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2. Status of the Pilot SIBs
As the U.S. General Accounting Office stated in a recent report, the start-up time involved in establishing and funding the pilot SIBs places necessary limits on the amount of information available to report as of March 1997. [ See U.S. General Accounting Office, State Infrastructure Banks: A Mechanism to Expand Federal Transportation Financing , GAO/RCED-97-9, October 1996.] With the most fully developed banks just now starting to acquire seed capital and make decisions as to loan recipients, it appears that a gestation period of about 6 to 12 months represents the minimum time needed to organize, staff, and fund a SIB. As of March 1997, only three to five months have elapsed since most States signed cooperative agreements with USDOT for chartering their SIBs. As a result, modest financial activity has taken place within most of the banks.
The gradual pace of the banks’ maturation is apparent both in the States’ progress toward depositing equity capital into the SIBs, as well as in the rate at which the States are approving projects to receive loans and other assistance from the banks. From the standpoint of capitalization, 7 of the 10 pilot States had obligated Federal-aid highway funds by February 28, 1997. Of these seven States, five had actually deposited Federal funds, totaling $65 million, into their banks. An additional State (Oklahoma) had deposited State funds in its bank, bringing the total number of capitalized banks to six. As for amounts of assistance offered from the banks, States are just beginning to award loans to project sponsors. As of February 28, 1997, only one State (Ohio) had provided loan assistance ($20 million) to a project. (The Missouri SIB has since made a loan as well.)
The pace of implementation appears to be picking up. For example, capitalization activity was especially heavy during February 1997, with two additional States (Florida and Missouri) depositing Federal funds into their SIBs. On the assistance side, Ohio and at least four additional States anticipate providing further SIB assistance by the end of Federal fiscal year 1997. In short, with start-up activities nearly complete inseveral of the States, a fairly robust market for SIB assistance is starting to emerge.
SIB Capitalization: ACAP, Obligations, Outlays, and Deposits
In depicting current patterns of States’ deposit of Federal-aid funding into their SIBs, four key elements of the capitalization process must be considered: (i) requested advance capitalization levels; (ii) obligations; (iii) Federal outlays; and (iv) actual bank deposits, which combine Federal outlays and non-Federal matching funds.
Exhibit 2.1 provides an overview of States’ capitalization of their SIBs as of February 28, 1997. The following sub-sections provide a State-by-State breakdown of each step of the capitalization process along with explanatory material.
Exhibit 2.1: Capitalization of Ten Initial Pilot SIBs as of February 28, 1997
Requested ACAP: $353 million FY 96: $330 million (max. $465 million) FY 97: $23 million (max. $625 million) -
Obligations: $79 million (maximum permissible @ 2/28/97: $228 million) -
Federal Outlays: $65 million -
Bank Deposits: $106 million Federal: $65 million Non-Federal: $41 million Note: the maximum ACAP displayed for fiscal year 1997 is a cumulative number, representing 10 percent of eligible apportionments and allocations for fiscal year 1997, plus $135 million in permissible ACAP from fiscal year 1996 that was not designated that year.
Advance Capitalization
Advance capitalization (ACAP) is a new Federal-aid funding procedure that permits each pilot State to notify FHWA when it has identified an amount of Federal assistance that it may ultimately choose to convert to a SIB capitalization grant. As specified by the Act, each pilot State’s maximumpotential ACAP amount is keyed to 10 percent of most categories of apportioned and allocated funding for fiscal years 1996 and 1997. [ For highway purposes, the eligible program categories are: Interstate Maintenance, National Highway System, Bridge, Surface Transportation Program, Minimum Allocation, Interstate Reimbursement, Hold Harmless, 90 Percent of Payments Adjustment, and Donor State Bonus. States are explicitly precluded from using apportionments for the Congestion Mitigation and Air Quality Improvement Program and allocations for special projects for the purpose of capitalizing their SIBs. For capitalization of transit accounts, States may draw on up to 10 percent of funds distributed for capital assistance under Section 3 (49 U.S.C. 5309), formula capital assistance for urban transit operators under Section 9 (49 U.S.C. 5307), and formula assistance for non-urban transit operators under Section 18 (49 U.S.C. 5311). Although the amount of ACAP that can be requested and designated in a given year is calculated on the basis of specific years ' fund apportionments and allocations, the ACAP amount itself is not tied to any specific program funding category. As a result, the ACAP process imposes no restrictions on a State 's future funding decisions, since ACAP does not result in any kind of set-aside of funds. ACAP simply establishes a baseline from which to calculate the amount of Federal funding that may be deposited into the SIBs during succeeding years. ]
Exhibit 2.2 presents the amount of ACAP that each state requested in fiscal years 1996 and 1997 as of February 28, 1997. No ACAP amount had yet been declared for transit.
Exhibit 2.2: Advance Capitalization Activity as of February 28, 1997
Fiscal Year 1996 Fiscal Year 1997 State Maximum ACAP Requested ACAP Maximum ACAP Requested ACAP Arizona 20,228,526 16,297,410 27,946,377 22,917,000 California 123,969,453 50,000,000 157,293,839 - Florida 60,489,955 30,750,000 84,072,345 - Missouri 32,113,243 12,500,000 42,200,147 - Ohio 51,989,563 51,989,563 62,676,827 - Oklahoma 20,692,294 20,692,294 28,302,303 - Oregon 19,807,925 19,807,294 21,554,805 - South carolina 20,446,173 12,900,000 31,246,743 - Texas 82,243,562 82,243,562 125,510,218 - Virginia 32,979,025 32,979,025 44,688,236 - PROGRAMWIDE 464,959,719 330,159,148 625,491,840 22,917,000 Note: The maximum ACAP figures displayed above apply onto to highway apportionments and allocations.
Additional amounts are available for the capitalization of transit accounts.
Obligations
Obligations occur when a State decides to convert some portion of its requested ACAP amount into an actual bank deposit. It is only at the point of obligation that States must declare from which program category (e.g., Bridge Program, National Highway System) they are drawing SIB capitalization funds. States do not have to align the programs they tap for SIB capitalization with the specific types of projects to be assisted by the SIB. The fact that program funds lose their identity once deposited in a SIB is critical to the program’s flexibility.
The amount of Federal funding available for deposit is governed by a statutory disbursement limitation which is imposed on the pilot program for budgetary purposes. Even though the average outlay rate for
individual highway projects bears no resemblance to the types of outlays likely to be experienced by a SIB, the disbursement limitation for highway accounts is keyed to the standard 9-year outlay rate assumed for the rest of the highway program, as shown in Exhibit 2.3. [ This outlay rate derives from the recognition that within the standard Federal-aid program, something considerably less than a dollar is actually expended for each dollar obligated for a project in any given year. The 9-year outlay rate shown in Exhibit 2.3 represents the expenditure assumptions used by the Office of Management and Budget when calculating the impact of obligations of Federal-aid highway funds on actual annual Federal expenditures.]
Exhibit 2.3: Outlay Rate for Federal-aid Highway Programs
Year 1 2 3 4 5 6 7 8 9 Percent available for obligation and outlay
15% 53% 16% 5% 3% 3% 2% 2% 1% Exhibit 2.4, shown on the facing page, presents an annual view of States’ obligations as compared to the maximum amount of ACAP available for obligation. The information is presented both by State and as a national aggregate. For the purposes of ensuring the States’ compliance with the disbursement limitation shown in Exhibit 2.3, note that the disbursement limitation governs on a programwide basis, not for each State. Appendix C displays the Federal-aid programs from which these obligations have been drawn.
Exhibit 2.4: Obligation of Federal Funds for SIB Capitalization, as of February 28, 1997
O B L I G A T I O N S Obs as percent of ACAP Max allowable, FY 1996 FY 1997 SUBTOTAL FY 1996 FY 1997 SUBTOTAL FY96+FY97 Arizona FY 1996 ACAP: 16,297,410 2,444,611 8,637,627 11,082,238 15% 53% 68% FY 1997 ACAP: 22,917,000 - 2,716,231 2,716,231 12% 12% Total obligations-> 2,444,611 11,353,858 13,798,469 California FY 1996 ACAP: 50,000,000 - - - - - - FY 1997 ACAP: - - - - - - Total obligations-> - - - Florida FY 1996 ACAP: 30,750,000 - 20,000,000 20,000,000 0% 65% 65% FY 1997 ACAP: - - - - - - Total obligations-> - 20,000,000 20,000,000 Missouri FY 1996 ACAP: 12,500,000 - 1,875,000 1,875,000 0% 15% 15% FY 1997 ACAP: - - - - - - Total obligations-> - 1,875,000 1,875,000 Ohio FY 1996 ACAP: 51,989,563 10,000,000 10,000,000 20,000,000 19% 19% 38% FY 1997 ACAP: - - - - - - Total obligations-> 10,000,000 10,000,000 20,000,000 Oklahoma FY 1996 ACAP: 20,692,294 - - - - - - FY 1997 ACAP: - - - - - - Total obligations-> - - - Oregon FY 1996 ACAP: 19,807,925 2,971,189 6,001,811 8,973,000 15% 30% 45% FY 1997 ACAP: - - - - - - Total obligations-> 2,971,189 6,001,811 8,973,000 South carolina FY 1996 ACAP: 12,900,000 - 1,848,046 1,848,046 0% 14% 14% FY 1997 ACAP: - - - - Total obligations-> - 1,848,046 1,848,046 Texas FY 1996 ACAP: 82,243,562 12,336,534 - 12,336,534 15% 0% 15% FY 1997 ACAP: - - - - - - Total obligations-> 12,336,534 - 12,336,534 Virginia FY 1996 ACAP: 32,979,025 - - - - - - FY 1997 ACAP: - - - - - - Total obligations-> - - - PROGRAMWIDE FY 1996 ACAP: 330,159,779 27,752,334 48,362,484 76,114,818 8% 15% 23% 68% FY 1997 ACAP: 22,917,000 - 2,716,231 2,716,231 12% 12% 15% Total obligations-> 27,752,334 51,078,715 78,831,049
Outlays
Although an obligation represents a commitment on the part of the State to capitalize its SIB, a SIB is not truly capitalized until a State actually deposits funds into one or more accounts. These cash deposits occur when the Federal government makes a cash outlay from the Federal Treasury in response to a State’s submission of a voucher for reimbursement. Again, as of February 28, 1997, four of the seven States having made obligations for SIB capitalization had sought reimbursement from FHWA. The resulting total Federal outlay was $65 million.
Although most States refrain from making obligations and seeking reimbursement for SIB capitalization until they have projects that are ready to receive assistance, under some circumstances a State might anticipate such heavy future draws on SIB assistance that early capitalization is necessary. This is particularly true in cases where capitalizing a bank in a single future year would consume an unacceptably high portion of that year’s obligational authority. If, for example, it is expected that demands on the SIB’s equity capital will be $30 million, but that these demands will not materialize until fiscal year 1998, it may make sense for a State to begin capitalizing its bank at allowable levels several years earlier. In this example, early capitalization would permit a State to spread its obligations for SIB capitalization out over several years, thereby obviating the need to "charge" the full $30 million to fiscal year 1998 obligational authority.
Deposits
Exhibit 2.5 displays the amount of obligated funding that has actually been outlayed (expended) by the Federal government as reimbursement for vouchers submitted by the States for SIB capitalization grants. The exhibit also shows how much funding the States have provided as non-Federal match. Taken together, these figures provide a snapshot view of total deposits to the banks as of February 28, 1997. The figures are combined to capture outlay and matching activity for fiscal years 1996 and 1997.
The five States that have capitalized their SIBs with Federal funds have deposited a total of $103 million into their SIBs. In addition, one other State (Oklahoma) has already deposited State matching funds of $2.5 million into its SIB, bringing total SIB deposits to $106 million as of February 28, 1997.
Exhibit 2.5: Total SIB Deposits, as of February 28, 1997
B A N K D E P O S I T S Obligations Combined FY96+FY97 Federal Outlays Combined FY96+FY97 Match (Non-Federal Contribution) Total Bank Deposits FY96+FY97 Arizona 13,798,469 13,798,469 2,370,334 16,168,803 California - - - - Florida 20,000,000 20,000,000 5,000,000 25,000,000 Missouri 1,875,000 1,875,000 473,996 2,348,996 Ohio 20,000,000 20,000,000 30,000,000 50,000,000 Oklahoma - - 2,500,000 2,500,000 Oregon 8,973,000 8,973,000 1,028,000 10,001,000 South carolina 1,848,046 - - - Texas 12,336,534 - - - Virginia - - - - PROGRAMWIDE 78,831,049 64,646,469 41,372,330 106,018,799 Percent of total deposits 61% 39%
Procedures for Capitalizing Transit Accounts
The process by which transit accounts are to be capitalized is very similar to the ACAP process by which States capitalize highway accounts. It is important to note, however, that the NHS Designation Act requires that initial Federal capitalization grants for highways and transit be kept wholly separate; no intermingling of these funds is permitted.
For transit capitalization grants, the SIB, as an eligible transit grant recipient, will be allowed to commit, obligate, and disburse (or draw) funding. When the funding is available, therefore, the SIB will first commit a designated funding level through a grant application. This will reserve 100 percent of the designated capitalization amount. Then, each year, the SIB will obligate the allowed percentage of the available funds, in accordance with the transit outlay rate displayed in Exhibit 2.6. [ In the fiscal year 1997 Appropriations Act, the Congress designated the highway outlay rate, shown in Exhibit 2.3, as the rate applicable to the extra $150 million provided from the U.S. General Fund for SIB capitalization.] At the same time, the SIB will draw down the allowed amount.
Exhibit 2.6: Outlay Rate for Federal Transit Programs
Year 1 2 3 4 5 Percent available for obligation and outlay 15% 30% 30% 20% 5% Despite these similarities in the capitalization process, there is a significant difference in the way that highway and transit grants flow to their respective SIB accounts. Highway grants customarily flow to the State DOT, which then supports individual projects. Transit grants flow directly to transit providers, under both formula and discretionary programs. Thus, if the State DOT wishes to capitalize a transit account, it must go to each transit provider in turn to reserve the necessary funding. This process is likely to slow the rate of capitalization of SIB transit accounts in the near term.
Anticipated SIB-Assisted Projects through Fiscal Year 1997
The types of financial assistance that may be provided by SIBs can be divided into two broad categories: loans and credit enhancements. Appendix B provides details and commentary on the forms of SIB assistance permitted under the NHS Designation Act.
With only three States having capitalized their SIBs with Federal funding as of February 28, 1997, it is not surprising that as of the same date, only two loans had yet been made. The Ohio SIB made both loans, each for $10 million, to a highway and interchange project in Butler County. To date, this $20 million represents the only withdrawal from any SIB. [ Subsequent to March 1, 1997, but prior to publication of this report, the state of Missouri made a $1.18 million loan for a debt service reserve fund to support a $16.6 million revenue bond issue. The loan was made to a non-profit transportation corporation in Springfield.]
For the remaining nine States, specific plans as to which projects to assist, and how, remain a work in progress. Exhibit 2.7, shown on the facing page, displays the projects currently expected to receive SIB assistance by the close of Federal fiscal year 1997 (September 30, 1997). The projects listed in this summary table were named by State officials responsible for implementation of each of the 10 pilot SIBs.
Looking beyond the end of fiscal year 1997, the initial 10 pilot States have already identified a series of additional projects that are likely to receive SIB assistance. Exhibit 2.8, shown on the two following pages, presents a preliminary list of 32 projects that State officials currently expect to receive SIB assistance by the end of fiscal year 1998. Appendix D provides narrative describing the current status of each of the initial ten pilot States’ SIB and outlining State officials’ latest thinking on the forms and levels of assistance that the SIBs are likely to offer.
Exhibit 2.7: Anticipated Levels of SIB Assistance through September 30, 1997
State Number of Projects Combined Value of Projects ($millions) Form(s) of Assistance Combined Amount of Assistance ($millions) Arizona - California - Florida Loans for interest cost subsidy Missouri Preconstruction loans converted to loans for debt service reserve or permanent external financing Ohio Preconstruction loans and permanent loans Oklahoma Loans Oregon Construction and permanent loans South Carolina - Texas - Virginia - TOTAL
Source: U.S. Federal Highway Administration and relevant State DOTs.
Exhibit 2.8: Anticipated Projects for SIB Assistance through Fiscal Year 1998
State Project Name Type Cost Amt of Assistance Type of Assistance Repayment Source Sponsor(s) Est. Start Date Arizona candidate projects are still being determined. California candidate projects are still being determined. Florida SR 80 Interchange H loan (interest cost subsidy) tolls & state transp. tax revs. FDOT turnpike district Seminole II Expressway H loan (interest cost subsidy) tolls & state transp. tax revs. FDOT turnpike district Missouri Springfield Transportation Corporation H debt service reserve loan tax increment financing and state highway funds for SIB loan; local sales tax revs. for debt svc. non-profit transportation corporation Gateway Multimodal Center MM preconstruction loan & permanent loan local sales tax revs. for SIB loan; parking & other project revs. for debt svc. city Cape Gireardeau Bridge H loan state highway tax revs. Missouri DOT Highway 179 H preconstruction loan & debt service reserve loan tax increment financing and state highway funds for SIB loan; local sales tax revs. for debt svc. non-profit transportation corporation Fulton Interchange H preconstruction loan & debt service reserve loan tax increment financing and state highway funds for SIB loan; local sales tax revs. for debt svc. non-profit transportation corporation Ohio Butler Regional Highway H construction period loan tolls, via rev. bond takeout county transp. improvement district Wilmington Bypass H construction period & permanent loan various city SR 250 Widening (Erie Cty) H construction period & permanent loan lodging fees county Mink Road/SR16 Improvements H loan property tax (tax increment financing) county transp. improvement district Great Lakes Science Center Parking Facility MM construction period & permanent loan parking & other fees, via permanent financing takeout city Muskingum Intermodal Facility MM loan lift (cargo) fees & county tax revs. county transp. improvement district I-71 Improvements H permanent loan vehicle license fees county Emerald Corp. Park Access Road H permanent loan office park assessment fees city Cleveland Business Dev. Park Access Road H permanent loan business assessments and rental car charges city Cleveland Passenger Rail Bridge Rehab. T permanent loan county sales tax revs. transit authority Spring-Sandusky Interchange H permanent loan of proceeds from SIB-issued revenue bonds future federal-aid apportionments Ohio DOT Cleveland Port Authority MM permanent loan dock fees and storage rental fees port authority Oklahoma At-Grade Highway-Rail Crossings MM loan sales tax revs. multiple local governments Creek Turnpike Extension H loan tolls OK turnpike authority Oregon Cedar Hill Blvd Ext. H loan property tax (tax increment financing) county Van Pool Lease T loan (subsidization of commercial bank loans) private lease payments private borrowers Newberg-Dundee Tollway H preconstruction loan state highway revs. Oregon DOT Tualatin-Sherwood Tollway H preconstruction loan state highway revs. Oregon DOT Marion County Road Projects H loan highway and public works funds county Signal Pre-emption H loan payroll tax receipts transit district Hood River Maintenance Facility H loan city water & sewer tax revs. county Dixie Mountain Road H loan property tax (tax increment financing) & state/local road funds county South Carolina Crawford Road Improvement H loan HUD community development block grant city Texas Laredo Bridge No. 4 H loan tbd city Virginia I-895 Connector H loan tbd tbd TOTALS 32 projects H: 25 MM: 5 T: 2 Additional projects may receive SIB assistance by the end of fiscal year 1997, but in some cases, their financing plans are not yet sufficiently developed to assure the utility of SIB assistance. In other instances, multiple projects may be vying for a limited sum of SIB capital, and State officials are understandably reluctant to offer opinions as to which projects are considered most likely to obtain SIB assistance from the limited amount of equity capital currently available for distribution. As a result, the preceding and following tables are intentionally conservative in their presentation of anticipated projects, and may thus understate the full extent to which States will provide loans or other assistance toproject sponsors by the end of the current Federal fiscal year. At the same time, State officials caution that unanticipated delays in certain prerequisites to the projects’ advancement (e.g., environmental clearances) may postpone some of these loans.
an evaluation of the u.s. department of transportation state infrastructure bank pilot program
