States and territories across the country have adopted or are in the process of implementing innovative funding and financing mechanisms across a wide range of infrastructure projects. As Governors look to implement the bipartisan Infrastructure Investment & Jobs Act (IIJA), innovative funding and financing approaches can be leveraged to potentially improve project efficiencies, reduce costs, enhance delivery timeframes and free constrained public resources for other priorities and projects.
The NGA has created this resources hub to provide information sources to assist with building capacity in these areas. This page explores a range of tools which can be used for infrastructure projects of varying sizes and across sectors and provides links to information on each. This page will be continuously updated with new resources and please reach out to email@example.com if you have any suggestions or additions.
Additionally, the NGA has recently published a summary of a panel discussion on Leveraging IIJA Funding that was held as part of the NGA’s Infrastructure Coordinators Workshop on March 3. The NGA is also collaborating with the recently established Build America Center located in the Maryland Transportation Institute to provide new and targeted resources for Governor’s advisors on innovative financing and delivery.
Public-private partnerships, or P3s, are a form of government procurement to build and implement infrastructure using the resources and expertise of the private sector. The U.S. Department of Transportation’s Federal Highway Administration defines a P3 as a long-term contract that involves a component of private financing (equity and/or loans) and may include development (design and construction), operation and/or maintenance of a facility.
Here is a list of useful P3 resources:
- Build America Bureau – Public-Private Partnerships resources page and P3 library
- Federal Highway Administration – Center for Innovative Finance Support – Public-Private Partnerships resources page
- Center of Development Finance Agencies – Public-Private Partnership Finance Resource Center
- The American Association for State Highway and Transportation Officials – Build America Transportation Investment Center (BATIC) Institute on project financing
- Department of Commerce National Telecommunications and Information Administration – Case Studies in Public Private Partnerships
- Federal Highway Administration – Innovative Finance Video Series – P3s
Long-Term Lease Concessions and Asset Recycling
Some states and territories have engaged in long-term P3 concessions which lease existing public assets to private sector investors for a specified period of time. During the lease period, the private concessionaire has the right to collect user fees or tolls from the facility in exchange for upfront payments and/or an obligation to operate, maintain and improve the facility. Asset recycling is a mechanism which uses the proceeds from the lease or sale of government-owned assets to private sector investors to invest in new infrastructure projects.
Below are some resources on P3 concessions and asset recycling:
- Federal Highway Administration – Center for Innovative Finance Support – Asset Recycling Page
- Federal Highway Administration – Center for Innovative Finance Support – P3s for Existing Facilities
- Bipartisan Policy Center – How Could “Asset Recycling” Work in the United States
- The IIJA includes a new $100 million asset concession program to provide technical assistance to states, local governments, Tribes and other entities. Further details on this program are forthcoming.
Innovative Infrastructure Procurement
Beyond the use of long-term P3s and lease concessions, states and territories are using a wide range of methods to contract with the private sector. These include project bundling, design-build (DB), design-build operate maintain (DBOM) and operations and maintenance (O&M) agreements, and problem-based procurement approaches. These arrangements allow for some degree of private participation through transferring some risk and responsibility from the public to private sectors which can improve project efficiencies.
Below are some useful information on innovative procurement methods:
- Federal Highway Administration – Center for Innovative Finance Support – Alternative Project Delivery
- Federal Highway Administration – Project Bundling
- Virginia’s Department of Transportation Alternative Project Delivery Division
- Harvard Kennedy School’s Government Performance Lab procurement systems page
- National Association of State Chief Information Officers
Value capture and Tax Increment Financing
Value capture mechanisms provide a way to derive a revenue stream from infrastructure projects and/or land use changes (such as transit-oriented development projects) which can help pay for those investments. Value capture mechanisms can include Development Impact Fees, which are paid by land developers to recover a share of infrastructure costs associated with new development, or Special Assessment Districts that are designated areas where taxes collected are funneled toward that project. Tax Increment Financing combines revenue streams from value capture with financing arrangements (i.e., bond issuance) to provide upfront resources to deliver the project.
Please see below some resources on value capture and tax increment financing:
- Council of Development Finance Agencies Tax Increment Finance Resources Center
- Federal Highway Administration Center for Innovative Finance Support – Value Capture
- Build America Bureau’s Transit Oriented Development resources page
- Federal Transit Authority’s Value Capture resources page
State Infrastructure Banks and State Revolving Loan Funds
State infrastructure banks and green banks offer direct, low-cost loans and various forms of credit to public and private sponsors to finance surface transportation, energy, water, wastewater, and community resilience projects. State Infrastructure Banks can be financed with federal resources, including federal grants and Transportation Infrastructure Finance and Innovation Act (TIFIA) loans, and/or state funds. Loans provided through infrastructure banks can augment existing state and local agency capital funds to accelerate and deliver projects. Like State Infrastructure Banks, Revolving Loan Funds are created by state governments to offer loans to public and private entities to assist with the delivery of infrastructure (most commonly for energy and water) or for economic development purposes. Additional loans can be issued by the fund for new projects as debt is repaid from previous loans.
Below are information on State Infrastructure Banks:
- Build America Bureau – State Infrastructure Banks page
- Federal Transit Authority – State Infrastructure Banks
- Federal Highway Administration – Innovative Financing Video Series – State Infrastructure Banks
- Council of Development Finance Agencies – Revolving Loan Funds Resources Page
- National Renewable Energy Laboratory (NREL) – Green Banks | State, Local, and Tribal Governments
- U.S. Economic Development Administration – Revolving Loan Fund Program
- Environmental Protection Agency – How the Drinking Water State Revolving Fund Works
Energy Service Performance Contracting
Energy Service Performance Contracting is a commonly used model in which state and local contract with an energy service company (ESCO) to perform energy and resilience retrofits with a guaranteed level of energy savings. The ESCO fronts the cost of a large retrofit or facility upgrade and recoups their costs through guaranteed energy savings over a period of time.
- U.S. Department of Energy – Energy Savings Performance Contracting
- Maryland Energy Administration – Energy Performance Contracting
- American Council for an Energy-Efficient Economy – Energy Savings Performance Contracting
- NGA Publication – State Governance, Planning, and Financing to Enhance Energy Resources
- NGA Publication – Transportation Funding and Financing During COVID-19
- NGA Publication – State Energy Efficiency Policy in A New Era: A toolkit for Governors
- U.S. Department of Energy – Funding and Financing
- U.S. Department of Energy – Better Buildings Finance Navigator