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Memorandum

DOT Logo  U. S. Department of Transportation
  Federal Highway Administration

 

Subject: Information: State Infrastructure Bank (SIB) Guidance - Transportation Equity Act for the 21st Century (TEA-21)

Date: May 17, 2001

From: Thomas Merlo (original signed by)
Director, Office of Budget and Finance

Reply to: Attn of: HABF-40

To: See Addressees

I am attaching guidance for administering the SIB pilot program authorized by section 1511 of TEA-21. The guidance is referenced in the cooperative agreements previously executed with Missouri and Florida.

We encourage California and Rhode Island to revise their existing SIB agreements to incorporate the provisions of TEA-21. The States will then be able to take advantage of the additional Federal funds for SIB capitalization.

Please provide a copy of the guidance to the States. If you have any questions or comments on the guidance, you may contact Phyllis Jones at (202) 366-2854.

Attachment:

Guidance For Administering the TEA-21 State Infrastructure Bank Pilot Program (see below)

Addressees:

California Division Administrator (HDA-CA)
Florida Division Administrator (HDA-FL)
Missouri Division Administrator (HDA-MO)
Rhode Island Division Administrator (HDA-RI)

cc: Resource Centers

 

Guidance for Administering the TEA-21 State Infrastructure Bank Pilot Program (May 2001)

Introduction

The State Infrastructure Bank (SIB) pilot program approved under Section 1511 of the Transportation Equity Act for the 21st Century (TEA-21) authorizes the Secretary to enter into cooperative agreements for the establishment of a SIB pilot in four States: California, Florida, Missouri, and Rhode Island. Only these four States are authorized to request a revision of their existing SIB agreements to incorporate the TEA-21 provisions. When a revised agreement is approved under the provisions of TEA-21, the original SIB agreement is superceded.

Each cooperative agreement is required to specify the procedures and guidelines for establishing, operating, and providing assistance from the SIB. The guidance provided in this document relates primarily to the implementation of the SIB pilot program for highway and transit projects, but may be used for other eligible transportation projects.

The four pilot States may capitalize up to 100 percent of funds apportioned to the State for National Highway System (NHS), the Surface Transportation Program (STP) (excluding safety and transportation enhancement set - asides), Bridge, and Minimum Guarantee funds for Fiscal Years 1998-2003. These States may also capitalize with up to 100 percent of funds apportioned for Interstate Maintenance (IM) funds; however, IM funds may only be used to assist IM eligible projects.

In addition, funds available to a State under Title 49 for transit capital projects and rail projects may be contributed to a SIB.

Table of Contents

  1. Capitalization
  2. Types of Assistance
  3. Administration
  4. Project Requirements
  5. Reporting
  6. Disposition

I. Capitalization

The following steps are necessary to capitalize the SIB using Federal-aid apportioned funds.

  1. Execute the SIB cooperative agreement.
  2. Establish an advance capitalization (ACAP) amount.
  3. Transfer eligible apportionments to the SIB.
  4. Obligate the funds.
  5. Capitalize the bank.

Step 1. Execute the SIB cooperative agreement

The first step in the implementation of the TEA-21 SIB pilot is execution of the cooperative agreement between the FHWA and/or FTA/FRA Administrator(s), the responsible State official, and any other party to the SIB. Cooperative agreements entered into with States under section 350 of the National Highway System Designation Act of 1995 (Public Law 104-59) must be revised to comply with section 1511 of TEA-21, thereby superceding the original agreement. A cooperative agreement is the legal document that establishes the State SIB program and specifies the requirements both for program and fund management. The cooperative agreement must be signed before any funds can be transferred to the SIB program.

If, at any time, FHWA and/or FTA/FRA determines that the State has not complied with the terms of its cooperative agreement, the requirements of TEA-21 or these SIB Guidelines, the appropriate agency will notify the State of the noncompliance. The State is required to take appropriate corrective action or submit a compliance plan to FHWA and/or FTA/FRA within 60 days.

If the State fails to take corrective action or provide an acceptable plan to correct the noncompliance, appropriate action will be taken in accordance with Title 23, Code of Federal Regulations, Section 1.36.

Step 2. Establish an Advance Capitalization (ACAP) amount

To begin the capitalization process, the State determines the amount of funds to be designated as Advance Capitalization (ACAP) and submits a written request to FHWA or the appropriate DOT modal administration for approval. ACAP is similar in concept to advance construction and enables the State to designate a level of potential SIB funding for each fiscal year. States may ACAP up to 100 percent of a fiscal year's eligible SIB funding categories (before SPR take-down). If the maximum amount is not initially requested, the State may modify the ACAP amount within a fiscal year, up to the unobligated balances in the eligible categories. Approval of the ACAP amount is not a commitment of funds, but a recognition of the amount of Federal-aid funding that may subsequently be provided for the SIB. The ACAP amount will be entered into FHWA's Fiscal Management Information System (FMIS) as program code S99. A State may transfer and obligate up to 20 percent of the ACAP amount each year (see step 3).

The annual ACAP amount may include the value of up to 100 percent of eligible apportionments in a fiscal year and any eligible carryover apportionments not designated as ACAP in prior fiscal years, beginning with FY 1998.

SIB-assisted projects must be included in the Transportation Improvement Plan (TIP), if applicable, and the Statewide Transportation Improvement Program (STIP), showing the amount of SIB assistance. This meets the Title 23 and Title 49 requirements that the STIP reflects the resources that are reasonably expected to be available for the program and identifies innovative financing techniques. The ACAP amount, however, should not be identified on the STIP.

Step 3. Transfer eligible apportionments to the SIB

The State will submit a written request to FHWA or appropriate DOT modal administration to transfer eligible apportionments to the SIB. Eligible categories of highway funds include:

Funding Category (Program Code) Special Provisions
Interstate Maintenance (Q01) May only be used to assist IM eligible projects
National Highway System (Q05)  
Bridge (Q10 and Q12) Off system bridge funds may not be transferred to the SIB
Surface Transportation Program (Q24) Enhancement, safety, and rural area subcategories may not be transferred to the SIB
STP Urbanized Area (Q23) Requires written concurrence from MPO
Minimum Guarantee (Q76, Q77, Q78)  

Eligible categories of transit funds are Urbanized Area Formula Grants, (49 U.S.C. 5307), Special Needs of Elderly and Disabled (5310), and Other Than Urbanized Area (5311). There are no railroad funds available at this time. However, funds made available from subtitle V of Title 49 may be contributed to the SIB for railroad projects consistent with any project description specified under the law making the funds available.

The State has flexibility in determining the eligible funding categories to be used for capitalization. For example, a State does not have to capitalize the SIB with funds from every category or use the maximum of any one category. Furthermore, SIB contributions from the various eligible funding categories lose their programmatic identity once deposited into the SIB and do not have to be tracked separately, except that Interstate Maintenance funds must be used on Interstate Maintenance projects. Following the State's request, FHWA will transfer the specified amounts from the designated eligible funding categories to the SIB Account.

Use of Surface Transportation Program and Bridge Program Funds

States are allowed to capitalize the SIBs with up to 100 percent of their Surface Transportation Program (STP) funds with the exception of certain subcategories (e.g. enhancement activities, safety, and rural areas) as specifically defined in Title 23 U.S.C. A State's capitalization of a SIB with a specific subcategory would not relieve that State from the requirements associated with those funds. Therefore, the use of STP funds to capitalize the SIB is limited to funds in the Aany area@ subcategory (Q24), and funds that are attributable to an urbanized area (Q23).

Bridge funds that may be transferred to the SIB are limited to program codes Q10 and Q12. Off-system bridge funds (Q11) may not be transferred.

Urban Attributable Funds that Require Concurrence from the M. P. O.

TEA-21 funds attributable to an urbanized area require written concurrence from the Metropolitan Planning Organization before transferring to the SIB. The affected funding category is the Surface Transportation Program (Q23).

For control purposes, the amount transferred to the SIB each year cannot exceed 20 percent of the ACAP amount. The percentages are applied to the State's designated annual ACAP amount. If the State does not claim the full amount in a given year, the remainder will be available in a subsequent year up to the cumulative amounts shown in the following chart.

  Year 1 Year 2 Year 3 Year 4 Year 5
Outlay Rate 20% 20% 20% 20% 20%
Cumulative 20% 40% 60%    

Step 4. Obligate the funds.

Once a transfer of eligible apportionments has taken place, the State may request that the funds be obligated. At the time funds are first obligated for the SIB under the TEA-21 pilot program, FHWA will enter into a Project Agreement with the State. The Project Agreement will be modified each time a State obligates funds for the SIB.

Step 5. Capitalize the bank.

The State must submit a payment request to FHWA (through the current bill system) or the appropriate DOT modal administration to receive a disbursement. Payments must be promptly deposited into the SIB.

While disbursements of Federal funds cannot exceed the amount transferred and obligated, the State may submit a request to FHWA and the appropriate DOT modal administration for an increased disbursement amount if needed to finance a specific project. If approved, additional funds would be transferred to the SIB program.

Disbursements of Federal funds must be matched by a State deposit of at least 25 percent of the Federal contribution (which equals 20 percent of the total deposit). The non-Federal share can be reduced, if the State uses a lower non-Federal share under subsection 120(b) of Title 23 (sliding scale rate applicable to projects not on the Interstate System). Title 49 does not have a sliding scale provision. The non-Federal match must be deposited into the SIB on or before the date Federal funds are deposited. The non-Federal match must be in the form of cash. Soft match and in-kind contributions cannot be used to match Federal funds deposited into the SIB.

II. Types of Assistance

SIBs may offer assistance to highway, transit capital, railroad (if Title 49, subtitle V funds are provided) and other surface transportation projects approved by the Secretary in the following forms:

Loans:

  • Loans with flexible terms
  • Market or below interest rates
  • Subordinated loans
  • Short-term construction or long-term debt financing

Credit Enhancement:

  • Capital reserves and other security for bond or debt instrument financing
  • Letters of credit (direct pay or stand-by)
  • Lines of credit
  • Bond insurance and loan guarantees

Other Forms of Assistance:

  • Certificates of Participation or lease-purchase agreements
  • Grant Anticipation Revenue Vehicles (GARVEEs) and Grant Anticipation Notes (GANs)
  • Direct and indirect interest rate subsidies
  • Other forms of debt financing and methods of leveraging funds as approved by the Secretary. Such requests should be submitted in writing to FHWA.

III. Administration

Accounting

The State must establish fiscal controls and accounting procedures sufficient to assure proper accounting for payments received and disbursements made through the SIB, and to provide SIB balances at the beginning and end of the accounting period on a monthly and annual basis. In administering the SIB, the State must use accounting and fiscal procedures conforming to generally accepted accounting principles as promulgated by the Governmental Accounting Standards Board.

The State may establish accounts and sub-accounts, as needed, within the SIB, such as a repayment account. It is important to note that repayments to the SIB cannot be used as matching funds for capitalization.

Under the TEA-21 SIB provisions, separate highway and transit accounts are not required.

Investments

Funds held in SIB accounts may be invested in U.S. Treasury securities or other financing instruments that the State currently uses for its own funds to earn interest. If a State chooses to use an investment instrument that it does not currently use for its own State funds, the State must seek approval from FHWA or the appropriate DOT modal administration in writing. The interest earned on funds deposited into the SIB must be credited to the account in which it was earned and is subject to the requirements of that account.

Records Retention

The State will retain project files relating to the SIB until all financial assistance has been repaid and necessary audits have been performed. Retention and disposition of SIB files will be in accordance with State laws unless the period for retention conflicts with the requirement above or the three-year minimum requirement of 49 CFR section 18.42 in which event, the later period of retention will apply.

Administrative Costs

Up to two percent of the Federal funds deposited into the SIB can be used to administer the SIB.

This limitation does not apply to non-Federal funds in the SIB. In managing the SIB program, the State is not required to account for Federal SIB program administration separate from overall SIB administration.

State Entity

The SIB is a State entity. The United States is not obligated to any third party as a result of commitments made by the State as part of the SIB program.

Debt Issuance

If the SIB issues debt through bonds or other financial instruments, the obligations must receive an investment grade rating (BBB or higher) from a nationally recognized rating agency. If the SIB provides other assistance resulting in liabilities in excess of its contributed capital, such as loan guarantees, the SIB must also receive an investment grade rating on its claims-paying ability. The State will provide a copy of any rating agency report to DOT.

Audit

The SIB is subject to the single audit requirements established by the Office of Management and Budget Circular A-133.

IV. Project Requirements

Agreements with Project Sponsors

Before providing SIB financial assistance for a project, the SIB must enter into a written agreement with the project sponsor. The agreement must include interest rates, repayment terms, a disbursement schedule, and any fees, compensation, or other collateral offered by the recipient of the assistance. The written agreement must require each recipient to maintain project accounts in accordance with generally accepted accounting principles. The State will indicate in all agreements with parties receiving financial assistance from the SIB that any security or debt financing instrument issued by the bank does not constitute a commitment, guarantee, or obligation of the United States.

Federal Requirements

All projects receiving assistance from the SIB must comply with the Federal requirements that apply to projects under Title 23 or Title 49 when the assistance is derived from: (1) the Federal funds deposited into the SIB, (2) the non-Federal matching funds, (3) all repayment amounts from Federal and non-Federal sources, and (4) any investment income generated from these funds.

If a State establishes separate accounts within the SIB that are not required by TEA-21 and are capitalized with non-Federal funds, then the above Federal requirements would not be applicable.

Loans

Repayments on the loan must commence not later than five years after the project has been completed, or in the case of a highway project, when the facility has opened to traffic (whichever is later). Once repayments commence, they must be completed within 35 years.

Loans will bear interest at or below market rates as determined by the State. The SIB is not required to charge an interest rate on loans.

Lines of Credit

If a line of credit has not been drawn upon after the terms of the project agreement have been met, the amount of funds supporting the line of credit may be transferred into a repayment account and made available for financial assistance under the terms of the State's SIB cooperative agreement. Those funds may then be used for eligible Title 23 or Title 49 project activities advanced with funds from a repayment account.

V. Reporting

The State must submit an annual report to the FHWA, FTA and/or FRA Administrators no later than 90 days after the end of the Federal fiscal year. This report must identify the recipients of financial assistance, describe the projects financed, and show the amounts of financial assistance, interest rates, and repayment terms. The State should include financial statements showing the financial condition of the SIB.

Biennially, the report will address the overall benefits of the SIB program and how the program has contributed to the State's transportation goals.

VI. Disposition

The State will notify DOT if it wishes to terminate the SIB. Any Federal funds that have not been used to assist a project must be returned to the appropriate DOT modal administration and will be credited to the State's Federal account from which the funds were originally transferred.

Funds that have been used to assist projects and repaid to the SIB will be used for Title 23 purposes and may be in the form of a grant.

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