In municipal finance, as in attire, neither

one size nor one style fits all. This issue

of IFQ presents a comparison of three

different ways that states can structure a

GARVEE-type debt instrument. A

Grant Anticipation Revenue Vehicle, or

GARVEE bond, refers to any financing

instrument for which principal and/or

interest is repaid with future Federal-aid

highway funds. In essence, the debt is

issued in anticipation of the receipt of

Federal-aid grant reimbursements in subsequent years. The concept was fully

described in IFQ Volume 3, Number 2.

The three transactions profiled in this

article – the Central Artery/Tunnel in

Boston, Massachusetts; Corridor 44 in

northwest New Mexico; and the SpringSandusky Interchange in Columbus,

Ohio – represent the GARVEE bond’s

real debut in the financial markets.

From all appearances, GARVEE bonds

are receiving a warm welcome and may

see increased use in the coming years. In

fact, New Mexico is already considering

a series of additional transactions that

may employ this financing strategy, and

other states are making inquiries as well.

In considering these transactions, three

points of contrast merit special mention:

• The underlying source of Federal-aid

highway reimbursements; 

• The presence and nature of backstop

sources of payment; and

• The state implementing action(s) on

which those funds’ availability is conditioned.

Underlying Source of Reimbursements

The general GARVEE bond concept can

be applied in one of two ways: 1) a

“direct” GARVEE bond, in which federal assistance directly reimburses debt service paid to investors in a debt-financed

Federal-aid project, as permitted under

23 U.S.C. 122; and 2) an indirect reimbursement, whereby federal funds reimburse expenditures on other Federal-aid

projects and the state Department of

Transportation (DOT) subsequently

uses a portion of those funds to pay debt

service on the debt-financed project.

Note that in the second instance, the

debt-financed project need not be a

Federal-aid project, since the reimbursements of state expenditures on other

Federal-aid projects effectively transform

into state funds upon receipt by the state

DOT. Figure 1 on page 3 depicts the

two approaches.

In the three subject cases, Ohio and

New Mexico are employing a direct

GARVEE; Massachusetts is employing

the indirect reimbursement strategy.

It should be noted that regardless of the

structure selected, the enactment of the

Transportation Equity Act for the 21st

Century (TEA 21) bolsters the security

of the underlying source of repayment.

First, the Act’s minimum guarantee provision ensures that each state will

receive annual apportionments of no

less than 90.5 percent of its percentage

contributions to the Highway Account

of the Highway Trust Fund. Second,

and more important, TEA 21’s provisions governing the budgetary treatment of the highway program virtually

eliminate appropriations risk at the federal level over the current six-year

authorization period through the effective creation of minimum obligation

levels. It is true that some degree of

federal authorization risk still exists since

theoretically the Congress could elect

not to reauthorize the Federal-aid highway program when TEA 21 expires

after federal fiscal year 2003. However,

the risk of non-authorization in future

years is considered remote, given the

importance, longevity, and general popularity of the Federal-aid program.

Quarterly

FHWA's

MIRIAM ROSKIN, EDITOR VOL. 4, NO. 3

MAX INMAN, FHWA MANAGING EDITOR SUMMER 1998

Also in this issue ...

Reauthorization Update

TEA 21: What’s In, What’s

Out, What’s New . . . . . . . .4

Resource Referral

Eastern Finance Center 

Web Site . . . . . . . . . . . . . 6

SIB Update

A Tale of Two Pilots . . . . . 8

CASE STUDIES

Federal Highway Funds and Debt Finance

A Spectrum of Strategies from Massachusetts, New Mexico and Ohio

continued on page 2

Contributing Authors

Contributors to Vol. 4, No. 3 

of IFQ include:

Lucinda Eagle, FHWA

Bryan Grote, FHWA

Jennifer Mayer, FHWA/ Western

Finance Center

Miriam Roskin,

Porter & Associates, Inc.

David Seltzer, FHWA
2

Quarterly

FHWA's

State Backstops

The second major area of difference in the structure of a

GARVEE-style financing instrument is the presence of alternate funding sources or revenue streams to back up the

Federal-aid reimbursements should they fail to materialize or

fall short of requirements.

Ohio and Massachusetts have structured their debt so that

other state funding sources may be sought in the event of

unexpected shortfalls. In Ohio, all eligible Federal-aid highway funds will potentially be available to reimburse debt service expenditures (though subject to biennial appropriation);

if these funds prove insufficient, moneys residing in the state

infrastructure bank’s bond service fund and other grants or

state highway funds will be sought to pay debt service. As a

final state backstop, the debt is secured by a moral obligation

for the Ohio DOT to seek appropriations from the state

assembly in the event that none of the preceding sources is

available to meet debt service. The presence of such strong

non-federal backstops – which some characterize as a triplebarreled structure – was of greater importance in Ohio

because its debt issue represented the first GARVEE bond of

its kind and occurred before enactment of TEA 21. 

In Massachusetts, under very limited – and unlikely – circumstances, the Commonwealth will direct 10 cents of its 21-cent

state fuel tax to the Grant Anticipation Note (GAN) Trust

Fund for the purpose of paying debt service on the Central

Artery instruments. This limited backstop is triggered only if:

1) annual Federal-aid highway funding falls to less than $17.1

billion nationwide; and 2) Massachusetts’ share of such funding is projected to provide less than 120 percent coverage of

aggregate debt service on the GANs in the following year. 

Municipal bond insurance, which safeguards bondholders

against the repercussions of a revenue shortfall by covering up

to 100 percent of debt service payments, serves as a way of

enhancing the creditworthiness of a transaction, and can allay

investors’ concerns regarding the security of their investment.

Bond insurance is a form of “external” credit enhancement,

in contrast to a state make-up, which represents a form of

“internal” credit enhancement. If cost-effective, New Mexico

may purchase bond insurance for the Corridor 44 issues,

which would raise the rating on the issues to AAA. New

Mexico is not, however, planning to structure internal credit

enhancement through a state backstop.

Implementing Actions

The third variation in potential GARVEE structures is the

extent to which the availability of the underlying Federal-aid

reimbursements and backstop sources is subject to others’

actions. From a ratings standpoint, the need for implementMASSACHUSETTS: Central Artery/Tunnel

The Project: An elevated portion of Interstate 93, known as the Central

Artery in downtown Boston, is being reconstructed primarily

as a tunnel. In addition, Interstate 90 is being extended to

Boston’s Logan Airport via a new tunnel under Boston

Harbor. The project is expected to be finished in 2004.

The Cost: $10.8 billion

The Debt: The Commonwealth of Massachusetts issued $600 million of

Grant Anticipation Notes (GANs) in June 1998, with authority from the legislature to issue up to $1.5 billion in total.

The $600 million issue matures in 8 to 17 years and has

received ratings of Aa3, AA, and AAA by Moody’s, Fitch

IBCA, and Duff & Phelps, respectively. The Commonwealth

intends to pay interest from state highway funds but retire

principal with Federal-aid reimbursements. 

Debt service payments will address interest only until calendar

year 2005, at which point the Commonwealth will start

repaying principal. From 2005 forward, average annual debt

service on the first $600 million issued will be approximately

$60 million. By comparison Massachusetts’ average annual

Federal-aid highway apportionments throughout the life of

TEA 21 are expected to be approximately $524 million.

NEW MEXICO: Corridor 44

The Project: Corridor 44 is a 140-mile, two-lane principal arterial extending between Bernalillo and Bloomfield in the northwest corner of the state. The New Mexico State Highway and

Transportation Department will acquire necessary right-ofway and contract with a private developer to design and manage construction associated with expanding the highway from

two to four lanes, and provide a long-term warranty for preventive maintenance activities. Construction is expected to be

complete in 2001.

The Cost: $295 million

The Debt: The New Mexico Finance Authority expects to issue approximately $287 million of bonds in four series beginning in July

1998. The bonds will amortize over 15 years, with final

maturity in 2015. The debt will be insured but has not yet

received ratings. Average annual debt service will be approximately $28 million. By comparison, New Mexico’s average

annual highway apportionments throughout TEA 21 are

expected to be about $256 million. 

OHIO: Spring-Sandusky Interchange

The Project: The Spring-Sandusky project will improve connections and

traffic flow in downtown Columbus through relocation of

U.S. Route 33; new construction of Interstate 670 and State

Route 315; and related paving, grading, and drainage work.

The project is expected to be complete in 2002.

The Cost: $116 million

The Debt: The State of Ohio issued $70 million worth of bonds in May

1998. The bonds will mature in 10 years. The bonds received

ratings of Aa3 from Moody’s and AA- from both Standard &

Poor’s and Fitch IBCA. Average annual debt service will be

slightly less than $9 million. By comparison, Ohio’s average

annual highway apportionments throughout TEA 21 are

expected to be about $887 million.

FINANCE STRATEGIES, continued from page 1

continued on page 3
ing actions such as appropriations may

be of less consequence than the underlying and backstop sources of repayment. Nonetheless, the extent to which

these sources of funds are conditioned

on specific actions stands as a clear

point of contrast in the way that Ohio,

New Mexico, and Massachusetts are

approaching the GARVEE concept. 

In Ohio, the availability of federal

funds and all backstop sources is subject

to biennial appropriations by the Ohio

General Assembly. In New Mexico,

federal funds are automatically available

to the state highway and transportation

department; no state-level appropriations action is required.

In Massachusetts, where an indirect

reimbursement is the mechanism of

choice, the availability of the Federalaid reimbursements (i.e., federal funds

“earned” on other projects) to the

newly-created GAN Trust Fund is not

conditioned upon annual appropriation by the state legislature. Rather,

pursuant to state legislation establishing the GAN Trust Fund, all future

federal highway reimbursements flow

directly to the Trust Fund without further state action. However, in the

unlikely event that the backstop source

is triggered, associated revenues would

be subject to appropriation.

So Which Is Best?

As demonstrated by the variety of transactions structured by Massachusetts,

New Mexico, and Ohio, GARVEE-type

transactions can be arranged in various

ways. So far it appears that no one

structure is inherently preferable to others, as each of the three states profiled

in this article has created a highly-rated

and very marketable debt instrument.

Instead, circumstances specific to each

state will help determine which strategies are most desirable. Factors contributing to the design of the GARVEE

instrument include, for example, projected population growth; this projection suggests how well a state will fare

under the Federal-aid apportionment

formulas. Other considerations

include flexibility within the State

Transportation Improvement Program,

the stability of the non-federal contribution to the project’s construction

costs, legal or political constraints on

the availability of gas tax receipts or

other funds to backstop Federal-aid

funds, and the assurance of the debtfinanced project’s eligibility for Federalaid (Title 23) funds. 

Patterns of Federal-aid cash flows are of

special importance when deciding

whether to use a direct GARVEE or

indirect reimbursement strategy. In

Massachusetts, for example, the high

volume of Federal-aid projects, and

especially those built under advance

construction, creates a favorable environment for an indirect reimbursement

strategy. This is because the volume of

projects creates plenty of liquidity,

which is necessary to demonstrate to

bondholders that debt service payments

can be made in a full and timely fashion. A high volume of advance construction projects is especially beneficial, since these projects can be readily

converted to Federal-aid, creating

“quick cash” that can be applied to debt

service. (Note: Advance construction

is a grants management strategy

3

Quarterly

FHWA's

FINANCE STRATEGIES continued from page 2

Figure 1. Direct GARVEE vs. Indirect Reimbursement

Direct GARVEE

Bond Holders State DOT or

Financing Agent

1

FHWA

3b

3a

2

Debt-Financed

Project

Investors purchase bonds issued by state DOT; proceeds flow to state DOT.

State DOT expends bond proceeds to construct Federal-aid debt-financed project.

State receives “cost-reimbursement” from FHWA for debt service expenses from its annual

Federal-aid obligation authority.

State DOT passes through Federal-aid reimbursements as debt service payments to bondholders over a multi-year term.

1

2

3b

3a

Indirect Reimbursement

Bond Holders State DOT or

Financing Agent

1

FHWA

2

Federal-Aid

Projects

State DOT expends funds on traditional pay-as-you-go Federal-aid projects.

FHWA reimburses state DOT for costs incurred on such Federal-aid projects.

Investors purchase bonds issued by state DOT; proceeds flow to state DOT.

State DOT expends bond proceeds to construct debt-financed project.

State DOT passes through Federal-aid reimbursements for traditional pay-as-you-go projects

as debt service payments to bond holders over a multi-year term.

1

2

3

4

5

3

4 5

Debt-Financed

Project

continued on page 4
whereby a state DOT constructs a project with non-federal

funds, but preserves the project’s eligibility for future Federalaid funding.)

The indirect reimbursement strategy might not work so well

in cases where a state has comparatively few advance construction projects and 1) a short construction season or 2) a limited

number of large and financially “bulky” Federal-aid projects.

These conditions suggest a less liquid stream of Federal-aid

reimbursements, and the unpredictability of the stream might

limit the apparent security of the credit.

If an indirect reimbursement strategy is neither advantageous

nor feasible, the direct GARVEE may be structured to establish a direct relationship between debt service payments and

liquidating cash from the Federal-aid highway program. In

this instance, the issuer may still need to concern itself with an

adequate backstop, particularly to guard against federal reauthorization risk. 

Bond insurance is often the surest and simplest method to

bring a credit rating up to a high level, but the premiums

charged by the municipal bond insurer add to the financing

cost. Still, depending on the underlying rating of a project,

bond insurance may prove cost-effective compared to the

interest expense of an “unenhanced” issue. 

Backstops of state highway or general funds or a moral obligation on the part of the state as a whole are another option, but

again, these might face the same constraints (e.g., legislative

appropriation) on which the original credit was conditioned.

Also, it should be noted that a state may be reluctant to

encumber its highway fund balance sheet with contingent liabilities for a variety of reasons. Pertinent considerations

include: 1) legal matters, such as state debt limits; 2) financial

assessments concerning the savings associated with a higher

credit rating; and 3) philosophic leanings, such as a state’s general disposition toward debt and risk.

Massachusetts, New Mexico, and Ohio offer strong examples

of three very different, but equally marketable, financing

structures. Each state’s experience demonstrates that regardless

of an individual GARVEE bond’s structure, these instruments

are producing benefits by accelerating construction, adding

flexibility to states’ financing options, and lowering financing

costs by improving ratings. As more states test the GARVEE

concept with new transactions developed under alternative

conditions, issuers, underwriters, rating agencies, and insurers

will develop an even better sense for structures that offer the

highest possible security to the investor at the lowest possible

cost to the issuer.

Quarterly

FHWA's

4

Contacts:

David Seltzer, FHWA, 202/366-0397 and Bryan Grote, FHWA,

202/366-5785, and

Jeff Stearns, Office of the Massachusetts State Treasurer, 617/367-3900,

ext. 564

Gary Joseph, Ohio Department of Transportation, 614/728-7473

John Fenner, New Mexico State Highway and Transportation

Department, 505/827-5446.

Special thanks also to Sonia Toledo, Jeff Carey, and Pete Markle for

their thoughtful review and extensive comments on this article.

FINANCE STRATEGIES, continued from page 3

REAUTHORIZATION UPDATE

TEA 21

What’s In, What’s Out, What’s New

President Clinton signed the six-year Transportation Equity Act for the 21st Century (TEA 21, Public Law 105-178) on June 9,

1998. By and large, the Act maintains the core surface transportation programs authorized under the Intermodal Surface

Transportation Efficiency Act of 1991. However, the Act does effect several significant changes, including an increase in authorized funding to $175 billion for highways and $42 billion for transit over six years. It also substantially alters the budgetary

treatment of the Federal-aid highway program, and collapses all equity adjustment funding categories into a single program

known as Minimum Guarantee. TEA 21 also provides new grants management flexibilities and project financing opportunities

to state DOTs and other project sponsors. Major finance provisions include:

• Enactment of a new pilot program to supplement the existing state infrastructure bank (SIB) pilot for four states;

• Enactment of the Transportation Infrastructure Finance and Innovative Act (TIFIA), which enables the Department of

Transportation to provide up to $10.6 billion in credit assistance (through loans, loan guarantees, and standby lines of credit)

to major projects of national significance;

• Language offering new means for states to generate income for surface transportation projects through tolls and right-of-way

sales and leases; and

• Language offering more flexibility in non-federal matching share requirements.

The table appearing on page 5 displays the legislative outcome for key financial provisions. It updates the reauthorization scorecard presented in the previous issue of IFQ.

Contact:

Max Inman, FHWA, 202/366-0637.
Quarterly

FHWA's

5

• State Infrastructure Banks Establishes a new SIB pilot program for four states. 1511

(See related article on page 8.)

• Direct Federal Credit

Surface Transportation Provides direct Federal loans, loan guarantees, and 1501-1504

Credit Program lines of credit for large surface transportation projects 

of national significance.

Rail Credit Pilot Provides direct Federal loans and loan 7203

guarantees for rail and intermodal projects.

• Tolls and Other Income

Interstate Highways: Up to three Interstate highway segments may be converted 1216(b)

Conversions to Toll from free to toll as part of a reconstruction project.

Right of Way Income Allows income from right-of-way sales and leases to be used 1303

for Title 23 purposes, as currently allowed for airspace income.

• Matching Share Provisions

Tapered (Variable) Match Allows non-federal share to vary over project life, so long 1302

as the ultimate matching share is preserved over time.

Program Level Match For Surface Transportation Program projects, allows Federal 1108

for STP projects funds to be matched across full program, not on a

project-by-project basis.

Flexible Match: Funds from other Federal agencies may count toward the 1115(j)

Federal Land non-federal matching share for recreational trails and 

Management Agency transportation enhancement projects. 

Funds

Flexible Match: Funds from DOT’s Federal Lands Highway Program may 1115(k)

Federal Lands count towards non-federal match for projects within or 

Highway Program providing access to federal or Indian lands.

Flexible Match: Permits donations of publicly-owned property to count 1301

Publicly-Owned Land towards non-federal match on all Federal-aid highway projects.

Soft Match: Toll Permits certain toll revenues to be used as a credit toward the 1111(j)

Credits non-federal share of another highway project.

• Tax-Exempt Status for Private Would have permitted up to 15 privately-owned and/or none

Activity Highway Bonds operated highway projects to gain eligibility for 

tax-exempt financing.

Category/Provision Purpose TEA 21 Section(s)

TEA 21 Box Score: Key Innovative Finance Provisions

✔

✔

✔

✔

✔

✔

✔

✔

✔

✔

TR NEWS, a bimonthly publication of the Transportation Research Board, features

timely articles on innovative and state-of-the-art research and practice in all modes of

transportation. The September-October 1998 issue of TR NEWS will be dedicated to

highway finance topics, presenting articles on the history of highway funding, the economic significance of highways to the nation, current innovative finance initiatives,

future funding needs, and strategic alternatives for the future. Contributing authors

include representatives from the Federal Highway Administration, the American

Association of State Highway and Transportation Officials, the Surface Transportation

Policy Project, a state department of transportation, and the academic community.

TR NEWS has an international circulation of 10,000. To order copies of the SeptemberOctober 1998 issue, contact the TRB Business Office (telephone 202/334-3214, 

email “aarcher@nas.edu”). 

TRB Plans Special Finance Issue of TR NEWS
Quarterly

FHWA's

6

RESOURCE REFERRAL

FHWA Eastern Finance Center Launches Web Site

The Federal Highway Administration’s Eastern Finance Center has developed a new Internet site (address: www.fhwa.dot.gov/efc)

to inform the EFC’s partners about financial management techniques for transportation infrastructure projects. The site complements the existing website for the FHWA Western Finance Center by promoting a variety of initiatives of special value to the 29

eastern states that the EFC serves. Staff from the EFC regularly post updates concerning the status of the eastern state infrastructure banks and the development of various quality financial management initiatives (QFMI). The site also provides links to other

useful financial and government Internet sites. 

Contact:

Robena Reid, FHWA/Eastern Finance Center, 518/431-4224 ext. 225.

STATE PROJECT

PROJECT COST 

($000)

LOAN AMOUNT 

($000)

INTEREST 

RATE

DRAW 

DATE REPAYMENT SOURCE

LOANS

1 Missouri Springfield Transportation Projects 39,360 1,180 3.70% 04.01.97 Local dedicated sales tax increment financing and 

State Highway Fund

1,690 3.50% 04.01.99 Local dedicated sales tax increment financing and 

State Highway Fund

2 Missouri Cape Girardeau Bridge 102,198 8,000 5.30% 10.07.97 State and future federal funds

20,000 5.30% 02.06.98 State and future federal funds

3 Ohio Butler Regional Highway 150,000 10,000 6.00% 10.16.96 Bond proceeds

4 10,000 6.00% 01.13.97 Bond proceeds

5 15,000 6.00% 05.19.97 Bond proceeds

6 Ohio Great Lakes Science Center Parking Facility 7,825 7,825 6.00% 05.01.97 Parking fees

7 Ohio Fort Washington Way Relocation 120,000 20,000 5.00% 03.01.98 Future city income and sales tax

8 Ohio Cleveland Transit Viaduct 25,000 6,900 4.25% 04.01.98 County sales tax

9 Ohio Project Monaco (Marion, OH) 2,025 2,025 4.00% 04.01.98 Payment in lieu of property taxes (TIF)

10 Ohio Cincinnati Industrial Park Access Road 

Improvements

645 645 4.00% 04.01.98 City's capital improvement fund (primarily income tax) 

11 Ohio Brower Road Improvements, Lima MPO 950 950 4.00% 06.01.98 Future federal funds

12 Oregon Ash Creek Bridge Replacement 850 735 4.00% 04.01.98 Future federal highway funds, city revenues

13 Oregon Signal Priority System 781 781 4.18% 05.15.98 Transit District revenues (primarily payroll tax receipts) 

14 New Mexico City of Moriarty Intersection Signal 541 541 03.31.98

15 Texas Laredo Bridge #4 61,400 27,000

16 Texas State Route 190 - Bush Turnpike* 1,000,000 20,000 4.20% 10.01.97 Toll revenues

SUBTOTAL 1,511,575 153,272

LOAN AGREEMENTS

1 Arizona Price Corridor Segments 56,600 26,000 3.67% 3/00/99 Earmarked sales tax revenues

2 Arizona Red Mountain Freeway Segments 60,400 13,700 3.67% 7/00/98 Earmarked sales tax revenues

3 Florida Branan Field Road Construction - Clay City 27,046 4,980 0.00% 1999 State DOT District funds (deriving mainly from gas 

tax receipts)

4 Florida Branan Field Road Construction - Duval City 36,255 13,406 0.00% 1999 State DOT District funds

5 Florida Congress/Australian Connector 11,529 8,365 0.00% tbd State DOT District funds

6 Florida I-275 Widening 11,801 2,327 0.00% 1999 Future federal highway funds

7 Florida SR77 Reconstruction 27,046 5,598 0.00% 2000 State DOT District funds

8 Florida SR80 Improvements 20,448 4,366 0.00% tbd State DOT District funds

9 Florida SR540 Improvements 18,727 2,590 0.00% 1999 State DOT District funds

10 Florida SR655 Construction 14,948 6,953 0.00% 1999 State DOT District funds

11 Florida SR44 Widening and Rehabilitation 20,500 9,800 tbd State DOT District funds

12 Florida SR30 (US98) to SR73 to SR295 12,100 2,400 tbd Future federal highway funds

13 Florida Recker Highway, US17 to Winterlake Construction 14,900 7,000 tbd State DOT funds

14 Florida Lee County Trolley Purchase 720 720 0.00% 1999 Future federal transit funds

15 Michigan Center Street Reconstruction 2,000 700 4.00% City funds

16 Missouri Cole County Highway 179 37,544 6,000 3.50% 11.01.02 Earmarked local sales tax revenues and State 

Highway Fund

17 New Jersey Atlantic City Expressway 1,500 1,500 tbd 06.20.05 Expressway toll revenues

18 Ohio Market Street Improvements (Canton, OH) 12,469 1,200 4.25% 07.01.98 City-pledged excess revenues (primarily income tax) 

19 Texas State Route 190 - Bush 

Turnpike*

see above 40,000 4.20% 10.01.98 Toll revenues

20 see above 20,000 4.20% 10.01.99 Toll revenues

21 Wyoming Cody to Yellowstone Park Improvement 15,000 15,000 0.00% 10.01.98 Future federal highway funds and state 

highway funds 

SUBTOTAL 401,533 192,605

GRAND TOTAL 1,913,108 345,877

* SR 190 received two loan disbursements under 23 USC 129, prior to establishment of the Texas SIB. Those obligations were subsequently adopted by the SIB. 

 The two previous loan disbursements were made on 1/1/96 in the amounts of $20 million and on 10/1/96 for $35 million.

 It is anticipated that the full $135 million from all prior and future loan disbursements will be repaid to the Texas SIB.

State Infrastructure Bank Loans and Loan Agreements as of June 1, 1998
Though Section 129 offers less flexibility than does the SIB

structure, it gives states the chance to offer credit assistance to

many of the same projects that SIBs can benefit.

• Any state may, of course, use its own funds or private contributions to add to its SIB’s seed capital.

SIB Status

As of May 31, 1998, $293 million in federal funds had been

deposited into the banks’ highway and transit accounts. The

banks have signed loan agreements to assist 33 projects; for

these projects it is expected that $346 million in SIB loans will

support $1.9 billion in total project construction. The tables

on page 6 and above display: 1) loans and loan agreements

signed to date; and 2) obligations and outlays of federal funds

for the SIB program as of May 31, 1998.

Quarterly

FHWA's

7

Contact:

Lucinda Eagle, FHWA, 202/366-5057.

TWO PILOTS, continued from page 8

State Infrastructure Bank Pilot Program: Federal Financial

Transactions, cumulative, October 1, 1995 through May 31, 1998

HIGHWAY OBLIGATIONS HIGHWAY OUTLAYS TRANSIT

STATE FAH FUNDS

SPECIAL

APPROPRIATIONS TOTAL FAH FUNDS

SPECIAL 

APPROPRIATIONS TOTAL

OBLIGATIONS: 

SPECIAL 

APPROPRIATIONS 

Alaska - $ 2,490,000 $ 2,490,000 $ - $ 1,693,200 $ 1,693,200 $ - $ - $ 

Arizona 29,501,487 6,700,000 36,201,487 29,501,487 4,556,000 34,057,487 - -

Arkansas - 1,500,000 1,500,000 - 1,020,000 1,020,000 - -

California - 3,000,000 3,000,000 - - - - -

Colorado - 1,500,000 1,500,000 - - - - -

Delaware 3,300,000 1,500,000 4,800,000 3,300,000 1,500,000 4,800,000 - -

Florida 38,815,438 8,650,000 47,465,438 38,815,437 5,882,000 44,697,437 - -

Georgia - - - - - - - -

Illinois - - - - - - - -

Indiana - 3,390,000 3,390,000 - - - - -

Iowa - 870,000 870,000 - 591,600 591,600 630,000 -

Louisiana - - - - - - - -

Maine - 2,540,000 2,540,000 - - - - -

Massachusetts - - - - - - - -

Michigan - 11,050,000 11,050,000 - 7,514,000 7,514,000 - -

Minnesota - 3,960,000 3,960,000 - - - - -

Missouri 25,000,000 - 25,000,000 25,000,000 - 25,000,000 7,410,000 6,224,400

Nebraska - 2,830,000 2,830,000 - - - - -

New Jersey - 1,500,000 1,500,000 - - - - -

New Mexico - 8,140,000 8,140,000 - 5,535,200 5,535,200 - -

New York - 12,000,000 12,000,000 - - - - -

North Carolina - 480,000 480,000 - - - 1,020,000 1,020,000

North Dakota - 1,727,200 1,727,200 - - - - -

Ohio 35,000,000 5,100,000 40,100,000 35,000,000 1,260,000 36,260,000 6,900,000 6,900,000

Oklahoma - 4,700,000 4,700,000 - - - - -

Oregon 8,973,000 5,510,000 14,483,000 8,973,000 826,500 9,799,500 - -

Pennsylvania - 1,000,000 1,000,000 - - - 2,390,000 -

Rhode Island - 1,500,000 1,500,000 - - - - -

South Carolina - 3,000,000 3,000,000 - 2,040,000 2,040,000 - -

South Dakota - 2,830,000 2,830,000 - 1,924,400 1,924,400 - -

Tennessee - 1,500,000 1,500,000 - - - - -

Texas 75,211,476 12,000,000 87,211,476 75,211,476 8,160,000 83,371,476 - -

Utah - 2,310,000 2,310,000 - - - - -

Vermont - 1,500,000 1,500,000 - 1,020,000 1,020,000 - -

Virginia 18,000,000 3,000,000 21,000,000 18,000,000 - 18,000,000 - -

Washington - 1,500,000 1,500,000 - - - - -

Wisconsin - 1,500,000 1,500,000 - - - - -

Wyoming - 2,510,000 2,510,000 - 1,706,800 1,706,800 - -

Puerto Rico 10,748,588 1,500,000 12,248,588 - - - - -

Total 244,549,989 $ 124,787,200 $ 369,337,189 $ 233,801,400 $ 45,229,700 $ 279,031,100 $ 18,350,000 $ 14,144,400 $ 

COUNT 9 34 35 8 15 17 5 3

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8

SIB UPDATE

A Tale of Two Pilots

Although reference to state infrastructure

banks (SIBs) was inadvertently omitted

from TEA 21’s table of contents, close

readers of the legislation will find a SIB

provision in section 1511 of the Act.

Once you begin reading the provision, it

seems that little has changed. Then you

reach subsection (b), which states that

“...the Secretary may enter into cooperative agreements with the States of

California, Florida, Missouri, and Rhode

Island...” If you are not from one of

those four states, you may well ask,

“What about my state?” 

In fact, there are now two SIB pilot

programs. Of the 39 states currently

authorized to establish SIBs, 35 states

(including Puerto Rico) may continue

under the initial pilot program (“SIB

95”) that was established under the

National Highway System (NHS)

Designation Act of 1995. The four

remaining states (California, Florida,

Missouri, and Rhode Island) are now

effectively part of two pilots. First, they

will continue to operate under SIB 95,

with rules specific to SIB 95 governing

the capitalization funds deriving from

fiscal year 1996 and 1997 apportionments. Second, these four states will

also have the opportunity to expand

their SIB programs under the new TEA

21 pilot which we will refer to “SIB

98.” 

SIB 98: “TEA” for Four

TEA 21 establishes a new SIB pilot program under which four states –

California, Florida, Missouri, and Rhode

Island – may capitalize their banks with

federal transportation funds authorized

for fiscal years 1998 through 2003. If

your state is one of the four that can participate in the new SIB 98 pilot, here are

a few of the main points you need to be

familiar with. Notably, SIB 98:

• Removes the 10 percent limit on

capitalization with eligible program

categories;

• Does not require separate highway

and transit accounts, but does

require separate tracking for the use

of Interstate and rail funds;

• Broadens project eligibility from

highway and transit capital projects

to include other surface transportation projects, as may be approved by

the Secretary;

• Applies federal requirements to all

SIB-assisted projects, including those

financed with repayments from nonfederal sources (so-called “second

round” projects); and

• Replaces the existing 9-year disbursement schedule for federal capitalization funds with a 5-year disbursement schedule of 20 percent per year.

SIB 95: Reports of SIBs’ Death Have

Been Greatly Exaggerated

Thirty-four other states and Puerto

Rico, which established banks under

Section 350 of the NHS Designation

Act of 1995, may continue to capitalize

their SIBs with any leftover federal

funds apportioned in fiscal years 1996

and 1997. It will not be possible for

them to utilize fiscal year 1998 (or

beyond) funds apportioned under TEA

21 to capitalize their SIBs.

Many of the states that are limited to

participation in SIB 95 are actively

seeking a legislative remedy that would

enable them to join SIB 98. In the

meantime, however, these states may

wish to consider some of the following

strategies.

• States may be able to designate additional advance capitalization amounts

in fiscal year 1998 (and beyond).

The feasibility of this option is conditioned, of course, on the availability of unobligated balances of fiscal

year 1996 and 1997 apportionments

for eligible program categories.

• All states may still make loans to projects with dedicated revenue streams

under Section 129 of Title 23.

continued on page 7