Fairfax County Board of Supervisors Moves Forward on Federal Loan to Help Pay for One Third of Dulles Rail Project
May 14, 2013
Fairfax County took the first step today towards applying for a joint $1.9 billion federal loan that will help pay for about a third of the Silver Line’s total costs.
Today, the Board of Supervisors agreed to back the loan with money from the tax district for the rail line’s second phase and commercial and industrial taxes. It also signed off on getting a credit rating for these two sources of collateral—a key precondition to apply for the loan.
This loan offers flexible terms and very low interest rates—potentially better than those found on Wall Street.
The money would come from the U.S. Department of Transportation under the Transportation Infrastructure Finance and Innovation Act (TIFIA). Fairfax, along with the project’s other partners, would apply for the money jointly.
DOT Secretary Ray LaHood, who is expected to step down soon, has strongly supported this loan for the estimated $5.9 billion rail project. While the project’s partners still must formally apply for the loan, county officials hope to have the money in hand as early as the end of the year if the loan is approved.
“The opportunity for a TIFIA loan is a huge benefit for the Silver Line project,” said Fairfax Board of Supervisors Chairman Sharon Bulova. “It will keep costs affordable for motorists using the Dulles Toll Road and help both Fairfax and Loudoun Counties with our funding plans. I thank Secretary Ray LaHood for his personal involvement in making the Silver Line happen.”
By previous agreement, Fairfax would receive $475 million from the loan if it’s granted. This amount equals almost 45 percent of the county’s more than $1 billion contribution to build both legs of the new rail line.
However, the loan’s biggest beneficiary would be the Metropolitan Washington Airports Authority. It would get $1.3 billion. The remainder would go to Loudoun County.
The loan offers interest rates comparable to a 30-year U.S. Treasury note. Federal rules also allow the county to defer payments for five years after the project is finished. Because the Silver Line is expected to be completed in 2018, Fairfax could wait to pay until 2023. This would allow the county to fund other projects during this time.
The county plans to use the Dulles Rail Phase 2 Tax District as primary collateral. However, TIFIA loans must be backed by collateral with an AA category rating, per the U.S. DOT guidelines specific to the project.
County officials anticipate that the tax district will only garner an A category rating while the C&I fund likely will get an AA rating. As a result, the county needed to pledge commercial and industrial (C&I) tax revenues as a back-up to the tax district.
If neither funding source achieves an AA category rating, Fairfax promised to repay the loan with money from its general fund. If this money is spent, it could be repaid by extending the life of the Phase 2 Tax District or from the C&I fund.
However, officials are confident even with conservative growth assumptions that the portion of the loan for the tax district can be repaid completely by tax district tax collections alone, which will have $34 million in its coffers by the end of FY 2014.
The county’s share for the total rail project is estimated at $1.06 billion. Of this amount, $730 million—or almost 70 percent—will be paid for by the two voluntary, special tax districts created by landowners.
In the Phase 1 Tax District, landowners agreed to pay up to 29 cents per $100 of the assessed value of commercial and industrial properties, up to a total of $400 million. Phase 2 District property owners agreed to pay up to 25 cents per $100, up to a total of $330 million.
The estimated total cost for the entire rail project comes in at $5.9 billion dollars. The project’s partners agreed to split total costs as follows: 16.1 percent by Fairfax County; 4.8 percent by Loudoun County; 4.1 percent by the Metropolitan Washington Airports Authority; and 75 percent (less any federal and state funding) by Dulles Toll Road revenues.
The TIFIA loan was element to the 2011 revised financing deal for the rail project.
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