[Federal Register: December 28, 2006 (Volume 71, Number 249)]
[Notices]
[Page 78267-78268]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28de06-141]
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DEPARTMENT OF TRANSPORTATION
Federal Transit Administration
Debt Service Reserve Pilot Program
AGENCY: Federal Transit Administration (FTA), DOT.
ACTION: Notice; Solicitation of Proposals to Participate in the Debt
Service Reserve Pilot Program.
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SUMMARY: This solicitation is for proposals from pubic transportation
agencies currently receiving grant funds under the Urbanized Area
Formula Program at 49 U.S.C. 5307 to establish a debt service reserve
fund in connection with bonds to be issued in support of a public
transportation project.
DATES: Complete proposals may be submitted to FTA at any time prior to
June 1, 2009.
ADDRESSES: Proposals must be submitted electronically to
Paul.Marx@dot.gov and Katherine.Mattice@dot.gov. The subject line of
the e-mail should read: Proposal for Debt Service Reserve Pilot
Program.
FOR FURTHER INFORMATION CONTACT: Contact Paul Marx, Office of Budget
and Policy, (202) 366-1675, e-mail; Paul.Marx@dot.gov.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. General Program Information
II. Guidelines for Preparing and Submitting Proposals
III. Proposal Review, Selection, and Notification
I. General Program Information
A. Authority
Section 3023(3) of the Safe, Accountable, Flexible, and Efficient
Transportation Equity Act--A Legacy of Users (SAFETEA-LU) established
the Debt Service Reserve Pilot Program under 49 U.S.C. 5323(d)(4). This
section establishes a pilot program to reimburse not to exceed 10
eligible recipients for deposits of bond proceeds in a debt service
reserve that the recipient establishes pursuant to section
5302(a)(1)(K) from amounts made available to the recipient under
section 5307.
B. Background
Debt service reserves (generally one year's debt service
requirement) are usually required when a project sponsor issues debt
bonds) in support of its project. The debt service reserve may
represent as much as 10 percent of the face value of the bonds and must
be
[[Page 78268]]
held until the bonds mature or are substantially repaid. This
represents an opportunity cost to the public transportation provider's
capital budget. By allowing this expense to be reimbursed with grant
funds, the pilot program hopes to make the public transportation
agencies's capital programs more cost-effective, and possibly to reduce
the agencies' total cost of borrowing.
C. Eligible Applicants
Public transportation providers, who currently receive grants under
the Urbanized Area Formula Grants Program (section 5307), and issue or
intend to issue bonds for eligible transit capital projects, and who
wish to have the related debt service reserve reimbursed with funds
available to them under section 5307, must submit a proposal. For the
purposes of this pilot program there is not difference between bonds
secured with purely local funds (such as a sales tax revenue bonds) or
bonds secured with anticipated receipts of future grants fund (grant
anticipation bonds). This pilot program is not intended to apply to
public transportation agencies that issue bonds for which no debt
service reserve is needed (as when certain bond insurance is present).
These agencies may seek reimbursement of the financing costs associated
with such bonds under existing authority. The pilot program is also not
intended to apply to borrowing from a State Infrastructure Bank (SIB),
even if such a bank required a debt service reserve. FTA reads the
combination of conditions for eligibility--i.e., ``an eligible
recipient of section 5307 funds'' and ``bond proceeds deposited in a
debt service reserve''--as being prescriptive of the applicability of
this pilot program.
D. Eligible Expenses
For the purposes of this pilot program, the blood proceeds
deposited into the debt service reserve constitute the eligible costs
to be reimbursed with section 5307 grant funds. Subsequent debt service
payments and project costs will remain eligible for reimbursement, as
authorized under section 5307. Thus, the sole effect of this authority
is to accelerate the reimbursement for the debt service reserve.
E. Matching Requirements
The Federal share for capital expenses, including payment of the
debt service reserve, may not exceed 80 percent. All local and state
revenues generally are eligible for inclusion in the local match with
the exception of farebox and farebox-related revenues.
F. Proposal Evaluation Criteria
Proposals from eligible Urbanized Area Formula grant recipients
will be evaluated on the following basis.
The proposal involves a bond issuance to occur within one
Calendar Year.
The proposal includes a clear financial goal to be
achieved by the bond issuance.
The bond issuance is likely to be rated (prior to any bond
insurance) at least ``investment grade'' (i.e., BBB+, Baa or higher).
Without limitation, the bond issuance may be for revenue
bonds secured solely by farebox revenues, provided the sum of Federal
project reimbursement does not exceed 80 percent of eligible project
costs including the debt service reserve. (See matching requirements
above).
The proposal includes a description of the cash-flow or
project acceleration benefit anticipated from use of the debt service
reserve reimbursement.
To the extent possible from the proposals received, FTA will seek
to provide for geographic and size of public transportation authority
diversity in the approval of pilot program participants.
G. Program Requirements
Grants made for projects that include Federal reimbursement for
financing costs are subject to Federal requirements that apply to all
grants made under section 5307. This includes the requirement at
section 5307 (g)(3) that states, with regard to debt financing, the
``amount of interest allowed * * * may not be more than the most
favorable financing terms reasonable for the project at the time of
borrowing.''
II. Guidelines for Preparing and Submitting Proposals
FTA is conducting a national solicitation for proposals from public
transportation agencies wishing to participate in the Debt Service
Reserve Pilot Program. FTA will grant authority for not more than 10
agencies to use apportioned Urbanized Area Formula Grant funds to
reimburse the cost of depositing bond proceeds into a debt service
reserve. Public transportation agencies will be selected to participate
on a competitive basis. To the extent possible, FTA seeks proposals for
bond issuance to occur in calendar year 2007. However, if fewer than
ten proposals are received FTA will process proposals for bond
issuances after 2007 on a first-come first-served basis.
Proposals should be submitted electronically to: Paul.Marx@dot.gov.
and Katherine.Mattice@dot.gov.
Proposals must be received by FTA no later than June 1, 2009. The
public transportation agency designated to receive apportionments under
the Urbanized Area Formula Grants program (section 5307) will submit a
proposal that includes:
1. Applicant Information
Basic identifying information, including:
a. Agency;
b. Contact information for notification of project selection:
Contact name, address, fax and phone number.
2. Project Information
Every application must:
a. Identify the project in support of which bonds will be issued,
the amount of the bonds, the term(s) of the bonds, the source of
security for the bonds (e.g., pledged asset or revenue) and the
projected interest rate(s);
b. Provide a sources and uses of funds statement/budget for the
project, taking into account the bond issuance;
c. Document sources of funds likely to be used to match FTA funds;
d. Document the benefit to be derived from issuing the bonds, the
benefit anticipated from reimbursement of the debt service reserve, and
how the reimbursement, which constitutes program income, will be used.
e. Include a narrative portion (not more than 8 pages, double-
spaced) that addresses: the historic role of debt in the public
transportation agency's capital or operating plans, where the pilot
program proposal fits within that context, and what proportion of the
current capital plan the debt issuance and the debt service reserve
represent.
III. Proposal Review, Selection, and Notification
FTA will evaluate proposals based on the degree to which a public
transportation agency has planned and justified the issuance of bonds
or other debt to advance a transit capital project funded with section
5307 funds.
FTA expects to announce public transportation agencies selected to
participate in the pilot program in a Federal Register Notice in early
2007.
Issued on December 22, 2006.
James S. Simpson,
Administrator.
[FR Doc. 06-9912 Filed 12-27-06; 8:45 am]
BILLING CODE 4910-57-M