Financing Techniques Guide

Financing Techniques Financing Techniques GuideGuide

For Project Sponsors along For Project Sponsors along

US/Mexico BorderUS/Mexico Border

OutlineOutline

• What is a project sponsor?

• TIFIA Credit Program

• Private Activity Bonds

• RRIF Credit Program

• BANOBRAS Credit Programs

• Other financing techniques

• Contacts for more information

What is a project sponsor?What is a project sponsor?

• Any legal entity proposing a transportation project:

– State DOTs

– Cities, counties

– Bridge authorities or districts

– Border authorities or districts

– Private sector firms


• For a given project:

– May be combination of legal entities

– Will vary based on project size, complexity, geographic reach and available financing options


• What entity is authorized/obligated to:

– Enter into contracts?

– Enforce contract provisions?

– Borrow funds?

– Repay borrowed funds?

TIFIA Credit ProgramTIFIA Credit Program

• Summary of Program

• TIFIA = Transportation Infrastructure Finance and Innovation Act

• Strategic goal of TIFIA is to:– Leverage limited federal resources– Stimulate private capital investment


• Federal credit assistance provided in several forms:– Direct loans– Loan guarantees– Standby lines of credit– Combinations of above

• For projects costing an estimated $50 million or more; $15 million threshold for ITS projects


• TIFIA contribution limited to 33% of estimated project costs

• Senior debt must be investment grade

• Dedicated revenues available for repayment of credit assistance

• Federal requirements are met


• Key objectives are to:– Accelerate projects– Encourage new revenue streams– Encourage private participation– Fill capital market gaps– Provide assistance as flexible, patient investor– Limit federal losses– Maximize use of budget authority


• Eligible Borrowers– State governments, agencies, authorities– Local governments, agencies, authorities– Bridge, border, transit authorities– Multi-state consortia– Private companies– Joint ventures– Bi-national entities


• Benefits of Program– Interest and principal payments may be

deferred for up to five years– Repayment may extend up to 35 years– Interest rates equivalent to Treasury rates– No prepayment penalty– Accelerate projects; avoid cost increases


• Project Selection Criteria– Regional or national significance– Private participation– Favorable environmental impact– Project acceleration– Credit worthiness– Reduction in grant assistance– Use of budget authority


• Eligible Projects– Highways and bridges– Freight and passenger rail– Inter-city passenger bus facilities– Intermodal freight transfer facilities– Access to intermodal freight transfer facilities– Port terminal projects– International bridges and tunnels


• Application Process– Contact TIFIA Joint Program Office and/or Resource

Center Finance Team– Submit Letter of Interest to USDOT– Assess comments provided by USDOT and revise

project, if appropriate– Ensure project is included in state transportation plan– Ensure environmental requirements are met– Obtain preliminary rating letter


• Application Process, cont’d– Prepare and submit application to USDOT– Make presentation to TIFIA Joint Program

Office– Ensure that ROD is obtained– Ensure that project is included in approved

STIP– Ensure that investment grade opinion letter is

obtained


• Application Process, cont’d– Negotiate credit agreement with USDOT– Pay credit processing fee equal to USDOT

costs incurred in negotiating agreement– Pay for financial and legal advisors working

on project sponsor’s behalf


• Contact Information• Mr. Mark Sullivan TIFIA Joint Program Office (HCF-50)

U.S. Department of TransportationRoom 4310400 Seventh Street, S.W.Washington DC 20590(202) 366-5785

http://tifia.fhwa.dot.gov

Private Activity BondsPrivate Activity Bonds


• PABs = Private Activity Bonds

• $15 billion available

• Allow private project sponsors to issue tax-exempt bonds at low, tax-exempt interest rates

• PABs can be issued for highway, bridge, rail and freight transfer facilities


• Eligible Borrowers

– Private project sponsors developing highway, bridge, rail or freight transfer facilities

– Need to work closely with public sector “conduit issuer” selling bonds

– Need to ensure project is included in STIP and is Title 23 eligible


• Qualified Projects– Surface transportation projects receiving

assistance under Title 23– Any project for an international bridge or

tunnel which an international entity manages – Any facility for transfer of freight from truck to

rail or rail to truck, including temporary storage facilities


• Qualified Projects, cont’d– Any TIFIA-assisted public transportation,

intercity bus or rail facilities and vehicles– This includes vehicles and facilities owned by

Amtrak– This also includes public freight rail facilities,

private freight rail facilities, and intermodal freight transfer facilities


• Application Process

• Project sponsors requesting PAB authority should provide following data elements:– Amount of requested allocation– Proposed date of bond issuance– Date of bond issuer resolution– Draft bond counsel opinion letter


• Application process, cont’d

• Data elements:– Financing/development team information– Borrower information– Project description– Project schedule– Financial structure– Title 23/49 funding received


• Application process, cont’d

• Data elements:– Project readiness– Signatures– Declarations– Addresses


• Contact Information• Mr. Jack Bennett U.S. Department of Transportation Office of the Asst. Secy. for Transportation

Policy P-20, Room 10305 E 400 7th Street S. W. Washington DC 20590 (202) 366-6222

RRIF Credit ProgramRRIF Credit Program


• RRIF = Railroad Rehabilitation and Improvement Financing program

• Administrator of FRA is authorized to provide up to $35 billion in loans and loan guarantees


• Eligible Borrowers– Railroads– State and local governments– Government-sponsored authorities and

corporations– Joint ventures including at least one railroad– Freight shippers


• Benefits of Program– Loans for up to 100% of eligible project costs– Repayment periods up to 25 years– Interest rates equivalent to Treasury rates– Project acceleration– Avoidance of future ROW and construction

cost increases


• Evaluation Criteria– Eligible borrower and project– Creditworthiness of project– Extent to which project will enhance safety– Significance of project on local, regional,

national level– Improvement to the environment– Improvement in service or capacity in railroad

transportation system


• Eligible Projects

• RRIF credit may be used to:– Acquire, improve, or rehabilitate intermodal or

rail equipment or facilities– Refinance outstanding debt incurred for the

above purposes– Develop or establish new intermodal or

railroad facilities


• Application Process– Contact FRA Office of Freight Programs– Compile preliminary application information:a. Description of project, including amount of

loan or loan guarantee requested;b. Description of benefits and/or savings to be

generated by project;c. Description of collateral;d. Financial statements; and


• Application Process, cont’d

e. Discussion whether project: Will enhance safety and the environment

Will promote economic development and US competitiveness

Will preserve rail or enhance intermodal service

Is included in the state’s transportation plan


• Application Process, cont’d

– Assess FRA comments/feedback– Submit Loan Application to FRA– Pay evaluation fee – Pay Credit Risk Premium


• Contact Information

• Federal Railroad Administration

Office of Freight Programs (RDV-12)

400 7th Street SW

Washington DC 20590

(202) 493-6381

BANOBRAS Credit ProgramsBANOBRAS Credit Programs


• BANOBRAS = Banco Nacional de Obras y Servicios Publicos (National Bank for Public Works and Services)

• Provides financial assistance to state and municipal administrations in Mexico


• Eligible Projects, examples– Construction and improvement of highways,

bypasses and bridges– Construction of passenger and cargo

terminals– Intersection improvements– Lighting and traffic signals– Planning and paving of local streets


• Available Financial Assistance– Direct loans to concessionaires– Other financial support to concessionaires,

such as contingent and revolving credit– Long-term refinancing– Partial guarantees for a public sale or offering– Support for federal New Concession Plan for

Toll Highways


• Supports New Concession Plan by providing funds to Investment Fund for Infrastructure (FINFRA)

• In turn, FINFRA:– Grants public funds to reduce equity

investment and/or bank loans needed by concessionaire to finance construction

– Provides guarantees supporting concessionaire debt


• Contact Information Direccion de Promocion y Proyectos BANOBRAS, S.N.C. Av. Javier Barros Sierra 515 Pisos 5, 6 y 8 Colonia Lomas de Santa Fe CP 01219 Tel. 5270-1200

Other Financing TechniquesOther Financing Techniques

• State Infrastructure Bank (SIB) Lending– All states are now allowed to establish SIBs – States can use up to 10% of FHWA and FTA

funding to capitalize SIBs– States must provide matching state funds– SIBs can provide direct loans and credit

enhancement to public entities or private firms


• GARVEE Bonding

• GARVEE = Grant Anticipation Revenue Vehicles– All states are now allowed to issue GARVEEs– GARVEEs are secured by future federal funds

for federal-aid eligible projects– Expand state’s borrowing capacity– Accelerate construction of critical projects


• Tolling Initiatives– Interstate Construction Toll Pilot Program– Express Lanes Demonstration Program– HOV to HOT Lane Conversion Program– Interstate System Reconstruction and

Rehabilitation Toll Pilot Program– One-stop FHWA application procedure


• Other Funding from Federal Railroad Administration– Congressional appropriations for specific

high-priority rail projects – Congressional appropriations for research

and development projects for passenger and freight rail

Contacts for more informationContacts for more information

• Ms. Thay Bishop, Team Leader

• USDOT FHWA Resource Center Innovative Finance Team

61 Forsyth Street SW, Suite 17T26

Atlanta GA 30303

(404) 562-3695

[email protected]

Documents

Financing Techniques Guide