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Expanded TIFIA Changing the Loan Game for Transit

How did Los Angeles secure federal loans for projects promised by Measure R? A 14-year-old program that goes by the name of TIFIA. Now, a former Santa Monica mayor wants to see the program expand.

Los Angeles Mayor Antonio Villaraigosa (second from left) at the opening of the Metro Expo Line in April. Credit: Metro Transportation Library and Archive

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Transit advocates took note when the population of car-choked Los Angeles voted, by a 68 percent majority, to raise taxes on themselves to fund a dedicated transit expansion. Remember, the revenue was earmarked for specific projects before the tax was approved, so voters knew exactly what their money would be spent on.

Measure R, as the ballot initiative was called, instituted a half-cent sales tax for the next 30 years. It may not have sounded like much to voters, but the cumulative gain totaled $40 billion. In other words, it was a democratically approved windfall for transit. The only problem was that the city couldn’t access it all up front.

Los Angeles Mayor Antonio Villaraigosa went to Washington asking not for grants, but for loans against the future revenue that would be raised by the tax to facilitate the construction of the new subway and light rail lines now, when the people who had voted for them were still alive.

But policymakers in D.C. didn’t know how to respond to a local politician who came asking for money that would be paid back, as opposed to the other kind. As Villaraigosa told Washington Post columnist Harold Meyerson in 2010, “They laughed. They said they didn’t have a program that could do this.”

As it turns out, the feds did have a program. The problem was, it wasn’t very well known, or well funded. Founded in 1998, the Transportation Infrastructure Finance and Innovation Act loan program (TIFIA) grants loans to state, regional or transportation infrastructure projects at very low interest rates and sensible repayment terms.

Fast forward two-plus years and Congress, against all odds, did something — albeit under pressure from Villaraigosa’s America Fast Forward campaign and its attendant policies. As part of the MAP-21 transportation funding reauthorization bill approved this summer after laborious delays, TIFIA was expanded significantly.

While this year only $122 million was available to cities like L.A. seeking to borrow money for transit, $750 million will be available in 2013 and $1 billion from 2014 on. In Washington, Transportation Secretary Ray LaHood has defended the spending, arguing against the notion that it will help the federal government leverage more from local partners. “Each dollar of Federal funds can provide up to $10 in TIFIA credit assistance and leverage $30 in transportation infrastructure investment,” LaHood wrote on his department’s blog.

Denny Zane, former mayor of Santa Monica and executive director of Move LA, a transit advocacy group, applauded the move as a necessary step for cash-strapped local governments looking to make strategic long-term investments without breaking the bank. “You can borrow money for multiple projects and not just one project at a time,” Zane said. “Its like a line of credit and it means… communities can plan for their assistance knowing that they are virtually assured of getting a low interest loan for not just one, but a whole system of projects. As a result they actually plan a system instead of just one line.”

Zane argues that the TIFIA expansion can ease the political rivalries that often bedevil transit projects as multiple communities struggle over a particular line of funding. His evidence? It allowed L.A. to move forward with Measure R’s designated projects in 10 years, instead of 30. Zane believes the initial approval ratings for Measure R would have been even higher had voters known the projects could be completed in their lifetimes. The 400,000 jobs created by these large-scale transit projects are an added bonus. Good for employment and the environment, easing traffic and stimulating the local economy, and with what seems like an easily replicable model. What could be wrong with that?

But many transit advocates are fierce opponents of the TIFIA expansion which, in addition to increasing funding, also scrapped the intricate rubric by which projects were previously judged worthy of funding. Now the only concern is whether the loan can be paid back, with no requirements regarding environmental sustainability or regional need.

After the bill was passed, Streetsblog ripped into it, arguing that the changes made TIFIA “completely useless as an instrument to reward and enable innovation… It’s now first-come-first-served.” Advocates fear that highways will get the majority of funding, as transit proposals tend to be more complex than road projects and take longer to complete. There’s even the possibility that projects which failed to get TIFIA funding under the previous requirements could be resubmitted under the new standards.

For Zane, the expansion is a step in the right direction, but indeed imperfect in the way Streetsblog describes. His hope is that future negotiation will fix that loophole while maintaining the increased level of support for transportation. “It is a flawed, but it will be easier to remedy that flaw with future Congresses than it will be to find an agreement over new funding sources at the federal level,” Zane said. “The TIFIA program is a big opportunity, a big step forward. But there are more steps.”

One key bit of progress is the program’s regional approach, which allows multiple projects in an area to move forward simultaneously. This can be particularly useful in transit areas that encompass multiple political jurisdictions (Philadelphia’s SEPTA, for example, serves seven counties in three states). It also allows for the easing of suburban/urban tensions, as funding becomes realistic for both, say, new bus routes and commuter rail maintenance and construction. TIFIA also has the added bonus of stimulating local and regional funding sources.

“I believe that there is a great deal more capital in the aggregate among metropolitan communities than there is capital available at the federal level,” Zane said. “If the goal of the federal program is to stimulate investment in transit or transportation broadly, there is good reason to think that a loan program with many more winners can stimulate more planning and more investment from communities, where the real money is.”

Advocates and policymakers in other urban areas are just as taken with this model. Zane seems to be constantly taking questions from across the country, as others try to emulate the L.A. model to bolster transit in their own regions. When I spoke with him he was in Boston, talking with a group of parties interested in taking advantage of the opportunity represented by TIFIA. He would soon be on the way to New York for a similar meeting. Zane has fielded calls from Minneapolis and Seattle along similar lines.

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Jake Blumgart is a senior staff writer at Governing.

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Tags: infrastructurepublic transportationlos angelestransit agencieslight railray lahoodantonio villaraigosamap-21

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