIFIA credit assistance must first submit a Letter of Interest using the most current form. 48 Pursuant to MAP-21, the application process, which includes the submission of Letters of Interest, will be conducted on a rolling basis by the USDOT. 49
Projects that previously submitted Letters of Interest for a prior fiscal year's funding, but have not previously been asked by USDOT to submit an application, must submit a new Letter of Interest. In the context of a public-private partnership, where multiple bidders may be competing for a concession such that the obligor has not yet been identified, the procuring agency must submit the project's Letter of Interest on behalf of the eventual obligor. 50 The USDOT will not consider Letters of Interest from entities that have not obtained the legal rights to develop the project. 51
To be considered for TIFIA credit assistance, projects must submit a Letter of Interest that: (i) describes the project and the location, purpose, and cost of the project, (ii) outlines the proposed financial plan, including the requested TIFIA credit assistance and the proposed obligor, (iii) provides a status of environmental review, and (iv) provides information regarding satisfaction of other eligibility requirements of the TIFIA Program. 52
The USDOT will review each Letter of Interest and may contact project sponsors for clarification of specific information included in the Letter of Interest. The USDOT will notify project sponsors if the USDOT determines that their projects are not eligible, or if the USDOT will not be able to continue reviewing their Letter of Interest until eligibility requirements are addressed. If the USDOT does not determine a project to be ineligible based on its initial review, the USDOT will request additional information to supplement the Letter of Interest and complete its eligibility determination. This information may include, among other things, more detailed descriptions of the project, applicant and its organizational structure, the project's readiness to proceed, the project's financial plan (including financial model), revenue feasibility studies, and financial commitments to the project from sources other than TIFIA. Once the project satisfies the first level of review, the USDOT will also request that the applicant provide a preliminary rating opinion letter at this time and the project sponsor will be required to submit $100,000 to the USDOT to enable it to hire outside financial and, as and when necessary, legal advisors to continue the evaluation process. Once the $100,000 has been received, the USDOT will engage an independent financial advisor to prepare a report and recommendation acceptable in form and substance to the USDOT. The USDOT may also engage an independent legal advisor to help complete its evaluation of a project's eligibility.
The increased demand on TIFIA's resources has led to the discontinuation of the practice of advancing the entire cost of financial and legal advisors engaged to assist the USDOT in determining a project's creditworthiness and overall eligibility and having those costs reimbursed to the USDOT after execution of a credit agreement. As such, upon request, project sponsors must pay the $100,000 before the USDOT hires financial and/or legal advisors as part of the Letter of Interest review process. This amount is due upon request. Additional amounts will be charged after the credit instrument is executed, including additional amounts required to fully cover TIFIA's financial and legal advisory services costs in connection with the evaluation and negotiation of the terms of TIFIA credit assistance for the project. By submitting a Letter of Interest, the applicant certifies that it will pay all required fees.
Following the initial eligibility review of the Letter of Interest and receipt of a preliminary rating opinion letter and the $100,000, the DOT will request that the potential applicant give an oral presentation to the DOT, followed by a question and answer session.
After concluding its review of each Letter of Interest and related information submitted by the project, including a preliminary rating opinion letter, along with the independent financial analysis report from the USDOT's financial advisor, and after receipt of the $100,000 to enable the DOT to hire outside financial and legal advisors, the USDOT will invite sponsors of eligible projects to submit complete applications. The USDOT will conduct a rolling application process where project sponsors may submit Letters of Interest at any time and the USDOT will permit project sponsors to apply once a favorable eligibility determination is made.
Depending on the mode(s) of transportation involved in the project, the USDOT may establish an evaluation team representing several offices and agencies (e.g., FHWA, FRA, FTA, MARAD, and OST) to conduct the review.
All TIFIA credit assistance will be awarded based on a project's merits and its satisfaction of TIFIA statutory requirements. When funding is available, the USDOT will issue a Notice of Funding Availability (NOFA) in the Federal Register. The implementation process generally includes the following steps:
What eligibility requirements are involved in the award of TIFIA credit instruments?
The TIFIA Program assesses the strengths of applications in meeting the following eligibility criteria provided in MAP-21:
What is a TIFIA term sheet?
The term sheet is a contractual agreement between the USDOT and the borrower that sets forth certain business terms and conditions of TIFIA credit assistance for the project. The USDOT's issuance of this document triggers the USDOT's obligation (i.e., legal commitment) of budget authority, but no disbursements are made. 63
What are the contents of a typical term sheet for a TIFIA credit instrument?
Term sheets serve primarily as obligating instruments for TIFIA credit assistance. Therefore, they include only basic terms and conditions related to the USDOT's provision of TIFIA credit assistance. Typically, the following information is included in every TIFIA term sheet:
What is a TIFIA credit agreement?
The TIFIA credit agreement is the definitive agreement between the USDOT and the borrower (and the guaranteed lender, if applicable). It specifies all terms and conditions of the TIFIA credit assistance and authorizes the disbursement of TIFIA credit assistance to the project.
What are the contents of a typical TIFIA credit agreement?
The contents of TIFIA credit agreements include both standard provisions and transaction-specific provisions. The borrower and the USDOT will execute the credit agreement for a secured loan or line of credit; the guaranteed lender, the USDOT, and the borrower will execute the credit agreement for a loan guarantee. Additionally, the guaranteed lender will execute a separate loan agreement with the borrower, and the borrower will execute a borrower's certificate, compliance, and loan agreement with the USDOT. Depending on the nature of the transaction, additional documents, such as an intercreditor agreement, may also be necessary.
MAP-21 expands eligibility to include related improvement projects grouped together, so long as the individual components are eligible and the related projects are secured by a common pledge. 64
The USDOT will also require the borrower to provide copies of the bond documents and other agreement materials to the flow of funds or to USDOT's security for its review of the project's creditworthiness. 65 The USDOT may also review any disclosure regarding the TIFIA transaction that the borrower includes in the offering documents.
Generally, borrowers can expect credit agreements to include the items required for the TIFIA term sheet, as well as the following:
The credit agreement also includes a form of requisition for disbursements and a form of note. Each borrower under a TIFIA secured loan executes a note evidencing the obligation to repay the loan.
1. 23 U.S.C. §603(b)(5).
2. 23 U.S.C. §603(c)(2).
3. 23 U.S.C. §603(c)(2), (e)(2).
4. 23 U.S.C. §604(b)(6).
5. 23 U.S.C. §§603(b)(6), (e)(2) and 604(b)(8).
6. 23 U.S.C. §603(b)(2).
7. 23 U.S.C. §604(b)(2).
8. 23 U.S.C. §§603(b)(5), (e)(2) and 604(c)(2)(B).
9. 23 U.S.C. §§603(c)(2), (c)(3), (e)(2) and 604(c)(2).
10. 23 U.S.C. §§603(b)(6), (e)(2) and 604(b)(8).
11. 23 U.S.C. §601(a)(2).
12. 49 C.F.R. §§80.5(b) and 80.17(b).
13. See 23 U.S.C. §603(a)(12) for a list of project eligibility requirements.
14. 23 U.S.C. §602(c).
15. 23 U.S.C. §602(a)(1)(A), (a)(8).
16. 23 U.S.C. §602(a)(10).
17. 23 U.S.C. §602(a)(5)(A).
18. 23 U.S.C. §602(a)(5)(A).
19. 23 U.S.C. §601(a)(15).
20. 23 U.S.C. §608(a)(3)(A).
21. 23 U.S.C. §603(b)(4)(B).
22. 23 U.S.C. §602(a)(5)(B).
23. 23 U.S.C. §603(b)(2).
24. 23 U.S.C. §604(b)(2).
25. 49 C.F.R. §80.5(a).
26. 23 U.S.C. §603(b)(9).
27. 23 U.S.C. §602(a)(1), (a)(4).
28. 23 U.S.C. §602(a)(3).
29. 49 C.F.R. §§80.7(b)(1) and 80.13(a)(1).
30. 49 C.F.R. §§80.7(b)(1) and 80.13(a)(1).
31. 23 U.S.C. §602(a)(3).
32. 49 C.F.R. §§80.7(b)(1) and 80.13(a)(1).
33. 23 U.S.C. §602(a)(6).
34. 49 C.F.R. §80.13(c).
35. 23 U.S.C. §602(a)(7).
36. 23 U.S.C. §602(c)(2).
37. 23 U.S.C. §602(a)(10).
38. 23 U.S.C. §602(c)(2).
39. 23 U.S.C. §602(b)(3).
40. 23 U.S.C. §602(b)(3).
41. 23 U.S.C. §602(a)(2)(A).
42. 23 U.S.C. §603(b)(2).
43. 23 U.S.C. §602(a)(2)(B).
44. 23 U.S.C. §601(a)(14). The complete list of nationally recognized statistical rating organizations can be found at http://www.sec.gov/answers/nrsro.htm.
45. 49 C.F.R. §80.11(d).
46. 49 C.F.R. §80.11(d).
47. 49 C.F.R. §80.17(b).
48. 23 U.S.C. §602(a)(1)(A).
49. 23 U.S.C. §602(b)(1).
50. 23 U.S.C. §602(a)(1)(A), (a)(8).
51. 23 U.S.C. §602(a)(10).
52. 23 U.S.C. §601(a)(6).
53. 23 U.S.C. §602(a)(1)(A).
54. 23 U.S.C. §602(a)(1)(A) and (a)(4).
55. 23 U.S.C. §602(d).
56. 23 U.S.C. §602(a)(2).
57. 23 U.S.C. §§603(a), (e)(2) and 604(a)(2).
58. 23 U.S.C. §602(a)(2).
59. 23 U.S.C. §602(a)(9)(A).
60. 23 U.S.C. §602(a)(9)(B).
61. 23 U.S.C. §602(a)(9)(C).
62. 23 U.S.C. §602(a)(10).
63. 23 U.S.C. §608(b)(1).
64. 23 U.S.C. §601(a)(12)(D)(iv).
65. 23 U.S.C. §602(a)(2).
66. 23 U.S.C. §602(d)(1).