GAO-02-1126T Transportation Infrastructure: Alternative Financing Mechanisms for Surface Transportation

Mr. Chairman and members of the committees: We are pleased to be here today to discuss alternative financing for surface transportation infrastructure projects. As Congress considers reauthorizing the Transportation Equity Act for the 21st Century (TEA-21) in 2003, it does so in the face of a continuing need for the nation to invest in its surface transportation infrastructure and at a time when both the federal and state governments are experiencing severe financial constraints. 1 Many observers are concerned that a significant gap exists between the availability of funds and immediate needs. In the longer term, questions have been raised about the financial capacity of the Highway Trust Fund to sustain current and future levels of highway and transit spending. This is of particular concern since Congress has by law established a direct link between Highway Trust Fund revenues and surface transportation spending levels. In recent years, as transportation needs have grown, Congress provided states—in the National Highway System Designation Act of 1995 (NHS) and TEA-21—additional means to make highway investments through alternative financing mechanisms. These alternative mechanisms included State Infrastructure Banks (SIBs)—revolving funds to make or guarantee loans to approved projects; Grant Anticipation Revenue Vehicles (GARVEEs)—which are state issued bonds or notes repayable with future federal-aid; and credit assistance under the Transportation Infrastructure Finance and Innovation Act (TIFIA)—including loans, loan guarantees, and lines of credit. All are part of the Federal Highway Administration's (FHWA's) Innovative Finance Program. As the time draws nearer to reauthorizing TEA-21, information is needed about the performance of these tools and the potential for these and other proposed tools to help meet the nation's surface transportation infrastructure investment needs. At the request of your Committees, we are examining a range of surface transportation financing issues, including FHWA's Innovative Finance Program and proposed alternative financing approaches. My testimony today is based on the preliminary results of our work and discusses (1) the use and performance of existing innovative financing tools and the factors limiting their use, and (2) the prospective costs of current and newly proposed alternative financing techniques for meeting surface transportation infrastructure investment needs. I will also discuss issues 1 Performance Budgeting: Opportunities and Challenges. concerning the potential costs and benefits of expanding alternative financing mechanisms to meet our nation's surface transportation needs. My testimony is based on our review of applicable laws, FHWA's evaluation studies and other reports concerning its Innovative Financing Program, …