Subway loan moves forward

July 11, 2011

U.S. Senators Barbara Boxer and Dianne Feinstein issued a joint press release on July 6 announcing that the U.S. Department of Transportation (USDOT) was taking a major step toward approval of a $640.8 Transportation Infrastructure Finance and Innovation Act (TIFA) loan for the Westside Subway Extension.

The expansion of the TIFIA program is a centerpiece of Metro’s America Fast Forward initiative, which also calls for the creation of a Qualified Transportation Improvement Bond (QTIBs) program.

"Today's announcement is a critical step towards creating an ambitious, multi-faceted transit network and putting Angelenos back to work,” Mayor and Chair of the MTA Antonio Villaraigosa said. “With this latest, generous loan commitment from the federal government, we will extend the Metro Purple Line from Koreatown to Century Cityall the way into Westwood, better serving the 300,000 commuters that pour into these job centers every day and putting approximately 40,000 Angelenos back to work.”

“As Mayor and Chair of the MTA, I will continue to push Congress and the Administration to provide Los Angeles and cities across the country with the innovative financing tools we need to accelerate construction of transportation projects and create nearly 1 million jobs nationwide when we need them most,”  Mayor Villaraigosa said.

TIFIA loans, when paired with the suggested bond program, hold the promise, as outlined in the America Fast Forward initiative, of dramatically accelerating the construction of Metro highway and transit projects.

On March 1, 2011, Metro had written a letter of interest to the USDOT outlining our interest in a TIFIA loan for the Westside Subway Extension and the Regional Connector. What occurred today is that the USDOT selected the Westside Subway Extension [and seven other projects] from a pool of 34 project sponsors that were seeking a total of over $14 billion in TIFIA loans to help finance some $48 billion of new capital investments.

Metro must now submit a final TIFIA application with USDOT and await formal approval of our Westside Subway Extension loan over the next several months.

The TIFIA program is designed to fill market gaps and leverage substantial private and other non-federal co-investment by providing supplemental and subordinate capital to projects.

The TIFIA program offers project sponsors the following advantages:

·        Long-term loans at the comparable U.S. Treasury yield.

·        Ability to lock in the interest rate several years in advance of a drawdown, without any additional cost.

·        Right to prepay loan draw downs in whole or in part at any time, without penalty.

·        Potential willingness of USDOT to accept more flexible terms, such as back-loading debt service to reflect anticipated growth in the pledged revenue stream, and thinner debt service coverage margins than required to obtain an investment-grade rating in the capital markets.

·        Diversified source of debt capital (U.S. Treasury as lender), reducing market saturation.

·        Lower transaction costs.

Metro staff (finance and construction) will work to specifically outline the impact of this TIFIA loan on the Westside Subway Extension project.  

This effort will include how the TIFIA funds will be spent and the impact the loan will have, when paired with New Starts funds and a prospective low-interest federal bond program, on the timeline for building the subway to its terminus at the Veterans Administration Hospital in Westwood.

The Source's Steve Hymon says, "Under Measure R and the agency's long-range plan, Metro is planning to build the subway in three phases: to Fairfax by 2019, Century City by 2026 and Westwood by 2036."