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

		TIFIA Projects Are Concentrated in Five States and Tend to Be Large Highway Projects

Since the TIFIA program was created in 1998, DOT has executed 27  credit agreements for 26 projects. 4.) According to DOT data, TIFIA credit agreements have been used mostly  for large, high-cost highway projects. Overall, DOT has provided TIFIA  assistance to 17 highway projects. As of April 2012, DOT reported that it has provided nearly $9.1 billion— $8.5 billion through direct loans and $600 million in loan guarantees—to  projects at a budgetary cost of about $654 million. TIFIA Program Could Benefit from Use of Performance Measures to Evaluate Progress toward Goals

While DOT tracks certain aspects of a project, such as monitoring  whether the project is meeting its construction timeline and comparing  actual and projected receipts of the revenue pledged to repay TIFIA  assistance, the agency does not systematically assess whether its  portfolio as a whole is achieving the program’s goals of leveraging federal  funds and encouraging private co-investment. DOT Used a Competitive Process to Evaluate Projects, but This Process Could Benefit from Increased Transparency

		DOT Developed a Competitive, Two-Step Process to Evaluate and Select Projects Using the Statutory Criteria

In response to increased program demand and the uncertain budget  environment, DOT used a competitive, two-step process to assess LOIs  and select projects to apply for credit assistance in fiscal years 2010 and  2011. DOT’s process for competitively selecting amongst LOIs involved two  steps; first, DOT convened a multimodal team to assess, score, and  group projects using statutory criteria, and second, DOT used a team of  senior-level staff—called the executive leadership team—to review the  multimodal team’s assessments and invite select project sponsors to  submit an application for credit assistance (see fig. DOT officials said it did so as part of its  efforts to improve its communication of the criteria and selection  process to applicants through the funding notices over time. Since many of DOT’s changes to the selection process occurred in the  fiscal year 2012 TIFIA solicitation, it is too soon to know whether these  changes will address the transparency and uncertainty concerns raised  by recent applicants and financial and legal advisors. A Number of Factors Influence whether States and Sponsors Seek TIFIA Assistance

As shown in table 5, most recent applicants we surveyed cited TIFIA’s  repayment terms and options, low interest rate, and ability to serve as  subordinate debt as very or somewhat important in their decision to seek  assistance in fiscal years 2010 and 2011. However, our survey also indicated that some states have neither sought  nor plan to seek TIFIA assistance. In addition, most of these state DOTs indicated that  changes to the program—such as making more funds available for the  program or increasing the portion of project costs that TIFIA assistance  could cover—would have somewhat or little to no increase on the  likelihood that they would seek TIFIA assistance. For the  last 3 fiscal years, sponsors submitted LOIs for credit assistance totaling  more than 10 times what the program’s current budget authority can  support. Two other factors will influence the demand for TIFIA assistance. Options Proposed to Modify the TIFIA Program

With the pending reauthorization of the surface transportation programs,  the tight budgetary environment, and the increase in demand for TIFIA,  government and industry officials have proffered options to modify the  program. Each option has advantages and  disadvantages, and thus implementing any of these options would require  policy trade-offs. Given these complexities,  this option may be difficult to implement, though it could be done relatively  quickly. Recommendations for Executive Action

To improve the implementation of the TIFIA program and enable  Congress and DOT to better assess program performance, we  recommend that the Secretary of Transportation further develop and  define performance measures to monitor and evaluate progress toward  meeting the program’s goals and objectives. Appendix I: Scope and Methodology

To address our objectives, we reviewed Department of Transportation  (DOT) program guidance for the Transportation Infrastructure Finance  and Innovation Act (TIFIA) program, relevant legislation and regulations,  and DOT’s biennial reports to Congress on the TIFIA program. In addition, we  interviewed legal and financial advisors that help sponsors apply for TIFIA  credit assistance and private concessionaires that invest in large  infrastructure projects to learn about their experiences with the TIFIA  program, including the selection process. The  survey was administered to the state DOTs in all 50 states, the District of  Columbia, and Puerto Rico, as well as to all recent applicants that submitted an LOI to the TIFIA program in fiscal years 2010 and 2011.The survey population consisted of four unique groups of respondents:  state DOTs from states from which no sponsor had ever applied to the  TIFIA program; state DOTs from states from which a sponsor had applied  to the TIFIA program but not in recent years—that is, 2010 and 2011;  state DOTs who had recently applied to the TIFIA program; and other,  non-state DOT organizations who had recently applied to the TIFIA  program. Appendix II: Projects Receiving TIFIA Credit Assistance

DOT has awarded 27 TIFIA credit agreements to projects through 26  loans and one loan guarantee. The TIFIA eligibility requirements are (1) the project shall be consistent  with the state transportation plan, if located in a metropolitan area shall be  included in that area’s metropolitan transportation plan, and shall appear  in an approved state transportation improvement program before the DOT  and the project sponsor execute a term sheet or credit agreement that  results in the obligation of funds; (2) the state, local servicer, or other  entity undertaking the project shall submit a project application to the  Secretary of Transportation; (3) a project shall have eligible project costs  that are reasonably anticipated to equal or exceed the lesser of $50  million or 33 1/3 percent of the amount of federal aid highway funds  apportioned for the most recently completed fiscal year to the state in  which the project is located (in the case of a project principally involving  the installation of intelligent transportation systems (ITS), eligible project  costs shall be reasonably anticipated to equal or exceed $15 million); (4)  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.
Why GAO Did This Study

Created in 1998, the TIFIA program is designed to fill market gaps and leverage substantial nonfederal investment by providing federal credit assistance to help finance surface transportation projects including highway, transit, rail, and intermodal projects. Since 2008, demand for the program has surged, annually exceeding budget resources for the program by a factor of more than 10 to 1. Given the increased demand and recent proposals to expand and modify the program, GAO was asked to review (1) the characteristics of TIFIA projects and how DOT tracks progress toward the programs goals, (2) the process DOT used to evaluate and select projects that submitted LOIs to apply for credit assistance in fiscal years 2010 and 2011, (3) the factors that affect project sponsors decisions about whether to seek TIFIA credit assistance, and (4) the options proposed to modify the program. GAO reviewed laws and program guidance; interviewed DOT officials, project sponsors, and advisors involved in procuring credit assistance; and surveyed all state departments of mtransportation and other recent applicants about the TIFIA program.

What GAO Found

Projects that received credit assistance through the Transportation Infrastructure Finance and Innovation Act (TIFIA) program, administered by the Department of Transportation (DOT), tend to be large, high-cost highway projects. As of April 2012, DOT has executed 27 TIFIA credit agreements for 26 projects with project sponsors such as state DOTs and transit agencies. Overall, DOT has provided nearly $9.1 billion in credit assistance through 26 loans and one loan guarantee. By mode, there are 17 highway, 5 transit, and 4 intermodal projects. Most projects have a total cost of over $1 billion. DOT monitors individual credit agreements but does not systematically assess whether its TIFIA portfolio as a whole is achieving the programs goals of leveraging federal funds and encouraging private co-investment. DOT has identified goals and objectives for the TIFIA program, but its limited use of performance measures makes it difficult to determine the degree to which the program is meeting these goals and objectives. Given that DOT already collects project data, it could use these data to better evaluate the programs overall progress toward meeting its goals.
In fiscal years 2010 and 2011, DOT used a competitive two-step process to evaluate and invite projects to apply for TIFIA credit assistance to address the considerable increase in demand for the program. First, a multimodal team scored and grouped letters of interest (LOI) using statutory criteria. Second, a group of senior DOT staff reviewed the LOIs based on the criteria and other factors, like available budget authority, and invited a subset to applythe next step in securing TIFIA assistance. While recent applicants were satisfied with many aspects of the process, they also indicated, along with legal and financial advisors, that the selection process lacks transparency and creates uncertainty in their ability to implement projects. For example, some recent applicants told us it is difficult to understand what characteristics DOT uses to measure how well a project meets each criterion. DOT officials said the agency is taking steps to improve its evaluation process, but since many of the changes were initiated in 2012, it is too soon to tell if they will address recent applicants concerns.
Several factors influence whether project sponsors seek TIFIA assistance. More than 30 of 36 recent applicants we surveyed cited TIFIAs repayment options (like deferring repayments for 5 years after project completion), low interest rate, and flexible structure (i.e., ability to subordinate TIFIA repayment) as important in their decision to seek assistance. To date, sponsors from 17 states have never sought TIFIA assistance. State DOT respondents from these states cited various reasons for this, including lack of eligible projects and state-imposed borrowing restrictions. Many of these state DOTs indicated that regardless of options for modifying the program, they have no plans to seek TIFIA assistance.
Several options to change the TIFIA program have been proposed by, among others, Congress and DOT; these options include increasing the programs funding, increasing the portion of costs that may be covered by TIFIA from 33 percent to 49 percent of project costs, and modifying the selection process. Each option has advantages and disadvantages and, if adopted, some could alter the original goals of the programto leverage public funds and encourage private co-investment.

What GAO Recommends

GAO recommends that DOT develop and use program performance measures to better assess progress in meeting TIFIAs goals and objectives. DOT should better disclose information on how it selects projects to apply for TIFIA assistance through program guidance or other means to help ensure that the program is more transparent to Congress, applicants, and the public. DOT said it would consider the studys results.