The Transportation Infrastructure Finance and Innovation Act (TIFIA) program provides credit assistance for qualified projects of regional and national significance. Many large-scale, surface transportation projects - highway, transit, railroad, intermodal freight, and port access - are eligible for assistance. Eligible applicants include state and local governments, transit agencies, railroad companies, special authorities, special districts, and private entities. The TIFIA credit program is designed to fill market gaps and leverage substantial private co-investment by providing supplemental and subordinate capital. Each dollar of Federal funds can provide up to $10 in TIFIA credit assistance and support up to $30 in transportation infrastructure investment.
The program's fundamental goal is to leverage Federal funds by attracting substantial private and other non-Federal co-investment in critical improvements to the nation's surface transportation system. 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.
The TIFIA credit program offers three distinct types of financial assistance designed to address the varying requirements of projects throughout their life cycles:
Secured (direct) loan - Offers flexible repayment terms and provides combined construction and permanent financing of capital costs. Maximum term of 35 years from substantial completion. Repayments can start up to five years after substantial completion to allow time for facility construction and ramp-up.
Loan guarantee - Provides full-faith-and-credit guarantees by the Federal Government and guarantees a borrower's repayments to non-Federal lender. Loan repayments to lender must commence no later than five years after substantial completion of project.
Standby line of credit - Represents a secondary source of funding in the form of a contingent Federal loan to supplement project revenues, if needed, during the first 10 years of project operations, available up to 10 years after substantial completion of project.
The amount of Federal credit assistance may not exceed 33 percent of total reasonably anticipated eligible project costs. The exact terms for each loan are negotiated between the USDOT and the borrower, based on the project economics, the cost and revenue profile of the project, and any other relevant factors. For example, USDOT policy does not generally permit equity investors to receive project returns unless the borrower is current on TIFIA interest payments. TIFIA interest rates are equivalent to Treasury rates. Depending on market conditions, these rates are often lower than what most borrowers can obtain in the private markets. Unlike private commercial loans with variable rate debt, TIFIA interest rates are fixed. Overall, borrowers benefit from improved access to capital markets and potentially achieve earlier completion of large-scale, capital intensive projects that otherwise might be delayed or not built at all because of their size and complexity and the market's uncertainty over the timing of revenues.
Chapter 2 of the TIFIA Program Guide provides further detail on TIFIA credit instruments and other funding issues.
Any type of project that is eligible for Federal assistance through existing surface transportation programs (highway projects and transit capital projects) is eligible for the TIFIA credit program, including intelligent transportation systems (ITS). In addition, the following types of projects are eligible: international bridges and tunnels; intercity passenger bus and rail facilities and vehicles; publicly owned freight rail facilities; private facilities providing public benefit for highway users; intermodal freight transfer facilities; projects that provide access to such facilities; service improvements on or adjacent to the National Highway System; and projects located within the boundary of a port terminal under certain conditions.
An eligible project must be included in the applicable State Transportation Improvement Program. Major requirements include a capital cost of at least $50 million (or 33.3 percent of a state's annual apportionment of Federal-aid funds, whichever is less) or $15 million in the case of ITS. TIFIA credit assistance is limited to a maximum of 33 percent of the total eligible project costs. Senior debt must be rated investment grade. The project also must be supported in whole or in part from user charges or other non-Federal dedicated funding sources and be included in the state's transportation plan. Applicable Federal requirements include, but are not limited to Titles 23 and 49 of the U.S. Code, NEPA, Buy America provisions, and the Civil Rights and Uniform Relocation Acts.
Qualified projects are evaluated by the Secretary against eight statutory criteria, including among others, impact on the environment, significance to the national transportation system, and the extent to which they generate economic benefits, leverage private capital, and promote innovative technologies.
Further information on project and applicant eligibility is available in Chapter 3 of the TIFIA Program Guide.
The TIFIA Program Guide also contains more detailed information on:
The TIFIA application process
The project evaluation and selection process
Contractual documents, closing activities, and ongoing oversight and monitoring activities
Special issues related to loan guarantees