WASHINGTON - State and local issuers could be awarded as much as $1.5 billion in discretionary grants, loans, and other credit assistance as early as this fall, under the new stimulus law.
Transportation Department officials announced last month that they would begin to award the credit assistance in September. They also said they would use up to $200 million of the $1.5 billion to provide loans and credit assistance to state and local governments for transportation projects under the Transportation Infrastructure Finance and Innovation Act program, which had already exhausted its funds for this fiscal year.
Most of the $1.5 billion will be used for capital investment for surface transportation projects under the Transportation Investment Generating Economic Recovery, or TIGER, competitive grant program.
The TIFIA program provides loans and other lines of credit to transportation bond issuers and other investors including private entities. It was designed to fill gaps in project funding and to leverage private investment with subordinate capital, and since its inception in 1998, it has been used to finance more than $24 billion of investment in transportation projects.
Usually, borrowers get about $10 of investment for every $1 of TIFIA financing. The $200 million limit on so-called TIGER TIFIA payments could create up to $2 billion of TIFIA credit, the DOT estimates.
Issuers can use the TIFIA loans in conjunction with tax-exempt muni bonds and private-activity bonds to pay for transportation projects. For example, the North Carolina Turnpike Authority's forthcoming sale of $636 million of bonds to fund the Triangle Expressway Project is dependent on the authority's receiving a $413 million TIFIA loan. The DOT has approved the loan pending credit negotiations.
But the low interest rate, pegged to Treasury rates, has lured so many prospective borrowers that the program was already over-subscribed only a few months into this fiscal year.
As a result, market participants have been excited by the prospect of extra TIFIA funds from the stimulus package.
Previously unseen applicants may begin rising to the surface because of the new funding, said Jack Basso, director of management and business development for the American Association of State Highway and Transportation Officials.
"People weren't rushing to submit applications [when] there wasn't any available" to help finance projects earlier this year, he said.
While the DOT has not set aside the full amount allowed for TIFIA, "they're certainly signaling that they're going to use the $200 million," Basso said.
The credit applicants will be competing for funds on a broader playing field than they are used to, however. They will be competing with discretionary grant applicants as well as other TIFIA applicants, according to DOT spokesman Bill Adams.
Their requests will need to meet TIFIA criteria as well as a separate set of TIGER criteria laid out in the stimulus plan that includes the project's potential "to quickly create and preserve jobs and stimulate rapid increases in economic activity, especially projects that will benefit economically distressed areas," the DOT said.
The department will also "give priority to projects with other sources of funding [and] to significant projects nationally, regionally or in major metropolitan areas. Most TIFIA project proposals are likely to rate highly on both counts," Adams said.
Public-private partnerships will be eligible for TIFIA credit, according to Jake Falk, acting director of the DOT Office of Infrastructure Finance and Innovation. But only the public partners could apply for the newly available TIFIA funding.
Projects that were still awaiting TIFIA approval as of yesterday included the Port of Miami Tunnel in Florida, North Tarrant Express in Texas, the Jackson Airport Parkway in Mississippi, and Transbay Terminal in California, according to TIFIA records.
The DOT had not yet received any applications for the newly available TIFIA funds, Falk said, possibly because the program's requirements were announced by the DOT only two weeks ago.
Applications are due Sept. 15. The recipients will be announced by Feb. 17, the DOT said.
Patrick Temple-West contributed to this story.