AASHTO Calls for ‘Simpler, More Reliable’ USDOT Process to Spur Use of TIFIA Project Loans
The group that represents state departments of transportation wants to see the USDOT increase the federal share of financing projects under TIFIA, the department's main infrastructure loan program, and "develop a simpler, faster and more reliable application process."
The American Association of State Highway and Transportation Officials made the comments in written testimony to the Senate Commerce, Science and Transportation Committee for a July 12 hearing on TIFIA and innovative financing options to pay for transportation projects.
AASHTO said that while Congress in the 2012 MAP-21 surface transportation law increased the federal-share financing cap to 49 percent of a project's cost from 33 percent previously for loans made under the Transportation Infrastructure Finance and Innovation Act program, "as a matter of policy, the USDOT has capped TIFIA project cost share at 33 percent."
The association said although the 2015 Fixing America's Surface Transportation Act required the USDOT to create an expedited application process for TIFIA's project loans, the process often remains burdensome.
"Many [project] sponsors – especially those advancing smaller projects – have commented on the often lengthy and uncertain process for obtaining credit assistance from the USDOT," AASHTO wrote.
It emphasized that rural projects in particular could benefit from a streamlined process, since they tend to be smaller and pledge tax-backed security for their loan repayments rather than rely on project-generated revenue such as tolls.
The group also suggested lawmakers may need to spur this effort. "AASHTO encourages the USDOT to develop a simpler, faster and more reliable application process for all project sponsors but especially for the smaller projects with simpler terms," it said. "This may be an area that requires additional Congressional action in subsequent legislation."
The hearing and comments come as the transportation sector still waits for the Trump administration to introduce its long-promised infrastructure investment proposal, but as federal officials say it will rely strongly on leveraging local and private financing through loans as well as offering direct federal project funding.
Hearing comments by others touched on some of the same issues AASHTO highlighted.
Jennifer Aument, group general manager/North America for toll road builder Transurban, said among other things that TIFIA can have a greater impact on financing transportation projects by "promoting consistency in its loan terms and conditions" and by "providing greater certainty and speed in its evaluation and approval processes."
She told senators: "Our experience is that TIFIA's terms and risk profile shift from one project to the next, and even within the negotiation of a single transaction. These changes are well intentioned – often designed to address a risk identified in the last project or to anticipate new issues. However, sizable shifts in terms over time can have the unintended consequence of creating greater uncertainty and risk, which drives up project costs, delays project implementation and reduces the benefits that can be delivered."
In addition, Aument said that "TIFIA applies a capital charge based on a project's risk profile to offset the impacts of potential default, it is increasingly seeking to further de-risk projects by requiring less flexible terms and standards in loan and inter-creditor agreements. The program must balance these extra protections with the additional costs and delays they may require."
Christopher Coes, vice president of Smart Growth America, said although Congress in the FAST Act reduced the project cost to qualify for a TIFIA loan from $50 million to $10 million, "the same large project requirements were applied [to the small ones]. This makes small projects unworkable."
For instance, Coes said TIFIA requires a project applicant to "secure an investment grade rating to determine creditworthiness," but that the cost of obtaining one "can range from $300,000 to $400,000 and must be paid whether or not the loan is ultimately approved. This does not include the additional legal and financial consultants required to process a TIFIA loan."
Another TIFIA user reminded lawmakers of the program's limits.
Anne Mayer, executive director of the Riverside (Calif.) County Transportation Commission, said although her community has used TIFIA for some work and increased local taxes for project investments, "a vast majority of the projects in my agency's 30-year local sales tax measure cannot use TIFIA or public-private partnerships and must have adequate sources of traditional grant funding from our state and federal governments."
AASHTO also said that while FAST Act allowed TIFIA borrowers to use certain amounts of the their normal federal-aid project funds to cover subsidy and administrative costs of USDOT credit, this option should be the choice of the project sponsor without any pressure to reallocate federal-aid funds in that manner.
It said the FAST Act provided ample levels of TIFIA subsidy funding over five years – $1.435 billion or enough to cover about $20 billion in loans – "almost as much as the $22.2 billion of total credit in the first 17 years of program history."