WASHINGTON — Virginia Gov. Bob McDonnell is pushing for the creation of a state transportation infrastructure bank that would be funded with revenue from the privatization of state-owned liquor stores and provide an array of financing tools for road construction and other projects.
The infrastructure bank would be similar to the existing Virginia Resources Authority, a bond-issuing entity, and would possibly issue its own bonds as well as provide credit enhancement for bonds issued by other entities, according to a spokeswoman for the governor.
The plan for the bank was outlined by Sean Connaughton, Virginia’s secretary of transportation, in a Sept. 8 presentation to the governor’s commission on reform and restructuring.
Connaughton cited the federal TIFIA program as evidence of the need for the state bank. This low-interest loan program, created by the Transportation Infrastructure Finance and Innovation Act, is oversubscribed. It and other federal resources have been less available in the poor economy, prompting states and localities to scramble for new ways of financing projects.
As proposed, the state transportation bank would be separate from the existing federally chartered state infrastructure bank, Connaughton said. It would provide a state-funded, state-run source of grants and low-interest loans with maturity dates of 20 to 30 years.
Grants would go to local governments for projects of “local and regional significance,” he said. Rural projects would get higher priority for the grants.
The bank would loan directly to local governments, governmental entities and other public authorities, as well as railroads, transit companies, and private-sector transportation companies. Eligible applications could range from building new tunnels or toll roads, to purchasing transit facilities or freight-rail vehicles, to improvement of port facilities.
Those loans would be repaid by borrowers using revenues from tolls and other user fees, local taxes and fees, or dedicated revenue sources such as tax-increment financing.
In addition, the bank would provide leveraging assistance with interest subsidies, credit enhancement, and bond issuance. Connaughton’s presentation offered a scenario under which $100 million of private-activity bonds are priced to yield 7%, for about $140 million of interest costs over 20 years. A state infrastructure bank loan could provide interest rates as low as 2%, saving the borrower as much as $100 million over 20 years, he showed.
The bank’s initial funding would come from ABC privatization proceeds, but additional funds would come from governmental sources such as general revenues and appropriations.
However, two major actions would be required by the commonwealth’s government for the bank to be established. The state code would need to be amended to create the new transportation bank. Also, the legislature and governor would need to agree on an ABC privatization plan in order for those proceeds to provide initial capital for the bank.
If this happens, fees related to privatization could generate $500 million or more, according to the governor. Distilled spirits are currently sold at 332 Alcoholic Beverage Control stores. The system as it currently exists generated $665.6 million in annual gross sales in fiscal 2009, and it has contributed more than $1.5 billion to the commonwealth’s general fund in the past five years, the ABC department said.
The governor said on a recent WTOP radio station interview that he will approve ABC privatization if “every dime from the up-front license fees, which we estimate at least $500 million, will go to transportation.”
A coalition of construction industry groups has backed McDonnell’s plan for ABC privatization, arguing that maintenance and improvement of the state’s aging infrastructure requires at least $1 billion per year in addition to current funding levels.