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Transportation Infrastructure FInancing and Value Capture

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On February 27, 2019 the National Association of Development Organizations (NADO) Research Foundation held a webinar on financing programs available through the U.S. Department of Transportation's Build America Bureau, as well as value capture techiques for recovering value that occurs as a result of infrastructure investment.

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Transportation Infrastructure FInancing and Value Capture

  1. 1. ONTHEROADTOPROSPERITY Transportation Infrastructure Financing and Value Capture
  2. 2. ONTHEROADTOPROSPERITY About NADO ▪ National association for 540 regional development organizations, including emerging network of Rural Transportation Planning Organizations (RTPOs or RPOs) ▪ Promote public policies that strengthen local governments, communities and economies through the regional strategies, coordination efforts and program expertise of the nation’s regional development organizations
  3. 3. ONTHEROADTOPROSPERITY About NADO ▪ Through the NADO Research Foundation, develop training and resources related to: • Rural/small metro transportation planning, RPO America • Small business finance • Economic development planning • Regional resiliency • Developing quality of place
  4. 4. ONTHEROADTOPROSPERITY Resources for Regional Planning
  5. 5. ONTHEROADTOPROSPERITY Resources for Regional Planning
  6. 6. Today’s Topic: Transportation Infrastructure Financing and Value Capture ONTHEROADTOPROSPERITY
  7. 7. On the Road to Prosperity: Fostering Collaborative Transportation and Economic Development Planning ONTHEROADTOPROSPERITY
  8. 8. Housekeeping and Technology • Two presenters with a brief pause for questions between and a longer Q&A session at the end of the webinar • We welcome questions and comments via “chat”—enter them at any time! • All attendee lines are muted by default • We are recording this session • Webinar slides and recording will be available on RuralTransportation.org ONTHEROADTOPROSPERITY
  9. 9. How to “Chat” Questions and Comments If you have a question or comment, enter it into the Chat box at any time! • Below the Chat window, use the drop-down menu to select the recipient of the message: All - Entire Audience OR Organizers only (Megan & Carrie) • Type your message in the text field, then click Send. ONTHEROADTOPROSPERITY
  10. 10. Introducing Today’s Presenters ONTHEROADTOPROSPERITY • Scott Allen, Transportation Specialist, FHWA Office of Planning, Environment, and Realty
  11. 11. On the Road to Prosperity: Fostering Collaborative Transportation and Economic Development Planning Webinar: Transportation Infrastructure Financing and Value Capture February 27, 2019
  12. 12. Introducing Today’s Presenters ONTHEROADTOPROSPERITY • Nefretiti Harrison, Project Development Lead, U.S. Department of Transportation Build America Bureau
  13. 13. Overview of the Department of Transportation’s Innovative Financing Solutions
  14. 14. Session Objectives ❑ INFRA Grants ❑ Private Activity Bonds (PABs) ❑ Railroad Rehabilitation & Improvement Financing (RRIF) ❑ Transportation Infrastructure Finance and Innovation Act (TIFIA) ❑ TIFIA Rural Projects Initiative (RPI) 14
  15. 15. Infrastructure for Rebuilding America (INFRA) 15 ❑ Discretionary grant program authorized under the FAST Act through 2020 - previously known as FASTLANE ❑ Approximately $855-900 million available for infrastructure grants for FY 2019. ❑ Minimum INFRA Award Size • $25 million for large projects • $5 million for small projects ❑ INFRA program preserves statutory requirements and utilizes updated criteria to evaluate projects and align with national and regional economic vitality goals. ▪ Leveraging increased investment by state, local, and private partners. ▪ Promoting improved project performance and accountability. ▪ Providing project sponsors maximum flexibility to propose innovative solutions to address specific, local needs. ❑ APPLICATION DEADLINE: March 4, 2019 8PM EST https://www.transportation.gov/buildamerica/Infragrants
  16. 16. Private Activity Bonds 16 ▪ U.S. DOT Secretary of Transportation is authorized to allocate $15 billion of PABs for qualified highway or surface freight transfer facilities ▪ State or local governments issue tax-exempt bonds on behalf of a private entity ▪ Private entity/developer responsible for all PABs debt service (PABs are not a moral or legal obligation of a governmental issuer) ▪ Can be used in combination with TIFIA credit assistance ▪ To date, nearly $8.99 billion in PABs have been issued for 22 projects ▪ Currently, $1.3 billion in allocated volume cap is outstanding for three projects ▪ About $4.7 billion remains to be allocated ▪ Currently processing seven requests totaling $3.55 billion ▪ If all requests are approved , about $1.2 billion would remain available
  17. 17. About RRIF 17 The Railroad Rehabilitation & Improvement Financing Program which provides direct loans and loan guarantees to finance railroad infrastructure underwent substantive and procedural changes as a result of the FAST Act. FAST Act changes to the RRIF Program included: ▪ Expanded applicant and project eligibilities, to include Transit-Oriented Development projects ▪ Extended maximum loan maturity to 35 years after substantial completion ▪ Revamped and more transparent application process ▪ Clarified ability for applicants to pledge dedicated revenues as collateral ▪ Master Credit Agreement capability ▪ Required all applicants and borrowers to be responsible for all transaction costs and fees associated with application evaluation, independent financial and legal advisors, post- closing costs, among other fees ▪ Removed cohort requirement as well as the requirement of RRIF to repay Credit Risk Premiums (CRPs)
  18. 18. RRIF Program Benefits ▪ Long term, fixed interest, permanent, up-front financing ▪ Funds are drawn as needed ▪ Flexible amortization ▪ No pre-payment penalty ▪ Uses Treasury Rate ▪ Current interest rate would depend on the term of the loan ▪ Rates available at treasury.gov website 18
  19. 19. Railroads State and Local Govs Government sponsored authorities and corporations Interstate compacts (410(a)) Amtrak Reform and Acc. Act of 1997 Limited option freight shippers Joint Ventures Design/planning Freight Rail Facilities Freight Transfer Facilities FRA-Regulated Commuter Rail Facilities Passenger Rail Vehicles and Equipment Transit-Oriented Development “Intermodal” or Rail Equipment or Facilities Refinance of above NO OPERATIONS! BORROWERS PROJECTS RRIF Eligible Borrowers and Projects 19
  20. 20. 20 RRIF Portfolio Statistics Since program inception, RRIF has approved 39 loans to finance $6.3 billion towards infrastructure investments in 27 states.
  21. 21. 21 About TIFIA The Transportation Infrastructure Finance and Innovation Act of 1998 (TIFIA) established a Federal credit program under the U.S. Department of Transportation (DOT) for eligible transportation projects.
  22. 22. TIFIA Credit Assistance 22 ▪ Secured (Direct) Loan ▪ Maximum term of 35 years from substantial completion ▪ Repayments must start within 5 years after substantial completion ▪ Loan Guarantee ▪ Guarantees a project sponsor’s repayments to non-Federal lender ▪ Loan repayments to lender must commence within 5 years after substantial completion ▪ Line of Credit ▪ Contingent loan available for draws as needed up to 10 years after substantial completion of project
  23. 23. TIFIA Changes Under the FAST Act ▪ The FAST Act enacted several changes to the TIFIA Program including: ▪ Expanded Eligibilities ▪ Transit-Oriented Development Projects ▪ Rural Projects Fund within a State Infrastructure Bank ▪ Modified Rural Project Eligibility ▪ Streamlined Application Process for Secured Loans ▪ Fee Relief for Small Projects (under $75 million) ▪ Master Credit Agreement Authority Clarifications 23 The FAST Act continues the Transportation Infrastructure Finance and Innovation Act (TIFIA) program which leverages Federal funds by attracting substantial private and other non- Federal co-investment to improve the nation's surface transportation system.
  24. 24. TIFIA Major Benefits 24 ▪ Long term, fixed cost, permanent financing ▪ Longer repayment periods - Up to 35 years ▪ Deferred for 5 years following substantial completion ▪ No prepayment penalty ▪ Can be highly customized to meet borrower needs ▪ Low interest rates
  25. 25. TIFIA Major Requirements ▪ Minimum Anticipated Project Costs ▪ $10 million for Local and Rural Projects ▪ $15 million for Intelligent Transportation Projects ▪ $50 million for all other eligible Surface Transportation Projects ▪ Limited to 33% of reasonably anticipated eligible project costs (unless the sponsor provides a compelling justification for up to 49%) ▪ Investment Grade Rating ▪ Senior debt must receive two investment grade ratings (BBB-/Baa3) from nationally recognized credit rating agencies ▪ Only one investment grade rating is required from projects totaling $75 million or less ▪ Dedicated Repayment Source ▪ Pledged to secure both the TIFIA and senior debt financing ▪ Comply with Federal requirements ▪ Including but not limited to NEPA, Buy America, Titles 23 and 49 25
  26. 26. ELIGIBLE PROJECTS Highways and Bridges Intelligent Transportation Systems Intermodal Connectors Transit Vehicles and Facilities Intercity Buses and Facilities Freight Transfer Facilities Pedestrian and Bicycle Infrastructure Networks Transit-Oriented Development Rural Infrastructure Projects Passenger Rail Vehicles and Facilities Surface Transportation Elements of Port Projects NO OPERATIONS! Eligible TIFIA Borrowers and Projects 26 ELIGIBLE BORROWERS • State Governments • Local Governments • State Infrastructure Banks • Private Firms • Special Authorities • Transportation Improvement Districts
  27. 27. TIFIA Portfolio Statistics Since program inception, TIFIA has approved 82 loans totaling over $31.4 billion to stimulate over $113.2 billion of transportation infrastructure investments in 22 states (plus the District of Columbia and Puerto Rico).
  28. 28. 28 TIFIA Rural Projects Initiative (RPI) ❑ Rural project definition: Project located in an area that is outside of an urbanized area with a population greater than 150,000 individuals ❑ Project size: Total eligible project cost of $10-75 million ❑ Loan size: Up to 49% of eligible project costs ❑ Loan term: Up to 35 years with potential for deferred repayment (up to five years after substantial completion ❑ Interest rate: Fixed rate of ½ Treasury rate ❑ DOT’s advisory fees: Borrower fees may be covered by DOT
  29. 29. Quick Questions for Nefretiti How to enter them into the Chat box: • Below the Chat window, use the drop-down menu to select the recipient of the message: All - Entire Audience OR Organizers only (Megan & Carrie) • Type your message in the text field, then click Send. ONTHEROADTOPROSPERITY
  30. 30. Introducing Today’s Presenters ONTHEROADTOPROSPERITY • Thay Bishop, Senior Program Advisor, Federal Highway Administration Center for Innovative Finance Support
  31. 31. EDC-5 Value Capture Implementation Team 31 Value Capture: Capitalizing on the Value Created by Transportation
  32. 32. Value Capture Implementation Team 32 Introduction to Value Capture ▪ Value capture overview ▪ The EDC-5 Value Capture initiative ▪ Value capture mechanisms & examples ▪ Ingredients of a successful implement value capture ▪ Funding opportunities
  33. 33. Value Capture Implementation Team 33 What is a Value Capture? “Value capture” refers to a toolbox of strategies used by public agencies to recover a portion of the increased property value created as a result of public infrastructure investment.
  34. 34. Value Capture Implementation Team 34 EDC 5 Value Capture Initiative Promotes the use of value capture mechanisms as part of a mixed funding and innovative finance strategy to accelerate project delivery and provide equitable funding for sustainable transportation investments Clearinghouse for best practices/lessons learned: ▪ EDC-5 Value Capture Sessions: https://www.fhwa.dot.gov/ipd/value_capture/resources/value_ capture_resources/edc-5_resources.aspx. ▪ Project Profiles: https://www.fhwa.dot.gov/ipd/value_capture/project_profiles/ ▪ Factsheets: https://www.fhwa.dot.gov/ipd/fact_sheets/ ▪ Value Capture Resources: https://www.fhwa.dot.gov/ipd/value_capture/resources/value_ capture_resources/default.aspx
  35. 35. Value Capture Implementation Team 35 Background ▪ U.S. transportation infrastructure is deteriorating - End of useful lifecycle - Deferred maintenance - Maintenance backlog ▪ Federal funding unsustainable - The Federal gas tax has lost its purchasing power by nearly 40% since 1993 - Increased fuel efficiency and reduced growth in VMT has further eroded the growth in fuel tax revenues ▪ “Smart” Infrastructure Investment needs
  36. 36. Value Capture Implementation Team 36 Supplemental Funding Sources ▪ General Fund transfers have kept the Highway Trust Fund solvent ▪ Exploring new funding sources, such as the mileage based user fee ▪ Innovative financing is used to deliver large capital projects, leveraging private capital or borrowing from government backed loan programs, such as: - Transportation Infrastructure Finance and Innovation Act (TIFIA) - Railroad Rehabilitation and Improvement Financing (RRIF) - Private Activity Bonds - State Infrastructure Banks - Section 129 Loans - Lease
  37. 37. Value Capture Implementation Team 37 Value Capture Techniques Category Technique Purpose Fund or Finance Developer Contributions Impact Fees Capital Expenses Fund Negotiated Exactions Capital Expenses Fund Special Assessments Special assessment Districts Capital Expenses Fund or Finance Business Improvement Districts Capital or Maintenance Fund or Finance Sales tax Districts Capital or Maintenance Fund or Finance Land Value Taxes Capital or Maintenance Fund or Finance Fees Transportation Utility Fees Operation & Maintenance Fund Incremental Growth Tax Incremental Finance Capital Expenses Fund or Finance Transportation Reinvestment Zones Capital Expenses Fund or Finance Tax Allocation District Capital Expenses Fund or Finance Joint Development At Grade Capital Expenses Fund or Finance Below grade Capital Expenses Fund or Finance Above grade (Air Rights) Capital Expenses Fund or Finance Concession Asset Recycling Capital Expenses Fund or Finance Advertising Advertising Capital or Maintenance Fund Naming Rights Capital or Maintenance Fund
  38. 38. Value Capture Implementation Team 38 Developer Contributions/Impact Fees Osceola County Florida ▪ A one-time fee assessed on new development - Intended to pay the cost of expanding & extending public services resulted from new development - Assessed at the time a building permit is issued and are paid prior to the issuance of a Certificate of Occupancy ▪ Used for roadways, less frequently used in transit ▪ Example: Osceola County, Florida - Used impact fees to pay for the $1B County Road & Bridge Program - Boosted the County economy - Sped up delivery & save money
  39. 39. Value Capture Implementation Team 39 Special Assessments/Special Assessment District ▪ A special fee levied on property owners to pay for infrastructure development ▪ Specific geographic area ▪ Assessed against those properties receiving benefit from the improvement ▪ Example: Route 28 Corridor Improvements in Virginia - Covers 10,204 acres of land, in an appx. 14-mile-long corridor - Maximum tax rate of $0.20 per $100 of assessed value - Special assessment district funded 75% of the $139 M project cost
  40. 40. Value Capture Implementation Team 40 Fees/Transportation Utility Fees ▪ Applies to all residents and businesses ▪ Pays by property occupants rather than property owners ▪ Bases on the estimated number of roadway trips generated by a property ▪ Fees are typically added to city utility bills ▪ Example: City of Hillsboro, Oregon - Used Transportation Utility Fee to pay for street repairs, routine maintenance, and pavement preservation - Saved money and extended the life of pavement by almost 50% Photo Credit to City of Hillsboro
  41. 41. Value Capture Implementation Team 41 $ Incremental Growth: Tax Incremental Finance Property tax base is frozen when TIF is created Local government jurisdictions continue to collect tax revenue on that tax base PostTIFpropertytax revenueavailablefor localgovernment jurisdictions Property Tax Revenue 25 years TIF TIF Terminated Redevelopment stimulates increase in property value N e w T a x B a s e As properties redevelop and develop, tax revenue increases used to pay for eligible costs ▪ Within a defined geographic area or zone ▪ Authorized by state statutes in 49 states and the District of Columbia
  42. 42. Value Capture Implementation Team 42 Incremental Growth: Tax Incremental Finance ▪ Example: $4.8 B Atlanta Beltline project, George − Adopted in 2005; Sunset in 2032 (25 years) − Utilized 22-miles unused freight ROW − Social: 5,600 Affordable Housing Units of 28,000 residential units − Economic: $20 B in annual new economic development tax revenue including 30,000 permanent jobs − Environmental: Reduce Carbon foot print by 665,000 metric tons annually ▪ Offers a source of long-term revenues and generates significant “gap financing” ▪ Flexible, powerful tool to foster high quality development and redevelopment
  43. 43. Value Capture Implementation Team 43 Joint Development: Air Rights ▪ Involves a partnership between a public entity and a private developer to develop certain infrastructure assets ▪ Sale/lease of development right over a transit station or the highway ▪ Plays key role in some urban projects ▪ Example: Capitol Crossing Project, Washington, D.C. − Sold the right to develop above the I-395 to the developer in 2012 − Captured: o $120 M at the time financial closed o $270 M improvements o $40 M in new property taxes o Creates 8,000 permanent jobs, 51% fills by the district residents o Reconnects the two long divided neighborhoods https://www.fhwa.dot.gov/ipd/project_profiles/
  44. 44. Value Capture Implementation Team 44 Concession: Asset Recycling ▪ A long-term lease of existing highway facility (i.e. toll facility) and use of the lease revenues to pay for other highway improvement needs ▪ U.S. experience with infrastructure asset recycling is limited ▪ Example: $3.8 B Indiana Toll Road, Indiana − 75-year agreement, the right to operate the toll road − Received $3.8 B upfront money − Funded 10 transportation plan − Retained all public employees ▪ Other examples: https://www.fhwa.dot.gov/ipd/value_capture/project_profiles/ Source: Atkins Acuity
  45. 45. Value Capture Implementation Team Value Capture is …… ▪ A set of powerful funding tools that can help address funding gaps (USDOT supports Value Capture) ▪ Can be part of the mix of funding sources for transportation improvement solutions ▪ Can accelerate project delivery, enhance safety, and save time and money when done properly 45 Value Capture Summary
  46. 46. 46 Ingredients of a Successful Value Capture Project Identify Needs Long-Range CIP Strategic Plan Identify Funding & Financing Implement Projects & Programs Annual Capital Budget Five-Year CIP Plan Capital Improvement Plan
  47. 47. Value Capture Implementation Team State Transportation Innovation Council (STIC) Incentive ▪ Up to $100,000 per STIC per year to standardize an innovation https://www.fhwa.dot.gov/innovation/stic/ Accelerated Innovation Deployment (AID) Demonstration ▪ Up to $1million available per year to deploy an innovation not routinely used https://www.fhwa.dot.gov/innovation/grants 47 EDC-5 Funding Opportunities
  48. 48. EDC-5 Value Capture Implementation Team 48 Questions & Answers Thay Bishop, Senior Program Advisor Center for Innovative Finance Support E-mail: Thay.Bishop@dot.gov Tel: 404-562-3695
  49. 49. Time for Your Questions and Comments! How to enter them into the Chat box: • Below the Chat window, use the drop-down menu to select the recipient of the message: All - Entire Audience OR Organizers only (Megan & Carrie) • Type your message in the text field, then click Send. ONTHEROADTOPROSPERITY
  50. 50. Thank you! ONTHEROADTOPROSPERITY • Webinar slides and recording will be available on RuralTransportation.org • Final Virtual Peer Exchange: How transportation technologies are meeting mobility and economic development needs in rural and small urban communities • Coming this spring—watch for info! • Questions or suggestions? Contact megan.e.mcconville@gmail.com or ckissel@nado.org