These FAQs were updated in January 2017.
INTRODUCTION TO TIFIA
- Why was the TIFIA Program created?
- What types of credit assistance does the TIFIA Program provide?
- Who is responsible for implementing the TIFIA Program?
- How much funding is available for the TIFIA Program?
TERMS AND FUNDING OF TIFIA CREDIT INSTRUMENTS
- What is the maximum maturity of a TIFIA credit instrument?
- Is it possible to defer the payment of debt service on TIFIA credit instruments?
- What eligible project costs can TIFIA credit instruments be used to support?
- What types of projects may receive assistance through the TIFIA Program?
- What types of entities are eligible to apply for TIFIA credit instruments?
- Are there specific cost threshold requirements for projects receiving TIFIA credit instruments?
- Are there additional threshold requirements other than project cost that projects must meet before being considered for TIFIA credit assistance?
- What environmental requirements must be met for a project to qualify to receive TIFIA credit assistance?
- Are rating opinions required for a project receiving TIFIA credit assistance?
- Does the TIFIA Program require reimbursement for certain of its expenses?
- What does the TIFIA application process involve?
TRANSACTION DOCUMENTS AND ONGOING MONITORING REQUIREMENTS
- What is a TIFIA term sheet?
- What are the contents of a typical term sheet for a TIFIA credit instrument?
- What is a TIFIA credit agreement?
- What are the contents of a typical TIFIA credit agreement?
- Where can I find answers to other questions that I may have regarding the TIFIA Program?
INTRODUCTION TO TIFIA
Why was the TIFIA Program created?
TIFIA was created because state and local governments that sought to finance large-scale transportation projects with tolls and other forms of user-backed revenue often had difficulty obtaining financing at reasonable rates due to the uncertainties associated with these revenue streams. Tolls and other project-based revenues are difficult to predict, particularly for new facilities. Although tolls can become a predictable revenue source over the long-term, it is difficult to estimate how many road users will pay tolls, particularly during the initial "ramp-up" years after construction of a new facility. Similarly, innovative revenue sources, such as proceeds from tax increment financing, are difficult to predict. TIFIA credit assistance is often available on more advantageous terms than in the financial market, making it possible to obtain financing for needed projects when it might not otherwise be possible.
What types of credit assistance does the TIFIA Program provide?
The TIFIA credit program (the TIFIA Program) offers three distinct types of financial assistance designed to address the varying requirements of projects throughout their life cycles:
- Secured (Direct) Loan. Offers flexible repayment terms and provides combined construction and permanent financing of capital costs. Maximum term of 35 years from substantial completion or the useful life of the project being financed by TIFIA, whichever is less.1 Repayments can start up to five years after substantial completion to allow time for facility construction and ramp-up.2
- Loan Guarantee. Provides full-faith-and-credit guarantees by the Federal Government and guarantees a borrower's repayments to non-Federal lender. Loan repayments to a lender must commence no later than five years after substantial completion of project.3
- Standby Line of Credit. Represents a secondary source of funding in the form of a contingent Federal loan to supplement project revenues, if needed, during the first 10 years of project operations, available up to 10 years after substantial completion of project.4
The TIFIA credit facility, which must have a lien on par with senior creditors in the event of bankruptcy, liquidation or insolvency, can be subordinate as to cash flows absent such an event.5 The amount of Federal credit assistance may not exceed 49 percent of anticipated eligible project costs for a TIFIA secured loan6 and 33 percent for a TIFIA standby line of credit.7
Who is responsible for implementing the TIFIA Program?
Implementation of the TIFIA Program within the U.S. Department of Transportation (USDOT) is the responsibility of the Secretary of Transportation (Secretary). A thirteen-member USDOT Credit Council provides policy direction and makes recommendations to the Secretary regarding the selection of projects for TIFIA credit assistance. USDOT Credit Council members include six representatives from the Office of the Secretary of Transportation (OST): the Deputy Secretary of Transportation (Chair), the Assistant Secretary for Budget and Programs (Vice-Chair); the Under Secretary of Transportation for Policy; the General Counsel; the Assistant Secretary for Transportation Policy; and the Director of the Office of Small and Disadvantaged Business Utilization. The Administrators of the Federal Highway Administration (FHWA), the Federal Transit Administration (FTA), the Federal Railroad Administration (FRA), and the Maritime Administration (MARAD) also sit on the USDOT Credit Council. Additionally, at-large members to the USDOT Credit Council (USDOT employees designated by the Secretary of Transportation) comprise the other three members.
The Office of the Assistant Secretary for Budget and Programs and Chief Financial Officer oversees the TIFIA Program and the Joint Program Office on behalf of the Secretary, including the evaluation of individual projects, and provides overall policy direction and program decisions for the TIFIA Program. Final approval of TIFIA credit assistance is reserved for the Secretary.
How much funding is available for the TIFIA Program?
The TIFIA Program is governed by the Federal Credit Reform Act of 1990 (FCRA), which requires the USDOT to establish a capital reserve, or "subsidy amount," to cover expected credit losses before it can provide TIFIA credit assistance. Congress places limits on the annual subsidy amount available. The FAST Act authorized $275 million in FY 2016 funds, $275 million in FY 2017 funds, $285 million in FY 2018 funds, $300 million in FY 2019 funds, and $300 million in FY 2020 funds in TIFIA budget authority from the Highway Trust Fund to pay the subsidy cost of TIFIA credit assistance.
Additional funds may also be available from budget authority carried over from previous fiscal years. Any budget authority not obligated in the fiscal year for which it is authorized remains available for obligation in subsequent years. The TIFIA budget authority is subject to an annual obligation limitation that may be established in appropriations law. Like all funds subject to the annual Federal-aid obligation ceiling, the amount of TIFIA budget authority available in a given year may be less than the amount authorized for that fiscal year.
TERMS AND FUNDING OF TIFIA CREDIT INSTRUMENTS
What is the maximum maturity of a TIFIA credit instrument?
The maximum maturity of all TIFIA credit instruments is the lesser of: (i) 35 years after a project's substantial completion or (ii) the useful life of the project being financed by TIFIA.8
Is it possible to defer the payment of debt service on TIFIA credit instruments?
Yes, TIFIA repayments can be deferred for up to five years after substantial completion of a project, but such a deferral is at the discretion of the USDOT.9 The decision as to whether to grant such a deferral will be based on the projected cash flows, nature of the revenue pledge and overall project economics and financing structure. In many cases TIFIA credit instruments are junior ( i.e., subordinate) to the project's capital markets or commercial bank debt in the project's cash flow. However, in the event of bankruptcy, insolvency, or liquidation, the USDOT is required by statute to have a parity lien with respect to senior creditors. The credit agreement will clearly specify the USDOT's interest in the pledged security relative to other creditors.10
The figure below shows a typical repayment structure for a TIFIA credit instrument. In this case, the USDOT has granted a deferral of the first TIFIA payment until five years into the operation of the project and after substantial completion. This is midway through the initial 10-year ramp-up period. The figure shows a maximum TIFIA term, with the credit being repaid in full 35 years after the completion of construction.
Terms and Funding Timeline
What eligible project costs can TIFIA credit instruments be used to support?
The TIFIA statute, codified at 23 U.S.C. §601 et seq, defines eligible project costs as those expenses paid in connection with a project, including the cost of:
- Development phase activities, including planning, feasibility analysis, revenue forecasting, environmental review, permitting, preliminary engineering and design work, and other pre-construction activities;
- Construction, reconstruction, rehabilitation, replacement, and acquisition of real property (including land related to the project and improvements to land), environmental mitigation, construction contingencies, and acquisition of equipment; and
- Capitalized interest necessary to meet market requirements, reasonably required reserve funds, capital issuance expenses, and other carrying costs during construction.11
Capitalized interest on TIFIA credit assistance may not be included as an eligible project cost. Applicants may not include any of the fees described below - or any expenses associated with the application process (such as charges associated with obtaining the required preliminary rating opinion letter) - among eligible project costs for the purpose of calculating the maximum TIFIA credit assistance.12
What types of projects may receive assistance through the TIFIA Program?
The USDOT has provided TIFIA credit assistance across a broad range of project types, including a variety of transportation modes and the surface transportation components of multifaceted development and redevelopment projects. Generally, eligible projects include highway projects, passenger rail projects, transit and intermodal projects, private rail facilities providing public benefit to highway users, surface transportation infrastructure modifications necessary to facilitate direct intermodal transfer and access into and out of a port terminal, intelligent transportation systems (ITS), surface transportation projects eligible for Federal assistance under title 23 or chapter 53 of title 49 of the U.S. Code, international bridges and tunnels, and intercity passenger bus or rail facilities and vehicles.
- Eligible highway facilities include interstates, state highways, bridges, toll roads, international bridges or tunnels, and any other type of facility eligible for grant assistance under title 23, the highways title of the U.S. Code (23 U.S.C.). This also includes a category specifically permitted under the TIFIA statute, i.e., a project for an international bridge or tunnel for which an international entity authorized under Federal or State law is responsible.
- Eligible transit projects include the design and construction of stations, track, and other transit-related infrastructure, purchase of transit vehicles, and any other type of project that is eligible for grant assistance under the transit title, Chapter 53 of title 49 of the U.S. Code (49 U.S.C.), including the installation of positive train control systems. Additionally, intercity bus vehicles and facilities are eligible to receive TIFIA credit assistance.
- Rail projects involving the design and construction of intercity passenger rail facilities or the procurement of intercity passenger rail vehicles are eligible for TIFIA credit assistance.
- Public freight rail facilities, private facilities providing public benefit for highway users by way of direct freight interchange between highway and rail carriers, intermodal freight transfer facilities, projects that provide access to any of the foregoing facilities, and service improvements (including capital investments for intelligent transportation systems) at such facilities, are also eligible for TIFIA credit assistance. In addition, a logical series of such projects with the common objective of improving the flow of goods can be combined in order to reach the minimum cost threshold for eligibility.
- Projects located within the boundary of a port terminal are also eligible to receive TIFIA credit assistance, so long as the project is limited to only such surface transportation infrastructure modifications as are necessary to facilitate direct intermodal interchange, transfer, and access into and out of the port.
The FAST Act maintains eligibility for related improvement projects grouped together, so long as the individual components are eligible and the related projects are secured by a common pledge. In addition, surface transportation projects principally involving the installation of intelligent transportation systems are eligible for TIFIA credit assistance.13
Rural Project Assistance: The TIFIA statute provides two different forms of assistance to rural infrastructure projects. The FAST Act expanded TIFIA eligibility to include capitalization of rural projects funds within State Infrastructure Banks (SIBs), and it continued the DOT’s ability to offer reduced interest rates to Rural Projects.
Transit-Oriented Development: The FAST Act expanded eligibility to include projects to improve or construct public infrastructure that are located within walking distance of, and accessible to, a fixed guideway transit facility, passenger rail station, intercity bus station, or intermodal facility, including a transportation, public utility, or capital project described in 49 U.S.C. §5302(3)(G)(v), and related infrastructure (collectively, Transit-Oriented Development Projects or TOD Projects). 49 U.S.C. §5302(3)(G)(v) sets forth a list of specific elements that would generally be included in a TOD Project once the DOT has determined a TOD Project is eligible. Subject to project-specific review, eligible elements could include: property acquisition; demolition of existing structures; site preparation; utilities; building foundations; walkways; pedestrian and bicycle access to a public transportation facility; construction, renovation, and improvement of intercity bus and intercity rail stations and terminals; renovation and improvement of historic transportation facilities; open space; safety and security equipment and facilities; facilities that incorporate community services such as daycare or health care; a capital project for, and improving, equipment or a facility for an intermodal transfer facility or transportation mall; and construction of space for commercial uses. The DOT may also fund “related infrastructure;” however, the DOT will prioritize the use of TIFIA funds for TOD projects that are significantly integrated into the related transportation facility.
What types of entities are eligible to apply for TIFIA credit instruments?
Public or private entities seeking to finance, design, construct, own, or operate an eligible surface transportation project may apply for TIFIA credit assistance. Examples of such entities include state departments of transportation; local governments; transit agencies; special authorities; special districts; railroad companies; and private firms or consortia that may include companies specializing in engineering, construction, materials, and/or the operation of transportation facilities.
In evaluating an applicant's creditworthiness, the USDOT looks for relevant experience, strong qualifications, a sound project approach, and financial stability, as each of these items ultimately has bearing on the project's creditworthiness. Applicants also must meet various Federal standards as well as modal-specific requirements among other factors to receive TIFIA credit assistance.14
In the context of a public-private partnership, where multiple bidders may be competing for a concession such that the obligor has not yet been identified, the procuring agency must submit the project's Letter of Interest on behalf of the eventual obligor.15 The USDOT will not consider Letters of Interest from entities that have not obtained rights to develop the project.16
Are there specific cost threshold requirements for projects receiving TIFIA credit instruments?
Yes, projects must have eligible costs reasonably anticipated to total at least $50 million ($10 million for rural infrastructure projects) to be considered for TIFIA credit instruments, or alternatively, eligible project costs must equal 33.33 percent or more of the state's Federal-aid highway apportionments for the most recently completed fiscal year, whichever is less.17 The USDOT revisits apportionments to states annually, to determine if any states qualify under the alternative test.
The FAST Act set a lower eligible cost threshold for ITS projects, TOD projects, rural projects, and local infrastructure projects.
- For projects that principally involve the installation of ITS, eligible project costs must be reasonably anticipated to total at least $15 million. This $15 million threshold applies only to projects for which the ITS component is the central feature of the project and not an ancillary component.
- For TOD projects and local infrastructure projects, eligible project costs must be reasonably anticipated to total at least $10 million. Local infrastructure projects are projects (i) for which the sponsor is a local government or instrumentality or public authority, (ii) that are located on a facility owned by a local government, and (iii) for which a local government is substantially involved in its development, in the determination of the Secretary.
- For rural projects, eligible project costs must be reasonably anticipated to total at least $10 million but not exceed $100 million.
Are there additional threshold requirements other than project cost that projects must meet before being considered for TIFIA credit assistance?
Yes, there are four other threshold requirements in addition to project cost thresholds that all TIFIA projects must meet to be considered for TIFIA credit assistance.
- Application Submission. Each applicant seeking TIFIA credit assistance must demonstrate its ability to meet the requirements related to satisfying project fundamentals and addressing the statutory TIFIA eligibility requirements at the Letter of Interest stage before being invited to submit a formal TIFIA Application to the USDOT.27
- Transportation Planning Process. The TIFIA statute conditions a project's receipt of TIFIA credit assistance on the project's satisfaction of all applicable planning and programming requirements.28 That generally means inclusion in both the state's long-range transportation plan and the approved State Transportation Improvement Program (STIP).
State transportation plans extend as far as 20 years into the future and are often geared to setting general priorities rather than listing individual projects. Therefore, at the time of submitting an application, each applicant must certify that the proposed project is consistent with the transportation plan(s) of the affected state(s).29 For projects in metropolitan areas, the applicant must also demonstrate that the project is or can be included in the metropolitan transportation plan.30
In contrast to the long-range state transportation plan, the STIP focuses on specific projects to be funded in the near term; STIPs typically look ahead from three to five years. The TIFIA statute requires that the project satisfy planning and programming requirements of §134 ("Metropolitan Planning") and §135 ("Statewide Planning") of title 23, at such time as a TIFIA credit agreement is executed.31 Therefore, the applicant must demonstrate that the proposed project is part of the appropriate STIP(s) before the USDOT will select the project, issue a term sheet, and obligate funds.32
- Dedicated Revenue Sources. The TIFIA statute states that the TIFIA credit instrument shall be repayable, in whole or in part, from tolls, user fees or other dedicated revenue sources that also secure the senior project obligations.33 The USDOT interprets "dedicated revenue sources" to include such levies as tolls, user fees, special assessments, tax increment financing, and any portion of a tax or fee that produces revenues that are pledged for the purpose of retiring debt on the project. The Secretary may accept general obligation pledges or corporate promissory pledges and will determine the acceptability of other pledges or forms of collateral as dedicated revenue sources on a case-by-case basis. Without exception, the Secretary will not accept a pledge of Federal funds, regardless of source, as security for the TIFIA credit instrument.34
- Public Approval of Privately Sponsored Project. The final threshold requirement requires any private entity applying for TIFIA credit assistance to demonstrate state support for the project through the project's inclusion in the state's planning documents (the long-range plan and the STIP), as noted above.35
What environmental requirements must be met for a project to qualify to receive TIFIA credit assistance?
To comply with the National Environmental Policy Act (NEPA), each proposed TIFIA project must be evaluated to determine its impact on the environment. The USDOT will not obligate funds for a project until it has received a final agency decision, including (if necessary) a Record of Decision (ROD).36 The three scenarios for addressing NEPA requirements are outlined below.
- Categorical Exclusion. Some projects, such as minor widening, rehabilitation, safety upgrading, or bus replacements, do not individually or cumulatively affect the environment significantly. These projects are termed Categorical Exclusions, and thus are exempt from the requirement to prepare an Environmental Assessment or an Environmental Impact Statement (EIS).
- Environmental Assessment. An Environmental Assessment is usually prepared for a project that does not qualify as a Categorical Exclusion. The Environmental Assessment may reveal that the project's impacts are not significant, in which case a Finding of No Significant Impact (FONSI) is issued for the project.
- Environmental Impact Statement and Record of Decision. Assuming that a project does not qualify for a Categorical Exclusion or FONSI, the applicant is required to prepare a draft EIS. For highway projects, this is typically done in cooperation with the state department of transportation. For major investments, the draft EIS must include an analysis of various alternative solutions.
A variety of agencies and the public at large have the opportunity to comment on the draft EIS. These comments are addressed during the preparation of the final EIS. This second iteration ensures that adequate consideration has been given to public comments and the anticipated effects of the project. Depending on the nature of the project, the FHWA, FRA, FTA, or MARAD issues a ROD to signify Federal approval of the final EIS.
To ensure project readiness,37 the applicant must have circulated a draft EIS at the time it submits an application, unless the project has received either a FONSI or a Categorical Exclusion. The USDOT will not obligate funds for a project before a ROD (if required, or the equivalent final agency decision) has been issued for that project.38
Are rating opinions required for a project receiving TIFIA credit assistance?
Yes, the TIFIA statute requires each project sponsor to provide a preliminary rating opinion letter from at least one Nationally Recognized Statistical Rating Organization (NRSRO), indicating that the project's senior obligations (which may be the TIFIA credit instrument) have the potential to achieve an investment grade rating.39 The statute also requires a preliminary rating opinion on the TIFIA credit instrument.40 Before the USDOT completes reviewing a Letter of Interest and rendering a determination of eligibility, the USDOT will request that a project sponsor provide a preliminary rating opinion letter.
Prior to execution of a TIFIA credit instrument, the senior debt obligations for each project receiving TIFIA credit assistance must obtain investment grade ratings from at least two NRSROs, and the TIFIA debt obligations must obtain ratings from at least two NRSROs, unless the total amount of the debt is less than $75 million, in which case only one investment grade rating is required for the senior debt obligations and one rating for the TIFIA debt obligations.41 The TIFIA debt cannot exceed the amount of the senior obligations unless the TIFIA credit assistance receives two investment grade ratings.42 If the TIFIA credit instrument is proposed as the senior debt, then it must receive two investment grade ratings, unless the total amount of the debt is less than $75 million, in which case only one investment grade rating is required.43
According to title 23, "the term 'rating agency' means a credit rating agency registered with the Securities and Exchange Commission as a nationally recognized statistical rating organization (as that term is defined in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)))."44
Throughout the life of the TIFIA credit instrument, the borrower must obtain annually, at no cost to the Federal Government, current credit evaluations of the project, the project obligations, and the Federal credit instrument.45 The current credit evaluations must be performed by a NRSRO.46 By "current credit evaluation," the USDOT means: (i) in the case of a project with a published rating, either a current rating or the borrower's certification stating that the rating and outlook are unchanged from the previous year and (ii) in the case of a project without a published rating, a current rating of the project obligations and the Federal credit instrument.
Does the TIFIA Program require reimbursement for certain of its expenses?
Yes, the USDOT currently requires TIFIA participants to reimburse the government for its out-of-pocket costs for its outside legal counsel and financial advisors needed to negotiate and close the credit agreement. Such fees are not considered as eligible project costs.47
- There is no fee to submit a Letter of Interest. However, the project sponsor must pay the USDOT in the amount of $250,000 to enable the USDOT to hire financial and, as appropriate, legal advisors as part of the Letter of Interest review process. Additionally, for projects that have multiple sponsors pursuing different loans and/or credit structures, each entity would be required to pay the $250,000. This amount is due upon request by the USDOT.
- For successful applicants, the initial $250,000 paid by the project sponsor(s) as well as any additional costs reimbursed prior to financial close will be credited toward final payment of the transaction (credit processing) fee, to be assessed at financial close or shortly thereafter. Historically, the amount of the transaction (credit processing) fee has been between approximately $300,000 and $500,000. However, the amount of this fee may be significantly greater depending on the complexity of the project's financing structure and the extent of related loan documents, such as the intercreditor agreement, compliance agreements, equity funding agreements, etc. The transaction (credit processing) fee and the initial $250,000 together are equal to the actual costs incurred by the USDOT in negotiating the credit agreement through execution of the credit agreement(s) and satisfaction of all funding requirements of those agreements. These amounts reimburse the government for its out-of-pocket costs for its outside legal counsel and financial advisors needed to negotiate and close the credit agreement. For projects seeking more than $1 billion in TIFIA credit assistance, two financial advisors will be hired to produce independent financial analyses and recommendations acceptable in form and content to the USDOT. The costs of the additional financial advisor will be included in the total transaction fees assessed on the proposed borrower. By submitting a Letter of Interest, the proposed borrower acknowledges that it is responsible for payment of this fee regardless of whether the credit agreement is executed.
- An annual servicing fee, indexed to inflation and currently approximately $13,000, for each credit instrument approved, due by November 15 each year. The servicing fee will be collected based on the USDOT's out-of-pocket costs to administer the credit instruments, including accounting, collections, document maintenance, and financial reporting.
- Project monitoring fees are charged to borrowers in cases where the USDOT incurs costs in connection with monitoring the performance of a project, the enforcement of credit agreement provisions, amendments to the credit agreement and related documents, and other performance-related activities. The USDOT includes a provision requiring the borrower to reimburse the USDOT for such costs in each TIFIA credit agreement.
The USDOT announces periodic changes to the types and amounts of fees for the TIFIA Program in the Federal Register. Check to ensure that you are paying the correct fee in the event that this FAQ is not up to date.
What does the TIFIA application process involve?
All projects wishing to apply for TIFIA credit assistance must first submit a Letter of Interest (LOI) using the most current form.48 Pursuant to the FAST Act, LOIs may be submitted on a rolling basis (i.e., at any time), though the Bureau recommends that project sponsors consult the Bureau before submitting LOIs to ensure that the relevant programmatic requirements are met and initial risk assessments are completed. This ensures that all key project elements are in place for an efficient underwriting process.
Projects that previously submitted Letters of Interest for a prior fiscal year's funding, but have not previously been asked by USDOT to submit an application, must submit a new Letter of Interest. In the context of a public-private partnership, where multiple bidders may be competing for a concession such that the obligor has not yet been identified, the procuring agency must submit the project's Letter of Interest on behalf of the eventual obligor.50 The USDOT will not consider Letters of Interest from entities that have not obtained the legal rights to develop the project.51
To be considered for TIFIA credit assistance, projects must submit a Letter of Interest that: (i) describes the project and the location, purpose, and cost of the project, (ii) outlines the proposed financial plan, including the requested TIFIA credit assistance and the proposed obligor, (iii) provides a status of environmental review, (iv) provides information regarding satisfaction of other eligibility requirements of the TIFIA Program52, and (v) indicate whether the project sponsor would like to use the TIFIA streamlined application process and, if so, how the project satisfies the criteria for that process.
The USDOT will review each Letter of Interest and may contact project sponsors for clarification of specific information included in the Letter of Interest. The USDOT will notify project sponsors if the USDOT determines that their projects are not eligible, or if the USDOT will not be able to continue reviewing their Letter of Interest until eligibility requirements are addressed. If the USDOT does not determine a project to be ineligible based on its initial review, the USDOT will request additional information to supplement the Letter of Interest and complete its eligibility determination. This information may include, among other things, more detailed descriptions of the project, applicant and its organizational structure, the project's readiness to proceed, the project's financial plan (including financial model), revenue feasibility studies, and financial commitments to the project from sources other than TIFIA. Once the project satisfies the first level of review, the USDOT will also request that the applicant provide a preliminary rating opinion letter at this time and the project sponsor will be required to submit to the DOT an upfront fee to cover the DOT’s costs to procure outside financial and legal advisors (the Advisors’ Fees Upfront Payment). This fee will be used, dollar-for-dollar, to cover the actual costs incurred for services provided by the DOT’s outside financial and legal advisors in connection with the review of the Letter of Interest/Draft Application and Application and the negotiation of the transaction documents. The Advisors’ Fees Upfront Payment amount is $250,000 (subject to availability of funds for assistance for TIFIA small projects, as discussed below). Once the $250,000 has been received, the USDOT will engage an independent financial advisor to prepare a report and recommendation acceptable in form and substance to the USDOT. The USDOT may also engage an independent legal advisor to help complete its evaluation of a project's eligibility.
The increased demand on TIFIA's resources has led to the discontinuation of the practice of advancing the entire cost of financial and legal advisors engaged to assist the USDOT in determining a project's creditworthiness and overall eligibility and having those costs reimbursed to the USDOT after execution of a credit agreement. As such, upon request, project sponsors must pay the $250,000 before the USDOT hires financial and/or legal advisors as part of the Letter of Interest review process. This amount is due upon request. Additional amounts will be charged after the credit instrument is executed, including additional amounts required to fully cover TIFIA's financial and legal advisory services costs in connection with the evaluation and negotiation of the terms of TIFIA credit assistance for the project. By submitting a Letter of Interest, the applicant certifies that it will pay all required fees.
Following the initial eligibility review of the Letter of Interest and receipt of a preliminary rating opinion letter and the $250,000, the DOT will request that the potential applicant give an oral presentation to the DOT, followed by a question and answer session.
After concluding its review of each Letter of Interest and related information submitted by the project, including a preliminary rating opinion letter, along with the independent financial analysis report from the USDOT's financial advisor, and after receipt of the $250,000 to enable the DOT to hire outside financial and legal advisors, the USDOT will invite sponsors of eligible projects to submit complete applications. The USDOT will conduct a rolling application process where project sponsors may submit Letters of Interest at any time and the USDOT will permit project sponsors to apply once a favorable eligibility determination is made.
Depending on the mode(s) of transportation involved in the project, the USDOT may establish an evaluation team representing several offices and agencies (e.g., FHWA, FRA, FTA, MARAD, and OST) to conduct the review.
All TIFIA credit assistance will be awarded based on a project's merits and its satisfaction of TIFIA statutory requirements. When funding is available, the USDOT will issue a Notice of Funding Availability (NOFA) in the Federal Register. The implementation process generally includes the following steps:
- Letter of Interest. Each potential applicant must submit a detailed Letter of Interest using the form provided on the TIFIA web site when the project is ready to proceed.53 The Letter of Interest form has been expanded to allow applicants to describe the project, demonstrate their ability to meet the requirements related to satisfying the project fundamentals, detail how the TIFIA statutory eligibility requirements are met, and outline the proposed financial plan, including the requested TIFIA credit assistance. Applicants should submit this form electronically via email at BureauCredit@dot.gov. The USDOT will review this submission to determine whether the project meets the requirements for TIFIA participation and will contact the potential applicant subsequently to review the project's eligibility and readiness to apply for TIFIA credit assistance. The initial eligibility review of a Letter of Interest is intended to identify any major statutory, regulatory, financing or timing issues that would prevent the project from receiving TIFIA credit assistance.
- Creditworthiness Review. After concluding its initial review of the Letter of Interest and upon making a determination that the project is reasonably likely to satisfy all of the eligibility requirements of the TIFIA Program, the USDOT will conduct an in-depth creditworthiness review of the project sponsor and the proposed revenue stream. The creditworthiness review involves evaluation of the plan of finance, financial model, and feasibility of the anticipated pledged revenue. In connection with this review, the USDOT will ask project sponsors to provide any additional materials necessary to facilitate its review of the project's creditworthiness. Once the DOT has concluded that the project satisfies statutory eligibility criteria, including a preliminary review of a project's creditworthiness and satisfaction of readiness requirements, the DOT will ask a project sponsor to provide a preliminary rating opinion letter from at least one NRSRO and submit $250,000 to the DOT to reimburse it for the costs incurred for services provided by its outside financial and legal advisors in connection with the review of the TIFIA Letter of Interest and application and the negotiation of the TIFIA transaction documents.
- Oral Presentation. Following completion of the USDOT's in-depth review of the Letter of Interest and receipt of a preliminary rating opinion letter and the $250,000, the DOT will request that the potential applicant give an oral presentation on the project and its plan of finance to the DOT, followed by a question and answer session. The DOT will provide guidance regarding the structure and content of the presentation at the time of the request.
- Application. After concluding its review of the Letters of Interest and receipt of all requested materials, including a preliminary rating opinion letter and the $250,000, the USDOT will invite complete applications from projects that meet the eligibility requirements.54 An applicant may submit an application only after the TIFIA JPO confirms that the project satisfies all statutory eligibility requirements, including a full review of the creditworthiness of the project and the project's readiness. Upon receiving such notification from the USDOT, the applicant may submit its application package with all required materials. The USDOT will not review incomplete applications or applications for projects that do not satisfy TIFIA requirements.
- Notification of Completeness. No later than 30 days after the date of receipt of the application by the TIFIA Program, the USDOT will notify the applicant in writing that the application is complete or requires additional information or materials to complete the application.66
- Project Recommendation. Based upon the written application, an oral presentation, and any supplemental submission of information, USDOT staff will prepare a project evaluation and recommendation for the USDOT Credit Council.
- Project Selection. The USDOT Credit Council, in turn, provides a recommendation to the Secretary of Transportation, who makes the final determination regarding project selection. The USDOT will not obligate funds for a project that does not satisfy statutory requirements such as obtaining environmental clearances.
- Notification of Project Approval. The USDOT will notify the project sponsor regarding project approval or disapproval no more than 60 days after notifying the project sponsor that its application was complete.55
- Term Sheet Issuance, Credit Agreement Execution, and Funding Obligation. For each approved project, the USDOT will issue two documents: a term sheet, which sets forth the basic terms and conditions of TIFIA credit assistance, and a credit agreement, which is the definitive agreement between the USDOT and the borrower and specifies all the terms and conditions of the TIFIA credit assistance and authorizes disbursement of funds. Prior to execution of the credit agreement, the borrower must satisfy all program requirements - including receipt of two investment grade ratings on the project's debt obligations senior to TIFIA and two ratings on the TIFIA credit instrument itself.56
- Disbursement of Funds. For all TIFIA credit assistance, the USDOT will disburse funds only to reimburse eligible project costs upon satisfaction of the conditions precedent set forth in the credit agreement.57
What eligibility requirements are involved in the award of TIFIA credit instruments?
The TIFIA Program assesses the strengths of applications in meeting the following eligibility criteria provided in MAP-21:
- Creditworthiness: The creditworthiness of the project. This includes a demonstrated capacity to repay the TIFIA credit assistance as well as a determination that the project has appropriate security features, such as appropriate coverage ratios, rate covenants and reserves, as applicable. Specifically, projects will need to demonstrate the following:
- Ability to satisfy applicable creditworthiness standards;
- Rate covenant, if applicable;
- Adequate coverage requirements to ensure repayment; and
- Ability to obtain investment grade ratings on senior debt.58
- Foster partnerships that attract public and private investment for the project: The extent to which assistance would foster innovative public-private partnerships and attract private debt or equity investment. 59
- Ability to proceed at an earlier date or reduced lifecycle costs (including debt service costs): The likelihood that assistance would enable the project to proceed at an earlier date than the project would otherwise be possible.60 This includes demonstrating that traditional sources of financing are not available at feasible rates, or that the costs of traditional financing would constrain the sponsor's ability to deliver the project, or that delivery of this project through traditional financing approaches would constrain their ability to deliver additional components of their capital programs.
- Reduces contribution of Federal grant assistance for the project: The extent to which assistance would reduce the contribution of Federal grant assistance to the project.61
- Project readiness: Construction contracting process can commence no more than 90 days from execution of a TIFIA credit instrument. 62
TRANSACTION DOCUMENTS AND ONGOING MONITORING REQUIREMENTS
What is a TIFIA term sheet?
The term sheet is a contractual agreement between the USDOT and the borrower that sets forth certain business terms and conditions of TIFIA credit assistance for the project. The USDOT's issuance of this document triggers the USDOT's obligation (i.e., legal commitment) of budget authority, but no disbursements are made.63
What are the contents of a typical term sheet for a TIFIA credit instrument?
Term sheets serve primarily as obligating instruments for TIFIA credit assistance. Therefore, they include only basic terms and conditions related to the USDOT's provision of TIFIA credit assistance. Typically, the following information is included in every TIFIA term sheet:
- Parties to the agreement (e.g., lender, borrower, and guaranteed lender, as applicable)
- Type(s) of credit instrument (i.e., secured loan, loan guarantee, or line of credit)
- Description of the project
- Estimated total project costs and total TIFIA-eligible project costs
- Maximum amount of TIFIA credit assistance
- Method for establishing the interest rate
- Estimated final maturity date
- Source of payment and security, including lien structure and TIFIA credit instrument priority
- Requirement to reimburse the USDOT for credit processing fees
- Conditions, if applicable, for execution of a credit agreement
What is a TIFIA credit agreement?
The TIFIA credit agreement is the definitive agreement between the USDOT and the borrower (and the guaranteed lender, if applicable). It specifies all terms and conditions of the TIFIA credit assistance and authorizes the disbursement of TIFIA credit assistance to the project.
What are the contents of a typical TIFIA credit agreement?
The contents of TIFIA credit agreements include both standard provisions and transaction-specific provisions. The borrower and the USDOT will execute the credit agreement for a secured loan or line of credit; the guaranteed lender, the USDOT, and the borrower will execute the credit agreement for a loan guarantee. Additionally, the guaranteed lender will execute a separate loan agreement with the borrower, and the borrower will execute a borrower's certificate, compliance, and loan agreement with the USDOT. Depending on the nature of the transaction, additional documents, such as an intercreditor agreement, may also be necessary.
MAP-21 expands eligibility to include related improvement projects grouped together, so long as the individual components are eligible and the related projects are secured by a common pledge.64
The USDOT will also require the borrower to provide copies of the bond documents and other agreement materials to the flow of funds or to USDOT's security for its review of the project's creditworthiness.65 The USDOT may also review any disclosure regarding the TIFIA transaction that the borrower includes in the offering documents.
Generally, borrowers can expect credit agreements to include the items required for the TIFIA term sheet, as well as the following:
- Security features and additional terms
- Detailed description of pledged security (e.g., rate covenants)
- Flow of funds
- Repayment terms, including amortization schedule and final maturity
- Representations and warranties
- Borrower covenants
- Annual disbursement schedule and conditions to draw funds
- Financial plan requirements
- Monitoring and reporting requirements
The credit agreement also includes a form of requisition for disbursements and a form of note. Each borrower under a TIFIA secured loan executes a note evidencing the obligation to repay the loan. The template TIFIA Loan Indicative Term Sheet and Loan Agreement have been updated to reflect current USDOT's credit policies.
1. 23 U.S.C. §603(b)(5).
2. 23 U.S.C. §603(c)(2).
3. 23 U.S.C. §603(c)(2), (e)(2).
4. 23 U.S.C. §604(b)(6).
5. 23 U.S.C. §§603(b)(6), (e)(2) and 604(b)(8).
6. 23 U.S.C. §603(b)(2).
7. 23 U.S.C. §604(b)(2).
8. 23 U.S.C. §§603(b)(5), (e)(2) and 604(c)(2)(B).
9. 23 U.S.C. §§603(c)(2), (c)(3), (e)(2) and 604(c)(2).
10. 23 U.S.C. §§603(b)(6), (e)(2) and 604(b)(8).
11. 23 U.S.C. §601(a)(2).
12. 49 C.F.R. §§80.5(b) and 80.17(b).
13. See 23 U.S.C. §603(a)(12) for a list of project eligibility requirements.
14. 23 U.S.C. §602(c).
15. 23 U.S.C. §602(a)(1)(A), (a)(8).
16. 23 U.S.C. §602(a)(10).
17. 23 U.S.C. §602(a)(5)(A).
18. 23 U.S.C. §602(a)(5)(A).
19. 23 U.S.C. §601(a)(15).
20. 23 U.S.C. §608(a)(3)(A).
21. 23 U.S.C. §603(b)(4)(B).
22. 23 U.S.C. §602(a)(5)(B).
23. 23 U.S.C. §603(b)(2).
24. 23 U.S.C. §604(b)(2).
25. 49 C.F.R. §80.5(a).
26. 23 U.S.C. §603(b)(9).
27. 23 U.S.C. §602(a)(1), (a)(4).
28. 23 U.S.C. §602(a)(3).
29. 49 C.F.R. §§80.7(b)(1) and 80.13(a)(1).
30. 49 C.F.R. §§80.7(b)(1) and 80.13(a)(1).
31. 23 U.S.C. §602(a)(3).
32. 49 C.F.R. §§80.7(b)(1) and 80.13(a)(1).
33. 23 U.S.C. §602(a)(6).
34. 49 C.F.R. §80.13(c).
35. 23 U.S.C. §602(a)(7).
36. 23 U.S.C. §602(c)(2).
37. 23 U.S.C. §602(a)(10).
38. 23 U.S.C. §602(c)(2).
39. 23 U.S.C. §602(b)(3).
40. 23 U.S.C. §602(b)(3).
41. 23 U.S.C. §602(a)(2)(A).
42. 23 U.S.C. §603(b)(2).
43. 23 U.S.C. §602(a)(2)(B).
45. 49 C.F.R. §80.11(d).
46. 49 C.F.R. §80.11(d).
47. 49 C.F.R. §80.17(b).
48. 23 U.S.C. §602(a)(1)(A).
49. 23 U.S.C. §602(b)(1).
50. 23 U.S.C. §602(a)(1)(A), (a)(8).
51. 23 U.S.C. §602(a)(10).
52. 23 U.S.C. §601(a)(6).
53. 23 U.S.C. §602(a)(1)(A).
54. 23 U.S.C. §602(a)(1)(A) and (a)(4).
55. 23 U.S.C. §602(d).
56. 23 U.S.C. §602(a)(2).
57. 23 U.S.C. §§603(a), (e)(2) and 604(a)(2).
58. 23 U.S.C. §602(a)(2).
59. 23 U.S.C. §602(a)(9)(A).
60. 23 U.S.C. §602(a)(9)(B).
61. 23 U.S.C. §602(a)(9)(C).
62. 23 U.S.C. §602(a)(10).
63. 23 U.S.C. §608(b)(1).
64. 23 U.S.C. §601(a)(12)(D)(iv).
65. 23 U.S.C. §602(a)(2).
66. 23 U.S.C. §602(d)(1).