Over the past two years there has been a lot of discussion in government and the media about how to finance transportation projects in New York. The Transportation Bond Act campaign, potential privatization of assets such as the Tappan Zee Bridge and the use of congestion pricing in New York City to pay for enhanced transit services have inspired these discussions. This is all very good because transportation issues are not usually a hot topic around the water cooler.
However, with the exception of the recent NYC congestion pricing proposal, these discussions have been missing an important component, mainly federally authorized innovative transportation financing tools. In the 1990s, the federal government began to recognize the importance of finding new ways to fund transportation projects. ISTEA and succeeding reauthorizations provide states with a wide range of financing tools to get projects done. These tools fall into four broad categories; innovative management of federal funds; debt financing; credit assistance; and, tolling.
The following tables detail federal innovative transportation financing strategies that could be employed by New York.
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| TECHNIQUE |
WHAT DOES IT DO? |
| Advance Construction (AC) & Partial Conversion of Advance Construction (PCAC) |
AC allows a state to begin a project even if the state does not currently have sufficient Federal-aid obligation authority to cover the Federal share of project costs. Under PCAC, a state may elect to obligate funds for an advance construction project in stages.
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| Tapered Match |
With tapered match, the non-Federal matching requirement may be paid at any time during the project rather than on a payment-by-payment basis.
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| Flexible Match |
Flexible match allows states to substitute private and other donations of materials, land, and services for the non-Federal share of funding for highway projects.
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| Toll Credits |
States may use revenue from toll facilities as a credit toward the non-Federal matching share of certain highway projects. |
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| TECHNIQUE |
WHAT DOES IT DO? |
| GARVEEs |
Bonding of Federal-aid. States are permitted to pay debt service and other bond-related expenses with future Federal-aid highway apportionments, including insurance costs, rating agency fees, fees paid to financial advisors and bond counsel and printing costs.
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| Non-Recourse GARVEEs |
Same as GARVEEs but states may elect to pledge their obligations of future Federal-aid funds as the only security backing the Federal share of the obligation to investors. These bonds are riskier and therefore may carry higher interest rates.
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| Back-stopped GARVEEs |
Same as GARVEEs but states may elect to pledge other sources of revenue as a back-stop for the future Federal-aid funds. In these cases, states have pledged secondary sources of revenues such as state fuel tax revenues or property taxes. This is a less risky strategy and generally results in lower interest costs on the bonds.
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| TECHNIQUE |
WHAT DOES IT DO? |
| Section 129 Loans |
Allows states to use regular Federal-aid highway apportionments to fund direct loans to projects with dedicated revenue streams, i.e., toll projects.
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| State Infrastructure Banks (SIBs) |
Allows certain states to use regular Federal-aid highway apportionments to capitalize state-administered revolving loan funds known as SIBs. SIBs can offer loans and credit enhancements to both public and private transportation project sponsors. Banks can also be capitalized with state funds.
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| Transportation Infrastructure Finance & Innovation Act (TIFIA) |
Allows U.S. DOT to provide direct credit assistance to sponsors of major transportation projects of at least $100 million. Credit assistance can take the form of loans, loan guarantees, or lines of credit. The total amount of the credit cannot exceed 33 percent of eligible project costs.
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| TECHNIQUE |
WHAT DOES IT DO? |
| Tolling of Federal-aid Highways |
Allows states to use regular Federal-aid highway apportionments to fund direct loans to projects with dedicated revenue streams, i.e., toll projects. |
| Interstate Reconstruction & Rehabilitation Pilot Program |
Allows up to three pilot projects, nationwide, to convert reconstructed or rehabilitated free Interstates highway segments into toll ways.
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| Value Pricing Pilot Program |
Sponsors the testing and evaluation of road and parking pricing concepts designed to achieve reductions in highway congestion.
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| STATE |
TECHNIQUE |
| Arizona |
Arizona DOT is using GARVEEs, in combination with SIBs, to finance the Maricopa Country freeway system. Plans call for $450 million of GARVEEs.
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| Arkansas |
After citizens rejected a transportation bond act in 1995, the state authorized $575 million in GARVEE bonds in 1999.
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| California |
Value pricing is used to construct reversible High Occupancy Toll (HOT) lanes in the median of the I-15 Freeway in Sandiego.
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| Colorado |
Issued $600 million in GARVEE type bonds to finance its Southeast Corridor Project , I-25 and I-225.
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| Florida |
Toll credits are applied on almost every new project, so that most of its Federal highway program is 100 percent federally funded. FDOT is also building a $2.25 billion intermodal center in Miami to improve connections for travelers using rental cars, the airport, cruise line and buses. FODT is using a series of direct loans authorized under the TIFIA program totaling. Motor fuel taxes and rental car fees are being used to repay the loans.
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| New Jersey |
Toll credits have been applied to secure 100 percent federal funding for state transportation projects. As of September 2001, New Jersey has used about $860 million of $1.9 billion in approved toll credits for highway projects.
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| New Mexico |
This state sold its first GARVEE bond in 1998 to finance 118 miles of improvements on Corridor 44. To date New Mexico has sold more than $118 million in GARVEE bonds.
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| New York |
The MTA and City of New York (NYCEDC) obtained more than $300 million in Direct TIFIA loans for their respective projects, the Farley Post Office Conversion and the reconstruction of the Staten Island Ferry Terminal.
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| Ohio |
ODOT has an aggressive innovative financing program that uses SIBS, toll credits and GARVEEs. As of December 2001 Ohio has earned $653 million in toll credits and floated $190 million in GARVEE bonds through its SIB program.
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| Pennsylvania |
valign="top"Penn DOT is using toll credits to increase federal funding to 100 percent for transportation projects. As of September 2001 Penn DOT credits have totaled $1.2 billion. PA is also looking at tolling I-80. |
| South Carolina |
SCDOT is using a combination of new toll roads, SIBs and a TIFIA loan to complete 27 years worth of highway projects in just seven years. The “27 in 7” Peak Performance Program will cost more than $5 billion.
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| Texas |
The George Bush Turnpike, a 30-mile corridor outside Dallas was financed a $135 million Section 129 loan spread out over 25 years.
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Mr. Lattuca is also a principal at Binnacle, a government affairs consulting firm located near Rochester, New York (www.binnacleconsulting.com).
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