P3 Pros See Peril in TIFIA Cutback
December 23, 2015 10:59 AM
The reduction in TIFIA funding may not be a problem in the first year or so of the FAST Act, with a funding crunch beginning in the third or fourth years as new projects are proposed, said Doug Koelemay, director of Virginias Office of Public-Private Partnerships. It looks like it doesnt hamstring us for the first few years, but thats because there are some projects already in the pipeline for 2016 and 2017. he said. We might even see some projects being accelerated in the next two to three years as they compete for the limited TIFIA assistance that is available.
Former Transportation Secretary James Burnley, who now co-chairs the transportation law practice at Venable LLP in Washington, said the lower TIFIA allocations should meet the anticipated demand for funding from P3 projects. The Transportation Department has struggled to use the TIFIA capacity that has been available, said Burnley. The whole approach of the program is a good one but it has not delivered what supporters had hoped would be delivered. The Transportation Department transferred $638.7 million of unobligated and uncommitted TIFIA funds from fiscal 2013 through 2015 in April, but a provision in the FAST Act eliminated the requirement to turn back the unused funding.
The 70% cut in funding for the Transportation Infrastructure Finance and Innovation Act credit-enhancement program in the five-year FAST ACT could be a hurdle for P3 projects in 2016 and beyond, said Ananth Prasad, transportation practice leader at infrastructure solutions firm HNTB and a former Florida transportation secretary. TIFIA funding that had been $1 billion per year in fiscal 2014 and 2015 will be reduced to $275 million per year in the first two years, rising to $285 million in fiscal 2018 and then to $300 million per year in 2019 and 2020. There is a significant reduction in TIFIA funding in FAST to the point where it is now borderline adequate, said Prasad. Loans and lines of credit provided by TIFIA have been instrumental in financing many of the large and complex P3 projects over the past 10 years, and the supply is going to be tighter.
The FAST Act expands TIFIA eligibility to include transit oriented developments such as multiuse facilities, parking garages and property acquisition, which could be a boon to P3s in 2016. The measure lowers the project cost requirements to $10 million from the previous minimum of $50 million, making the low-cost funding source available to relatively small projects that are within walking distance of a transit station or a multimodal facility. The new measure also cuts application costs for low-risk projects and provides up to $2 million in annual grants to help in the preparation of TIFIA requests.
The two new freight-dedicated programs created by the FAST ACT may help finance P3 projects that cannot obtain a TIFIA loan. The programs are to focus on projects that remove bottlenecks that impede the flow of goods. The National Highway Freight Program with funding allocated by a formula to every state will provide $6.2 billion through 2020 for road and bridge projects. Another $4.5 billion will be available for multimodal projects through the competitive Nationally Significant Freight and Highway program. Funding for the multimodal program begins at $800 million in 2016 and goes up $50 million per year to $1 billion in 2020.
The Maryland Transit Administration is expected to select a preferred private partner for its $2.16 billion Purple Line light-rail system in March 2016. Financial bids were received in December from four potential private investment groups interested in financing, building, and operating the 16-mile system for 35 years. Financing for the P3 project will include a $900 million New Starts grant from the Federal Transit Authority and a $732 million TIFIA low-interest loan. The successful concessionaire is expected to contribute up to $900 million for the project, for which the state has capped its contribution at $168 million.
