These mechanisms have given states additional options to accelerate the construction of projects and leverage federal assistance. It has also provided them with greater flexibility and more funding techniques. To date, most federal funding for highways and transit projects has come through the federal-aid highway grants—appropriated by Congress from the Highway Trust Fund. Grants are the next most costly alternative for the federal government. Our work raises a number of issues concerning the potential costs and benefits of expanding alternative financing mechanisms to meet our nation’s surface transportation needs. Congress likely will weigh these potential costs and benefits as it considers reauthorizing TEA-21. Expanding the use of alternative financing mechanisms has the potential to stimulate additional investment and private participation. But expanding investment in our nation’s highways and transit systems raises basic questions of who pays, how much, and when. In 1995, the federally capitalized transportation revolving loan fund concept took shape as the State Infrastructure Bank (SIB) pilot program, authorized under Section 350 of the NHS Act. Transportation Infrastructure Finance and Innovation Act (TIFIA) credit assistance

As part of TEA-21, Congress authorized the Transportation Infrastructure Finance and Innovation Act of 1998 (TIFIA) to provide credit assistance, in the form of direct loans, loan guarantees, and standby lines of credit to projects of national significance.
What GAO Found

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 at a time when both the federal and state governments are experiencing severe financial constraints. As transportation needs have grown, Congress provided states--in the National Highway System Designation Act of 1995 and TEA-21--additional means to make highway investments through alternative financing mechanisms. A number of states are using existing alternative financing tools such as State Infrastructure Banks, Grant Anticipation Revenue Vehicles bonds, and loans under the Transportation Infrastructure Finance and Innovation Act. These tools can provide states with additional options to accelerate projects and leverage federal assistance--they can also provide greater flexibility and more funding techniques. Federal funding of surface transportation investments includes federal-aid highway program grant funding appropriated by Congress out of the Highway Trust Fund, loans and loan guarantees, and bonds that are issued by states that are exempt from federal taxation. Expanding the use of alternative financing mechanisms has the potential to stimulate additional investment and private participation. However, expanding investment in the nation's highways and transit systems raises basic questions of who pays, how much, and when.