Feds float first TIFIA loan for transit-oriented development

The U.S. Department of Transportation Wednesday announced its first-ever Transportation Infrastructure Financing and Innovation Act loan for a transit-oriented development project.

The loan marks the first of what's likely to be several similar loans from the USDOT's Build America Bureau, which supports transportation development with a variety of financing structures, including public-private partnerships and private activity bonds.

The 2021 Infrastructure Investment and Jobs Act expanded the type of TOD projects eligible for TIFIA loans, and in 2022, the program was expanded to allow TIFIA loans to finance up to 49% of eligible transit projects. The traditional cap was 33%.

TODs aim to encourage growth along transit corridors with public buildings or housing near modes of public transportation like light rail, subways and busy bus routes.

"TOD is a new but fast-growing category," the bureau said in a release announcing the loan, which will go to a project in Mount Vernon, Wash. The bureau has 20 TOD projects under development and two in the credit underwriting process, ranging from public buildings to affordable housing to community redevelopment.

"In total, requests are more than $12 billion in long-term financing, currently representing one-third of the bureau's pipeline of projects to be financed," the agency said.

The new loan totals just under $26.8 million with an interest rate of around 2.5%, half the Treasury rate. It's going through the TIFIA's Rural Project Initiative, and as a rural project, DOT waived the bureau's external advisor fees, which could require an initial $250,000 deposit. TIFIA loans are generally 35 years long, although some projects are eligible for 75-year terms under the IIJA.

Build America Bureau executive director Morteza Farajian Wednesday highlighted the loan at a Brookings conference in Washington, D.C., saying that the project qualified as it was under $100 million and located in a city with a population under 150,000.

"We cut the interest rate to half [and] we gave them a loan that is going to cover almost half of their project costs," Farajian said. "Guess what's the rate — half of Treasury rate yesterday," he said.

In a statement, Transportation Secretary Pete Buttigieg said the loan "is the first of what we hope will be many TOD loans that will make vital resources more accessible to more people, especially historically overlooked communities."

The city said it saved $3 million over "traditional financing" with the loan. "The length of the loan and incredible interest rate made our project doable with our city budget," said Jill Boudreau, the project administrator.

The Mt. Vernon Library Commons Project in Washington state includes a multi-use building in downtown Mt. Vernon, near transit stop, with a public library, community center, kitchen, parking garage, computing space, and electric vehicle chargers. The project, which is set to be completed this summer, "is a catalyst for economic development in the Cascadia Innovation Corridor along the Interstate 5 corridor between Seattle and Vancouver, BC, and represents a $53 million investment in the local economy," according to the city's website.

The DOT also awarded the city $12.5 million through the Infrastructure Investment and Jobs Act's electric vehicle charging program to install EV charging ports in the parking garage.