WASHINGTON—In response to the pressing challenges facing our nation’s transportation system, states and territories are exploring ways to make better use of existing and new approaches to fund and finance transportation, according to a new report by the National Governors Association Center for Best Practices (NGA Center). How States and Territories Fund Transportation: An Overview of Traditional and Nontraditional Strategies examines these challenges and looks at the traditional funding mechanisms states are using to address them, as well as new and innovative programs at work in the United States and internationally. Additionally, the report summarizes each state’s surface transportation funding approaches.

“A growing imbalance between system use and system capacity, erosion of traditional funding sources, greater infrastructure costs and shrinking credit as a result of the economic downturn are straining the nation’s transportation system,” said John Thomasian, director of the NGA Center for Best Practices. “With this in mind, states are using a variety of approaches to address their revenue needs related to transportation.”

Although traditional funding and financing sources, such as fuel taxes, vehicle registration fees and traditional bond proceeds and tolls, still produce the majority of state transportation revenues, nontraditional approaches have generated billions of dollars to fund state transportation projects over the past decade or so.

Among the new or innovative transportation funding and financing approaches being used in one or more states are:

• Grant Anticipation Revenue Vehicles (GARVEE bonds)—financing instruments issued by a state whose principal and interest are repaid primarily by future federal-aid funds;
• Private Activity Bonds (PABs)—financing instruments authorized for highway and intermodal transfer stations;
• ARRA Bonds—two new types of transportation bonds, Build America Bonds (BABs) and Recovery Zone Bonds (RZBs), that are provided for by the American Recovery and Reinvestment Act of 2009;
• Federal credit assistance—direct loans, loan guarantees or lines of credit for transportation infrastructure projects provided through the Transportation Infrastructure Finance and Innovation Act (TIFIA) loan program;
• State Infrastructure Banks (SIBs)—revolving loan funds to finance highway and transit projects;
• Congestion or cordon pricing—fees charged to motorists for road use during times of peak demand or for entry into a congested area during some portion of the day, respectively;
• Public-private partnerships (PPPs)—contractual agreements between a public agency and a private sector entity to collaborate on a transportation project;
• Vehicle miles traveled (VMT) fees—fees charged directly to drivers for each mile traveled, in replacement of a traditional motor fuel tax; and
• Other sources such as impact fees, container fees and traffic camera fees.

The report was made possible through the support of the Federal Highway Administration.

For more information on state efforts to address transportation issues, please visit www.nga.org/center/eenr.

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Founded in 1908, the National Governors Association (NGA) is the collective voice of the nation’s governors and one of Washington, D.C.’s most respected public policy organizations. Its members are the governors of the 50 states, three territories and two commonwealths. NGA provides governors and their senior staff members with services that range from representing states on Capitol Hill and before the Administration on key federal issues to developing and implementing innovative solutions to public policy challenges through the NGA Center for Best Practices. For more information, visit www.nga.org.