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1. IntroductionA State Infrastructure Bank (SIB) is a State or multistate investment fund that offers loans and other types of financial assistance to surface transportation projects. SIBs operate much like regular commercial lending banks, in that they rely on an initial infusion of equity capital—sometimes referred to as capitalization funds or seed money—to provide financial assistance to their customers. SIBs’ customers are typically the sponsors of highway, transit, or intermodal projects, and can either be public entities (such as local governments, special financing districts, and port authorities), private corporations, or public-private partnerships. These customers’ repayments of principal and interest on loans, as well as fees paid for other forms of assistance (e.g., letters of credit) are used to replenish the fund. This secondary infusion of funds into the bank permits the SIB to become a self-sustaining financial institution.
Ten States are currently testing the real-world applicability and utility of the SIB concept through a pilot program created under Section 350 of the National Highway System (NHS) Designation Act of 1995. Appendix A to this report provides information on the precedents for the SIB pilot program, its legislative history, and key milestones toward implementation.
The NHS Designation Act did not provide additional Federal funds for the SIBs’ capitalization. It instead permitted the pilot States to contribute up to 10 percent of apportioned Federal funds received in fiscal years 1996 and 1997 for most highway and transit programs. The NHS Designation Act also specified an array of eligible uses of funds deposited into the pilot SIBs. These uses fall into two broad categories: loans and credit enhancements. Appendix B to this report describes the many types of assistance that SIBs may offer to project sponsors.
Subsection 350(k) of the NHS Designation Act required that the Secretary of Transportation review the financial condition of each infrastructure bank and transmit a report to Congress on the resulting findings. This reporting requirement also asked for: (i) an evaluation of the pilot program, including commentary on its ability to increase public investment and attract non-Federal capital; and (ii) recommendations on whether the pilot program ought to be expanded or made part of the codified Federal-aidhighway and transit programs. This report responds to the Subsection 350(k) requirement for Secretarial review of the pilot program.
The initial 10 States designated under the pilot program form the basis for the evaluation presented herein. However, readers should also be aware that the pilot program will soon be expanded to encompass additional State participants. This program expansion derives from the fiscal year 1997 DOT Appropriations Act (Public Law 104-205), which opened participation in the pilot program to other States, pending approval of their applications by the Secretary of Transportation. The Appropriations Act also provided $150 million in extra funding from the U.S. General Fund for distribution to participating States, again at the discretion of the Secretary. The initial and expanded pilot programs have attracted intense State interest, as detailed in Appendix A.
* * * * * The balance of this report: (i) describes the ten States’ actual and anticipated progress towards capitalization of their SIBs and provision of assistance to project sponsors; and (ii) discusses preliminary indications of the effectiveness of the SIB pilot program in increasing transportation investment levels, reducing project costs, and accelerating projects. The report’s appendices provide further information on: (i) the legislative history of the pilot program and major implementation milestones; (ii) the types of financial assistance that SIBs can offer; (iii) sources of capitalization funds; (iv) the current status of the 10 initial pilot SIBs; and (v) several specific projects likely to receive SIB assistance.
an evaluation of the u.s. department of transportation state infrastructure bank pilot program
