Grant Anticipation Revenue Vehicle, or GARVEE, is a type of bond or similar financing method issued by a state or state infrastructure bank under the guidelines of the National Highway System Designation Act of 1995, eventually made permanent in section 122 of Title 23 of the United States Code. States must repay the bonds using federal funds expected to be received in the future. Some financing under this plan is referred to using the term Grant Anticipation Note (GAN).
In finance, a bond is an instrument of indebtedness of the bond issuer to the holders. The most common types of bonds include municipal bonds and corporate bonds.
Title 23 of the United States Code outlines the role of highways in the United States Code.
Section 122 states "an eligible debt financing instrument is a bond, note, certificate, mortgage, lease, or other debt financing instrument issued by a State or political subdivision of a State or a public authority, the proceeds of which are used to fund a project eligible for assistance under Title 23." [1]
GARVEE bonds may be used for major projects receiving federal funding. They do not guarantee that the federal government will provide the expected financing, and they are not guaranteed by the federal government. Details of projects must be sent to the appropriate Federal Highway Administration (FHWA) division office to make sure the project follows federal rules for eligibility. The FHWA approves only the projects, not the financing method. The state may also elect to use methods other than federal funding for repayment, and it may receive federal funds through a trustee or depository.
The Federal Highway Administration (FHWA) is a division of the United States Department of Transportation that specializes in highway transportation. The agency's major activities are grouped into two programs, the Federal-aid Highway Program and the Federal Lands Highway Program. Its role had previously been performed by the Office of Road Inquiry, Office of Public Roads and the Bureau of Public Roads.
Trustee is a legal term which, in its broadest sense, is a synonym for anyone in a position of trust and so can refer to any person who holds property, authority, or a position of trust or responsibility for the benefit of another. A trustee can also refer to a person who is allowed to do certain tasks but not able to gain income. Although in the strictest sense of the term a trustee is the holder of property on behalf of a beneficiary, the more expansive sense encompasses persons who serve, for example, on the board of trustees of an institution that operates for a charity, for the benefit of the general public, or a person in the local government.
Eligible costs for projects may include interest, retirement of principal, costs for issuing bonds, and other incidental costs which must be approved. Bond proceeds not used for projects may be used to pay principal and interest, but they may not be reimbursed. The FHWA may also repay a debt service reserve fund used to pay bondholders when federal funds come later than needed. Reimbursement of a surety provider for interest and principal is also eligible; interest and penalties associated with payments to surety providers are not. [1]
Interest is payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum, at a particular rate. It is distinct from a fee which the borrower may pay the lender or some third party. It is also distinct from dividend which is paid by a company to its shareholders (owners) from its profit or reserve, but not at a particular rate decided beforehand, rather on a pro rata basis as a share in the reward gained by risk taking entrepreneurs when the revenue earned exceeds the total costs.
In finance, a surety, surety bond or guaranty involves a promise by one party to assume responsibility for the debt obligation of a borrower if that borrower defaults. The person or company providing the promise is also known as a "surety" or as a "guarantor".
