Credit Assistance

State Infrastructure Banks (SIBs) are revolving infrastructure investment funds for surface transportation that are established and administered by states. 

How does it work?

A SIB functions as a revolving fund that, much like a bank, can offer loans and other credit products to public and private sponsors of Title 23 highway construction projects or Title 49 transit capital projects. Federally capitalized SIBs were first authorized under the provisions of the NHS Act. The pilot program was originally available to only 10 states, and was later expanded to include 38 states and Puerto Rico. TEA-21 established a new pilot program for the states of California, Florida, Missouri, and Rhode Island. The initial infusion of Federal and state matching funds was critical to the start-up of a SIB, but states have the opportunity to contribute additional state or local funds to enhance capitalization.

SIB assistance may include loans (at or below market rates), loan guarantees, standby lines of credit, letters of credit, certificates of participation, debt service reserve funds, bond insurance, and other forms of non-grant assistance. As loans are repaid, a SIB's capital is replenished and can be used to support a new cycle of projects.

SIBs can also be structured to leverage additional resources. A "leveraged" SIB would issue bonds against its capitalization, increasing the amount of funds available for loans.

Arizona SIB
Arizona's SIB has entered into 23 loan agreements 
valued at $373 million, helping advance highway projects throughout 
the state, including the Price Freeway, a critical segment in the 
Phoenix area regional freeway system. 
Photo Credit: Arizona Department of Transportation

South Carolina SIB
South Carolina's SIB has approved financing and begun development 
of projects valued at nearly $3.0 billion, including the $387 million 
Conway Bypass to improve access to popular Myrtle Beach.
Photo Credit: South Carolina Department of Transportation

What are the benefits?

SIBs complement traditional funding techniques and serve as a useful tool to meet project financing demands, stretching both Federal and state dollars. The primary benefits of SIBs to transportation investment include:

While the authorizing Federal legislation establishes basic requirements and the overall operating framework for a SIB, states have customized the structure and focus of their SIB programs to meet state-specific requirements. 

A variety of types of financing assistance can be offered by a SIB, with loans the most popular form of SIB assistance. As of September 30, 2001, 32 states had entered into 245 loan agreements with a dollar value of over $2.8 billion. Two states, Minnesota and South Carolina, have leveraged their SIBs through the issuance of bonds. Since its inception, the South Carolina Transportation Infrastructure Bank has approved financing and begun development of $3.0 billion in projects for eight applicants. This SIB financing mechanism is helping to condense 27 years of projects into seven years.

Florida has a very active SIB with 32 loan agreements executed through the end of FY 2001, at a value of $465 million. Because of loan demands, Florida's SIB has been augmented with a phased-in state fund appropriation of $150 million. Ohio and Arizona also have contributed additional state funds to their SIBs.

Transportation Infrastructure Finance and Innovation Act (TIFIA)

TIFIA allows U.S. DOT to provide direct credit assistance to sponsors of major transportation projects.

How does it work? 

The TIFIA credit program offers three distinct types of financial assistance - direct loans, loan guarantees, and standby lines of credits. These instruments are designed to address the varying requirements of projects throughout their life cycles. The amount of Federal credit assistance may not exceed 33 percent of total eligible project costs. TIFIA project sponsors may be public or private entities, including state and local governments, special purpose authorities, transportation improvement districts, and private firms or consortia.

Any type of project eligible for Federal assistance through existing surface transportation programs (both highways and transit) is eligible for TIFIA assistance. In addition, the following types of projects are eligible: international bridges and tunnels; inter-city passenger bus and rail facilities and vehicles; and publicly-owned intermodal freight transfer facilities on or adjacent to the National Highway System.

Miami Intermodal Center
TIFIA credit assistance backed by a regional gas tax and daily rental 
car fees helped complete the financing for the $1.3 billion 
Miami Intermodal Center, designed to improve access to and 
within Miami International Airport, a global gateway for 
national and international trade and commerce. 
Photo Credit: Florida Department of Transportation

TIFIA assistance involves an application process and each project must meet certain threshold criteria to apply. The project's estimated eligible costs must be at least $100 million or 50 percent of the state's annual Federal-aid highway apportionments, whichever is less, or at least $30 million for intelligent transportation systems (ITS) projects. The project must be supported in whole or part from user charges or other non-Federal dedicated funding sources and be included in the state's Transportation Plan. The project is subject to all Federal requirements.

Qualified projects are evaluated and selected based on eight criteria. Before TIFIA assistance can be committed, the project must receive an investment grade rating on its senior obligations and have a completed environmental action.

What are the benefits? 

TIFIA assistance provides improved access to capital markets, flexible repayment terms, and potentially more favorable interest rates than can be found in private capital markets for similar instruments. TIFIA can help advance expensive projects that otherwise might be delayed or deferred because of size, complexity, or uncertainty over the timing of revenues.

The ability to use TIFIA to partner with the Federal government for essential and costly projects improves access to the capital markets. Large, complex projects frequently encounter market resistance as a result of investor concerns about risk, particularly in the case of subordinate and secondary sources of capital. However, with TIFIA, the government can be a flexible, patient investor by providing subordinate capital that may not be available through the capital markets on attractive terms. The flexibility provided by TIFIA can then enable the senior debt to demonstrate higher coverage margins and attain investment-grade bond ratings. By facilitating the borrower's access to the capital markets through TIFIA, major projects that might be delayed or accomplished with less efficiency can be advanced.

How is it used?

Approved TIFIA projects range in cost from a $242 million highway-rail corridor improvement project to a $3.3 billion dual span toll bridge structure. TIFIA assistance is also being provided to transit and ferry systems, as well as intermodal facilities. Four of the approved projects are toll facilities, including a new toll facility in central Texas that will span 122 miles and a new bridge in California to replace the east span of the San Francisco-Oakland Bay Bridge. For these projects, TIFIA credit assistance offers the project sponsors a way to boost debt service coverage and enhances senior obligations at an affordable cost. Also, flexible repayment terms will facilitate these toll financings, enabling a better match of loan repayments to expected revenue flows.

Because of their size, many of the approved TIFIA projects were either unfunded in the near term or had large funding gaps. For some projects, TIFIA assistance enhanced market access and reduced borrowing costs; for others, it provided an alternative to grant funding, enabling the project sponsor to conserve regular Federal funds for smaller projects that could not be supported through user charges or dedicated revenue streams.