FOR THE LAST COUPLE OF DECADES MANY US GREENFIELD TRANSPORTATION PROJECTS HAVE BENEFITED FROM TIFIA FINANCING . BY FERNANDO J RODRIGUEZ MARIN , PARTNER , AND NICOLAI J SARAD , PARTNER , BRACEWELL LLP PARTNERS .

The Transportation Infrastructure Finance & Innovation Act of 1998 ( TIFIA or the Program ) created a credit programme to facilitate the financing of large transportation projects , including roads , bridges and rail , among others . 1 TIFIA can provide credit assistance for the design and construction and , when applicable , the operation and maintenance , of eligible projects in the form of direct loans , loan guarantees and standby letters of credit .

In practice , to our knowledge , most credit assistance provided to-date has taken the form of subordinated direct loans . TIFIA was expanded under the comprehensive Bipartisan Infrastructure Law passed by Congress last autumn after months of negotiations as the Infrastructure Investment & Jobs Act of December 2021 ( the IIJA ), which President Biden signed into law on November 15 2021 . In what follows , we will provide a general recap on the Program and explain how the IIJA will serve to grow the reach and availability of TIFIA funds for eligible US transportation projects .

TIFIA is implemented by the Secretary of Transportation and administered on their behalf by the Build America Bureau ( the Bureau ), an agency created in 2016 as a single point of contact for infrastructure financing . 2 The total amount of funds available for the Program in a particular year is determined by law , and there are limits on the percentage of the total available funds that can be deployed , depending on the type of eligible project . 3

Eligible transportation projects include the design and construction or installation of highways and bridges , intelligent transportation systems , intermodal connectors , transit vehicles and facilities , intercity buses and facilities and rural infrastructure projects that exceed a minimum size – for example , US $ 10m for local or rural projects , or US $ 50m for road and transit projects .

For each eligible project , TIFIA senior secured loan assistance is capped generally at 49 % of eligible costs and at 33 % for lines of credit . Project sponsors ( typically , the department of transportation of the state , or another local authority or agency procuring the project ) must file an application with the Bureau , providing general information on the project that demonstrates that it will meet the Program ’ s eligibility requirements and comply with the necessary risk assessments ; if the Bureau ’ s creditworthiness review is favourable , it will then execute a Letter of Intent with the relevant sponsor .

TIFIA loans are , by definition , project financings that must have a dedicated repayment source . In practice , this source can be a periodic payment from the public authority that owns the asset , another dedicated third-party funding source , or user fees paid by customers – tolls , rail fares , user fees , tariffs – or a combination of the same . The Program was designed expressly to leverage federal funding by fostering partnerships that attract other public funds and private investments . In fact , often TIFIA funds are deployed in projects procured as a public-private partnership ( PPP or P3 ) using different procurement methods , from the more basic design-build , or design-build-finance to the more complex design , build , finance , operate and maintain ( DBFOM ).

Thus , typically , borrowers are private entities holding concession-type rights or public authorities that have a contractual or statutory right to the revenue , although governmental authorities can also borrow directly through from the Program if they can pledge a specific third-party revenue stream ( for example , tobacco settlement funds ). Consistent with this , TIFIA assistance is expressly contemplated to coexist with private sources of project funds ( equity , senior bank loans and / or taxable or tax-exempt bond financing – including “ private activity bonds ”), as well as public funding such as direct grants .

TIFIA direct loans are provided on favourable terms ; principally : first , by charging low interest rates ( typically federal cost of funds plus a reasonable spread ); and second , by accepting to be expressly subordinated to the senior debt ( although such subordination is expressly contemplated to disappear if the borrower is involved in a bankruptcy event ). 4 TIFIA financings thus require intercreditor provisions designated to protect the TIFIA lender .

Importantly , TIFIA financing requires eligible projects to have an investment rating supported by one or two ratings ( depending on the size of the project ) from reputable agencies . In addition , a TIFIA secured loan will be subject to the completion of an environmental impact statement or similar analysis required under the National Environmental Policy Act of 1969 ( NEPA ).

Project Finance International March 23 2022 51