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I N S T I T U T I O N A L F R A M E W O R K F O R I N N O VAT I V E T R A N S P O RTAT I O N F I N A N C E 77 imposition of tolls on any facility that received federal State and Federal Credit Assistance funds. Exceptions to that policy have been established over the years. Nevertheless, today less than 4 percent What Is This Strategy Intended to Accomplish? of the National Highway System is tolled. In large part, that is because political opposition to tolling existing By providing other forms of assistance besides grants, facilities remains a significant hurdle. No states, for the federal government and states can help project example, have taken advantage of provisions estab- sponsors accelerate construction of certain projects and lished in TEA-21 that allow reconstructed or rehabili- attract additional investment for transportation infra- tated Interstate segments or bridges to be converted to structure from local and private entities. Federal credit toll facilities. assistance has the added benefit of being scored for fed- In addition to using it to generate revenue, there is eral budget purposes on the basis of anticipated cash growing interest in using tolling to manage highway disbursements that may not be repaid rather than the capacity in congested corridors. In response to higher total amount committed. fees charged during periods of peak use, some users will The vehicle for providing credit assistance at the state shift to less congested routes or travel times. To support level is the state infrastructure bank (SIB). SIBs can be development of value pricing strategies, the federal gov- structured in a variety of ways, but most are revolving ernment established a Value Pricing Pilot Program in loan funds. As of October 1, 2001, 32 states had entered TEA-21 to provide up to $51 million of support (80 per- into 245 loan agreements with a dollar value of nearly cent federal share) for projects incorporating peak-period $2.9 billion. The South Carolina Transportation Infra- pricing and related concepts. structure Bank initiated approximately $1.5 billion of the total loan activity. Capitalized primarily with state funds (including a share of the state gas tax and truck registra- Where Is This Strategy Leading Us? tion fees), it has facilitated the development of nearly $2.4 billion of projects. Successful development of start-up toll facilities At the federal level, credit assistance is provided under requires a unique blend of public and private the Transportation Infrastructure Finance and Innovation resources and expertise. To meet the challenge, new Act of 1998 (TIFIA). It authorizes the U.S. Department of publicprivate partnership structures and financing Transportation (USDOT) to provide up to $10.6 billion vehicles were created to facilitate the allocation of of credit assistance to surface transportation projects of risk and benefits. Regional toll authorities such as national or regional significance. As of August 2002, the Transportation Corridor Agencies in California USDOT had committed nearly $3.6 billion in assistance and the E-470 and Northwest Parkway Public to 11 projects, primarily in the form of direct federal loans. Highway Authorities in Colorado worked closely The total budgetary cost of providing that support, based with private designbuild teams to finance and on federal guidelines, was approximately $200 million. develop their projects. Private nonprofit corpora- tions, created to facilitate access to the tax-exempt markets, secured funding for the Southern Connector Where Is This Strategy Leading Us? project in South Carolina and the Route 895 Connector in Virginia. Most states have experimented with the SIB concept, Although efforts to promote private development of but few have used it extensively. It is not clear that loan public infrastructure continue (including proposals to activity will increase if all states are allowed to capital- create a new class of tax-exempt private activity bonds ize their SIBs with federal-aid funds (TEA-21 only for toll projects and certain multimodal facilities), state authorized four states to do so), but the consensus is and local governments are increasingly willing to take that each state should at least be given the option. the lead themselves. As a result, many new toll facili- It is too early to tell whether TIFIA can be more than ties may be developed by using an old model: state and a niche program. As noted in the report to Congress on local toll authorities. The Texas Turnpike Authority, for TIFIA, a limited number of projects fit the TIFIA profile, example, recently entered the bond markets to finance and they typically take 5 to 10 years to secure necessary a $2.9 billion Central Texas Turnpike system. Georgia, planning approvals and environmental clearances. There Colorado, North Carolina, and Louisiana are consid- are proposals to lower the minimum threshold for eligi- ering the use of existing or new state toll authorities to ble costs from $100 million to $50 million, but sponsors develop and operate projects. Although the states will of smaller projects are likely to wait for funding through likely use some form of designbuild, the amount of traditional processes or to pursue a direct congressional risk transferred to private entities may be limited. earmark.