Section 11143 of Title XI of SAFETEA-LU amended Section 142 of the Internal Revenue Code to add highway and freight transfer facilities to the types of privately developed and operated projects for which private activity bonds (PABs) may be issued. This change allows private activity on these types of projects, while maintaining the tax-exempt status of the bonds. No substantive changes have been made to the PAB program by MAP-21 or any other legislation.
The law limits the total amount of such bonds to $15 billion and directs the Secretary of Transportation to allocate this amount among qualified facilities. The $15 billion in exempt facility bonds is not subject to the state volume caps.
Passage of the private activity bond legislation reflects the Federal Government's desire to increase private sector investment in U.S. transportation infrastructure. Providing private developers and operators with access to tax-exempt interest rates lowers the cost of capital significantly, enhancing investment prospects. Increasing the involvement of private investors in highway and freight projects generates new sources of money, ideas, and efficiency.
As of August 15, 2016, nearly $6.5 billion in PABs have been issued to date for the 17 projects listed below. PAB allocations approved by U.S. DOT total nearly $4.75 billion to support the six projects shown in the table below.
PAB Pipeline (August 15, 2016)
| Project | PAB Allocation ($ in thousands) |
|---|---|
| Bonds Issued | |
| I-495 Capital Beltway HOT Lanes, Northern Virginia | $589,000 |
| North Tarrant Express (I820 and SH 121/183), Fort Worth, Texas | $400,000 |
| IH 635 Managed Lanes, Dallas, Texas | $615,000 |
| Denver RTD Eagle Project (East Corridor & Gold Line), Denver, Colorado | $397,835 |
| CenterPoint Intermodal Center, Joliet, Illinois | $150,000 |
| CenterPoint Intermodal Center, Joliet, Illinois | $75,000 |
| Elizabeth River Tunnels, Norfolk, Virginia | $675,004 |
| I-95 HOV/HOT Lanes, Northern Virginia | $252,648 |
| Ohio River Bridges East End Crossing, Louisville, Kentucky | $676,805 |
| North Tarrant Express 35W Project, Fort Worth, Texas | $274,030 |
| Goethals Bridge Replacement, Staten Island, New York | $460,915 |
| U.S.36 Express Lanes, Denver Metro Area, Colorado | $20,360 |
| I-69 Section 5, Bloomington to Martinsville, Indiana | $243,845 |
| Rapid Bridge Replacement Project, Pennsylvania | $721,485 |
| Southern Ohio Veterans Memorial Highway, Portsmouth, Ohio | $227,355 |
| I-77 HOT Lanes, Charlotte, North Carolina | $100,000 |
| SH-288 Toll Lanes, Houston, Texas | $272,635 |
| Purple Line, Maryland | $313,035 |
| Subtotal | $6,464,952 |
| Allocations | |
| Knik Arm Crossing, Anchorage, Alaska | $600,000 |
| CenterPoint Intermodal Center, Joliet, Illinois | $700,000 |
| All Aboard Florida, Miami to Tampa, Florida | $1,750,000 |
| I-70 East Project, Denver, Colorado | $725,000 |
| Transform 66, Northern Virginia | $946,000 |
| Gibson County Intermodal Freight Facility, Tennessee | $25,000 |
| Subtotal | $4,746,000 |
| Grand Total | $11,210,952 |
Qualified Highway or Surface Freight Transfer Facilities include:
Examples of facilities for the transfer of freight from truck to rail or rail to truck include cranes, loading docks and computer-controlled equipment that are integral to such freight transfers. Examples of facilities that are not freight transfer facilities include lodging, retail, industrial or manufacturing facilities. 1
The legislation requires that at least 95 percent of the net proceeds of bond issues be expended for qualified highways or surface freight transfer facilities within a five-year period from the date of issue. If this does not occur, the issuer must use all unspent proceeds to redeem bonds of the issue within 90 days after the conclusion of the five-year period. Alternatively the issuer may request an extension of the five-year period if it can establish that the failure to expend the funds was due to circumstances beyond its control.
Any surface transportation project which receives Title 23 assistance is qualified to benefit from private activity bonds. Because projects that receive TIFIA credit assistance are Title 23 projects, this means that TIFIA projects are also eligible to receive this tax-exempt bonding authority. This provision therefore extends eligibility to TIFIA-assisted public transportation, intercity bus or rail facilities and vehicles, including vehicles and facilities owned by Amtrak, public freight rail facilities or private facilities providing public benefit for highway users, and intermodal freight transfer facilities. Together TIFIA and private activity bonds should provide substantial incentives for private equity investment in highway and freight projects.
U.S. DOT is accepting applications from sponsors interested in receiving authority to use a portion of the $15 billion in exempt facility. While US DOT has not specified a fixed format for bond applications, it has identified a number of pieces of information that would be helpful in facilitating its consideration of applications. These Include:
Amount of Allocation Requested
Proposed Date of Bond Issuance
The approximate date when it is
anticipated that the tax-exempt bonds would be issued
should authority to do so be allocated by the Department.
Date of Inducement by the Bond Issuer
A copy of a resolution adopted
in accordance with state or local law authorizing the
issuance of a specific issue of obligations. The resolution
may state that issuance of obligations is contingent upon
receipt of an allocation from the Secretary of Transportation
of a portion of the $15,000,000,000 national limitation.
Draft Bond Counsel Opinion Letter
Form of Bond Counsel Opinion or
date by which a draft letter will be submitted.
Financing/Development Team Information
The names of the issuer of the
bonds, the borrower, and any other key participants in
the financing, with complete contact information, including
Federal taxpayer identification numbers.
Borrower Information
For each borrower, the official
business name, ownership and legal structure (corporation,
partnership, or sole proprietorship), Federal taxpayer
identification number, and prior experience as it relates
to carrying out projects similar to that proposed. For
the purposes of this Notice, the term ``borrower'' includes
any borrower of the bond proceeds or any other entity
responsible for re-paying the bonds.
Project Description
Description of the project as a
whole and the proposed organizational and legal structure
of the project (ownership, franchise or lease arrangements,
etc.). Describe the portion of the project and all capital
assets to be funded with the proceeds of the exempt facility
bonds. If the application is for an international bridge
or tunnel under section 142(m)(1)(B), the project description
should include a representation that the international
entity that has responsibility for the project is authorized
under Federal or state law.
Project Schedule
A timeline showing the estimated
start and completion dates for each major phase or milestone
of project development. Indicate the current status of
milestones on this timeline, including all necessary permits
and environmental approvals.
Financial Structure
A statement of anticipated sources
and uses of funds for the project, including separate
line items, as applicable, for proceeds of exempt facility
bonds or other borrowing, federal grants, state and local
grants, other credit assistance, and private investment.
Provide a projected drawdown schedule for the use of funds,
project revenue and expenses, and sources of security
and repayment for the bonds.
Description of Title 23/49 funding received by
the project
The date (or anticipated date)
of receipt and types and amount of financial assistance.
Project Readiness
Description of the financing/development
team's capacity to undertake this project. Discuss readiness
to begin the project. List all major permits and approvals
necessary for construction of the project and the date,
or projected date, of the receipt of such permits or approvals.
Include information on engineering work, and procurement
of construction.
Signatures
Applications should be signed by
a duly authorized representative of the proposed issuer
and a duly authorized representative of each proposed
borrower. Applications may be submitted by the proposed
issuer or the proposed borrower.
Declarations
Each application, including any
supporting reports or other document, should include the
following declaration signed by an individual who has
personal knowledge of the relevant facts and circumstances: ``Under penalties of perjury, I declare that I have examined
this document and, to the best of my knowledge and belief,
the document contains all the relevant facts relating
to the document, and such facts are true, correct, and
complete.''
Addresses
Applications should be submitted (with 10 copies) to:
Mr. Paul Baumer
Office of Infrastructure Finance and Innovation
Office of the Secretary
U.S. Department of Transportation
W84-229
1200 New Jersey Avenue S.E.
Washington , DC 20590
202-366-1092
paul.baumer@dot.gov
Upon receipt, the US DOT will consider applications in light of applicable statutory requirements and the availability of tax-exempt authority for the type and location of the project for which the allocation is requested. If the Department needs additional information from an applicant, the Department will contact the applicant to arrange for the submission the required information. In making application to the Department, applicants should note that there are no specific standards, beyond those set forth in applicable laws or regulation, that apply to the consideration of the applications. The intent is to provide maximum flexibility in the Secretary's award of the $15 billion bonding authority. The Department is particularly concerned that once it makes an allocation, tax-exempt facility bonds are issued in timely fashion. Hence, if the schedules agreed upon in the final allocation action are not met, the allocation may be withdrawn.
US DOT has also invited interested parties to provide comments on how the Department should exercise the allocation authority. There is no deadline for the submission of comments, which may address both the process established for awarding the allocation authority or any other matters that commenters believe would be useful in administering this new innovative finance tool.
US DOT will be reviewing its implementation of this new provision of SAFETEA-LU on an ongoing basis to ensure that allocations are made in a fair and reasonable manner and to ensure that the authority is fully utilized and adds to the vitality of the Nation's transportation system.
Comments may be submitted through the Federal Register Docket, as described below. All comments received are also posted on the Docket.
https://www.gpo.gov/fdsys/pkg/FR-2006-01-05/pdf/E5-8306.pdf
View the Federal Register
notice inviting comments on and applications for Authority
for Tax-Exempt Financing of Highway Projects and Rail-Truck
Transfer Facilities.
https://www.gpo.gov/fdsys/pkg/FR-2006-01-05/html/E5-8306.htm
This location provides background
documents and comments received on the Federal Register
Notice. It is updated as new documentation and comments
are received.
http://www.fhwa.dot.gov/safetealu/reference.htm
To view resource materials
on Private Activity Bonds, use this link and navigate
to the entry for Section 11143 Tax-Exempt Financing of
Highway Projects and Rail-Truck Transfer Facilities.
1. The paragraph providing examples of intermodal freight transfer facilities clarifies language in the January 5, 2005, Federal Register Notice, by using the exact language in the President's Budget.
