In response to Executive Order 12893 and in recognition of the need to explore new financing strategies, FHWA announced the Innovative Finance Program - Test and Evaluation Project (TE-045) in a Federal Register notice dated April 8, 1994. The program was established using statutory authority granted under Section 307(a) of Title 23 of the U.S. Code. Section 307(a) permits FHWA to engage in a wide range of research projects, including those related to highway finance. As part of this research effort, FHWA was able to waive selected policies and procedures so that specific transportation projects could be advanced through the use of non-traditional financing concepts.
TE-045 was initially designed to give states a forum in which to propose and test those concepts that best meet their needs. Projects advanced under TE-045 were identified by state-level decision makers facing real world barriers to financing needed transportation improvements. Since TE-045 did not make new money available, its primary focus and ultimate measure of success has been its ability to foster the identification and implementation of new, flexible strategies to overcome fiscal, institutional, and administrative obstacles faced in funding transportation projects.
The TE-045 initiatives include:
The nine major types of financing tools that state proposed and were tested under TE-045 are generally characterized as investment tools or cash flow tools. Investment tools can be used to attract new sources of funds to transportation investment. Cash flow tools accelerate the construction and completion of projects. As shown in the table below, eight out of the nine tools have now been codified into law as part of TEA-21 and are available to all state departments of transportation.
Asterisked methods have now been approved as standard features of the Federal-aid program, either by law (NHS Designation Act or TEA-21) or by administrative action.
Source: Federal Highway Administration, An Evaluation of the TE-045 Innovative Finance Initiative, November 1996.
An Evaluation of the TE-045 Innovative Finance Research Initiative October 1996
This report assesses the accomplishments of the TE-045 Innovative Finance Research Initiative, a test and evaluation project of the FHWA. The financing strategies tested under TE-045 were identified through an ongoing solicitation process that was launched in April 1994; this report addresses the initiative's achievements realized as of July 1996. In addition to serving as official evaluation of TE-045's progress toward meeting its basic objectives, this report provides perspectives on the structure and performance of the individual financing tools tested under the initiative. The report closes with commentary on opportunities for continued research and observations on various financial concepts that may be considered in connection with the 1997 reauthorization of the Federal-aid highway program. The findings presented herein were developed through a written survey that covered the full universe of active TE-045 projects. The survey was performed during June and July 1996 in conjunction with the regular quarterly process through which FHWA updates information regarding the status of each active project. Survey responses were further clarified through independent telephone interviews with project managers, officials from FHWA headquarters and state division offices, and representatives from state departments of transportation. Additional interviews with transportation experts from the financial industry and the project development community provided further perspectives on the long-term implications of the TE-045 initiative.