FHWA's Center for Innovative Finance Support (formerly Innovative Program Delivery) is responsible for ensuring that the SIB pilot programs and other related innovative revenue and credit programs are effectively administered, and for providing technical assistance to the States and FHWA Division Offices with respect to these programs.
FHWA's most recent SIB guidance was issued in January 2014 and supersedes its earlier May 2001 guidance. This new guidance provides a summary discussion of stewardship practices for managing the SIB pilot programs. The practices included in this document are based on legislative requirements, existing SIB Guidance, and a survey conducted of all FHWA Division Offices regarding program use by the States.
The 2014 guidance includes examples of best practices related to the SIB pilot programs identified in a 2011 review of the program, along with some tools that may aid FHWA Division Offices and the States in carrying out their stewardship responsibilities.
To establish a SIB, a cooperative agreement is executed between the FHWA and/or FTA/FRA Administrator(s) and the responsible state official. A cooperative agreement is the legal document that establishes the state SIB program and specifies the requirements both for program and fund management.
Capitalization of the SIB requires the state to determine the amount of funds to be designated as Advance Capitalization (ACAP) and submits a written request to FHWA or the appropriate USDOT 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 and any eligible carryover apportionments not designated as ACAP in prior fiscal years. A state may transfer and obligate up to 20 percent of the ACAP amount each year.
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.
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 SAFETEA-LU, 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.
The state must submit a payment request to FHWA or the appropriate USDOT modal administration to receive a disbursement. 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), except where the sliding scale applies. 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.
A SIB can be structured as a leveraged or unleveraged SIB. An unleveraged SIB simply lends available funds or provides credit enhancement to projects from its existing capitalization. Loan repayments are recycled for funding future projects, but there exists a time lag before the SIB is replenished through repayments from its original borrowers. To maximize replenishment of a SIB, some state DOTs have limited borrowings to short-term loans.
To expand the lending power of a SIB beyond its capitalization, a leveraged SIB issues bonds against its initial capitalization, significantly increasing the amount of funds available for loans. Rather than loaning Federal funds and state matching funds, these funds together with anticipated loan repayments can be pledged as security for the bond issue. The proceeds from the debt issuance can then be provided to project sponsors as either loans or credit enhancements. The South Carolina Transportation Infrastructure Bank (SCTIB) is a good example of a leveraged SIB. Since its inception, the SCTIB has approved financing and developed over $3 billion in projects and has issued over $1.2 billion in revenue bonds.
The decision of whether or not to leverage a SIB will depend on the assessment of overall loan demand and state policies relative to bond financing. A state may need specific authority through enabling legislation to issue SIB loans. For leveraged SIBs, credit and rating considerations will also be factors in the overall SIB structure. In practice, while most SIBs are unleveraged, leveraging is a viable alternative for states to facilitate a larger dollar investment in transportation.
A SIB must enter into a written agreement with a project sponsor prior to providing SIB financial assistance. 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.
All projects receiving assistance from a 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 SAFETEA-LU and are capitalized with non-Federal funds, then these Federal requirements would not be applicable. Legacy SIBs established under the NHS Act are not subject to item 3, i.e. repayments are not subject to Federal-aid requirements.