Financing Program Could Benefit from Increased Performance Focus and Better Communication
GAO-12-641: Published: Jun 21, 2012. Publicly Released: Jul 23, 2012.
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.
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 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.
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Recommendations for Executive Action
Status: Closed - Implemented
Comments: The Transportation Infrastructure Finance and Innovation Act (TIFIA) program provides federal credit assistance to finance surface transportation projects including highway, transit, rail, port access, and intermodal projects. In 2012, we reported that DOT has identified goals and objectives for the TIFIA program, including leveraging federal funds and encouraging private co-investment. However, we found that DOT did not systematically assess whether its TIFIA portfolio as a whole is achieving program goals. We recommended that DOT further develop and define performance measures to monitor and evaluate progress toward meeting the program's goals and objectives in order to improve the implementation of the program and enable both Congress and DOT to better assess program performance. DOT has taken steps to better measure to degree to which the TIFIA portfolio is meeting program goals. In its 2012 biennial Report to Congress, DOT expanded the information presented on whether the TIFIA program is attaining key goals. In particular, the report now includes data on the amount of private debt and equity-a measure of private co-investment-and the size of a TIFIA loan as a percentage of total project cost-a measure of leveraging federal funds-for all projects in the TIFIA portfolio. DOT then updated information on these two measures in its fiscal year 2015 budget justification. DOT officials also told us they plan to report on these measures in future biennial reports and budget documents, which demonstrates that DOT is tracking these measures over time. By developing and tracking performance along these measures over time, DOT will be better able to evaluate the program's overall progress toward meeting its goals and determine whether adjustments need to be made to in its administration of the TIFIA program.
Recommendation: To improve the implementation of the TIFIA program and enable Congress and DOT to better assess program performance, the Secretary of Transportation should further develop and define performance measures to monitor and evaluate progress toward meeting the program's goals and objectives.
Agency Affected: Department of Transportation
Status: Closed - Implemented
Comments: The Transportation Infrastructure Finance and Innovation Act (TIFIA) program provides federal credit assistance to finance surface transportation projects. Though underutilized for most of its history, interest in the program increased substantially starting in fiscal year 2008 due to several factors, including the growing demand for infrastructure investment relative to available transportation funding and the economic downturn. In 2012, we reported that many recent applicants and financial and legal advisors that assist applicants in developing projects felt that the TIFIA selection and approval process which has as a first step submitting a letter of interest (LOI) for a project lacked transparency. For instance, recent applicants we surveyed and interviewed expressed concerns about the lack of transparency with which the Department of Transportation (DOT) applies statutory criteria to select LOIs to advance and the uncertainty of the timing of the process. Therefore, we recommended that DOT better disclose information, through notices of funding availability or other program guidance, regarding how DOT evaluates and selects projects to ensure that the process is transparent to Congress, applicants, and the public. After the report was issued, the TIFIA review and approval process was amended by the Moving Ahead for Progress in the 21st Century Act (MAP-21), which Congress passed and the President signed on July 6, 2012. MAP-21 removed the statutory selection criteria and expanded the statutory eligibility criteria that DOT uses to review and approve projects for credit assistance. It also set timeframes for DOT to complete certain parts of the process. With the implementation of these changes, DOT officials said that creditworthiness is now the main determinant of whether a project progresses in the TIFIA approval process and thus is the primary focus of DOT's review of LOIs. In updated versions of the TIFIA program guide and other guidance from July 2013, DOT explains in detail the staged documentation requirements and specific aspects of creditworthiness that the TIFIA office examines for a project. Moreover, DOT officials said that the TIFIA program office has taken other steps to increase the transparency of the review and approval process, like publishing and regularly updating a chart that tracks the progress of all LOIs received since the passage of MAP-21. DOT has also updated its website to underscore the importance of creditworthiness and to describe the timing of DOT actions in the approval process. Overall, the additional information that DOT has made available to the public about the TIFIA approval process has improved the transparency of the program and can help potential applicants better understand how DOT is reviewing and approving projects for federal credit assistance.
Recommendation: To ensure that future project selections in the TIFIA program are transparent to Congress, applicants, and the public, the Secretary of Transportation should better disclose information, through notices of funding availability or other program guidance, regarding how DOT evaluates and selects projects.
Agency Affected: Department of Transportation