Welcome to the second edition of the TIFIA Times, the e-mail newsletter that keeps you informed about the US Department of Transportation's credit program for large-scale surface transportation projects. This issue highlights many significant changes to the TIFIA project solicitation process and provides links you can follow for more information.
The TIFIA Joint Program Office (JPO) encourages you to share this newsletter with associates throughout the transportation finance community.
Through a May 18 publication in the Federal Register, the USDOT has issued a Notice of Funding Availability (NOFA) of approximately $1.3 billion in credit assistance for TIFIA project applications. Any unused portion of this credit authority will expire on September 30, 2001, the end of Federal Fiscal Year 2001. The TIFIA program has already selected two projects, Central Texas Turnpike and Reno ReTRAC, to receive almost $900 million in FY 2001 credit assistance. Remaining credit authority for FYs 2002 and 2003, the final two years of TEA 21 authorization, amounts to $5 billion.
As announced in the NOFA, the TIFIA program will depart from past practice and, beginning immediately, will accept letters of interest from potential applicants at any time. A project that the USDOT concludes has met all threshold criteria can then apply for credit assistance based on its own scheduling needs rather than dates fixed in a solicitation process. This "rolling" process applies to all future TIFIA project applications, regardless of the fiscal year in which they may be submitted. Completion of Environmental Review a Must for Project Selection As announced in the NOFA, the TIFIA program will require that a project obtain its environmental Record of Decision (or equivalent final agency NEPA decision) before USDOT will award credit assistance. The TIFIA program does not accept applications from any project yet to circulate its Draft Environmental Impact Statement.
As announced in the NOFA, the USDOT will require each project sponsor to submit a non-refundable fee of $30,000 due upon application. This fee is based upon the TIFIA program's outside costs to evaluate applications. In addition, the USDOT will impose a processing fee on each borrower equal to a portion of TIFIA program's incurred costs to negotiate the credit facility. We anticipate this fee will range from $100,000 to $300,000, depending on the complexity and length of credit negotiations.
The NOFA, as published in the May 18, 2000 Federal Register (66 FR 27747), can be viewed at the website of the National Archives and Records Administration: http://www.nara.gov/fedreg/. You can also link to the NOFA through the TIFIA website at: http://tifia.fhwa.dot.gov and in addition review the updated TIFIA application, program guide and other important background information.
TIFIA JPO Adds a Veteran Banker On May 7, Ms. Cheryl E. Jones, who has more than 25 years experience in public finance investment banking and advisory work, joined the TIFIA JPO as a Project Finance Advisor. Having started her public finance career in1976, Cheryl has managed varied financings during several tax law eras, priced securities under a broad variety of changing market conditions, and implemented a wide range of innovations. Cheryl has served as senior manager or financial advisor for more than $40 billion of tax-exempt and taxable securities for transportation, real estate, economic development, education, water and sewer, public power, airport and seaport, and general government issuers. She graduated from Boston University and holds an Ed.M. from Harvard University and an M.B.A. from Columbia University. Cheryl's addition to the TIFIA staff, which already includes Suzanne H. Sale and Robert C. Brown, means the USDOT now has three capital market finance experts.
The TIFIA JPO has spent many hours with bankers, borrowers and credit analysts reviewing the "springing lien" provision of the TIFIA program. For all the discussion surrounding this issue, one thing is clear: the springing lien is imposed by the US Congress and therefore must be accommodated to secure any TIFIA credit facility. This accommodation should not, however, prevent TIFIA assistance from enhancing a project's marketability.
The TIFIA program's underlying design anticipates that, befitting an investor willing to be patient so that more transportation projects can obtain capital market financing, a TIFIA credit facility often will be junior to a project's capital market debt in its claim on project cash flow. The TIFIA law does require that USDOT's claim on a project's pledged revenues or other security, in the event of bankruptcy, insolvency, or liquidation, not be subordinated to the claims of other creditors. These are the only conditions, however, that would trigger the springing lien. Contrary to what is sometimes said, a mere default, by itself, never occasions USDOT's rise to parity.
This "functional subordination" of TIFIA debt, combined with the program's flexible payment provisions, offers meaningful credit enhancement to senior project debt. If project fundamentals are sound and the ability of the borrower to ultimately repay all its debt obligations is high, a functionally subordinate TIFIA credit facility will enhance the creditworthiness of the senior debt.
The mailing address for the TIFIA Credit Program is:
Federal Highway Administration (HABF-50)
400 Seventh Street, S.W.
Washington, DC 20590
Please e-mail your comments or inquiries regarding this newsletter or the TIFIA program to: Duane.Callender@fhwa.dot.gov.
TIFIA Credit Program
US Dept. of Transportation