By Rep. Eddie Bernice Johnson (D-Texas) - 06/16/09 06:17 PM EDT
In February, Congress passed and President Obama signed landmark economic recovery legislation. The American Recovery and Reinvestment Act (ARRA) allocated billions of dollars for infrastructure projects, in the form of direct payments from the federal government to transit agencies and state and local governments. ARRA was designed to jumpstart the economy as quickly as possible, putting people back to work and getting markets moving again. The federal government can give grants to local agencies and governments quickly, enabling them to get contracts signed and people hired within months. Transportation and infrastructure projects won’t solve our economic crisis, but they will help us move toward recovery and, ultimately, long-term prosperity.
Transportation and infrastructure projects have the added bonus of improving our nation’s roads, bridges, mass transit systems, railroads and airports, which have been neglected for far too many years. Crumbling levees and collapsing bridges aren’t the only evidence we see of inadequate infrastructure — many people in many parts of the country experience crowded on-ramps or too-narrow roads that slow traffic to a crawl on a daily basis.
The federal government, however, has only a limited amount of money it can devote to transportation and infrastructure projects, especially now, when the country faces such a broad range of economic challenges, including two wars, the rising cost of healthcare and a faltering financial industry.
For this reason, innovative programs like the Transportation Infrastructure Finance and Innovation Act (TIFIA) program have become critical. It is clear that the TIFIA program should be reauthorized; it should also be enlarged and given greater flexibility. And now is the time, as Congress develops legislation to authorize a new surface transportation law.
TIFIA was established by the Transportation Infrastructure Finance and Innovation Act of 1998. The TIFIA program enables the U.S. Department of Transportation (DOT) to provide credit to state and local governments, transit agencies and other eligible applicants for transportation projects of national or regional significance. Under TIFIA, the DOT can provide three forms of credit assistance — direct loans, loan guarantees and standby lines of credit.
Direct loans enable local governments and agencies to borrow directly from the DOT. Loan guarantees enable local governments and agencies to borrow from a third-party lender with the added security of the federal government guaranteeing the loan. Finally, a TIFIA line of credit provides a project with a contingent loan that can be drawn upon to supplement project revenues, if necessary.
The federal government thus plays a role in supplementing other funding sources for transportation projects, rather than providing the funding itself. And the federal government is a good lender. Because of its inherently long-term investment horizon, it can absorb the short-term risks of financing transportation projects. It can also provide credit at a low interest rate and with flexible repayment terms. Finally, TIFIA’s range of options allows the government to provide each transportation project the type of credit that is most appropriate for it.
In the past decade, we have seen that TIFIA works. Since 1998, $4.8 billion in TIFIA assistance has leveraged more than $18.6 billion in transportation project investments. In my home state, the Texas Department of Transportation used a financing package that included a TIFIA direct loan to fund the Central Texas Turnpike Project, which covered 65 miles of three intersecting national highways in the Austin-San Antonio corridor. The project relieved congestion in the fast-growing region, making Interstate 35 safer in the process, and it opened in phases, several ahead of schedule. As another example, the Central Texas Regional Mobility Authority used a TIFIA direct loan to build the 183-A Turnpike, a new tolled highway in metropolitan Austin, which opened in March 2007, on time and on budget. Indeed, TIFIA has grown so popular that demand far outstrips available funds.
The TIFIA program’s success can be measured in other ways, too. To date, the federal government hasn’t lost a single cent through its investments. Borrowers have paid back all of the money they have borrowed, with interest. And to ensure that taxpayers are never subjected to too much risk, TIFIA includes safeguards. For example, each credit instrument has a maximum maturity of 35 years after a project’s substantial completion.
In February, the National Surface Transportation Infrastructure Financing Commission released “Paying Our Way: A New Framework for Transportation Financing,” a report that called for reauthorizing TIFIA, but with more credit capacity and flexibility. At the beginning of June, I introduced H.R. 2663, the Transportation Infrastructure Finance and Innovation Act (TIFIA) of 2009. The bill increases the share of overall project cost that can come from the TIFIA program, from 33 percent to 49 percent of the anticipated eligible project cost, and authorizes $285 million in budget authority per year over the life of the bill, up from $122 million.
Incorporating TIFIA reauthorization and expansion into the upcoming surface transportation bill is the right thing to do. TIFIA is exactly the type of innovative and effective program that we need right now.
Johnson is a member of the House Transportation and Infrastructure Committee and chairwoman of the Subcommittee on Water Resources and Development.