Innovative Finance Options

It is safe to say that the traditional "pay-as-you-go" method of funding transportation projects is in need of some assistance. With recent increases in construction costs outpacing inflation - coupled with the decrease in the Highway Trust Fund balance, the Middle Tennessee Region - as well as the rest of the nation - needs to explore new and creative ways of financing transportation projects. Some of the more popular options are:

Public-Private Partnerships (P3)

Public-private partnerships are cooperative agreements between the public and private sectors in which the private sector has the option to share in the design, delivery, operation, or maintenance of certain transportation projects. P3s allow the public sector to transfer some risk to the private sector and also allows the private sector to share in the proposed revenue or other incentive. There are many forms of public-private partnerships. Some of the most widely used are listed below:

  1. Design/Build
  2. Design/Build/Operate (Maintain)
  3. Design/Build/Finance/Operate

Case Studies

Las Vegas Monorail:
http://www.fhwa.dot.gov/ipd/p3/case_studies/case_study_lasvegas.htm

Hudson-Bergen Light Rail:
http://www.transportation-finance.org/projects/hudson_bergen_lrt.aspx

More Information

http://www.fhwa.dot.gov/ipd/p3/index.htm

Tolling & Congestion Pricing

Some states and local governments utilize toll roads as a way to help generate revenue. Depending on how the laws are written for each state, these revenue streams can either be used to help pay for the operation and maintenance costs of these tolled roadways, or could be used as a general fund revenue stream.

Tolling can also help manage traffic demand. One example of using tolls to manage congestion is the concept of road pricing. This is essentially a form of toll, but instead of the toll being a fixed price, the cost of using the roadway or lane will vary based on the demand. The more demand for the use of that roadway, the higher the price.

Depending on the laws established in each particular state, toll roads can be managed by private, independent agencies, or by the state. In the State of Tennessee, current legislation allows tolls to be established for a total of two new facilities (roadway and/or bridge), with the State acting as the tolling authority.

Case Studies

Texas State Highway 130:
http://www.fhwa.dot.gov/ipd/p3/case_studies/case_study_texas130.htm

I-495 Capital Beltway HOT Lanes:
http://www.fhwa.dot.gov/ipd/p3/case_studies/case_study_i495_capital.htm

More Information

http://www.transportation-finance.org/funding_financing/funding/state_funding/tolls.aspx
http://www.tollroadsnews.com/

State Infrastructure Banks (SIB)

State infrastructure banks are essentially revolving accounts that function similar to a traditional bank. These banks - which are set up by each state - may be funded using federal dollars, state dollars or a combination of both. As with traditional banks, SIBs provide a variety of funding mechanisms such as loans and credit assistance for highway and transit projects.

More Information

http://www.transportation-finance.org/funding_financing/financing/credit_assistance/state_infrastructure_banks.aspx

Transportation Infrastructure Finance and Innovation Act (TIFIA)

Major transportation projects may be eligible for Federal credit assistance. If the project is eligible, this assistance can come in the form of direct loans, loan guarantees or lines of credit. One reason why this option may be attractive to some is that it allows state and local agencies a way to secure a substantial amount of up-front capital - at reasonable interest rates - to help move a project forward that may otherwise remain on the shelf or delayed because of low anticipated revenue streams, or the project's size and complexity.

Case Study

Miami Intermodal Center:
http://www.micdot.com/timeline.html
http://www.fhwa.dot.gov/ipd/case_studies/fl_miami_intermodal.htm

More Information

http://www.transportation-finance.org/funding_financing/financing/credit_assistance/tifia.aspx
http://tifia.fhwa.dot.gov/

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