Doing more with less is a continuing reality for transportation agencies. As the need for infrastructure improvements continues to outpace available funding, agencies seek innovative ways to finance critical transportation projects to expedite delivery and manage their construction programs more effectively.

The Center for Innovative Finance Support(CIFS), a component of the Federal Highway Administration’s Office of Innovative Program Delivery, providestools and resources to help agencies use alternative financing strategies to deliver projects under the Federal-Aid Highway Program.

“Pursuing financing opportunities is a way to accelerate project delivery,” says Mark Sullivan, director of CIFS. “Financing can mean the difference between proceeding with critical projects or delaying them for years.”

CIFS offers expertise on a variety of innovative finance options, including Grant Anticipation Revenue Vehicles (GARVEEs), State infrastructure banks, revenue tools, and public-private partnerships. Center staff can work with agencies to identify the appropriate approach for their needs and provide technical assistance to guide them through the process.

Innovative Strategies

One of the innovations that CIFS can assist with, the GARVEE program, enables departments of transportation to finance projects by issuing bonds that will be repaid with future Federal-Aid Highway Program dollars. The GARVEE bonds enable agencies to accelerate construction timelines and spread the cost over the transportation facilities’ useful lives.

State infrastructure banks, funded with Federal and State resources, enable State DOTs to lend money to local governments for infrastructure projects, providing greater efficiency. “The banks are similar to revolving loan funds. As money returns to the bank, it can be loaned out again,” says Sullivan.

Many transportation agencies use highway tolls to provide revenue for investment in transportation facilities beyond traditional taxes and fees. Apart from interstates, almost any Federal-aid road can be tolled if it needs to be reconstructed. In addition, CIFS can provide guidance on allowable exceptions to prohibitions in Federal statutes on interstate tolling.

Another revenue strategy is value capture, which funds infrastructure projects by recovering part of the increase in surrounding property values generated by improvements through taxes or special assessments. An example is the Route 28 Highway Transportation Improvement District in Virginia. Fairfax County formed the district in partnership with Loudoun County to accelerate road improvements through taxes on commercial and industrial properties along the busy northern Virginia corridor.

States are also financing and delivering transportation projects via public-private partnerships, which enable agencies to leverage private sector creativity, efficiency, and capital. CIFS provides expertise on these partnerships through its role as the liaison with the U.S. Department of Transportation’s Build America Bureau. The Build America Bureau coordinates credit and technical assistance on large infrastructure projects.

Combining Strategies

Many agencies address the challenge of delivering complex projects by combining a variety of financing and construction approaches. On the Ohio River Bridges Project, Kentucky and Indiana collaborated to use innovative methods to construct two bridges and the connecting highways.

The Kentucky Transportation Cabinet built the project’s Downtown Crossing–including the Abraham Lincoln Bridge between Louisville, KY, and Jeffersonville, IN–using the design-build contracting method. The Indiana Department of Transportation delivered the East End Crossing–including the Lewis and Clark Bridge connecting Utica, IN, and Prospect, KY–through a design-build-finance-operate-maintain concession. Funding sources for the Ohio River Bridges project include GARVEE bonds, toll revenue bonds, Transportation Infrastructure Finance and Innovation Act (TIFIA) loans, and State and Federal funding.

“It’s impressive that two States worked together on a single high-profile project,” says Sullivan, “with each State taking responsibility to build a bridge and using a different financing strategy to complete its part of the project.”

For more information on CIFS, visit www.fhwa.dot.gov/ipd.

Robert Ritter, P.E., is the managing director of FHWA’s Office of Innovative Program Delivery.