Creative Alternatives to Raising Taxes to Pay for Transportation Projects
By Larry Peterson, Transportation Market Manager
Whether employed in government or the private sector, transportation experts know there has never been a more difficult time to find funding for projects that are badly needed.
Raising taxes to make up for deficits in transportation budgets is one solution, but with so many families struggling, tax increases aren’t the most desirable option for politicians. When tax increases are off the table, innovative ways to finance projects are needed. Government agencies are partnering together – and often collaborating with private entities – to come up with alternative financing plans to make projects happen that couldn’t be constructed as scheduled using traditional funding mechanisms.
Joint Funding Agreements
Road projects typically are paid for by a unit of the state or federal government responsible for managing that particular road, but projects often benefit a number of other jurisdictions. Due to the joint benefits offered by these roadways, cost-sharing partnerships for projects along them are becoming more common.
For example, a city may contribute a portion of the project cost on a state road to begin construction before schedule. On a larger level, transit projects that serve multiple constituencies, such as the Hiawatha Light Rail Line in Minneapolis have been built using funding from multiple government sources.
Funding Assistance Programs
Government entities working together to come up with regional transportation solutions are also well positioned to benefit from other forms of assistance.
Programs like the federal TIGER grant program reward unique projects that are deemed to serve the nation’s interests. Federal initiatives like the Transportation Infrastructure Finance and Innovation Act (TIFIA) credit assistance program can also help finance unique projects. Multiple states also maintain state infrastructure banks that help provide financing for needed projects that aren’t part of regular construction schedules.
Public-Private Partnerships
Public-private partnerships (PPPs) are increasingly becoming an option for government agencies looking to address transportation funding challenges. Through these creative programs, government can offer private firms financial incentives for planning, designing, constructing, maintaining, and operating facilities over an extended period of time. An example of a PPP would be a private firm partnering with a government entity to construct a toll lane. While the private firm might cover all of part of the construction costs, those costs may be recouped through fees collected for using the toll lane.
Design-Build
Transit or road projects that are bid as design-build projects allow private firms to partner together to streamline the activities of designing and building a project. This can result in cost savings through finding efficiencies and faster completion of the project.
While the current funding environment for transportation professionals is challenging, it also presents the opportunity for innovative cost-saving initiatives. From cost-sharing projects that carry benefits for all agencies involved to PPPs where efficiency is encouraged, innovative transportation funding programs make it possible to complete needed projects when raising taxes is not an option.
Continue the conversation with Larry Peterson, Transportation Market Manager at lpeterson@kleinfelder.com