Subtitle C, Chapter 2 establishes a Federal credit assistance program for major surface transportation projects under the Transportation Infrastructure Finance and Innovation Act of 1998 (TIFIA).
The House bill contains no comparable provision.
The conference adopts the Senate provision, with certain modifications. The TIFIA program is designed to assist major surface transportation projects with their own revenue streams, which can attract substantial private capital with a limited Federal investment. This program offers the sponsors of large transportation projects a new tool to leverage limited Federal resources, stimulate additional investment in our Nation's infrastructure, and encourage greater private sector participation in meeting our transportation needs.
Eligible projects for TIFIA assistance include any projects eligible under title 23 (highway and transit capital projects) as well as international bridges and tunnels, inter-city passenger bus and rail facilities and vehicles (including Amtrak and magnetic levitation systems), and publicly-owned intermodal freight facilities. Examples of the types of projects which may benefit from this program are the Woodrow Wilson Bridge, the Farley/Pennsylvania Station project in New York City and the State of Florida's proposed high-speed rail project between Miami, Orlando and Tampa. Project sponsors may be governmental units, private entities, or public-private partnerships. The Conferees wish to reiterate language concerning the Florida high-speed rail project in the Senate committee report section on TIFIA. This project represents an effort by the State of Florida to bring a new technology to the United States by using an innovative public-private partnership that does not rely on Federal grant support. The State of Florida's request for a Federal loan equal to 1/3 of project costs should receive favorable consideration from the Department of Transportation, provided it meets program criteria.
To be eligible for credit assistance, a project must meet certain threshold criteria. It must cost at least $100 million or 50 percent of a State's annual apportionment of Federal-aid funds, whichever is less. (For intelligent transportation system projects, the minimum cost is $30 million, due to the substantial capacity enhancements attainable with but a limited investment.) The project also must have the potential to be self-supporting from user charges or other non-Federal dedicated funding sources, be on a State's transportation plan and, at the time of funding, be on a fiscally-constrained State transportation improvement program. An application for credit assistance may be submitted by a State or local government or other entity. The Secretary will select among potential candidates based on various criteria, including the project's regional or national significance, its potential economic benefits, its credit-worthiness, the degree of private sector participation, and other factors.
Forms of assistance that can be provided under this program consist of direct loans, loan guarantees, and lines of credit. In all cases the Federal role will be that of a minority investor, with Federal participation limited to not more than 33 percent of total project costs. The Secretary is authorized to enter into agreements with project sponsors containing terms and conditions designed to assist the projects in leveraging additional funds, while ensuring that the program operates in a fiscally-prudent manner. The State in which a project is located may identify a State or local government entity to assist the Secretary in servicing the Federal credit instrument.
The Secretary may provide credit assistance to demonstrate to the capital markets the viability of making transportation infrastructure investments where returns depend on residual project cash flows after servicing senior municipal revenue bonds or other capital markets debt. An objective of the program is to help the financial markets develop the capability ultimately to supplant the role of the Federal government in helping finance the costs of large projects of national significance. That is why loan guarantees are limited to major institutional lenders, such as defined benefit pension funds, which may be potential providers in the future of supplemental and subordinate capital for projects. The Conference would like the Secretary to encourage Federal borrowers to prepay their direct loans or guaranteed loans as soon as practicable from excess revenues or the proceeds of municipal or other capital market debt obligations. The Secretary also may sell off direct loans to third parties or into the capital markets, if such transactions can be arranged upon favorable terms.
The Conference recognizes that the Congress enacted the Deficit Reduction Act of 1984 provision prohibiting the combination of Federal guarantees with tax-exempt debt, because of concerns that such a double-subsidy could result in the creation of a "AAA" rated security superior to U.S. Treasury obligations. Accordingly, any project loan backed by a loan guarantee as provided in TIFIA must be issued on a taxable basis.
The Conference wants to ensure that projects receiving TIFIA assistance are financially-sound. Each project, at the time of its application for assistance, is required to furnish a preliminary rating opinion letter from one of the bond rating agencies identified by the Securities and Exchange Commission as a "Nationally Recognized Statistical Rating Organization," indicating that the project's senior debt obligations have the potential to achieve an investment-grade bond rating. The Secretary shall consult with the Office of Management and Budget, each rating agency providing such an opinion letter, and any other financial experts the Secretary deems necessary, in order to determine the credit instrument's appropriate subsidy cost (capital reserve) pursuant to the Federal Credit Reform Act of 1990. Until such time as a formal investment-grade rating is assigned, the Secretary shall not extend credit in an amount exceeding the estimated subsidy cost. The Conference believes that analytical techniques that are widely-accepted by the capital markets, such as those used by the rating agencies to evaluate the financial stability of municipal bond insurance companies, should be drawn upon to estimate the appropriate subsidy cost.
TIFIA expressly requires that projects adhere to Title VI of the Civil Rights Act, the National Environmental Policy Act, and the Uniform Relocation Assistance and Real Property Acquisition Policies Act. the Conference also recognizes that highway and transit capital projects assisted under TIFIA will retain adequate protections for labor in terms of prevailing wages, as required under title 23 provisions.
The bill provides $530 million of contract authority, funded from the Highway Trust Fund, to fund the budgetary or subsidy costs of the Federal credit instruments between fiscal years 1999-2003: $80 million in fiscal year 1999; $90 million in fiscal year 2000; $110 million in fiscal year 2001; $120 million in fiscal year 2002; and $130 million in fiscal year 2003. (As with other Federal credit programs, the non-budgetary or financing costs of the Federal credit instruments will be funded from the General Fund.). The bill caps the nominal amount of credit instruments supported by this contract authority at $1.2 billion for each of fiscal years 1998 and 1999; $1.8 billion for fiscal years 2000 and 2001; and $2.0 billion for fiscal years 2002 and 2003.
The Conferees are aware that present Federal income tax law prohibits the use of direct or indirect Federal guarantees in combination with tax-exempt debt (section 149(b) of the Internal Revenue Code of 1986. The TIFIA provisions of the conference agreement do not override or otherwise modify this provision of the Code.
The Conference finds that developing, implementing, and evaluating financial assistance programs such as TIFIA is a crucial mission of the Department of Transportation. To ensure the financial and programmatic success of TIFIA, the conference strongly encourages the Secretary to establish an organizational structure within the Department in which financial assistance activities and programs can be closely coordinated and monitored.
In order to evaluate the effectiveness of this program, the Secretary is required to submit a report to Congress within four years of the date of enactment of this bill. The report should summarize the program's financial performance to date, and recommend whether the objectives of the program would be best met by continuing the program under the authority of the Secretary, establishing a Government corporation of Government-sponsored enterprise to administer the program, or by relying upon the capital markets to fund projects of regional and national significance without Federal participation.