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Transportation Funding & Financing

National Highway System (NHS) Designation Act of 1995

ISTEA created new opportunities to innovate by encouraging multiple financing strategies in addition to new partnerships among Federal, state, local, and private funding sources. The National Highway System Designation Act of 1995 (NHS Act) contained several innovative finance provisions that built upon the experience of ISTEA and codified tools tested under the FHWA's Innovative Finance Test and Evaluation (TE-045) program. The NHS Act contains the following innovative finance provisions.

Section 308 Limitation on Advance Construction

Section 308 permits the state to advance construct projects, provided the project is on the states Transportation Improvement Program (STIP). This eliminates the requirement that: 1) future year authorizations have to be in place in order to advance construct, and 2) the total of advance construct projects that could not exceed a cumulative dollar limit.

Section 322 Donations of Funds, Materials, or Services for Federally Assisted Projects

Section 322 allows private funds, materials, or services to be donated to a specific Federal-aid project and permits states to apply the value of those contributions to the state's matching share. Before this change, states could receive credit only for donation of private property incorporated into a Federal project.

Section 350 State Infrastructure Bank Pilot Program

Section 350 allows up to 10 states or multi-state entities to establish transportation infrastructure banks, with the USDOT establishing procedures for selecting program participants. The infrastructure banks may be used to make project loans, enhance credit, subsidize interest rates, and provide other assistance for eligible highway and transit capital projects. The funds from the banks may not be used as a grant. The recipients of the assistance can be either public or private.


National Highway System Designation Act: Guidance
Section 101 of the National Highway System Designation Act of 1995 designated the NHS within the United States, including the District of Columbia and the Commonwealth of Puerto Rico, and authorized the Secretary of Transportation to make future modifications to the system. The purpose of this memorandum is to transmit interim guidance for use by the states in considering modifications to the system. Final guidance will be issued as a revision to 23 CFR 470.

Guidance on Section 311 of the NHS Act: Payment to States for Bond and Other Debt Instrument Financing
Section 311 of the NHS Act replaces 23 U.S.C. 122 and expands the Federal eligibility of bond related costs. The previous section 122 allowed certain types of projects to be approved as bond issue projects. Similar to advance construction, these projects were advanced as Federal-aid projects without any commitment of Federal funds until the bonds matured and the state converted the projects to regular Federal-aid. The section also allowed for reimbursement of bond interest costs on certain Interstate construction projects.

The new section 122 makes bond-related costs eligible for Federal reimbursement on any Federal-aid project eligible under title 23, U.S.C. The definition of construction is also revised in 23 U.S.C. 101 to include a reference to bond-related costs.

Guidance on Section 308 of the NHS Act Advance construction of Federal-Aid Projects
Advance construction is a technique which allows a state to initiate a project using non federal funds while preserving eligibility for future Federal-aid funds. Eligibility means that FHWA has determined that the project technically qualifies for Federal-aid; however, no present or future Federal funds are committed to the project. After an advance construction project is authorized, the state may convert the project to regular Federal-aid funding, provided Federal funds are made available for the project.

Guidance on Section 313(a) of the NHS Act Toll Facilities Under Section 129(a) of Title 23
Section 313(a) replaced paragraph (a)(5) of 23 U.S.C., Section 129, relating to the Federal share for toll projects. Title 23 sets forth the statutory requirements governing use of Federal-aid highway funding for toll facilities. These provisions were significantly modified by the 1991 ISTEA and have been further amended by Section 313 of the NHS Act. This document consolidates information on Federal-aid funding of toll facilities contained in the three previous memoranda, modified as appropriate to implement the NHS Act.