oversight

Surface Transportation: Financing Program Could Benefit from Increased Performance Focus and Better Communication

Published by the Government Accountability Office on 2012-06-21.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

             United States Government Accountability Office

GAO          Report to Congressional Committees




June 2012
             SURFACE
             TRANSPORTATION
             Financing Program
             Could Benefit from
             Increased
             Performance Focus
             and Better
             Communication




GAO-12-641
                                             June 2012

                                             SURFACE TRANSPORTATION
                                             Financing Program Could Benefit from Increased
                                             Performance Focus and Better Communication
Highlights of GAO-12-641, a report to
congressional committees




Why GAO Did This Study                       What GAO Found
Created in 1998, the TIFIA program is        Projects that received credit assistance through the Transportation Infrastructure
designed to fill market gaps and             Finance and Innovation Act (TIFIA) program, administered by the Department of
leverage substantial nonfederal              Transportation (DOT), tend to be large, high-cost highway projects. As of April
investment by providing federal credit       2012, DOT has executed 27 TIFIA credit agreements for 26 projects with project
assistance to help finance surface           sponsors such as state DOTs and transit agencies. Overall, DOT has provided
transportation projects including            nearly $9.1 billion in credit assistance through 26 loans and one loan guarantee.
highway, transit, rail, and intermodal       By mode, there are 17 highway, 5 transit, and 4 intermodal projects. Most
projects. Since 2008, demand for the         projects have a total cost of over $1 billion. DOT monitors individual credit
program has surged, annually
                                             agreements but does not systematically assess whether its TIFIA portfolio as a
exceeding budget resources for the
                                             whole is achieving the program’s goals of leveraging federal funds and
program by a factor of more than 10 to
1. Given the increased demand and
                                             encouraging private co-investment. DOT has identified goals and objectives for
recent proposals to expand and modify        the TIFIA program, but its limited use of performance measures makes it difficult
the program, GAO was asked to                to determine the degree to which the program is meeting these goals and
review (1) the characteristics of TIFIA      objectives. Given that DOT already collects project data, it could use these data
projects and how DOT tracks progress         to better evaluate the program’s overall progress toward meeting its goals.
toward the program’s goals, (2) the          In fiscal years 2010 and 2011, DOT used a competitive two-step process to
process DOT used to evaluate and             evaluate and invite projects to apply for TIFIA credit assistance to address the
select projects that submitted LOIs to
                                             considerable increase in demand for the program. First, a multimodal team
apply for credit assistance in fiscal
                                             scored and grouped letters of interest (LOI) using statutory criteria. Second, a
years 2010 and 2011, (3) the factors
that affect project sponsors’ decisions      group of senior DOT staff reviewed the LOIs based on the criteria and other
about whether to seek TIFIA credit           factors, like available budget authority, and invited a subset to apply—the next
assistance, and (4) the options              step in securing TIFIA assistance. While recent applicants were satisfied with
proposed to modify the program. GAO          many aspects of the process, they also indicated, along with legal and financial
reviewed laws and program guidance;          advisors, that the selection process lacks transparency and creates uncertainty in
interviewed DOT officials, project           their ability to implement projects. For example, some recent applicants told us it
sponsors, and advisors involved in           is difficult to understand what characteristics DOT uses to measure how well a
procuring credit assistance; and             project meets each criterion. DOT officials said the agency is taking steps to
surveyed all state departments of            improve its evaluation process, but since many of the changes were initiated in
transportation and other recent              2012, it is too soon to tell if they will address recent applicants’ concerns.
applicants about the TIFIA program.
                                             Several factors influence whether project sponsors seek TIFIA assistance. More
What GAO Recommends                          than 30 of 36 recent applicants we surveyed cited TIFIA’s repayment options
                                             (like deferring repayments for 5 years after project completion), low interest rate,
GAO recommends that DOT develop
                                             and flexible structure (i.e., ability to subordinate TIFIA repayment) as important in
and use program performance
                                             their decision to seek assistance. To date, sponsors from 17 states have never
measures to better assess progress in
meeting TIFIA’s goals and objectives.        sought TIFIA assistance. State DOT respondents from these states cited various
DOT should better disclose information       reasons for this, including lack of eligible projects and state-imposed borrowing
on how it selects projects to apply for      restrictions. Many of these state DOTs indicated that regardless of options for
TIFIA assistance through program             modifying the program, they have no plans to seek TIFIA assistance.
guidance or other means to help              Several options to change the TIFIA program have been proposed by, among
ensure that the program is more              others, Congress and DOT; these options include increasing the program’s
transparent to Congress, applicants,         funding, increasing the portion of costs that may be covered by TIFIA from 33
and the public. DOT said it would
                                             percent to 49 percent of project costs, and modifying the selection process. Each
consider the study’s results.
                                             option has advantages and disadvantages and, if adopted, some could alter the
View GAO-12-641. For more information,       original goals of the program—to leverage public funds and encourage private
contact Susan Fleming at (202) 512-2834 or   co-investment.
flemings@gao.gov.

                                                                                      United States Government Accountability Office
Contents


Letter                                                                                     1
               Background                                                                  4
               TIFIA Projects Are Mostly Large Highway Projects; Performance
                 Measures Are Needed to Better Evaluate Program Outcomes                 12
               DOT Used a Competitive Process to Evaluate Projects, but This
                 Process Could Benefit from Increased Transparency                       21
               Flexible Repayment Terms and Other Factors Influence whether
                 States and Other Sponsors Seek TIFIA Assistance; Future
                 Demand Is Difficult to Gauge                                            31
               Options Proposed to Modify the TIFIA Program                              37
               Conclusions                                                               46
               Recommendations for Executive Action                                      47
               Agency Comments                                                           48

Appendix I     Scope and Methodology                                                     49



Appendix II    Projects Receiving TIFIA Credit Assistance                                55



Appendix III   Responses to Questions from GAO’s Survey on TIFIA                         58



Appendix IV    GAO Contact and Staff Acknowledgments                                     69



Tables
               Table 1: DOT Definitions and Clarifications of TIFIA Statutory
                        Criteria                                                         10
               Table 2: Number of LOIs, by Fiscal Year and Outcome of
                        Multimodal Team’s Assessment                                     23
               Table 3: Number of LOIs Invited to Apply, by Fiscal Year and Mode         25
               Table 4: Status of Projects Invited to Apply, by Fiscal Year              26
               Table 5: Top Factors That Affected Recent Applicants’ Decisions to
                        Seek TIFIA Assistance                                            32
               Table 6: Other Factors That Affected Recent Applicants’ Decisions
                        to Seek TIFIA Assistance                                         33
               Table 7: Factors That Affected State DOTs’ Decisions to Not Seek
                        TIFIA Assistance                                                 34


               Page i                                       GAO-12-641 Surface Transportation
Table 8: Summary of Proposed Changes to the TIFIA Program                  38
Table 9: List of Interviewees—Sponsors, Financial and Legal
         Advisors, All Others                                              51
Table 10: List of Survey Recipients and Respondents, by Type of
         Organization                                                      53
Table 11: Projects with TIFIA Credit Agreements                            55
Table 12: How Important or Unimportant Were Each of the
         Following Factor(s) in Your Organization’s Decision to
         Seek TIFIA Credit Assistance for Projects in Federal Fiscal
         Year 2010 or 2011?                                                58
Table 13: How Satisfied or Dissatisfied Were You with Each of the
         Following Aspects of the Process for Submitting a Letter
         of Interest (LOI) for the TIFIA Program in Federal Fiscal
         Year 2010 or 2011?                                                59
Table 14: Thinking about the Amount of Effort Your Organization
         Spent, How Much of a Burden, if at All, Were the
         Following Aspects of Submitting an LOI?                           60
Table 15: For Federal Fiscal Year 2010 or 2011, Did You Receive
         Any Feedback from DOT TIFIA Staff on Any Letters of
         Interest for TIFIA Credit Assistance?                             60
Table 16: If You Received Feedback on Any of the Following
         Topics, How Useful, if at All, Was the Feedback You
         Received from DOT TIFIA Staff?                                    60
Table 17: How Much Do You Support or Oppose the Following
         Proposed Changes to the TIFIA Program?                            61
Table 18: Do You Support Modifying the TIFIA Selection Criteria?           61
Table 19: How Much, if at All, Did Each of the Following Factors
         Impact Your State DOT’s Decision to Not Submit an LOI to
         the TIFIA Program?                                                62
Table 20: In Your Opinion, How Much, if at All, Does Each of the
         Following Proposed Changes Increase the Likelihood That
         Your Organization Would Seek TIFIA Credit Assistance in
         the Future?                                                       63
Table 21: In Your Opinion, How Much, if at All, Does Each of the
         Following Proposed Changes Increase the Likelihood That
         Your Organization Would Seek TIFIA Credit Assistance in
         the Future?                                                       64
Table 22: Do You Support Modifying the TIFIA Selection Criteria?           64
Table 23: In the Next 5 years, Approximately How Many Projects
         Do You Anticipate Will Be Undertaken in Your State That
         Have a Total Cost of ...                                          65




Page ii                                       GAO-12-641 Surface Transportation
          Table 24: Of the Projects Identified in Table 23, for About How
                  Many Do You Anticipate That Your Organization Will Seek
                  TIFIA Credit Assistance?                                           65
          Table 25: Does Your State DOT Have the Legislative Authority to
                  Use Any of the Following Tools for Transportation
                  Projects?                                                          66
          Table 26: Does Your State Have Access to Any of the Following
                  Revenue Sources, at Either the State or Local Level, That
                  Could Be Used to Repay a TIFIA Loan?                               66
          Table 27: Does Your State DOT Have Either Bonding Authority OR
                  Have Access to the Bond Market through Another State
                  Entity?                                                            66
          Table 28: Which, if Any, of the Following Legislative Restrictions
                  on Conducting Bond Issuances for Capital Projects Apply?           67


Figures
          Figure 1: Requests for TIFIA Credit Assistance, Fiscal Years 1999-
                   2012                                                               8
          Figure 2: Four Stages of TIFIA Credit Assistance                            9
          Figure 3: Location of Projects with TIFIA Credit Agreements                13
          Figure 4: States That Had Submitted TIFIA Letters of Interest,
                   through Fiscal Year 2012                                          15
          Figure 5: TIFIA LOI Evaluation and Selection Process for Fiscal
                   Years 2010 and 2011                                               22




          Page iii                                      GAO-12-641 Surface Transportation
Abbreviations

AASHTO     American Association of State Highway and Transportation
           Officials
ARTBA      American Road and Transportation Builders Association
DOT        department of transportation
FCRA       Federal Credit Reform Act
FHWA       Federal Highway Administration
FRA        Federal Railroad Administration
FTA        Federal Transit Authority
GAN        Grant Anticipation Note
GARVEE     Grant Anticipation Revenue Vehicle
ITS        intelligent transportation system
LOI        letter of interest
MAP-21     Moving Ahead for Progress in the 21st Century Act
NOFA       Notice of Funding Availability
OMB        Office of Management and Budget
OST        Office of the Secretary of Transportation
RRIF       Railroad Rehabilitation and Improvement Financing
SAFETEA-LU Safe, Accountable, Flexible, Efficient Transportation Equity
           Act: A Legacy for Users
SANDAG     San Diego Association of Governments
SEP-15     Special Experimental Project Number 15
TIFIA      Transportation Infrastructure Finance and Innovation Act
TIGER      Transportation Investment Generating Economic Recovery


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Page iv                                                 GAO-12-641 Surface Transportation
United States Government Accountability Office
Washington, DC 20548




                                   June 21, 2012

                                   The Honorable Barbara Boxer
                                   Chairman
                                   The Honorable James M. Inhofe
                                   Ranking Member
                                   Committee on Environment and Public Works
                                   United States Senate

                                   The Honorable Max Baucus
                                   Chairman
                                   The Honorable David Vitter
                                   Ranking Member
                                   Subcommittee on Transportation and Infrastructure
                                   Committee on Environment and Public Works
                                   United States Senate

                                   The Transportation Infrastructure Finance and Innovation Act (TIFIA)
                                   program provides federal credit assistance in the form of direct loans,
                                   loan guarantees, and lines of credit to finance surface transportation
                                   projects including highway, transit, rail, port access, and intermodal
                                   projects. Created in 1998 as part of the Transportation Equity Act for the
                                   21st Century (TEA-21), 1 the program is designed to fill market gaps and
                                   leverage substantial private and other nonfederal investment to help
                                   advance projects of regional and national significance. For most of its
                                   history, the TIFIA program was underutilized. Beginning in fiscal year
                                   2008, however, interest in the program increased substantially because of
                                   several factors, including the growing demand for infrastructure
                                   investment relative to available transportation funding and the economic
                                   downturn. For the past 3 years, demand for credit assistance has
                                   exceeded the program’s budget resources by a factor of more than 10 to
                                   1. In part because of to this oversubscription, Members of Congress and
                                   others have offered reauthorization proposals to greatly expand and
                                   modify various aspects of the program.

                                   The Federal Highway Administration (FHWA) within the U.S. Department
                                   of Transportation (DOT) administers the TIFIA program. DOT awards



                                   1
                                    Pub. L. No. 105-178, 112 Stat. 107 (1998) (codified as 23 U.S.C. ch.6).




                                   Page 1                                                 GAO-12-641 Surface Transportation
credit assistance to eligible project sponsors, such as state departments
of transportation, transit agencies, tolling authorities, and private entities.
To receive assistance, projects must meet several eligibility
requirements—such as having a total cost of at least $50 million 2—and
sponsors must submit a letter of interest (LOI) and a formal application.
Since the program’s inception, 26 projects in 12 states, the District of
Columbia, and Puerto Rico have received about $9.1 billion in TIFIA
credit assistance through direct loans and one loan guarantee, and over a
dozen more projects are working toward receiving credit assistance.

In response to your request, this report addresses the following
questions: (1) What are the characteristics of TIFIA projects and how
does DOT track progress toward the program’s stated goals? (2) How did
DOT evaluate and select projects to apply for TIFIA credit assistance for
fiscal years 2010 and 2011? (3) What factors affect states’ and other
project sponsors’ decisions about whether to apply for TIFIA credit
assistance? (4) What are the proposed options to modify the TIFIA
program?

To address these objectives, we reviewed DOT program guidance for
TIFIA, relevant legislation and regulations, and DOT’s biennial reports to
Congress on the TIFIA program. We also reviewed documents developed
by DOT to capture the evaluation and scoring decisions for projects
seeking credit assistance in fiscal years 2010 and 2011. We analyzed
data from DOT on LOIs submitted to the program since its creation and
on projects in the TIFIA portfolio—projects with credit agreements—to
describe the characteristics and results of the TIFIA program. We
assessed the reliability of the data by reviewing DOT’s data
documentation, interviewing knowledgeable officials, and conducting
independent validation through use of our web survey of states and
recent applicants. We found the data to be sufficiently reliable for our
purposes. In addition, we interviewed DOT officials on TIFIA program
goals and performance measures, the selection and evaluation of
projects, the demand for the program, and proposed options to modify
TIFIA. We also interviewed project sponsors, including those that
received credit assistance in California, Colorado, Florida, Texas, and
Virginia, the 5 states with the most TIFIA awards; the state DOTs in North



2
 Intelligent transportation systems (ITS) projects must have a total cost of at least $15
million.




Page 2                                                   GAO-12-641 Surface Transportation
Carolina and Iowa; private concessionaires, private sector entities that
have entered into agreements with public agencies to allow greater
private sector participation in the delivery and financing of transportation
projects; and legal and financial advisors that have been involved in
securing TIFIA credit assistance to learn about their experience with the
TIFIA program, including the application process, oversight and
monitoring of credit assistance, future demand for the program, and
proposed options to change the program.

In addition, we surveyed all state departments of transportation and all
recent applicants that submitted an LOI to the TIFIA program in fiscal
years 2010 and 2011 using a web-based survey. 3 The survey recipients
fell into four categories: (1) state DOTs from states from which no
sponsor had ever applied to the TIFIA program, (2) state DOTs from
states for which a sponsor had applied to the TIFIA program but not in
recent years—that is, 2010 or 2011, (3) state DOTs who had recently
applied to the TIFIA program, and (4) other non-state DOT organizations,
such as transit agencies, who had recently applied to the TIFIA program.
Survey respondents were presented with different questions in the survey
depending on their past experience with the TIFIA program and whether
they were state DOTs. In general, the survey topics included the factors
contributing to organizations’ decisions about whether to seek TIFIA
assistance, satisfaction with the process for submitting an LOI to the
TIFIA program, opinions on proposed modifications to the TIFIA program,
potential future demand for the TIFIA program, and characteristics of the
state DOTs. We distributed a link for the survey to 83 organizations by e-
mail and also subsequently e-mailed and telephoned nonrespondents to
encourage a higher response rate. We received completed surveys from
66 respondents (80 percent). Of the 66 completed responses, 16 were
state DOTs from states with no TIFIA experience, 14 were from state
DOTs from states with no recent TIFIA experience, 12 were from state
DOTs that were recent applicants, and 24 were from non-state DOT
organizations that were recent applicants.

To determine options that had been proposed to change the TIFIA
program, we reviewed the American Energy and Infrastructure Jobs Act



3
 These two groups were not mutually exclusive, in that some state DOTs are also recent
TIFIA applicants. For the purposes of this report, our definition of state DOTs includes
those from the 50 states, the District of Columbia, and Puerto Rico.




Page 3                                                 GAO-12-641 Surface Transportation
             of 2012, 4 as reported out by the House Committee on Transportation and
             Infrastructure, and the Moving Ahead for Progress in the 21st Century Act
             (MAP-21), 5 as passed by the Senate. We also reviewed other
             reauthorization proposals and documents prepared by, among others,
             DOT and the American Association of State Highway and Transportation
             Officials (AASHTO). In interviews, we discussed these and other options
             with DOT, select project sponsors, legal and financial advisors, and
             private concessionaires with investments in transportation infrastructure,
             all familiar with or recipients of TIFIA assistance.

             We conducted this performance audit from July 2011 to June 2012 in
             accordance with generally accepted government auditing standards.
             Those standards require that we plan and perform the audit to obtain
             sufficient, appropriate evidence to provide a reasonable basis for our
             findings and conclusions based on our audit objectives. We believe that
             the evidence obtained provides a reasonable basis for our findings and
             conclusions based on our audit objectives. For more information on our
             scope and methodology, see appendix I.


             Most federal highway transportation funds are distributed as grants to
Background   states as part of the federal aid highway program through a set of
             complex formulas that take into account a number of factors, including the
             estimated share of taxes highway users in each state contributes. The
             Highway Trust Fund is the principal source of funding for federal aid
             highway programs and is funded through motor fuel and other highway
             use taxes. 6 Grants for transit projects are distributed as part of the federal
             transit program through a collection of formula-based and discretionary
             programs and are funded primarily by the Mass Transit Account of the
             Highway Trust Fund. 7 Supplementing these federal programs is a
             collection of financing methods that allow project sponsors—such as state
             DOTs and transit agencies—to borrow money through bonds, loans, or
             other mechanisms. State DOTs and other project sponsors can raise
             money in the bond market through, for example, revenue bonds backed


             4
             H.R. 7, 112th Cong. (Feb. 13, 2012).
             5
             S. 1813, 112th Cong. (Feb. 6, 2012).
             6
             23 U.S.C. §§ 104, 105.
             7
             49 U.S.C. ch. 53.




             Page 4                                          GAO-12-641 Surface Transportation
                          by anticipated project revenues like tolls; bonds backed by future federal
                          transportation funds, such as Grant Anticipation Revenue Vehicles
                          (GARVEE) or Grant Anticipation Notes (GAN); or general obligation
                          bonds backed by the full faith and credit of a state or municipality. Project
                          sponsors may also seek private investment through bank debt, private
                          equity, or private activity bonds. Through TIFIA, DOT provides loans or
                          other credit assistance to sponsors of surface transportation projects.
                          Declining Highway Trust Fund revenues and states’ budget constraints,
                          as well as the high cost and size of major transportation projects, have
                          prompted project sponsors to seek alternative methods of funding
                          transportation infrastructure.


TIFIA Goals               The TIFIA program’s primary goal is to leverage limited federal resources
                          and stimulate private capital investment in transportation infrastructure by
                          providing credit assistance to projects of national or regional significance.
                          Underlying the TIFIA program is the notion that the federal government
                          can perform a constructive role in financing large transportation
                          infrastructure projects by supplementing, but not supplanting, existing
                          capital finance markets. In this role, DOT identifies five key objectives for
                          the TIFIA program:

                          •   facilitate projects with significant public benefits;

                          •   encourage new revenue streams and private participation;

                          •   fill capital market gaps for secondary (subordinate) capital;

                          •   be a flexible, “patient” investor willing to take on investor concerns
                              about investment horizon, liquidity, predictability, and risk; and

                          •   limit federal exposure by relying on market discipline.



TIFIA Credit Assistance   DOT provides TIFIA credit assistance in three forms: direct loans, loan
Terms and Eligibility     guarantees, and standby lines of credit. The maximum maturity for all
Requirements              types of TIFIA credit assistance is 35 years after substantial completion of
                          a project. Lines of credit can supplement project revenues during the first
                          10 years of project operations. In addition, DOT can defer the first TIFIA
                          repayment until 5 years after substantial completion of a project, and
                          most project sponsors avail themselves of this option. Other credit
                          assistance terms include that (1) TIFIA assistance may provide no more



                          Page 5                                            GAO-12-641 Surface Transportation
than 33 percent of total project costs, 8 (2) senior debt has an investment-
grade credit rating (Baa3/BBB- or higher), 9 and (3) TIFIA assistance can
be subordinate to the project’s senior debt, meaning that senior creditors
may receive project revenues ahead of DOT. According to DOT officials,
the TIFIA program is one of the few federal credit programs in which
federal assistance routinely takes a subordinate position to other,
nonfederal lenders with respect to cash flows. However, to protect
taxpayers, TIFIA loans may not be subordinated to the claims of other
creditors with respect to the loan recipients’ bankruptcy, insolvency, or
liquidation. 10

Both public and private entities are eligible to receive TIFIA assistance for
a range of surface transportation-related projects including highway,
transit, railroad, intermodal freight, and port access. Borrowers can
include entities like state DOTs, toll authorities, transit agencies, and
private concessionaires. 11 Other eligibility requirements include that a
project

•     must have total costs of at least $50 million (or $15 million for
      intelligent transportation systems projects); 12

•     must be included in state and local transportation plans; and

•     must have dedicated revenues, like tolls, user fees, or pledged taxes,
      for repayment.
Through the Safe, Accountable, Flexible, Efficient Transportation Equity
Act: A Legacy for Users (SAFETEA-LU), Congress amended and


8
 23 U.S.C. §§ 603(b)(2), 604(b)(2).
9
 23 U.S.C. §§ 601(a)(3), 603(a)(4), 604(a)(4). In order to receive TIFIA assistance, the
senior debt obligations funding the project (i.e., those obligations having a lien senior to
that of the TIFIA credit instrument on the pledged security) must achieve an investment
grade rating.
10
    23 U.S.C. §§ 603(b)(6), 604(b)(8).
11
   Private concessionaires are private sector entities that have entered into agreements
with public agencies to allow greater private sector participation in the delivery and
financing of transportation projects.
12
  ITS encompasses a broad range of electronics and communication technologies to
enhance the capacity and efficiency of surface transportation systems, including traveler
information, public transportation, and commercial vehicle operations.




Page 6                                                    GAO-12-641 Surface Transportation
                        reauthorized the TIFIA program, authorizing budget authority of $122
                        million for each of fiscal years 2005-2009 from the Highway Trust Fund
                        for the program’s credit subsidy cost and administrative expenses. 13 The
                        credit subsidy is the estimated long-term cost to the government of
                        providing assistance. 14 Extensions of SAFETEA-LU have authorized
                        budget authority of $122 million for the TIFIA program for each
                        subsequent fiscal year. Any uncommitted budget authority remains
                        available for obligation in subsequent years, unless Congress chooses to
                        reprogram or rescind these amounts. According to DOT, $10 million in
                        TIFIA budget authority can generally be leveraged to provide $100 million
                        in credit assistance. 15


TIFIA Program History   In fiscal year 2008, total requests for TIFIA assistance exceeded DOT’s
                        available budgetary resources for the first time. Prior to this, when there
                        was lower demand for the program, DOT allowed project sponsors to
                        seek TIFIA assistance on a “first come, first served” basis defined by the
                        sponsor’s schedule. 16 Figure 1 shows the number and amount of credit
                        assistance requested each fiscal year.




                        13
                         Pub. L. No. 109-59, § 5309(j), 119 Stat. 1144, 1584 (2005).
                        14
                          Budgeting for the cost of credit programs, including the TIFIA program, is governed by
                        the Federal Credit Reform Act (FCRA) of 1990, Pub. L. 93-344, Title V, as amended
                        (codified at 2 U.S.C. §§ 661-661f), which requires federal agencies to receive budget
                        authorities to cover the estimated long-term cost to the government (which includes
                        defaults, delinquencies, and interest subsidies) of providing credit assistance, calculated
                        on a net present value basis and excluding administration costs. The amount of budget
                        authority DOT may use is subject to annual obligation limitations in annual appropriations
                        acts. Of the $122 million in budget authority that has been authorized per year, DOT has
                        the authority to use up to $2.2 million annually to administer the program, and to collect
                        and spend fees, subject to authority being provided in appropriations acts, to cover
                        expenses related to reviewing, negotiating, and servicing credit agreements.
                        15
                          Actual TIFIA lending capacity is subject to the calculation of the estimated subsidy cost
                        for each credit assistance transaction. The amount varies based on the risk profile of the
                        project and the repayment stream. According to DOT, actual original subsidy rates have
                        ranged from less than 1 percent to over 15 percent of the TIFIA credit assistance
                        received.
                        16
                          For fiscal years 1999, 2000, and 2001, DOT used a fixed-date solicitation process for
                        the TIFIA program but used the open, first-come first-served process after these initial
                        years.




                        Page 7                                                   GAO-12-641 Surface Transportation
Figure 1: Requests for TIFIA Credit Assistance, Fiscal Years 1999-2012




                                         Note: Not all letters of interest included a total project cost or TIFIA assistance request. To calculate a
                                         dollar estimate of the total TIFIA request for each fiscal year, we multiplied the number of letters of
                                         interest in a year by the average TIFIA request that year. We refer to this estimate as the inferred
                                         total TIFIA assistance request. Of the 182 letters of interest submitted to the program, 16 did not
                                         include an estimate of TIFIA assistance.


                                         In its 2010 report to Congress on TIFIA, DOT attributed the increased
                                         demand for TIFIA assistance to several factors, including the growing
                                         demand for infrastructure investment relative to other sources of funding
                                         (like declining fuel tax receipts), the economic downturn and difficulty
                                         accessing capital markets, and the increasing use of innovative
                                         approaches, like public-private partnerships, to finance and deliver
                                         projects. After demand exceeded available budget resources, DOT
                                         terminated the open application process and instituted an annual, fixed-
                                         date solicitation process for sponsors to submit LOIs for credit assistance.
                                         In fiscal year 2010, DOT began evaluating and competitively selecting




                                         Page 8                                                            GAO-12-641 Surface Transportation
                                         projects based on how well they align with the TIFIA selection criteria and
                                         the availability of budget resources. 17


Primary Stages for                       As shown in figure 2, there are four primary stages for securing TIFIA
Securing a TIFIA Credit                  credit assistance. For each project, the amount of time needed to
Agreement                                complete each stage varies. For instance, in its 2002 report to Congress,
                                         DOT stated that the length of credit agreement negotiations is affected by
                                         the complexities and uncertainties of large infrastructure projects as well
                                         as the learning curve of both project sponsors and DOT as they
                                         encounter unique legal and financial issues with projects.

Figure 2: Four Stages of TIFIA Credit Assistance




                                         Notes: Sponsors of highway projects may seek waivers from the usual TIFIA application process
                                         through FHWA’s Special Experimental Project Number 15 (SEP-15). SEP-15 allows for the
                                         modification of FHWA policy and procedure to facilitate public-private partnerships and other types of
                                         innovation in the federal aid highway process. Specifically, sponsors can seek waivers from FHWA
                                         procedures and policy, including those that apply to TIFIA.




                                         17
                                            Though the program was oversubscribed in fiscal year 2008, DOT did not institute the
                                         fixed-date process until fiscal year 2010 because it reserved most of its anticipated fiscal
                                         year 2009 and fiscal year 2010 appropriations for existing applicants.




                                         Page 9                                                         GAO-12-641 Surface Transportation
                                            a
                                             The Credit Council provides policy direction to the TIFIA program and recommends projects to
                                            receive credit assistance. The DOT Credit Council is composed of the following DOT officials: the
                                            Deputy Secretary of Transportation, who serves as chair; Assistant Secretary for Budget and
                                            Programs, who serves as vice-chair; Under Secretary of Transportation for Policy; General Counsel;
                                            Assistant Secretary for Transportation Policy; and the Director of the Office of Small and
                                            Disadvantaged Business Utilization. The Federal Highway Administrator, Federal Transit
                                            Administrator, Federal Railroad Administrator, and Maritime Administrator also sit on the Credit
                                            Council. Finally, there can be up to three at-large members.

                                            b
                                             For loan guarantees, DOT disburses funds to the guaranteed lender only when there is a payment
                                            default by the borrower. Any funds that the guaranteed lender draws from the loan guarantee initiate
                                            a loan between DOT and the borrower.


                                            After determining that a project meets the eligibility requirements, DOT
                                            uses eight statutory criteria 18 weighted by regulation 19 to select projects to
                                            receive credit assistance. Beginning in fiscal year 2010, DOT defined the
                                            statutory criteria in the notice of funding availability (funding notice), which
                                            included clarification of the national or regional significance and
                                            environment criteria. (See table 1.)

Table 1: DOT Definitions and Clarifications of TIFIA Statutory Criteria

                                                                                                                           2010 and 2011
Criterion (weight)           Definition                                                                                    clarifications
National or regional         Extent to which project is nationally or regionally significant in terms of generating        Livability
significance (20%)           economic benefits, supporting international commerce, or otherwise enhancing                  Economic
                             national transportation system. It includes                                                   competitiveness
                             •    livability—providing transportation options linked with housing and commercial           Safety
                                  development to improve the economic opportunities and quality of life for
                                  people in communities across the United States,
                             •    economic competitiveness—contributing to the economic competitiveness of
                                  the United States by improving long-term efficiency and reliability in the
                                  movement of people and goods, and
                             •    safety—improving the safety of U.S. transportation facilities and systems and
                                  the communities and populations they affect.
Environment (20%)            Extent to which the project helps maintain or protect the environment. It includes     Sustainability
                             •   sustainability—improving energy efficiency, reducing dependence on oil,            State of good
                                 reducing greenhouse gas emissions and other transportation-related impacts         repair
                                 on ecosystems through use of tolling or pricing structures to reduce congestion
                                 and encourage the use of alternative transportation options, and
                             •   state of good repair—improving the condition of existing transportation
                                 infrastructure with particular emphasis on projects that minimize life cycle costs
                                 and use environmentally sustainable practices and materials.



                                            18
                                                23 U.S.C. § 602(b)(2)(A).
                                            19
                                                47 C.F.R. § 80.15(a).




                                            Page 10                                                       GAO-12-641 Surface Transportation
                                                                                                                              2010 and 2011
Criterion (weight)            Definition                                                                                      clarifications
Private participation (20%)   Extent to which TIFIA assistance would foster innovative public-private partnerships
                              and attract private debt or equity investment.
Project acceleration          Likelihood that TIFIA assistance would enable a project to proceed at an earlier
(12.5%)                       date than the project would otherwise be able to proceed.
Creditworthiness (12.5%)      The creditworthiness of the project, including a determination by the Secretary of
                              Transportation that any financing for the project has appropriate security features to
                              ensure repayment, such as rate covenants.
Use of new technologies       Extent to which project uses new technologies, including intelligent transportation
(5%)                          systems, to enhance project efficiency.
Reduced federal grant         Extent to which TIFIA assistance would reduce the contribution of federal grant
assistance (5%)               assistance to the project.
Consumption of budget         Amount of budget authority required to fund the federal credit instrument made
authority (5%)                available under TIFIA.
                                             Source: GAO analysis of DOT documents.


                                             Note: On the basis of both the funding notices for fiscal years 2010 and 2011, DOT did not consider
                                             two criteria—creditworthiness and consumption of budget authority—when evaluating LOIs as DOT
                                             did not believe project sponsors would have sufficient details regarding these criteria at the time of
                                             the LOI submission. Per the funding notice issued on November 3, 2011, DOT considered all eight
                                             criteria in its evaluation of LOIs beginning in fiscal year 2012.

                                             In addition, projects that received funding through DOT’s Transportation
                                             Investment Generating Economic Recovery (TIGER) grant program were
                                             eligible for TIFIA credit assistance. Specifically, project sponsors could
                                             use TIGER grant funds for TIFIA credit assistance, known as a TIGER
                                             TIFIA payment. In each of the four rounds through which DOT TIGER
                                             grants have been available, a portion of the funds could be used to
                                             support the credit subsidy and administrative costs of projects eligible for
                                             federal credit assistance. When a project sponsor is offered a TIFIA
                                             award through the TIGER program, the project goes through the regular
                                             TIFIA process, including the TIFIA credit evaluation, credit agreement
                                             negotiation, and oversight and monitoring. 20

                                             DOT implements and manages the program using internal staff and a
                                             pool of external financial and legal advisors. There are nine internal TIFIA
                                             office staff who are responsible for assisting with reviewing LOIs,
                                             selecting projects to apply for credit assistance, negotiating credit


                                             20
                                               To date, six projects have been selected to receive TIGER grants to support TIFIA credit
                                             assistance. The sponsors for two of these projects have executed credit agreements and
                                             the sponsors for the remaining four projects are working with DOT to apply for and
                                             negotiate a credit agreement.




                                             Page 11                                                         GAO-12-641 Surface Transportation
                         agreements, monitoring loan disbursements and the financial
                         performance of executed credit agreements, and tracking credit subsidy
                         calculations. Currently, DOT supplements its internal staff with a pool of
                         five financial and legal advisors, contracted for 5-year periods, who assist
                         in the review of applications and negotiation of credit agreements. 21



TIFIA Projects Are
Mostly Large Highway
Projects; Performance
Measures Are Needed
to Better Evaluate
Program Outcomes

TIFIA Projects Are       Since the TIFIA program was created in 1998, DOT has executed 27
Concentrated in Five     credit agreements for 26 projects. 22 To date, assistance has been
States and Tend to Be    provided through 26 loans and one loan guarantee. Of the 26 projects, 17
                         are located in 5 states—California, Colorado, Florida, Texas, and Virginia
Large Highway Projects   (see fig. 3).




                         21
                           To avoid conflicts of interest, DOT prohibits key external personnel (financial and legal
                         advisors) from also representing TIFIA applicants. The TIFIA office is currently conducting
                         a new solicitation for its advisors.
                         22
                          The number of TIFIA credit agreements and projects differs because one project, the
                         Miami Intermodal Center, has three credit agreements for two loans, one of which was
                         amended. See appendix II for a full list of the TIFIA credit agreements and projects.




                         Page 12                                                 GAO-12-641 Surface Transportation
Figure 3: Location of Projects with TIFIA Credit Agreements




                                         Note: Dollar values indicate the amount of TIFIA assistance each project received, in millions of
                                         dollars.

                                         Overall, sponsors from 33 states, the District of Columbia, and Puerto
                                         Rico have submitted LOIs for projects that vary by mode and purpose, but
                                         most have high total costs. Highway projects account for a majority of all
                                         LOIs submitted to TIFIA program. According to DOT data, highway
                                         projects—such as building new roads and replacing bridges—accounted
                                         for about 60 percent of the 182 LOIs submitted to the TIFIA program from
                                         1999 to 2012. Transit and intermodal projects—such as building new
                                         transit systems and constructing parking garages and facilities linking
                                         various transport modes near airports—account for 18 percent and 10




                                         Page 13                                                        GAO-12-641 Surface Transportation
percent of all LOIs, respectively. In addition, rail, ferry, and ITS projects
account for 4 percent, 2 percent, and 1 percent of LOIs during this time,
respectively. 23 However, no projects in these three modes have received
TIFIA assistance to date. Over the history of the program, the average
total cost of projects seeking TIFIA assistance has been $1.2 billion.
Through fiscal year 2012, no sponsor in the other 17 states has submitted
an LOI to the TIFIA program. 24 (See fig. 4.)




23
  Other projects, such as construction of visitors’ centers and truck technology systems,
account for 7 percent of all LOIs.
24
  Though no sponsor from Mississippi has submitted an LOI, the Mississippi DOT
submitted an application for TIFIA in September 2008. The Mississippi DOT met the LOI
requirement through FHWA’s SEP-15 program.




Page 14                                                 GAO-12-641 Surface Transportation
Figure 4: States That Had Submitted TIFIA Letters of Interest, through Fiscal Year 2012




                                          Note: Counts include duplicate LOIs submitted for the same project in different years.


                                          According to DOT data, TIFIA credit agreements have been used mostly
                                          for large, high-cost highway projects. Overall, DOT has provided TIFIA
                                          assistance to 17 highway projects. Some of these projects—like the
                                          President George Bush Turnpike-Western Extension (SH 161) in Texas—
                                          were to construct new roads, and others—like the I-595 Corridor
                                          Roadway Improvements project in Florida—to reconstruct and expand
                                          existing roads. Projects receiving credit assistance also tend to have high



                                          Page 15                                                        GAO-12-641 Surface Transportation
total costs. Of the 25 projects, 20 projects cost more than $500 million
and 16 projects cost more than $1 billion. The average total cost of
projects receiving TIFIA credit assistance is $1.4 billion. 25 According to
DOT, TIFIA assistance can help advance large-scale projects that
otherwise might be delayed or deferred because of size or complexity,
and as such, TIFIA projects to date have mainly been large-scale
projects. On average, TIFIA assistance accounts for 24 percent of total
project costs, about 9 percent less than the 33 percent currently permitted
by law.

To a lesser extent, TIFIA has also been used for transit and intermodal
projects. Four intermodal projects have received credit assistance,
including the Reno ReTRAC project in Nevada, which includes rail and
roadway improvements to improve freight capacity and address
environmental and safety concerns. Five transit projects have received
TIFIA assistance. The Tren Urbano project in Puerto Rico, for example,
constructed a new, fixed-guideway transit system to relieve congestion in
the San Juan area. DOT officials told us that the balance of projects is
becoming more diverse in terms of mode. They noted that sponsors of
transit projects have been slower to use TIFIA assistance in the past,
primarily because transit projects have access to low-cost municipal debt
and do not generate revenue in excess of their operating costs to repay
assistance. Moreover, it can be difficult to integrate TIFIA assistance with
federal funding for transit provided through the New Starts program. 26
However, in fiscal years 2010 and 2011, DOT invited the sponsors of 12
projects to apply for TIFIA assistance, which is the next stage in securing
TIFIA assistance, 4 of which were transit projects. 27

Projects financed with TIFIA credit agreements also have other attributes.
According to DOT data, roughly one-third of projects are public-private
partnerships that include private equity investments. For these projects,


25
  To date, the smallest TIFIA project cost $267 million and received a loan for $42 million
(Interlink). The largest TIFIA project cost $3.3 billion and received a loan for $900 million
(Central Texas Turnpike System).
26
  The Federal Transit Administration’s (FTA) New Starts program, part of the Capital
Investment Grant program, is the federal government’s primary financial resource for
supporting new major transit capital projects that are locally planned, implemented, and
operated, such as light rail and bus rapid transit.
27
  During this time, transit projects composed about 18 percent of submitted LOIs, while
highway projects composed about 73 percent of submitted LOIs.




Page 16                                                   GAO-12-641 Surface Transportation
the private equity accounts for about 17 percent of total project costs.
Defining private participation more broadly, 17 projects with active credit
agreements include either private equity or debt. The average private
investment for projects with active credit agreements, including equity and
debt, is 37 percent of total project costs. 28 The North Tarrant Express, for
example, is a public-private partnership between the Texas Department
of Transportation and a private concessionaire—NTE Mobility Partners—
to design, build, finance, operate, and maintain a 13-mile section of
highway in the Dallas-Fort Worth area. Project funds include $426 million
in equity from NTE Mobility Partners and $398 million from private activity
bonds. These two sources of private investment account for about 40
percent of the project’s total cost. Projects with credit agreements
typically pledge user fees or dedicated tax revenue to repay TIFIA
assistance. For 16 credit agreements, user fees like tolls are pledged to
repay assistance, while for 8 credit agreements, tax-backed revenue
streams like local sales taxes are pledged to repay assistance. The
remaining 3 credit agreements use other dedicated revenues, like
availability payments, 29 to repay assistance. 30

As of April 2012, DOT reported that it has provided nearly $9.1 billion—
$8.5 billion through direct loans and $600 million in loan guarantees—to
projects at a budgetary cost of about $654 million. The budgetary cost of
TIFIA assistance is the total credit subsidy for all projects, with the credit
subsidy, as noted earlier, being the estimated long-term cost to the
government of providing assistance calculated on a net present value



28
  In calculating this figure, we used DOT’s convention from its 2002 report to Congress on
TIFIA. Namely, (1) the project must feature investor-held debt or equity and (2) the
investment return must be derived from project-generated revenues or other revenues
levied specifically to support the project. We only included active credit agreements—
those for which sponsors had not repaid or refinanced their credit agreements—as we did
not have complete information on the funding sources for all the retired credit agreements.
29
  An availability payment is a payment made by the public sponsor of a project to the
private concessionaire for its responsibility to design, construct, operate, or maintain a
project. The payment is based on particular project milestones or facility performance
standards, irrespective of usage of the asset, such as ridership or toll revenue. Typically,
the private sector concessionaire is the TIFIA borrower when availability payments are
pledged to repay assistance.
30
  One project—the Miami Intermodal Center—received two loans. The sponsor pledged
different forms of revenue to repay each loan—user fees from rental car users and fuel tax
revenues. See appendix II for a full list of the revenues pledged to repay assistance for all
projects with TIFIA credit agreements.




Page 17                                                   GAO-12-641 Surface Transportation
                    basis, excluding administrative costs. As such, the credit subsidy reflects
                    the estimated risk of the loan or assistance. According to DOT, the
                    original credit subsidy cost for credit agreements ranges from less than 1
                    percent to over 15 percent of the amount of TIFIA assistance. Projects
                    that pledge user fees tend to have higher subsidy costs and, thus,
                    generally entail greater risk to the federal government because actual
                    usage and fees for a project (such as traffic and toll revenue on a new
                    road) may not meet projections, particularly early in its operation. In such
                    cases, where repayment of TIFIA assistance relies solely on revenues
                    from user fees, poor performance—such as less than projected use of a
                    facility—could result in nonpayment.


Most Sponsors Are   Project sponsors are actively drawing funds from DOT for about half of
Drawing Funds for   the projects with TIFIA credit agreements. 31 Many of these projects—14
Projects            of 26 projects—are currently under construction. As a result, many
                    sponsors are drawing and not yet repaying TIFIA loans. Six project
                    sponsors have retired their TIFIA credit agreements through early
                    repayment, by refinancing the loan, or because of expiration of the credit
                    agreement in the case of a loan guarantee. For example, the Puerto Rico
                    Highway and Transportation Authority refinanced its TIFIA loan for the
                    Tren Urbano project with tax-exempt debt about 3 years after DOT fully
                    disbursed the loan. The sponsor paid back the TIFIA loan 32 years ahead
                    of schedule and anticipated saving about $31.7 million in interest
                    payments to DOT by refinancing the TIFIA loan.

                    The sponsor of one TIFIA project—the South Bay Expressway in San
                    Diego County, California—declared bankruptcy in 2010 but has not
                    defaulted on any TIFIA payments. At the time of the bankruptcy filing, the
                    outstanding balance of the TIFIA loan was $172 million, including interest.
                    The Plan of Reorganization ordered by the U.S. bankruptcy court reduced
                    the value of the loan’s principal. DOT’s unsecured claim was $73 million,
                    or 42 percent of the outstanding loan balance. Following the sale of the
                    project to and the assumption of the TIFIA loan by the San Diego
                    Association of Governments (SANDAG) in December 2011, DOT expects



                    31
                      All but one of the TIFIA credit agreements are for loans. Each credit agreement includes
                    an annual disbursement schedule and outlines the conditions and forms for drawing
                    funds. For loans, DOT will disburse funds as often as monthly on a reimbursement basis
                    as costs are incurred for eligible project purposes. For the one loan guarantee made to
                    date, no funds were drawn for the project before the credit agreement expired.




                    Page 18                                                GAO-12-641 Surface Transportation
                           to recover the original loan value through higher interest rates charged on
                           the restructured loan.


TIFIA Program Could        While DOT tracks certain aspects of a project, such as monitoring
Benefit from Use of        whether the project is meeting its construction timeline and comparing
Performance Measures to    actual and projected receipts of the revenue pledged to repay TIFIA
                           assistance, the agency does not systematically assess whether its
Evaluate Progress toward   portfolio as a whole is achieving the program’s goals of leveraging federal
Goals                      funds and encouraging private co-investment. The Secretary of
                           Transportation is required to report biennially to Congress on the financial
                           performance of projects that are receiving or have received TIFIA
                           assistance and whether the goals of the TIFIA program are best served
                           by continuing the program under the authority of the Secretary,
                           establishing another entity to administer to program, or phasing out the
                           program. 32

                           As DOT administers a growing portfolio of TIFIA credit agreements,
                           decision making and program implementation could be aided by
                           additional use of performance measures to assess how well the agency is
                           meeting its goals. Moreover, knowing the degree to which the agency is
                           meeting its goals could augment the information DOT uses to fulfill the
                           above stated requirement to make recommendations to Congress.
                           According to our work on leading performance management practices,
                           agencies should have plans for managing their programs that identify
                           goals, strategies, time frames, resources, and stakeholder involvement in
                           decision making. 33 Though DOT has identified goals and objectives for
                           the TIFIA program, its limited use of performance measures makes it
                           difficult to determine the degree to which the TIFIA program is meeting
                           these goals and objectives. Other programs administered by DOT do
                           have performance measures. Programs administered by the Federal
                           Railroad Administration (FRA) and the Federal Motor Carrier Safety
                           Administration, for example, have created a set of performance goals and



                           32
                            23 U.S.C. § 609.
                           33
                             In the past, we also recommended that a Department of Energy credit assistance
                           program develop performance measures to evaluate program progress. See GAO,
                           Department of Energy: New Loan Guarantee Program Should Complete Activities
                           Necessary for Effective and Accountable Program Management, GAO-08-750
                           (Washington, D.C.: July 7, 2008).




                           Page 19                                              GAO-12-641 Surface Transportation
measures to address program performance. 34 For example, FRA set
goals to reduce the rate of train accidents in its proposed fiscal year 2013
budget, and FRA tracks these goals and actual accident rates over time
to measure whether or not it is meeting its safety goals. Also, for FHWA’s
Express Lanes Demonstration program, DOT developed performance
measures to evaluate projects’ performance along four program goals—
such as travel, traffic, and air quality—and uses information collected
annually from project sponsors to report to Congress on the projects’
performance. 35

In its first report to Congress in 2002, DOT examined the extent to which
projects approved to receive assistance collectively met key TIFIA goals
and objectives. For instance, DOT calculated that the amount of private
co-investment in projects totaled $3.1 billion, or about 20 percent of the
projects’ total costs. 36 DOT also calculated that TIFIA had a federal
leverage ratio of 4.8, meaning that every dollar of federal investment in
projects approved to receive assistance—including TIFIA as well as other
federal funds—represented nearly $5 in total infrastructure investment.
However, DOT has not presented similar data on its progress in meeting
the program’s goals in any of the subsequent reports to Congress. In
these reports, DOT provides only broad descriptive information on the
financial status of the projects and highlights project innovations, such as
reporting on the use of new revenue sources like availability payments to
repay assistance. DOT provides information on each project with a TIFIA
credit agreement that describes each project and lists funding sources,
but DOT does not aggregate this information for the portfolio of projects
on its website or in other program documents. Given that the agency
collects such data on projects that received TIFIA assistance, it could use
these data—in particular, the amount of federal and nonfederal funding
and financing, as well as the amount of private equity and debt—to better
evaluate the progress toward meeting program goals and objectives, like



34
 GAO, Rail Transit: FTA Programs Are Helping Address Transit Agencies’ Safety
Challenges, but Improved Performance Goals and Measures Could Better Focus Efforts,
GAO-11-199 (Washington, D.C.: Jan. 14, 2011).
35
  GAO, Traffic Congestion: Road Pricing Can Help Reduce Congestion, but Equity
Concerns May Grow, GAO-12-119 (Washington, D.C.: Jan. 12, 2012).
36
  The projects selected to receive TIFIA assistance as of 2002 had a total cost of $15.4
billion. The private co-investment in these projects consisted of about $3 billion in debt
and $100 million in equity.




Page 20                                                  GAO-12-641 Surface Transportation
                            leveraging limited federal resources and stimulating private capital
                            investment in transportation infrastructure.



DOT Used a
Competitive Process
to Evaluate Projects,
but This Process
Could Benefit from
Increased
Transparency
DOT Developed a             In response to increased program demand and the uncertain budget
Competitive, Two-Step       environment, DOT used a competitive, two-step process to assess LOIs
Process to Evaluate and     and select projects to apply for credit assistance in fiscal years 2010 and
                            2011. 37 DOT officials told us that they began using the current evaluation
Select Projects Using the
                            process—focusing on the LOIs to pre-assess a project’s alignment with
Statutory Criteria          TIFIA’s statutory criteria—to address the significant increase in demand
                            for the program coupled with the current uncertain and limited budgetary
                            environment due in part to a lack of a long-term surface transportation
                            reauthorization bill. These circumstances, according to DOT, required the
                            agency to establish a process that allows the agency to choose amongst
                            best-qualified projects in each fiscal year instead of accepting eligible
                            projects on a first-come, first-served basis as was the case when the
                            program was undersubscribed.

                            DOT’s process for competitively selecting amongst LOIs involved two
                            steps; first, DOT convened a multimodal team to assess, score, and
                            group projects using statutory criteria, and second, DOT used a team of
                            senior-level staff—called the executive leadership team—to review the
                            multimodal team’s assessments and invite select project sponsors to
                            submit an application for credit assistance (see fig. 5).




                            37
                              DOT officials told us that they also used a competitive, two-step process in fiscal year
                            2012.




                            Page 21                                                  GAO-12-641 Surface Transportation
Figure 5: TIFIA LOI Evaluation and Selection Process for Fiscal Years 2010 and 2011




Multimodal Team                          The multimodal team—composed of staff from different DOT modal
                                         administrations 38—individually assessed each LOI against the statutory
                                         criteria to assign preliminary scores. Multimodal team members read and
                                         assigned each LOI a numeric score of 0 to 4 for each of the six criteria,
                                         with 0 indicating that a project was not consistent with a criterion and 4
                                         indicating that a project was most consistent with a statutory criterion. 39
                                         While the funding notices defined each of the statutory criteria, they did
                                         not describe specific project qualifications or benefits that would merit a
                                         higher or lower score. Additionally, multimodal team members did not use
                                         any guidance beyond the funding notices to delineate what the possible
                                         range of scores signified in terms of project qualifications and benefits.
                                         DOT officials said that evaluators relied primarily on content in the


                                         38
                                           The multimodal team comprised five members representing the Federal Transit
                                         Administration, Federal Highway Administration, and the Office of the Secretary of
                                         Transportation (OST). This team design meant that LOIs were reviewed by members with
                                         subject matter expertise from several transportation modes.
                                         39
                                           As noted earlier, the eight statutory criteria are National or Regional Significance,
                                         Creditworthiness, Private Participation, Project Acceleration, Use of New Technologies,
                                         Consumption of Budget Authority, Environment, and Reduced Federal Grant Assistance;
                                         however, DOT did not consider the Creditworthiness and Budget Authority criteria when
                                         evaluating LOIs in fiscal years 2010 and 2011, since it did not believe project sponsors
                                         would have sufficient information regarding these two criteria at the time of the LOI
                                         submission. Further, for these two fiscal years, DOT provided additional clarification on
                                         two of the criteria through funding notices; specifically, livability, safety, and economic
                                         competitiveness for National or Regional Significance and sustainability and state of good
                                         repair for Environment.




                                         Page 22                                                 GAO-12-641 Surface Transportation
submitted LOIs, as well as their own modal expertise as necessary, to
evaluate projects. Each LOI contained information to describe the project
and its proposed financial plan, identify the proposed borrower, explain
how the TIFIA statutory selection criteria are met, and describe the
benefits of the proposed project and its use of TIFIA assistance.

To finalize their individual scores for each LOI, multimodal team members
compared LOIs with one another to determine the relative merits of each
project when assigning scores. For example, if an LOI received a
preliminary score of 3.5 for the private participation criterion, but when
compared with other projects in its cohort appeared less well aligned with
the private participation criterion, its score would be lowered to reflect its
relative rank among the LOIs. Also, multimodal team members met over
several weeks to discuss and compare LOIs in an effort to help ensure
reliability in scoring across team members. To arrive at a final score for
each LOI, individual team members’ final scores were combined for each
criterion and a cumulative weighted total score based on assigned
weights in regulation was calculated for each project.

Last, the multimodal team rank ordered the LOIs by the total score and
grouped them into three categories—A, B, and C. DOT officials said that
the multimodal team grouped LOIs based on natural breaks in the
numerical scores. LOIs placed in category A were those that scored the
highest numerically, and thus were considered to be the most consistent
with the statutory criteria. Table 2 details the category grouping for LOIs
by fiscal year.

Table 2: Number of LOIs, by Fiscal Year and Outcome of Multimodal Team’s
Assessment

                      Number of LOIs in     Number of LOIs in         Number of LOIs in
    Fiscal year            category A            category B                category C            Total
    2010                              7                        17                        15        39
                                                                                                       a
    2011                             21                         6                         5       32
Source: GAO analysis of DOT data.

a
 DOT did not assign a category for two additional LOIs in 2011, as these projects had received
TIGER grants to cover the subsidy cost of a TIFIA loan.

As shown in table 2, there was a threefold increase in the number of
category A LOIs from fiscal year 2010 to fiscal year 2011. DOT officials
attributed this increase to higher-quality LOI submissions as well as
improved project readiness of resubmitted projects. For projects that
submitted an LOI in fiscal year 2011, 10 of the 34 had previously


Page 23                                                       GAO-12-641 Surface Transportation
                            submitted an LOI in 2010. For projects that submitted an LOI in fiscal year
                            2012, 16 of 26 had applied in either fiscal year 2010 or 2011.


Executive Leadership Team   After the multimodal team grouped LOIs and provided a briefing about its
                            assessment of all projects to the executive leadership team, 40 this second
                            team reviewed the projects and selected a subset of the category A
                            projects to advance. According to DOT officials, in its review of projects,
                            the executive leadership team was not aware of the scoring or ranking
                            distinctions amongst LOIs in the category because numerical scores
                            assigned by the multimodal team were removed. Instead, only basic
                            project information, including high-level project summaries and category
                            groupings (A, B, or C), were provided to the executive leadership team. 41
                            Similar to the multimodal team evaluation, the executive leadership team
                            did not use any guidance beyond the funding notice in its review of LOIs
                            and relied primarily on content in the LOIs to score projects. However, in
                            some cases, the team sought clarification from DOT staff, including
                            FHWA division offices in various states, to gather additional information
                            on a project’s readiness, like its status in the environmental review
                            process.

                            The executive leadership team reviewed the LOIs to determine the extent
                            to which they met statutory criteria and, to choose projects to advance
                            from among category A LOIs, considered other factors including available
                            budget authority and geographic diversity. 42 In making final selections, the
                            executive leadership team had to consider projects that could be funded
                            within TIFIA’s limited budget authority. Further, with limited budget
                            authority, DOT officials said that project acceleration—which



                            40
                              The executive leadership team is composed of the Deputy Secretary, Under Secretary
                            for Policy, Assistant Secretary for Budget and Program and Chief Financial Officer, and
                            the General Counsel (in 2010 only), all of whom sit on the DOT Credit Council.
                            41
                              In 2010, the executive leadership team invited all seven sponsors with LOIs in category
                            A to give an oral presentation on their projects. In 2011, DOT officials said sponsors were
                            not invited to give presentations because (1) the number of projects in category A
                            increased and (2) the executive leadership team developed familiarity with several
                            projects that had submitted in successive solicitation rounds. According to DOT officials,
                            the executive leadership team relied more heavily on the modal administrations, in
                            particular FHWA division offices and FTA regional offices, to collect additional information
                            on projects in 2011.
                            42
                              In the fiscal year 2012 funding notice DOT further clarified that it would use factors like
                            budget authority and geographic dispersion to select from amongst highly rated projects.




                            Page 24                                                   GAO-12-641 Surface Transportation
encompasses factors like the project’s progress in completing
environmental review requirements—was an important consideration in
picking among projects that were consistent with the statutory criteria,
particularly in 2011, when there were a higher number of category A
LOIs. As a result of its review, the executive leadership team invited 4
projects in fiscal year 2010 and 8 projects in fiscal year 2011 to submit a
full TIFIA application. 43 (See table 3.)

Table 3: Number of LOIs Invited to Apply, by Fiscal Year and Mode

                                    Total number of
Fiscal year                                 projects   Highway Transit       Intermodal     Other
2010
Invited to apply                                  4          2           1              0         1
Total                                            39         29           5              3         2
2011
Invited to apply                                  8          4           3              1         0
Total                                            34         24           8              1         1
Source: GAO analysis of DOT data.


Note: Other includes projects like those for truck technology systems and multimodal transportation
improvements.

Overall, this two-step process ensured that projects invited to apply were
from among the highest-scoring LOIs overall—that is, from category A—
but did not ensure that the projects selected were those that scored the
highest numerically by the multimodal team. According to DOT officials,
relying on numerical scores alone could provide a false sense of precision
in selecting projects to advance. To date, because only category A
projects are forwarded, no category B or C projects from the multimodal
team evaluation have advanced over category A projects in the executive
leadership team evaluation. DOT officials said that while there are no
specific requirements to do so, the executive leadership team has only
considered advancing LOIs in category A.



43
   The fiscal year 2010 funding notice stated that the TIFIA program had a limited amount
of credit assistance for new applicants that year. According to the Transportation
Infrastructure Finance and Innovation Act 2010 Report to Congress, DOT reserved part of
its fiscal year 2010 appropriation to cover the 2008 oversubscription to the program. As a
result of DOT’s invitations, the TIFIA program’s fiscal years 2010 and 2011 budget
authority is fully committed.




Page 25                                                          GAO-12-641 Surface Transportation
After the executive leadership team has invited the sponsors of projects
to apply for credit assistance, project sponsors must submit a full TIFIA
application, after which DOT conducts a full evaluation of the application
and makes a recommendation to the Credit Council. Then, the Secretary
of Transportation makes the final decision on whether to approve a
project to receive TIFIA credit assistance. Six of the 12 of the project
sponsors that were invited to apply in fiscal years 2010 and 2011 have
not yet submitted an application to DOT but all are still pursuing TIFIA
loans. (See table 4.)

Table 4: Status of Projects Invited to Apply, by Fiscal Year

                     Total number     Number with an     Number with Number for which
 Fiscal        invited to submit a    executed credit   an application DOT is awaiting
 year              full application       agreement      under review   an application
 2010                            4                 1                2                    1
 2011                            8                 1                2                    5
Source: DOT, as of April 2012.


DOT officials and project sponsors that had executed TIFIA credit
agreements said that the amount of time it takes for sponsors to complete
the application and negotiation process varies by project. Several
factors—such as the status of a project’s environmental review, the
complexity of the project’s finance and delivery approach, and changes to
the project—can influence the length of these processes. According to
DOT, sponsors of four invited projects that have not yet submitted an
application are completing work to comply with federal environmental
requirements. Also, some project sponsors we spoke with said that the
TIFIA application and negotiation processes can be longer for projects
that have more complex financial plans, such as having a less frequently
used revenue stream or relying on future state appropriations. For
example, after being invited to apply, one sponsor we interviewed had to
complete the process to select a private concessionaire for the project;
then, since submitting the TIFIA application, the sponsor has been
working with the TIFIA office regarding uncertainty around appropriations
from the state legislature before beginning the negotiation process.

For projects not invited to apply, staff from the TIFIA office provided
feedback to sponsors on their LOIs upon request. According to DOT
officials, the primary aim of feedback is to explain how the LOI performed
against each criterion. In addition, feedback included information on how
a project sponsor could improve an LOI for resubmission, such as
explaining that it needs to provide more details on specific project



Page 26                                                   GAO-12-641 Surface Transportation
                          benefits. However, through this feedback, a project sponsor is not
                          informed about the numeric scoring or ranking of its LOI relative to other
                          LOIs. In some cases, DOT officials said that the feedback provided
                          indicated that there was nothing “wrong” with a project’s LOI but that it
                          was not invited to apply given the strength of the pool of LOIs submitted
                          in that round.


TIFIA Selection Process   While project sponsors and other stakeholders we interviewed were
Could Benefit from        satisfied with many aspects of DOT’s selection process, they cited two
Greater Transparency      areas of the TIFIA selection process that they found to be less
                          satisfactory—DOT’s application of selection criteria and the uncertainty of
                          the timing of the process. Twenty-seven of the 36 recent TIFIA applicants
                          that responded to our survey indicated that they were satisfied with DOT’s
                          explanation of the application process in funding notices, and 28 of the
                          recent applicants reported that the LOI format allowed them to provide
                          sufficient detail about their project. 44 In addition, several applicants told us
                          that the TIFIA selection process was fairly simple to understand and not
                          overly burdensome, and many applicants and advisors we interviewed
                          told us that they found the TIFIA staff to be very cooperative and helpful.
                          Moreover, many recent applicants told us that they appreciated that DOT
                          gave feedback to the sponsors of unsuccessful LOIs.

                          Recent applicants we surveyed and interviewed, however, expressed two
                          primary concerns about the process: the lack of transparency with which
                          DOT applies statutory criteria to select LOIs to advance, and the
                          uncertainty of the timing of the process. Only 7 of the recent applicants
                          that responded to our survey were satisfied with the transparency of
                          DOT’s project selection decisions. In addition, some recent applicants we
                          interviewed and surveyed indicated that clarifications made to two
                          criteria—national or regional significance and environment 45—are highly
                          subjective, and that it is difficult to understand what characteristics DOT is
                          using to determine the extent to which a project does or does not meet
                          these criteria. For example, one survey respondent indicated that it is



                          44
                           We received completed surveys from 36 of 46 recent applicants (78 percent).
                          45
                            DOT provided these clarifications beginning in fiscal year 2010 in the annual TIFIA
                          funding notices. The livability, economic competitiveness, and safety clarifications are part
                          of the National or Regional Significance criterion and sustainability and state of good
                          repair clarifications are part of the Environment criterion.




                          Page 27                                                  GAO-12-641 Surface Transportation
unclear how one qualified project is selected over another in the
competitive process. In addition, one recent applicant we interviewed said
that it does not know what characteristics DOT looks for or uses to
determine if a project does or does not meet a criterion, particularly for
the livability clarification in national or regional significance. Some recent
applicants also indicated that the LOI evaluation and selection process
remained unclear, even after receiving feedback from DOT. Of the 21
recent applicants that indicated they received feedback, 8 reported that it
was slightly or not at all useful in understanding the scoring of their
LOIs—the primary aim of feedback.

Several financial and legal advisors as well as private concessionaires we
interviewed also said that there is a lack of transparency in the application
of the criteria. These advisors indicated that DOT could be more
transparent about the selection criteria and scoring process it uses to
select projects. As we reported previously regarding competitively
selected funding programs, were DOT to make additional information on
its selection decisions publicly available, potential applicants would have
better information on how to create and submit well-developed projects. 46
When such information is not made available, DOT may invite speculation
that projects were selected for reasons other than merit.

In addition, recent applicants and financial and legal advisors we
interviewed said the timing of the LOI evaluation and selection process is
inconsistent from year to year and therefore creates uncertainty.
Specifically, several applicants and advisors we interviewed told us that
the inconsistent timing in both the dates of the release of DOT’s funding
notice and LOI submission deadline, as well as the announcement of the
outcome of the selection process, contributes to this uncertainty. 47
Because TIFIA projects are typically high-cost projects with multiple
funding and financing streams, the uncertainty about when a project can



46
  GAO, Surface Transportation: Competitive Grant Programs Could Benefit from
Increased Performance Focus and Better Documentation of Key Decisions, GAO-11-234
(Washington, D.C.: Mar. 30, 2011), and Intercity Passenger Rail: Recording Clearer
Reasons for Awards Decisions Would Improve Otherwise Good Grantmaking Practices,
GAO-11-283 (Washington, D.C.: Mar. 10, 2011).
47
  In fiscal year 2010, the funding notice was released on December 3, 2009, and in fiscal
year 2011, the funding notice was released January 19, 2011; for both these fiscal years,
LOIs were due in March after an extension. For fiscal year 2012, the funding notice was
released on November 3, 2011, with a December 30, 2011, deadline.




Page 28                                                GAO-12-641 Surface Transportation
                         submit an LOI and more importantly, when a project can count on a TIFIA
                         credit agreement to fill a funding gap, can affect the financial feasibility of
                         these projects. For example, one financial advisor said that because the
                         current LOI process occurs only once per year, it makes it difficult to plan
                         and to coordinate with other vital project planning pieces, like state
                         budget cycles, environmental reviews, and private investors’ timelines. If
                         a project sponsor misses the solicitation for a particular year, it has to wait
                         another year to submit an LOI. The uncertainty as to when the outcome of
                         the selection process will be announced can also affect projects.
                         According to one financial advisor, project delays can affect construction
                         costs or public support for the project, among other things. DOT officials
                         said that the timing of the annual solicitation is due, in part, to receiving
                         budget authority for the TIFIA program on a year-to-year rather than a
                         multiyear basis. On the basis of feedback from fiscal year 2010
                         applicants, DOT has also tried to shorten the LOI evaluation and selection
                         process in subsequent years so that applicants learn outcomes sooner.
                         For fiscal year 2010, this process, measured from the date LOIs were due
                         to the announcement of which LOIs were invited to apply, took about 6
                         months, but for fiscal years 2011 and 2012, the process took 5 months
                         and 4 months, respectively.


DOT Is Taking Steps to   DOT has made changes to try to improve the LOI evaluation process
Improve the LOI          since returning to a competitive fixed-date selection process. In particular,
Evaluation Process       DOT officials said that they are applying best practices from other DOT
                         discretionary programs such as the TIGER program and learning from
                         past rounds of TIFIA solicitations. The changes include the following:

                         •   In fiscal year 2011, DOT increased its documentation of key decisions
                             for the LOI evaluation and selection process. For each LOI, the
                             multimodal team summarized its deliberations on the extent to which
                             a project met each statutory criterion in a standard form. In addition, to
                             aid in providing feedback to unsuccessful applicants, TIFIA office staff
                             produced an internal memo to document the multimodal team’s
                             rationale for LOI scores and grouping as well as the executive
                             leadership team’s concurrence with these evaluations.




                         Page 29                                         GAO-12-641 Surface Transportation
•    In fiscal year 2012, DOT made changes to the LOI evaluation process
     at the multimodal team level. 48 Specifically, the team assigned
     qualitative scores—”not aligned,” “somewhat aligned,” “well aligned,”
     and “very well aligned”—rather than numeric scores to LOIs for each
     criterion. According to DOT officials, these changes facilitate
     discussion within the team and accelerate progress to consensus on
     project scores and impressions. In addition, DOT officials said the
     qualitative scores are more reflective of the actual evaluation process
     than the numeric scoring system used in past rounds of solicitation
     and prevent the team from focusing too heavily on the numeric
     scores.

•    In fiscal year 2012, DOT further clarified the TIFIA funding notice. In
     particular, DOT included the two statutory selection criteria that had
     not been considered as part of the LOI selection process for fiscal
     year 2010 or 2011—creditworthiness and consumption of budget
     authority. It also stated that in selecting LOIs to advance, it may give
     priority to projects that enhance the geographic diversity of the TIFIA
     portfolio and may consider the project’s readiness and timeline to
     proceed to financial close. DOT officials said it did so as part of its
     efforts to improve its communication of the criteria and selection
     process to applicants through the funding notices over time.

•    For fiscal year 2012, DOT invited the sponsors of five projects to
     apply for TIFIA credit assistance. In addition, in response to concerns
     raised by project sponsors as well as the lack of certainty about future
     funding levels associated with the TIFIA program because of the
     absence of a long-term surface reauthorization, DOT officials said that
     an expedited review process would be created for additional highly-
     rated projects if TIFIA budgetary resources are significantly increased
     based on the President’s Budget Request for fiscal year 2013. 49
Since many of DOT’s changes to the selection process occurred in the
fiscal year 2012 TIFIA solicitation, it is too soon to know whether these



48
  In fiscal year 2012, DOT considered all eight statutory criteria in its evaluations. On the
basis of its experience in 2010 and 2011, DOT officials believe applicants can provide
sufficient information on the creditworthiness and consumption of budget authority criteria
that will enable them to be scored in the LOI evaluation process.
49
  The President’s Budget Request for fiscal year 2013 and the current reauthorization
proposals include significant increases in the amount of authorized budget authority for
the TIFIA program.




Page 30                                                   GAO-12-641 Surface Transportation
                      changes will address the transparency and uncertainty concerns raised
                      by recent applicants and financial and legal advisors. DOT officials said
                      that they will continue to explore other changes to the process, such as
                      creating additional internal guidance on scoring projects or changing
                      feedback. Additionally, DOT officials said that the variety of TIFIA projects
                      by size and mode could make it difficult for DOT to specify how particular
                      benefits translate to a score for an LOI. For instance, in 2010 sponsors
                      submitted LOIs for projects that varied greatly in terms of benefits, size,
                      and mode, as exemplified by the $360 million Southeast Waterfront
                      project—a 5-mile bus, auto, bicycle, and pedestrian corridor that is part of
                      a redevelopment project in San Francisco—and the $1.5 billion Goethals
                      Bridge project—the replacement of a existing bridge connecting New
                      York and New Jersey. DOT officials said that the current LOI selection
                      process was developed in response to the combination of high demand
                      and uncertain budgetary environment, and indicated that it would likely
                      modify the evaluation and selection process in response to an increase in
                      TIFIA’s budget authority.


                      The TIFIA program’s flexibility and low interest rates are the predominant
Flexible Repayment    reasons why sponsors seek TIFIA assistance. TIFIA’s flexibility extends
Terms and Other       to both repayment terms and debt structuring. For states that have not
                      sought TIFIA assistance, state DOTs indicated that a variety of factors
Factors Influence     contributed to their decision not to use TIFIA, such as a lack of projects
whether States and    that met the eligibility requirements or the availability of other financing
Other Sponsors Seek   options. Looking ahead, future demand for TIFIA is difficult to gauge
                      because it is influenced by a number of factors such as changes to
TIFIA Assistance;     interest rates or state fiscal conditions.
Future Demand Is
Difficult to Gauge




                      Page 31                                        GAO-12-641 Surface Transportation
A Number of Factors                              As shown in table 5, most recent applicants we surveyed cited TIFIA’s
Influence whether States                         repayment terms and options, low interest rate, and ability to serve as
and Sponsors Seek TIFIA                          subordinate debt as very or somewhat important in their decision to seek
                                                 assistance in fiscal years 2010 and 2011. 50
Assistance
Table 5: Top Factors That Affected Recent Applicants’ Decisions to Seek TIFIA Assistance

                                                                        Very or                   Neither       Very or Don’t know/not
                                                                     somewhat               important nor     somewhat     applicable/
                                                                      important              unimportant    unimportant        missing Total
Repayment terms and options offered by TIFIA credit
assistance                                                                       34                    0              0                   2      36
Low interest rate of TIFIA relative to other financing
options                                                                          34                    0              1                   1      36
Ability of TIFIA credit assistance to serve as
                                            a
subordinate debt in a project finance plan                                       32                    0              3                   1      36
                                                 Source: GAO survey of recent TIFIA applicants.

                                                 a
                                                  TIFIA assistance can be subordinate to a project’s senior debt in a project finance plan, meaning that
                                                 senior creditors may receive project revenue ahead of DOT, except in the event of a borrower’s
                                                 bankruptcy, insolvency, or liquidation.


                                                 In addition to recent applicants we surveyed, other project sponsors,
                                                 financial and legal advisors, and private concessionaires we interviewed
                                                 consistently cited TIFIA’s flexible terms as a major benefit of the program.
                                                 According to DOT officials, the major benefits of TIFIA are that it can be a
                                                 patient, flexible lender and can help a sponsor secure a portion of the
                                                 project’s lending to attract other financing. For example, one project
                                                 sponsor said that deferring payment for 5 years after substantial
                                                 completion is very important for new toll road projects to allow time for
                                                 usage to grow and thus revenues to ramp up after opening. Beyond
                                                 favorable repayment terms, TIFIA assistance can be subordinate to other
                                                 debt, meaning that this other debt may receive project revenue ahead of
                                                 DOT except in the case of bankruptcy, insolvency, or liquidation. 51 All six
                                                 of the private concessionaires we interviewed said that this structure is a


                                                 50
                                                   As noted previously, we received completed surveys from 36 of 46 recent applicants (78
                                                 percent). Recent applicants include both state DOTs and other non-state DOT
                                                 organizations, such as transit agencies, that submitted LOIs to the TIFIA program in fiscal
                                                 year 2010 or 2011. See appendix III for a complete list of responses to this and other
                                                 survey questions.
                                                 51
                                                   In the event of bankruptcy, insolvency, or liquidation, DOT’s claim would be on parity
                                                 with senior creditors.




                                                 Page 32                                                          GAO-12-641 Surface Transportation
                                                  key benefit of the program, as it can help improve their ability to raise
                                                  senior debt. Many project sponsors we spoke to also cited TIFIA’s
                                                  relatively low interest rate as a main benefit of the program. The interest
                                                  rate of TIFIA assistance is based on U.S. Treasury securities of a similar
                                                  maturity and, since 2008, these Treasury rates have been lower than
                                                  municipal bond interest rates.

                                                  To a lesser extent, recent applicants we surveyed cited several other
                                                  factors as important in their decision to seek TIFIA assistance in fiscal
                                                  years 2010 and 2011. (See table 6.)

Table 6: Other Factors That Affected Recent Applicants’ Decisions to Seek TIFIA Assistance

                                                                  Very or     Neither                      Very or
                                                               somewhat important nor                    somewhat       Don’t know/not
                                                                important unimportant                  unimportant   applicable/missing     Total
Availability of user fees to repay TIFIA credit
assistance                                                                  27                     2            4                     3       36
Ability to accelerate delivery of project through
use of TIFIA credit assistance                                              27                     4            3                     2       36
Lack of other funding options                                               26                     5            4                     1       36
                                                  Source: GAO survey of recent TIFIA applicants.



                                                  For instance, survey responses indicate that the TIFIA program can
                                                  provide financing to projects that is unavailable in the financial markets,
                                                  particularly for projects with unproven revenue streams. For example, one
                                                  project sponsor we interviewed that received a TIFIA loan said that
                                                  obtaining subordinate debt in the financial markets would have been
                                                  prohibitively expensive, since the project was a new toll road. In addition,
                                                  the ability of TIFIA to help accelerate the delivery of projects was also
                                                  important among recent applicants. Officials from the Florida Department
                                                  of Transportation estimated that its TIFIA loan helped accelerate
                                                  completion of the Miami Intermodal Center by 10 years. Two other project
                                                  sponsors we interviewed said TIFIA plays an important role in
                                                  accelerating not only the projects for which they received assistance but
                                                  other major capital projects too, as TIFIA assistance helps free up funds
                                                  for other projects.

                                                  However, our survey also indicated that some states have neither sought
                                                  nor plan to seek TIFIA assistance. In states where sponsors have never
                                                  sought TIFIA assistance, the extent to which certain factors affected state
                                                  DOTs’ decisions to not seek credit assistance varied, but many of these
                                                  state DOTs indicated that they have not submitted LOIs because they (1)



                                                  Page 33                                                        GAO-12-641 Surface Transportation
                                              do not have projects that meet the eligibility requirements including the
                                              required cost threshold, (2) get financing from other source(s), or (3) have
                                              state restrictions on borrowing funds for transportation projects. 52 (See
                                              table 7.)

Table 7: Factors That Affected State DOTs’ Decisions to Not Seek TIFIA Assistance

                                                                     Very great                            Some or
                                                                       or great                Moderate little to no        Don’t know/not
                                                                        impact                   impact      impact      applicable/missing       Total
A lack of either user fees or dedicated revenues to repay
assistance                                                                         8                   1          6                     1           16
No projects in the state met the required cost threshold
($50 million)                                                                      6                   1          7                     2           16
Other financing options were available                                             8                   2          5                     1           16
                                                  a
State is subjected to restrictions on borrowing                                    6                   0          9                     1           16
                                              Source: GAO survey of recent TIFIA applicants.


                                              Notes: For the remaining factors on the survey, at least 9 of 16 state DOTs indicated that the factor
                                              had some or little to no impact on its decision not to submit an LOI. See appendix III for a table of the
                                              survey results for this question.
                                              a
                                               These restrictions include, among others, that states do not have authorizing legislation to allow its
                                              governments or public agencies to borrow funds, or that states require legislative approval to borrow
                                              funds through bonds and other financing tools.

                                              Regarding lack of eligible projects, one state DOT indicated in the survey
                                              that a lack of dedicated revenues or private investment prevents TIFIA
                                              from being a viable option for rural states now and in the future. Several
                                              financial and legal advisors we interviewed also said that some states
                                              lack projects that are large enough to benefit from the TIFIA program. For
                                              the TIFIA program, a sponsor must pay a $50,000 application fee if
                                              invited to apply after the LOI stage. Then, if selected to receive
                                              assistance, the TIFIA borrower must pay a transaction fee, typically
                                              between $300,000 and $400,000, to cover the costs incurred by DOT to
                                              negotiate and execute the credit agreement, like costs for external
                                              advisors. Borrowers can also incur additional costs from hiring their own
                                              advisors and obtaining a credit rating for the project. Therefore, the cost
                                              of applying for TIFIA may outweigh the benefits of TIFIA for lower-cost
                                              projects.



                                              52
                                                We received completed surveys from 16 of 18 state DOTs from states where a sponsor
                                              has never submitted an LOI (89 percent).




                                              Page 34                                                                  GAO-12-641 Surface Transportation
                               Moreover, DOT officials as well as several financial advisors, a private
                               concessionaire, and an industry association we spoke to said that the
                               TIFIA program may be better suited to states with more urban populations
                               and a greater need for large-scale projects. States with sponsors that
                               have never sought TIFIA assistance tend to have a smaller portion of
                               their population living in urban areas—that is, areas with a total
                               population of 50,000 or more—than states with sponsors that have
                               sought TIFIA assistance. 53 DOT officials said that to date, TIFIA projects
                               have been located in states with large urban areas that have major
                               transportation needs and can more easily charge tolls or generate other
                               project revenues.

                               Based on our survey, it is unlikely that many of the states that have not
                               sought TIFIA assistance will seek such assistance in the future. Of the 16
                               state DOTs from states that have never sought assistance that responded
                               to our survey, only 1 indicated that it anticipated seeking TIFIA assistance
                               in the next 5 years. In addition, most of these state DOTs indicated that
                               changes to the program—such as making more funds available for the
                               program or increasing the portion of project costs that TIFIA assistance
                               could cover—would have somewhat or little to no increase on the
                               likelihood that they would seek TIFIA assistance. 54


Future TIFIA Demand            According to our interviews with DOT, project sponsors, advisors, and
Exists, but Its Magnitude Is   private concessionaires, overall demand for the TIFIA program is likely to
Difficult to Gauge             continue. However, the magnitude of this demand is difficult to estimate
                               because it is influenced by a variety of external factors like changes to
                               interest rates, use of public-private partnerships, and state fiscal
                               conditions.


                               53
                                 A metropolitan statistical area (metro area) is a geographic entity defined by the Office
                               of Management and Budget (OMB) for use by federal statistical agencies in collecting,
                               tabulating, and publishing federal statistics. A metro area contains a core urban area of
                               50,000 or more population, and it includes the counties containing the core urban area, as
                               well as any adjacent counties that have a high degree of social and economic integration
                               (as measured by commuting to work) with the urban core.
                               54
                                 For all but the option to add separate eligibility requirements and terms to encourage
                               rural infrastructure projects, half or more of the 16 state DOTs indicated the changes
                               would have somewhat or little to no increase on the likelihood that they would seek TIFIA
                               credit assistance. For this one other option, five state DOTs indicated that the change
                               would significantly or greatly increase the likelihood that that they would seek TIFIA credit
                               assistance in the future. See appendix III for survey results for this and other questions.




                               Page 35                                                   GAO-12-641 Surface Transportation
Changes to the TIFIA interest rate relative to municipal debt interest rates
could considerably affect the demand for TIFIA credit assistance. For the
last 3 fiscal years, sponsors submitted LOIs for credit assistance totaling
more than 10 times what the program’s current budget authority can
support. Several legal and financial advisors we interviewed said that
many project sponsors sought TIFIA in recent years because of
depressed market conditions and attractive TIFIA interest rates, relative
to interest rates on municipal debt, and a few of these advisors and one
industry association said that demand for TIFIA will likely decrease if
TIFIA interest rates become less attractive relative to municipal debt
interest rates. The relatively low TIFIA interest rates made the program
attractive to a greater number of sponsors, even those with access to
other financing options. For example, one recent applicant we interviewed
said that in the past, TIFIA was a more expensive finance option than
issuing its own debt, and its interest in TIFIA during the last few years is
primarily driven by the program’s relatively low interest rates. The
applicant noted that should interest rates on TIFIA loans increase in the
future, it will likely seek financing in the private capital markets.

Two other factors will influence the demand for TIFIA assistance.

•    Greater use of public-private partnerships and other alternative project
     delivery approaches could result in a greater demand for TIFIA credit
     assistance. Many private concessionaires we interviewed said that
     TIFIA is an important financing tool for public-private partnerships.
     According to DOT officials, TIFIA credit assistance has been part of
     the financing package for most large-scale public-private partnership
     projects in the United States in recent years. In addition, some states,
     like Colorado and Virginia, have set up offices to facilitate public-
     private partnerships, so sponsors in such states may be more likely to
     use this approach given this support.

•    State-specific conditions will also influence the demand for TIFIA
     assistance. As federal and state fuel taxes may not be a sustainable
     long-term source of transportation funding, state DOTs may make
     greater use of finance tools like TIFIA to deliver projects. We have
     previously reported that state and local governments face persistent
     and long-term fiscal pressures. 55 At the same time, estimates to


55
  GAO, State and Local Governments’ Fiscal Outlook April 2011 Update, GAO-11-495SP
(Washington, D.C.: Apr. 6, 2011).




Page 36                                            GAO-12-641 Surface Transportation
                           repair, replace, or upgrade aging transportation infrastructure—as well
                           as expand capacity to meet increased demand—top hundreds of
                           billions of dollars. As a result, DOT anticipates more demand for the
                           TIFIA program as states and localities look to leverage limited funds.
                           One state we interviewed, for example, said that pay-as-you-go
                           funding—a more traditional means of funding transportation
                           infrastructure whereby a sponsor builds projects in phases or
                           increments as funds are available—no longer keeps pace with
                           infrastructure needs. Therefore, the state DOT has turned to TIFIA to
                           help finance big, high-cost projects that need federal assistance to
                           advance. Looking ahead, 15 of the 42 state DOTs that responded to
                           our survey indicated that they have projects for which they will likely
                           seek TIFIA in the next 5 years. Most of these state DOTs (13) have
                           sought TIFIA assistance in the past and indicated that they are likely
                           to seek TIFIA for 1-5 projects, while a few indicated they are likely to
                           seek TIFIA for 6-10 projects. 56

                      With the pending reauthorization of the surface transportation programs,
Options Proposed to   the tight budgetary environment, and the increase in demand for TIFIA,
Modify the TIFIA      government and industry officials have proffered options to modify the
                      program. We reviewed surface transportation reauthorization bills—H.R.
Program               7, the American Energy and Infrastructure Jobs Act as reported by the
                      House Committee on Transportation and Infrastructure, and S. 1813,
                      Moving Ahead for Progress in the 21st Century Act (MAP-21) as adopted
                      by the Senate, respectively—to identify proposed changes to the
                      program. Based on our interviews with select project sponsors, financial
                      and legal advisors, and others, as well as our survey of state DOTs and
                      recent applicants, we identified several recurring options that have been
                      proposed to modify the TIFA program. Some options require
                      congressional action to implement, while others would require DOT to
                      change program-level policies. Each option has advantages and
                      disadvantages, and thus implementing any of these options would require
                      policy trade-offs. Moreover, some options could affect the overall demand
                      for the program and the sphere of projects that could apply for or benefit
                      from TIFIA.




                      56
                        Of the remaining 27 state DOTs, 21 state DOTs indicated that they have no projects for
                      which they will likely seek TIFIA in the next 5 years, 5 state DOTs did not know, and 1 did
                      not respond to that item.




                      Page 37                                                 GAO-12-641 Surface Transportation
                                               Table 8 provides a list of proposed options to modify the TIFIA program in
                                               the surface transportation reauthorization bills and the President’s fiscal
                                               year 2013 budget.

Table 8: Summary of Proposed Changes to the TIFIA Program

                                                                                     Fiscal year 2013      American Energy and
                                                                                       President’s       Infrastructure Jobs Act of
                                                                                                                         a                             a
Proposed change                                                                          budget                     2012                     MAP-21
Increase authorized budget authority                                                                                                            
Increase funding for program administration                                                                                                     
Explicitly allow any project sponsor to pay subsidy cost                                                                
                                                                              b
Increase the portion of costs covered by TIFIA (from 33% to 49%)                                                                                 
Allow exceptions to the nonsubordination clause                                                                                                  
Remove all selection criteria                                                                                                                    
Return to a rolling application process                                                                                                          
                                    c
Allow program of projects to apply                                                                                                               
Decrease the required total project costs required for rural                                                                                     
infrastructure projects
Expand eligible costs (e.g., development phase and preconstruction                                                      
costs)
Offer lower interest rates to rural infrastructure projects                                                                                       
Require two credit ratings agencies to rate senior debt                                                                                          
Require DOT to notify applicants on the status of their applications                                                    
within mandated timeframes
                                               Source: GAO analysis of proposals and legislation.

                                               a
                                                This analysis is based on H.R.7 The American Energy and Infrastructure Jobs Act of 2012 as
                                               reported to the House of Representatives by the House Committee on Transportation and
                                               Infrastructure (H.R. 7, 112th Cong. (Feb. 13, 2012)) and S. 1813 the Moving Ahead for Progress in
                                               the 21st Century Act (MAP-21) as adopted by the Senate (S.1813, 112th Cong. (Feb. 6, 2012)).

                                               b
                                                   In MAP-21, TIFIA lines of credit may not exceed 33 percent of the anticipated eligible project costs.

                                               c
                                                Currently only individual projects with dedicated revenues may apply for credit assistance through
                                               the TIFIA program. This proposed change would allow a set of related projects that will be phased in
                                               over a period of several years to apply and be approved under a single master credit agreement. As
                                               with individual projects, a program of projects would have to meet other statutory requirements before
                                               entering into a master credit agreement.



Increase the Number of                         Two proposed changes, increasing the amount of authorized budget
Projects the TIFIA                             authority and allowing project sponsors to pay fees to contribute to the
Program Can Support                            credit subsidy cost, could potentially allow the TIFIA program to provide
                                               more assistance to projects.



                                               Page 38                                                            GAO-12-641 Surface Transportation
Increase amount of authorized budget authority. Members of Congress,
DOT, and others have proposed increasing the amount of authorized
budget authority to cover the subsidy costs for the TIFIA program.
Proposals vary from increasing this amount to $1 billion, as in the
reauthorization bills, to a smaller increase of $500 million proposed in
DOT’s fiscal year 2013 budget. Congressional support for an increase in
authorized budget authority for TIFIA is rooted in the program’s ability to
leverage funds and stretch federal dollars further than a traditional grant
program. These proposals represent significant increases to TIFIA’s
current annual authorized budget authority of $122 million. Proposals to
increase the amount of authorized budget authority for the TIFIA program
occur during an austere federal budget environment. The Budget Control
Act of 2011 places limits on discretionary spending for the next 10 fiscal
years. 57 As a result, an increase in one area of discretionary spending,
like the TIFIA program, requires a decrease in another area of
discretionary spending.

Increasing the amount of authorized budget authority is strongly
supported by recent applicants we surveyed as well as legal and financial
advisors we interviewed. For example, 32 out of 36 recent applicants that
responded to our survey strongly support expanding funding for the TIFIA
program. An increase in funding would likely allow the program to provide
more credit assistance, in terms of the number of projects receiving credit
assistance or the amount of credit assistance provided to each project.
An increase in funding could also allow the program to come closer to
meeting the current demand for the program, which is more than 10 times
what the current budget authority could support. However, DOT officials
and other stakeholders told us that an increase in funding would need to
be accompanied by an increase in administrative resources. According to
project sponsors and other stakeholders, the TIFIA office has been very
responsive and helpful, but a few said that response time has slowed in
recent years. With increased funding, DOT would likely see an increase in
the number of applications to review, credit agreements to negotiate, and
credit agreements to monitor. DOT officials said they are prepared to
adjust staffing levels in the event that Congress provides the TIFIA
program with an increase in authorized budget authority as is proposed in
the surface transportation reauthorization bills. Further, DOT officials said
that an increase in TIFIA funding may require DOT to reexamine how it



57
 Pub. L. No. 112-25, 125 Stat. 240 (2011).




Page 39                                        GAO-12-641 Surface Transportation
manages the program—such as how it selects projects and negotiates
credit agreements—and issue new regulations.

Allow sponsors to pay fees to contribute to the credit subsidy cost of
assistance. H.R. 7 would mandate that DOT allow project sponsors to pay
fees to reduce the credit subsidy cost of assistance if DOT funds run
out. 58 According to DOT, current law allows but does not require DOT to
let the approved sponsor pay a fee to reduce the credit subsidy cost of
the project in the event that there is insufficient budget authority to fund
credit assistance for a selected TIFIA project. Over the life of the TIFIA
program, three project sponsors have paid fees to reduce the credit
subsidy cost of their TIFIA assistance; all three cases occurred after the
program became oversubscribed in fiscal year 2008.

Among recent applicants we surveyed and project sponsors we
interviewed, many supported this program change. 59 Supporters of this
option said that given the high demand for TIFIA credit assistance and
limited budget authority, allowing project sponsors to pay fees to cover
the credit subsidy cost when DOT’s budget authority runs out would allow
more eligible projects to be built and reduce the oversubscription of the
program. However, DOT previously decided against instituting this option
more broadly through a pilot program in 2010. DOT officials told us that
while allowing project sponsors to pay fees to cover the credit subsidy
cost provides flexibility, especially when demand outpaces budget
authority, it complicates the negotiation of credit agreements. While DOT
would have to follow its subsidy estimation methodology to determine a
project sponsor’s fee, the project sponsor may want to negotiate the fee.
Project sponsors we interviewed said that for this option to work, DOT
would need to provide them with more information on how the credit
subsidy cost is calculated. Under FCRA, OMB is responsible for subsidy
cost estimates. OMB may delegate this authority to the agency providing
credit assistance, but the delegation should be based on the written
guidelines or criteria developed by OMB. 60 OMB retains the responsibility


58
  As noted earlier, budget authority is used to pay the credit subsidy cost and
administrative expenses of TIFIA credit assistance. The credit subsidy cost, as required by
the FCRA, is based on the estimated long-term cost to the government calculated on a net
present value basis, excluding administrative costs.
59
  Nineteen of the 36 recent applicants that responded to our survey supported allowing
project sponsors to contribute to the subsidy costs of assistance.
60
 2 U.S.C. § 661b.




Page 40                                                 GAO-12-641 Surface Transportation
                          and final approval of subsidy cost estimates. Given these complexities,
                          this option may be difficult to implement, though it could be done relatively
                          quickly. In addition, to the extent that DOT underestimates the initial
                          subsidy costs and does not collect enough fees from borrowers,
                          taxpayers will ultimately have to pay for any shortfalls. 61

                          Allowing project sponsors to pay fees to cover the credit subsidy cost
                          could remove the congressional limit on the size of the TIFIA program
                          and thus increase the federal government’s exposure. According to DOT,
                          SAFETEA-LU removed the cap on the amount of credit assistance the
                          TIFIA program could provide each year, so the only limit on the TIFIA
                          program’s size currently is the budget authority provided by Congress.
                          DOT officials said that allowing project sponsors to pay the subsidy cost
                          could allow the program to grow larger than Congress authorized through
                          budget authority. DOT officials told us that for other DOT credit programs,
                          such as the Railroad Rehabilitation and Improvement Financing (RRIF)
                          program, project sponsors are required to pay fees towards the credit
                          subsidies for loans because they do not have budget authority for this
                          purpose, but the RRIF program has a statutory limit on total outstanding
                          credit assistance. 62 When Congress imposes such a limit, it can control
                          the government’s exposure to financial losses. Moreover, if this proposed
                          change were adopted in combination with other proposed changes to the
                          program—requiring the Secretary to approve all qualifying applications—
                          the total size and exposure of the TIFIA program could expand
                          dramatically.


Increase the Portion of   Another option in the reauthorization bills would increase the portion of
Costs Covered by TIFIA    eligible project costs TIFIA assistance could cover from 33 percent to 49
                          percent. 63 Among think tank and industry group proposals, project
                          sponsors, and other stakeholders we interviewed, support for this option



                          61
                            Under FCRA, DOT is required to update, or reestimate, the subsidy costs to reflect
                          actual loan performance and changes in expected future loan performance. Shortfalls
                          identified in annual reestimates are funded through a permanent indefinite appropriation
                          and are not subject to the annual appropriations process.
                          62
                            45 U.S.C. § 822(d).
                          63
                            S. 1813 raises the portion of project costs TIFIA loans and loan guarantees may cover
                          but retains the 33 percent limit for lines of credit. H.R. 7 increases the portion of project
                          costs that may be covered by loans, loan guarantees, and lines of credit to 49 percent.




                          Page 41                                                   GAO-12-641 Surface Transportation
                          varied. Those that support increasing the TIFIA share said it would
                          reduce the burden on sponsors to find nonfederal sources of debt and
                          allow them to borrow more funds on favorable terms. For example,
                          several project sponsors said that for very large infrastructure projects,
                          finding a combination of federal, state, and private financing can be
                          difficult. Those that do not support this option expressed concern that it
                          would reduce the incentive to find private and other nonfederal financing
                          and potentially reduce market discipline that comes from other lenders to
                          projects. For example, several stakeholders we interviewed said that
                          increasing the percentage of total project costs that TIFIA can finance
                          could result in project sponsors substituting TIFIA credit assistance for
                          private debt or private equity investments. Others expressed concern that
                          increasing the share of costs TIFIA covers would potentially reduce the
                          availability of TIFIA assistance, especially if Congress does not increase
                          budget authority for the TIFIA program.

                          Moreover, increasing the portion of costs covered by TIFIA could
                          decrease the program’s ability to achieve one of its key goals—leveraging
                          federal funds. DOT officials told us that changing the statute to increase
                          the TIFIA share could reduce the number of projects supported (for a
                          given amount of budget authority) and reduce the leveraging of federal
                          funds as project sponsors seek more financing through TIFIA rather than
                          other sources. Currently, DOT estimates that each $10 million in budget
                          authority can provide up to $100 million in TIFIA credit assistance and
                          leverage $300 million in transportation infrastructure investment. If the
                          limit on TIFIA assistance were increased to 49 percent, this same amount
                          of budget authority could leverage about $200 million in transportation
                          infrastructure investment. 64 This change could also increase the exposure
                          of the federal government to the risk of loan defaults if the size of the
                          credit assistance for each project increases.


Eliminate or Waive the    The reauthorization bills propose exceptions to the nonsubordination
Nonsubordination Clause   clause. For example, the Senate reauthorization bill, S. 1813, allows
                          exceptions to the nonsubordination clause for certain types of




                          64
                            This estimate assumes that projects receive the maximum amount of credit assistance
                          (either 33 or 49 percent of total project costs) and uses DOT’s general rule of thumb that
                          $1 in budget authority can be leveraged to provide $10 in credit assistance.




                          Page 42                                                 GAO-12-641 Surface Transportation
borrowers. 65 Specifically, public agencies that are financing ongoing
capital programs and have senior bonds outstanding could be exempt
from the nonsubordination clause if (1) the outstanding bonds are rated A
or higher, (2) the TIFIA assistance and outstanding bonds are secured by
revenues not affected by project performance (e.g., sales tax), and (3) the
TIFIA assistance is 33 percent or less of the total project costs. Among
recent applicants we surveyed, 22 out of 36 strongly or moderately
support allowing waivers to the nonsubordination clause. Several legal
and financial advisors and other project sponsors we interviewed support
removing the nonsubordination clause altogether.

While there is general support for allowing waivers to or eliminating the
nonsubordination clause, many of those we interviewed indicated that the
clause does not pose an insurmountable challenge to negotiating a credit
agreement, and that it provides needed protection for the federal
government. Eliminating or waiving the nonsubordination clause could
address some issues identified by financial advisors and credit ratings
agencies we interviewed. For example, the TIFIA nonsubordination
clause can be difficult to integrate with existing terms for outstanding
bonds secured by the same revenue stream. If the nonsubordination
clause is triggered due to project bankruptcy or insolvency, project
sponsors must make special arrangements to ensure this bond covenant
is not violated. However, despite these issues, many project sponsors
and legal and financial advisors said that the nonsubordination clause
provides an important protection to taxpayers. Moreover, few if any could
point to instances where it prevented the closing of a credit agreement.

DOT officials said that the nonsubordination clause helps protect the
federal government and taxpayers. For the TIFIA program, the
nonsubordination clause is used to lessen the risk to the federal
government. 66 While the nonsubordination clause can cause issues for


65
  TIFIA credit assistance is designed with patient repayment terms to encourage private
debt as part of the total financing package. To do this, TIFIA assistance can be
subordinate to other debt, meaning that this other (senior) debt may receive project
revenue ahead of DOT. However, TIFIA credit agreements include, pursuant to the TIFIA
statute, a nonsubordination clause (also known as the springing lien), which states that in
the event of a borrower’s bankruptcy, insolvency, or liquidation, DOT’s claims on project
revenues will not be subordinate to the claims of other creditors.
66
  OMB Circular A-129, Appendix B, II.3.c. (2) says that to protect the government’s
interest, the government’s claims on assets should not be subordinated to the claim of
other lenders in the case of a borrower’s default.




Page 43                                                 GAO-12-641 Surface Transportation
                       borrowers, DOT officials said that they can work with borrowers to try to
                       address financial difficulties before they must legally invoke the clause.
                       For example, DOT can defer invoking the nonsubordination clause for up
                       to a year after a missed payment, but to date no sponsor has missed a
                       payment. In addition, DOT officials told us that removing the
                       nonsubordination clause would increase the federal government’s risk
                       because it would lower the likelihood of recovering funds. According to
                       DOT officials, the nonsubordination clause facilitated its involvement in
                       bankruptcy discussions for the South Bay Expressway and, as a result,
                       DOT expects to recover, through the restructuring of the project’s debt
                       and assumption of the loan by SANDAG, up to 100 percent of the original
                       loan value. Further, DOT officials said that without the nonsubordination
                       clause, the credit subsidy cost required for a project would increase
                       significantly, because of the increased risk to the federal government, and
                       thus reduce the amount of assistance the TIFIA program could provide.


Modify the Selection   Modify selection criteria. Both the reauthorization bills propose eliminating
Process                TIFIA’s selection criteria and adding to the current eligibility
                       requirements. 67 H.R. 7 would expand eligibility requirements to include
                       creditworthiness, regional significance, beneficial effects, and project
                       readiness. 68 S. 1813 adds creditworthiness to the program’s current
                       eligibility requirements.

                       Twenty-three of 36 recent applicants that responded to our survey
                       support modifying the TIFIA selection criteria, but when asked how the
                       criteria should be modified, these respondents most often indicated that
                       they want more transparency in how selection criteria are applied. 69


                       67
                         The TIFIA program has five statutory eligibility requirements for projects: (1) inclusion in
                       transportation plans and programs; (2) application submitted by state or local government,
                       public authority, or public-private partnership; (3) project costs of equal to or greater than
                       $50 million or $15 million for intelligent transportation system projects; (4) dedicated
                       revenue sources; and (5) public sponsorship of private entities.
                       68
                         In H.R. 7, the proposed regional significance eligibility requirement states that the
                       project shall be regionally significant or otherwise significantly enhance the national
                       transportation system. Currently, one of the statutory selection criteria is national or
                       regional significance, which is 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.
                       69
                         Sixteen respondents provided an open-ended response elaborating on that question,
                       with 6 indicating that they wanted more transparency.




                       Page 44                                                   GAO-12-641 Surface Transportation
Project sponsors and advisors we interviewed said they would prefer
more transparency in the evaluation of LOIs and a better explanation of
how selection criteria are applied. Several project sponsors and advisors
expressed concern about the definitions of some criteria—in particular,
the livability and sustainability clarifications—as well as how the criteria
are applied to LOIs.

However, altering or eliminating the selection criteria could modify the
nature of the TIFIA program, changing it from a discretionary program
where select projects receive assistance to more of an eligibility-based
program where all eligible, creditworthy projects can receive assistance.
DOT supports retaining the statutory criteria to use in selecting projects to
receive credit assistance. In this way, the TIFIA program would continue
to provide assistance to projects that meet DOT’s national transportation
goals. DOT officials added that just because a project is creditworthy
does not ensure that it will have positive transportation benefits. Further,
modifying or eliminating the selection criteria could be implemented in
several ways, each entailing different trade-offs. For example, one of the
new eligibility requirements in H.R. 7 is “beneficial effects,” which
collapses some existing statutory criteria and program goals—specifically,
fostering public-private partnerships, attracting private debt or equity
investment, enabling a project to proceed faster than without the credit
assistance, and reducing federal grant assistance—into one category.
While fostering public-private partnerships, for example, is one of the
selection criteria for the current TIFIA program, projects without a public-
private component are still eligible to apply. Depending on how the
beneficial effects eligibility requirement, if enacted, is defined and
implemented, it could render some projects—including some that recently
received credit assistance—ineligible.

Return to an open application cycle. The reauthorization bills propose
returning to an open application process and prohibiting a fixed-date
solicitation. Several project sponsors as well as financial and legal
advisors we interviewed support a return to an open application cycle.
Some project sponsors said this would allow sponsors to seek TIFIA
credit assistance according to a project’s schedule, rather than trying to
alter this schedule to fit the annual TIFIA solicitation. One state DOT said
that the projects applying for TIFIA credit assistance are very complex
and must manage multiple timelines for various financing stakeholders,
which is further complicated by TIFIA’s once-a-year solicitation. A few
financial advisors and one project sponsor we spoke with also indicated
that increasing the number of solicitations per year would be an
improvement if DOT did not return to an open application cycle.


Page 45                                        GAO-12-641 Surface Transportation
              Moreover, due to the fixed-date solicitation process, some project
              sponsors may be submitting LOIs for projects not yet ready to use TIFIA
              assistance. DOT previously reported that based on its use of an annual,
              fixed-date application process from 1999 to 2001, project sponsors may
              have been applying for assistance prematurely in response to the limited
              application window. DOT switched to an open application process to
              allow sponsors to apply based on a project’s schedule. For example, one
              recent applicant told us it submitted an LOI early, as it planned and
              obtained permits for the project, to familiarize DOT with the project and
              improve its chances of obtaining TIFIA credit assistance in the next few
              years. DOT officials told us the fixed-date application cycle is currently a
              necessity because of limited resources; however, if they had more funds
              to pay the credit subsidy costs for credit assistance, they would prefer to
              use an open application system that allows a sponsor to seek TIFIA when
              it best fits a project’s schedule.

              Importantly, returning to an open application cycle removes the
              competitive nature of the TIFIA program. If the TIFIA program’s
              authorized budget authority remains at current levels or does not meet
              total demand, a project’s order in line would determine whether it receives
              assistance, not its relative merit. Further, if this option were adopted, DOT
              would have to reconsider its current two-step selection process and
              determine the extent to which it has the discretion to distribute assistance
              based on geographic location, project readiness, or other factors not
              included in the statutory eligibility requirements.


              Until recently, the innovative credit assistance offered by the TIFIA
Conclusions   program to finance the construction of large-scale surface transportation
              projects was underutilized. However, demand for the program surged, in
              part because of the tightening of commercial credit markets and low
              federal treasury interest rates. TIFIA is increasingly becoming a more
              recognized approach for filling funding and financing gaps for complex
              transportation projects that can help to mitigate mobility and other
              transportation issues in many congested urban areas in the United
              States. DOT, project sponsors, legal and financial advisors, and other
              stakeholders in the transportation industry have expressed strong support
              for the program, and Members of Congress have recently developed
              several reauthorization proposals aimed at greatly increasing the
              authorized budget authority for the program and modifying other aspects
              of the program to make it more accessible. DOT has taken some steps to
              monitor and assess the program through its project oversight and credit
              monitoring of individual TIFIA credit agreements and, early in the


              Page 46                                        GAO-12-641 Surface Transportation
                      program’s tenure, by tracking and reporting on the private investment and
                      leveraging effect of TIFIA to gauge its progress in meeting program goals.
                      However, since that time, DOT has not publicly reported on these or other
                      measures to assess the program as a whole. Without other measures in
                      place going forward, Congress will not have the complete and aggregated
                      data needed to make informed decisions about the program’s size and
                      structure.

                      Additionally, in response to increased demand for the program and
                      multiple extensions of the surface transportation reauthorization over the
                      last 3 years, DOT has had to adapt its process for selecting projects,
                      focusing its review of projects on applicants’ LOIs and selecting projects
                      based on their relative merits. The new process, whereby DOT balances
                      a limited program budget authority with selecting projects that are most
                      consistent with the statutory selection criteria, is a work in progress. In
                      response to feedback from applicants and lessons from this and other
                      discretionary programs, DOT has taken steps to make the TIFIA selection
                      process transparent by publicizing the selection criteria and other factors
                      that contribute to project selection and providing feedback to
                      unsuccessful applicants, and many think these steps have been useful.
                      However, many recent applicants and financial and legal advisors that
                      assist applicants in developing projects still feel that the process lacks
                      transparency, making it difficult for them to advance well-developed LOIs.
                      While federal agencies rarely publicly disclose the reasons for their
                      selection decisions in a competitive review process, the considerable
                      demand for TIFIA and changes to the selection process suggest that
                      publicly disclosing additional information about how selection decisions
                      are made would better enable potential applicants to identify how DOT is
                      using the statutory criteria to select projects and develop effective LOIs.


                      To improve the implementation of the TIFIA program and enable
Recommendations for   Congress and DOT to better assess program performance, we
Executive Action      recommend that the Secretary of Transportation further develop and
                      define performance measures to monitor and evaluate progress toward
                      meeting the program’s goals and objectives.

                      To ensure that future project selections in the TIFIA program are
                      transparent to Congress, applicants, and the public, we recommend that
                      the Secretary of Transportation better disclose information, through
                      notices of funding availability or other program guidance, regarding how
                      DOT evaluates and selects projects.



                      Page 47                                       GAO-12-641 Surface Transportation
                  We provided a draft of this report to DOT for review and comment. In
Agency Comments   response, DOT said it would carefully consider the results of our review
                  but did not take a position on whether it agreed with our
                  recommendations. DOT told us that it objectively evaluates applications
                  for TIFIA participation using comprehensive, data-driven processes to
                  identify the most highly qualified projects, and that DOT encourages
                  strong communication with applicants and offers transparent discussion
                  of applicants’ submittals to ensure they are fully informed of the basis for
                  program participation decisions. Further, the agency stated that it is
                  continuously reevaluating its processes to ensure they are as effective as
                  possible. The agency also provided technical comments, which we
                  incorporated, as appropriate.


                  As agreed with your offices, unless you publicly announce the contents of
                  this report earlier, we plan no further distribution until 30 days from the
                  report date. At that time, we will send copies to the Secretary of
                  Transportation, the Administrator of the Federal Highway Administration,
                  and appropriate congressional committees. In addition, the report will be
                  available at no charge on the GAO website at http://www.gao.gov.

                  If you have any questions about this report, please contact me at (202)
                  512-2834 or flemings@gao.gov. Contact points for our Offices of
                  Congressional Relations and Public Affairs may be found on the last page
                  of this report. Major contributors to this report are listed in appendix IV.




                  Susan Fleming
                  Director, Physical Infrastructure Issues




                  Page 48                                        GAO-12-641 Surface Transportation
Appendix I: Scope and Methodology
             Appendix I: Scope and Methodology




             To address our objectives, we reviewed Department of Transportation
             (DOT) program guidance for the Transportation Infrastructure Finance
             and Innovation Act (TIFIA) program, relevant legislation and regulations,
             and DOT’s biennial reports to Congress on the TIFIA program. To
             describe the characteristics and results of the TIFIA program, we
             analyzed DOT data on past letters of interest (LOI) and applications for
             assistance to describe the projects that sought credit assistance. We also
             analyzed data on the projects receiving TIFIA credit agreements through
             April 2012 to describe these projects, including mode of transport, total
             cost, amount of TIFIA assistance, amount of private investment, and
             geographic location. For mode of transport, we used DOT’s available
             characterizations for all projects with credit agreements and for LOIs for
             fiscal year 2011, while for the remaining LOIs we determined the mode
             for projects by applying DOT’s characterization scheme. When
             considering the amount of private investment, we followed DOT’s
             convention established in its 2002 report to Congress on TIFIA. Namely,
             (1) the project must feature investor-held debt or equity and (2) the
             investment return must be derived from project-generated revenues or
             other revenues levied specifically to support the project. We only included
             active credit agreements—those for which sponsors had not repaid or
             refinanced their credit agreements—as we did not have complete
             information on the funding sources for all the retired credit agreements.
             We assessed the reliability of the data by reviewing DOT’s data
             documentation, interviewing knowledgeable officials, and conducting
             independent validation through use of our web survey. We found the data
             to be sufficiently reliable for our purposes. In addition, we interviewed
             DOT officials to learn about the program’s goals and the tools DOT uses
             or plans to use to track and evaluate the performance of credit
             agreements and the program.

             To describe and assess DOT’s process for evaluating and selecting
             projects to invite to apply in fiscal years 2010 and 2011, we examined
             legislation, regulations, and agency guidance, including notices of funding
             availability, to describe the statutory and regulatory criteria DOT uses to
             select projects for credit assistance. We also analyzed and summarized
             data and documents provided by DOT—including scores assigned and
             reviewers’ assessments of project letters of interest—and interviewed
             DOT officials to describe the decision-making processes used by the
             agency to select projects for credit assistance. We focused on federal
             fiscal years 2010 and 2011, the years for which DOT used a fixed-date
             competitive solicitation for projects after demand for credit assistance
             exceeded the program’s budget authority and for which the evaluation
             and selection processes were complete. To assess DOT’s process for


             Page 49                                       GAO-12-641 Surface Transportation
Appendix I: Scope and Methodology




selecting projects, we compared DOT’s process with statute, regulations,
and guidance; GAO’s Standards for Internal Control in the Federal
Government; and, as appropriate, past GAO work on federal credit
assistance and grant programs.

In addition, we gathered and analyzed data on state-level characteristics,
such as federal highway apportionments and whether states have
legislative restrictions on borrowing, to determine whether such
characteristics were correlated to past demand for the TIFIA program. To
explore the potential future demand for TIFIA credit assistance, we
analyzed data from DOT on interest in the program in the last 2 fiscal
years. To identify the options proposed to modify the TIFIA program, we
reviewed reauthorization proposals for surface transportation programs
from congressional committees, DOT, and industry and research
organizations.

We also interviewed a variety of stakeholders to inform our objectives.
We interviewed select current and potential project sponsors (such as
state DOTs and transit agencies) to learn about their experiences with the
TIFIA selection process and the factors that influenced whether they
sought TIFIA assistance. In particular, we interviewed project sponsors in
the 5 states—California, Colorado, Florida, Virginia, and Texas—that
constitute the majority of TIFIA awards to date, as well as a few states
that have had little or no experience with the program—North Carolina
and Iowa—that varied in terms of geographic location and legislative
authority to borrow and use public-private partnerships. In each of these
states, we interviewed the state DOT and all project sponsors that
received TIFIA credit assistance as of April 1, 2012. In addition, we
interviewed legal and financial advisors that help sponsors apply for TIFIA
credit assistance and private concessionaires that invest in large
infrastructure projects to learn about their experiences with the TIFIA
program, including the selection process. We also interviewed credit
rating agencies and industry associations such as the American
Association of State Highway and Transportation Officials (AASHTO) and
the American Road and Transportation Builders Association (ARTBA), to
learn about their experiences with the TIFIA program and to gain
additional information about the types of projects that have sought or
received TIFIA credit assistance. In our interviews, we also asked about
the factors that would influence future demand for the program as well as
options to modify the program and the potential trade-offs of
implementing such changes to the TIFIA program. Table 9 lists the
organizations we interviewed.



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Appendix I: Scope and Methodology




Table 9: List of Interviewees—Sponsors, Financial and Legal Advisors, All Others

 AASHTO
 ARTBA
 Nossaman LLP
 White and Case LLP
 Jeffrey Parker and Associates
 KPMG
 Mercator Advisors
 Public Financial Management
 Cintra
 Macquarie
 Meridiam
 Transurban
 Miami Access Tunnel LLC
 ACS Infrastructure
 Fitch Ratings
 Moody’s
 Standard and Poor’s
 California DOT
 Central Texas Regional Mobility Authority
 Colorado DOT
 Denver Union Station
 Florida DOT
 Iowa DOT
 Los Angeles County Metropolitan Transportation Authority
 North Carolina DOT
 North Texas Tollway Authority
 Denver Regional Transportation District
 Riverside County Transportation Commission
 San Diego Association of Governments
 Southern California Association of Governments
 Texas DOT
 Transbay Joint Powers Authority
 Virginia DOT
Source: GAO.


In order to gather opinions of the TIFIA program from the users’
standpoint, we designed and administered a web-based survey. The



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Appendix I: Scope and Methodology




survey was administered to the state DOTs in all 50 states, the District of
Columbia, and Puerto Rico, as well as to all recent applicants that
submitted an LOI to the TIFIA program in fiscal years 2010 and 2011. 1
The survey population consisted of four unique groups of respondents:
state DOTs from states from which no sponsor had ever applied to the
TIFIA program; state DOTs from states from which a sponsor had applied
to the TIFIA program but not in recent years—that is, 2010 and 2011;
state DOTs who had recently applied to the TIFIA program; and other,
non-state DOT organizations who had recently applied to the TIFIA
program. Survey respondents were presented with different questions in
the survey depending on their past experience with the TIFIA program,
and whether or not they were from a state DOT. In general, the survey
topics included the following:

•   factors contributing to organizations’ decision to seek, or not to seek,
    TIFIA assistance;

•   satisfaction with the process for submitting an LOI to the TIFIA
    program;

•   opinions on proposed modifications to the TIFIA program;

•   potential future demand for the TIFIA program; and

•   characteristics of the state DOTs.

In developing the survey, we took steps to ensure the accuracy and
reliability of responses. We cognitively tested the survey with
representatives from 5 state DOTs and one other organization included in
the respondent population to ensure that questions were clear,
comprehensive, and unbiased, and to minimize the burden the survey
placed on respondents. On the basis of feedback from the six pretests we
conducted, we made changes to the content and format of some survey
questions. We obtained contact information for the survey recipients from
two sources. First, we obtained contact information for the state DOTs
from AASHTO, specifically, from its Standing Committee on Finance and
Administration. Second, we obtained contact information for recent


1
 These two groups were not mutually exclusive, in that some state DOTs are also recent
TIFIA applicants. For the purposes of this report, our definition of state DOTs includes
those from the 50 states, the District of Columbia, and Puerto Rico.




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Appendix I: Scope and Methodology




applicants from DOT. We also contacted all of the survey recipients in
advance, by e-mail, to ensure that we had identified the correct
respondents and to request their completion of the questionnaire.

The survey was administered between January 25, 2012, and April 4,
2012. We distributed a link for the survey to the 83 organizations by e-
mail and also subsequently e-mailed and telephoned nonrespondents to
encourage a higher response rate. Because this was not a sample
survey, there are no sampling errors. However, the practical difficulties of
conducting any survey may introduce errors, commonly referred to as
nonsampling errors. For example, difficulties in how a particular question
is interpreted, in the sources of information that are available to
respondents, or in how the data were analyzed can introduce unwanted
variability into the survey results. We took steps in the development of the
questionnaire, the data collection, and the data analysis to minimize these
nonsampling errors. Most of the survey questions included close-ended
response categories; however, a few survey questions asked
respondents to provide a written response to an open-ended question.
When analyzing written responses, one analyst read the responses and
assigned them to different categories, while a second analyst reviewed
this categorization. We received completed surveys from 66 respondents
for an overall response rate of 80 percent. The survey response rates for
the four groups of respondents are presented in table 10 below:

Table 10: List of Survey Recipients and Respondents, by Type of Organization

                                       Number of Total number             Response
 Type of recipient                     responses of recipients                 rate
 State departments of transportation           42               52              81%
 No TIFIA experience                           16               18               89
 No recent TIFIA experience                    14               19               74
 Recent applicant/TIFIA experience             12               15               80
 Other organizations with recent
 TIFIA experience                              24               31               77
 All respondents                               66               83               80
Source: GAO.


We conducted this performance audit from July 2011 to June 2012 in
accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that



Page 53                                             GAO-12-641 Surface Transportation
Appendix I: Scope and Methodology




the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.




Page 54                                      GAO-12-641 Surface Transportation
Appendix II: Projects Receiving TIFIA Credit
                                           Appendix II: Projects Receiving TIFIA Credit
                                           Assistance



Assistance

                                           DOT has awarded 27 TIFIA credit agreements to projects through 26
                                           loans and one loan guarantee. Table 11 provides information on each
                                           credit agreement, including the name and location of the project receiving
                                           assistance, the amount of credit assistance, and the status of the credit
                                           agreement.

Table 11: Projects with TIFIA Credit Agreements

Dollars in millions
Active credit agreements
                                              Total project       Type of         Amount of      Primary        Status of
Project (location)               Mode                 cost        assistance      assistance     revenue pledge assistance
                                                                                                                b
Miami Intermodal Center          Intermodal          $1,664       Direct loan             $270   User charges       Drawing funds
            a
(Miami, FL)
Central Texas Turnpike System    Highway               3,278      Direct loan              900   User charges       Repaying partial
(Austin, TX)                                                                                                        interest
South Bay Expressway-formerly Highway                    658      Direct loan              140   User charges       Repaying
SR 125 South (San Diego                                                                                             principal and
            c
County, CA)                                                                                                         interest
183-A Turnpike (Austin, TX)      Highway                 305      Direct loan               66   User charges       Repaying
                                                                                                                    principal and
                                                                                                                    interest
LA 1 Improvements (Leeville,     Highway                 372      Direct loan               66   User charges       Deferring interest
LA)
Interlink-formerly Warwick       Intermodal              267      Direct loan               42   User charges       Repaying interest
Intermodal Station (Warwick, RI)
Pocahontas Parkway/Richmond Highway                      597      Direct loan              150   User charges       Deferring interest
Airport Connector (Richmond,
VA)
I-495 Capital Beltway HOT        Highway               1,938      Direct loan              589   User charges       Drawing funds
Lanes (Fairfax County, VA)
SH 130 Segments 5-6 (Austin,     Highway               1,328      Direct loan              430   User charges       Drawing funds
TX)
Intercounty Connector            Highway               2,566      Direct loan              516   User charges       Drawing funds
(Montgomery and Prince
George’s County, MD)
I-595 Corridor Roadway        Highway                  1,834      Direct loan              603   Availability       Drawing funds
                                                                                                            d
Improvements (Broward County,                                                                    payments
FL)
Triangle Expressway (Raleigh-    Highway               1,172      Direct loan        386.662     User charges       Drawing funds
Durham, NC)
Port of Miami Tunnel (Miami,     Highway               1,073      Direct loan        341.037     Availability       Drawing funds
FL)                                                                                              payments
North Tarrant Express (Dallas-   Highway               2,047      Direct loan              650   User charges       Drawing funds
Fort Worth, TX)




                                           Page 55                                                  GAO-12-641 Surface Transportation
                                          Appendix II: Projects Receiving TIFIA Credit
                                          Assistance




Dollars in millions
Active credit agreements
                                               Total project              Type of                  Amount of    Primary        Status of
Project (location)              Mode                   cost               assistance               assistance   revenue pledge assistance
Transbay Transit Center (San    Transit                   1,189           Direct loan                    171    Real estate tax    Not yet drawing
Francisco, CA)                                                                                                  increment          funds
IH 635 Managed Lanes (Dallas- Highway                     2,615           Direct loan                    850    User charges       Disbursing
Fort Worth, TX)
Denver Union Station Project    Intermodal                   519          Direct loan                   145.6   Sales tax/real     Drawing funds
(Denver, CO)                                                                                                    estate tax         and repaying
                                                                                                                increment          partial interest
President George Bush         Highway                     1,268           Direct loan                   418.4   User charges       Not yet drawing
Turnpike Western Extension-SH                                                                                                      funds
161 (Dallas, TX)
U.S. 36 Managed Lanes/Bus       Highway                      307          Direct loan                     54    User charges       Not yet drawing
Rapid Transit Project: Segments                                                                                                    funds
1 and 2 (Denver, CO)
Eagle Project (Denver, CO)      Transit                   2,047           Direct loan                    280    Tax revenues       Not yet drawing
                                                                                                                                   funds
Downtown Tunnel/Midtown         Highway                   2,089           Direct loan                    422    User charges       Drawing funds
Tunnel/MLK Extension
(Hampton Roads, VA
Total                                                 $29,524                                       $7,490.70
Retired credit agreements
Washington Metro Capital        Transit                   2,324           Guarantee                      600    Interjurisdictional Retired
Improvement Program                                                                                             funding
(Washington, DC)                                                                                                agreements
Tren Urbano (San Juan, PR)      Transit                   2,250           Direct loan                    300    Tax revenues       Retired
Cooper River Bridge             Highway                      675          Direct loan                    215    Infrastructure     Retired
Replacement (Charleston, SC)                                                                                    bank loan
                                                                                                                repayments
Staten Island Ferries and       Transit                      482          Direct loan                159.225    Tobacco            Retired
Terminals (New York City, NY)                                                                                   settlement
                                                                                                                revenues
Reno Transportation Rail        Intermodal                   280          Direct loan                    50.5   Room and sales Retired
Access Corridor-ReTRAC                                                                                          tax
(Reno, NV)
                                                                 e
Miami Intermodal Center         Intermodal                                Direct loan                269.076    Tax revenues       Retired
(Miami, FL)
Total                                                   $6,011                                      $1,593.80
Total all agreements                                  $35,535                                       $9,084.50
                                          Source: GAO analysis of DOT data as of April 16, 2012.

                                          a
                                           This loan, originally for $170 million in credit assistance, was closed on April 25, 2005. An additional
                                          $100 million was requested and approved, and the loan was amended on August 1, 2007.




                                          Page 56                                                                  GAO-12-641 Surface Transportation
Appendix II: Projects Receiving TIFIA Credit
Assistance




b
User charges include tolls and rental car customer facility charges.
c
  Under the plan of reorganization approved by the bankruptcy court in April 2011, the restructured
principal amount of the loan is $93 million; see project fact sheet for details
d
 An availability payment is a payment made by the public sponsor of a project to the private
concessionaire for its responsibility to design, construct, operate, or maintain a project. The payment
is based on particular project milestones or facility performance standards, irrespective of usage of
the asset, such as ridership or toll revenue.
e
Project cost included in first listing of the Miami Intermodal Center.




Page 57                                                          GAO-12-641 Surface Transportation
Appendix III: Responses to Questions from
                                            Appendix III: Responses to Questions from
                                            GAO’s Survey on TIFIA



GAO’s Survey on TIFIA

                                            We distributed a survey to all state departments of transportation, 1 as well
                                            as the organizations who have submitted a letter of interest for TIFIA
                                            assistance during federal fiscal years 2010-2011, to gain insight into their
                                            experience with and opinions regarding the TIFIA program. In total the
                                            survey went to 83 recipients, and we received completed surveys from 66
                                            of 83 recipients for a response rate of 80 percent. Tables 12-28 below
                                            show responses to questions from the survey related to the TIFIA
                                            program and project finance. We also provided examples and definitions
                                            for certain terms used in the questions, which are reprinted below. Survey
                                            respondents were presented with different questions in the survey
                                            depending on their past experience with the TIFIA program, and whether
                                            or not they were from a state DOT. For example, we only asked
                                            organizations that submitted an LOI in 2010 or 2011 (recent applicants)
                                            about their experience with the TIFIA evaluation and selection process.
                                            For more information about our methodology for designing and
                                            distributing the survey, see appendix I.


Responses to Questions
for Recent Applicants to
the TIFIA program
Table 12: How Important or Unimportant Were Each of the Following Factor(s) in Your Organization’s Decision to Seek TIFIA
Credit Assistance for Projects in Federal Fiscal Year 2010 or 2011?

                                                                       Neither                              Don’t
                                               Very     Somewhat important nor Somewhat          Very know/not
                                           important     important unimportant unimportant unimportant applicable Total
Availability of user fees to repay TIFIA
credit assistance                                 20              7                2          -            4           3     36
Availability of other dedicated revenue
stream(s) to repay TIFIA credit
assistance                                        12              7                5          -            7           5     36
Use of TIFIA to attract private equity            12              3                5          1           10           5     36
Low interest rate of TIFIA credit
assistance relative to other financing
options                                           28              6                 -         1             -          1     36




                                            1
                                             For the purposes of this report, our definition of state DOTs includes those from
                                            the 50 states, the District of Columbia, and Puerto Rico.




                                            Page 58                                            GAO-12-641 Surface Transportation
                                                 Appendix III: Responses to Questions from
                                                 GAO’s Survey on TIFIA




                                                                                 Neither                              Don’t
                                                    Very          Somewhat important nor Somewhat          Very know/not
                                                important          important unimportant unimportant unimportant applicable Total
Ability of TIFIA credit assistance to serve
as subordinate debt in project finance
plan                                                     26               6                    -              1               2            1        36
Repayment terms and options offered by
TIFIA credit assistance                                  30               4                    -              -               -            2        36
Political support given to use of
alternative project delivery and financing
tools                                                    10              13                 9                 2               2            -        36
Prior experience using alternative
financing and delivery tools to implement
projects                                                  4              10                13                 -               6            3        36
Lack of other funding options                            13              13                 5                 2               2            1        36
Ability to accelerate delivery of project
through use of TIFIA credit assistance                   12              15                 4                 1               2            1        35
                                                 Source: GAO.


                                                 Note: We received completed surveys from 36 of 46 recent applicants (78 percent). Totals may not
                                                 add to 36 because respondents did not all answer every question.


Table 13: How Satisfied or Dissatisfied Were You with Each of the Following Aspects of the Process for Submitting a Letter of
Interest (LOI) for the TIFIA Program in Federal Fiscal Year 2010 or 2011?

                                                                                    Neither                                Don’t
                                                      Very Somewhat           satisfied nor Somewhat            Very know/not
                                                  satisfied satisfied          dissatisfied dissatisfied dissatisfied applicable               Total
Explanation of the application process in
DOT’s Notice of Funding Availability
(NOFA)                                                     15           12                 4              3              1             1            36
Clarity of DOT’s selection criteria in the
NOFA                                                          6         15                 3              9              2             1            36
Ability to provide sufficient project details
in LOI format                                              12           16                 5              1               -            1            35
Length of time it took from submission of
LOI to announcement of projects invited to
apply                                                         3         15                 4              7              5             2            36
Transparency of DOT’s project selection
decisions                                                     4          3                13              5              8             3            36
Technical assistance on LOI provided by
TIFIA office                                                  8          8                10              2              1             7            36
                                                 Source: GAO.


                                                 Note: We received completed surveys from 36 of 46 recent applicants (78 percent). Totals may not
                                                 add to 36 because respondents did not all answer every question.




                                                 Page 59                                                      GAO-12-641 Surface Transportation
                                         Appendix III: Responses to Questions from
                                         GAO’s Survey on TIFIA




Table 14: Thinking about the Amount of Effort Your Organization Spent, How Much of a Burden, if at All, Were the Following
Aspects of Submitting an LOI?

                                                Great           Moderate        Some        Little to no     Don’t know/not
                                               burden            burden        burden            burden          Applicable         Total
Cost associated with submitting an LOI                  -            15              11                9                     1           36
Time associated with submitting an LOI                  4            15              12                4                     1           36
                                         Source: GAO.


                                         Note: We received completed surveys from 36 of 46 recent applicants (78 percent).


                                         Table 15: For Federal Fiscal Year 2010 or 2011, Did You Receive Any Feedback from
                                         DOT TIFIA Staff on Any Letters of Interest for TIFIA Credit Assistance?

                                                                                                                             Frequency
                                          Yes                                                                                            21
                                          No                                                                                             10
                                          Don’t know                                                                                      5
                                          Total                                                                                          36
                                         Source: GAO.


                                         Note: We received completed surveys from 36 of 46 recent applicants (78 percent).


Table 16: If You Received Feedback on Any of the Following Topics, How Useful, if at All, Was the Feedback You Received
from DOT TIFIA Staff?

                                                                                                                  Don’t
                                                                 Moderately     Slightly      Not at all      know/not
                                          Highly useful             useful       useful         useful       applicable          Total
Clarification of selection criteria                         4              5           4                4               4          21
Scoring of your LOI                                         3              6           6                2               4          21
Areas for improvement on future
submissions                                                 6              6           1                2               6          21
                                         Source: GAO.




                                         Page 60                                                      GAO-12-641 Surface Transportation
                                               Appendix III: Responses to Questions from
                                               GAO’s Survey on TIFIA




Table 17: How Much Do You Support or Oppose the Following Proposed Changes to the TIFIA Program?

                                                                                     Neither
                                                                                    support                                    Don’t
                                                      Strongly Moderately                nor Moderately           Strongly know/not
                                                      support    support            oppose     oppose              oppose applicable Total
Expand funding for the TIFIA program                          32              -             -              1              2             -     35
Change eligibility requirements to decrease
total project cost to below $50 million                       3              5              9              9              9             1     36
Change eligibility requirements to decrease
total ITS project cost to below $15 million                    -             7            15               3              9             2     36
Increase the portion of costs that TIFIA can
cover from 33 percent                                         19             7              4              2              3             1     36
Allow waivers for the nonsubordination clause                 13             9              8              1              1             3     35
Eliminate the nonsubordination clause                         9              6            12               1              3             4     35
Allow project sponsors to contribute to the
subsidy costs of assistance                                   10             9            10               -              1             5     35
Add separate eligibility requirements and
terms to encourage rural infrastructure
projects to seek credit assistance                            3              7            11               4              7             3     35
                                               Source: GAO.


                                               Note: We received completed surveys from 36 of 46 recent applicants (78 percent). Totals may not
                                               add to 36 because respondents did not all answer every question.


                                               Table 18: Do You Support Modifying the TIFIA Selection Criteria?

                                                                                                                                    Frequency
                                               Yes                                                                                            23
                                               No                                                                                                 2
                                               Don’t know                                                                                     10
                                               Total                                                                                          35

                                               Source: GAO.


                                               Note: We received completed surveys from 36 of 46 recent applicants (78 percent). Totals may not
                                               add to 36 because respondents did not all answer every question.




                                               Page 61                                                     GAO-12-641 Surface Transportation
                                              Appendix III: Responses to Questions from
                                              GAO’s Survey on TIFIA




Responses to Questions
for State DOTs from States
That Were Not Recent
Applicants

Table 19: How Much, if at All, Did Each of the Following Factors Impact Your State DOT’s Decision to Not Submit an LOI to the
TIFIA Program?

                                                                  Very                                                    Don’t
                                                                 great      Great Moderate           Some    Little to know/not
                                                               impact      impact   impact          impact no impact applicable Total
No projects within the state that met the required cost
thresholds for the TIFIA program                                     4            2            1           2             5             2     16
Lack of either user fees or dedicated revenues to repay
assistance                                                           6            2            1           3             3             1     16
State has no legal authority to use alternative finance and
delivery approaches                                                  3            1            1           2             8             1     16
State is subjected to restrictions on borrowing                      4            2            -           2             7             -     15
Other financing options were available                               5            3            2           1             4             1     16
State does not use debt financing for transportation
projects                                                             2            1            1           1             9             2     16
Inclusion of nonsubordination clause in TIFIA credit
agreements                                                           1            -            -           -             9             6     16
Cost associated with federalizing projects                           1            -            1           -           12              2     16
Unfamiliarity with the TIFIA program                                  -           -            2           4             9             1     16
Resources needed to apply for and negotiate a TIFIA
credit agreement                                                     1            1            2           2             9             1     16
Resources needed to maintain an executed TIFIA credit
agreement                                                            1            1            1           3             8             1     15
                                              Source: GAO.


                                              Note: We received completed surveys from 16 of 18 state DOTs from states from which no sponsor
                                              had ever submitted a letter of interest (89 percent). Totals may not add to 16 because respondents
                                              did not all answer every question.




                                              Page 62                                                      GAO-12-641 Surface Transportation
                                             Appendix III: Responses to Questions from
                                             GAO’s Survey on TIFIA




Table 20: In Your Opinion, How Much, if at All, Does Each of the Following Proposed Changes Increase the Likelihood That
Your Organization Would Seek TIFIA Credit Assistance in the Future?

                                                                                                   Little to    Don’t
                                                       Significantly Greatly Moderately Somewhat         no know/not
                                                           increase increase   increase  increase increase applicable Total
Expand funding for the TIFIA program                                2           2              3             5          17              1         30
Change eligibility requirements to decrease total
project cost to below $50 million                                   2           3              5             3          16              1         30
Change eligibility requirements to decrease total
ITS project cost to below $15 million                               2           2              3             6          16              1         30
Increase the portion of costs that TIFIA can cover
from 33 percent                                                     4           4              4             5          12              1         30
Allow waivers for the nonsubordination clause                       2           2              2             4          12              8         30
Eliminate the nonsubordination clause                               3           2               -            3          14              8         30
Allow project sponsors to contribute to the subsidy
costs of assistance                                                 2           2              4             6          11              5         30
Add separate eligibility requirements and terms to
encourage rural infrastructure projects to seek
credit assistance                                                   2           4              5             7            9             3         30
                                             Source: GAO.


                                             Note: Of the 37 state DOTs from states from which no sponsor had either not submitted a letter of
                                             interest during fiscal years 2010 and 2011 or not ever submitted a letter of interest, we received
                                             completed surveys from 30 state DOTs (81 percent).




                                             Page 63                                                       GAO-12-641 Surface Transportation
                                             Appendix III: Responses to Questions from
                                             GAO’s Survey on TIFIA




Table 21: In Your Opinion, How Much, if at All, Does Each of the Following Proposed Changes Increase the Likelihood That
Your Organization Would Seek TIFIA Credit Assistance in the Future?

(Only with Responses from State DOTs from Which No Sponsor Had Ever Sought Credit Assistance.)


                                                                                                   Little to    Don’t
                                                       Significantly Greatly Moderately Somewhat         no know/not
                                                           increase increase   increase  increase increase applicable Total
Expand funding for the TIFIA program                                1            -             1             3          10              1         16
Change eligibility requirements to decrease total
project cost to below $50 million                                   2           1              2             2            8             1         16
Change eligibility requirements to decrease total
ITS project cost to below $15 million                               2           1              1             2            9             1         16
Increase the portion of costs that TIFIA can cover
from 33 percent                                                     3           1              2             4            5             1         16
Allow waivers for the nonsubordination clause                       2            -              -            3            6             5         16
Eliminate the nonsubordination clause                               2            -              -            2            7             5         16
Allow project sponsors to contribute to the subsidy
costs of assistance                                                 2            -             2             3            6             3         16
Add separate eligibility requirements and terms to
encourage rural infrastructure projects to seek
credit assistance                                                   2           3              2             4            3             2         16
                                             Source: GAO.


                                             Note: We received completed surveys from 16 of 18 state DOTs from states from which no sponsor
                                             had ever submitted a letter of interest (89 percent).


                                             Table 22: Do You Support Modifying the TIFIA Selection Criteria?

                                              Responses
                                              Yes                                                                                             11
                                              No                                                                                                  3
                                              Don’t know                                                                                      15
                                              Total                                                                                           29
                                             Source: GAO.


                                             Note: Of the 37 state DOTs from states from which no sponsor had either not submitted a letter of
                                             interest during fiscal years 2010 and 2011 or not ever submitted a letter of interest, we received
                                             completed surveys from 30 state DOTs (81 percent). The totals may not add to 30 because
                                             respondents did not all answer every question.




                                             Page 64                                                       GAO-12-641 Surface Transportation
                                        Appendix III: Responses to Questions from
                                        GAO’s Survey on TIFIA




Responses to Questions
for All State DOTs
Table 23: In the Next 5 years, Approximately How Many Projects Do You Anticipate Will Be Undertaken in Your State That
Have a Total Cost of ...

                                                   None       1 to 2        3 to 5        6 to 10          More than 10            Total
Less than $10 million?                                  -           -             -              -                    39              39
$10 to less than $25 million?                           -           -             1             5                     33              39
$25 to less than $50 million?                           -           3             6             8                     21              38
$50 to less than $100 million?                         6            8             5             7                     12              38
$100 to less than $150 million?                        13         10              5             7                      5              40
$150 to less than $200 million?                        16           7             7             7                      2              39
$200 million or more?                                  17           8             8             4                      2              39
                                        Source: GAO.


                                        Note: We received completed surveys from 42 of 52 state DOTs (81 percent). Totals may not add to
                                        42 because respondents did not all answer every question.


                                        Table 24: Of the Projects Identified in Table 23, for About How Many Do You
                                        Anticipate That Your Organization Will Seek TIFIA Credit Assistance?

                                                                Recent TIFIA          No recent TIFIA              No TIFIA
                                                                 experience               experience             experience        Total
                                         None                                 2                        7                   12         21
                                         1 to 2                               3                        2                    1          6
                                         3 to 5                               4                        3                     -         7
                                         6 to 10                              2                        -                     -         2
                                         Don’t know                           1                        1                    3          5
                                         Total                              12                        13                   16         41
                                        Source: GAO.


                                        Note: We received completed surveys from 42 of 52 state DOTs (81 percent). Totals may not add to
                                        42 because respondents did not all answer every question.




                                        Page 65                                                      GAO-12-641 Surface Transportation
                                          Appendix III: Responses to Questions from
                                          GAO’s Survey on TIFIA




Table 25: Does Your State DOT Have the Legislative Authority to Use Any of the Following Tools for Transportation Projects?

                                                                                           Yes           No      Don’t know        Total
Design-build                        Legislative authority?                                   35            6                  1       42
                                    If yes, has this authority been used?                    32            3                  -       35
Public-private partnerships         Legislative authority?                                   28           11                  2       41
                                    If yes, has this authority been used?                    17           11                  -       28
Levy tolls for roads, bridges and   Legislative authority?                                   24           17                  -       41
tunnels                             If yes, has this authority been used?                    16            8                  -       24
                                          Source: GAO.


                                          Note: We received completed surveys from 42 of 52 state DOTs (81 percent). Totals may not add to
                                          42 because respondents did not all answer every question.


                                          Table 26: Does Your State Have Access to Any of the Following Revenue Sources,
                                          at Either the State or Local Level, That Could Be Used to Repay a TIFIA Loan?

                                                                             Yes                  No           Don’t know          Total
                                           Tolling                            20                  19                      3            42
                                           Sales tax                          11                  24                      5            40
                                          Source: GAO.


                                          Note: We received completed surveys from 42 of 52 state DOTs (81 percent). Totals may not add to
                                          42 because respondents did not all answer every question.


                                          Table 27: Does Your State DOT Have Either Bonding Authority OR Have Access to
                                          the Bond Market through Another State Entity?

                                                                                                                              Frequency
                                           Response
                                           Yes                                                                                         41
                                           Don’t know                                                                                   1
                                           Total                                                                                       42
                                          Source: GAO.


                                          Note: We received completed surveys from 42 of 52 state DOTs (81 percent). Totals may not add to
                                          42 because respondents did not all answer every question.




                                          Page 66                                                      GAO-12-641 Surface Transportation
                    Appendix III: Responses to Questions from
                    GAO’s Survey on TIFIA




                    Table 28: Which, if Any, of the Following Legislative Restrictions on Conducting
                    Bond Issuances for Capital Projects Apply?

                                                                                                     Don’t
                                                                                     Yes       No    know      Total
                    Limitations on the amount that can be issued                       31        8        2       41
                    Limitations on the frequency with which bonds can be
                    issued                                                              7      31         3       41
                    Bond issuances require legislative approval                        23      15         2       40
                    Source: GAO.

                    Note: We received completed surveys from 42 of 52 state DOTs (81 percent). Totals may not add to
                    42 because respondents did not all answer every question.




Glossary/Examples   ITS stands for intelligent transportation system.

                    The nonsubordination clause (also known in the context of the TIFIA
                    program as the springing lien) means that the TIFIA lien on project
                    revenues can be subordinated to those of senior lenders except in the
                    event of bankruptcy, insolvency, or liquidation of the obligor. In such an
                    instance, the TIFIA lien would rise to parity with senior creditors. This
                    provision can be effected through a master trust agreement, an
                    intercreditor agreement, or other agreement entered into at the time of
                    execution of the credit agreement.

                    Examples of other dedicated revenue stream(s) to repay TIFIA credit
                    assistance may include pledged sales taxes, tax increment financing, and
                    availability payments.

                    The TIFIA eligibility requirements are (1) the project shall be consistent
                    with the state transportation plan, if located in a metropolitan area shall be
                    included in that area’s metropolitan transportation plan, and shall appear
                    in an approved state transportation improvement program before the DOT
                    and the project sponsor execute a term sheet or credit agreement that
                    results in the obligation of funds; (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 $50
                    million or 33 1/3 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 $15 million); (4)


                    Page 67                                                     GAO-12-641 Surface Transportation
Appendix III: Responses to Questions from
GAO’s Survey on TIFIA




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.

The TIFIA selection criteria are (1) national or regional significance
(including consideration of livability, economic competitiveness, and
safety), (2) private participation, (3) environment (including consideration
of sustainability and state of good repair), (4) project acceleration, (5)
credit worthiness, (6) use of new technology, (7) consumption of budget
authority, and (8) reduced federal grant assistance.

Examples of user fees to repay TIFIA credit assistance may include tolls
and rental car customer facility charges.




Page 68                                        GAO-12-641 Surface Transportation
Appendix IV: GAO Contact and Staff
                  Appendix IV: GAO Contact and Staff
                  Acknowledgments



Acknowledgments

                  Susan Fleming, (202) 512-2834 or flemings@gao.gov
GAO Contact
                  In addition to the contact named above, Susan Zimmerman, Assistant
Staff             Director; Sarah Arnett; Carl Barden; Marcia Carlsen; Carol Henn; Bert
Acknowledgments   Japikse; David Lin; Joanie Lofgren; Ruben Montes de Oca; Josh Ormond;
                  Amy Rosewarne; Andrew Von Ah; and Elizabeth Wood made key
                  contributions to this report.




(546056)
                  Page 69                                   GAO-12-641 Surface Transportation
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