TIFIA Loan Refinancing in Pursuit of Major Savings

October 13, 2020

Back in April of last year, the San Bernardino County Transportation Authority (SBCTA) Board of Directors (Board) approved a $225 million Transportation Infrastructure Finance and Innovation Act (TIFIA) loan with the United States Department of Transportation (USDOT) to fund the Interstate 10 (I-10) Corridor Contract 1 Project (Project). The loan closed with an interest rate of 2.93%, and an interest cost of $177 million. The significant reduction in the US Treasury Rate over the past few months has provided an opportunity for the USDOT to lower the interest rate to about 1.36%,with an estimated total interest cost of $75 million, reflecting a potential savings of more than $100 million for the 30-year term of the loan. The final rate will be determined at time of closing.

The USDOT reached out to SBCTA staff to provide information on refinancing the TIFIA loan to lower the interest rate. The initial step required to refinance the loan is for SBCTA to issue a Letter of Interest (LOI) to USDOT. The LOI contains the required project information, including the cost, benefits, and schedule, to enable USDOT to determine whether the Project is eligible for refinancing. An indicative rating letter will be included from one of the two credit rating agencies involved with the original loan. This rating letter would indicate that the rating agency has reviewed the financial information for the Project, and that the Project’s TIFIA loan has the potential to achieve an investment grade rating. Then USDOT will complete its review of the LOI and the indicative rating letter to draft a new loan agreement.

On October 7th, the SBCTA Board of Directors authorized staff to continue pursuit of the refinancing.

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