Why the Infrastructure Bank Should Go
IT SERVES ITS PURPOSES, ALL RIGHT
. . . AND THEY’RE ALL BAD
As lawmakers and the governor seek to add more revenue to, and possibly reform, South Carolina’s broken transportation system, there is one glaringly obvious issue hasn’t gotten the attention it deserves: eliminating the State Transportation Infrastructure Bank (STIB). There is no entity more emblematic of South Carolina state government’s mismanagement of roads than the STIB. Its structure and powers encourage waste and shortsightedness, promote favoritism, and prevent accountability. To be specific:
The STIB only finances new and expansionary projects, never maintenance.
Since its inception, the STIB has only contributed funding to projects that either create entirely new roads or expand existing ones (by adding miles or widening lanes, etc.). Every dollar that goes to the STIB is a dollar that could have gone to maintenance instead of funding expansions. Remember, South Carolina’s is the 4th largest state highway system in the country.
The STIB expansions put more strain on existing maintenance funding.
There are three primary sources of funding for roads in South Carolina: state gas tax revenues, federal funds, and STIB debt financing. Of these three, state gas tax revenues are the smallest source; they are also the only source free to be devoted to routine road maintenance. Every expansion of the state road system (the kind of projects routinely funded by the STIB) creates more lane miles that must be maintained with the small pool of funds free to be used for maintenance.
The STIB finances road construction through the issuance of bonds – i.e. debt.
The agency generates the large amount of funds it uses to finance road expansionary projects by issuing bonds backed by the dollars appropriated to them by the legislature. Once the STIB board has generated funds via bonding, it issues loans to counties for various projects the board chooses to finance. All of these bonds must be paid back with interest. Again: payments on these bonds are dollars that could have gone towards needed road maintenance and repair. STIB bonds are the largest category of South Carolina’s bond debt, with total liabilities at over $2 billion dollars in fiscal year 2014 (see page 230 of the PDF).
The STIB favors a few counties.
As of January 2013, 35 counties had received no funding from the STIB since its creation. Up to the same point, six counties had received 95 percent of STIB disbursements, and one county (Charleston) had received 33 percent of all STIB disbursements. The large majority of counties are losing out on maintenance dollars so that a handful of counties can build largely unnecessary new roads.
The STIB is effectively controlled by two legislators.
STIB policy is set by a seven member board comprised of two members appointed by the governor, two members appointed by the Senate President Pro Tem, two members appointed by the House Speaker, and the chairman of the DOT Commission (who is most most likely elected by legislators). With control of four of the seven members of the board, the House Speaker and Senate President Pro Tem – two politicians not elected statewide – have de facto control over one of the most powerful infrastructure authorities in the state.
The STIB Board is free to finance whatever projects it chooses.
Under existing law, the STIB is free to finance any “eligible projects.” A quick perusal of the state law code, however, reveals a definition of eligible projects so loose as to be almost meaningless. The few STIB financing requirements that do exist, such as the requirement that a project’s costs must exceed $100 million to qualify for STIB financing, are ignored in practice. No real prioritization requirements and little accountability make the STIB the transportation slush fund of two powerful legislators.
Before the legislature raises taxes, creates new taxes or fees, and commits the state to any further debt, the STIB should be eliminated and the Department of Transportation reformed to create a more accountable system.