CHICAGO — Municipal borrowers looking to expedite the process to tap the Transportation Infrastructure Finance and Innovation Act program for project loans should bring a thorough financing package to the table and be flexible in negotiating terms, loan recipients advised Thursday.
The TIFIA program provides assistance for surface transportation projects in the form of loans, loan guarantees and standby lines of credit. The 1998 program was expanded from $122 million in annual funding and reformed under the Moving Ahead for Progress in the 21st Century (MAP-21) transportation bill that was signed into law in July 2012.
MAP-21 increased TIFIA's funding to $750 million for fiscal year 2013 and $1 billion for fiscal 2014. The U.S. Department of Transportation estimates that the program could stimulate $30 billion or more in infrastructure investment in fiscal 2014.
Although the loan approval process had sped up, some market participants are pushing for the government to move more quickly. Both representatives from USDOT and local government officials who have tapped the program offered tips Thursday for others considering its use.
Having your project and financing "fully packaged" and "flushed out" just as you would if you went to a bank "is critical to make sure that your projects get done on a timely basis," Chicago deputy comptroller Jeremy Fine said during a panel discussion on TIFIA at The Bond Buyer's Transportation Finance/Public-Private Partnership conference in Chicago.
The city tapped the program for loans involving two projects — its downtown Riverwalk expansion and an intermodal transportation facility at O'Hare International Airport that will house a new rental car facility, parking, and extend links to public transit.
The city did not get stuck on terms during negotiations, showing willingness to compromise, both Fine and federal authorities said.
Chicago specifically earmarked its loans to cover expenses that would not have qualified for tax-exempt bond support. The city lowered its costs by 300 basis points over issuing taxable bonds. If qualified for tax-exemption, the loans still achieved 150 basis point savings.
The federal government expects to close on another six to eight loans into the new year with another eight already under its belt since Congress expanded the program in 2012, according to UDOT TIFIA credit program director Duane Callender.
USDOT has heard the grumbles over the timeline from application to loan closing, but the department sees improvement with the changes made in MAP-21, including shifting from set review periods to a rolling application process. Also, more up-front credit analysis is completed during the pre-application process.
"That's the biggest change in the program," said Sylvia Garcia, chief financial officer and assistant secretary for budget and programs, USDOT. She added that the department does meet the statutory deadlines.
Government borrowers also offered up a wish list for the next surface transportation reauthorization package as MAP-21 expires next year. Several showed little optimism that funding levels are likely to grow and they differed on whether another short-term package or the more traditional six-year period was in their favor.
If funds are held at current levels, Pennsylvania DOT's director of the Office of Policy & Private Partnerships Bryan Kendro said a two-year program works, but he pushed for more flexibility in terms and conditions and project requirements. "Give us more tools in the tool box," he said.
Illinois Department of Transportation deputy director of Highways Roger Driskell said the state prefers a long-term reauthorization. "We need to know what the landscape is out there" for long-term planning purposes.
Illinois is eyeing a TIFIA loan as part of a public-private partnership financing package to build its piece of the proposed Illiana tollroad that will provide a new route between northwest Indiana and a rural area far south of Chicago. It submitted a letter of intent last week and is looking at the eligibility requirements for capturing the program's rural rate which is significantly lower than the standard rate.
The state late last week launched an initial request for qualifications for private partners in the project. A local planning agency recently approved placing the project on the region's long-term transportation plan that makes it eligible for federal support. The project would mark the state's first P3 and first use of TIFIA. Indiana is responsible separately for financing its portion of the project.
Expediting the process is crucial for projects with an aggressive timeline. Kendro said the state is looking to replace 300 bridges through a P3 with a request for proposals expected to be release next month but some participants question whether the state's timeline might too aggressive to use TIFIA.
Local government representatives praised the program as a low-cost piece of an overall financing package, but stressed the program represents financing assistance, not actually funding aid, and said more direct grant aid is needed.
The program managers remain reluctant to issue loans that represent more than 33% of a financing although the expanded program raised the limit to 49%. "Being a minority partner" gives us some comfort and ensures that risk-sharing is spread out, Garcia stressed.
Some local governments have asked for more than the 33% — the previous cap — but none have yet received it. If the department had awarded more loans at the higher threshold, Garcia noted that the authorization would have already been exhausted.
Aside from the formal legislative changes, the program's staff has heightened its stress-testing of project projections. That followed the first bankruptcy filed in 2010 of a TIFIA recipient — the South Bay Expressway in San Diego County — and strains on other projects with loans closed during the financial crisis that are now struggling to meet projections.
Callender said the program must balance risks with what's needed to get a project done to avoid any shift in its popularity with Congress which could occur if it's perceived as too risky for taxpayers.