[Federal Register Volume 64, Number 25 (Monday, February 8, 1999)]
[Proposed Rules]
[Pages 5996-6005]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-2637]


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DEPARTMENT OF TRANSPORTATION

Federal Highway Administration

23 CFR Part 180

Federal Railroad Administration

49 CFR Part 261

Federal Transit Administration

49 CFR Part 640

[FHWA Docket No. FHWA-98-47-15]
RIN 2125-AE49


Credit Assistance for Surface Transportation Projects

AGENCY: Federal Highway Administration (FHWA), Federal Railroad 
Administration (FRA), Federal Transit Administration (FTA), U.S. 
Department of Transportation (DOT).

ACTION: Notice of proposed rulemaking (NPRM); request for comments.

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SUMMARY: This document proposes to implement a new program enacted 
under the Transportation Infrastructure Finance and Innovation Act of 
1998 (TIFIA), to provide credit assistance to surface transportation 
projects. The TIFIA authorizes the DOT to provide secured (direct) 
loans, lines of credit, and loan guarantees to public and private 
sponsors of eligible surface transportation projects. Projects will be 
evaluated and selected by the Secretary of Transportation. Following 
selections,

[[Page 5997]]

individual credit agreements will be developed through negotiations 
between the project sponsors and the DOT. This document solicits 
comments on a proposed regulation to establish a new credit assistance 
program for surface transportation projects; and the process by which 
the DOT, through the FHWA, the FRA, and the FTA, will administer such 
credit assistance.

DATES: Comments must be submitted on or before March 10, 1999.

ADDRESSES: Your signed, written comments must refer to the docket 
number appearing at the top of this document and you must submit the 
comments to the Docket Clerk, U.S. DOT Dockets, Room PL-401, 400 
Seventh Street, SW, Washington, DC 20590-0001. All comments received 
will be available for examination at the above address between 9:00 
a.m. and 5:00 p.m., e.t., Monday through Friday, except Federal 
holidays. Those desiring notification of receipt of comments must 
include a self-addressed, stamped envelope or postcard.

FOR FURTHER INFORMATION CONTACT: FHWA: Mr. Max Inman, Office of Budget 
and Finance, Federal-Aid Financial Management Division, (202) 366-0673. 
FRA: Ms. JoAnne McGowan, Office of Passenger and Freight Services, 
Freight Program Division, (202) 493-6390. FTA: Mr. Paul Marx, Office of 
Policy Development, (202) 366-1734. Department of Transportation, 400 
Seventh Street, SW, Washington, DC, 20590. Office hours are from 7:45 
a.m. to 4:15 p.m., e.t., Monday through Friday, except Federal 
holidays. Hearing- and speech-impaired persons may access this number 
via TTY by calling the Federal Information Relay Service at 1-800-877-
8339.

SUPPLEMENTARY INFORMATION:

Electronic Access

    Internet users may access all comments received by the U.S. DOT 
Dockets, Room PL-401, by using the universal resource locator (URL) 
http://dms.dot.gov. It is available 24 hours each day, 365 days each 
year. Please follow the instructions on-line for more information and 
help. An electronic copy of this document may be downloaded using a 
modem and suitable communications software from the Government Printing 
Office's Electronic Bulletin Board Service at (202) 512-1661. Internet 
users may reach the Federal Register's home page at http://
www.nara.gov/fedreg and the Government Printing Office's web page at 
http://www.access.gpo.gov/nara.
    Additional information on the TIFIA program and credit assistance 
for surface transportation projects generally is available at the TIFIA 
web site at http://tifia.fhwa.dot.gov. Among other information, the DOT 
will provide responses to commonly asked questions and information on 
program participation.

Background

    The Transportation Equity Act for the 21st Century (TEA-21), Pub. 
L. 105-178, 112 Stat. 107, created two new Federal credit programs: The 
Transportation Infrastructure Finance and Innovation Act of 1998 
(TIFIA) and the Railroad Rehabilitation and Improvement Financing 
Program (RRIF). RRIF will be addressed in a separate notice of proposed 
rulemaking. TIFIA, as amended by section 9007, Pub. L. 105-206, 112 
Stat. 685, 849, and codified at 23 U.S.C. 181-189, establishes a new 
Federal credit program for surface transportation projects. Funding for 
this program is limited, meaning that projects obtaining assistance 
under TIFIA will be selected on a competitive basis. Final selections 
of projects will be made by the Secretary of Transportation.
    Credit assistance programs such as TIFIA are designed to help 
financial markets develop the capability to supplement the role of the 
Federal Government in helping finance the costs of large projects of 
national significance. Developing, implementing, and evaluating 
financial assistance programs such as TIFIA is a crucial mission of the 
DOT. To help ensure financial and programmatic success, the DOT is 
establishing a multi-agency Credit Program Steering Committee and 
Working Group. The Steering Committee and Working Group are comprised 
of representatives from the Office of the Secretary, the Office of 
Intermodalism, the FHWA, the FRA, and the FTA, as well as other DOT 
agencies and offices. The Steering Committee and Working Group will 
coordinate and monitor all policy decisions and implementation actions 
associated with this Federal credit assistance program.
    Outreach efforts have already been made to facilitate the 
implementation of TIFIA. At a July 13, 1998, meeting sponsored by the 
American Association of State Highway and Transportation Officials, DOT 
representatives met with over 100 State transportation officials to 
discuss implementation of provisions of TEA-21, including the Act's 
Federal credit assistance programs. On September 14, 1998, a public 
focus group meeting of about 70 Federal and State officials, project 
sponsors, and members of the financial community was held in New York 
City to discuss the provision of credit assistance under TEA-21 
programs. Another public focus group meeting of about 60 governmental 
and private sector officials was held on December 8, 1998, near San 
Diego, California. On-going DOT activities include meeting with capital 
markets financial experts and disseminating program information to the 
public for their comments.

Program Information

Funding

    The TIFIA authorizes annual funding levels for both total annual 
credit amounts (i.e., the total principal amounts that may be disbursed 
in the form of direct loans, loan guarantees, or lines of credit) and 
subsidy amounts (i.e., the amounts of budget authority available to 
cover the estimated present value of default losses associated with the 
provision of credit instruments, net of any fee income). Funding for 
the subsidy amounts is provided in the form of budget authority funded 
from the Highway Trust Fund, other than the Mass Transit Account. As a 
practical example, for fiscal year 1999, TIFIA provides $80 million in 
budget authority to fund the subsidy costs associated with a total 
nominal amount of direct loans, loan guarantees, and lines of credit 
that is limited to $1.6 billion. Depending on the individual risk 
assessments made for each of the projects receiving assistance, the 
total amount of credit assistance provided in fiscal year 1999 may be 
less than the $1.6 billion limitation.
    Total Federal credit assistance authorized under TIFIA is limited 
to $1.6 billion in fiscal year 1999; $1.8 billion in fiscal year 2000; 
$2.2 billion in fiscal year 2001; $2.4 billion in fiscal year 2002; and 
$2.6 billion in fiscal year 2003. These amounts lapse if not awarded by 
the end of the fiscal year for which they are provided.
    To support this assistance by funding the required subsidy amounts, 
TIFIA provides budget authority of $80 million in fiscal year 1999; $90 
million in fiscal year 2000; $110 million in fiscal year 2001; $120 
million in fiscal year 2002; and $130 million in fiscal year 2003. This 
budget authority is subject to annual obligation limitations that may 
be established in appropriations law. Of the amounts made available, 
the Secretary may use up to $2 million for each of the fiscal years for 
administrative expenses. Unobligated budget authority remains available 
for obligation in subsequent years.

[[Page 5998]]

Credit Instruments

    Three types of credit instruments are permitted under TIFIA: 
secured (direct) loans, loan guarantees, and lines of credit. General 
rules concerning the terms governing these credit instruments appear at 
23 U.S.C. 183 and 184. More specific terms will be determined on a 
project-specific basis during negotiations between the DOT and 
successful applicants.

Eligibility

    Sections 181 and 182 of title 23, U.S.C., describe the conditions 
that govern a project's eligibility for assistance under TIFIA. 
Projects shall have eligible costs of at least $100 million or an 
amount equal to 50 percent of Federal-aid highway funds apportioned to 
the State in which the project is located for the most recently 
completed fiscal year, whichever is lesser. Projects principally 
involving the installation of an intelligent transportation system 
(ITS) must cost at least $30 million. To be eligible for assistance, 
projects must be classified within the following categories:
    1. Surface transportation projects as defined under title 23 or 
chapter 53 of title 49 of the United States Code;
    2. International bridge or tunnel projects for which an 
international entity authorized under Federal or State law is 
responsible;
    3. Intercity passenger bus or rail facilities and vehicles, 
including those owned by the National Railroad Passenger Corporation 
and components of magnetic levitation transportation systems; or
    4. Publicly-owned intermodal surface freight transfer facilities, 
provided that the facilities:
    (a) are located on or adjacent to National Highway System routes or 
connections to the National Highway System, and (b) are not seaports or 
airports.

Application Process

    Public or private applicants for credit assistance will be required 
to submit applications to the DOT in order to be considered for 
approval. Each fiscal year for which credit assistance is available, 
the DOT will publish a Federal Register notice to solicit applications 
for credit assistance. This notice will also be posted on the TIFIA web 
site, at the address cited above. The notice will specify the relevant 
due dates for that year's application submissions and funding 
approvals, as well as the address to which applications should be sent. 
It will also advise potential applicants of the estimated amount of 
funding available to support TIFIA credit instruments in the current 
and future fiscal years. An application checklist is appended to this 
NPRM. Respondents are encouraged to comment on the content of this 
checklist, which will serve as the basis for a standard application 
form. Detailed application information will be contained in a handbook 
of program guidelines that is currently being developed by the DOT and 
will be posted on the TIFIA web site and made available to the public 
at the time a solicitation for applications is published.

Charges

    The DOT will require a non-refundable initiation charge for each 
project applying for credit assistance under TIFIA. The DOT may also 
require an additional credit processing charge for projects selected to 
receive assistance. The proceeds of any such charges will equal a 
portion of the costs to the Federal Government of soliciting and 
evaluating applications, selecting projects to receive assistance, and 
negotiating credit agreements. For fiscal year 1999, the DOT proposes 
an application initiation charge of $5,000 for each project applying 
for credit assistance under TIFIA. The DOT does not propose any credit 
processing charges for fiscal year 1999. For fiscal years 2000 and 
beyond, the DOT may adjust the amount of the application initiation 
charge, and will determine the appropriate amount of the credit 
processing charge based on early program implementation experience in 
fiscal year 1999. The DOT will publish these amounts in each Federal 
Register solicitation for applications.
    The Secretary cannot accept or compel from borrowers the subsidy 
costs of TIFIA credit instruments. However, the Secretary does have the 
authority to establish fees at a level sufficient to cover all or a 
portion of the subsidy costs to the Federal Government of providing 
credit assistance under TIFIA. Therefore, such fees could potentially 
reduce the subsidy cost of a TIFIA credit instrument to zero. That is 
to say, if in a given year there is insufficient budget authority to 
fund the credit instrument for a qualified project that has been 
selected to receive TIFIA assistance, the DOT may increase the 
application initiation charge or the credit processing charge on the 
approved applicant to reduce the subsidy cost of that project. Note 
that any such fees or charges may not be included among total project 
costs for the purpose of calculating the maximum 33 percent credit 
amount of TIFIA assistance.

Limitations on Assistance

    The amount of credit assistance that may be provided to a project 
under TIFIA is limited to not more than 33 percent of eligible project 
costs. Costs incurred prior to a project sponsor's submission of an 
application for credit assistance may be considered in calculating 
eligible project costs only upon approval by the DOT. In addition, 
applicants shall not include application charges or any other expenses 
associated with the application process (such as charges associated 
with obtaining the required preliminary rating opinion letter, as 
discussed below) in the total project cost. No costs financed 
internally or with interim funding may be reimbursed later than a year 
following substantial completion of the project.
    Within the overall credit assistance limitation of 33 percent of 
eligible project costs, the DOT may consider making multi-year 
contingent commitments of budget authority and associated credit 
assistance for especially large projects with extended construction 
periods and financing needs. In this instance, any reservation of 
future-year funding shall be made through a letter of intent and shall 
be contingent on the project's demonstrating satisfactory progress to 
the DOT. Depending on the overall demand for credit assistance under 
TIFIA, the DOT may limit such contingent commitments to 50 percent of 
the budget authority becoming available in applicable future years. If 
such a multi-year commitment is made, each year's loan will be tied to 
distinct, clearly identified project segments or stages.

Rating Requirement

    The TIFIA allows the DOT to partially fund a credit instrument up 
to the estimated subsidy amount based on a preliminary rating opinion 
letter. However, the DOT proposes to provide credit assistance only 
after a formal credit agreement has been executed and the project's 
senior obligations have obtained a formal investment-grade rating.
    In administering this provision, the DOT will require each 
applicant to furnish a preliminary rating opinion letter as part of the 
application process. The applicant is responsible for identifying and 
approaching one or more rating agencies to obtain such letter. This 
letter is to indicate that the applicant project's senior obligations 
have the potential of attaining an

[[Page 5999]]

investment-grade rating. This letter will allow the DOT to evaluate the 
application and potentially select the project and execute a term sheet 
upon which funds are obligated. The disbursement of any funds will be 
contingent upon the execution of a formal credit agreement between the 
DOT and the project sponsor and the receipt of a formal investment-
grade rating on the project's senior obligations. This rating must 
apply to all project obligations with claims senior to that of the 
Federal credit instrument on the security pledged to the Federal credit 
instrument.
    As suggested by the preceding paragraphs, the DOT's Federal credit 
instrument may have a junior claim to other debt issued for the project 
in terms of its priority interest in the project's pledged security. 
However, the DOT's claim on assets should not be subordinated to the 
claims of other creditors in the event of a default leading to 
bankruptcy, insolvency, or liquidation of the obligor. The DOT's 
interest may include collateral other than pledged revenues.

Threshold Criteria

    To be eligible to receive Federal credit assistance under TIFIA, a 
project shall meet the following five threshold criteria:
    (1) The project shall be included in a State transportation plan 
and, at such time as an agreement to make a Federal credit instrument 
is entered into under this Act, in an approved State Transportation 
Improvement Program.
    (2) A State, local servicer, or other entity undertaking the 
project shall submit a project application to the Secretary of 
Transportation;
    (3) A project shall have eligible project costs that are reasonably 
anticipated to equal or exceed the lesser of $100 million or 50 percent 
of the amount of Federal-aid highway funds apportioned for the most 
recently completed fiscal year to the State in which the project is 
located (in the case of a project principally involving the 
installation of Intelligent Transportation Systems (ITS), eligible 
project costs shall be reasonably anticipated to equal or exceed $30 
million);
    (4) Project financing shall be repayable, in whole or in part, from 
tolls, user fees or other dedicated revenue sources; and
    (5) In the case of a project that is undertaken by an entity that 
is not a State or local government or an agency or instrumentality of a 
State or local government, the project that the entity is undertaking 
shall be included in the State transportation plan and an approved 
State Transportation Improvement Program.
    With this rulemaking, the DOT elaborates on criterion 4 (repayment 
of project financing from user fees or other dedicated revenue 
sources). In applying this threshold criterion, the DOT will not 
consider current or future Federal funds, regardless of source, to be a 
dedicated revenue source. This interpretation is consistent with 
congressional intent that the Federal Government position itself as a 
minority-share investor in the context of this credit program.

Selection Criteria

    The Secretary shall consider the following eight criteria in 
evaluating and selecting among eligible projects to receive credit 
assistance:
    (1) The extent to which the project is nationally or regionally 
significant, in terms of generating economic benefits, supporting 
international commerce, or otherwise enhancing the national 
transportation system;
    (2) The creditworthiness of the project, including a determination 
by the Secretary that any financing for the project has appropriate 
security features, such as a rate covenant, to ensure repayment;
    (3) The extent to which such assistance would foster innovative 
public-private partnerships and attract private debt or equity 
investment;
    (4) The likelihood that such assistance would enable the project to 
proceed at an earlier date than the project would otherwise be able to 
proceed;
    (5) The extent to which the project uses new technologies, 
including Intelligent Transportation Systems (ITS), that enhances the 
efficiency of the project;
    (6) The amount of budget authority required to fund the Federal 
credit instrument made available;
    (7) The extent to which the project helps maintain or protect the 
environment; and
    (8) The extent to which such assistance would reduce the 
contribution of Federal grant assistance to the project.
    With this rulemaking, the DOT requests comments on whether 
criterion 3 (the extent to which assistance under TIFIA would foster 
innovative public-private partnerships and attract private debt or 
equity investment) and criterion 8 (the extent to which assistance 
under TIFIA would reduce the contribution of Federal grant assistance 
to the project) should be elaborated. The DOT also requests comments on 
whether preference should be given to projects based on the total 
Federal contribution (including both credit and grant assistance from 
any source) and/or type of transportation project.

Tax Status of Loan Guarantees

    The TIFIA did not amend the provisions in section 149(b) of the 
Internal Revenue Code that prohibit the use of direct or indirect 
Federal guarantees of tax-exempt obligations. Accordingly, the interest 
income on any project loan that is directly or indirectly federally 
guaranteed under TIFIA, shall not be exempt from Federal income 
taxation.

Rulemaking Analysis and Notices

    The 30-day comment period is necessary to help ensure that this new 
program can be implemented before the credit amount authorized for 
fiscal year 1999 ($1.6 billion) lapses. Given the need for the DOT to 
solicit and evaluate applications, make selections, negotiate 
agreements with project sponsors, and obligate funds before the end of 
fiscal year 1999, the usual 60-day comment period would be both 
impracticable and contrary to public interest and congressional intent.
    All comments received before the close of business on the comment 
closing date indicated above will be considered and will be available 
for examination using the docket number appearing at the top of this 
document in the docket room at the above address. The DOT will file 
comments received after the comment closing date in the docket and will 
consider late comments to the extent practicable. The DOT may, however, 
issue a final rule at any time after the close of the comment period. 
In addition to late comments, the DOT will also continue to file, in 
the docket, relevant information becoming available after the comment 
closing date. Interested persons should continue to examine the docket 
for new material.

Executive Order 12866 (Regulatory Planning and Review) and DOT 
Regulatory Policies and Procedures

    The DOT has determined that issuance of a rule is necessary to 
implement TIFIA, and has concluded that this action represents a 
``significant regulatory action'' within the meaning of DOT's 
Regulatory Policies and Procedures (44 FR 11034, February 26, 1979) and 
Executive Order 12866. This determination is based on a finding that 
the rule may have an annual effect on the economy of $100 million or 
more. The NPRM was reviewed by the Office of Management and Budget 
under E.O. 12866.
    This section summarizes the estimated economic impact of the

[[Page 6000]]

proposed rule. This regulation would affect only those entities that 
voluntarily elected to apply for TIFIA assistance and were selected to 
receive a Federal credit instrument. It would not impose any direct 
involuntary costs on non-participants.
    The DOT has undertaken a preliminary evaluation of the economic 
impact of this proposed regulatory action. However, because the number, 
nature, and size of projects to be assisted will not be known until 
specific applicants come forward, this analysis is by necessity an 
estimate. Congress recognized this by including a provision in TIFIA 
(23 U.S.C. 189) requiring the Secretary to submit a report summarizing 
the effectiveness of the program within four years of the date of 
enactment of the legislation (June 9, 2002).
    DOT and industry research has indicated that there are substantial 
economic productivity gains to be derived from capital investment in 
surface transportation facilities. One study estimates that in the 
four-decade period from 1950 to 1989, U.S. firms realized annual 
production cost savings of 18 percent from general highway investment 
(yearly return of 18 cents per dollar invested in all roads) and 24 
percent from investment in non-local roads.1 In addition to 
these direct returns, transportation capital investment typically 
generates significant spillover benefits, which may be of a non-
financial nature, such as reduced pollution, increased safety, improved 
international competitiveness, and enhanced accessibility. Market 
imperfections often prevent these intangible but nonetheless important 
public benefits from being monetized and captured.
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    \1\ Contribution of Highway Capital to Industry and National 
Productivity Growth--Executive Summary, Ishaq Nadirir, New York, 
FHWA, 1996.
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    Just as transportation investment produces benefits, failure to 
invest results in cost increases. Another recent study estimates that 
congestion costs the average U.S. citizen $370 annually, in terms of 
time lost and fuel wasted.2 These costs are expected to 
increase as growing investment needs--both in terms of system renewal 
and capacity expansion--and limited availability of public funding 
contribute to declining performance.
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    \2\ Measuring and Monitoring Urban Mobility, Texas 
Transportation Institute, November 1996.
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    Growth in both freight movement and passenger travel has grown 
dramatically in recent years, and is expected to continue growing. For 
example, since 1980, total ton-miles and intercity passenger miles have 
grown by 30 percent and 60 percent respectively, according to a recent 
study by the American Association of State Highway and Transportation 
Officials. Despite substantial increases in authorized Federal funding 
levels for surface transportation under the Transportation Equity Act 
for the 21st Century, current resources are not expected to be able to 
keep pace with maintenance and preservation needs, let alone the 
additional demands resulting from growth in population and goods 
movement. Funding shortfalls can be particularly acute for large 
infrastructure projects (costing $100 million or more) which, due to 
their scale, often cannot be readily accommodated in ongoing State and 
local capital renewal programs.
    The economic drag created by under-investment in the nation's 
transportation network is substantial, as shippers and motorists incur 
increased vehicle maintenance and fuel costs, shipping delays, safety 
hazards, and time delays associated with congestion and poorly 
maintained roads.
    The TIFIA was established to provide fractional credit assistance 
to major transportation infrastructure projects--such as border 
crossings, trade corridors, and intermodal transfer facilities--that 
have the potential of generating substantial economic benefits both 
regionally and nationally. In many cases, such projects are capable of 
being supported through direct user charges or dedicated revenue 
streams that can be used to access private capital and other non-
Federal funding sources. The TIFIA is designed to fill market gaps 
through providing supplemental and/or subordinate capital to such 
projects. It should facilitate their ability to access the capital 
markets or other financing sources for the majority of their funding 
needs. Through TIFIA's leverage of limited Federal funds with private 
capital, these capital-intensive projects can be advanced without 
displacing smaller, more traditional grant-supported projects. Federal 
risk exposure should be mitigated by substantial co-investment from 
non-Federal parties and the use of objective, market-based credit 
evaluation criteria.
    The TIFIA is authorized to receive $530 million of budget authority 
to support up to $10.6 billion in nominal amounts of credit (or such 
lesser amounts of credit as can be supported by the budget authority). 
Under the terms of the legislation, the Federal share is limited to not 
more than 33 percent of total eligible project costs. In many cases, 
the actual share of TIFIA assistance may be considerably less. For 
example, prior to TIFIA, three major surface transportation projects in 
southern California obtained Federal credit instruments pursuant to 
special appropriations from Congress. Between 1993 and 1996, the 
Congress approved a $120 million standby Federal line of credit for the 
San Joaquin Hills Toll Road; two standby lines of credit totaling $145 
million for the Foothill-Eastern Toll Road; and a $400 million direct 
Federal loan for the Alameda Corridor project. Each of these projects 
would have met the threshold eligibility criteria under the terms of 
TIFIA. The Federal credit assistance as a percent of total project 
costs for these three investments is approximately 8.5 percent, 11.5 
percent, and 17.5 percent, respectively.
    Under the Federal Credit Reform Act of 1990 (FCRA), the amount of 
budget authority necessary to support a Federal credit instrument 
depends upon the subsidy cost (i.e., the estimated present value cost 
of estimated losses that will be incurred as a result of defaults, net 
of any fee income). Each project will be assigned a subsidy cost based 
upon an evaluation of its credit-worthiness.
    Since the actual projects under TIFIA have yet to be identified, it 
is not possible at this stage to ascertain the appropriate subsidy 
amounts. If, for example, the assumed average subsidy rate under TIFIA 
were 10 percent, the $530 million of budget authority could support 
$5.3 billion in nominal amount of Federal credit instruments, and 
(assuming a 33 percent TIFIA share of project costs) an aggregate of 
$15.9 billion in capital investment. This would represent a 
benefit:cost ratio (total capital investment compared to federal 
budgetary cost) of 30:1. If the subsidy rate averaged 5 percent, the 
budget authority could support $31.8 billion in aggregate investment; 
and if the subsidy rate averaged 15 percent, the budget authority could 
support approximately $10.6 billion in aggregate investment. The only 
costs imposed on the participants are the repayment of credit at the 
U.S. Treasury rate (which in certain instances may be significantly 
less than their own marginal cost of capital), a credit processing 
charge, and an application charge based upon direct costs incurred by 
the DOT in processing applications.
    On this basis, the DOT has concluded that TIFIA will promote the 
efficient functioning of project delivery and the private markets, and 
will generate both direct and indirect benefits, including reduced 
congestion, greater mobility, improved safety, an enhanced environment, 
and greater economic growth. These benefits are anticipated to

[[Page 6001]]

far surpass the combined direct costs to the Federal Government ($530 
million) and to the entities that elect to participate in the program. 
Because of the voluntary nature of participation in TIFIA, this 
regulatory action is not anticipated to impose any costs upon non-
participants. The DOT requests comments, information, and data from the 
public and potential users concerning the economic impact of 
implementing this rule and the TIFIA program.

Regulatory Flexibility Act

    The Regulatory Flexibility Act of 1980 (Pub. L. 96-354, 5 U.S.C. 
601-612) requires an assessment of the extent to which proposed rules 
will have an impact on small business or other small entities. 
Consistent with the Regulatory Flexibility Act, the DOT has evaluated 
the effects of this rule on small business or other small entities. The 
NPRM proposes to implement a Federal Credit assistance program for 
surface transportation projects. There will be a substantial economic 
impact on the projects funded. However, the DOT anticipates that few, 
if any, of the applicants for assistance, will be small entities as 
defined by the Small Business Administration. For example, applicants 
are likely to include States and large public, or quasi-public 
entities. In addition, although it is difficult to judge how many 
applications will be received, we anticipate that the DOT will offer 
credit assistance to no more than a handful of projects each year. 
Based on that evaluation, the DOT hereby certifies that this action 
would not have significant economic impact on a substantial number of 
small entities. The DOT invites public comment on this determination.

Unfunded Mandates Reform Act of 1995

    The Unfunded Mandates Reform Act of 1995 (Public Law 104-4) 
requires agencies to prepare a written assessment of the costs, 
benefits and other effects of proposed or final rules that include a 
Federal mandate likely to result in the expenditure by State, local or 
tribal governments, in the aggregate, or by the private sector, of more 
than $100 million annually. This proposed rule would not impose a 
Federal mandate resulting in the expenditure by State, local, and 
tribal governments, in the aggregate, or by the private sector, of $100 
million or more in any one year. The rule simply implements a Federal 
credit assistance program.

Executive Order 12612 (Federalism Assessment)

    This action has been analyzed in accordance with the principles and 
criteria contained in Executive Order 12612. The DOT has determined 
that this action does not have sufficient federalism implications to 
warrant the preparation of a federalism assessment. The bases for this 
determination are that a) eligibility for assistance under this program 
extends to both private and public entities; and b) the recipients of 
credit under this voluntary program will receive a benefit, rather than 
incur costs, through participation. The DOT invites public comment on 
this determination.

Executive Order 12372 (Intergovernmental Review)

    Given that projects receiving assistance under TIFIA may fall under 
the programmatic jurisdiction of the FHWA, the FRA, or the FTA, the 
relevant Catalog of Federal Domestic Assistance Program Numbers are: 
20.205 highway planning and construction; 20.310 Rail rehabilitation 
and improvement; and 20.500 transit capital improvement grants. The 
regulations implementing Executive Order 12372 regarding 
intergovernmental consultation on Federal programs and activities apply 
to this program.

Paperwork Reduction Act

    This document does not contain information collection requirements 
for the purposes of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 
et seq.); specifically, that fewer than ten respondents, as defined in 
5 CFR 1320.3, are anticipated. Based upon preliminary assessments, 
research reports, meetings with focus groups and discussions with 
potential respondents, the DOT anticipates approximately six 
respondents to the application annually. If in the future, the DOT 
anticipates ten or more respondents annually, immediate steps will be 
taken to seek approval from OMB for an information collection, as 
required under the Paperwork Reduction Act.

National Environmental Policy Act

    As specified under Sec. 1503 of TIFIA, and codified under 
Sec. 182(c)(2) of title 23, U.S.C., each project obtaining assistance 
under this program is required to adhere to the National Environmental 
Policy Act of 1969, as amended (42 U.S.C. 4321 et seq.). This 
rulemaking simply provides the procedure to apply for credit 
assistance; therefore, by itself, this rulemaking will not have any 
effect on the quality of the environment.

Regulation Identification Number

    A regulation identification number (RIN) is assigned to each 
regulatory action listed in the Unified Agenda of Federal Regulations. 
The Regulatory Information Service Center publishes the Unified Agenda 
in April and October of each year. The RIN contained in the heading of 
this document may be used to cross-reference this action with the 
Unified Agenda. The agency-specific proposed common rule appears at the 
end of this common preamble.

List of Subjects in 23 CFR Part 180 and 49 CFR Parts 261 and 640

    Credit programs--transportation, Highways and roads, Mass transit, 
Railroads, Investments, Reporting and recordkeeping requirements.

Text of the Common Proposed Rule

    The text of the common proposed rule appears below:

PART __--CREDIT ASSISTANCE FOR SURFACE TRANSPORTATION PROJECTS

Sec.
____.1  Purpose.
____.3  Definitions.
____.5  Limitations on assistance.
____.7  Application process.
____.9  Federal requirements.
____.11  Investment-grade ratings.
____.13  Threshold criteria.
____.15  Selection criteria.
____.17  Charges.
____.19  Reporting requirements.

    Authority: 23 U.S.C. 180-189 and 315; secs. 1501 et seq., Public 
Law 105-178, 112 stat. 107, 241, as amended, 49 CFR 1.48.

Sec. ____.1  Purpose.

    This rule implements a Federal credit assistance program for 
surface transportation projects.


Sec. ____.3  Definitions.

    Eligible project costs means amounts substantially all of which are 
paid by, or for the account of, an obligor in connection with a 
project, including the cost of:
    (1) Development phase activities, including planning, feasibility 
analysis, revenue forecasting, environmental review, permitting, 
preliminary engineering and design work, and other pre-construction 
activities;
    (2) Construction, reconstruction, rehabilitation, replacement, and 
acquisition of real property (including land related to the project and 
improvements to land), environmental mitigation, construction 
contingencies, and acquisition of equipment; and
    (3) Capitalized interest necessary to meet market requirements, 
reasonably

[[Page 6002]]

required reserve funds, capital issuance expenses, and other carrying 
costs during construction.
    Federal credit instrument means a secured loan, loan guarantee, or 
line of credit authorized to be made available under this subchapter 
with respect to a project.
    Investment-grade rating means a rating category of BBB minus, Baa3, 
or higher assigned by a rating agency to project obligations offered 
into the capital markets.
    Lender means any non-Federal qualified institutional buyer as 
defined in Sec. 230.144A(a) of title 17, Code of Federal Regulations, 
known as Rule 144A(a) of the Securities and Exchange Commission and 
issued under the Securities Act of 1933 (15 U.S.C. 77a et seq.), 
including:
    (1) A qualified retirement plan (as defined in Sec. 4974(c) of the 
Internal Revenue Code of 1986) that is a qualified institutional buyer; 
and
    (2) A governmental plan (as defined in Sec. 414(d) of the Internal 
Revenue Code of 1986) that is a qualified institutional buyer.
    Line of credit means an agreement entered into by the Secretary 
with an obligor under Sec. 184 of title 23, United States Code, to 
provide a direct loan at a future date upon the occurrence of certain 
events.
    Loan guarantee means any guarantee or other pledge by the Secretary 
to pay all or part of the principal of and interest on a loan or other 
debt obligation issued by an obligor and funded by a lender.
    Local servicer means:
    (1) A State infrastructure bank established under title 23; or
    (2) A State or local government or any agency of a State or local 
government that is responsible for servicing a Federal credit 
instrument on behalf of the Secretary.
    Obligor means a party primarily liable for payment of the principal 
of or interest on a Federal credit instrument, which party may be a 
corporation, partnership, joint venture, trust, or governmental entity, 
agency, or instrumentality.
    Project means:
    (1) Any surface transportation project eligible for Federal 
assistance under title 23 or chapter 53 of title 49, United States 
Code.
    (2) A project for an international bridge or tunnel for which an 
international entity authorized under Federal or State law is 
responsible;
    (3) A project for intercity passenger bus or rail facilities and 
vehicles, including facilities and vehicles owned by the National 
Railroad Passenger Corporation, and components of magnetic levitation 
transportation systems; and
    (4) A project for publicly owned intermodal surface freight 
transfer facilities, other than seaports and airports, if the 
facilities are located on or adjacent to National Highway System routes 
or connections to the National Highway System.
    Project obligation means any note, bond, debenture, or other debt 
obligation issued by an obligor in connection with the financing of a 
project, other than a Federal credit instrument.
    Rating agency means a bond rating agency identified by the 
Securities and Exchange Commission as a Nationally Recognized 
Statistical Rating Organization.
    Secured loan means a direct loan or other debt obligation issued by 
an obligor and funded by the Secretary in connection with the financing 
of a project under Sec. 183 of title 23, United States Code.
    State means any one of the fifty states, the District of Columbia, 
or Puerto Rico.
    Subsidy amount means the amount of budget authority sufficient to 
cover the estimated long-term cost to the Federal Government of a 
Federal credit instrument, calculated on a net present value basis, 
excluding administrative costs and any incidental effects on 
governmental receipts or outlays in accordance with the provisions of 
the Federal Credit Reform Act of 1990 (2 U.S.C. 661 et seq.).
    Substantial completion means the opening of a project to vehicular 
or passenger traffic.
    TIFIA means the Transportation Infrastructure Finance and 
Innovation Act of 1998.


Sec. ____.5  Limitations on assistance.

    (a) The total amount of Federal credit offered to any project 
receiving credit assistance under this part shall not exceed 33 percent 
of the anticipated eligible project costs.
    (b) Costs incurred prior to a project sponsor's submission of an 
application for credit assistance may be considered in calculating 
eligible project costs only upon approval of the Secretary. In 
addition, applicants shall not include application charges or any other 
expenses associated with the application process (such as charges 
associated with obtaining the required preliminary rating opinion 
letter) among the eligible project costs.
    (c) No costs financed internally or with interim funding may be 
refinanced under this part later than a year following substantial 
completion of the project.
    (d) Within the overall credit assistance limitation of 33 percent 
of eligible project costs, the DOT may consider making multi-year 
contingent commitments of budget authority and associated credit 
assistance for especially large projects with extended construction 
periods and financing needs. In this instance, any reservation of 
future-year funding shall be made through a letter of intent and shall 
be contingent on the project's demonstrating satisfactory progress to 
the DOT. Depending on the overall demand for credit assistance under 
this part, the DOT may limit such contingent commitments to 50 percent 
of the budget authority becoming available in the applicable future 
years. If such a multi-year commitment is made, each year's loan will 
be tied to distinct, clearly identified project segments or stages.


Sec. ____.7  Application process.

    (a) Public and private applicants for credit assistance under this 
part will be required to submit applications to the DOT in order to be 
considered for approval by the Secretary of Transportation.
    (b) At a minimum, such applications shall provide:
    (1) Documentation sufficient to demonstrate that the project 
satisfies each of the threshold criteria in Sec. ____.13 and describe 
the extent to which the project satisfies each of the selection 
criteria in Sec. ____.15.
    (2) Background information on the project for which assistance is 
sought, such as the project's description, status of the environmental 
permitting process, and construction schedule;
    (3) Background information on the applicant and/or project sponsor;
    (4) Historical information, if applicable, concerning the 
applicant's financial condition, including, for example, independently 
audited financial statements and certifications concerning bankruptcies 
or delinquencies on other debt; and
    (5) Current financial information concerning both the project and 
the applicant, such as sources and uses of funds for the project and a 
forecast of cash flows available to service all debt instruments.
    (c) An application for a project located in or sponsored by more 
than one State or other entity shall be submitted to the DOT by just 
one State or entity. The sponsoring States or entities shall designate 
a single obligor for purposes of applying for, receiving, and repaying 
TIFIA credit assistance.

[[Page 6003]]

    (d) Each fiscal year for which Federal assistance is available 
under this part, the DOT will publish a Federal Register notice to 
solicit applications for credit assistance. Such notice will specify 
the relevant due dates, the estimated amount of funding available to 
support TIFIA credit instruments for the current and future fiscal 
years, contact name(s), and other details for that year's application 
submissions and funding approvals. The DOT will also maintain a 
centralized mailing list for sending notices to prospective applicants.


Sec. ____.9  Federal requirements.

    All projects receiving credit assistance under this part shall 
comply with:
    (a) the relevant requirements of title 23 of the United States Code 
for highway projects, chapter 53 of title 49, United States Code, for 
transit projects, and Sec. 5333(a) of title 49, United States Code, for 
rail projects, as appropriate;
    (b) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d et 
seq.);
    (c) the National Environmental Policy Act of 1969 (42 U.S.C. 4321 
et seq.);
    (d) the Uniform Relocation Assistance and Real Property Acquisition 
Policies Act of 1970 (42 U.S.C. 4601 et seq.); and
    (e) other Federal and compliance requirements as may be applicable.


Sec. ____.11  Investment-grade ratings.

    (a) The full funding of a secured (direct) loan, loan guarantee, or 
line of credit shall be contingent on the assignment of an investment-
grade rating by a recognized bond rating agency to all project 
obligations that have a lien senior to that of the Federal credit 
instrument on the pledged security.
    (b) An investment-grade rating must be received before the DOT will 
disburse any funds.


Sec. ____.13  Threshold criteria.

    (a) To be eligible to receive Federal credit assistance under this 
part, a project shall meet the following five threshold criteria:
    (1) The project shall be included in a State transportation plan 
and, at such time as the DOT and project sponsor initially execute a 
credit agreement, in an approved State Transportation Improvement 
Program.
    (2) The State, local servicer, or other entity undertaking the 
project shall submit a project application to the Secretary of 
Transportation;
    (3) A project shall have eligible project costs that are reasonably 
anticipated to equal or exceed the lesser of $100 million or 50 percent 
of the amount of Federal-aid highway funds apportioned for the most 
recently completed fiscal year to the State in which the project is 
located (in the case of a project principally involving the 
installation of Intelligent Transportation Systems (ITS), eligible 
project costs shall be reasonably anticipated to equal or exceed $30 
million);
    (4) Project financing shall be repayable, in whole or in part, from 
tolls, user fees or other dedicated revenue sources; and
    (5) In the case of a project that is undertaken by an entity that 
is not a State or local government or an agency or instrumentality of a 
State or local government, the project that the entity is undertaking 
shall be included in the State transportation plan and an approved 
State Transportation Improvement Program as provided in paragraph 
(a)(1) of this section.
    (b) With respect to paragraph (a)(3), for a project located in more 
than one State, the minimum cost threshold size shall be the lesser of 
$100 million or 50 percent of the amount of Federal-aid highway funds 
apportioned for the most recently completed fiscal year to the 
participating State that receives the least amount of such funds.
    (c) With respect to paragraph (a)(4), the DOT will not consider 
current or future Federal funds, regardless of source, to be a 
dedicated revenue source.


Sec. ____.15  Selection criteria.

    (a) The Secretary shall consider the following eight criteria in 
evaluating and selecting among eligible projects to receive credit 
assistance:
    (1) The extent to which the project is nationally or regionally 
significant, in terms of generating economic benefits, supporting 
international commerce, or otherwise enhancing the national 
transportation system;
    (2) The creditworthiness of the project, including a determination 
by the Secretary that any financing for the project has appropriate 
security features, such as a rate covenant, to ensure repayment;
    (3) The extent to which such assistance would foster innovative 
public-private partnerships and attract private debt or equity 
investment;
    (4) The likelihood that such assistance would enable the project to 
proceed at an earlier date than the project would otherwise be able to 
proceed;
    (5) The extent to which the project uses new technologies, 
including Intelligent Transportation Systems (ITS), that enhances the 
efficiency of the project;
    (6) The amount of budget authority required to fund the Federal 
credit instrument made available;
    (7) The extent to which the project helps maintain or protect the 
environment;
    (8) The extent to which such assistance would reduce the 
contribution of Federal grant assistance to the project.
    (b) In addition, section 182(b)(2)(B) of title 23, United States 
Code, conditions a project's approval for credit assistance on receipt 
of a preliminary rating opinion letter indicating that the project's 
senior obligations have the potential to attain an investment-grade 
rating.
    (c) The DOT shall evaluate each project's distinct public benefits 
(including personal and freight mobility, economic development, and 
impact on international competitiveness) and contribution to program 
goals (including leverage of the Federal contribution and increased 
private investment in surface transportation infrastructure).
    (d) The DOT may give preference to those projects for which the 
total Federal contribution (including both credit and grant assistance 
from any Federal source) requested is small. This preference supports 
the policy goal of the DOT to position itself as a minority-share 
investor in any project receiving credit assistance under TIFIA to 
induce significant private co-investment.
    (e) The DOT may also give preference to applications for loan 
guarantees rather than other forms of Federal credit assistance. This 
preference is consistent with Federal policy that, when Federal credit 
assistance is necessary to meet a Federal objective, loan guarantees 
should be favored over direct loans, unless attaining the Federal 
objective requires a subsidy, as defined by the Federal Credit Reform 
Act of 1990, deeper than can be provided by a loan guarantee.


Sec. ____.17  Charges.

    (a) The DOT will require a non-refundable application initiation 
charge for each project applying for credit assistance under TIFIA. The 
DOT may also require an additional credit processing charge for 
projects selected to receive assistance. The proceeds of any such 
charges will cover a portion of the costs to the Federal Government of 
soliciting and evaluating applications, selecting projects to receive 
assistance, and negotiating credit agreements. For fiscal year 1999, 
the DOT will require an application initiation charge of $5,000 for 
each project applying for credit assistance under TIFIA. The DOT will 
not require any credit processing charges for fiscal year 1999. For 
fiscal years 2000 and beyond, the DOT may

[[Page 6004]]

adjust the amount of the application initiation charge, and will 
determine the appropriate amount of the credit processing charge, based 
on early program implementation experience in fiscal year 1999.
    (b) Applicants shall not include application charges or any other 
expenses associated with the application process (such as charges 
associated with obtaining the required preliminary rating opinion 
letter) in the total project cost for the purposes of calculating the 
33 percent credit limitation referenced in Sec. ____.5(a).
    (c) If, in any given year, there is insufficient budget authority 
to fund the credit instrument for a qualified project that has been 
selected to receive assistance under TIFIA, the Secretary may increase 
the application initiation charge or the credit processing charge on 
the approved applicant to reduce the subsidy cost of that project. No 
such fees or charges may be included among eligible project costs for 
the purpose of calculating the maximum 33 percent credit amount of 
TIFIA assistance under Sec. ____.5.


Sec. ____.19  Reporting requirements.

    At a minimum, any recipient of Federal credit under this part shall 
submit an annual project performance report and audited financial 
statements to the DOT within 120 days following the recipient's fiscal 
year-end for each year during which the recipient's obligation to the 
Federal Government remains in effect. The DOT may conduct periodic 
financial and compliance audits of the recipient of credit assistance, 
as determined necessary by the DOT. The specific credit agreement 
between the recipient of credit assistance and the DOT may contain 
additional reporting requirements.
    1. The Federal Highway Administration proposes to add part 180 to 
23 CFR Chapter I as set forth at the end of the common preamble.
    2. The Federal Railroad Administration proposes to add part 261 to 
49 CFR Chapter II as set forth at the end of the common preamble.
    3. The Federal Transit Administration proposes to add part 640 to 
49 CFR Chapter VI as set forth at the end of the common preamble.

Appendix ____--Application Checklist

    Note: This appendix will not appear in the Code of Federal 
Regulations.

    The DOT is in the process of developing a standard application 
form for credit assistance for surface transportation projects. This 
appendix specifies the documentary materials that the DOT is 
considering for inclusion in the standard application form. The 
following list of information items derives, in part, from the DOT's 
research concerning State and Federal credit assistance programs, as 
well as internal DOT guidance. The following list of items 
potentially to be included in a standard application form is being 
provided for public comment.
    a. Summary of how the proposed project satisfies each of the 
threshold criteria in Sec. ____.13 and the extent to which it 
satisfies each of the selection criteria in Sec. ____.15 of this 
part. (Each criterion should be addressed separately by the 
applicant).
    b. Project information.
    1. Detailed description of the project, including type of 
project, geographic location, economic impact, public benefits, and 
purpose or purposes.
    2. Documentation sufficient to demonstrate the project's current 
inclusion in the long-range State transportation plan and 
anticipated inclusion in the State Transportation Improvement 
Program (STIP).
    3. Copies of permits and approvals required by local, regional, 
State, and Federal agencies, including environmental and other 
permits and approvals, and other documentation sufficient to 
demonstrate compliance with other statutory and regulatory 
requirements.
    4. Documentation specifying the project's status with regard to 
conformance with the National Environmental Policy Act of 1969 
(NEPA).
    5. Description of project construction phases and timeline.
    6. Description of the current condition of all facilities 
relating to the project.
    7. Description of the maintenance and operation plan for the 
project.
    c. Applicant information.
    1. Legal applicant's name, headquarters address, mailing 
address, phone and fax numbers.
    2. Primary contact person's name, title, address, phone and fax 
numbers.
    3. Full description of type of sponsoring entity (general 
partnership, limited partnership, corporation, other), the parties 
forming the entity, and the date on which the entity was 
established.
    4. Applicant's tax identification number.
    5. Name of the entity that will exercise ownership control of 
project.
    6. Names of the entities charged with planning, developing, and 
operating the project.
    7. Names of various other parties involved in the project with 
description of responsibilities and evidence of agreements or 
commitments.
    8. Disclosure of current or past litigation involving the 
parties that will own, plan, develop and/or operate the project.
    d. Historical financial information relating to the applicant.
    1. Signed, audited financial statements.
    2. Credit references or release forms.
    3. Federal income tax returns.
    4. Certification and/or resolution of any delinquency or default 
on Federal debt.
    5. Bankruptcy history.
    e. Initial financial plan for the project.
    1. Initial total cost estimate.
    i. Costs of feasibility studies.
    ii. Costs of preliminary engineering.
    iii. Costs of environmental assessment.
    iv. Costs of right of way.
    v. Costs of construction.
    vi. Costs of construction engineering/inspection.
    vii. Costs of project management.
    viii. Costs relating to financing.
    ix. Proposed cost containment strategies (e.g., design-build, 
use of cost control teams, management cost control strategies, and 
value engineering).
    2. Implementation plan for the project.
    i. Schedule, presented in annual increments, for completing and 
operating the project based on initial base year costs adjusted for 
inflation and any cost escalation.
    ii. Methodology for all cost assumptions.
    iii. Sources of potential future cost estimates (e.g., 
environmental costs, litigation costs, overtime costs, and value 
engineering savings).
    3. Funding sources: all proposed sources and uses of project 
funds presented as annual amounts.
    i. Supporting documentation to verify the availability of all 
sources of public and private funding.
    ii. Comparison of annual amounts available for project 
obligations versus annual obligation needs.
    4. Cash flows: Long-term pro-forma cash flow projection clearly 
delineating all cash flows by category (revenues and expenses) and 
subcategory (e.g., operations and maintenance, debt service to 
senior bondholders, debt service to the Federal Government, 
reserves) and specifying coverage ratios for each year.
    5. Type of Federal credit assistance that the applicant is 
requesting and proposed terms (e.g., amount, maturity, allowances 
for prepayment and deferral).
    6. Proposed timing and use of disbursements of requested Federal 
credit assistance.
    7. Proposed collateral/security for Federal credit assistance.
    8. Copy of preliminary rating opinion letter on senior debt 
obligations from at least one nationally recognized rating agency.
    9. Copy of narrative financial analysis and/or feasibility 
study, including documentation to support revenue projections, such 
as traffic studies and regional economic projections, as applicable.
    10. For loan guarantees, additional documentation including 
copies of the obligation agreement between the proposed guaranteed 
lender and borrower, background information on the proposed 
guaranteed lender, and other data specifically pertaining to a loan 
guarantee.
    f. Any other information which the DOT may deem necessary for 
project evaluation and selection.


[[Page 6005]]


    Issued in Washington, DC on January 28, 1999.
Kenneth R. Wykle,
Federal Highway Administration Administrator.
Jolene M. Molitoris,
Federal Railroad Administration Administrator.
Gordon J. Linton,
Federal Transit Administration Administrator.
[FR Doc. 99-2637 Filed 2-5-99; 8:45 am]
BILLING CODE 4910-22-P