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Transportation Revolving Loan Fund - How it works.
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How Does TRLF Work?

 

I. Background and Purpose

In November 1995, the federal government established the State Infrastructure Bank (SIB) program through the National Highway System Designation Act. A SIB is a state or multi-state fund that can be used by eligible borrowers to finance transportation projects. The purpose of the SIB program is to attract new funding into transportation, encourage innovative approaches to financing transportation projects, and help build needed transportation infrastructure. A SIB operates much like a commercial bank. It offers loans and other types of financial assistance to eligible borrowers to finance transportation projects. When the loans are repaid, the funds are returned to the SIB and used to finance another set of projects, creating a continually expanding pool of money for transportation projects.

 

During the 1997 legislative session, the Minnesota Department of Transportation (MnDOT) proposed legislation which would create a SIB for Minnesota. On May 12, 1997, this legislation, known as the Transportation Revolving Loan Fund (TRLF) Act, was signed into law. The TRLF Act authorized MnDOT, the Minnesota Department of Trade and Economic Development (DTED), and the Minnesota Public Facilities Authority (PFA or Authority) to jointly develop and administer a SIB program. MnDOT is responsible for evaluating and certifying transportation projects to the PFA for TRLF financing. The PFA is responsible for conducting a financial evaluation of the certified transportation project applicants and setting the terms and conditions for the TRLF loans.

 

In June of 1997, the federal government authorized Minnesota to create a SIB program and appropriated the state $3.96 million in federal incentive funds to capitalize the TRLF. All federal funds deposited into the TRLF require the concurrent deposit of a non-federal match of 25% of the federal contribution.

 

II. Eligible Borrowers

Eligible TRLF borrowers include the state, counties, cities, and other governmental entities. Although private entities are not currently eligible for TRLF financing, they may be able to enter into agreements with eligible borrowers to finance eligible transportation projects.

 

III. Eligible Projects/Activities

To be eligible for TRLF financing, a project must be eligible under Title 23 or Title 49 of the United States Code and Minn. Stat. [[section]] 446A.085, subd. 2 (1998). Eligible projects include, but are not limited to, pre-design studies; acquisition of right-of-way; road and bridge maintenance, repair, improvement, or construction; enhancement items; rail safety projects; transit capital purchases and leases; airport safety projects; and drainage structures, signs, guardrails, and protective structures used in connection with these projects. TRLF financing cannot be used for any toll facilities project or congestion-pricing project.

 

IV. Types of Financial Assistance Available

Federal and state law authorize financial assistance in the form of loans, loan guarantees, lines of credit, credit enhancements, equipment financing leases, bond insurance, and other forms of financial assistance. The use of the word "loan" in this document includes all of these other types of financial assistance, unless otherwise specified.

 

V. Sources of Loan Repayment

An eligible borrower's possible sources of TRLF loan repayment include, but are not limited to, special assessments, property tax levies, tax increment financing, local government option sales taxes, future federal funds, future state funds, and customer fees from revenue-generating projects such as parking ramps and intermodal terminals.

 

VI. Project Certification and Selection Process

All proposals for TRLF projects will be required to go through the District/Area Transportation Partnership (ATP) process (a/k/a the State Transportation Improvement Program (STIP) development process). This process uses eight District/ATPs as the geographic basis for integrating transportation investment priorities within the state. Each District/ATP consists of representatives from MnDOT, Regional Development Commissions (RDCs), Metropolitan Planning Organizations (MPOs), cities, counties, transit authorities, and other transportation partners. The primary role of each District/ATP is to bring together the transportation improvement recommendations of all of these transportation partners into an integrated list for transportation investments.

 

Although the District/ATP process primarily addresses transportation projects to be advanced with federal funding in the next three years, it will also address proposed TRLF projects to be advanced solely with state and/or local funding, as well as TRLF projects which may be advanced or financed beyond the next three fiscal years.

 

District/ATPs solicit potential TRLF applicants for projects in accordance with the current STIP development schedule. Because each District/ATP has its own unique project solicitation and selection procedures, applicants must first follow the instructions set forth in the District/ATP’s TRLF solicitation letter.

 

Each District/ATP has a TRLF Coordinator to answer questions and to provide TRLF Application and Information Packets to anyone interested in the TRLF program.

 

Eligible borrowers who are interested in applying for a TRLF loan must complete the TRLF Application contained in the TRLF Application & Information Packet and submit it to the applicable District/ATP TRLF Coordinator for processing and presentation before the District/ATP. Each District/ATP may require TRLF sponsors to provide additional information not requested in the TRLF Application

 

Each District/ATP evaluates, approves, and prioritizes the applications it receives using its own regionally significant evaluation criteria. If applicants have any questions about precisely how the District/ATP will evaluate and prioritize TRLF Applications, they should contact their District/ATP TRLF Coordinator. If a proposed TRLF project is located within an MPO area, the applicant must also obtain the MPO’s approval for the TRLF Application and ensure the project is included in the MPO’s Transportation Improvement Program (TIP).

 

After evaluating the applications, each District/ATP submits its list of approved, prioritized TRLF Applications to MnDOT's Office of Capital Programs and Performance Measures (OCPPM), along with the completed applications and any supplemental information provided by the applicants. All of the District/ATPs’ TRLF lists are due April 15th along with the District/ATP Area Transportation Improvement Programs (ATIPs).

 

All of the TRLF Applications approved and submitted by the District/ATPs are then reviewed, evaluated, and integrated into a single prioritized list of TRLF projects by applying the project evaluation criteria and procedures set forth in the Minnesota Statute 446A.085 and Minnesota Rule 8805.0400. Those applications for which sufficient TRLF funds exist are certified, in priority, to the PFA. For a more detailed explanation of how MnDOT evaluates and selects which TRLF projects to certify to the PFA see MnDOT’s TRLF Project Certification Methodology included in the Appendix at the end of this document.

 

Applications not certified to the PFA will be held by OCPPM until the Transportation Committee of the PFA makes its final loan approval determination on all certified applications. If a certified application is rejected by the Transportation Committee, MnDOT will certify another application to the PFA from those being held by OCPPM. After the Transportation Committee of the PFA makes its final loan approval determination on all certified applications, applications which did not receive MnDOT certification or PFA final loan approval must be resubmitted through the District/ATP if the applicants wish to again seek TRLF financing.

 

VII. PFA Loan Approval Process

Upon receiving the prioritized list of certified TRLF projects, PFA will request that the project sponsors submit supplemental loan applications, as well as the following additional financial information (if applicable):

TRLF borrowers, other than MnDOT, will be required to provide a general obligation bond or revenue bond to the PFA to secure TRLF loans. Borrowers providing a general obligation bond or revenue bond to the PFA will be required to retain the services of nationally recognized bond counsel to prepare the bond and related documents and to render an opinion to the PFA. For borrowers providing a revenue bond for a private activity loan, the PFA will take a security interest in privately held capital assets or real property to collateralize the loan.

 

PFA staff will evaluate the TRLF Applications using the criteria set forth in Minnesota Rule 7380.0725, subp. 1. After the TRLF Applications are evaluated, PFA staff will provide a recommendation to the Transportation Committee of the PFA whether the loan should be approved, approved with special conditions, or rejected.

 

The Transportation Committee is required to reject a project if the applicant fails to assure full project financing; demonstrate financial capability to repay the loan; collateralize the loan to the extent required by the PFA; develop a dedicated source of revenue sufficient to ensure timely repayment of the loan; or demonstrate its capacity to comply with Minnesota Statutes, section 446A.085, the TRLF administrative rules, the loan agreement, and the covenants of the general obligation bond or revenue bond issued to the PFA.

When the Transportation Committee approves a loan, PFA sends the applicant a commitment letter. PFA and the borrower then proceed with entering into a loan agreement and bond closing.

 

VIII. Interest Rates

PFA will use a bond market index to establish base interest rates for TRLF loans, based on whether the borrower will provide a general obligation bond or revenue bond. PFA will provide discounts from the base interest rates to make TRLF financing a viable and attractive alternative for funding transportation projects. Cities with a population of less than 5,000 will receive an additional 1% discount. PFA will establish the applicable interest rate discount based on the demand for loans and the need to maintain the long term viability of the TRLF.

 

IX. Loan Disbursement

TRLF loan proceeds will be disbursed to the borrower on a monthly basis as project expenses are incurred. Draw down of TRLF loan proceeds will be made only upon receipt of appropriate TRLF disbursement requests and supporting documentation and compliance with Minnesota Rule 7380.0765. Also, the PFA is not allowed to release funds to a borrower until the PFA has determined that there has been no adverse change in the financial capacity of the borrower since the day of the completion of the application. The PFA has the right to suspend or terminate funding to an applicant/borrower if the PFA determines that there has been an adverse change.

 

X. Terms and Repayments

The term of the TRLF financing will be based upon the "useful life" of the assets being financed. The "useful life" of the project or the term of 30 years, whichever is less, will be the maximum term for the loan; there are no minimum terms.

 

On a TRLF loan, principal payments must commence no later than 3 years and interest payments no later than one year after the execution of the loan agreement. Capitalized interest is an eligible loan cost

 

Generally, loans will be structured as level payments over the specified term of the loan. However, depending on certain circumstances of the project, loan repayments may be structured differently over time to the extent allowed by state and federal law.

Borrowers will also be required to designate and maintain a debt service account and a dedicated source(s) of revenue sufficient to meet the principal and interest payments on the loan.

 

XI. Federal and State Requirements

All projects receiving TRLF funding must be developed, completed, and maintained in compliance with applicable federal and state laws, rules and regulations. For a more detailed explanation of TRLF project development requirements and procedures see TRLF Project Development Procedures included in the Appendix at the end of this document.

 

In addition, during the term of a TRLF loan, the borrower must cooperate and comply with all disclosure, inspection, and auditing requirements pursuant to the loan agreement and applicable state and federal law.

 

Appendix: MnDOT TRLF Project Certification Methodology

 

  1. TRLF applications are completed and submitted to the applicable District/ATP. Each District/ATP evaluates, approves, and prioritizes the applications using its own regionally significant evaluation criteria. Each District/ATP then submits its approved, prioritized applications to MnDOT’s Office of Capital Programs and Performance Measures (OCPPM).

  2. OIM staff member opens a file for each TRLF application received from the District/ATP’s, prepares a cover sheet for each application, and sends copies of each application to the members of the TRLF Application Review Committee.
    Members of the TRLF Application Review Committee; review, discuss, and evaluate each application using the evaluation criteria set forth in Minn. Stat. § 446A.085, subd. 8 and Minn. Rule 8805.0400. Each member evaluates each application on each criterion using the following scale:

    • Application highly satisfies criterion = 3
    • Application moderately satisfies criterion = 2
    • Application nominally satisfies criterion = 1
    • Application does not satisfy criterion = 0

    Each member records the evaluation value from the above scale in the appropriate box on the “Individual Evaluation Sheet” and records the reasons for each evaluation on the application cover sheet.

    The committee then totals the evaluation values from each “Individual Evaluation Sheet” and records the evaluation value totals on the committee “Ranking Sheet.” After all of the evaluation values are tabulated and totaled for each application, the committee examines the loan amount requested in each application and compares it to the amount of money available for loan in the TRLF. If there are sufficient funds in the TRLF to make the loan to the application with the highest evaluation total, the committee ranks that application #1. If there are sufficient funds in the TRLF to make the loan to the application with the second highest evaluation total, the member ranks that application #2, and so forth. (*If at any time there is a tie in evaluation totals, the committee examines all of the criteria, as well as any applicable TRLF account constraints, to determine how the tie should be broken and records the reasons for such determination on the applicable application cover sheets.) For example, if there are not sufficient funds in the TRLF to make the loan to the application with the fifth highest evaluation total, the committee may decide to contact the applicant to inquire whether it would be willing to accept a reduced loan amount. If the applicant agrees to the reduced loan amount, it must identify a guaranteed funding source(s) for the remaining amount of the loan request in order to be certified. If the applicant declines the reduced loan amount, the committee may examine the application with the sixth highest evaluation total to see if sufficient funds exist for that application. If they do, the committee may elect to rank that application #5. If there are not sufficient funds for that application, the committee may contact the applicant and make a reduced loan offer as described above. In addition, the committee may decide to rank a lower evaluated application higher if doing so reduces the loan amount impact of higher ranked projects on the TRLF and enables more projects to funded through the use of leveraging. (*Although there is a need to utilize the money in the TRLF in as timely manner as possible, there is no obligation to select a lower evaluated application merely because the loan amount requested is within the range of funds remaining in the TRLF or because the application could be leveraged. Also, because the PFA must at all times maintain a fiscally sufficient cash balance in the TRLF, not all of the funds in the TRLF can be loaned at once.)

    The committee’s “Certification Recommendation” is then submitted to MnDOT’s Transportation Program Investment Committee (TPIC). The “Certification Recommendation” includes a summary of the applications, the committee’s “Ranking Sheet,” and a summary of the committee’s rationale for each application’s recommended ranking. Although the committee members’ “Individual Evaluation Sheets” and application cover sheets are not included in the “Certification Recommendation” package, they are kept in the application files and are available for review at any time.

    TPIC reviews and evaluates the committee’s “Certification Recommendation” and makes the final recommendation to the Commissioner regarding which applications should be certified to the PFA. The Commissioner will only certify those applications to the PFA for which sufficient TRLF funding exists. Applicants will be promptly notified in writing of the certification decision and the reasons for the decision.

  3. The Transportation Committee of the PFA makes the final decision on which TRLF applicants will receive loans using the financial evaluation criteria set forth in Minn. R.7380.0725, subp. 1.

Applications not certified to the PFA will be held by OCPPM until the Transportation Committee of the PFA makes its final loan approval determination on all certified applications. If a certified application is rejected by the Transportation Committee, MnDOT will certify another application to the PFA from those being held by OCPPM utilizing the same process described above. After the Transportation Committee of the PFA makes its final loan approval determination on all certified applications, applications which did not receive MnDOT certification or PFA final loan approval must be resubmitted through the District/ATP if the applicants wish to again seek TRLF financing the following year.

 

Appendix: TRLF Project Development Procedures

TRLF projects must follow either the federal project development process or the state-aid project development process. Which process a TRLF project must follow generally depends on the TRLF account where the loan originates.

 

Federal Process: All projects receiving loans from the following TRLF accounts must follow the federal project development process: HIGHWAY (FHWA Title 23) ACCOUNT; TRANSIT (FTA Title 49) ACCOUNT; TRUNK HIGHWAY REVOLVING LOAN ACCOUNT; COUNTY STATE AID REVOLVING LOAN ACCOUNT; MUNICIPAL STATE AID REVOLVING LOAN ACCOUNT. In addition, all projects repaying loans with federal funds must follow the federal project development process, regardless of which TRLF account the loans are from. These projects must follow all applicable federal laws and regulations: such as Titles 23 and 49 of the USC and the CFR with regard to project design, procurement, construction, and operation; Title VI of the Civil Rights Act and other civil rights laws; NEPA; Davis-Bacon with regard to labor wages; and the Uniform Relocation Assistance and Real Property Acquisition Policies Act. These projects must also follow all applicable state laws and rules.

 

State Process: Projects receiving loans from the following TRLF accounts may follow the state-aid project development process and do not have to follow the federal process: STATE FUNDS GENERAL LOAN ACCOUNT; FEDERALLY NON-RESTRICTIVE ACCOUNT (See a copy of the TRLF Account Structure attached). These projects must follow all applicable state laws and rules; such as the Minnesota Human Rights Act, Workers Compensation, State Building Code, and Prevailing Wages.

The following summary highlights significant procedural requirements associated with each process.