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Research Reports

TE-045 - Innovative Finance Test and Evaluation Program

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:

  • Establishing SIB Pilot Program;
  • Expanding the Federal share of toll projects;
  • Authorizing the use of Federal-aid for debt instrument financing, a significant enabler for Grant Anticipation Revenue Vehicles (GARVEEs);
  • Allowing loans of Federal-aid to non-toll projects; and
  • Making private donations eligible for state match.

TE-045 Financing Tools

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.

Investment Tools

  • Flexible Match*
  • State Project Loans*
  • Toll Credits*
  • Reimbursement of Bond Financing Costs*

Cash Flows Tools

  • Advance Construction*
  • Construction*
  • Phased Funding
  • Tapered Match*
  • STP Simplication*

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.


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