It’s been called the lifeblood of the private transportation investment industry in the US. TIFIA, short-form for the 1998 Transportation Infrastructure Finance and Innovation Act, provides low-cost, long-term loans to highway and transit projects.
During the run-up to the credit crisis, the programme was not much in demand. Project sponsors worried about its “springing lien” provision, which states that, in the event of bankruptcy, the government’s TIFIA loan “springs up” the capital structure to a parity status with senior project debt.
But as debt became more expensive in the wake of the financial crisis, demand for TIFIA financing skyrocketed. And 2010 provides a perfect data snapshot of just how much demand now exceeds supply for this scarce financing tool.
On 1 March, the US Department of Transportation received 39 letters of interest for $12.5 billion of TIFIA loans, according to the department’s website. Fast-forward to October, and a grand total of four projects have been given the go-ahead to submit applications for about $1.3 billion in loans.
How significant are 39 letters of interest? Think of it this way: during the previous 11 years of its existence, the TIFIA programme received 83 letters of interest for loans, according to its website. Now, in one year, it has received nearly half that amount. Clearly, demand is accelerating fast. And that means competition’s getting tough.
The winners included several prominent public-private partnerships – such as the Presidio Parkway in San Francisco ($309 million), the Eagle Commuter Rail Project in Denver ($400 million) and the Goethals bridge replacement in New York and New Jersey ($500 million). San Francisco’s waterfront transportation improvement project also got the go-ahead to apply for $121 million in loans.
Just as importantly, several noteworthy public-private partnerships were left out, including Pennsylvania and New Jersey’s Scudder Falls bridge replacement (which requested $102 million in TIFIA loans), Georgia Department of Transportation’s Northwest Corridor improvement ($375 million), and Macquarie- and Skanska-backed Elizabeth River Crossings’ underwater tunnel in Portsmouth and Norfolk, Virginia ($525 million).
Luckily, because project development is a lengthy process, each of these projects will have a chance to apply again next year when their procurement is further along. But this year’s tight competition for TIFIA funding shows that important transportation projects may get stranded in future years – unless Congress increases the size of this important lending programme.
The Department of Transportation has been able to reach into some other buckets to make TIFIA loans available. For instance, in October the department announced it would make $20 million available for a $546 million TIFIA loan to Los Angeles County Metropolitan Transportation Authority’s 30-10 initiative. The initiative aims to construct 12 major transit projects in 10 years instead of 30 and will get moving more quickly thanks to the $20 million loan, which came from an infrastructure stimulus grant program known as TIGER, or Transportation Investment Generating Economic Recovery.
But TIGER’s now run out. So now borrowers can only count on the regular TIFIA programme for funding. And, as this year’s tight competition shows, unless Congress increases the size of this important lending programme soon, important transportation projects may get stranded in future years.