Ideas Floated To Step Up TIFIA Loan Program
As the Trump administration continues to work on its promised $1-trillion infrastructure investment plan, it is expected to recommend increasing funds for the long-standing federal Transportation Infrastructure Finance and Innovation Act (TIFIA) program, which provides low-interest loans to help finance a range of transportation projects.
TIFIA loan recipients testifying at a recent Senate Environment and Public Works Committee hearing on the program said the loans have been important in financing their projects. But they see shortcomings in TIFIA and have recommended steps that they say will broaden its appeal and make it run more smoothly. (View webcast of hearing.)
At the committee's July 12 hearing, Sen. Tom Carper of Delaware, its ranking Democrat, said, "TIFIA is a critical component of a funding package for large projects that helps to leverage non-federal funding, including state, local, and private dollars."
Carper observed that since TIFIA was established in 1998, DOT has approved loans for just 64 projects. He called for making TIFIA assistance available to "a wider range of projects," including small ones. The 2015 FAST Act expanded TIFIA eligibility to projects as small as $10 million, but Carper said no such projects have received loans so far.
Committee Chairman John Barrasso (R-Wyo.) said, "Solutions to address and pay for fixing our nation's crumbling roads and bridges are not ‘one-size-fits-all.' "
He told reporters after the hearing, "Some of these [public-private] partnerships worked well in large metropolitan areas but don't apply to rural America." Rural areas thus need specific funding, he said.
Officials whose projects have received TIFIA aid praised the impact the loans have had. Anne Mayer, executive director of the Riverside County Transportation Commission in California, told the committee that a $421-million TIFIA loan "was absolutely essential" to financing the commission's $1.4-billion extension of tolled express lanes.
"Without it," Mayer said, "We would have faced costly delays or increased costs from issuing municipal debt." She said the project opened to traffic in March and "the results have been overwhelmingly positive."
U.S. DOT announced on July 20 that it had approved a $152-million TIFIA loan for another Riverside County Transportation Commission project—$471-million express lanes on Interstate 15.
Jennifer Aument, group general manager for North America with Transurban, an Australia-based developer and operator of toll roads, cited TIFIA loans' roles on two northern Virginia projects whose total cost was $3 billion—express-toll-lane plans on the Capital Beltway and on Interstate 95. Each project received a TIFIA loan, whose combined amount was $889 million.
Under agreements with the Virginia DOT, Transurban led consortia to design, build, finance, operate and maintain the toll lanes.
Aument said, "The success of Virginia's express lanes network would not have been possible without the TIFIA program." She added, "Thanks to the program's flexible terms and attractive interest rates, TIFIA enables major projects to be delivered that might not otherwise be possible."
Even so, Transurban decided not to seek a TIFIA loan for another Virginia project, express lanes on I-395. Aument said, "We decided the potential costs associated with the uncertainty around the terms TIFIA would require for the 395 loan, as well as the timing and process for approval, outweighed the benefits the TIFIA loan could provide."
Witnesses said TIFIA has room to improve. Christopher Coes, Smart Growth America vice president for real estate and external affairs, said small localities mulling TIFIA loan applications face "enormous transaction costs."
They include a requirement to get a rating from a credit agency that can cost $300,000 to $400,000, a large sum for local governments with small budgets. The transaction costs, he said, make TIFIA aid for projects under $75 million "absolutely unworkable."
Coes suggested allowing other financial data, such as projects' cash flows or putting up collateral.
He also said there should be greater TIFIA program "outreach to small and rural communities" and raised the idea of using the Agriculture Dept.'s rural-development field-office staff as contact points.
Mayer recommended adding deadlines for U.S. DOT to process applicants' letters of interest, an early stage in the TIFIA process. That would give applicants more certainty about the timeframe they face and possible costs, she said.
TIFIA's funding level will be perhaps the most important issue. The 2015 FAST Act authorized $275 million in fiscal 2017 direct funding for the program, rising to $285 million next year and in 2019, and then to $300 million in 2019 and 2020.
Those figures represent the cost to the government of the loans' subsidies. Each direct federal TIFIA dollar can support an estimated $10 or more in loan volume.
An Office of Management and Budget infrastructure fact sheet accompanying Trump's 2018 budget proposal discussed $1 billion annually in direct funding for TIFIA for 10 years, which it said could spark as much as $140 billion in loans.
At the hearing, Carper asked witnesses what TIFIA's funding should be.
Mayer said, "There may be times when $1 billion is too much." In fact, TIFIA was funded at $1 billion in 2015, but DOT was unable to commit all of that to projects. It had to turn back about $640 million to the Federal Highway Administration, which redistributed it among states, as regular formula highway aid.
Mayer added, however, that "project delivery is very cyclical and … predictability for project sponsors is important." She said, "Having an understanding that there's at least that base level authorized will be very, very important, so that we know the program will be there when we need it."
Aument said that a key factor is "a pipeline of projects" ready to use TIFIA loans. Funding is important, she acknowledged, but so are incentives for states and cities to advance projects and streamline the process.
She said, "Those are the kinds of efforts that are necessary to fill that pipeline and unlock a lot of the private capital that is waiting to invest."
Story updated on July 24 with U.S. DOT's approval of a TIFIA loan for a Riverside County, Calif., project.