The U.S. Department of Transportation has recently made changes to its Transportation Infrastructure Finance and Innovation Act program, specifically focusing on clarifying interest rates for its longest-term loans. This amendment is a part of the 2021 Infrastructure Investment and Jobs Act, which introduced several key provisions to enhance the program. One notable change is the extension of the loan period for certain projects to 75 years, up from the previous 35-year term. Additionally, eligibility for the TIFIA program has been expanded to include airports, transit-oriented developments, and projects outside of a state’s transportation plan.
The TIFIA program, established in 1998, provides credit assistance in the form of low-interest loans for large-scale transportation infrastructure projects of regional and national significance. The primary goal of the program is to address market gaps and leverage private co-investment for critical improvements to the nation’s transportation system. Despite being well-known in the public-private partnership and infrastructure finance sectors, some industry participants have criticized the program for being underutilized due to bureaucratic delays and unclear borrowing requirements.
As of January, the TIFIA program had a lending capacity of $70 billion, offering loans with interest rates around 4.11% for a 35-year term. Since its inception, the program has provided $39.8 billion in TIFIA financing, supporting over $136 billion in infrastructure investment. The new rules introduced by the DOT aim to provide more clarity on interest rates for longer-term TIFIA loans. The interest rate for loans with a final maturity date beyond 35 years after project completion and a term exceeding 40 years will now be linked to State and Local Government Series (SLGS) 30- to 40-year securities, with an additional basis point adjustment.
In addition to the updated interest rate structure, the recent amendments to the TIFIA program have relaxed some of the eligibility criteria. Projects are no longer required to be “included in or consistent with” a state’s transportation plan to qualify for TIFIA assistance. This change aims to expand the scope of eligible projects and streamline the application process. The new rules are set to take effect on June 24, providing more flexibility for project developers and sponsors.
Industry experts, such as Steve T. Park from Ballard Spahr LLP, have welcomed the changes in the TIFIA program, particularly the increased clarity on interest rates. Park emphasized the importance of clear rules and regulations in promoting investment and development in the infrastructure sector. The American Public Transportation Association has also expressed support for the interest rate rule while urging the DOT to enhance transparency regarding the criteria for qualifying for longer-term loans under the new regulations.
Overall, the revamped TIFIA program represents a significant step towards enhancing infrastructure financing and fostering public-private partnerships in transportation projects. The updated rules provide greater certainty for borrowers and investors, ultimately contributing to the development of critical infrastructure across the country. As the program continues to evolve, stakeholders in the infrastructure sector should stay informed about the latest changes and opportunities offered by the TIFIA program.