On January 5, 2006, the United States Department of Transportation released its proposed guidelines to be followed by those seeking to obtain an allocation from the $15 billion available (until September 30, 2009) for tax-exempt financing of surface transportation and rail-truck transfer facilities to be constructed and operated pursuant to a public-private partnership arrangement. The recently enacted SAFETEA-LU reauthorization bill created this new category of "private activity bonds" under federal tax laws applicable to tax-exempt bonds. Prior to the enactment of this new provision, public-private partnership agreements were limited in their term and compensation formulas which severely hampered the ability to attract private "equity" to these projects. In addition to the requirement that projects receive an allocation from the $15 billion, there are several other conditions that must be met to ensure tax-exempt treatment of project financing. The benefit of the lower interest rate generally available for tax-exempt financing should be weighed against these limitations, one of the more significant of which is the requirement that the private borrower can not use accelerated depreciation schedules. For a discussion of the SAFETEA-LU "private activity bond" provisions, click on this link to Nossaman's E-Alert titled "‘SAFETEA—LU' Promotes Private Investment in Transportation" sent July 19, 2005.
Under the proposed guidelines, applications for an allocation from this "private activity bond" authorization must be submitted to US DOT and are not restricted in form or content. However, the guidelines suggest that applications contain basic information about the applicant, the project, the amount of financing requested, the project schedule, the financial plan, the amount of federal funding expected to be received and project readiness.
According to the proposed guidelines, "…applicants should note that there are no specific standards, beyond those set forth in applicable laws or regulation, that apply to the consideration of the applications." US DOT does seem particularly concerned about the issuance of the tax exempt securities "…in timely fashion", with the potential for withdrawal of the allocation if the agreed-upon financing schedule is not met.
Applications for allocations, as well as comments to the proposed guidelines (which may be submitted at any time), should be sent to Mr. Jack Bennett, U.S. Department of Transportation, Office of the Assistant Secretary for Transportation Policy, Office of Economic and Strategic Analysis (P-20), 400 Seventh Street, SW., Washington, DC 20590, Fax: 202-493-493-2251.
For more information, please contact Barney Allison at (213) 612-7847 / email@example.com.