States Pay for Transportation Costs with Newer Bonding, Loan Programs
This story appears in the Aug. 10 print edition of Transport Topics.
Faced with capacity and maintenance limitations and inadequate revenues, states are taking advantage of newer bonding and federally guaranteed loan programs to help underwrite transportation costs, according to a new report.
“Between 2001 and 2006, revenue from state and local public bond proceeds increased by more than 26%, from $9.4 billion to $11.9 billion,” the National Governors Association said in its latest transportation funding report.
Among the bonding programs that have become popular are GARVEEs (grant anticipation revenue vehicles), which allow states to borrow against their future federal-aid transportation funds.
The federal government also has authorized states to issue private activity bonds for construction of highway and intermodal surface freight transfer stations, NGA said in its report.
For transportation projects deemed of national and regional significance, the government also came to the aid of states with the Transportation Infrastructure Finance and Innovation Act.
According to the report, “as of April 2009, 17 projects in 12 states and territories have used TIFIA financing worth $6 billion.”
TIFIA provides three forms of assistance to states planning to build transportation facilities: direct loans, loan guarantees and lines of credit.
Most recently, the federal government included two new bonding programs in its economic stimulus program that states can use to fund transportation programs.
With Build America Bonds is-sued by states, the federal government will subsidize part of the interest paid to bondholders. The government will do the same for buyers of the new Recovery Zone Bonds, which fund projects in severely economically distressed areas.
However, traditional revenues such as fuel taxes and motor vehicle fees still provide the biggest share of transportation funding, according to the NGA report.
Those revenue sources, however, are eroding relative to cost increases, forcing states to use such sources as bonding, infrastructure banks and public-private partnerships to fund their transportation systems.
“Current long-term prospects suggest an increasingly strained system in many parts of the country,” said the report, in which NGA calls on states to trade innovative ideas with one another on how best to fund transportation.
State governments currently generate more than 40% of all the tax money spent on the nation’s transportation network. Local governments provide only 31% and the federal government just 21%, the report said.
All states, for instance, have some sort of motor fuel tax and some form of vehicle registration fee, although not all states dedicate those revenues solely to transportation.
Likewise, “every state except South Dakota, Tennessee and Wyoming has the authority to issue state transportation bonds,” the report said.
According to the study, 35 states have infrastructure banks in place, although most of the states are not fully using that funding tool.
More than 95% of the funding by such banks nationwide occurs in only eight states, and South Carolina alone accounts for more than half that activity.
Twenty-four states have used public-private partnerships to fund 71 surface transportation projects, including roads, freight facilities and transit, the report said.
