Saying it's "common sense to allow all eligible projects the same access" to low-interest financing, Sean Duffy, U.S. secretary of transportation, announced in July an update to the Transportation Infrastructure Finance and Innovation Act (TIFIA). This move will allow the financing of up to 49 percent of costs on all types of transportation infrastructure projects.
Until now, a long-standing DOT policy limited the kinds of projects that could be financed.
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The TIFIA program provides federal credit assistance to finance surface transportation projects of national and regional significance. That credit assistance, according to DOT, can come in the form of direct loans, loan guarantees and standby lines of credit. The credit provides improved access to capital markets, flexible repayment terms and potentially more favorable interest rates than in private capital markets.
"TIFIA can help advance qualified, large-scale projects that otherwise might be delayed or deferred," said DOT.
These roadblocks can crop up because of project size, complexity or uncertainty over the timing of revenues related to the project.
"Many surface transportation projects — highway, transit, railroad, intermodal freight and port access — are eligible for assistance," said the agency. "Each dollar of federal funds can provide up to $10 in TIFIA credit assistance — and leverage $30 in transportation infrastructure investment."
TIFIA is designed to fill market gaps and leverage substantial private co-investment, said DOT.
This co-investment comes in the form of supplemental, subordinate investment in critical improvements to the nation's transportation system.
Until now, most of these projects were capped at up to 33 percent financing. That presented a roadblock for project sponsors, said the DOT.
"Unleashing the full value of the TIFIA program represents another step forward in getting America building again," said Duffy. "It's common sense to allow all eligible projects the same access to our low-interest financing opportunities."
As a result, infrastructure would be built "easier, quicker and cheaper," he said, and that much analysis, pilot programs and feedback went into the decision.
The Build America Bureau's TIFIA credit program provides flexible, long-term, low-interest loans. In the process, it allows project sponsors to accelerate the delivery of infrastructure at a lower cost. Loans must be repaid using non-federal funding.
According to DOT, the TIFIA program has been in place by statute since 2012.
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Over the years, loans could have financed up to 49 percent of reasonably anticipated eligible project costs. But DOT continued its policy of limiting loans to up to 33 percent for most projects.
Morteza Farajian, Build American Bureau executive director, said the policy update will ensure the program remains available at full capacity.
"The TIFIA loan program has proven to be a highly effective tool," said Farajian.
The program has supported the delivery of more than $150 billion in infrastructure investment through more than $52 billion in flexible, low-cost loans, he said.
"We're helping to open the door for every type of project to receive the same benefits and level of support from this administration," added Farajian.
The bureau began in 2018 to identify categorical eligibilities in addition to the project-by-project request approach, DOT explained in announcing the update.
Analyzing years of program data, the bureau showed that taxpayer exposure from TIFIA loans is minimal. As a result, the office established several successful pilot programs to allow sponsors access to the higher financing maximum. These included the TIFIA Rural Projects Initiative and certain transit and transit-oriented development projects.
DOT said further expansion of the option to finance up to 49 percent provides more projects with opportunities to expedite delivery. It also saves significantly on financing costs, reducing the need for federal grants or freeing up those grants to be used for other projects said the agency.
"The bureau also can increase efficiency because the streamlined policy simplifies due diligence and underwriting processes," said DOT.
That simplification in turn delivers more value for a similar level of work and non-federal investors will continue to share project costs and risks.
According to DOT, exact terms for each loan are negotiated between the agency and the borrower. Terms are based on the project economics, the cost and revenue profile of the project and any other relevant factors.
TIFIA interest rates are equivalent to U.S. treasury rates, which are often lower than what most borrowers can obtain in the private markets. And, unlike private commercial loans with variable rate debt, TIFIA interest rates are fixed.
Notable Shift With Benefits
Terming the update "a notable shift," from previous limits, public infrastructure law firm Kaplan Kirsch believes the program a powerful financing tool.
"The program provides federal credit assistance in the form of direct loans, loan guarantees and standby lines of credit," according to an article on the update.
The various forms of financing are specifically for surface transportation projects of national and regional significance said the article's writers.
"TIFIA assistance offers improved access to capital markets, flexible repayment terms and more favorable interest rates."
That's in comparison to those typically available in private markets, according to the article.
KaplanKirsch outlined projects that could be eligible for TIFIA financing, including transit systems, bicycle and pedestrian infrastructure.
The category of projects doesn't stop there, though: Intercity passenger bus or rail facilities and vehicles, transit-oriented development, intelligent transportation systems and public-private partnerships are covered.
Public or private entities seeking to finance, design, construct, own or operate an eligible project may apply for TIFIA credit assistance. That includes state transportation departments, local governments, transit agencies, special authorities and districts, railroad companies and private firms.
"While the statutory cap for TIFIA secured loans is 49 percent of eligible project costs, DOT has historically taken a conservative approach to credit risk," said KaplanKirsch.
The agency has traditionally limited many loans to 33 percent of eligible project costs as a policy matter.
"Under the new policy, all eligible projects can capitalize on TIFIA's assistance to the maximum extent allowable under the statute."
Industry Reaction Is Positive
The American Association of State Highway and Transportation Officials (AASHTO) praised the update, which it has long advocated for.
The association said it had lobbied for increased TIFIA eligibility as part of the six surface transportation reauthorization policies it adopted this year. The group pointed, as well, to a white paper in which it "expressly" called for USDOT to follow current law in considering a cost-share update to 49 percent.
ARTBA also lauded the TIFIA update which the roadbuilders association also recommended.
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ARTBA described the update as "a policy modification intended to incentivize greater use of the TIFIA credit assistance program."
"Dating back to 1998, TIFIA is a congressionally authorized loan and loan guarantee program that helps facilitate transportation projects," said the group.
These projects often involve private-sector partners through credit assistance incorporating more advantageous terms, ARTBA said in announcing the update. The group pushed for the change in recommendations for the next surface transportation reauthorization bill due in September 2026.
"ARTBA called on congress and the Trump administration to include the change to 49 percent TIFIA participation," the association said. "While helping enhance DOT's profile as a ‘lender of choice' for project sponsors, the revised policy will in turn free up other grants and funding resources."
Those other sources are earmarked for surface transportation improvements not eligible for TIFIA.
ARTBA noted that Duffy cited feedback from DOT partners as contributing to his department's policy change.
Law firm Nixon Peabody believes the more than $150 billion in investment and $52 million-plus in direct loans is the program's proven track record.
The firm likes the program's low, fixed interest rates which reduce borrowing costs for project sponsors.
TIFIA's flexible amortization schedules are tailored to project cash flows, said Nixon Peabody staffers Roderick Devlin and Virginia Wong.
They also like the long repayment periods of up to 35 years and as long as 75 years, in some cases, that are built into the program.
No pre-payment penalties mean borrowers can repay early without incurring additional costs.
"Enhanced financial viability for projects that may otherwise struggle to attract private investment," makes TIFIA a critical tool.
And it's a tool designed perfectly to benefit public-private partnerships and innovative project delivery, believes Nixon Peabody.
Annual availability of TIFIA funding is determined by congressional appropriations rather than a statutory cap.
Even so, said Devlin and Wong, the policy change does not increase the total funding pool.
"However, by allowing sponsors to finance a larger share of project costs with low-interest federal loans," TIFIA is more attractive and accessible, they said.
This update, in turn, is expected to accelerate project timelines by reducing the need for complex, multi-source financing, wrote Devlin and Wong.
It should encourage broader participation from both public agencies and private investors and support a wider range of projects. Those wide-ranging projects should include construction in rural and underserved communities.
"The USDOT's decision to expand TIFIA loan coverage to 49 percent of eligible project costs marks a transformative step in U.S. infrastructure finance," they said. "By making federal support more accessible and flexible, the TIFIA program is positioned to drive the next generation of transportation projects."
And those projects will then support economic growth, job creation, and improved mobility across the nation. CEG
