Created in 1998 as part of the Transportation Equity Act for the 21st Century, the Transportation Infrastructure Finance and Innovation Act (TIFIA) provides credit assistance (loans and/or loan guarantees) for surface transportation projects. In most cases, these are highway and transit projects.
The program aims to provide ‘gap’ funding to worthwhile transportation infrastructure projects that have dedicated funding sources (such as tolls), but which governments might not be able to fully finance without federal assistance in closing the funding gap.
TIFIA provides subordinated loans, which can account for no more than 50 percent of a project’s funding (although the TIFIA office typically limits loan amounts to 33 percent of a project’s funding). The senior debt (e.g., toll revenue bonds) must attain an investment-grade rating in order for the project to obtain TIFIA support.
TIFIA is considered an important tool for project finance and a growing number of infrastructure projects have made use of TIFIA loans in recent years, including the Elizabeth River Tunnels in the Tidewater area of Virginia, the I-77 Express Lanes in North Carolina, and Transform 66 in Virginia. If TIFIA loans were not an option, many of these types of large transportation projects might struggle to find funding.
When individuals finance a large capital expenditure such as a car or a house, they typically make a down payment and arrange for one or more loans to pay the balance of the initial cost. It is a long-lived asset that is being paid for over a time period in which the individual can use it and enjoy its benefits. Large-scale transportation infrastructure projects are likewise long-lived assets, whose benefits extend over their entire useful lives and can be funded over time.
In the Moving Ahead for Progress in the 21st Century Act (MAP-21) of 2012, TIFIA funding was increased to $1 billion per year. However, In the subsequent Fixing America’s Surface Transportation (FAST) Act of 2015, TIFIA funding was decreased to $275 million.
The purported reason for this change was not enough projects being financed. However, the bigger problem was that the U.S. Department of Transportation (USDOT) treated TIFIA as a discretionary program, similar to Infrastructure for Rebuilding America (INFRA) grants. Treating the program this way leads to delays in the USDOT review process, which leads some project proponents to avoid or seek alternatives to TIFIA. While these process delays have decreased significantly under the FAST Act they can still be an impediment.
When Congress reformed TIFIA in 2012’s MAP-21, it intended for the program to become a check-the-box process. Any project that met TIFIA’s rigorous criteria, including being rated as an investment-grade project by at least two rating agencies and having a dedicated revenue stream, was supposed to be deemed a safe investment for TIFIA’s taxpayer credit assistance.
TIFIA funding is very different from INFRA funding, which supports projects that may not have investment-grade ratings. It makes sense for USDOT to use rigorous metrics to evaluate INFRA grants that score as an outlay compared to TIFIA that scores as a loan.
Both Democratic and Republican administrations have, in many ways, treated TIFIA as a discretionary program. Yet, this was not the intent of the original program. Congress should direct USDOT to follow the mandate laid out in TEA-21. Subject to the availability of TIFIA funds, the Department of Transportation should approve all projects that meet TIFIA criteria.