Private Activity Bonds
The U.S. Department of Transportation (USDOT) Private Activity Bonds (PABs) Program is a key financing tool to support private sector participation and investment in critical transportation infrastructure projects nationwide. Public-private partnerships (P3s) generate new sources of funding and financing (private equity and debt) as well as efficiency and innovation in project design and delivery. Providing private sector infrastructure developers and operators with access to tax-exempt debt lowers the cost of capital for these large and expensive projects, enhancing their investment prospects.
As a tax-exempt debt instrument1, PABs offer a financing option at a lower cost than comparable taxable bonds for a range of transportation projects that are privately developed, built, financed, operated, and/or maintained utilizing P3 project delivery methods. The types of projects that qualify for PABs that USDOT allocates include a broad range of surface transportation projects, including highways, passenger rail, and surface freight transfer facilities. Please see Private Activity Bonds - Eligibility for more detailed information.
Most PAB applications are submitted by State DOTs early in a P3 procurement process on behalf of the to-be-selected private developer. The approved allocations provide firms bidding for the project with assurance that this low-cost financing will be available to make the project more affordable. The PABs that USDOT allocates to projects are issued on capital markets by state/local (i.e., public sector) conduit agencies on behalf of the private developers who are responsible for debt repayment from either the project-generated revenues or from the availability payments they receive from the project owner/grantor. As such, this financing tool is not a form of federal financial assistance. Please see Private Activity Bonds - Applications for more information about applying.
Examples of projects that benefited from the PABs Program include high-speed commuter and passenger rail lines, urban transit, and thousands of miles of new express/managed lanes throughout the country. These projects provide the traveling public with fast and comfortable mobility options, reducing congestion on the nation’s road network. PABs have also financed old bridge replacements and a transfer facility supporting the movement of cargo and goods from rail to truck and truck to rail.
The USDOT is authorized to allocate up to $30 billion in PABs. Please see Private Activity Bonds - Allocations for all allocations to date.
Allocations (as of April 1, 2025)
- Total authorized: $30 billion
- Total allocated and issued: $20.2 billion
- Total allocated and yet-to-be issued: $7.4 billion
- Total currently available to be allocated: $2.4 billion
Private Activity Bond Resources
Federal Register Notice
https://www.gpo.gov/fdsys/pkg/FR-2006-01-05/pdf/E5-8306.pdf
View the Federal Register notice inviting comments on and applications for Authority for Tax-Exempt Financing of Highway Projects and Rail-Truck Transfer Facilities.
Federal Register Docket
https://www.gpo.gov/fdsys/pkg/FR-2006-01-05/html/E5-8306.htm
This location provides background documents and comments received on the Federal Register Notice. It is updated as new documentation and comments are received.
SAFETEA-LU Fact Sheets, Guidance, and Regulations
http://www.fhwa.dot.gov/safetealu/reference.htm
To view resource materials on Private Activity Bonds, use this link and navigate to the entry for Section 11143 Tax-Exempt Financing of Highway Projects and Rail-Truck Transfer Facilities.
1Under Section 103(a) of the Internal Revenue Code, interest on qualified private activity bonds (similarly to governmental bonds issued by states and local governments) is not taxed by the Federal government. This feature makes such bonds more attractive for purchase. Lenders are willing to accept a lower interest rate on the bond, which lowers the cost of borrowing for the issuer.