RECENT DEVELOPMENTS IN FEDERAL PROJECT FINANCE

In May 1998, the Transportation Equity Act for the 21st Century (TEA-21) dramatically increased the funding levels of surface transportation projects and added a number of new tools to be used by sponsors of highway and transit projects to advance their programs. States how have greater latitude to satisfy the matching funds requirements for projects. They can use design-build contracting for procurements greater than $50 million, and ultimately, they may draw upon streamlined procedures for multiagency federal environmental review. TEA-21 also continued the trend of introducing innovative finance techniques, giving project sponsors new ways to go about financing their surface transportation projects. Two prominent financing programs that have attracted particular attention are Grant Anticipation Revenue Vehicles (GARVEE) bonds and the Transportation Infrastructure Finance and Innovation Act of 1998 (TIFIA). GARVEE bonds refer to federal-aid assistance that states receive in the form of annual apportionments from the Federal Highway Administration. TIFIA was designed to provide assistance in the form of credit, rather than grants, to major surface transportation capital investments. Five projects seeking $1.6 billion in credit support were selected for the first round of TIFIA assistance in September 1999. They are the Miami (Florida) Intermodal Center; Farley-Pennsylvania Station in New York City; State Route 125 in San Diego, California; Tren Urbano in San Juan, Puerto Rico; and the Washington D.C. Metro Capital Program. Both GARVEE bonds and TIFIA allow states to leverage limited federal resources to help expand the level of capital investment in transportation projects.