Federal Debt Financing Tools
Grant Anticipation Revenue Vehicles (GARVEEs)
Section 122 of Title 23 codifies the provisions that make bond-related costs eligible for Federal reimbursement for any Federal-aid project eligible under Title 23.
§ 122. Payments to States for bond and other debt instrument financing
- Definition of Eligible Debt Financing Instrument. -
In this section, the term "eligible debt financing instrument" means a bond or other debt financing instrument, including a note, certificate, mortgage, or lease agreement, issued by a State or political subdivision of a State or a public authority, the proceeds of which are used for an eligible project under this title.
- Federal Reimbursement. -
Subject to subsections (c) and (d), the Secretary may reimburse a State for expenses and costs incurred by the State or a political subdivision of the State and reimburse a public authority for expenses and costs incurred by the public authority for -
- interest payments under an eligible debt financing instrument;
- the retirement of principal of an eligible debt financing instrument;
- the cost of the issuance of an eligible debt financing instrument;
- the cost of insurance for an eligible debt financing instrument; and
- any other cost incidental to the sale of an eligible debt financing instrument (as determined by the Secretary).
- Conditions on Payment. -
The Secretary may reimburse a State or public authority under subsection (b) with respect to a project funded by an eligible debt financing instrument after the State or public authority has complied with this title with respect to the project to the extent and in the manner that would be required if payment were to be made under section 121.
- Federal Share. -
The Federal share of the cost of a project payable under this section shall not exceed the Federal share of the cost of the project as determined under section 120.
- Statutory Construction. -
Notwithstanding any other provision of law, the eligibility of an eligible debt financing instrument for reimbursement under subsection (b) shall not -
- constitute a commitment, guarantee, or obligation on the part of the United States to provide for payment of principal or interest on the eligible debt financing instrument; or
- create any right of a third party against the United States for payment under the eligible debt financing instrument.
Enabling legislation is required at the state level for state DOTs to issue GARVEE debt. Additional information on the different options and issues addressed in state GARVEEE legislation, as well as onward links to actual GARVEE legislation is available on AASHTO's Center for Excellence in Project Finance.