No Solyndras in Virginia, Please

by James A. Bacon

Fears of repeating another Solyndra or Fannie Mae/Freddie Mac fiasco shadowed discussions of an innovative Virginia Transportation Infrastructure Bank (VTIB) at the Commonwealth Transportation Board meeting today.

Funds from the VTIB, which will be capitalized initially with $283 million, will help finance transportation projects that might not otherwise be built. Initially, the bank will provide loan guarantees or pledges against other types of financial leverage. Repayments of principal and interest will be reinvested in new projects. Eventually, the bank may provide outright grants.

The infrastructure bank is a centerpiece of the McDonnell administration’s strategy to jump-start construction of transportation projects in Virginia. The administration plans to borrow $3.4 billion during its four-year term, a sum it hopes to leverage through toll-financed public-private partnerships. The infrastructure bank will chip in resources to help close deals for projects large and small, drawing upon revenue streams as diverse as developer proffers or leases from airport hangars. “If you’ve got a good financial adviser, you can turn one dollar into three or four dollars,” Transportation Secretary Sean Connaughton told the board.

Talk of leverage and loan guarantees was disconcerting to some members, however. “Do we have the safeguards in place to make sure this doesn’t turn into another Solyndra?” asked James E. Rich, the Culpeper District representative, referring to the solar-panel manufacturer that recently went belly up after the Obama administration guaranteed $535 million in the company’s debt.

John Lawson, chief financial officer of the Virginia Department of Transportation, outlined how the infrastructure bank would work. The Virginia Resources Authority (VRA) will administer the bank, while the CTB will set policies and have the final say over project approvals. The bank is expected to lend or grant money mainly to local governments or authorities, but private companies working under a public-private partnership agreement also are eligible. Loans will be amortized over as many as 35 years; principal payment can be delayed for five years after substantial project completion. Interest rates will be pegged to the rate paid by AAA government entities, but lower rates may be negotiated.

The VTIB will rate projects by 18 scoring criteria, such as project readiness, impact on air quality, safety enhancements and the recipient’s credit worthiness.

Of all the criteria, creditworthiness of the recipient is the most critical, asserted Cord A. Sterling, the Fredericksburg District representative. Other scores could be perfect, but a weak credit ranking should be an automatic disqualifier, he said.

“This is not Fannie Mae or Freddie Mac selling bundled loans,” insisted Connaughton. For the most part, the CTB will be considering projects that it has already voted to include in the Six-Year Improvement Plan. “This is just one tool in the tool chest.” In a worst case scenario, if the loan recipient goes under, said Connaughton, Virginia ends up with the underlying transportation asset — something it would have paid to build anyway.

Also, said the transportation secretary, the Virginia Resources Authority, which will help run the bank, has the financial savvy to sniff out the dubious financings. The VRA has issued $4.2 billion of dollars of loans for 875 scandal-free projects ranging from government buildings and solid-waste projects to brownfield remediation and oyster restoration.

The first project could well originate in Chesapeake, said Connaughton, with a nod to representatives from the Hampton Roads city in the audience. Not all projects will be for roads and highways, he added. He has already received inquiries for “ports” and “space,” the last presumably referring to the Wallops Island space-launch facility. “You’ll see loans for things you’ve never seen before.”

Connaughton said he would like to get the first projects financed before the General Assembly reconvenes in January, but he will be running on a tight schedule. Board members refused to sign on before details of the bank were published and the public had a chance to provide input. The next opportunity to vote on acceptance will be in December.

This article was written thanks to a sponsorship by the Piedmont Environmental Council.

Share this article


(comments below)


(comments below)


8 responses to “No Solyndras in Virginia, Please”

  1. ask soon as they say “may” give outright grants – that bank is doomed to be bankrupted by one or more politically motivated “give me the money” schemes.

    if they are worried about credit ratings – they ought to be more worried about who looks at the viability of a project. It should be an independent third party who performs an investor-grade analysis – not anyone connected with the fund or with proposals.

    McDonnell has an opportunity to set up this bank – “right”. If he does not do it .. it’s going to turn into yet another fiasco… because there is no shortage of folks in Va who know how to politically manipulate weakly-designed financing entities.

    I would have been a lot more comfortable if I had heard the phrase “investor grade” analysis from the CTB members.

  2. ANOTHER good idea from McDonnell. Yes, it has to be set up right. Yes, you need non-bureaucrats to oversee the finances and risks. But at least it’s forward progress.

    McDonnell is well on his way to correcting the four years of absolute uselessness of his predecessor.

    And yes – something will go wrong. That’s life. That’s progress. The question is whether this works “on balance” not in every circumstance.

    I am back in Cambridge MA today. Still amazed by the impact that the Big Dig has had on Boston and surrounding towns. It seems to have been worth every penny that was spent (including the billions of pennies that were not in the original budget).

  3. You want to avoid a Solyndra? Don’t let a politician from Chicago near the money.

    Obama got back to his roots with the Solyndra scam.

  4. Peter Galuszka Avatar
    Peter Galuszka

    Big Dig gets you downtown ultra fast but you don’t SEE anything — not the river or the buildings. It takes the fun out of it.

  5. What’s the difference between a Solyndra and a Virginia Transportation Infrastructure Bank that get infested with developer/political interests?

    The Feds do it “right” with their TIFIA Bank.


    the money is loaned out – not given away… and people who get the money – have to pay it back.

    that means that a road proposal has to have a viable way to pay the money back.

    I actually think the “oh well boys will be boys” attitude is endemic to the Clown Show way of doing business.

  6. Peter:

    True on the sightseeing. However, when you do come up out of the tunnel you see something pretty amazing – urban revival. Decaying neighborhoods being rebuilt. Businesses that had fled to the suburbs returning to the city.


    Solyndra and an infrastructure bank have very little in common. In my opinion, Solyndra never had a chance of working. Bridges and roads are pretty well proven to work.

    However, your point about “boys being boys” is a good one. You know my solution. Put a political beat down on the General Assembly and evolve more of the power to the localities. The localities can make the loans and guarantee them. Local taxes should automatically rise when a project fails and the loan won’t be repaid. I think that would put the fear of God into the local politicians.

  7. Va has had “banks” before. The Literary Fund was once such fund for school construction but counties that have good credit ratings can often beat their rates.

    The same would be true of an infrastructure bank. Counties already have the option of passing referenda and floating bonds…so one has to wonder what problem it is solving.. and I’m not clear on that… unless we’re talking regional projects at which point – we have the problem of who is going to pay back the funds.

    I see more opportunities for malfeasance than solutions to be honest.

  8. in the end – an infrastructure bank is a loan – not a sustainable source of revenues for transportation.

    whoever obtains the loans will still have to determine how the infrastructure will be paid for….

    we should not confuse an infrastructure bank with funding sources…

Leave a Reply