April 10, 2015

From InfraAmericas

by Carl Winfield

The US’s two major political parties rarely see eye-to-eye on how transportation infrastructure projects should be funded but legislators on both sides of the aisle agree on the value of the TIFIA loan program, run by the Federal Highway Administration division of the US Department of Transportation.

TIFIA received a major funding boost when Congress passed the latest transportation bill, MAP-21, in 2012. The program received 120m in funding in 2012, but MAP-21 boosted that amount significantly, to USD 1.75bn over the next two years.

Moreover, President Obama has provided USD 1bn for the program over six-years in his new USD 478bn transportation funding bill.

Finding federal funds for transportation projects in these fiscally-restrained times has proven to be a challenge, so it is not surprising that a loan program like TIFIA has gained momentum in recent years.

DJ Gribbin, managing director at Macquarie, and former General Counsel to the US Department of Transportation, said that the TIFIA program has been the “star of P3 policy efforts.” He added that, if the program has received criticism, it is because it has become such a major financing tool for major transportation projects, including those that are traditionally procured and those that are not.

“If it wasn’t important, no one would care,” Gribbin said. 

Program benefits

The Transportation Infrastructure Financing and Innovation Act (TIFIA) program provides Federal credit assistance in the form of direct loans, loan guarantees, and standby lines of credit to finance large transportation projects. The program is particularly focused on projects which might otherwise be delayed or deferred due to its size, complexity, or the timing when the project may generate revenues.

“The TIFIA program was designed to fill market gaps and encourage innovative revenue streams for surface transportation projects, and we believe it has done just that,” The Federal Highway Administration told InfraAmericas. “TIFIA has been integral to the development of the US P3 market, and has supported project backed by a variety of new fee structures. TIFIA has provided almost USD 22bn in credit assistance to 51 projects, and stimulated nearly USD 78bn in infrastructure investment.” 

There is consensus across the market that low-interest rates on TIFIA loans make them attractive. Paul Lewis, director of policy and finance for the Eno Center for Transportation, a transportation think tank, also noted that the program’s flexible loan terms are also a draw.

“The loan does not have to be paid back for five years from when it is made, so borrowers have the opportunity to pay it back when a project is generating revenue,” Lewis said. “A dedicated funding source is required,” he added.


The program has received some criticism that is too “highway-centric,” but, Marcus Lemon, shareholder at Polsinelli and former Chief Counsel to the Federal Highway Administration, said the program’s structure favors certain types of transportation projects.

“Highways and bridges are a great source for revenue because they can be tolled and often have the most volume and congestion,” Lemon, said. “It’s sometimes more challenging to come up with a revenue source or user fee for other modes of transportation, so highways and bridges with heavy congestion tend to be the most viable applicants for the TIFIA program”

The FHWA said that, as a percentage of the overall portfolio, 27% of TIFIA projects are transit and 13% are multimodal. The remaining 60% of loans go to highway projects.

The body noted that, while highway projects are a majority of the portfolio, the share of TIFIA credit assistance for transit projects is much higher than transit’s share of traditional grant funding when compared to that for highway projects.

Lemon noted that TIFIA loans tend to made to states with the highest population totals, such as California, Texas and Florida. He added that that bias is not due to any political bias on the part of the FHWA.
“The congestion, population and volume factors support the revenue sources, thereby making the TIFIA loan more viable,” Lemon said.

The number of states with projects that have received or are seeking TIFIA credit assistance has grown from 14 states and territories in 2012, to 24 states and territories in 2015, according to the FHWA.

“MAP-21 and our reauthorization proposal expand the number of states and projects that could benefit from TIFIA,” FHWA said. “We have had lots of success in doing that so far, and going forward, we will continue to work within TIFIA statutory regulatory authority to encourage projects of all kinds to consider the benefit of TIFIA credit assistance.” 

TIFIA has received criticism over a loan approval process that some contend is too long.

Lewis said that, while he has heard those complaints, the number has decreased over time.

Lemon noted that the George W. Bush administration streamlined the TIFIA program, by standardizing documents, expediting decision-making, and streamlining decision making, Lemon said.

Lemon added that the Obama administration has built on that trend by creating a rolling admission process where those applicants who met their underwriting criteria were automatically accepted. The administration has also hired more TIFIA staff, and agreed to increase funding for the program, he said, noting that more changes are needed.

“The best way to further streamline TIFIA is to immediately further increase funding and staffing for the TIFIA program,” Lemon said. “The sheer demand and need for TIFIA far outweighs the size of the program.”

The TIFIA program has also received some criticism for being “too conservative,” and taking too long to make its loan decisions.

Gribbin said that some of the criticism is unfair, as some of the loan requests, such as Colorado’s US-36 and North Carolina’s I-77, can contain some innovative nuances that are likely to take longer to move through the approval process. Gribbin added that there remains some tension concerning the program, in terms of whether it should be more liberal or more conservative in its lending.

“Congress should give clear guidance” as to what it wants from the TIFIA program, Gribbin said.
Lewis said that he does not see major changes coming to the program, since it is generally seen to “function very well.” He said the sentiment among the majority of lawmakers is to “leave the program where it is.”