STATE INFRASTRUCTURE BANKS : A Mechanism to Expand Federal Transportation Financing

Officials from 8 of the 15 states that responded to our survey consider the expedited completion of projects to be the most important benefit of State Infrastructure Banks over the next 5 years. By drawing on diverse sources for funds, more capital can be amassed, thus enabling a project to get started and completed sooner than otherwise possible using conventional federal grants. Furthermore, when loans are repaid through tolls, dedicated taxes or other forms of repayment, the funds can be reloaned to other transportation projects in the future. The absence of new federal money to capitalize a State Infrastructure Bank was viewed by 8 of the 15 states surveyed as a factor that definitely diminished the likelihood that their state would participate in the pilot program. However, DOT’s appropriation for fiscal year 1997 provided $150 million for State Infrastructure Banks. DOT will have to decide how the funds will be allocated. This additional funding and how it will be allocated could affect the number of states interested in applying for the pilot program. Although a primary benefit of State Infrastructure Banks is that the financing will be repaid and can be recycled to future projects, some states expressed aversion to debt financing and concern about whether there are enough revenue-generating projects to sustain a State Infrastructure Bank. Also, some experts on infrastructure financing question State Infrastructure Banks’ prospects for attracting private sector involvement—one of the program’s primary goals