GARVEE Bond Program
GARVEE bonds are tax-exempt debt instrument financing mechanisms that are backed by annual federal appropriations for federal-aid transportation projects. Proceeds from the financing can be used for the costs of right of way and/or construction of highway or other transportation projects that are eligible under Title 23 of the United States Code and that meet all federal requirements. Additionally, projects must have environmental clearance and completed project design, be designated for GARVEE financing by the California Transportation Commission (CTC), and eligible through Federal Highway Administration (FHWA) for advance construction using GARVEE financing. Due to constitutional limitations, state funds are not used for payment of debt service; therefore, GARVEE financing relies solely on future federal-aid funding for debt repayment, and as a result, is subject to federal match requirements. However, state or local funds can be used for matching purposes outside of the debt service, in funding components prior to, or throughout the construction period.
Government Code Section 14553.8 requires that consideration must be given, and a determination made, as to the appropriateness of the use of GARVEEs for proposed projects, in comparison to other funding mechanisms. GARVEE guidelines specify that the anticipated economic, safety, and other benefits of the project and its early construction will be included in considering and determining the appropriateness of GARVEE financing. In making this determination, the Department utilizes the Life-Cycle Benefit/Cost Evaluation Model provided by the Department's Division of Transportation Planning, Office of Transportation Economics..