Bonds

New rules clarify TIFIA’s long-term rates, expand project eligibility

The U.S. Department of Transportation has amended its well-known Transportation Infrastructure Finance and Innovation Act program to clarify interest rates on its longest-term loans and to broaden eligibility for projects.

The new rules cover provisions that were included, but not yet implemented, in the 2021 Infrastructure Investment and Jobs Act. The IIJA, among other things, extended the loan period for some projects to 75 years, up from the traditional 35-year term, and increased eligibility to airports and transit-oriented developments and projects outside of a state’s transportation plan.

The TIFIA program, established in 1998, provides credit assistance like low-interest loans for large, complex transportation infrastructure projects of regional and national significance. It aims to “fill market gaps and leverage substantial private co-investment through supplemental, subordinate investment in critical improvements to the nation’s transportation system,” according to the DOT.

It’s a well-known program in the public-private partnership and infrastructure finance sectors, though some market participants have said the program is underused because of bureaucratic delays and a lack of clarity on borrowing requirements.

Build America Bureau director Morteza Farajian has said the department has a full pipeline of projects vying for TIFIA loans.

Build America Bureau

As of January, the program had $70 billion dollars in lending capacity with interest rates around 4.11% for a 35 -year loan. The DOT as of last December had closed $39.8 billion in TIFIA financing that supports more than $136 billion in infrastructure investment.

“TIFIA is a huge credit program that a lot of infrastructure projects use,” said Steve T. Park, a co-leader of Ballard Spahr LLP’s P3/Infrastructure Group and a partner in the Public Finance Group. The firm recently published a blog piece outlining the new rules.

Among other things, the DOT’s new rules make clear the interest rate set for longer-term TIFIA loans, Park said. “As a general rule, clarity is good,” he said.

The new rule applies to any TIFIA loans with a final maturity date later than 35 years after substantial completion of the project and a loan term of more than 40 years. The new interest rate will be equal to State and Local Government Series, or SLGS, 30- to 40-year securities plus one basis point, plus an annual interest rate adjustment for years 40 through 100.

SLGS are special purpose securities that Treasury issues to state and local governments that issue tax-exempt debt to help them comply with yield restriction and arbitrage rebate provisions.

The DOT noted on the Federal Register that the America Public Transportation Association supports the interest rate rule, “but encourages DOT to increase transparency about the specific criteria a project would need to meet to qualify for a loan with a term longer than those authorized before the passage of the IIJA.”

The amendments also reduce TIFIA-eligible requirements so projects no longer have to be “included in or consistent with” a state’s transportation plan, as Ballard Spahr said.

The rules take effect June 24.

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