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ROUTES: USDOT’s New Rural Transportation Initiative
- 1. The Build America Bureau Reimagining “Innovative” Finance & Procurement for the Future 2019 NADO Annual Training Conference Dr. Morteza Farajian, Executive Director October 22, 2019
- 2. 2 The Build America Bureau’s Mission EXPAND • the use of Federal transportation credit programs, such as TIFIA and RRIF, and diversify the project portfolio INNOVATE • new approaches to project financing and delivery, and promote best practices across credit programs and modal teams DELIVER • streamlined technical and financial assistance to accelerate delivery of critical transportation infrastructure The Build America Bureau serves as a single point of contact and coordination for states, municipalities, and other project sponsors looking to:
- 3. 3 Our products: TIFIA • Long-term repayment period – Up to 35 years – Can be deferred for five years following substantial completion – No pre-payment penalty • Finance up to 33% of eligible project costs • Draw funds as needed; only pay interest on drawn funds • Highly customizable to meet borrower needs • Also offer loan guarantees and lines of credit —Transportation Infrastructure Finance & Innovation Act of 1998 Low Interest Rate 2.08% for a 35-year loan (on 10/2/19)
- 4. 4 TIFIA Rural Project Initiative (RPI) • Outside Census-defined urbanized areas with a population > 150,000 • Finance up to 49% of eligible project costs • Fixed rate of ½ the U.S. Treasury rate • Can cover borrower fees ½ the U.S. Treasury rate 1.04% (on 10/2/2019)* *while funds last ~40% of county roads are inadequate for travel 38,000 rural bridges are in “poor” condition
- 5. 5 State Infrastructure Banks (SIBs) • SIBs are revolving funds for surface transportation projects • SIBs can borrow up to $100 million from TIFIA to capitalize a Rural Projects Fund (RPF) • RPFs “on-loan” to eligible rural projects • Typical borrower is a local public agency, but public and private entities can borrow • SIBs must be administered by a State DOT
- 6. 6 Our products: RRIF • Very similar to TIFIA (Long-term, fixed interest, flexible amortization, no pre-payment penalty, etc.) • Can finance up to 100% of eligible project cost • The credit risk premium is offset using – Upfront payment by the borrower – Collateral – Adjustment to the interest rate —Railroad Rehabilitation & Improvement Financing Low Interest Rate 2.08% for a 35-year loan (on 10/2/19)
- 7. 7 Our products: PABs • Authorized to allocate $15 billion in PABs • State or local government issues tax-exempt bonds on behalf of a private entity • Private entity/developer responsible for all debt service • Can be used separate or in combination with other Federal financing tools —Private Activity Bonds
- 8. 8 We would love to work with you You can reach us at: 202-366-2300 buildamerica@dot.gov More information available on: www.Transportation.gov/BuildAmerica
Hinweis der Redaktion
- We like to think of the Build America Bureau as America’s Transportation Infrastructure Bank. We connect states and cities –and even private entities with the financing you need to get projects built. In any bank, management matters. So you should know that, last year, I was sitting where you’re sitting now. I’m a state guy. I was Director of the P3 office for Virginia DOT. And I also served as Acting Deputy Secretary at VDOT. What does that mean? It means, I know what it’s like to try and piece together funding for a good project. I’ve had to negotiate with lenders. It’s difficult; it’s time-consuming; and, it’s expensive. One-size-fits-all loan products that don’t actually fit. Interest rates that make the cost of financing greater than the cost of building. Loan officers who don’t understand your revenue streams. I want to reduce your pain points as much as possible. And, in the next few minutes, I’ll talk about how the Bureau can do that.
- We were established in the FAST Act of 2016, and we’ve been expanding our services since. In short, we provide financing; we provide grant funding; and we provide technical assistance and education. And, we offer all these services in one place. By providing a single point of contact for each project and a focus from the highest level of the department, the Bureau can guide projects through every stage of the process. The Bureau is focused on… increasing access to the DOT’s credit programs. We are expanding the number and types of projects that are eligible and working to remove barriers. We also provide grant funding through the INFRA program. encouraging project sponsors to utilize technical assistance on innovative financing, permitting, project delivery, and other issues to improve their projects. and we deliver that assistance through direct consultations and by laying out best practices that can be utilized by both the public and the private sector.
- The first product we offer is TIFIA, the Transportation Infrastructure Finance and Innovation Act. TIFIA offers long term, fixed cost, permanent, up-front financing with low interest rates (2.08% for a 35 year loan, as of 10/2/19). TIFIA loans have a maximum repayment period of 35 years, and payments can be deferred for 5 years following project substantial completion. There is no pre-payment penalty. And, you can even customize the amortization schedule to meet your needs. TIFIA can finance up to 33% of eligible project costs and eligible sponsors can be anyone from a state/territory/local government to private firms (P3 project type procurement). TIFIA loans must have: Minimum size – at least $10 million. Investment grade rating – two from national rating agencies (one for small projects) Dedicated revenue source – non-federal repayment source pledged to secure debt services. Transportation plans – the project must be included in the respective state’s transportation planning and programming cycle.
- The Bureau is also trying to make federal dollars more accessible to rural communities to revitalize, repair, and rebuild rural infrastructure. So, for eligible rural projects, we have cut the already-low interest rate in half and cover borrower fees. The lower interest rate is available “while funds last” and provided on a first-come-first-serve basis, so get your applications in ASAP.
- The Rural Projects Fund would lend further to eligible Rural Infrastructure Projects, up to 80% of project cost. A direct TIFIA loan to a rural project is limited to 49%. Federally-capitalized SIBs: 28 states Federal capitalization: $661 million Transactions: 1,192 loans Loan value: $3.1 billion SIB requirements: Enter into a cooperative agreement with appropriate modal agencies. Execute a project loan to a borrower before receiving a disbursement of its TIFIA secured loan. Execute a project loan to a borrower within two years after obligation of the TIFIA loan (can be extended by DOT).
- RRIF is the Railroad Rehabilitation and Improvement Financing program. It has many of the same features as TIFIA. The same low interest rate. The same up-to-35-year repayment period. The same flexibility.
- Another financing option we can help with Is Private Activity Bonds or PABs. Allocating a PAB for your project Opens the doors to private companies, And gives them an incentive to join you in a public-private partnership, or P3. PABs provide private entities/developers access to tax-exempt interest rates, lowering their cost of capital and enhancing investment prospects. This mechanism increases private sector involvement in highway and freight projects, generates new sources of money, ideas, and efficiencies.
- So, make your life a little easier and get your projects built. Work with us. Help me help you. And now, I’ll be happy to take any questions you have…