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Chapter 1: Introduction to the Build America Bureau

The National Surface Transportation and Innovative Finance Bureau (referenced hereafter as the Build America Bureau or the Bureau) was established by the Secretary of Transportation on July 20, 2016, in accordance with the Fixing America’s Surface Transportation (FAST) Act (Public Law 114-94).

The Build America Bureau is responsible for driving transportation infrastructure development projects in the United States.  The Bureau streamlines credit opportunities and grants and provides access to the credit and grant programs with more speed and transparency, while also providing technical assistance and encouraging innovative best practices in project planning, financing, delivery, and monitoring.  To achieve this vision, the Bureau draws upon the full resources of the U.S. Department of Transportation (DOT) to best utilize the expertise of all the modes within the Department while promoting a culture of innovation and customer service.  This includes the administration of the application processes for the following programs:

  • The Transportation Infrastructure Finance and Innovation Act of 1998 (TIFIA) credit program, and
  • The Railroad Rehabilitation and Improvement Financing (RRIF) credit program.

The RRIF and TIFIA credit programs (together, the Credit Programs) operates under separate statutory authority, though as the implementation of the Bureau continues, we envision that the application processes described in this Program Guide are being consolidated and refined.  This Program Guide, written for prospective TIFIA and RRIF applicants, describes how the Bureau’s Credit Programs Office currently administers the TIFIA and RRIF Programs. 

The Transportation Infrastructure Finance and Innovation Act of 1998 established a Federal credit program (the TIFIA Program) for eligible transportation projects under which the DOT may provide three forms of credit assistance – secured (direct) loans, loan guarantees, and standby lines of credit.  The TIFIA Program’s fundamental goal is to leverage Federal funds by attracting substantial private and other non-Federal co-investment to support critical improvements to the nation’s surface transportation system.  The DOT awards TIFIA credit assistance to eligible applicants, which include state departments of transportation, transit operators, special authorities, local governments, and private entities.

The Transportation Equity Act for the 21st Century (TEA 21) established the Railroad Rehabilitation and Improvement Financing Program (the RRIF Program).  The RRIF Program provides direct loans and loan guarantees to finance the development of railroad infrastructure.  Under this program, the DOT is authorized to provide direct loans and loan guarantees up to $35.0 billion to finance development of railroad infrastructure. Not less than $7.0 billion is reserved for projects benefiting freight railroads other than Class I carriers.  The DOT awards RRIF credit assistance to eligible applicants, which include state and local governments, interstate compacts, government sponsored authorities and corporations, railroads, limited option rail freight shippers that own or operate a plant or other facility, and joint ventures that include at least one of the entities previously listed.

This chapter introduces each Credit Program’s objectives and provides an overview of how each Credit Program operates.  Chapter 2 details the required terms for individual credit instruments and describes how these instruments are funded.  Chapter 3 describes the eligibility requirements concerning types of projects, activities, cost limits, and applicants.  Chapter 4 describes the process by which potential applicants may apply for credit assistance.  Chapter 5 describes the review process that the DOT uses to determine who receives credit assistance.  Chapter 6 discusses the contractual documents, prerequisites for executing such documents, and the ongoing monitoring requirements.  Chapter 7 discusses special issues related to loan guarantees.

Electronic copies of this Program Guide can be found on the Bureau website located at https://www.transportation.gov/buildamerica, as can all application materials and additional information regarding the Credit Programs.

Legislative Reference

The Transportation Infrastructure Finance and Innovation Act of 1998 was enacted as part of TEA 21 (Public Law 105-178, §§1501-04), as amended in 1998 by the TEA 21 Restoration Act (Title IX of Public Law 105-206), was further amended in 2005 by the Safe, Accountable, Flexible, Efficient Transportation Equity Act:  A Legacy for Users (SAFETEA-LU) (Public Law 109-59), was amended and restated in 2012, by the Moving Ahead for Progress in the 21st Century Act (MAP-21) (Public Law 112-141), and most recently, was amended in 2015 by the FAST Act.  The TIFIA statute is codified within sections 601 through 609 of Title 23 of the United States Code (23 U.S.C. §§601-609), with supporting regulations appearing in part 80 of Title 49 of the Code of Federal Regulations (49 C.F.R. §80).  These documents are available at: http://www.transportation.gov/tifia/legislation-regulations.

The Railroad Rehabilitation and Improvement Financing program was created in 1998 by the TEA-21 amendments (§7203 thereof) to a predecessor loan and loan guarantee program from the 1970s set forth in Title V of the Railroad Revitalization and Regulatory Reform Act of 1976 (Public Law 94-210), and was amended in 2005 by SAFETEA-LU, was further amended in 2008 by the Rail Safety Improvement Act of 2008 (Public Law 110-432), and most recently, was amended in 2015 by the FAST Act.  The RRIF statute is codified within sections 821 through 823 of Title 45 of the United States Code (45 U.S.C. §§821-823)[1], with supporting regulations appearing in part 260 of Title 49 of the Code of Federal Regulations (49 C.F.R. §260).  These documents will be made available at https://www.transportation.gov/buildamerica.

Policy Considerations

The public policy underlying the TIFIA Program asserts that the Federal Government can perform a constructive role in supplementing, but not supplanting, existing markets for financing large transportation infrastructure projects.  Section 1502 of TEA 21 states that “a Federal credit program for projects of national significance can complement existing funding resources by filling market gaps, thereby leveraging substantial private co-investment.”  Because the TIFIA Program offers credit assistance, rather than grant funding, its potential users are infrastructure projects capable of pledging revenue streams generated through user charges or other dedicated funding sources.

A similar public policy underlies the RRIF Program.  In addition, the RRIF Program dedicates funding to providing vital access to financing for shortline and regional railroads, which have historically lacked the access to private financing.

Identifying a constructive role for Federal credit assistance begins with the acknowledgement that, when compared to most investors, the Federal Government has a naturally longer-term investment horizon, which enables it to more readily absorb the relatively short-term risks of project financings.  Absent typical capital market investor concerns regarding timing of payments and financial liquidity, the Federal Government can become the “patient investor” whose long-term view of asset returns enables the project’s non-Federal financial partners to meet their investment goals, allowing the borrower to receive a more favorable financing package.

Funding Levels

The Credit Programs are subject to the Federal Credit Reform Act of 1990, which requires the DOT to establish a capital reserve[2] sufficient to cover the estimated long-term cost to the Federal Government of a Federal credit instrument, including any expected credit losses, before the DOT can provide TIFIA or RRIF credit assistance.[3]

TIFIA Program
Pursuant to the FAST Act, the DOT announced availability of funding authorized in the amount of $1.435 billion ($275 million in Federal Fiscal Year (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 (and any funds that may be available from prior fiscal years) to provide TIFIA credit assistance for eligible projects.[4]  The FY 2016-2020 authorized funds are subject to an annual obligation limitation in accordance with appropriations law, as well as annual reobligation requirements, as further discussed in Section 2-5.  Historically, each dollar of funding has allowed TIFIA to provide approximately $14 in credit assistance.  As a result, these funding levels could translate to potentially $20 billion in TIFIA credit assistance.

RRIF Program
Under SAFETEA-LU, the RRIF Program was authorized to provide direct loans and loan guarantees totaling up to $35 billion.[5]  Not less than $7 billion is reserved for projects benefiting freight railroads other than Class I carriers.  For the current amount of available funding remaining, please refer to the Bureau Credit Programs website:  http://www.transportation.gov/buildamerica.  However, since the RRIF Program does not currently have an appropriation, the cost to the government of providing financial assistance must be borne by the RRIF applicant, or another non-federal entity on behalf of the applicant, through the payment of the credit risk premium. 

Program Administration

Implementation of the TIFIA and RRIF Programs is the responsibility of the Secretary of Transportation (the Secretary).  The FAST Act established the DOT Council on Credit and Finance to provide policy direction and make recommendations to the Secretary regarding the selection of projects for credit assistance.[6]  The Council on Credit and Finance members include five 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, and the Assistant Secretary for Transportation Policy.  The Administrators of the Federal Highway Administration (FHWA), the Federal Transit Administration (FTA), and the Federal Railroad Administration (FRA) also sit on the Council on Credit and Finance.  Additionally, the Secretary may designate up to three DOT officials to serve as at-large members of the Council on Credit and Finance.

The Build America Bureau administers the TIFIA and RRIF Programs on behalf of the Secretary, including the evaluation of individual projects, and provides overall policy direction and program decisions for the TIFIA and RRIF Programs.  Final approval of Bureau credit assistance is reserved for the Secretary.

Application Process Overview

All TIFIA and RRIF credit assistance will be awarded based on a project’s satisfaction of TIFIA and/or RRIF (as applicable) statutory eligibility requirements.  The summary below provides an overview of the TIFIA and RRIF application process.  More information about eligibility requirements can be found in Chapter 3 and more information about the application process can be found in Chapter 4.

1.   Build America Bureau Outreach and Project Development.  The initial point of contact for Bureau engagement is a Project Development Lead (PDL) who works with each project sponsor to determine project needs and the specific ways in which the Bureau can provide TIFIA and RRIF credit assistance.  Based on the specific questions, challenges, opportunities, and information needs related to a particular project, appropriate Bureau expertise is assigned and brought to bear for projects.  This may require the assignment of more specialized PDL assistance for projects that involve greater complexity in terms of such factors as scope, modal elements, regulatory requirements, private-sector involvement, and financing plan. This approach helps ensure that the project has followed statutory and regulatory requirements and that it appears to be eligible.  The intent of this process is to identify major hurdles that might delay a project early in the process. A customized project development team works closely with the project sponsor to navigate relevant Federal processes and to ensure that key program requirements are satisfied. 

2.   Submission of Letter of Interest/Draft Application.  Although letters of interest (LOIs) may be submitted on a rolling basis (i.e. at any time), 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. 

3.   Creditworthiness ReviewOnce a project sponsor has completed the initial consultation process with a PDL and DOT makes a determination that the project is reasonably likely to satisfy all of the eligibility requirements of the applicable Credit Program(s), DOT can expeditiously accept the LOI, and formally move the Project into the credit underwriting process.  Applicants interested in TIFIA credit assistance should use the Letter of Interest form and applicants interested in RRIF credit assistance should prepare a Draft Application using the Application form; both forms can be found at https://www.transportation.gov/buildamerica.  The Letter of Interest and Application forms allow potential applicants to describe the project (including location, purpose, and cost), demonstrate the project sponsor’s ability to meet the DOT’s creditworthiness requirements, detail how the TIFIA and/or RRIF statutory eligibility requirements are met, and outline the proposed financial plan, including the requested TIFIA and/or RRIF credit assistance.[7]

Potential applicants should submit these forms electronically via email at BureauCredit@dot.gov.  The DOT will conduct an in-depth creditworthiness review of the project sponsor and the revenue stream proposed to repay the TIFIA and/or RRIF credit assistance.  The creditworthiness review involves evaluation of the plan of finance, financial model, and feasibility of the anticipated pledged revenue or, in the case of RRIF loans where the proposed collateral is other than a dedicated revenue stream, the sufficiency of such other pledged collateral.  In connection with this review, the DOT 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, for TIFIA projects, satisfaction of readiness requirements,[8] the DOT will ask a project sponsor seeking TIFIA credit assistance to provide a preliminary rating opinion letter from at least one nationally recognized statistical rating organization (Credit Rating Agency)[9] and will ask all project sponsors 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.  For both TIFIA and RRIF, the Advisors’ Fees Upfront Payment amount is $250,000 (subject to availability of funds for assistance for TIFIA small projects, as discussed below).  For RRIF projects, the Advisors’ Fees Upfront Payment may be higher depending on the nature and complexity of the project.  Project sponsors should consult with the Bureau to confirm the applicable amount of the Advisors’ Fees Upfront Payment.    

Assistance Available to Offset Advisors’ Fees Upfront Payment

TIFIA Program:  For TIFIA projects with eligible project costs reasonably anticipated to be less than $75 million, the FAST Act requires the Secretary to set aside at least $2 million of the TIFIA Program’s annual budget authority to be used in lieu of fees charged to the project sponsor to cover the costs of the DOT’s outside advisors.[10]  Project sponsors should indicate in their Letter of Interest whether they wish to be considered for this assistance (though the DOT cannot guarantee that funds will be available to satisfy all requests).  To the extent a project sponsor is eligible for this assistance and sufficient funds are available, the Advisors’ Fees Upfront Payment will be waived, and the cost of the DOT’s outside advisors will be funded through this set-aside.

RRIF Program:  The FY 2016 Consolidated Appropriations Act set aside $1.96 million to assist Class II and III railroads pursuing RRIF credit assistance.  These funds are available to be used by the Bureau in lieu of fees charged to Class II and III railroads to cover the cost of the DOT’s outside advisors.[11]  These funds cannot be used to cover the CRP of a RRIF loan.[12]  Class II and III railroads seeking RRIF credit assistance should indicate in their Draft Application whether they wish to be considered for this assistance (though the DOT cannot guarantee that funds will be available to satisfy all requests).  To the extent a project sponsor is eligible for this assistance and sufficient funds are available, the Advisors’ Fees Upfront Payment will be waived and the cost of the DOT’s outside advisors will be funded through this appropriation.  These funds remain available beyond FY 2016 to the extent not expended.

4.   Oral Presentation.  Following completion of the DOT’s in-depth review of the Letter of Interest/Draft Application and receipt of a preliminary rating opinion letter and the Advisors’ Fees Upfront Payment, 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.

5.   Application.  Once both the preliminary rating opinion letter and the Advisors’ Fees Upfront Payment have been received, the project sponsor has made its oral presentation to the DOT, and the DOT has determined that the project satisfies all statutory eligibility requirements, including a full review of the creditworthiness of the project, the project sponsor will then be invited to submit a complete application with all required materials.  The DOT will not review incomplete applications or applications for projects that do not fully satisfy eligibility requirements.

Please note that an invitation by the DOT to submit an application does not guarantee that a project will receive credit assistance, which remains subject to a project’s continued eligibility and final approval by the Secretary.

6.   Notification of Completeness.  No later than 30 days after the date of its receipt of the application, the DOT shall notify the applicant in writing that the application is complete or requires additional information or materials to complete the application.[13]

7.   Project Recommendation.  Based upon the written application, the oral presentation, and any supplemental information submitted by an applicant, DOT staff will prepare a project evaluation and recommendation for the DOT Council on Credit and Finance.

8.   Project Selection.  The DOT Council on Credit and Finance, in turn, provides a recommendation to the Secretary, who makes the final determination regarding project selection.  The DOT will not obligate funds for a project that does not satisfy statutory requirements such as obtaining environmental clearances.

9.   Notification of Project Approval.  The DOT 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.[14]

10.   Term Sheet and Credit Agreement Execution and Funding Obligation.  For each approved project, the DOT will prepare a term sheet for execution with the borrower.  The term sheet sets forth the basic terms and conditions of DOT credit assistance.  In addition, the DOT and the borrower will execute a credit agreement, which is the definitive agreement between the DOT and the borrower, memorializes all of the terms and conditions of TIFIA or RRIF credit assistance, and authorizes the disbursement of funds subject to satisfaction of the specified conditions.  Prior to execution of the credit agreement, the borrower must satisfy all applicable TIFIA and/or RRIF Program requirements. 

11. Disbursement of Funds.  For all credit assistance, the DOT will disburse funds only to reimburse eligible project costs upon satisfaction of the conditions precedent set forth in the credit agreement.[15]

Exhibit 1-A below shows each of these eleven steps as a flow chart.

Exhibit 1-A:  Selection and Funding of TIFIA and RRIF Projects

Text of Exhibit 1-A

  1. Project Sponsor Engages with Bureau Outreach Staff to Determine Project Needs and Offer Technical Assistance
  2. Project Sponsor Submits Letter of Interest/Draft Application on a Rolling Basis
  3. If Requested by DOT, Project Sponsor Provides Additional Information, Preliminary Rating Opinion Letter and the Advisors' Fees
  4. Upon Invitation from DOT, Project Sponsor Makes Oral Presentation to DOT
  5. Upon Invitation from DOT, Project Sponsor Submits Complete Application
  6. DOT Notifies Project Sponsor Regarding Completeness of Application No More Than 30 Days After Receiving Application
  7. DOT Staff Prepare Evaluation and Make Recommendation to DOT  Council on Credit and Finance
  8. DOT Council on Credit and Finance Offers Recommendation to the Secretary, who Makes Final Determination
  9. DOT Notifies Project Sponsor Regarding Project Approval No More Than 60 Days After Delivery of Notice Regarding Application Completeness
  10. DOT Issues Term Sheet, Executes Credit Agreement, and Obligates Funds
  11. DOT Disburses Funds Upon Satisfaction of Conditions set forth in Credit Agreement
 

[1] Note that Title 45 of the United States Code is not positive law and citations thereto are used solely for ease of reference.  For direct statutory references, please refer to the Railroad Revitalization and Regulatory Reform Act of 1976, as amended by FAST Act §§ 11601–11611.

[2] Under the TIFIA Program, the capital reserve is referred to as the “credit subsidy” and under the RRIF Program it is referred to as the “credit risk premium.”

[3] 2 U.S.C. §661c(b).

[4] FAST Act, Pub. L. No. 114-94, §1101(a)(2), (129 Stat. 1322) (2015).

[5] SAFETEA-LU, Pub. L. No. 109-59, §9003(d)(1), (119 Stat. 1921) (2005), codified at 45 U.S.C. §822(d).

[6] FAST Act, Pub. L. No. 114-94, §9002(a), (129 Stat. 1618) (2015), codified at 49 U.S.C. §117.

[7] 23 U.S.C. §601(a)(6) and 45 U.S.C. §823(a).

[8] To be eligible for TIFIA credit assistance, the applicant must demonstrate: (a) that it satisfies (or will have satisfied at the time of obligation of Federal credit assistance) all applicable Federal requirements, including all National Environmental Policy Act requirements, and (b) a reasonable expectation that the contracting process for construction of the project can commence no later than 90 days after the date on which the TIFIA credit assistance is obligated.  Note that the readiness requirement for TIFIA loans to capitalize rural projects funds is different than that for traditional construction projects.  (See 23 U.S.C. §602(a)(10) for readiness requirements and §602(c) for Federal requirements.)

[9] For TIFIA projects, the preliminary rating opinion letter must indicate that the senior obligations of the project have the potential to achieve an investment-grade rating and must include a preliminary rating opinion on the TIFIA credit instrument.  23 U.S.C. §602(b)(3).

[10] 23 U.S.C. §605(f).

[11] Consolidated Appropriations Act, 2016, Division L, §152, Pub. L. 114-113, December 18, 2015, 129 Stat. 2242, 2856 (2015).

[12] Consolidated Appropriations Act, 2016, Division L, §146, Pub. L. 114-113, December 18, 2015, 129 Stat. 2242, 2853 (2015).

[13] 23 U.S.C. §602(d)(1) and 45 U.S.C. §822(i)(1).

[14] 23 U.S.C. §602(d)(2) and 45 U.S.C. §822(i)(3).

[15] 23 U.S.C. §§603(a), (e)(2), 604(a)(2) and 45 U.S.C. §822(b).

Updated: Friday, March 31, 2017
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