USA Trends and Developments Contributed by: John D. O’Neill, Jr., David B. Horner, Andrej Micovic and Ryan Pedraza, Hunton Andrews Kurth LLP
The PABs programme, which authorises the Secretary of Transportation to allocate these tax-exempt bonds for qualified surface transportation projects, was cre - ated in 2005 with an initial volume cap of USD15 bil - lion as part of the Safe, Accountable, Flexible, Effi - cient Transportation Equity Act. Congress increased the cap in 2021 to USD30 billion as part of the IIJA. To date, USDOT has allocated PABs authority to 47 transportation projects across the United States, including GDOT’s SR 400 and I-285 express lanes projects and TDOT’s I-24 Choice lanes project. The most recent allocation made by USDOT, to GDOT’s I-285 express lanes project, has exhausted the current USD30 billion cap. Despite the success of the PABs programme in attracting private investment, as evidenced by the number of projects that have received PABs alloca - tions and the increase to the overall cap provided by Congress just five years ago, the version of the BUILD America 250 Act passed by the House Transportation and Infrastructure Committee does not include any increase to USDOT’s current volume cap on PABs. Unless Congress adds capacity during the legislative process, the lack of additional PABs authority could constrain the financing of future transportation P3s. Although projects may be financed without PABs, replacing tax-exempt debt with taxable financing may materially increase debt-service costs, reduce proceeds and require additional public funding or sponsor equity. While we have seen an increased utilisation of qualified 501 (c)(3) bonds as a tax-exempt financing source for certain availability payment-based P3 projects, these bonds are untested in the demand risk space. We expect that they will be more difficult to implement for demand- risk concessions because the concessionaire’s right to retain toll revenues and bear traffic and revenue risk may be treated as impermissible private business use or a prohibited net-profits or net-loss arrangement. TIFIA The TIFIA programme was created by Congress in 1998 as part of the Transportation Equity Act for the 21st Century. The programme, which is administered by the Build America Bureau (the “Bureau”), an office within USDOT, offers direct loans, loan guarantees
and standby lines of credit to support eligible projects. Many large-scale surface transportation projects, including highway, transit, railroad, intermodal freight and port access, are eligible for credit assistance through the TIFIA programme. Eligible applicants include state and local governments, transit agen - cies, railroad companies, special authorities, special districts and private entities. TIFIA direct loans serve as junior or subordinated debt, subject to a statutorily mandated springing lien provision that elevates the TIFIA loan to parity with senior debt in the event of a borrower insolvency. TIFIA direct loans offer a number of favourable terms, including: • fixed interest rates tied to US Treasury rates; • the ability to finance a substantial percentage of eligible project costs; • no accrual of interest until proceeds are drawn; • ability to defer principal and interest payments for up to five years after substantial completion of the project; • flexible amortisation (up to 35 years, with 75-year repayment periods available in certain circum - stances); and • no pre-payment penalty. As of June 2025, the Bureau’s loan portfolio (including both TIFIA loans and loans made pursuant to the Rail - road Rehabilitation and Improvement Financing Pro - gram) was an estimated USD37.2 billion, and included loans for roadway, transit, rail, airport, port and other types of surface transportation infrastructure projects. The Bureau’s portfolio included 12 managed lanes projects, with ten of these projects open to traffic and generating toll revenue. In July 2025, USDOT announced a policy update to the TIFIA programme that allows all types of transpor - tation projects to finance up to 49% of eligible costs using TIFIA loan proceeds. Prior USDOT policy limited the 49% leverage to specific projects (including pro - jects undertaken in rural areas and select transit and transit-oriented development projects), while capping the maximum leverage available for all other projects to 33% of eligible project costs. The ability to finance
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