Association for Public Policy Analysis & Management

Although local governments in the United States are facing multiple challenges in financing transportation infrastructures, more and more innovative capital financing tools become available to local authorities. However, only a limited number of studies have been done to examine the factors that motivate local governments to adopt these alternative financing vehicles. Our study intends to fill this research gap by focusing on one of the public financing programs initiated in the mid-1990s: State Infrastructure Bank (SIB). SIBs are revolving loan funds designed to complement traditional transportation grants. They are established and administered by the states and provide local governments with a mechanism to finance a wide variety of transportation projects through loans and credit enhancements. Using a panel data of Pennsylvania municipalities from 2008 to 2010 and logit regression for rare events, this study finds that the local transportation demand and local fiscal burden are positively associated with municipalities’ likelihood of adopting SIB loans. We also found that cities with larger share of voters vote for Democratic candidates are more likely to use this innovative financing tools.