San Francisco's new $1.5 billion Transbay Transit Center is leveraging $117 million in TIFIA funds.
Did you know? The federal TIFIA loan program is so popular that in 2012, the U.S. Dept. of Transportation received 26 TIFIA letters of interest exceeding $13 billion, about 13 times the financing available. Funding for it was increased tenfold in H.R. 4348, MAP-21- the new transportation reauthorization. TIFIA is now authorized at $750 million next year and $1 billion in 2014, up from $122 million. That could fund about $10 billion in project loans.
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Established by Congress in 1998, the Transportation Infrastructure Finance and Innovation Act loan program (TIFIA) has played a crucial role in financing numerous large-scale transportation projects that otherwise might not have been built because of their size and complexity. Unlike a grant program, TIFIA provides loans and loan guarantees to public and private entities to help finance highway, transit, intercity passenger facilities, and freight rail projects. In a recent blog post, U.S. Sec. of Transportation Ray LaHood wrote, “A little TIFIA can go a long way,” and he’s right: Each dollar of federal funds can provide up to $10 in TIFIA credit assistance and leverage $30 in transportation infrastructure. Funding for TIFIA was increased tenfold in H.R. 4348, MAP-21, the new transportation reauthorization. TIFIA is now authorized at $750 million next year and $1 billion in 2014, up from $122 million. That could fund about $10 billion in project loans.
TIFIA was created because state and local governments had trouble financing major transportation projects backed by revenues that are difficult to predict, such as transit sales taxes, tolls, or tax increment financing (TIF). TIFIA helps by providing low interest loans (pegged at the Treasury rate) at attractive repayment terms to close the funding gap for these projects and leverage local and private investment.
TIFIA assistance has advanced numerous transit projects across the country. The Chicago Transit Authority will combine an $80 million TIFIA loan with federal TIGER funding, bond sales, and other state and federal funds as part of an overall $240 million funding package to renovate the Red Line’s 95st Street Terminal, one of the its busiest. The intermodal project will reduce pedestrian and bus congestion, cut travel times, improve accessibility, and be a catalyst for new economic development on Chicago’s south side.
Another example is Denver’s Eagle P3, the first commuter rail public-private partnership in the country. TIFIA financing, backed by a voter-approved sales tax increase, closed a $280 million funding gap. The Eagle P3 is part of Denver’s FasTraks transit system, a $7 billion, 12-year program to build 122 miles of new commuter and light rail and 18 miles of bus rapid transit service across the eight-county region. A renovated Denver Union Station will serve as the hub of FasTraks and the core of a new vibrant, pedestrian and transit-friendly neighborhood. The $484 million renovation was financed with a $145 million TIFIA loan backed by a surrounding TIF district.
In San Francisco, $171 million in TIFIA financing will be leveraged to fund the $1.5 billion Transbay Transit Center, which will transform an old bus terminal into a modern, multimodal transportation hub that will centralize the Bay Area’s 11 transit systems and serve as the future terminus for the high-speed rail route planned for San Francisco to Los Angeles. The Transbay Transit Center will anchor a new transit-friendly neighborhood just south of San Francisco’s Financial District, including a 5.4-acre rooftop park and a 1,000-foot-tall office tower that will become the city’s tallest building. Revenues from the TIF district created in this new neighborhood will go toward repayment of the TIFIA loan.
Regrettably what was the greatest strength of the TIFIA program, its strong project selection criteria, has been eliminated under the new federal transportation reauthorization. TIFIA loans will now be available on a first-come, first-served basis instead of through a competitive process. Prior to the new law, loans were given only to the most viable projects of national or regional significance, backed by a dedicated revenue stream capable of repaying the original investment, and senior debts had to gain an investment-grade rating. It is not unclear why this change was made, but given the success of the current TIFIA prioritization process, it should be reinstated.
The new law also increases the percent of TIFIA financing that may cover total projects costs from 33 to 49 percent. This change still will require public agencies to come up with significant funds from other confident investors, ensuring only projects of the highest merit will advance.
The TIFIA program offers state and local governments additional financing options to meet America’s growing transportation demands. As consumers continue to choose fuel-efficient vehicles, the current basis for funding transportation – the gas tax – is unsustainable. With Congress unlikely to index the motor fuel tax, innovative programs such as TIFIA must be expanded. In the face of shrinking public resources, TIFIA provides critical financing options for transportation investments that will improve quality of life, air quality, and the economy.
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