[Federal Register Volume 64, Number 25 (Monday, February 8, 1999)]
[Proposed Rules]
[Pages 5996-6005]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-2637]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
Federal Highway Administration
23 CFR Part 180
Federal Railroad Administration
49 CFR Part 261
Federal Transit Administration
49 CFR Part 640
[FHWA Docket No. FHWA-98-47-15]
RIN 2125-AE49
Credit Assistance for Surface Transportation Projects
AGENCY: Federal Highway Administration (FHWA), Federal Railroad
Administration (FRA), Federal Transit Administration (FTA), U.S.
Department of Transportation (DOT).
ACTION: Notice of proposed rulemaking (NPRM); request for comments.
-----------------------------------------------------------------------
SUMMARY: This document proposes to implement a new program enacted
under the Transportation Infrastructure Finance and Innovation Act of
1998 (TIFIA), to provide credit assistance to surface transportation
projects. The TIFIA authorizes the DOT to provide secured (direct)
loans, lines of credit, and loan guarantees to public and private
sponsors of eligible surface transportation projects. Projects will be
evaluated and selected by the Secretary of Transportation. Following
selections,
[[Page 5997]]
individual credit agreements will be developed through negotiations
between the project sponsors and the DOT. This document solicits
comments on a proposed regulation to establish a new credit assistance
program for surface transportation projects; and the process by which
the DOT, through the FHWA, the FRA, and the FTA, will administer such
credit assistance.
DATES: Comments must be submitted on or before March 10, 1999.
ADDRESSES: Your signed, written comments must refer to the docket
number appearing at the top of this document and you must submit the
comments to the Docket Clerk, U.S. DOT Dockets, Room PL-401, 400
Seventh Street, SW, Washington, DC 20590-0001. All comments received
will be available for examination at the above address between 9:00
a.m. and 5:00 p.m., e.t., Monday through Friday, except Federal
holidays. Those desiring notification of receipt of comments must
include a self-addressed, stamped envelope or postcard.
FOR FURTHER INFORMATION CONTACT: FHWA: Mr. Max Inman, Office of Budget
and Finance, Federal-Aid Financial Management Division, (202) 366-0673.
FRA: Ms. JoAnne McGowan, Office of Passenger and Freight Services,
Freight Program Division, (202) 493-6390. FTA: Mr. Paul Marx, Office of
Policy Development, (202) 366-1734. Department of Transportation, 400
Seventh Street, SW, Washington, DC, 20590. Office hours are from 7:45
a.m. to 4:15 p.m., e.t., Monday through Friday, except Federal
holidays. Hearing- and speech-impaired persons may access this number
via TTY by calling the Federal Information Relay Service at 1-800-877-
8339.
SUPPLEMENTARY INFORMATION:
Electronic Access
Internet users may access all comments received by the U.S. DOT
Dockets, Room PL-401, by using the universal resource locator (URL)
http://dms.dot.gov. It is available 24 hours each day, 365 days each
year. Please follow the instructions on-line for more information and
help. An electronic copy of this document may be downloaded using a
modem and suitable communications software from the Government Printing
Office's Electronic Bulletin Board Service at (202) 512-1661. Internet
users may reach the Federal Register's home page at http://
www.nara.gov/fedreg and the Government Printing Office's web page at
http://www.access.gpo.gov/nara.
Additional information on the TIFIA program and credit assistance
for surface transportation projects generally is available at the TIFIA
web site at http://tifia.fhwa.dot.gov. Among other information, the DOT
will provide responses to commonly asked questions and information on
program participation.
Background
The Transportation Equity Act for the 21st Century (TEA-21), Pub.
L. 105-178, 112 Stat. 107, created two new Federal credit programs: The
Transportation Infrastructure Finance and Innovation Act of 1998
(TIFIA) and the Railroad Rehabilitation and Improvement Financing
Program (RRIF). RRIF will be addressed in a separate notice of proposed
rulemaking. TIFIA, as amended by section 9007, Pub. L. 105-206, 112
Stat. 685, 849, and codified at 23 U.S.C. 181-189, establishes a new
Federal credit program for surface transportation projects. Funding for
this program is limited, meaning that projects obtaining assistance
under TIFIA will be selected on a competitive basis. Final selections
of projects will be made by the Secretary of Transportation.
Credit assistance programs such as TIFIA are designed to help
financial markets develop the capability to supplement the role of the
Federal Government in helping finance the costs of large projects of
national significance. Developing, implementing, and evaluating
financial assistance programs such as TIFIA is a crucial mission of the
DOT. To help ensure financial and programmatic success, the DOT is
establishing a multi-agency Credit Program Steering Committee and
Working Group. The Steering Committee and Working Group are comprised
of representatives from the Office of the Secretary, the Office of
Intermodalism, the FHWA, the FRA, and the FTA, as well as other DOT
agencies and offices. The Steering Committee and Working Group will
coordinate and monitor all policy decisions and implementation actions
associated with this Federal credit assistance program.
Outreach efforts have already been made to facilitate the
implementation of TIFIA. At a July 13, 1998, meeting sponsored by the
American Association of State Highway and Transportation Officials, DOT
representatives met with over 100 State transportation officials to
discuss implementation of provisions of TEA-21, including the Act's
Federal credit assistance programs. On September 14, 1998, a public
focus group meeting of about 70 Federal and State officials, project
sponsors, and members of the financial community was held in New York
City to discuss the provision of credit assistance under TEA-21
programs. Another public focus group meeting of about 60 governmental
and private sector officials was held on December 8, 1998, near San
Diego, California. On-going DOT activities include meeting with capital
markets financial experts and disseminating program information to the
public for their comments.
Program Information
Funding
The TIFIA authorizes annual funding levels for both total annual
credit amounts (i.e., the total principal amounts that may be disbursed
in the form of direct loans, loan guarantees, or lines of credit) and
subsidy amounts (i.e., the amounts of budget authority available to
cover the estimated present value of default losses associated with the
provision of credit instruments, net of any fee income). Funding for
the subsidy amounts is provided in the form of budget authority funded
from the Highway Trust Fund, other than the Mass Transit Account. As a
practical example, for fiscal year 1999, TIFIA provides $80 million in
budget authority to fund the subsidy costs associated with a total
nominal amount of direct loans, loan guarantees, and lines of credit
that is limited to $1.6 billion. Depending on the individual risk
assessments made for each of the projects receiving assistance, the
total amount of credit assistance provided in fiscal year 1999 may be
less than the $1.6 billion limitation.
Total Federal credit assistance authorized under TIFIA is limited
to $1.6 billion in fiscal year 1999; $1.8 billion in fiscal year 2000;
$2.2 billion in fiscal year 2001; $2.4 billion in fiscal year 2002; and
$2.6 billion in fiscal year 2003. These amounts lapse if not awarded by
the end of the fiscal year for which they are provided.
To support this assistance by funding the required subsidy amounts,
TIFIA provides budget authority of $80 million in fiscal year 1999; $90
million in fiscal year 2000; $110 million in fiscal year 2001; $120
million in fiscal year 2002; and $130 million in fiscal year 2003. This
budget authority is subject to annual obligation limitations that may
be established in appropriations law. Of the amounts made available,
the Secretary may use up to $2 million for each of the fiscal years for
administrative expenses. Unobligated budget authority remains available
for obligation in subsequent years.
[[Page 5998]]
Credit Instruments
Three types of credit instruments are permitted under TIFIA:
secured (direct) loans, loan guarantees, and lines of credit. General
rules concerning the terms governing these credit instruments appear at
23 U.S.C. 183 and 184. More specific terms will be determined on a
project-specific basis during negotiations between the DOT and
successful applicants.
Eligibility
Sections 181 and 182 of title 23, U.S.C., describe the conditions
that govern a project's eligibility for assistance under TIFIA.
Projects shall have eligible costs of at least $100 million or an
amount equal to 50 percent of Federal-aid highway funds apportioned to
the State in which the project is located for the most recently
completed fiscal year, whichever is lesser. Projects principally
involving the installation of an intelligent transportation system
(ITS) must cost at least $30 million. To be eligible for assistance,
projects must be classified within the following categories:
1. Surface transportation projects as defined under title 23 or
chapter 53 of title 49 of the United States Code;
2. International bridge or tunnel projects for which an
international entity authorized under Federal or State law is
responsible;
3. Intercity passenger bus or rail facilities and vehicles,
including those owned by the National Railroad Passenger Corporation
and components of magnetic levitation transportation systems; or
4. Publicly-owned intermodal surface freight transfer facilities,
provided that the facilities:
(a) are located on or adjacent to National Highway System routes or
connections to the National Highway System, and (b) are not seaports or
airports.
Application Process
Public or private applicants for credit assistance will be required
to submit applications to the DOT in order to be considered for
approval. Each fiscal year for which credit assistance is available,
the DOT will publish a Federal Register notice to solicit applications
for credit assistance. This notice will also be posted on the TIFIA web
site, at the address cited above. The notice will specify the relevant
due dates for that year's application submissions and funding
approvals, as well as the address to which applications should be sent.
It will also advise potential applicants of the estimated amount of
funding available to support TIFIA credit instruments in the current
and future fiscal years. An application checklist is appended to this
NPRM. Respondents are encouraged to comment on the content of this
checklist, which will serve as the basis for a standard application
form. Detailed application information will be contained in a handbook
of program guidelines that is currently being developed by the DOT and
will be posted on the TIFIA web site and made available to the public
at the time a solicitation for applications is published.
Charges
The DOT will require a non-refundable initiation charge for each
project applying for credit assistance under TIFIA. The DOT may also
require an additional credit processing charge for projects selected to
receive assistance. The proceeds of any such charges will equal a
portion of the costs to the Federal Government of soliciting and
evaluating applications, selecting projects to receive assistance, and
negotiating credit agreements. For fiscal year 1999, the DOT proposes
an application initiation charge of $5,000 for each project applying
for credit assistance under TIFIA. The DOT does not propose any credit
processing charges for fiscal year 1999. For fiscal years 2000 and
beyond, the DOT may adjust the amount of the application initiation
charge, and will determine the appropriate amount of the credit
processing charge based on early program implementation experience in
fiscal year 1999. The DOT will publish these amounts in each Federal
Register solicitation for applications.
The Secretary cannot accept or compel from borrowers the subsidy
costs of TIFIA credit instruments. However, the Secretary does have the
authority to establish fees at a level sufficient to cover all or a
portion of the subsidy costs to the Federal Government of providing
credit assistance under TIFIA. Therefore, such fees could potentially
reduce the subsidy cost of a TIFIA credit instrument to zero. That is
to say, if in a given year there is insufficient budget authority to
fund the credit instrument for a qualified project that has been
selected to receive TIFIA assistance, the DOT may increase the
application initiation charge or the credit processing charge on the
approved applicant to reduce the subsidy cost of that project. Note
that any such fees or charges may not be included among total project
costs for the purpose of calculating the maximum 33 percent credit
amount of TIFIA assistance.
Limitations on Assistance
The amount of credit assistance that may be provided to a project
under TIFIA is limited to not more than 33 percent of eligible project
costs. Costs incurred prior to a project sponsor's submission of an
application for credit assistance may be considered in calculating
eligible project costs only upon approval by the DOT. In addition,
applicants shall not include application charges or any other expenses
associated with the application process (such as charges associated
with obtaining the required preliminary rating opinion letter, as
discussed below) in the total project cost. No costs financed
internally or with interim funding may be reimbursed later than a year
following substantial completion of the project.
Within the overall credit assistance limitation of 33 percent of
eligible project costs, the DOT may consider making multi-year
contingent commitments of budget authority and associated credit
assistance for especially large projects with extended construction
periods and financing needs. In this instance, any reservation of
future-year funding shall be made through a letter of intent and shall
be contingent on the project's demonstrating satisfactory progress to
the DOT. Depending on the overall demand for credit assistance under
TIFIA, the DOT may limit such contingent commitments to 50 percent of
the budget authority becoming available in applicable future years. If
such a multi-year commitment is made, each year's loan will be tied to
distinct, clearly identified project segments or stages.
Rating Requirement
The TIFIA allows the DOT to partially fund a credit instrument up
to the estimated subsidy amount based on a preliminary rating opinion
letter. However, the DOT proposes to provide credit assistance only
after a formal credit agreement has been executed and the project's
senior obligations have obtained a formal investment-grade rating.
In administering this provision, the DOT will require each
applicant to furnish a preliminary rating opinion letter as part of the
application process. The applicant is responsible for identifying and
approaching one or more rating agencies to obtain such letter. This
letter is to indicate that the applicant project's senior obligations
have the potential of attaining an
[[Page 5999]]
investment-grade rating. This letter will allow the DOT to evaluate the
application and potentially select the project and execute a term sheet
upon which funds are obligated. The disbursement of any funds will be
contingent upon the execution of a formal credit agreement between the
DOT and the project sponsor and the receipt of a formal investment-
grade rating on the project's senior obligations. This rating must
apply to all project obligations with claims senior to that of the
Federal credit instrument on the security pledged to the Federal credit
instrument.
As suggested by the preceding paragraphs, the DOT's Federal credit
instrument may have a junior claim to other debt issued for the project
in terms of its priority interest in the project's pledged security.
However, the DOT's claim on assets should not be subordinated to the
claims of other creditors in the event of a default leading to
bankruptcy, insolvency, or liquidation of the obligor. The DOT's
interest may include collateral other than pledged revenues.
Threshold Criteria
To be eligible to receive Federal credit assistance under TIFIA, a
project shall meet the following five threshold criteria:
(1) The project shall be included in a State transportation plan
and, at such time as an agreement to make a Federal credit instrument
is entered into under this Act, in an approved State Transportation
Improvement Program.
(2) A State, local servicer, or other entity undertaking the
project shall submit a project application to the Secretary of
Transportation;
(3) A project shall have eligible project costs that are reasonably
anticipated to equal or exceed the lesser of $100 million or 50 percent
of the amount of Federal-aid highway funds apportioned for the most
recently completed fiscal year to the State in which the project is
located (in the case of a project principally involving the
installation of Intelligent Transportation Systems (ITS), eligible
project costs shall be reasonably anticipated to equal or exceed $30
million);
(4) Project financing shall be repayable, in whole or in part, from
tolls, user fees or other dedicated revenue sources; and
(5) In the case of a project that is undertaken by an entity that
is not a State or local government or an agency or instrumentality of a
State or local government, the project that the entity is undertaking
shall be included in the State transportation plan and an approved
State Transportation Improvement Program.
With this rulemaking, the DOT elaborates on criterion 4 (repayment
of project financing from user fees or other dedicated revenue
sources). In applying this threshold criterion, the DOT will not
consider current or future Federal funds, regardless of source, to be a
dedicated revenue source. This interpretation is consistent with
congressional intent that the Federal Government position itself as a
minority-share investor in the context of this credit program.
Selection Criteria
The Secretary shall consider the following eight criteria in
evaluating and selecting among eligible projects to receive credit
assistance:
(1) The extent to which the project is nationally or regionally
significant, in terms of generating economic benefits, supporting
international commerce, or otherwise enhancing the national
transportation system;
(2) The creditworthiness of the project, including a determination
by the Secretary that any financing for the project has appropriate
security features, such as a rate covenant, to ensure repayment;
(3) The extent to which such assistance would foster innovative
public-private partnerships and attract private debt or equity
investment;
(4) The likelihood that such assistance would enable the project to
proceed at an earlier date than the project would otherwise be able to
proceed;
(5) The extent to which the project uses new technologies,
including Intelligent Transportation Systems (ITS), that enhances the
efficiency of the project;
(6) The amount of budget authority required to fund the Federal
credit instrument made available;
(7) The extent to which the project helps maintain or protect the
environment; and
(8) The extent to which such assistance would reduce the
contribution of Federal grant assistance to the project.
With this rulemaking, the DOT requests comments on whether
criterion 3 (the extent to which assistance under TIFIA would foster
innovative public-private partnerships and attract private debt or
equity investment) and criterion 8 (the extent to which assistance
under TIFIA would reduce the contribution of Federal grant assistance
to the project) should be elaborated. The DOT also requests comments on
whether preference should be given to projects based on the total
Federal contribution (including both credit and grant assistance from
any source) and/or type of transportation project.
Tax Status of Loan Guarantees
The TIFIA did not amend the provisions in section 149(b) of the
Internal Revenue Code that prohibit the use of direct or indirect
Federal guarantees of tax-exempt obligations. Accordingly, the interest
income on any project loan that is directly or indirectly federally
guaranteed under TIFIA, shall not be exempt from Federal income
taxation.
Rulemaking Analysis and Notices
The 30-day comment period is necessary to help ensure that this new
program can be implemented before the credit amount authorized for
fiscal year 1999 ($1.6 billion) lapses. Given the need for the DOT to
solicit and evaluate applications, make selections, negotiate
agreements with project sponsors, and obligate funds before the end of
fiscal year 1999, the usual 60-day comment period would be both
impracticable and contrary to public interest and congressional intent.
All comments received before the close of business on the comment
closing date indicated above will be considered and will be available
for examination using the docket number appearing at the top of this
document in the docket room at the above address. The DOT will file
comments received after the comment closing date in the docket and will
consider late comments to the extent practicable. The DOT may, however,
issue a final rule at any time after the close of the comment period.
In addition to late comments, the DOT will also continue to file, in
the docket, relevant information becoming available after the comment
closing date. Interested persons should continue to examine the docket
for new material.
Executive Order 12866 (Regulatory Planning and Review) and DOT
Regulatory Policies and Procedures
The DOT has determined that issuance of a rule is necessary to
implement TIFIA, and has concluded that this action represents a
``significant regulatory action'' within the meaning of DOT's
Regulatory Policies and Procedures (44 FR 11034, February 26, 1979) and
Executive Order 12866. This determination is based on a finding that
the rule may have an annual effect on the economy of $100 million or
more. The NPRM was reviewed by the Office of Management and Budget
under E.O. 12866.
This section summarizes the estimated economic impact of the
[[Page 6000]]
proposed rule. This regulation would affect only those entities that
voluntarily elected to apply for TIFIA assistance and were selected to
receive a Federal credit instrument. It would not impose any direct
involuntary costs on non-participants.
The DOT has undertaken a preliminary evaluation of the economic
impact of this proposed regulatory action. However, because the number,
nature, and size of projects to be assisted will not be known until
specific applicants come forward, this analysis is by necessity an
estimate. Congress recognized this by including a provision in TIFIA
(23 U.S.C. 189) requiring the Secretary to submit a report summarizing
the effectiveness of the program within four years of the date of
enactment of the legislation (June 9, 2002).
DOT and industry research has indicated that there are substantial
economic productivity gains to be derived from capital investment in
surface transportation facilities. One study estimates that in the
four-decade period from 1950 to 1989, U.S. firms realized annual
production cost savings of 18 percent from general highway investment
(yearly return of 18 cents per dollar invested in all roads) and 24
percent from investment in non-local roads.1 In addition to
these direct returns, transportation capital investment typically
generates significant spillover benefits, which may be of a non-
financial nature, such as reduced pollution, increased safety, improved
international competitiveness, and enhanced accessibility. Market
imperfections often prevent these intangible but nonetheless important
public benefits from being monetized and captured.
---------------------------------------------------------------------------
\1\ Contribution of Highway Capital to Industry and National
Productivity Growth--Executive Summary, Ishaq Nadirir, New York,
FHWA, 1996.
---------------------------------------------------------------------------
Just as transportation investment produces benefits, failure to
invest results in cost increases. Another recent study estimates that
congestion costs the average U.S. citizen $370 annually, in terms of
time lost and fuel wasted.2 These costs are expected to
increase as growing investment needs--both in terms of system renewal
and capacity expansion--and limited availability of public funding
contribute to declining performance.
---------------------------------------------------------------------------
\2\ Measuring and Monitoring Urban Mobility, Texas
Transportation Institute, November 1996.
---------------------------------------------------------------------------
Growth in both freight movement and passenger travel has grown
dramatically in recent years, and is expected to continue growing. For
example, since 1980, total ton-miles and intercity passenger miles have
grown by 30 percent and 60 percent respectively, according to a recent
study by the American Association of State Highway and Transportation
Officials. Despite substantial increases in authorized Federal funding
levels for surface transportation under the Transportation Equity Act
for the 21st Century, current resources are not expected to be able to
keep pace with maintenance and preservation needs, let alone the
additional demands resulting from growth in population and goods
movement. Funding shortfalls can be particularly acute for large
infrastructure projects (costing $100 million or more) which, due to
their scale, often cannot be readily accommodated in ongoing State and
local capital renewal programs.
The economic drag created by under-investment in the nation's
transportation network is substantial, as shippers and motorists incur
increased vehicle maintenance and fuel costs, shipping delays, safety
hazards, and time delays associated with congestion and poorly
maintained roads.
The TIFIA was established to provide fractional credit assistance
to major transportation infrastructure projects--such as border
crossings, trade corridors, and intermodal transfer facilities--that
have the potential of generating substantial economic benefits both
regionally and nationally. In many cases, such projects are capable of
being supported through direct user charges or dedicated revenue
streams that can be used to access private capital and other non-
Federal funding sources. The TIFIA is designed to fill market gaps
through providing supplemental and/or subordinate capital to such
projects. It should facilitate their ability to access the capital
markets or other financing sources for the majority of their funding
needs. Through TIFIA's leverage of limited Federal funds with private
capital, these capital-intensive projects can be advanced without
displacing smaller, more traditional grant-supported projects. Federal
risk exposure should be mitigated by substantial co-investment from
non-Federal parties and the use of objective, market-based credit
evaluation criteria.
The TIFIA is authorized to receive $530 million of budget authority
to support up to $10.6 billion in nominal amounts of credit (or such
lesser amounts of credit as can be supported by the budget authority).
Under the terms of the legislation, the Federal share is limited to not
more than 33 percent of total eligible project costs. In many cases,
the actual share of TIFIA assistance may be considerably less. For
example, prior to TIFIA, three major surface transportation projects in
southern California obtained Federal credit instruments pursuant to
special appropriations from Congress. Between 1993 and 1996, the
Congress approved a $120 million standby Federal line of credit for the
San Joaquin Hills Toll Road; two standby lines of credit totaling $145
million for the Foothill-Eastern Toll Road; and a $400 million direct
Federal loan for the Alameda Corridor project. Each of these projects
would have met the threshold eligibility criteria under the terms of
TIFIA. The Federal credit assistance as a percent of total project
costs for these three investments is approximately 8.5 percent, 11.5
percent, and 17.5 percent, respectively.
Under the Federal Credit Reform Act of 1990 (FCRA), the amount of
budget authority necessary to support a Federal credit instrument
depends upon the subsidy cost (i.e., the estimated present value cost
of estimated losses that will be incurred as a result of defaults, net
of any fee income). Each project will be assigned a subsidy cost based
upon an evaluation of its credit-worthiness.
Since the actual projects under TIFIA have yet to be identified, it
is not possible at this stage to ascertain the appropriate subsidy
amounts. If, for example, the assumed average subsidy rate under TIFIA
were 10 percent, the $530 million of budget authority could support
$5.3 billion in nominal amount of Federal credit instruments, and
(assuming a 33 percent TIFIA share of project costs) an aggregate of
$15.9 billion in capital investment. This would represent a
benefit:cost ratio (total capital investment compared to federal
budgetary cost) of 30:1. If the subsidy rate averaged 5 percent, the
budget authority could support $31.8 billion in aggregate investment;
and if the subsidy rate averaged 15 percent, the budget authority could
support approximately $10.6 billion in aggregate investment. The only
costs imposed on the participants are the repayment of credit at the
U.S. Treasury rate (which in certain instances may be significantly
less than their own marginal cost of capital), a credit processing
charge, and an application charge based upon direct costs incurred by
the DOT in processing applications.
On this basis, the DOT has concluded that TIFIA will promote the
efficient functioning of project delivery and the private markets, and
will generate both direct and indirect benefits, including reduced
congestion, greater mobility, improved safety, an enhanced environment,
and greater economic growth. These benefits are anticipated to
[[Page 6001]]
far surpass the combined direct costs to the Federal Government ($530
million) and to the entities that elect to participate in the program.
Because of the voluntary nature of participation in TIFIA, this
regulatory action is not anticipated to impose any costs upon non-
participants. The DOT requests comments, information, and data from the
public and potential users concerning the economic impact of
implementing this rule and the TIFIA program.
Regulatory Flexibility Act
The Regulatory Flexibility Act of 1980 (Pub. L. 96-354, 5 U.S.C.
601-612) requires an assessment of the extent to which proposed rules
will have an impact on small business or other small entities.
Consistent with the Regulatory Flexibility Act, the DOT has evaluated
the effects of this rule on small business or other small entities. The
NPRM proposes to implement a Federal Credit assistance program for
surface transportation projects. There will be a substantial economic
impact on the projects funded. However, the DOT anticipates that few,
if any, of the applicants for assistance, will be small entities as
defined by the Small Business Administration. For example, applicants
are likely to include States and large public, or quasi-public
entities. In addition, although it is difficult to judge how many
applications will be received, we anticipate that the DOT will offer
credit assistance to no more than a handful of projects each year.
Based on that evaluation, the DOT hereby certifies that this action
would not have significant economic impact on a substantial number of
small entities. The DOT invites public comment on this determination.
Unfunded Mandates Reform Act of 1995
The Unfunded Mandates Reform Act of 1995 (Public Law 104-4)
requires agencies to prepare a written assessment of the costs,
benefits and other effects of proposed or final rules that include a
Federal mandate likely to result in the expenditure by State, local or
tribal governments, in the aggregate, or by the private sector, of more
than $100 million annually. This proposed rule would not impose a
Federal mandate resulting in the expenditure by State, local, and
tribal governments, in the aggregate, or by the private sector, of $100
million or more in any one year. The rule simply implements a Federal
credit assistance program.
Executive Order 12612 (Federalism Assessment)
This action has been analyzed in accordance with the principles and
criteria contained in Executive Order 12612. The DOT has determined
that this action does not have sufficient federalism implications to
warrant the preparation of a federalism assessment. The bases for this
determination are that a) eligibility for assistance under this program
extends to both private and public entities; and b) the recipients of
credit under this voluntary program will receive a benefit, rather than
incur costs, through participation. The DOT invites public comment on
this determination.
Executive Order 12372 (Intergovernmental Review)
Given that projects receiving assistance under TIFIA may fall under
the programmatic jurisdiction of the FHWA, the FRA, or the FTA, the
relevant Catalog of Federal Domestic Assistance Program Numbers are:
20.205 highway planning and construction; 20.310 Rail rehabilitation
and improvement; and 20.500 transit capital improvement grants. The
regulations implementing Executive Order 12372 regarding
intergovernmental consultation on Federal programs and activities apply
to this program.
Paperwork Reduction Act
This document does not contain information collection requirements
for the purposes of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
et seq.); specifically, that fewer than ten respondents, as defined in
5 CFR 1320.3, are anticipated. Based upon preliminary assessments,
research reports, meetings with focus groups and discussions with
potential respondents, the DOT anticipates approximately six
respondents to the application annually. If in the future, the DOT
anticipates ten or more respondents annually, immediate steps will be
taken to seek approval from OMB for an information collection, as
required under the Paperwork Reduction Act.
National Environmental Policy Act
As specified under Sec. 1503 of TIFIA, and codified under
Sec. 182(c)(2) of title 23, U.S.C., each project obtaining assistance
under this program is required to adhere to the National Environmental
Policy Act of 1969, as amended (42 U.S.C. 4321 et seq.). This
rulemaking simply provides the procedure to apply for credit
assistance; therefore, by itself, this rulemaking will not have any
effect on the quality of the environment.
Regulation Identification Number
A regulation identification number (RIN) is assigned to each
regulatory action listed in the Unified Agenda of Federal Regulations.
The Regulatory Information Service Center publishes the Unified Agenda
in April and October of each year. The RIN contained in the heading of
this document may be used to cross-reference this action with the
Unified Agenda. The agency-specific proposed common rule appears at the
end of this common preamble.
List of Subjects in 23 CFR Part 180 and 49 CFR Parts 261 and 640
Credit programs--transportation, Highways and roads, Mass transit,
Railroads, Investments, Reporting and recordkeeping requirements.
Text of the Common Proposed Rule
The text of the common proposed rule appears below:
PART __--CREDIT ASSISTANCE FOR SURFACE TRANSPORTATION PROJECTS
Sec.
____.1 Purpose.
____.3 Definitions.
____.5 Limitations on assistance.
____.7 Application process.
____.9 Federal requirements.
____.11 Investment-grade ratings.
____.13 Threshold criteria.
____.15 Selection criteria.
____.17 Charges.
____.19 Reporting requirements.
Authority: 23 U.S.C. 180-189 and 315; secs. 1501 et seq., Public
Law 105-178, 112 stat. 107, 241, as amended, 49 CFR 1.48.
Sec. ____.1 Purpose.
This rule implements a Federal credit assistance program for
surface transportation projects.
Sec. ____.3 Definitions.
Eligible project costs means amounts substantially all of which are
paid by, or for the account of, an obligor in connection with a
project, including the cost of:
(1) Development phase activities, including planning, feasibility
analysis, revenue forecasting, environmental review, permitting,
preliminary engineering and design work, and other pre-construction
activities;
(2) Construction, reconstruction, rehabilitation, replacement, and
acquisition of real property (including land related to the project and
improvements to land), environmental mitigation, construction
contingencies, and acquisition of equipment; and
(3) Capitalized interest necessary to meet market requirements,
reasonably
[[Page 6002]]
required reserve funds, capital issuance expenses, and other carrying
costs during construction.
Federal credit instrument means a secured loan, loan guarantee, or
line of credit authorized to be made available under this subchapter
with respect to a project.
Investment-grade rating means a rating category of BBB minus, Baa3,
or higher assigned by a rating agency to project obligations offered
into the capital markets.
Lender means any non-Federal qualified institutional buyer as
defined in Sec. 230.144A(a) of title 17, Code of Federal Regulations,
known as Rule 144A(a) of the Securities and Exchange Commission and
issued under the Securities Act of 1933 (15 U.S.C. 77a et seq.),
including:
(1) A qualified retirement plan (as defined in Sec. 4974(c) of the
Internal Revenue Code of 1986) that is a qualified institutional buyer;
and
(2) A governmental plan (as defined in Sec. 414(d) of the Internal
Revenue Code of 1986) that is a qualified institutional buyer.
Line of credit means an agreement entered into by the Secretary
with an obligor under Sec. 184 of title 23, United States Code, to
provide a direct loan at a future date upon the occurrence of certain
events.
Loan guarantee means any guarantee or other pledge by the Secretary
to pay all or part of the principal of and interest on a loan or other
debt obligation issued by an obligor and funded by a lender.
Local servicer means:
(1) A State infrastructure bank established under title 23; or
(2) A State or local government or any agency of a State or local
government that is responsible for servicing a Federal credit
instrument on behalf of the Secretary.
Obligor means a party primarily liable for payment of the principal
of or interest on a Federal credit instrument, which party may be a
corporation, partnership, joint venture, trust, or governmental entity,
agency, or instrumentality.
Project means:
(1) Any surface transportation project eligible for Federal
assistance under title 23 or chapter 53 of title 49, United States
Code.
(2) A project for an international bridge or tunnel for which an
international entity authorized under Federal or State law is
responsible;
(3) A project for intercity passenger bus or rail facilities and
vehicles, including facilities and vehicles owned by the National
Railroad Passenger Corporation, and components of magnetic levitation
transportation systems; and
(4) A project for publicly owned intermodal surface freight
transfer facilities, other than seaports and airports, if the
facilities are located on or adjacent to National Highway System routes
or connections to the National Highway System.
Project obligation means any note, bond, debenture, or other debt
obligation issued by an obligor in connection with the financing of a
project, other than a Federal credit instrument.
Rating agency means a bond rating agency identified by the
Securities and Exchange Commission as a Nationally Recognized
Statistical Rating Organization.
Secured loan means a direct loan or other debt obligation issued by
an obligor and funded by the Secretary in connection with the financing
of a project under Sec. 183 of title 23, United States Code.
State means any one of the fifty states, the District of Columbia,
or Puerto Rico.
Subsidy amount means the amount of budget authority sufficient to
cover the estimated long-term cost to the Federal Government of a
Federal credit instrument, calculated on a net present value basis,
excluding administrative costs and any incidental effects on
governmental receipts or outlays in accordance with the provisions of
the Federal Credit Reform Act of 1990 (2 U.S.C. 661 et seq.).
Substantial completion means the opening of a project to vehicular
or passenger traffic.
TIFIA means the Transportation Infrastructure Finance and
Innovation Act of 1998.
Sec. ____.5 Limitations on assistance.
(a) The total amount of Federal credit offered to any project
receiving credit assistance under this part shall not exceed 33 percent
of the anticipated eligible project costs.
(b) Costs incurred prior to a project sponsor's submission of an
application for credit assistance may be considered in calculating
eligible project costs only upon approval of the Secretary. In
addition, applicants shall not include application charges or any other
expenses associated with the application process (such as charges
associated with obtaining the required preliminary rating opinion
letter) among the eligible project costs.
(c) No costs financed internally or with interim funding may be
refinanced under this part later than a year following substantial
completion of the project.
(d) Within the overall credit assistance limitation of 33 percent
of eligible project costs, the DOT may consider making multi-year
contingent commitments of budget authority and associated credit
assistance for especially large projects with extended construction
periods and financing needs. In this instance, any reservation of
future-year funding shall be made through a letter of intent and shall
be contingent on the project's demonstrating satisfactory progress to
the DOT. Depending on the overall demand for credit assistance under
this part, the DOT may limit such contingent commitments to 50 percent
of the budget authority becoming available in the applicable future
years. If such a multi-year commitment is made, each year's loan will
be tied to distinct, clearly identified project segments or stages.
Sec. ____.7 Application process.
(a) Public and private applicants for credit assistance under this
part will be required to submit applications to the DOT in order to be
considered for approval by the Secretary of Transportation.
(b) At a minimum, such applications shall provide:
(1) Documentation sufficient to demonstrate that the project
satisfies each of the threshold criteria in Sec. ____.13 and describe
the extent to which the project satisfies each of the selection
criteria in Sec. ____.15.
(2) Background information on the project for which assistance is
sought, such as the project's description, status of the environmental
permitting process, and construction schedule;
(3) Background information on the applicant and/or project sponsor;
(4) Historical information, if applicable, concerning the
applicant's financial condition, including, for example, independently
audited financial statements and certifications concerning bankruptcies
or delinquencies on other debt; and
(5) Current financial information concerning both the project and
the applicant, such as sources and uses of funds for the project and a
forecast of cash flows available to service all debt instruments.
(c) An application for a project located in or sponsored by more
than one State or other entity shall be submitted to the DOT by just
one State or entity. The sponsoring States or entities shall designate
a single obligor for purposes of applying for, receiving, and repaying
TIFIA credit assistance.
[[Page 6003]]
(d) Each fiscal year for which Federal assistance is available
under this part, the DOT will publish a Federal Register notice to
solicit applications for credit assistance. Such notice will specify
the relevant due dates, the estimated amount of funding available to
support TIFIA credit instruments for the current and future fiscal
years, contact name(s), and other details for that year's application
submissions and funding approvals. The DOT will also maintain a
centralized mailing list for sending notices to prospective applicants.
Sec. ____.9 Federal requirements.
All projects receiving credit assistance under this part shall
comply with:
(a) the relevant requirements of title 23 of the United States Code
for highway projects, chapter 53 of title 49, United States Code, for
transit projects, and Sec. 5333(a) of title 49, United States Code, for
rail projects, as appropriate;
(b) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d et
seq.);
(c) the National Environmental Policy Act of 1969 (42 U.S.C. 4321
et seq.);
(d) the Uniform Relocation Assistance and Real Property Acquisition
Policies Act of 1970 (42 U.S.C. 4601 et seq.); and
(e) other Federal and compliance requirements as may be applicable.
Sec. ____.11 Investment-grade ratings.
(a) The full funding of a secured (direct) loan, loan guarantee, or
line of credit shall be contingent on the assignment of an investment-
grade rating by a recognized bond rating agency to all project
obligations that have a lien senior to that of the Federal credit
instrument on the pledged security.
(b) An investment-grade rating must be received before the DOT will
disburse any funds.
Sec. ____.13 Threshold criteria.
(a) To be eligible to receive Federal credit assistance under this
part, a project shall meet the following five threshold criteria:
(1) The project shall be included in a State transportation plan
and, at such time as the DOT and project sponsor initially execute a
credit agreement, in an approved State Transportation Improvement
Program.
(2) The State, local servicer, or other entity undertaking the
project shall submit a project application to the Secretary of
Transportation;
(3) A project shall have eligible project costs that are reasonably
anticipated to equal or exceed the lesser of $100 million or 50 percent
of the amount of Federal-aid highway funds apportioned for the most
recently completed fiscal year to the State in which the project is
located (in the case of a project principally involving the
installation of Intelligent Transportation Systems (ITS), eligible
project costs shall be reasonably anticipated to equal or exceed $30
million);
(4) Project financing shall be repayable, in whole or in part, from
tolls, user fees or other dedicated revenue sources; and
(5) In the case of a project that is undertaken by an entity that
is not a State or local government or an agency or instrumentality of a
State or local government, the project that the entity is undertaking
shall be included in the State transportation plan and an approved
State Transportation Improvement Program as provided in paragraph
(a)(1) of this section.
(b) With respect to paragraph (a)(3), for a project located in more
than one State, the minimum cost threshold size shall be the lesser of
$100 million or 50 percent of the amount of Federal-aid highway funds
apportioned for the most recently completed fiscal year to the
participating State that receives the least amount of such funds.
(c) With respect to paragraph (a)(4), the DOT will not consider
current or future Federal funds, regardless of source, to be a
dedicated revenue source.
Sec. ____.15 Selection criteria.
(a) The Secretary shall consider the following eight criteria in
evaluating and selecting among eligible projects to receive credit
assistance:
(1) The extent to which the project is nationally or regionally
significant, in terms of generating economic benefits, supporting
international commerce, or otherwise enhancing the national
transportation system;
(2) The creditworthiness of the project, including a determination
by the Secretary that any financing for the project has appropriate
security features, such as a rate covenant, to ensure repayment;
(3) The extent to which such assistance would foster innovative
public-private partnerships and attract private debt or equity
investment;
(4) The likelihood that such assistance would enable the project to
proceed at an earlier date than the project would otherwise be able to
proceed;
(5) The extent to which the project uses new technologies,
including Intelligent Transportation Systems (ITS), that enhances the
efficiency of the project;
(6) The amount of budget authority required to fund the Federal
credit instrument made available;
(7) The extent to which the project helps maintain or protect the
environment;
(8) The extent to which such assistance would reduce the
contribution of Federal grant assistance to the project.
(b) In addition, section 182(b)(2)(B) of title 23, United States
Code, conditions a project's approval for credit assistance on receipt
of a preliminary rating opinion letter indicating that the project's
senior obligations have the potential to attain an investment-grade
rating.
(c) The DOT shall evaluate each project's distinct public benefits
(including personal and freight mobility, economic development, and
impact on international competitiveness) and contribution to program
goals (including leverage of the Federal contribution and increased
private investment in surface transportation infrastructure).
(d) The DOT may give preference to those projects for which the
total Federal contribution (including both credit and grant assistance
from any Federal source) requested is small. This preference supports
the policy goal of the DOT to position itself as a minority-share
investor in any project receiving credit assistance under TIFIA to
induce significant private co-investment.
(e) The DOT may also give preference to applications for loan
guarantees rather than other forms of Federal credit assistance. This
preference is consistent with Federal policy that, when Federal credit
assistance is necessary to meet a Federal objective, loan guarantees
should be favored over direct loans, unless attaining the Federal
objective requires a subsidy, as defined by the Federal Credit Reform
Act of 1990, deeper than can be provided by a loan guarantee.
Sec. ____.17 Charges.
(a) The DOT will require a non-refundable application initiation
charge for each project applying for credit assistance under TIFIA. The
DOT may also require an additional credit processing charge for
projects selected to receive assistance. The proceeds of any such
charges will cover a portion of the costs to the Federal Government of
soliciting and evaluating applications, selecting projects to receive
assistance, and negotiating credit agreements. For fiscal year 1999,
the DOT will require an application initiation charge of $5,000 for
each project applying for credit assistance under TIFIA. The DOT will
not require any credit processing charges for fiscal year 1999. For
fiscal years 2000 and beyond, the DOT may
[[Page 6004]]
adjust the amount of the application initiation charge, and will
determine the appropriate amount of the credit processing charge, based
on early program implementation experience in fiscal year 1999.
(b) Applicants shall not include application charges or any other
expenses associated with the application process (such as charges
associated with obtaining the required preliminary rating opinion
letter) in the total project cost for the purposes of calculating the
33 percent credit limitation referenced in Sec. ____.5(a).
(c) If, in any given year, there is insufficient budget authority
to fund the credit instrument for a qualified project that has been
selected to receive assistance under TIFIA, the Secretary may increase
the application initiation charge or the credit processing charge on
the approved applicant to reduce the subsidy cost of that project. No
such fees or charges may be included among eligible project costs for
the purpose of calculating the maximum 33 percent credit amount of
TIFIA assistance under Sec. ____.5.
Sec. ____.19 Reporting requirements.
At a minimum, any recipient of Federal credit under this part shall
submit an annual project performance report and audited financial
statements to the DOT within 120 days following the recipient's fiscal
year-end for each year during which the recipient's obligation to the
Federal Government remains in effect. The DOT may conduct periodic
financial and compliance audits of the recipient of credit assistance,
as determined necessary by the DOT. The specific credit agreement
between the recipient of credit assistance and the DOT may contain
additional reporting requirements.
1. The Federal Highway Administration proposes to add part 180 to
23 CFR Chapter I as set forth at the end of the common preamble.
2. The Federal Railroad Administration proposes to add part 261 to
49 CFR Chapter II as set forth at the end of the common preamble.
3. The Federal Transit Administration proposes to add part 640 to
49 CFR Chapter VI as set forth at the end of the common preamble.
Appendix ____--Application Checklist
Note: This appendix will not appear in the Code of Federal
Regulations.
The DOT is in the process of developing a standard application
form for credit assistance for surface transportation projects. This
appendix specifies the documentary materials that the DOT is
considering for inclusion in the standard application form. The
following list of information items derives, in part, from the DOT's
research concerning State and Federal credit assistance programs, as
well as internal DOT guidance. The following list of items
potentially to be included in a standard application form is being
provided for public comment.
a. Summary of how the proposed project satisfies each of the
threshold criteria in Sec. ____.13 and the extent to which it
satisfies each of the selection criteria in Sec. ____.15 of this
part. (Each criterion should be addressed separately by the
applicant).
b. Project information.
1. Detailed description of the project, including type of
project, geographic location, economic impact, public benefits, and
purpose or purposes.
2. Documentation sufficient to demonstrate the project's current
inclusion in the long-range State transportation plan and
anticipated inclusion in the State Transportation Improvement
Program (STIP).
3. Copies of permits and approvals required by local, regional,
State, and Federal agencies, including environmental and other
permits and approvals, and other documentation sufficient to
demonstrate compliance with other statutory and regulatory
requirements.
4. Documentation specifying the project's status with regard to
conformance with the National Environmental Policy Act of 1969
(NEPA).
5. Description of project construction phases and timeline.
6. Description of the current condition of all facilities
relating to the project.
7. Description of the maintenance and operation plan for the
project.
c. Applicant information.
1. Legal applicant's name, headquarters address, mailing
address, phone and fax numbers.
2. Primary contact person's name, title, address, phone and fax
numbers.
3. Full description of type of sponsoring entity (general
partnership, limited partnership, corporation, other), the parties
forming the entity, and the date on which the entity was
established.
4. Applicant's tax identification number.
5. Name of the entity that will exercise ownership control of
project.
6. Names of the entities charged with planning, developing, and
operating the project.
7. Names of various other parties involved in the project with
description of responsibilities and evidence of agreements or
commitments.
8. Disclosure of current or past litigation involving the
parties that will own, plan, develop and/or operate the project.
d. Historical financial information relating to the applicant.
1. Signed, audited financial statements.
2. Credit references or release forms.
3. Federal income tax returns.
4. Certification and/or resolution of any delinquency or default
on Federal debt.
5. Bankruptcy history.
e. Initial financial plan for the project.
1. Initial total cost estimate.
i. Costs of feasibility studies.
ii. Costs of preliminary engineering.
iii. Costs of environmental assessment.
iv. Costs of right of way.
v. Costs of construction.
vi. Costs of construction engineering/inspection.
vii. Costs of project management.
viii. Costs relating to financing.
ix. Proposed cost containment strategies (e.g., design-build,
use of cost control teams, management cost control strategies, and
value engineering).
2. Implementation plan for the project.
i. Schedule, presented in annual increments, for completing and
operating the project based on initial base year costs adjusted for
inflation and any cost escalation.
ii. Methodology for all cost assumptions.
iii. Sources of potential future cost estimates (e.g.,
environmental costs, litigation costs, overtime costs, and value
engineering savings).
3. Funding sources: all proposed sources and uses of project
funds presented as annual amounts.
i. Supporting documentation to verify the availability of all
sources of public and private funding.
ii. Comparison of annual amounts available for project
obligations versus annual obligation needs.
4. Cash flows: Long-term pro-forma cash flow projection clearly
delineating all cash flows by category (revenues and expenses) and
subcategory (e.g., operations and maintenance, debt service to
senior bondholders, debt service to the Federal Government,
reserves) and specifying coverage ratios for each year.
5. Type of Federal credit assistance that the applicant is
requesting and proposed terms (e.g., amount, maturity, allowances
for prepayment and deferral).
6. Proposed timing and use of disbursements of requested Federal
credit assistance.
7. Proposed collateral/security for Federal credit assistance.
8. Copy of preliminary rating opinion letter on senior debt
obligations from at least one nationally recognized rating agency.
9. Copy of narrative financial analysis and/or feasibility
study, including documentation to support revenue projections, such
as traffic studies and regional economic projections, as applicable.
10. For loan guarantees, additional documentation including
copies of the obligation agreement between the proposed guaranteed
lender and borrower, background information on the proposed
guaranteed lender, and other data specifically pertaining to a loan
guarantee.
f. Any other information which the DOT may deem necessary for
project evaluation and selection.
[[Page 6005]]
Issued in Washington, DC on January 28, 1999.
Kenneth R. Wykle,
Federal Highway Administration Administrator.
Jolene M. Molitoris,
Federal Railroad Administration Administrator.
Gordon J. Linton,
Federal Transit Administration Administrator.
[FR Doc. 99-2637 Filed 2-5-99; 8:45 am]
BILLING CODE 4910-22-P