The newly enacted transportation bill gives a giant boost to a U.S. Dept. of Transportation loan program for major highway and transit projects. The line is already starting to form for the loans, which could total more than $16 billion over the next two years.
DOT's "bank" was created in 1998 by the Transportation Infrastructure Finance and Innovation Act (TIFIA) to provide loans and other credit assistance to help fund large projects. After relatively modest demand in TIFIA's first decade, interest took off in 2010. For 2012, DOT received 26 requests, totaling $13 billion, but had only about $1.1 billion to lend. It picked five projects to share that amount.
The Moving Ahead for Progress in the 21st Century Act (MAP-21), signed on July 6, writes a new chapter for TIFIA, hiking the program's direct federal funding to $750 million in fiscal 2013 and $1 billion in 2014, from $122 million in 2012.
Jack Basso, American Association of State Highway and Transportation Officials director for program finance and management, calls that boost "a huge change." What makes TIFIA aid more attractive is "the leverage effect," he adds.
Each direct federal dollar for TIFIA supports $10 in loan volume. Moreover, TIFIA loans are barred from fully funding a project and thus must be augmented by other financing, such as federal or state grants or private-sector money. Counting those other funds, the new TIFIA aid could help finance projects totaling as much as $50 billion, says DOT Secretary Ray LaHood.
With state and other federal transportation funding tight, the expanded TIFIA is a welcome infusion for state DOTs and transit agencies trying to finance their largest projects—and for construction firms that seek to carry them out. Tom Warne, former Utah DOT executive director, says, "If you've got a big project that's a candidate for TIFIA, this is one of the real wins out of MAP-21."
DOT got the fiscal 2013 round rolling with a July 31 funding-availability notice. New York state was quick to respond. Gov. Andrew Cuomo (D) and other officials on Aug. 20 signed a letter notifying DOT that the state is seeking TIFIA aid for the planned $5.2-billion replacement for the aging Tappan Zee Bridge, which crosses the Hudson River north of New York City. New York's letter didn't specify the amount of the loan it will request. The state unsuccessfully sought a $2-billion loan in the 2012 round.
MAP-21 mandates that DOT evaluate project applications on a rolling basis, instead of in a single, annual competition, and requires a DOT decision within 60 days after an application is complete.
MAP-21 also says TIFIA aid can account for no more than 49% of a project's total cost, up from 33%. The higher threshold could be a plus for loan-seekers. Kevin Thibault, a vice president in Parsons Corp.'s transportation group, says some applicants may request aid that slightly exceeds the old 33% cap. But he adds, "I don't expect there'll be a lot of them that'll be up at that 49% range." One reason, Thibault says, is that DOT "can leverage a lot more projects with 33% than 49%."
TIFIA cannot help most projects, however. Warne, now a Salt Lake City-based consultant, says, "I don't think it's going to have a huge impact on the vast majority of projects in the system." For one thing, only projects costing at least $50 million are eligible. MAP-21 did cut the threshold from $100 million, but the new cap still excludes many projects. (The minimums are lower for rural and intelligent-transportation-systems projects.)