The New SIB
Northern Border Finance Conference
Chicago, May14-16 2007
Mr. Prabhat Diksit
FHWA Resource Center
State alternatives to grants
support local highway
projects through grants:
grants for projects. But credit to local
governments (or private
sector projects) now
provides a creative
alternative to grants
State Infrastructure Bank (Sib)
Sibs are revolving funds created by a state
using Federal transportation dollars
The revolving fund is used to provide credit
assistance (loans, loan guarantees, lines of credit
etc) for local transportation projects:
The funds are revolving in that repaid loans go
back into the fund for further lending.
State Infrastructure Banks:
How they work!
Federal Aid 1 Initial
Loans Second Round
•Direct Loans 4 Repayments
•Interest Rate Buydowns
A state would take Federal monies (say $40
m) from any of an allowed set of funding
categories (NHS, STP,IM etc)
provide the local match ($10 m) and thus
“capitalize” the SIB.
The funds can then be used for any Title 23
project--- even years down the line
The funds are not limited to the original
funding categories drawn from.
Obviously, a project owner requesting
borrowing needs a means of repaying that
borrowing, i.e. a revenue stream dedicated to
Typical project revenue streams
Tolls on road and bridge projects
Pledges of taxes by local governments
Sales taxes, property taxes, motel taxes,
severance taxes etc.
Why should a state provide credit
rather than grants for transportation?
Priorities differ: aid to projects of not high enough
priority for grant assistance. (Second tier projects)
Allow local govts. to accelerate projects slated for
grants in later years of a STIP.
Provide “gap” funding or initial “seed” funding for
difficult to finance projects
& toll projects are always “difficult”
Assistance, short of grants, to private sector projects,
Truck stop electrification
State’s reasons to give credit
State encouragement to local govts. to
accelerate project on strategic state agenda
Local connectors to state highways that
enhance tourism or security
Strategic state effort to encourage private
investment in transportation.
The option of a credit facility allows a state
many alternative ways of supporting
transportation besides straightforward grants.
Local govt. reasons for requesting
Advance a project not high on state agenda.
Boost economic development via transportation
project even if it means borrowing costs.
Leverage borrowed funds to enable public private
For example, a state loan may be the only way of
starting a toll project important to local mobility or to
An air quality non-attainment area might want to
encourage private sector projects, such as truck stop
idling projects that improve emissions.
Federal Transportation Sibs since 1995
Federal-Aid Highway (and Transit) dollars
have been allowed for the capitalization of
Sibs since the NHS Act of 1995.
A new Sib pilot with new rules was allowed
with TEA 21 in 1998.
SAFETEA-LU has once again created a new
Sib program– with its own governing
New SAFETEA-LU Sibs
Program once again opened to all states and most
10% of major funding categories can be used to
NHS, STP, Bridge, IM, & Equity Bonus. (Highway
Title 49, Sec 5307, 5309, 5311 (Transit account)
All rounds of lending have to be for either Title 23, &
Title 49 eligible projects, or for surface transportation
projects specifically approved by the Secretary.
Other Major Provisions
There is a state match requirement of 25% of
Federal capitalization monies.
Separate transit and highway accounts have
to be created.
Maximum terms & interest rates are set in
Maximum terms of 30 years. Payments to
begin no later than 5 years after completion.
Interest rate no higher than market.
No grants allowed.
Investment income has to be credited to
Annual reports to Secretary required.
2% limit on fraction of funds used for
Guidelines on investment of Sib funds
Federal notes, bank deposits etc.
Projects receiving Federal assistance, even
indirectly via credit assistance, still have to
undergo due reviews, and are subject to
Federal requirements regarding NEPA,
Davis-Bacon, Buy-America etc
With the “new” SAFETEA-LU sibs these
reviews apply to all rounds of lending i.e.
even to repaid loans lent out again.
Mechanics of Authorization
A cooperative agreement, or an amendment
to an existing cooperative agreement ,
between a state wishing to create a Sib and
the Secretary is necessary.
Some 32 states have created Sibs.
Over 520 loan agreements
$6 b+ in project lending.
But it is fair to say only a few states have
used Sibs actively.
One state (So. Carolina) has disbursed half
the dollar value of total loans
Six states account for 91% of dollar volume of
Approaches to Sib lending:
Boost economic development!
Price Corridor, Chandler, AZ
Acceleration of 2.7 miles of Maricopa Freeway
important to Chandler economic development.
$26 m short term loan from Sib. Chandler &
private developer together pay interest on
Thus, a public private partnership enabled by
Fund HOT lanes/Express lanes
HOT/ Express lanes will become a popular
answer to the urban congestion problem.
They can be publicly or privately funded,
But may need the initial funding support that a
“patient” Sib loan may supply.
Lee Roy Selmon Reversible Express Lanes
in Tampa: $290m project seeded by $35m
Sib loan @ 3.5% and subordinated to senior
debt. Project would have been difficult to get off of
ground without Sib loan.
Structure multimodal deal:
Sib money ideal for multimodal projects:
Once in Sib, Fed-aid funds loose “color” of
origin and can be flexed to transit, or freight, or
other intermodal projects.
Harrisburg Transportation Center
$2.9 m rehab funded by $1.4m Sib loan &
funds from PenDOT, Amtrak, Pa Economic
Development, Pa Historical Commission.
Intermodal freight projects, including private
sector ones, have been financed with Sib
Stark County intermodal Facility, OH
Transfer yard where truck trailers & containers
are loaded onto railcars.
$32 m project-- $7 m Sib loan; $25m private
Wellsville intermodal facility, OH
A $5.2 m local port authority project financed by a
3% $2.1 m short term Sib construction loan.
Funding debt service reserve
Puerto Rico used $15 m The lifting of this requirement
from SIB to provide the of a years payments as debt
debt service reserve on service reserve, allows for a
a $75m revenue bond smaller bond issuance; and
issuance. permits a slightly lower rate
Missouri’s Sib provided
The FTA recently began a
$1.2 m loan to pilot program to allow up to
Springfield for debt ten recipients the use of
service reserve on a 5307 grant money for the
$33 m revenue bond funding of debt service
Use Sib to encourage investments in
Maine uses its Sib to encourage investments
in state collector roads
Qualified loans are for ten year terms and are
interest free. A local match of 25% is required.
Other states look to Sib loans to enhance
local roadway access to state tourist spots.
Sibs can be used to lend to CMAQ projects,
such as diesel engine retrofits & truck stop
idle reduction– an approach encouraged by
Boosting Sib Power: Revenues enhance!
A dedicated revenue base ( vs occasional
additions to Sib capital ) enhances Sib
The stability afforded by dedicated funds,
leads to a mature program that can be an
important part of transportation funding in the
So. Carolina with truck registration fees and a
¼ c gas tax dedicated to the Sib has the
largest volume of Sib lending in the country.
Issuing a bond can greatly expand monies
available for disbursement:
Example: $50 m annual revenue stream
supports a $700-800 m bond at 4%, 20 yrs.
Four state SIBs have issued bonds:
So. Carolina($1.2 b).
10 states have legislative authorization to do so.
Kansas has created its own state revolving
fund for transportation, without any Federal
money-- thus avoiding Federal requirements.
Approaches to bonding
1. South Carolina 3. Next Level: Fl & OH
issued revenue bonds have issued bonds
against annual gas against repayment
taxes, registration fees. streams from previously
2. MN against block SIB issued loans. OH uses
capitalizations from repayment stream
state and Federal funds monies to issue bonds
($58 m cap. vs. $110 m on demand by local
revenue bond issuance) borrowers.
This can be done with an
established and mature
program, but requires
PPPs & Sibs
With public private partnerships emerging
strongly as an answer to transportation
Sibs can be used to provide “patient capital”
for difficult to finance PPP projects such as
Additional tolled lanes down median
Developer built interchanges
Intermodal freight transfer yards
Other forms of credit assistance !
Four excellent financial instruments not
Lines of credit/letters of credit
Interest rate buy-downs
Commercial type loan programs managed by
If maximum leveraging of Federal/state funds
is the goal then these instruments are the
way to go.
The new SAFETEA-LU bill provides a great
opportunity for all states and territories to use
Fed-Aid funds to establish Sibs.
Sibs provide a creative and underexploited
alternative to grant assistance for local
For additional info:
The FHWA Sib website
The innnovativefinance.org web site
Prabhat A Diksit
Innovative Finance Specialist
FHWA Resource Center