State Infrastructure Banks

An Innovative (and Underused) Transportation Infrastructure Financing Tool for Texas Counties.

By Zelma Smith, TAC Financial Analyst

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Road and bridge improvement projects are a constant need across the state. While counties often struggle to find adequate funding, an underused financing tool is available. State Infrastructure Banks (SIBs) can offer local entities and county governments an alternative method of financing transportation infrastructure. SIBs are less costly than more conventional infrastructure financing tools such as bonds or certificates of obligations.

SIBs, authorized in 1995, are part of the National Highway Designation Act. Texas was one of 10 states asked to pilot the program. 

In 1997, the Texas Legislature passed Senate Bill 370 authorizing the Texas Department of Transportation (TxDOT) to administer the SIB program. The SIB operates as a revolving loan fund, with all repayments going back into the fund and recycled — disbursed as loans and repaid — to finance additional eligible projects. A combination of federal and state funds totaling $274 million provided the initial funding for the Texas SIB.

Since its inception, the Texas SIB has disbursed more than $616 million in loans to finance transportation projects at or below market interest rates. Cities have been the primary borrowers, representing 63% of the SIB loans-to-date. Texas counties, however, haven’t been significant borrowers from the SIB, accounting for 13% of all loans-to-date. Since 1997, 12 counties have borrowed $45.5 million

for roadway projects with a total project cost in excess of $1 billion.

Advantages of borrowing from the Texas SIB

No underwriting fees or rating agency costs as there are with bond financing;

No fees for loan applications or loan handling charges;

Prepayments can be made at any time;

Interest rates at or below market rates; and

Economically disadvantaged counties, as defined by TxDOT’s Economically Disadvantaged County Program, are eligible for a substantial (up to 1%) interest rate discount. At present, 70 counties would qualify for the interest rate discount. Visit for more information.

SIB eligibility 

A public or private entity authorized by law to construct, maintain or finance a public highway project may use a SIB loan for its own project or for participation in a TxDOT project. Eligible borrowers include cities, counties, regional mobility authorities and water supply corporations. Allowable uses for SIB loan proceeds include:

Construction of a public highway eligible for federal assistance under federal law at Title 23 United States Code. 

All costs related to the construction or reconstruction of public highways such as construction; utility relocation; right of way acquisition; appraisal and testing; engineering, surveying and inspection; planning, environmental and feasibility studies; financial and legal adviser fees. 

Project must be consistent with transportation plan developed by the local metropolitan planning organization and with the Statewide Transportation Improvement Program. 

Interested counties should contact their TxDOT district office to determine if a project meets the qualifications.

SIB program requirements

Projects must be eligible for funding under the existing federal highway rules to comply with SIB requirements. This usually requires a project to be on a state’s highway system and included in the STIP.

Program caps for borrowers and projects vary based on fund capacity. The current limit established by TxDOT is $90 million in outstanding loans for each borrower and $50 million for a single project.   

Loan proceeds must be disbursed within three years of the loan agreement’s execution, with at least one-third of the proceeds disbursed in the first year and the remaining two-thirds in the following two years.

Applicants must provide a certificate that identifies the proposed cash flow or revenues to be used to repay the loan and assurance that the SIB assistance will not violate any existing loans or bond commitments the borrower already has in place.

For more information about the program, visit