Federal Highway Administration Resource Center

Finance Technical Service Team Helps States Maximize Limited Resources

A landmark year for the Finance Technical Service Team (TST), 2004 brought about challenges from every direction. The Federal Highway Administration (FHWA) Resource Center’s team of seven national experts provided solutions to Federal, State, and local financial specialists and managers by engaging them in a variety of workshops, conferences, and technical briefings.

AASHTO Audit Conference. In 2004, at the American Association of Highway and Transportation Officials (AASHTO) Annual Audit Conference, TST Internal Control Specialist John Jeffers introduced the pilot draft of the AASHTO Internal Audit Guide. (The Guide development team included Finance TST members, John Jeffers and Financial Specialist, Gina Laney.) State Departments of Transportation (DOT) find this guide useful in performing stewardship and oversight of their transportation programs. The guide includes direction on carrying out internal control reviews, conducting audits, and completing reviews of transportation programs.

Field Financial Management Conference. In March 2004, the team hosted the Field Financial Management Conference in Las Vegas, Nevada. The first of its kind, this meeting provided service to the FHWA Financial Managers and Specialists from Headquarters, Federal Lands, and Divisions along the West, Midwest, and Northeastern regions. The conference specifically addressed Internal Control issues and the AASHTO Internal Audit Guide, where Jeffers and Laney discussed the content and purpose of the guide. Other topics discussed included the Transportation Infrastructure Finance and Innovation Act (TIFIA), Reauthorization, Career Planning for Financial Staff, FMIS 4, Cost Accounting, and more.

The session on TIFIA provided participants with the knowledge that TIFIA is designed to use credit rather than grants to advance surface transportation projects, provides credit support for up to 1/3 of project costs, and does not affect State apportionments. Jennifer Mayer, TST Innovative Finance Specialist, spearheaded the event for the team. Mayer also met the goal of the Finance TST—to empower each Division in making sound financial decisions by utilizing the tools provided to effectively manage finance programs.

GARVEE/Federal-aid Grant Management Tools Workshop. During September 2004, the team hosted the GARVEE/Federal-aid Grant Management Tools Workshop in Boston. This workshop targeted States in need of learning about various funding programs such as GARVEEs, RVEEs, and General Obligation bonds used to finance infrastructure projects:

• Grant Anticipation Revenue Vehicles, or GARVEEs, allow States to pledge Federal-aid funds to pay all or a portion of debt service on bonds issued for transportation projects. GARVEES allow State borrowers to obtain tax-exempt interest rates, which are significantly lower than the interest rates paid on most other debt, such as corporate bonds. GARVEES leverage limited Federal-aid funds and allow States to accelerate projects with flexible structuring to meet their needs.

• Reimbursement Vehicles, or RVEEs, are a variant on the GARVEE concept; RVEEs allow States to pledge Federal reimbursements of construction expenses, rather than future Federal-aid apportionments, to repay debt service—but RVEEs provide the same benefits of tax-exempt interest rates and leveraging of funds, as do GARVEES.

• Other tools discussed included State Infrastructure Banks, or SIBs, which provide States increased flexibility in project management and financing options. SIBs are similar to private banks—offering loans, lines of credit, finance purchase and lease agreements, and more.

A great portion of the workshop focused on Federal Funds Management Tools including the following:

• Advance Construction (AC) and Partial Construction of AC, non-federal funds that are used in combination with GARVEEs.

• Flexible Match, donated funds from other Federal agencies that leverage private funds and allow States to reallocate State matching funds for use on other projects.

• Toll credits, revenues used as a credit toward the non-Federal share of a project that frees up State funds for other projects.

Essentially, the workshop emphasized how these tools help States “stretch their dollars” to finance major projects.

Jim Hatter, TST Finance Specialist, led the team during this conference and incorporated guest speakers from the private sector of the financial services industry to discuss the rating process, bond insurance, and oversight of non-traditional financed projects. Financial managers from the State DOTs that participated in the conference all agreed the information was valuable and were given case studies, examples, contacts, and technical resources that will benefit them in the long-run.

Training and Technical Assistance
As a whole, the Finance TST offers group workshops, personalized training, and technical assistance to States in need of innovative revenue sources. This not only adds value to States with transportation financing on highway projects, but extends across other modes to include freight and mass transit.

The experts on the Finance TST provided briefings to high-level State and Federal officials, who requested technical assistance, including a discussion of best practices to advance critically-needed projects. As one example, in Arizona, Innovative Finance Specialist Fred Werner and Innovative Finance Specialist Prabhat Diksit provided technical assistance to develop an alternative funding strategy for a border project required to enhance national security. Assistance was provided to the following organizations:

• FHWA Arizona Division
• Arizona Department of Transportation
• U.S. Department of Homeland Security
• Government Services Administration (GSA) offices, serving the southern border States, several localities and private sector groups

This work was fulfilled in collaboration with a U.S./Mexico Joint Working Committee. The committee is a transportation planning work group, tasked with accelerating investments in surface transportation infrastructure along the border. Continuing to work closely with the Joint Working Committee, Werner will lead the team’s 2005 initiative to host the first bi-national Border Finance Conference in San Antonio this August.

In addition to their border activities, Diksit and Werner were invited to join the Virtual Freight Team, a joint effort by FHWA Headquarters offices and the Resource Center to provide technical assistance, and act as champions for freight initiatives. Freight projects often require funding from several different agencies, each with their own rules of eligibility; and also will often include private corporations, with their unique concerns.

In Hawaii, the Finance TST supported the Governor’s Task Force and the Division Administrator on Innovative Transportation Finance tools for the Oahu Rapid Transit System. In North Carolina, the experts provided technical assistance to the Deputy Secretary of Transportation, Chief Financial Officer, and all management for NCDOT. In Delaware, Oregon, Virginia, and the District of Columbia, Finance Specialists and Mayer, Hatter, Diksit worked together to deliver a day-and-a-half innovative finance workshops tailored to GARVEEs, SIBs, TIFIA, Public-Private Partnerships, Grant Management Tools, and the Federal-aid Program. As a result of these workshops, at least three States are investigating alternative financing tools. These accomplishments highlight but a few of the team’s successes during 2004.

When commenting on the achievements of the team during the past year, Finance TST Team Leader, Thay Bishop, noted that, “Focus, innovation, and commitment from the Finance Technical Experts are the key for the team’s success.” The team has embraced this strategy and is moving forward with its 2005 goals, which include continuing to work on Freight and Border Initiative projects, as well as providing Internal Control and Stewardship expertise. The team is sponsoring another Innovative Finance Workshop, tentatively planned for June 27-30, 2005 in San Francisco, California.

For more information, contact:

Thay Bishop
Finance Technical Service Team Leader
FHWA Resource Center, (404) 562-3695
thay.bishop@fhwa.dot.gov