January 2013
·
49 Reads
Deteriorating conditions of national highway systems have been partly attributed to the lack of financial resources. In response to the worsening highway infrastructures and attendant negative impacts on the national economy, federal legislations allowed state governments to use federal highway assistance funds as the equity capitalization funds for the State Infrastructure Bank (SIB) programs. The key innovations in SIB programs are revolving loan fund and leveraged loan fund structures. Those loan funding structures stretch scarce financial resources to expedite highway constructions. This chapter investigates the revolving loan systems (RLS) as viable PAY-AS-YOU-USE financing alternatives to traditional tax revenues. Elaborate computer simulations tested potential fiscal impacts of RLS loan interest rates, RLS loan shares, RLS borrowing interest rates, RLS borrowing shares, maturities of loans and borrowings, and their interactions. The simulation results reveal that RLS loan interest rates, RLS borrowing shares, interactions of RLS borrowing shares and loan interest rates, and most of all, maturities of loans and borrowings are the most critical parameters to maximize the amount of annual loans made to potential highway construction projects. This chapter further suggests three major caveats in implementing RLS programs: minimizing stimulating unnecessary investment projects, reinforcing marketing of RLS programs, and assessing project and credit capacities of the entities that borrow from RLS programs.