Banking on Infrastructure: Exploring the Fiscal Impacts of State Infrastructure Bank (SIB) Loans on Leveraging State and Local Transportation Investment

State Infrastructure Banks (SIBs) are revolving transportation infrastructure investment funds that are capitalized with federal assistance funds and state‐matching funds. Despite decades of use, research on innovative infrastructure finance lags behind the practice. Little research has been conducted on examining whether SIBs achieve the goal of increasing state and local transportation investment through their awarded loans and other financing activities. To fill the void, the primary purpose of the paper is to empirically estimate the fiscal effects of SIB loans on leveraging state and local highway capital investment. Using panel data consisting of SIB loan parameters made by the seven states from 1998 to 2010, the study finds that one dollar of three‐year lagged SIB loan disbursements to state and local highway project sponsors will increase state and local highway capital expenditure in the current year by nearly three dollars. In addition, the study confirms that higher SIB loan interest rates strengthen the role of the SIB program on stimulating state and local highway capital investment.