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The Transportation Infrastructure Finance and Innovation Act (TIFIA)

The Transportation Infrastructure Finance and Innovation Act (TIFIA ) allows the U.S. Department of Transportation (DOT) to provide direct credit assistance to sponsors of major transportation projects.

How Does It Work?

The TIFIA credit program offers three distinct types of financial assistance - direct loans, loan guarantees, and standby lines of credits (see sidebar for definitions). These instruments are designed to address the varying requirements of projects throughout their life cycles. The amount of Federal credit assistance may not exceed 33 percent of total eligible project costs. TIFIA project sponsors may be public or private entities, including State and local governments, special purpose authorities, transportation improvement districts, and private firms or consortia. The program is designed to fill market gaps and leverage limited Federal resources and substantial co-investment by providing projects with supplemental or subordinate debt rather than grants.

Any type of project eligible for Federal assistance through existing surface transportation programs (both highways and transit) is eligible for TIFIA assistance. In addition, the following types of projects are eligible: international bridges and tunnels, intercity passenger bus and rail facilities and vehicles, public freight-rail facilities or private facilities providing public benefit for highway users, intermodal freight-transfer facilities, access to such freight facilities, and service improvements to such facilities, including capital investment for intelligent transportation systems (ITS). When located in a port terminal, only surface transportation infrastructure modifications necessary to facilitate direct intermodal interchange, transfer, and access into and out of the port are eligible. A recent amendment to the TIFIA program under SAFETEA -LU allows the use of TIFIA loan and loan guarantee proceeds to refinance long-term project obligations or Federal credit instruments if such refinancing provides additional funding capacity for the completion, enhancement, or expansion of new transportation infrastructure.

What Are the Benefits?

TIFIA assistance provides improved access to capital markets, flexible repayment terms, and potentially more favorable interest rates than can be found in private capital markets for similar instruments. TIFIA can help advance expensive projects that otherwise might be delayed or deferred because of size, complexity, or uncertainty over the timing of revenues. Each dollar of Federal funds can provide approximately $10 in TIFIA credit assistance and leverage $30 in transportation infrastructure investment.

The ability to use TIFIA to partner with the Federal Government for essential and costly projects improves access to the capital markets. Large, complex projects frequently encounter market resistance as a result of investor concerns about risk, particularly in the case of subordinate and secondary sources of capital. However, with TIFIA , the government can be a flexible, patient investor by providing subordinate capital that may not be available through the capital markets on attractive terms. The flexibility provided by TIFIA can then enable the senior debt to demonstrate higher coverage margins and attain investment-grade bond ratings. By facilitating the borrower's access to the capital markets through TIFIA, major projects that might be delayed or accomplished with less efficiency can be advanced.

How Is It Used?

TIFIA assistance involves an application process, managed by the TIFIA Joint Program Office (under the Office of Innovative Program Delivery), and each project must meet certain threshold criteria to apply. The project's estimated eligible costs must be at least $50 million or 50 percent of the State's annual Federal-aid highway apportionments, whichever is less, or at least $15 million for ITS projects. The project must be supported in whole or part from user charges or other non-Federal dedicated funding sources and be included in the State's Transportation Plan. The project is subject to all Federal requirements. Qualified projects are evaluated and selected based on eight criteria. Before TIFIA assistance can be committed, the project must receive an investment grade rating on its senior obligations and have a completed environmental action.

The TIFIA program has leveraged almost $33.1 billion in project investment since its creation and has provided $8.7 billion in TIFIA assistance for 25 projects. Because of their size, many of the approved TIFIA projects were either unfunded in the near term or had large funding gaps. For some projects, TIFIA assistance enhanced market access and reduced borrowing costs; for others, it provided an alternative to grant funding, enabling the project sponsor to conserve regular Federal funds for smaller projects that could not be supported through user charges or dedicated revenue streams.

Potential Advantages

Potential Limitations

Considerations