Case Study - SIB
South Carolina:  "27 in 7" Peak Performance

The Financing Challenge

South Carolina is the 11th fastest growing state in the country, outpacing the nation overall in terms of major economic indicators.  Growth driven by tourism, business services, and international trade has created pressures on the state's transportation infrastructure.  With its location at the heart of the southeast, South Carolina's transportation network must serve not only residents, but also tourists and cross-state traffic.  Interstate 95, the main transportation corridor along the eastern seaboard, passes through the eastern half of the state, and commercial traffic destined for the nearby cities of Atlanta and Charlotte competes with commuters and tourists for space on the state's roadways.  The Port of Charleston has grown with the state's economy, placing increasing demands on Interstate highways and other access routes.

Recognizing that the state's economic performance is strongly linked to its transportation network, the South Carolina Department of Transportation (SCDOT) in recent years has been faced with the challenge of how to keep pace with its transportation needs.  In addition to meeting demands for new roads to serve growing areas of the state, SCDOT maintains the fourth-largest highway system in the United States, which includes 42,000 miles of state highways and 800 miles of Interstates.  Traditional highway funding sources on a pay-as-you go basis have been insufficient to finance needed highway improvements.  Not only does the state rank low in terms of Federal funds, but only five states have lower gasoline taxes than South Carolina, and six states have lower diesel fuel taxes.

South Carolina could not wait for years or decades until it could afford to pay for projects on its long-range transportation plan.  Over the FY 1999-2008 period, SCDOT identified an estimated $940 million annual shortfall to meet the state's transportation needs.  In an environment where needs substantially exceeded traditional funding mechanisms, SCDOT looked to new ways of doing business to accomplish its highway program.

The Innovative Solution

Using an array of innovative financing concepts, SCDOT is advancing 27 years of road and bridge projects in just seven years.  By putting aside conventional ways of doing business, SCDOT has launched an ambitious $5 billion program of highway construction known as "27 in 7" Peak Performance.  This accelerated program has put South Carolina in the fast lane, making a reality of projects that otherwise would not have been built for many years.  Key innovations integral to implementation of this program are financial assistance through a SIB, public-private partnerships, and new ways of leveraging Federal dollars.  New toll roads and a TIFIA loan have also been part of the financing package for the 27 in 7 program.

The cornerstone of SCDOT's accelerated program is the South Carolina Transportation Infrastructure Bank created in 1997 by the General Assembly to assist in financing major projects.  South Carolina was one of the first 10 states selected to participate in the SIB Pilot Program established under the NHS Act.  The South Carolina SIB is unique in several ways.  First, the SIB is focused on funding larger transportation projects - those exceeding $100 million.  Second, it is one of two SIBs nationally that is currently leveraging its capital through bonding.  Another distinctive feature of the SIB is its authority to provide grants as well as loans for project financing.

The major sources of revenue for the SIB include $66 million from the State General Fund as a one-time source of capitalization and state recurring monies which include a share of a one-cent per gallon gas tax (approximately $22 million annually) and truck registration fees (approximately $53 million annually).  Other sources include contributions from the borrowers who have received SIB funding in the form of loan repayments and additional contributions from SCDOT.

The South Carolina SIB has significantly leveraged these revenue sources through the issuance of bonds.  To date, the SIB has issued $1.2 billion in revenue bonds to finance projects in the 27 in 7 program.  The SIB expects to issue another $800 million in revenue bonds over the next several years.  In addition, the SIB has received a TIFIA loan in the amount of up to $215 million to help finance the replacement of the Cooper River Bridges in Charleston.

Partnerships with the private sector and local governments have also been important in the advancement of projects in the 27 in 7 program.  For example, SCDOT has entered into a public-private partnership with two construction and resource management firms to extend their staff and manage increased workload without inflating the size of the agency.  At the local level, Metropolitan Planning Organizations (MPOs) and Councils of Government (COGs) have partnered with SCDOT to accelerate projects in their respective areas.  A key part of this local project acceleration program involves issuance of a series of State Highway Bonds to supplement current Federal funds during the construction period.  A portion of the MPOs and COGs future Federal fund allotments is being used for debt service on the bond issues under the Section 122 provisions.

The Results

The SCDOT is meeting the challenge of closing the gap between funding and transportation needs by pursuing an array of innovative solutions.  The table below provides a summary of the accelerated program.

This ambitious program could not have been accomplished without the SIB financing mechanism to help accelerate major road and bridge projects across the state.  By leveraging the SIB, South Carolina has been able to advance a significant amount of construction work in a relatively short period of time.  More than $3.0 billion worth of projects have begun development as part of the 27 in 7 program, all of which are financed in part by funds from the SIB.  Of the total project amount, the SIB is contributing 45 percent, the project sponsors are providing 45 percent, and SCDOT is contributing the remaining 10 percent.  Agreements are currently in place for five projects.

Prominent projects benefiting from the 27 in 7 program include the Conway Bypass, a $387 million 28.5-mile road that reduces travel time for Myrtle Beach-bound traffic bypassing inland towns.  Another SIB project is a $667 million replacement bridge for the U.S. 17 Cooper River Bridges in Charleston.  Further inland, widening of a 15-mile section of Interstate 85 in Greenville and a five-mile section of Interstate 77 south of Charlotte, North Carolina will receive financial assistance from the SIB.

Under the 27 in 7 program, SCDOT also is accelerating upgrades to the Interstate system.  Using up to $130 million in State Highway Bonds with debt service funded through future Federal funds, the program of Interstate improvements is expected to be finished in three to five years.  It would have taken up to 15 years using traditional funding methods.

By compressing 27 years of planned work into seven years, South Carolina will realize many benefits, including enhanced mobility for its citizens and visitors, reduced congestion, more effective financing at low interest rates, and avoidance of inflation costs.