The process for funding a Section 129 loan is very similar to the process for committing funds to and obtaining reimbursement for any other Federal-aid project. The first step is for the state to identify a candidate project and a project sponsor that could benefit from public credit assistance through a Section 129 loan, determine the approximate amount of the loan, and determine the amount and source of Federal-aid highway funding to be committed to the loan. Apportionments from any program category may be committed to Section 129 loans as long as the project receiving the loan is eligible for funding from that program category.
After identifying the candidate project, the next step is for the state to discuss the project and loan structure with the FHWA Division Office. After ensuring that the project meets all the requirements specific to Section 129(a)(7), the Division Office will authorize either the entire amount of the loan or an incremental amount, depending on project cash flow needs. At this point in the process, Federal-aid funds are obligated for whatever portion of the loan was authorized. Federal reimbursements can be received after the state actually disburses loan funds to the project sponsor. The non-Federal matching share for all Section 129 loan projects is 20 percent.
Use of Section 129 loans for project financing has been very limited. The principal reason is that state infrastructure banks (SIBs), which serve the same purpose have been authorized since 1995. SIBs have broader eligibility rules than Section 129 loans, and 32 states have existing SIBs capitalized with federal funds.