Appendix B: State Infrastructure Bank

Introduction

As the population of Texas grows, the challenge becomes harder to meet the demand for a safe and efficient transportation system. Local demands for transportation improvements greatly outnumber the funds available to meet them under traditional federal and state funding methods. One tool to help TxDOT address the growing transportation needs of this state is the State Infrastructure Bank, or SIB.

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Background

In November of 1995, the President of the United States signed Public Law 104-59, known as the 1995 National Highway System Designation Act. Section 350 of that law allowed the United States Secretary of Transportation to designate a maximum of ten states as pilot projects for the State Infrastructure Bank program. Texas was selected as one of the initial pilot states.

A State Infrastructure Bank, or a SIB, operates chiefly as a revolving loan fund and may provide a wide range of financial assistance in addition to loans. The purpose of the pilot program is to attract new funding into transportation, to encourage innovative approaches to transportation problems, and to help build needed transportation infrastructure. The law provides that each designated state may transfer up to ten percent of certain federal dollars, match those funds with state funds, and deposit them into a State Infrastructure Bank. The greatest benefit of this program may well be the creation of a self-sustaining, growing, revolving loan fund.

In 1997, the 75th Texas Legislature passed Senate Bill 370 that adopted Transportation Code, Chapter 222, Subchapter D, which created the State Infrastructure Bank to be administered by the Texas Transportation Commission. In September 1997, the Texas Transportation Commission approved the administrative rules that govern the State Infrastructure Bank, which are located in 43TAC, Chapter 6.

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Purpose

The SIB program arose out of the need to improve, rehabilitate, and renovate transportation facilities. Transportation needs are increasing while federal, state and local financial resources are constant or declining. The SIB program is one of the ways that the federal government is utilizing innovative financial techniques to address growing transportation needs.

The purpose of the SIB is to:

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Encourage public and private investment in transportation facilities, including facilities that contribute to the multimodal and intermodal transportation capabilities of the state;

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Expand the availability of funding for transportation projects and reduce direct state costs; and

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Improve the efficiency of the state transportation system.

The mission of the SIB is to provide loans and other financial assistance for improving the transportation infrastructure in Texas. To accomplish this mission, TxDOT will operate the SIB as a self-sustaining, growth-oriented fund. TxDOT will also ensure projects satisfy all appropriate federal, state and local planning and programming requirements.

TxDOT has designed the SIB to enhance the ability of borrowers to access capital funds at lower-than-market interest rates. The success of the SIB program will depend on maintaining strong credit standards and successfully leveraging funds to increase the program’s activity through a revolving loan fund structure. The quality and diversification of the SIB’s financial assistance will have a direct impact on the interest rates paid by borrowers.

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How Does the SIB Work?

Much like a private bank, the SIB offers eligible customers a range of loans and credit enhancement services. The SIB will offer its financial services to finance or financially enhance transportation projects that meet its selection criteria. As loans are repaid to the SIB, additional assistance will be granted for more transportation projects. The SIB, in effect, is a revolving loan fund.

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Advantage to Local Communities

Why would a local entity want to borrow money from the SIB when historically they have not had to pay for local transportation projects? The answer is twofold: time and money.

Currently, TxDOT expects to be able to fund only about one third of the needed transportation projects in Texas. TxDOT will continue to fund as many needed projects as possible. In many cases however, a project considered a very high priority by one community, may not be ranked high enough on a statewide basis to receive funding for several years.

If the local community wants the project completed faster, it could borrow money from the SIB and advance the project by several years. In addition, if the proposed transportation project would generate additional economic development, the local community may receive enough revenue from the increased tax base to easily pay for the financial assistance from the SIB.

Thus, the community could get its project completed much sooner with little or no additional cost.

For more information, please contact the Transportation Planning and Programming Division (TPP) of TxDOT at (512) 486-5000.