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Introduction

Section 350 of the National Highway System Designation Act of 1995 (NHS Act) (Public Law 104-59) authorized the U.S. Department of Transportation (U.S. DOT) to establish the State Infrastructure Bank (SIB) Pilot Program. A SIB is a revolving fund mechanism for financing a wide variety of highway and transit projects through loans and credit enhancement. SIBs are designed to complement traditional Federal-aid highway and transit grants by providing States increased flexibility for financing infrastructure investments. Under the initial SIB Pilot Program, ten states were authorized to establish SIBs. In 1996 Congress passed supplemental SIB legislation as part of the DOT Fiscal Year (FY) 1997 Appropriations Act that enabled additional qualified states to participate in the SIB pilot program. This legislation included a $150 million General Fund appropriation for SIB capitalization. The Transportation Equity Act for the 21^st Century (TEA-21, Public Law 105-178, as amended by title IX of Public Law 105-206) extended the pilot program for four States: California, Florida, Missouri, and Rhode Island by allowing them to enter into cooperative agreements with the U.S. DOT to capitalize their banks with Federal-aid funds provided in FY 1998 through FY 2003.

Since the SIB Pilot Program was launched in 1996, steady progress has been made by States in advancing projects using the SIB financing mechanism. Operating within the limitations of State and Federal laws, States have been able to exercise a significant degree of latitude in the initiation and implementation of their programs, enabling the States to "customize" the focus of their SIB programs.

During the past five years, the SIBs have financed over 245 projects that have accomplished many of the original objectives of the pilot program, including project acceleration, economic development, and stimulation of private investment. Despite this success, states are at different levels in program implementation; some States have very active and mature programs and others have limited programs with moderate activity. In order to gauge how effectively the SIB pilot program is being implemented, the Federal-aid Financial Management Division of the Federal Highway Administration (FHWA) and the Federal Transit Administration (FTA), in partnership with FHWA Division Offices and State Department of Transportation offices (State DOT), performed a review of the SIB Pilot Program. This comprehensive review was conducted as a national financial management improvement project (FMIP), an element of FHWA's quality initiative.

This report documents the results of this review and is available on FHWA's Innovative Finance web site (www.fhwa.dot.gov/innovativefinance). FHWA hopes the results of this FMIP project will be of value in maximizing the benefits of the SIB financing mechanism and will contribute to long-term improvements in SIB operations.