Detailed Information on the
Transportation Infrastructure Finance and Innovation Assessment

Develop loan approval criteria to ensure that loan applicants take full advantage of private sector financing opportunities.

Develop loan approval criteria ensuring that the TIFIA program targets projects that were not able to access capital through other means.

Implement a strategy for encouraging borrowers to seek and private lenders to offer loans guaranteed by the TIFIA program.

Implement a strategy for encouraging borrowers to seek and private lenders to offer loans guaranteed by the TIFIA program (Follow Up Study).

Implement a strategy for encouraging borrowers to seek and private lenders to offer loans guaranteed by the TIFIA program.

Measure: Percent of individual TIFIA projects that meet their respective initial cost estimates, or miss them by less than 10 percent.

Explanation:DOT actively tracks the extent that construction projects financed by TIFIA remain on budget. The measure reflects the degree that TIFIA supports DOT's larger goal of being an effective steward of Federal transportation dollars. The measure represents the cumulate percent of total TIFIA sponsored projects that remain on budget during their construction. DOT tracks performance through the use of documented financial plans for each TIFIA-sponsored project. Performance has sagged recently because of rising prices in oil-related products used in construction. Because of the nature of construction projects, once a project has slipped past its schedule or exceeded its cost estimates, it is cost prohibitive to put the project back on track. Once a project has missed its targets, it typically remains delinquent until completion.

Measure: Annual investment in TIFIA-assisted projects (in billions).

Explanation:This measure tracks the annual total investment in TIFIA-supported projects, averaged over the most recent 3-year period. Total investment refers to all sources of financing for TIFIA-sponsored projects, measured in the year when a project's financial deal is closed. A 3-year average is appropriate because the number and size of TIFIA deals that close from year to year varies significantly. The annual investment level is useful because it shows the degree that higher risk projects were advanced due to the availability of TIFIA assistance. The spending indicates the level of demand for TIFIA by project sponsors who may have unable to obtain financing elsewhere. The measure suggests the presence of a gap in the private markets that is being filled by the TIFIA program.

Measure: Cumulative ratio of non-Federal investment to TIFIA investment in TIFIA sponsored projects.

Explanation:The measure represents the total non-Federal investment included in TIFIA projects (for example private equity or municipal debt) divided by TIFIA credit provided on a cumulative basis over time. This measure represents one of the programs key objectives, which is attracting financing from other sources, particularly the private sector. The cost effectiveness and leveraging of TIFIA improves as the ratio increases.

Measure: Cumulative share of TIFIA projects financed by the private sector.

Explanation:The measure represents the total amount of private co-investment (capital markets debt, either bond or private bank, and equity capital) divided by the total investment in projects receiving TIFIA obligations on a cumulative basis. It addresses one of the central objectives of the TIFIA program: to induce private investment in projects. TIFIA is working to encourage the private sector to eventually replace the need for TIFIA loans. For each loan, TIFIA aims to secure a greater level of private participation.

Measure: Average time (in months) to execute a TIFIA credit agreement from the date of Secretarial approval.

Explanation:Projects selected for TIFIA assistance must meet significant environmental and financial milestones. However, from loan approval to financial close, there are several additional steps that the program and the borrower must undertake. Additional contracts and agreements for grant, debt, and equity investors are required and final terms for agreements must be negotiated, including the TIFIA credit agreement. Although many of the required documents are beyond the control of the TIFIA JPO, this measure attempts to capture cycle time improvements.

Measure: External loan origination fees as a percentage of the TIFIA credit agreement amount.

Explanation:A key indicator of program efficiency is the degree to which external costs associated with financial and legal advisory services can be managed to reduce the cost to the borrower. As the TIFIA program matures, standardization of loan terms can reduce external fees. Fees can be further controlled through competitive bidding of task orders. In the capital markets, the rule of thumb is 1 percent of the bond issue for costs of issuance.

Measure: Cumulative percent of highway public private partnership projects over $50 million funded in part by TIFIA.

Explanation:Public private partnerships refer to arrangements in which governmental authorities and private entities collaborate in the development, operation, ownership, or financing of a transportation project. They generally involve high risk large scale projects, many of which exceed the financing means of the project sponsor. As such, they provide a proxy measure of the transportation financing gap. Project sponsors have used TIFIA to finance a large percent of these endeavors. This measure can be used to gauge TIFIA's role in addressing the gap. Note that TIFIA assistance is not limited to projects characterized as public private partnerships.

Is the program purpose clear?

Explanation: The Transportation Infrastructure Finance and Innovation Act (TIFIA) program's purpose is to finance projects of national or regional significance by filling market gaps and leveraging substantial non-Federal and private co-investment. Encouraging private sector participation to fill financing gaps is one of the primary objectives of the TIFIA program. Through TIFIA, the Department of Transportation (DOT) provides Federal credit assistance in the form of secured loans, loan guarantees, and lines of credit to eligible highway, transit, rail, and intermodal freight projects, including seaports. TIFIA credit assistance is intended to facilitate the financing of projects that would otherwise have been significantly delayed because of funding limitations or difficulties accessing the capital markets.

Evidence: The program's authorizing statute, the Transportation Equity Act for the 21st Century (TEA 21; Public Law 105-178), states Congress's central finding that, "A Federal credit program for projects of national significance can complement existing funding resources by filling market gaps, thereby leveraging substantial private co-investment." The TEA 21 Conference Report adds that TIFIA offers a "tool to leverage limited Federal resources, stimulate additional investment in our Nation's infrastructure, and encourage greater private sector participation in meeting our transportation needs." Importantly, the report also stipulated, "An objective of the program is to help the financial markets develop the capability ultimately to supplant the role of the Federal government in helping financing the cost of large projects of national significance." See TIFIA Program Guide -- http://tifia.fhwa.dot.gov/.

Does the program address a specific and existing problem, interest, or need?

Explanation: TIFIA attempts to fill a financing gap that exists for a certain type of transportation project. Large, user-fee funded, start-up transportation infrastructure projects, such as a new toll road, often lack access to private capital. State and local governments have traditionally relied on the municipal bond market to raise funds for transportation projects when grant funds are insufficient to cover project costs. Because of their size, complexity, uncertainty, bond investors often require that these types of projects meet higher financial tests to assure that bonds can be repaid. These requirements can reduce the up-front capital that can be raised through debt issuance. Furthermore, the municipal bond market generally avoids providing financing for below investment-grade projects. TIFIA is intended to cover this market gap by offering more flexible loan terms, less stringent credit tests, and more flexible repayment schedules. In recent years, state and local governments have begun to employ alternative private sector financing options to fund transportation projects. Still, the availability of private capital remains limited given the uncertain revenue potential of these projects and other risk factors.

Evidence: TIFIA's financing niche is relatively focused compared to the amount of funding provided by Federal, State, and local level transportation programs as well as the well-established public finance market. TIFIA has issued a total of $3.2 billion in loans since 1999 (http://tifia.fhwa.dot.gov/). In 2004 alone, total highway spending by all levels of government equaled $147 billion. (http://www.fhwa.dot.gov/policy/ohim/hs04/htm/hf10.htm). Moreover, the municipal debt market is highly liquid, issuing $39.8 billion for revenue backed transportation bonds and $4.8 billion in tax-backed transportation bonds in 2005. However, the market is risk averse; just 0.2 percent of revenue bonds issued in 2005 for all sectors, including transportation, were rated below investment grade. (See "Municipal Bond Credit Report," Feb 2006 http://www.bondmarkets.com/assets/files/municipal%20credit%20report%2005q4.pdf ). The General Accountability Office (GAO) has concluded that, "Active private sector sponsorship and investment has been used to a limited extent to build and finance major highway and transit projects; thus the nation has had little experience with such sponsorship." See, "Highways And Transit Private Sector Sponsorship of and Investment in Major Projects Has Been Limited" http://www.gao.gov/new.items/d04419.pdf

Is the program designed so that it is not redundant or duplicative of any other Federal, state, local or private effort?

Explanation: Neither private sector nor DOT programs have traditionally provided the flexible financing that is offered by TIFIA. Large revenue-backed projects typically face enormous financing challenges, since the scale and complexity of these projects exceed the financial resources of existing government programs. While the private market can provide both debt and equity to fund road capital needs, its financing structures are generally not as flexible as TIFIA. Project revenues may restrict the amount of capital market debt or bank loans that can be supported. TIFIA can supplement capital markets, enhancing the credit structure and making the project more attractive to private investment. By offering attractively-priced supplemental capital to large complex projects of national or regional significance, TIFIA helps advance higher-risk projects that may otherwise not receive adequate private financing. Further, other DOT "innovative financing" programs serve different functions from TIFIA. For example, state infrastructure banks (SIBs) are best suited to smaller shorter-term projects because SIBs are limited in size, states aim to recycle SIB funds quickly for new loans, and states restrict SIB loan maturities and project size. Likewise, Grant anticipation revenue vehicles (GARVEE), which are bonds that are repaid with a state's pledged future Federal highway grants, do not provide new capital for financing projects as TIFIA does. Also, GARVEE financings are not typically designed to support new, fee-backed projects that represent TIFIA's market niche.

Evidence: The municipal bond market is generally risk-adverse, with only a limited market for non-investment grade obligations (just 0.2 percent of revenue bonds issued in 2005 for all sectors, including transportation, were rated below investor grade). See "Municipal Bond Credit Report," Feb 2006 http://www.bondmarkets.com/assets/files/municipal%20credit%20report%2005q4.pdf. The case of Colorado's Northwest Parkway illustrates the market's limits to underwrite non-investment grade debt. After its construction, the toll road experienced financial trouble due to due weak traffic levels. In December 2005, a planned bond refinancing was halted when faced with a credit rating downgrade to non-investment grade. Note that TIFIA is one of several "innovative financing" tools offered by DOT. SIBs are state revolving funds capitalized with Federal funds that make loans for smaller highway projects. States often place limitations on the types of projects to be financed, the size of loans, and eligible borrowers. For example, Kansas' SIB is restricted by law to local transportation projects, and the SIB can only loan a maximum of $6 million to any one borrower annually.

Is the program design free of major flaws that would limit the program's effectiveness or efficiency?

Explanation: TIFIA's open-ended guidelines do not necessarily ensure that the program provides the most cost-efficient financing options. The program's authorization allows borrowers to apply for direct loans, guaranteed loans, or lines of credit. Because direct loans are generally less expensive for a borrower, nearly all applicants have pursued this option. However, Federal policy generally holds it would be less costly for the government to guarantee loans than to offer direct loans. This is because guaranteed loans allow private lenders to share risk with the government and to absorb some of administrative costs. Moreover, issuing guaranteed loans would directly involve the private sector in making transportation investments. This could potentially encourage the private sector to underwrite transportation deals independently in the future, which is a goal of the program. Finally, TIFIA lacks criteria or standards for determining the type of loan to offer for a given project. transportation investments. Potentially, this would provide the private sector the experience to independently underwrite future deals, an explicit goal of the program. Finally, providing loan structure options to applicants could be useful for the advancement of programs goals. However, TIFIA lacks any criteria or standards for determining the type of loan to offer for a given project.

Evidence: See OMB Circular A 129 which states, "When Federal credit assistance is necessary to meet a Federal objective, loan guarantees should be favored over direct loans, unless attaining the Federal objective requires a subsidy, as defined by the Federal Credit Reform Act of 1990, deeper than can be provided by a loan guarantee?? Loan guarantees may provide several advantages over direct loans. These advantages include: private sector credit servicing (which tends to be more efficient), private sector analysis of the borrowers creditworthiness (which tends to allocate resources more efficiently), involvement of borrowers with private sector lenders (which promotes their movement to private credit), and lower portfolio management costs for agencies." See: http://www.whitehouse.gov/omb/circulars/a129/a129rev.html

Is the program design effectively targeted so that resources will address the program's purpose directly and will reach intended beneficiaries?

Explanation: The program's design does not ensure the promotion of private investment in transportation infrastructure or stipulate that TIFIA assistance addresses a market failure. TIFIA does not require a threshold level of private investment for individual projects, and as a consequence, TIFIA projects have included varying amounts of private equity and debt. Further, the program has not explicitly targeted its assistance to those projects that lacked access to the financial markets and were unable to move forward without TIFIA credit assistance. Without guidelines, it is possible that some TIFIA-eligible projects could advance even without government subsidized TIFIA loans.

Evidence: The program's authorization lists eight selection criteria for DOT to follow including: credit worthiness, private participation, and significance. As one of eight criteria, however, it is unclear that private participation drives DOT's decision making process. Further, DOT's selection process does not consider whether it is appropriate to provide an applicant a low-interest government loan, or if the applicant could obtain financing elsewhere. See TIFIA Program Guide: http://tifia.fhwa.dot.gov/. Note that that FitchRatings has found that some TIFIA supported projects, "could have accessed the capital markets without the credit enhancement provided by TIFIA." See: "TIFIA: Growing Into Its Own" www.fitchratings.com

Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: Starting in 2006, DOT has established five long-term performance measures for TIFIA: 1) percentage of projects that meet cost estimates established in project plans, 2) Cumulative percent of public private partnerships funded by TIFIA 3) total investment in projects that are partially funded through TIFIA, 4) percent of private co-investment in TIFIA-assisted projects, and, 5) ratio of non-Federal investment to TIFIA investment. The measure of cost containment is significant because it supports DOT's larger goal of being an effective steward of Federal funds. The total investment output measure reflects borrowers' demand for TIFIA, indicating the extent that TIFIA has helped fill an unmet financing need, as does the percent of public private partnerships funded by TIFIA. The ratio of private co-investment and non-Federal investment indicates the degree that TIFIA has leveraged the private sector support for higher risk projects.

Evidence: The measure of total investment suggests the degree to which TIFIA has facilitated the construction of projects that may have lacked access to financing elsewhere. Consider that the majority of TIFIA credit assistance has been issued for start-up projects backed by user fees and that are, consequently, considered to be higher risk. Public private partnerships represent surface transportation projects that jointly involve the governmental and private sectors, and that often represent large scale high risk projects. As such, they provide a proxy for the transportation financing gap, and the TIFIA's involvement in these projects reflects the program's effectiveness in filling this gap. Also note that in addition to addressing financing needs, TIFIA contributes to the achievement of DOT's long-term strategic objectives, including improving highway safety and reducing congestion. However, DOT currently lacks the ability to measure these types of outcomes for individual TIFIA projects.

Does the program have ambitious targets and timeframes for its long-term measures?

Explanation: DOT has established specific targets for each measure. The targets reflect baseline performance to date and become increasingly ambitious in the out years. The annual targets through FY 2011 reflect potential demand for the program based on letters of interest. The DOT anticipates increased demand based on projects in process, specific expressions of interest from potential project sponsors, and a general demand for transportation investment. Additionally, the emergence of private investment and new state-level public-private partnership initiatives provide new opportunities to leverage TIFIA credit assistance.

Evidence: Note that TIFIA's ability to achieve some of its output and outcome targets depends on the characteristics of the loan applications it receives. For example, a project sponsor may plan to use more or less private sector resources than targeted by DOT for the year. For further evidence, see FY 2007 Federal Highway Administration (FHWA) Strategic Implementation Plan; FY 2003-2008 DOT Strategic Plan.

Does the program have a limited number of specific annual performance measures that can demonstrate progress toward achieving the program's long-term goals?

Explanation: TIFIA has adopted five annual performance measures that are the same as the long-term outcome measures presented in question 2.1. Baseline information for the measures dates back to FY 2000. In addition, TIFIA has two annual efficiency measures that consider: 1) the time to finalize a project's financial contracts, and 2) the program's loan origination costs.

Evidence: See FY 2007 FHWA Strategic Implementation Plan; FY 2003-2008 DOT Strategic Plan.

Does the program have baselines and ambitious targets for its annual measures?

Explanation: TIFIA has clear baselines and aggressive targets for its annual measures. Baseline information dates back to FY 2000 and is available for all measures, enabling DOT to track performance against targets. The first efficiency measure tracks the average time between the DOT secretary's approval of a TIFIA loan and the point of closing. The six month timeframe is ambitious given the average period between FY 2000 and FY 2005 was 10.8 months. The measure of underwriting costs is also ambitious because it is well below the industry standard of one percent of the value of the borrowing, which is typical for deals on municipal bonds.

Evidence: FY 2007 FHWA Strategic Implementation Plan; FY 2003-2008 DOT Strategic Plan.

Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) commit to and work toward the annual and/or long-term goals of the program?

Explanation: TIFIA project sponsors work toward the goals of maximizing non-Federal and private co-investment. Before submitting an application for TIFIA assistance, project sponsors typically work with a financial advisor to develop a plan of finance. Through this process, the project sponsor determines the various funding sources available for a project, including non-Federal and private co-investment. Since TIFIA may not be the cheapest source of project funding (compared to the tax-exempt bond market) and because TIFIA assistance can trigger Federal compliance requirements, the project sponsor typically lines up the majority of the financing through other mechanisms first and only pursues TIFIA credit assistance if a funding gap exists or to enhance the creditworthiness of the senior debt. Once a project is approved, TIFIA establishes a core negotiation team, comprised of program representatives, external financial and legal advisors, and DOT attorneys. The core team works with the project sponsor and its team members to advance the project on a timely basis to financial close. After a credit agreement is executed, the TIFIA Joint Program Office (JPO) along with program partners including other lenders, monitors the construction schedule and costs to ensure the project is completed on time and on budget. The TIFIA JPO continues monitoring project performance through the life of the credit instrument, working with the borrower and modal partners, such as FHWA's Major Projects team.

Evidence: December 2000 Memorandum of Understanding between the Secretary and the Administrators of FHWA, FRA, and FTA establishing a TIFIA Joint Program Office; DOT Order 2301.1 establishing the US DOT Credit Council; listings of meetings, workshops, and conference involving TIFIA participation; negotiation schedules for specific projects; schedules for site visits involving project partners.

Are independent evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need?

Explanation: Independent evaluations of TIFIA of sufficient scope have not been conducted. In 2002 DOT did commission a performance review of its "innovative finance" programs, including TIFIA among other programs. The report attempts to quantify TIFIA benefits, such as leveraged investment, and illustrate economic benefits associated with projects supported by innovative finance tools, such as employment impacts.

Evidence: See "Performance Review of U.S. DOT Innovative Finance Initiatives" (http://www.fhwa.dot.gov/innovativefinance/perfreview/index.htm)

Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget?

Explanation: In the latest budget justification to Congress, there is no definition of the link between resources and performance. TIFIA does not measure the programmatic impacts of its investments and is unable to link these expenditures to performance. Further, the budget justification does not provide a full explanation of impacts of recent legislative changes.

Evidence: SAFETEA LU Section(s): 1601; Other: 23 USC 601-609; USDOT FY 2007 Performance Budget submission.

Has the program taken meaningful steps to correct its strategic planning deficiencies?

Explanation: The TIFIA Joint Program Office (JPO) has taken significant steps towards developing a strategic plan that will serve as a roadmap to the attainment of long-term performance goals. TIFIA has adopted long-term performance goals, developed strategies to achieve these goals, and established measures to track both annual and long-term performance. In February 2005, the TIFIA JPO prepared a briefing paper for the FHWA Administrator entitled "TIFIA Credit Program: Strategies to Enhance Funding Utilization" as part of its strategic planning initiative. As part of its on-going efforts, the TIFIA program office works with the DOT operating administration to pursue ways for TIFIA to achieve higher levels of investment in appropriate, higher-risk surface transportation infrastructure projects. One of these strategies is to expand outreach and education through workshops and presentations at relevant conferences, web site enhancements, and newsletters. In FY 2005, the TIFIA Joint Program Office (JPO) launched a series of focused workshops in coordination with other transportation organizations such as the American Association of State Highway and Transportation Officials.

Evidence: TIFIA Performance Measurement Draft Document dated April 13, 2006; TIFIA Strategic Plan.

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: The program has focused particularly on collecting project level performance data, but has also tracked broader performance measures such as private participation, leveraged resources, and on-budget performance. As part of its oversight and monitoring of TIFIA projects, the DOT routinely updates information on TIFIA-assisted projects, including credit quality, construction schedules, legal issues, revenue forecasts, and financial projections. Project sponsors are required to provide ongoing financial and project information, not only during construction, but as long as the credit instrument is outstanding or until any debt obligation to the federal government is fully repaid. Each project sponsor is required to notify DOT of material events, including litigation, which could affect the credit quality of the project. This information is used to: 1) monitor the financial and operating performance of the project, 2) assure that borrowers are in compliance with the credit agreement terms and conditions, and 3) provide a basis for corrective actions. This information provides a basis for monitoring the TIFIA credit portfolio and for making improvements to the program. For example, quarterly progress reports during construction are now a standard requirement, and post construction performance data through the maturity of the TIFIA loan is required as part of the borrower's annual financial plan update.

Evidence: For each project, the TIFIA credit agreement with the project sponsor includes: an annual credit assessment from at least one rating agency, audited financial statements, updated budget and cash flow projections, audit reports, sources and uses of funds, coverage ratios, project schedules, operating statistics, and management updates. Credit agreement provisions and key data are captured in the TIFIA Loan Servicing System, which was developed by a bank under contract to FHWA.

Are Federal managers and program partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) held accountable for cost, schedule and performance results?

Explanation: DOT has several mechanisms for holding its managers and program partners accountable for results. All personnel assigned to the TIFIA program, from the Chief of the TIFIA JPO to the analysts, have performance elements and standards addressing key aspects of TIFIA. Elements and measures cover broad policy and outreach objectives as well as day-to-day review and processing of loan applications and monitoring of executed credit agreements. These criteria are used in individual performance evaluations to hold all TIFIA personnel accountable for achieving annual and long-term performance goals. Regarding program partners, the TIFIA credit agreements have strong terms and covenants to ensure borrower accountability. Borrowers are subject to development repayment default provisions, though to date no TIFIA loan has gone into default. During the construction phase, borrowers must receive permission from DOT to spend additional amounts on a construction element if the change exceeds a certain dollar threshold. Further, a DOT oversight team is established for each TIFIA project, which develops a project oversight and credit monitoring plan. The plan is tailored to meet the specific oversight and monitoring requirements for the project based on the likely risks facing the project. Furthermore, the TIFIA JPO closely monitors the performance of its external legal and financial advisors. Contractor assessments are used to determine renewals and future eligibility. Payments may be withheld if a contractor does not perform and a contract may be terminated for substandard performance.

Evidence: Executed credit agreements; TIFIA Project Oversight and Monitoring Guidance document; Project Oversight Plans; FHWA Strategic Implementation Plan.

Are funds (Federal and partners') obligated in a timely manner, spent for the intended purpose and accurately reported?

Explanation: Early in the program's history, DOT faced challenges signing loan agreements with applicants in a timely manner. For multiple projects, the time between when the DOT Secretary approved a loan and when a loan "closed" took several years, indicating that DOT had likely approved some loans prematurely. DOT has since improved its process for working with applicants to develop applications. For the projects approved since 2004, the time elapsed between the approval and financial close has been less than a year. DOT now aims to close on a loan within six months of its approval by the Secretary. Otherwise, funds are spent on their intended purposes.

Evidence: TIFIA Program Guide; TIFIA credit agreements; copies of borrowers' disbursement requests; disbursement approval documents.

Does the program have procedures (e.g. competitive sourcing/cost comparisons, IT improvements, appropriate incentives) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: To track the efficiency of its program execution, DOT this year has developed two annual efficiency measures: 1) the time between DOT's approval of a loan and when the loan contract is actually signed, and 2) the cost of loan origination fees expressed as a percentage of the loan value. The targets for these new measures are based on prior year performance. The measure of closing time is appropriate because DOT has previously faced challenges closing on loans in a timely manner. The measure of loan origination costs is relevant since they can be significant. For each credit transaction, the TIFIA JPO utilizes outside financial, risk assessment, and legal advisors. While many of these expenses are billed back to the borrower, DOT aims to minimize these costs. Additionally, TIFIA contracts its loan servicing function to a bank that was procured through a competitive process. Furthermore, TIFIA is participating in DOT's evaluation and implementation of a new Credits Program Portfolio Management System, which will support all DOT loan programs. The new system will streamline processes, support efficient administration of DOT credit programs, and provide a consistent approach to monitoring projects across all credit programs.

Evidence: In April 2005, the TIFIA Office completed solicitations to re-bid five-year contracts for legal and financial advisory services. Five law firms and four financial firms were selected to provide expert advice to the TIFIA office.

Does the program collaborate and coordinate effectively with related programs?

Explanation: TIFIA may fund the construction of not only highway projects but also transit, rail, and freight Intermodal infrastructure. This open-ended eligibility lends TIFIA to crosscutting program administration. Within DOT, the application review, credit evaluation, credit agreement negotiation, and project oversight are done collaboratively by the TIFIA Joint Program Office, the Federal Highway Administration, the Federal Transit Administration, the Maritime Administration, the Federal Railroad Administration, and the Office of the Secretary. These parties comprise DOT's Credit Council. The multi-agency oversight provided by the Credit Council is helpful because TIFIA-sponsored projects often receive funding from multiple DOT programs, as well as other non-Federal sources. Outside of DOT, TIFIA attends conferences as well as state and local level workshops to collaborate on innovative financing initiatives. One recent example includes an Innovative Financing Regional Workshop for San Diego area projects. By meeting with potential project sponsors, DOT was able to evaluate a range of financing options and to determine whether TIFIA was the optimum financing tool for a specific project.

Evidence: December 2000 Memorandum of Understanding between the Secretary and the Administrators of FHWA, FRA, and FTA establishing a TIFIA Joint Program Office; DOT Order 2301.1 establishing the US DOT Credit Council; 2003 TIFIA Program Guide; TIFIA Project Oversight and Monitoring Guidance; FHWA Program Administration Overview for Financial Plans; and workshop agendas. A specific example of TIFIA's collaboration with another program is the merged process for the review of financial plans. The process applies to all TIFIA-funded projects regardless of the total cost of the project. This review is done by the TIFIA JPO and the Major Projects Team in FHWA.

Does the program use strong financial management practices?

Explanation: The TIFIA JPO has established strong policies and procedures to improve financial management and reduce the credit risk of its portfolio. For each credit transaction, the TIFIA Office employs outside financial and legal advisors experienced in municipal bond finance, bank financings, and project finance to assist in the underwriting and servicing of the TIFIA credit instruments. These advisors independently evaluate a project's credit risks and structure a credit agreement to manage risks to the Federal government. Also, DOT employs independent risk assessments for quantifying the risks for loan repayments. Further, borrower must provide annual credit assessments of their loans by a nationally recognized rating agency. DOT has also contracted with a banking firm to carry out a full complement of loan servicing activities. TIFIA uses a loan servicing system that accounts for federal credit accounting standards and standards established by the Joint Financial Management Improvement Program. More generally, DOT has developed a template credit agreement with key terms and conditions that guides the negotiation process with borrowers based on established standard credit policies. One example is the requirement that annual projected revenues be at least 1.1 times the annual debt service (including senior debt and TIFIA).

Evidence: Strong financial management practices are incorporated in TIFIA's project financial evaluations, risk assessments, executed credit agreements; TIFIA Project Oversight and Monitoring Guidance document; Project Oversight Plans; Loan Servicing System Manuals and Reports.

Has the program taken meaningful steps to address its management deficiencies?

Explanation: To improve the management of the TIFIA credit program, DOT established a Joint Program Office (JPO) to administer TIFIA within the Federal Highway Administration in 2000. The office assumed the responsibilities that had previously been carried out by a working group of DOT agencies, including the Federal Transit Administration, the Federal Railroad Administration, and the Federal Maritime Administration. The centralized JPO structure provides better coordination of program activities, more effective program management, and better in-house expertise. Further, in 2004, DOT established an internal credit council to provide oversight and management of its four credit programs, including TIFIA. This structure ensures the application of consistent credit policies and management practices across all DOT credit programs. The credit council is also the central entity responsible for recommending approval or disapproval notification to applicants.

Evidence: December 2000 Memorandum of Understanding between the Secretary and the Administrators of FHWA, FRA, and FTA establishing a TIFIA Joint Program Office; DOT Order 2301.1 establishing the US DOT Credit Council.

Is the program managed on an ongoing basis to assure credit quality remains sound, collections and disbursements are timely, and reporting requirements are fulfilled?

Explanation: TIFIA has implemented a comprehensive project oversight and credit monitoring process to protect the Federal government's interests. The goal is to better manage risks associated with project development and construction and loan repayment. In February 2005, the TIFIA office published its Project Oversight and Credit Monitoring Guidance, which outlines consistent policies for monitoring projects throughout a TIFIA project's life cycle. The guidance identifies the key elements of the oversight and monitoring process and delineates the roles and responsibilities of the TIFIA JPO and responsible operating administrations. The guidance relies largely on the existing procedures used by DOT agencies. For each project, an oversight team creates a Project Oversight and Credit Monitoring Plan, which identifies project risks and appropriate mitigation measures. The team considers bond insurer reports, traffic and revenue studies, independent engineers' project evaluations, project management plans, and funding controls established by the project sponsor. Each plan is updated to address any material changes in the project's credit status. Furthermore, TIFIA has developed standard disbursement procedures to ensure timely action. Moreover, signed credit agreements between DOT and a borrower require that the borrowers provide annual credit assessments from a nationally recognized rating agency. Each credit agreement has contract terms to assure compliance with credit standards.

Evidence: February 2005 TIFIA Project Oversight and Monitoring Guidance; TIFIA Credit Agreements; Project Oversight and Monitoring Plans; annual rating assessments and financial plans; construction progress reports.

Do the program's credit models adequately provide reliable, consistent, accurate and transparent estimates of costs and the risk to the Government?

Explanation: The TIFIA Office employs a rigorous cost-estimation model using state-of-the-art techniques employed in the private sector. To estimate the subsidy cost of its credit instruments, TIFIA draws upon the expertise of financial consultants and nationally recognized rating agencies with direct knowledge of the methods used by the private sector to estimate similar risk. The program's credit subsidy methodology includes a capital allocation model that relies on Standard and Poor's historical default and recovery data, the credit rating on the project's senior debt obligations and the TIFIA debt, individual project characteristics, and projected amortization schedules for the TIFIA debt. The model is regularly updated to incorporate the latest Standard and Poor's default data. DOT staff and contractors continuously review the model in order to improve the accuracy and transparency of its algorithms. Re-estimates of each project subsidy are prepared based on the updated financial data, consistent with the requirements of OMB Circular A-11.

Evidence: The TIFIA subsidy model was developed by Ernst and Young LLP, which based its modeling on a series of meetings with three major credit rating agencies (Fitch IBCA, Moody's Investor Service, and Standard & Poor's), research on historical losses on transportation bonds, an assessment of alternative proxies for TIFIA losses, and its knowledge of credit risk modeling and requirements for other Federal credit programs.

Has the program demonstrated adequate progress in achieving its long-term performance goals?

Explanation: Though TIFIA has not formally tracked performance measures in the past, trend data for its newly adopted measures indicate that program performance has generally improved. The cumulative ratio of non-Federal to TIFIA investment steadily rose from 1.19 in 2000 to 2.03 in 2005. Moreover, the ratio of private co-investment to TIFIA investment also rose from 16 percent in 2000 to 39 percent in 2005. Even with this achievement, the program has opportunities to improve its results. Between 2000 and 2005, the cumulative percent of public private partnerships funded by TIFIA increased from zero to 54 percent, indicating that TIFIA has a played a significant role in financing high risk transportation projects that may have lacked access to other forms of capital. From 1999 (TIFIA's first year of operation) through 2006, DOT executed credit agreements for 12 projects worth $12.4 billion cumulatively. Of this amount, the TIFIA contribution equaled $3.2 billion. The level of investment each has varied significantly, which reflects an irregular demand for assistance. In addition, while actual "on-budget" performance data has not improved in recent years, the data do not indicate a systemic failure by project sponsors to control costs

Evidence: See DOT performance plan.

Does the program (including program partners) achieve its annual performance goals?

Explanation: Though TIFIA has not formally tracked performance measures in the past, trend data for the measures that are now established indicate that TIFIA's annual performance has improved. Further, TIFIA has worked with its partners (project sponsor, investment bankers, financial advisors, and outside counsel) to establish an overall schedule that will ensure timely approval of a project and attainment of financial close within six months of approval. Consequently, in 2005 DOT was able to meet its target for the first time for closing within six months. The TIFIA loan agreements have strong terms to ensure project sponsors meet cost and construction schedule goals, which has enabled a large percentage of TIFIA projects to remain within budget. Moreover, DOT has worked with project sponsors to explore all private and non-Federal financing options before selecting a TIFIA loan. As a result, the percent of private funding leveraged by TIFIA has increased, while, at the same time, project sponsors have increasingly used TIFIA to fund public private partnerships.

Evidence: Draft TIFIA Strategic Plan (under development); TIFIA Performance Measurement Draft Document dated April 13, 2006; FY 2007 USDOT Performance Budget Submission.

Does the program demonstrate improved efficiencies or cost effectiveness in achieving program goals each year?

Explanation: The program is making steady progress towards two efficiency goals. In FY 2005, for the first time, DOT closed on loans within six months of Secretarial approval, meeting its target. Likewise, loan origination fees as a percent of the value of the loan amount has remained below DOT's target of 0.25 percent. Note that variation in the complexity of each loan's financing as well as the project development yields varying results for these measures.

Evidence: TIFIA Performance Measurement Document dated April 13, 2006.

Does the performance of this program compare favorably to other programs, including government, private, etc., with similar purpose and goals?

Explanation: Like other transportation programs operated by the Federal, state, and local governments, TIFIA helps fund the construction of large infrastructure projects. There are also other public and private borrowing mechanisms available for financing revenue-backed transportation facilities. Yet TIFIA is unique in that its mission is to assist sponsors of projects of regional and national significance that may not have other access to capital because of their risk. To this point, the private sector has been largely hesitant to finance riskier projects, particularly the construction of new toll facilities. Government grant programs could fund these types of projects, but grant dollars are not always sufficient. This sometimes leads project sponsors to consider borrowing as way to fund their projects. TIFIA is meant to fill this need when the cost of borrowing from the private sector would be too great or not available.

Evidence: See Fitch Ratings special report dated October 17, 2005, "TIFIA: Growing Into Its Own;" June 2002 TIFIA Report to Congress; 2003 TIFIA Program Guide; February 2005 TIFIA Project Oversight and Monitoring Guidance.

Do independent evaluations of sufficient scope and quality indicate that the program is effective and achieving results?

Explanation: There is limited independent documentation indicating the program is effective in achieving results. While some General Accountability Office (GAO) reports have addressed various aspects of the program, including TIFIA's ability to leverage funds, they do not provide a comprehensive analysis of the program's effectiveness and results achieved to date. In 2005, Fitch Ratings report that, "TIFIA has found its niche as a financing vehicle that complements the role of the capital markets, thereby attracting private and other governmental investment to help accelerate the financing of critical improvements in the country's surface transportation system." However, the report does not elaborate on the degree to which TIFIA has filled a market gap, but rather focuses on program design aspects of interest to loan applicants and the investment community. Two 2002 DOT reports to Congress provide general statistics on the program's performance, such as, "six project selections (of 12 at the time) appear to meet the program's special emphasis of assisting lower-rated credits with new or untested revenue streams." The reports, though, do not discuss the appropriate use TIFIA credit assistance and generally find that the program is too new to draw conclusions about its effectiveness.

Evidence: See: GAO Reports (GAO-02-1126T, and GAO-04-419); Fitch Ratings Project Finance Special Report dated October 17, 2005 "TIFIA: Growing Into Its Own." www.fitchratings.com; June 2002 TIFIA Report to Congress and the July 2002 "Performance Review of U.S.DOT Innovative Finance Initiatives" prepared by Cambridge Systematics, Inc (http://tifia.fhwa.dot.gov/). The later notes, "With TIFIA still in its early years, it is too soon to say whether the secondary and subordinate capital provided via TIFIA loans and lines of credit have improved ultimate credit ratings on senior debt obligations and thus yielded the project sponsors lower interest rates on those obligations. Due to its junior lien status and flexible repayment terms, investors may perceive TIFIA assistance as effectively a form of credit enhancement, shielding the senior investors from some types of default."