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TIFIA Credit Program: An Introduction

The Transportation Infrastructure Finance and Innovation Act (TIFIA ) program provides credit for qualified projects of regional and national significance. Many surface transportation projects-highway, transit, railroad, intermodal freight, and port access-are eligible to apply for assistance. Each dollar of Federal funds can provide up to $10 in TIFIA credit assistance and support up to $30 in transportation infrastructure investment.

Program Goal

TIFIA was created because State and local governments that sought to finance largescale transportation projects with tolls and other forms of user-backed revenue had difficulty getting financing at reasonable rates. Tolls and other project-based revenues are difficult to predict, particularly for new facilities. Although tolls can become a predictable revenue source over the long-term, it is difficult to estimate how many road users will pay tolls, particularly in the initial "ramp-up" years after construction of a new facility. Similarly, innovative revenue sources, such as proceeds from tax increment financing, are difficult to predict. TIFIA credit assistance enables these projects to obtain financing in the private market.

Eligibility and Selection Criteria

Both public and private entities are eligible to receive TIFIA credit assistance. Projects are required to obtain an investment grade rating on their senior debt obligations. Projects must also be included in the applicable State Transportation Improvement Program and follow all Federal requirements, including the National Environmental Policy Act (NEPA ) and Buy America provisions. Potential projects are evaluated against eight statutory criteria, including impact on the environment and significance to the national transportation system.

Loan Terms

To allow time for facility construction and ramp-up, in some cases, initial TIFIA repayments may be delayed until 5 years after substantial completion of the project. The maximum loan repayment term is 35 years after construction completion. Each loan's exact terms are negotiated between the U.S. Department of Transportation (USDOT) and the borrower, based on the project economics, the cost and revenue profile of the project, and any other relevant factors. For example, USDOT policy does not generally permit equity investors to receive project returns unless the borrower is current on TIFIA interest payments. TIFIA interest rates are equivalent to Treasury rates. Depending on market conditions, these rates are often lower than what most borrowers can obtain in the private markets. Unlike private commercial loans with variable rate debt, TIFIA interest rates are fixed.

Complementing the Private Market

TIFIA complements other financing by supporting up to 33 percent of the total eligible project costs. TIFIA can be a "junior lender," meaning that if a shortfall occurs, the TIFIA loan will be paid last. This "subordinated" status allows other lenders to offer lower rates to TIFIA -assisted projects, because their risk is reduced.