Financing Freight Improvements
Glossary of Terms
63-20 Corporations – Corporations established under IRS Revenue Rule 63-20, which permits nonprofit corporations other than solely governmental bodies to issue tax-exempt debt.
Airport Improvement Program – FAA program that provides funding for airport planning and development projects at airports included in the FAA AIP Handbook.
Allocations – Method of delivering Federal-aid Highway Funds without a codified formula. Allocated federal funds are distributed, at the discretion of the U.S. DOT Secretary, to states based on specific selection criteria serving specific program goals identified by Congress or distributed to projects identified by Congress through "earmarking."
Apportionments – Federal funds distributed to states by Congressionally designed formulas. Includes FHWA programs such as Bridge (HBRR), Congestion Management and Air Quality (CMAQ), Interstate Maintenance (IM), National Highway System (NHS), Surface Transportation Program (STP), Highway Safety Improvement Program (HSIP), and Corridor Border Infrastructure Program (CBI).
Assessment District – A special district created where additional property taxes are levied to generate revenue used for a specific purpose such as infrastructure improvements. Often implemented using tax increment financing techniques.
Authorization Act – In most recent years, a multiyear substantive legislation that establishes or continues federal programs or agencies and establishes an upper limit on the amount of funds made available for the program(a) for a certain period (historically, four to six years). The current authorization acct for surface transportation programs is the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU; PL 109-59).
Bidding Process – Process in which transportation agency requests contractors to submit proposals for the construction of transportation infrastructure. Usually, a contractor is selected based on best value determined and the lowest cost proposal.
Bridge Program – Provides funding for replacement, rehabilitation and systematic preventive maintenance of the Nation's highway bridges.
Brownfield Revitalization Program – A program of the Environmental Protection Agency that provides grants or loans for brownfield site cleanup.
Capitalization – Process of depositing funds as seed capital into a State Infrastructure Bank (or for other state/local loan programs) to enable financial assistance.
Concession – Long-term agreement in which the private sector obtains the rights to operate and collect revenues on a transportation facility.
Congestion Mitigation Air Quality (CMAQ) Improvement Program – Provides funding for transportation projects and programs that improve air quality in nonattainment and maintenance area for ozone, carbon monoxide, and particulate matter by delivering transportation improvements that lead to measurable reductions in highway-based emissions.
Corridor Border Infrastructure Program – Program designed to improve the safe and efficient movement of motor vehicles at or across the land border between the United States and Canada and the land border between the United States and Mexico.
Credit Enhancement – Financial guarantees or other types of assistance that improve credit of underlying debt obligations. Credit enhancement has the effect of lowering the interest costs and improving marketability of bond issues.
Credit Ratings – Credit quality evaluations of bonds and notes made by independent rating services. A higher bond rating generally lowers the interest rate that the borrower must pay, and therefore, overall capital costs.
Debt Service – The amount of money necessary to pay principal and interest on a debt instrument (i.e., a bond or loan).
Dedicated Revenues – Funding source funded through certain deposits for funding specific purposes and includes repayment of debt, and may include tolls, lease income, or dedicated taxes (e.g., motor fuel taxes, or sales taxes).
Economic Development Administration Funds – A U.S. Department of Commerce program that provides grants for projects in economically distressed industrial sites that promote job creation and/or retention.
Equity – Commitment of money from public or private sources for project finance, with a designated rate of return target.
Fixed Guideway Modernization Program – Federal Transit Administration program that provides funding for capital improvements on "fixed guideway" systems, including heavy rail, commuter rail, HOV systems, and light rail.
Flexible Match – Any non-federal match that is allowed under FHWA laws and regulations other than state and local cash contributions to a project. Flexible match permitted include use of private cash and in-kind contributions, publicly owned right-of-way, and funds from other federal agencies.
General Obligation (G.O.) Bond – A security backed by the full faith and credit of a state, locality, or other governmental authority. In the event of default, holders of G.O. bonds have the right to compel a tax levy, other borrowing, or legislative appropriation in order to satisfy the debt obligation.
Grant Anticipation Revenue Vehicle (GARVEE) – A GARVEE is any bond or any other form of debt repayable, either exclusively or primarily, with future federal aid highway funds under Section 122 of Title 23. Although the source of payment is federal aid fund, GARVEEs cannot be backed by a federal guarantee, but are issued at the sole discretion of, and on the security of, the state issuing entity.
Harbor Maintenance Fund – A U.S. Army Corps of Engineers program that provides funding for operations and maintenance of federally authorized channels for commercial navigation.
Highway Safety Improvement Program (HSIP) – Program established under SAFETEA-LU consolidating several safety-based highway programs and creating new safety programs designed to achieve a significant reduction in traffic fatalities and serious injuries on all public roads.
In-Kind Contributions – Contributions employed in funding a project other than cash (including land and professional services) usually used to meet non-federal share payable (match) program requirements.
Interest – Sum paid for the use of capital.
Interstate Maintenance Program – Provides funding for resurfacing, restoration, rehabilitation, and reconstruction (the four "R's") of Interstate System facilities.
Intermodal Connectors – Roadways providing a connection major, intermodal facilities and routes designated as part of the National Highway System.
Investment-Grade Traffic and Revenue Study – Detailed study of current travel demand levels and forecasts of future traffic levels used in estimating potential revenues required to support project financing and bond issuance of toll projects.
Joint Development – Any formal arrangement between a public entity and a private organization that involves either private sector payments to the public authority or the private sector sharing project capital costs.
Junior Debt – Debt having subordinate or secondary claim on an underlying security or source of payment for debt service, relative to another issue with a higher priority claim (e.g., Senior Debt).
Letter of Credit – An instrument or document issued by a bank guaranteeing debt holder payment by enabling the bond trustee to draw from the bank the full amount of principal and interest due on each debt payment date.
Leverage – A financial mechanism used to increase available funds usually by issuing debt (typically bonds) or by guaranteeing or otherwise assuming liability for others' debt on an amount greater than cash balances.
Liability – Amount owed (i.e., payable) by an individual or entity, such as for terms received, service rendered, expenses incurred, assets acquired, construction performed, and amount received but not yet earned.
Line of Credit – A form of loan to be used only in the instance of a shortfall in net revenue debt service or other financial commitment (i.e., a contingent loan). A line of credit, while similar to a letter of credit, is security available directly to the borrower/project sponsor with flexibility in the use of funds.
Loan – Legally binding document which obligates a specific value of funds available for disbursement. The amount of funds disbursed is to be repaid (with or without interest and late fees) in accordance with the terms of a promissory note and/or repayment schedule.
Long-Range Transportation Plan (LRTP) – Transportation plan developed for Urbanized Areas (population greater than 50,000) that covers at least a 20-year period and includes both short- and long-term strategies and actions that develop and maintain an integrated, intermodal transportation system. LRTPs are developed at statewide and metropolitan areas. In metropolitan areas, the LRTP must be constrained to reasonably available funding sources. In air quality nonattainment and maintenance areas the metropolitan LRTP must conform to air quality State Implementation Plans. The plan must conform to regional air quality implementation plans, where applicable. The plan must be constrained to available funding resources.
Municipal Bonds – Interest bearing obligations issued by state or local governments to finance operating or capital costs. The principal characteristic that has traditionally set municipal bonds apart from other capital market securities is the exemption of interest income from Federal income tax.
National Highway System (NHS) – The NHS is approximately 160,000 miles (256,000 kilometers) of roadway important to the nation's economy, defense, and mobility designated by Congress. The National Highway System (NHS) includes the following subsystems of roadways: 1) Interstate; 2) other principal arterial; 3) Strategic Highway Network (STRAHNET); 4) major strategic highway connectors providing access between major military installations and STRAHNET; and 5) intermodal connectors (see definition).
Non-Federal Match – The commitment of state or other non-federal funds required to receive federal funds where non-federal share payable apply.
Pay-As-You-Go Financing – Describes government financing of capital projects from current revenues or grants, rather than by borrowing.
Principal – Amount loaned to the borrower and owed to the lender which excludes interests, penalties, administrative costs, loan fees, and prepaid charges.
Private Activity Bonds – Tax-exempt bonds issued by states and local governments for projects sponsored by a private entity.
Project Revenues – All rates, rents, fees, assessments, charges and other receipts derived by a project sponsor from a project.
Public-Private Partnerships (PPP) – Contractual agreement between a public agency and the private sector that allows for greater private sector participation in the delivery of transportation projects.
Rail Line Relocation Grant Program – New federal funding program that provides grants to states for local rail line relocation and improvement projects. No funding appropriations were provided for fiscal year 2006.
Rail Rehabilitation and Improvement Financing (RRIF) – RRIF is an FRA program that provides loans and credit assistance for acquisition, development, improvement, or rehabilitation of intermodal or rail equipment and facilities.
Rail-Highway Crossing Program – Provides funding for projects that reduce the number of fatalities and injuries at public highway-rail crossings.
Revenue Bonds – Bonds whose principal and interest are payable exclusively from earnings of a public enterprise.
Revolving Fund – Financing tool that recycles funds by providing loans, receiving loan repayments, and then providing further loans.
Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) – Current transportation authorization act, signed into legislation in August 2005 (PL 109-59) providing for transportation programs continuity through FY 2009.
Senior Debt – Debt obligations having a priority claim on the source of payment for debt service.
Shadow Tolls – Per vehicle amounts paid to a facility operator by a third party such as a sponsoring governmental entity and not directly by facility users. Shadow toll amounts paid to a facility operator can be based upon the type of vehicle and distance traveled.
State Infrastructure Bank (SIB) – A state or multistate revolving fund that provides loans, credit enhancement and other forms of financial assistance to surface transportation projects.
State Transportation Improvement Program (STIP) – A short-range transportation planning document developed by state DOTs, in cooperation/consideration with MPOs, tribal governments, and nonmetropolitan local officials. The STIP includes prioritized projects/project phases that cover at least four years and is developed at least every four years. Projects in the STIP must be consistent with LRTPs. In addition, the STIP must be financially constrained (achievable within existing or reasonably anticipated funding sources).
State/Local Match – Funding required to match federal funding and discretionary funds. Requirements toward this non-federal share payable funding is provided in 23 USC Section 120.
Strategic Highway Network (STRAHNET) – A network of highways important to the United States' strategic defense policy and which provide defense access, continuity and emergency capabilities for defense purposes.
Surface Transportation Program (STP) – FHWA program that provides flexible funding for projects on any federal aid highway, bridges on public roads, transit capital investments, and intracity and intercity bus terminal and facilities.
Tax Increment Financing – Financing technique in which bonds are issued to finance public infrastructure improvements, and repaid from dedicated revenues from the increase in property taxes as a result of such improvements.
Tax-Exempt Bonds – A bond, issued by a state or local government, whose interest payments are not subject to Federal income tax, and sometimes also state or local income tax.
Title 23 of the United States Code (USC) – Highway Title of the United States Code that sets forth many of the laws governing the Federal-aid Highway Program. The title embodies substantive provisions of law that Congress considers permanent and need not to be re-enacted in each new highway authorization act.
Title 49 of the United States Code (USC) – Transportation title that includes laws governing various transportation-related programs and agencies, including the U.S. DOT, general and intermodal programs, interstate commerce, rail and motor vehicle programs, aviation programs, pipeline, and commercial space transportation.
Toll Credits – Section 1044 of the Intermodal Surface Transportation Efficiency Act permitted states to apply the value of certain highway expenditures funded with toll revenues toward the required state match on current federal aid projects. States may only substitute toll credits for state match if they demonstrate that a state's prior year highway spending equaled or exceeded the average of the previous three years' expenditures.
Transportation Improvement Program (TIP) – A short-range transportation planning document developed by MPOs, in cooperation/consideration with state DOT(s), Transit Operator(s), tribal governments, and nonmetropolitan local officials. The TIP includes prioritized projects/project phases that cover at least four years and is developed at least every four years. Projects in the TIP must be consistent with LRTPs. In addition, the TIP must be financially constrained (achievable within existing or reasonably anticipated funding sources).
Transportation Infrastructure Finance and Innovation Act (TIFIA) – Federal transportation credit program enacted under TEA-21, and modified by SAFETEA-LU, that provides direct federal loans, lines of credit, or loan guarantees provided through U.S. DOT to large projects of national significance, under criteria developed by Congress.
Truck Parking Facilities Program – New program under SAFETEA-LU that provides funding for projects which address the shortage of long-term parking for commercial vehicles on the NHS.
Turnkey – A generic term for a variety of public-private partnership arrangements whereby a public sector entity awards a contract to one or more private firms to undertake the development, construction, and/or operation of an infrastructure project for a predetermined period of time before turning the project back over to the public entity. Turnkeys may take various forms, including design-build-transfer and build-operate-transfer.
User Fees – Revenue collected directly from facility users, including tolls or container fees.
