User:Svrmustafa/Sandbox/Funding and Finance

This page is preapared by ... for the Center for Integrated Asset Management for Multi-modal Transportation Infrastructure Systems (CIAMTIS): Region 3 University Transportation Center as part of the "Research in the Classroom: Teaching Modules for Multi-modal Transportation Infrastructure System" project.

Introduction

In the early 20th century, the development of highways in the United States was primarily influenced by state governments, which wielded significant power in determining freeway routes within urban areas. This influence stemmed from the states' substantial financial resources, as they collected annual registration fees and motor fuel taxes. With the surge in the number of cars and vehicle miles traveled, state highway department budgets experienced substantial growth during this period.

By 1921, the federal government began playing a more crucial role in highway funding. Despite this increased federal involvement, states continued to take the lead in planning, designing, constructing, and maintaining the nation's primary roadways. These activities were conducted in accordance with federal standards and required federal approval. Consequently, by the 1930s, a rudimentary national highway network had already been established, ensuring that the majority of Americans lived within close proximity to a numbered U.S. highway, exemplified by the iconic U.S. Route 66.

The pivotal moment in the history of highway funding in the U.S. occurred during President Dwight D. Eisenhower's administration. In the 1950s, Congress devised a financial strategy to support the ambitious vision of an interstate highway system that had been contemplated for a decade. The culmination of this effort was the Federal-Aid Highway Act of 1956. A key aspect highlighted in the historical account is the intricate interrelationship of roadway financing among local, state, and federal governments throughout the 20th century. Successive federal bills incentivized states and cities to increasingly depend on federal transportation funds. This evolving dynamic significantly impacted the road network and urban areas, shaping their development and connectivity.

Revenue Sources for Highway Funding ($ billions, 2016)
Revenue Type	Federal	Share	State	Share	Local	Share	Total	Share
User Charges 1
Motor Fuel Taxes	$29.1	32.5%	$35.4	28.9%	$1.0	1.7%	$65.5	24.1%
Motor Vehicle Taxes and Fees	$5.7	6.4%	$29.9	24.4%	$2.0	3.3%	$37.7	13.8%
Tolls	$0.0	0.0%	$12.2	10.0%	$2.3	3.8%	$14.5	5.3%
Subtotal	$34.8	38.8%	$77.5	63.3%	$5.4	8.8%	$117.7	43.2%
Other Revenue
Property Taxes and Assessments	$0.0	0.0%	$0.0	0.0%	$12.7	21.3%	$12.7	4.7%
Other Taxes and Fees	$0.4	0.5%	$10.6	8.7%	$8.4	14.0%	$19.4	7.1%
Bond Issue Proceeds	$0.0	0.0%	$14.9	12.2%	$5.8	9.7%	$20.7	7.6%
Investment Income and Other Receipts 3	$0.3	0.3%	$12.2	10.0%	$6.3	10.5%	$18.8	6.9%
General Fund Appropriations 2	$54.1	60.4%	$7.2	5.9%	$21.5	35.8%	$82.8	30.4%
Subtotal	$54.8	61.2%	$44.9	36.7%	$54.8	91.2%	$154.5	56.8%
Total Revenues	$89.6	100%	$122.4	100%	$60.1	100%	$272.1	100%
Net Intergovernmental Transfers from (or to) Other Levels of Government	($44.2)		$28.7		$15.5
Funds Drawn From (or Placed in) Reserves	($42.4)		($6.6)		$0.0		($49.0)	-18.0%
Total Direct Expenditures	$3.0	0.1%	$144.6	64.8%	$75.6	33.9%	$223.2	82.0%

¹ The figures shown represent only the portion of user charges allocated specifically to highway spending. ² Within the $54.1 billion designated for Federal funding, $51.9 billion was transferred from the General Fund to the Highway Account of the Highway Trust Fund. ³ The $0.3 billion noted for Federal funding includes a transfer of $0.1 billion from the Leaking Underground Storage Tank Fund balance to the Highway Account of the Highway Trust Fund.

In more recent decades, as the purchasing power of federal transportation revenues dwindled, states and cities found themselves compelled to rely more heavily on their own funding sources. The historical analysis underscores that this shift has implications for decision-making, suggesting that states and urban areas are becoming more empowered to set their own priorities. However, this newfound autonomy is tempered by a weakened capacity to execute large-scale projects due to reduced reliance on federal support.

This page aims to provide cruical background and analysis into the funding and finance of in the united states as part of the “Research in the Classroom: Teaching Modules for Multi-modal Transportation Infrastructure System” project.

One approach to understanding funding and finance in the United States is to divide the subject into two categories: Capital Funding and Finance, which refers to the financing of assets or investments that provide long-term benefits such as infrastructure, equipment, and property, and Operational Funding and Finance, which involves financing the day-to-day operations of an organization, covering expenses like salaries, utilities, and maintenance. It is important to note, however, that the distinction is quite arbitrary and reflects the customary practices of budgeting separately for multi-year capital projects and annual or biennial operations and maintenance.

Funding and Finance at the Federal Level

In the realm of transportation infrastructure, funding mechanisms are critical to understanding how projects are planned and executed. Two primary types of funding dominate this landscape: formula-based funding and discretionary funding. Each has distinct characteristics and implications for project development and resource allocation.

Formula-based funding is the predominant method for allocating resources in many transportation programs. This approach distributes funds based on specific criteria such as land area, population size, or other quantifiable factors. It is a staple of the federal surface transportation funding paradigm, providing predictable and stable financial resources across various regions. The advantage of formula-based funding lies in its ability to ensure equitable distribution of funds, allowing regions to engage in long-term planning and development of essential infrastructure. The consistency and reliability of this funding method support the maintenance and expansion of transportation systems on a broad scale.

In contrast to formula-based funding, discretionary funding is allocated based on the merits and specific benefits of individual projects. The Infrastructure Investment and Jobs Act (IIJA) has significantly elevated the role of discretionary funding, encompassing around 100 funding programs under this category. Historically, discretionary projects existed but were not as prevalent as they are now. The IIJA's emphasis on discretionary funding reflects a strategic shift towards encouraging innovative and impactful projects that align with current federal priorities. This type of funding requires a competitive application process where projects must demonstrate their value in terms of innovation, sustainability, regional impact, and other criteria deemed important by funding agencies.

The coexistence of formula-based and discretionary funding presents both opportunities and challenges in the planning and process of transportation projects. Formula-based funding offers a dependable financial foundation, enabling regions to sustain ongoing infrastructure needs and undertake long-term projects with confidence. On the other hand, the rise of discretionary funding introduces a competitive dynamic, pushing project planners to develop proposals that stand out in terms of innovation and potential benefits.

The IIJA's focus on discretionary funding highlights the importance of adapting to new funding landscapes. Transportation agencies must now invest in thorough project planning and articulate clear, compelling cases for their projects to secure discretionary funds. This dual funding approach ensures that while foundational infrastructure needs are consistently met through formula-based funding, there is also room for pioneering projects that can drive significant advancements in transportation systems.

Funding for Capital Investments

Funding and Financing Highways and Public Transportation Under the Infrastructure Investment and Jobs Act (IIJA)

This landmark bipartisan legislation aims to revitalize U.S. infrastructure and create jobs. This historic investment of over $1 trillion allocates funds to critical sectors such as transportation, broadband, water, and energy. Expected to create millions of jobs, this transformative initiative will be implemented through a phased rollout over several years.

The IIJA authorized spending on federal highway and public transportation programs until September 30, 2026. It included a substantial $118 billion in general fund transfers to the HTF, securing its solvency throughout the act's duration. This approach marked a de facto funding policy, sustaining the HTF for 18 years.

However, projections from the Congressional Budget Office (CBO) foresee a shortfall of $149.7 billion over the five fiscal years following the IIJA's expiration, prompting discussions on how to address this potential deficit. The IIJA introduced changes to the funding structure by providing additional non-trust fund sums through advance multiyear supplemental appropriations. It included advance appropriations totaling $47 billion for highways and $21 billion for public transportation over FY2022-FY2026, ensuring a guaranteed funding source.

The IIJA's reliance on large general fund amounts, in addition to HTF monies, is anticipated to be a focal point during its reauthorization debate in FY2025-FY2026. Potential considerations include exploring options such as raising motor fuel taxes, adopting a vehicle miles traveled (VMT) charge, implementing a carbon tax, or an electric vehicle fee. Alternatives involve continuing the use of Treasury general fund transfers, potentially requiring budget offsets, or evaluating a combination of authorized trust-funded budget authority and multiyear appropriations.

Congress may also need to address the impact of inflation on the purchasing power of IIJA authorizations. Tolling is recognized as a potential financing method for specific heavily used roads, bridges, or tunnels. While it may reduce the need for federal expenditures on such infrastructure, it might not garner broad support for surface transportation.

Current Federal Funding Programs

The federal funding programs for transportation, such as the Multimodal Project Discretionary Grants (MPDG) and the Rebuilding American Infrastructure with Sustainability and Equity (RAISE) program, operate under appropriation acts rather than authorization acts. While they share similarities, they have distinct objectives and operational frameworks. Other influential federal funding programs include:​

Program Name	Category	Five-year Funding Amount (FY 2022-2026)
Airport Infrastructure Grants	Airports and Federal Aviation Administration Facilities	$15,000,000,000
Amtrak National Network Grants	Passenger and Freight Rail	$15,750,000,000
Bridge Formula Program	Roads, Bridges and Major Projects	$26,675,000,000
Bridge Investment Program	Roads, Bridges and Major Projects	$12,200,000,000
Congestion Mitigation & Air Quality Improvement Program	Roads, Bridges and Major Projects	$13,200,000,000
Federal-State Partnership for Intercity Passenger Rail Grants	Passenger and Freight Rail	$36,000,000,000
Highway Safety Improvement Program	Safety	$15,557,499,996
National Highway Performance Program	Roads, Bridges and Major Projects	$148,000,000,000
Surface Transportation Block Grant Program	Roads, Bridges and Major Projects	$72,000,000,000
Urbanized Area Formula Grants	Public Transportation	$33,390,947,107

Multimodal Project Discretionary Grants (MPDG)

The MPDG program is designed to support projects that align with the Department of Transportation's strategic goals. It includes several key grant categories:

MEGA Grants: These grants provide substantial funding for large-scale transportation projects that have significant regional or national impacts. Examples of such projects include the construction of major highways, bridges, and transit systems that enhance connectivity and economic growth. Mega Grants are crucial for undertaking ambitious infrastructure projects that require extensive resources and long-term commitment.

INFRA Grants: The Infrastructure for Rebuilding America (INFRA) grants are aimed at addressing critical transportation challenges that impede the efficient movement of goods and people. These grants focus on projects that improve freight mobility, reduce congestion, enhance safety, and boost the reliability of transportation networks. INFRA grants support initiatives that are vital for maintaining the competitiveness of the U.S. economy by ensuring that critical infrastructure is modernized and well-maintained.

Rural Grants: Recognizing the unique transportation needs of rural areas, Rural Grants provide targeted funding to support infrastructure projects in these regions. These grants help address the disparities in transportation infrastructure between urban and rural areas, ensuring that rural communities have access to safe and reliable transportation options. Projects funded by Rural Grants often include road improvements, bridge repairs, and enhancements to public transit systems, which are crucial for the economic and social well-being of rural populations.

Rebuilding American Infrastructure with Sustainability and Equity (RAISE) Program

The Rebuilding American Infrastructure with Sustainability and Equity (RAISE) program, formerly known as BUILD (Better Utilizing Investments to Leverage Development) and TIGER (Transportation Investment Generating Economic Recovery), is a discretionary grant initiative managed by the U.S. Department of Transportation. The RAISE program aims to invest in a wide range of infrastructure projects, including road, rail, transit, and port projects. It supports state and local project sponsors and focuses on projects that are multimodal and multi-jurisdictional in nature.

A key aspect of the RAISE program is its investment in diverse projects. The program funds a variety of infrastructure initiatives that enhance transportation networks across different modes. This includes improvements to highways, rail systems, public transit, and port facilities, ensuring a comprehensive approach to infrastructure development. By diversifying the types of projects it supports, the RAISE program helps create a more resilient and robust transportation system.

Another significant focus of the RAISE program is its support for multimodal projects. By encouraging projects that integrate multiple modes of transportation, the program promotes a more efficient and interconnected transportation system. This multimodal approach helps reduce congestion, lower emissions, and improve overall transportation efficiency. For instance, a project might enhance both rail and road infrastructure, creating seamless connections between different transportation modes and thereby improving the flow of goods and people.

The RAISE program also places a strong emphasis on equity and sustainability. It ensures that infrastructure investments benefit all communities, particularly those that have been historically underserved. Projects funded by RAISE are expected to contribute to environmental sustainability by promoting green infrastructure and reducing the carbon footprint of transportation systems. Additionally, these projects aim to foster economic growth and social equity, ensuring that improvements in infrastructure contribute to the broader well-being of diverse populations. By prioritizing these values, the RAISE program seeks to create a more inclusive and sustainable future for transportation infrastructure in the United States.

These programs are funded through appropriation acts, which allocate money for specific purposes, rather than authorization acts, which provide the legal authority to undertake certain projects and activities. Authorization Acts provide the legal framework and contracting authority, allowing long-term planning and commitments. For example, the Infrastructure Investment and Jobs Act (IIJA) authorizes multi-year investments in infrastructure. Appropriation Acts allocate the necessary funds to implement the authorized projects. Appropriation committees are responsible for providing the money but have limited discretion over how the funds are used once allocated.

Furthermore, a multi-year approach to funding is critical in infrastructure development, as it enables consistent and predictable funding for large-scale projects. Authorization acts play a pivotal role in this approach by granting contracting authority, allowing for legal agreements with states that can be maintained over several years. This ensures that projects receive continuous support and can be completed efficiently. Once the authorization is in place, appropriation committees allocate the funds needed to fulfill these commitments, ensuring that the necessary financial resources are available to sustain long-term infrastructure projects.

Finance for Capital Investments

Build America Bureau

Established in 2016 under the Obama administration, the Build America Bureau (Bureau) emerged as a crucial sub-agency within the United States Department of Transportation. This initiative was conceived as part of a broader government-wide endeavor aimed at bolstering infrastructure investment and fostering economic growth. At its core, bureau was designed to actively engage private sector investors, fostering collaboration, and broadening the landscape for public-private partnerships (P3s) through two initiatives Transportation Infrastructure Finance and Innovation (TIFIA) and The Railroad Rehabilitation and Improvement Financing (RRIF) credit programs.

Transportation Infrastructure Finance and Innovation (TIFIA)

TIFIA stands as a dynamic and strategic financial initiative, meticulously crafted to not only amplify the impact of limited Federal resources but also to catalyze substantial capital market investment in the realm of transportation infrastructure. Since its inauguration in 1998, TIFIA has played a pivotal role by extending credit assistance through various mechanisms, including direct loans, loan guarantees, and standby lines of credit. Its unique positioning prioritizes projects of national or regional significance, aligning with the overarching goal of playing a transformative role in advancing and fortifying vital transportation networks across the United States.

At the heart of TIFIA's multifaceted approach lies a set of core objectives, each contributing to the program's strategic vision. TIFIA seeks not only to facilitate projects that bear significant public benefits but also to foster the exploration of innovative revenue streams, encourage active private sector participation, address capital market gaps, and adopt a flexible and "patient" investor approach. This nuanced strategy is carefully designed to navigate and mitigate concerns surrounding investment horizon, liquidity, predictability, and risk. By doing so, TIFIA effectively limits Federal exposure through a judicious reliance on market discipline.

The operational framework of TIFIA includes the enforcement of several critical requirements to ensure the program's efficacy. These encompass the determination of minimum anticipated project costs based on project type, defining credit assistance limits, mandating the attainment of an investment-grade rating from recognized credit agencies, and requiring a dedicated repayment source for both TIFIA and senior debt financing. There is also the requirement of compliance with applicable Federal requirements, spanning Civil Rights, NEPA, Uniform Relocation, Buy America, Titles 23, and 49.

The TIFIA application process unfolds as a dynamic and responsive system, embracing a rolling structure that allows for flexibility in project submissions. Entities eligible to participate range from State Governments to Transportation Improvement Districts, and the process initiates with the submission of detailed letters of interest when a project successfully satisfies statutory eligibility requirements. Upon receiving an invitation from the TIFIA Joint Program Office, eligible entities are required to submit a formal application, marking a critical juncture in the pursuit of TIFIA assistance. TIFIA's expansive scope encompasses a diverse array of projects, spanning highways and bridges, intelligent transportation systems, intermodal connectors, transit facilities, intercity buses and facilities, freight transfer facilities, pedestrian and bicycle infrastructure networks, transit-oriented development, rural infrastructure projects, passenger rail vehicles and facilities, surface transportation elements of port projects, and airports.

To qualify for TIFIA assistance, projects are held to stringent eligibility requirements, ranging from demonstrating creditworthiness and obtaining investment-grade ratings on senior debt to fostering partnerships for public and private investment. A crucial criterion involves showcasing the capability to proceed promptly or at reduced lifecycle costs. Importantly, the reduction of the contribution of Federal grant assistance for the project is deemed essential, and the construction contracting process must commence within 90 days of executing a TIFIA credit instrument. BAB emphasizes that TIFIA's commitment to supporting projects that not only meet high standards but also contribute significantly to the nation's transportation infrastructure is ensured through this comprehensive eligibility framework.

Numerous modifications have been implemented within the program, notably through legislative actions such as the Moving Ahead for Progress in the 21st Century (MAP-21) in 2012, the Fixing America's Surface Transportation (FAST) Act in 2015 and most recently Infrastructure Investment and Jobs Act (IIJA) in 2021.

In 2012, MAP-21 brought about substantial expansions to TIFIA, significantly augmenting the program's credit authority by nearly tenfold for fiscal years (FY) 2013 and 2014. This extension continued into FY 2015. Additionally, MAP-21 introduced the concept of "master credit agreements" and instituted a procedural shift to a "first-come, first-served" application process, departing from the previous annual competition model. Following MAP-21, the 2015 FAST Act marked a notable reduction, slashing the program's credit authority by over 70% for fiscal years 2016 through 2020. This reduction was likely a response to the program's underutilization of the expanded credit authority granted by MAP-21. Accumulated budgetary concerns have persisted since TIFIA's inception, with over $700 million remaining unobligated when MAP-21 was enacted and an unobligated balance of $1 billion following its implementation. Despite the substantial budget cuts under the FAST Act, a considerable portion of the TIFIA program budget remained underutilized. Most notably the FAST Act made a critical clarification regarding the utilization of TIFIA credit assistance for refinancing existing project obligations. According to this clarification, TIFIA credit assistance can only be employed for refinancing if the maturity of the existing obligations does not extend beyond one year after the substantial completion of the project. This adds an additional condition to the existing requirement that any refinancing must occur within one year after substantial completion of the project. The FAST Act also introduced a suite of additional policy adjustments, offering clarity on the authority for "master credit agreements," modifying requirements for the redistribution of unobligated funding, expanding support eligibility to include transit-oriented development (TOD), and prioritizing small and rural projects.

Most notably the FAST Act made a critical clarification regarding the utilization of TIFIA credit assistance for refinancing existing project obligations. According to this clarification, TIFIA credit assistance can only be employed for refinancing if the maturity of the existing obligations does not extend beyond one year after the substantial completion of the project. This adds an additional condition to the existing requirement that any refinancing must occur within one year after substantial completion of the project.

The recently enacted IIJA brought forth significant enhancements to TIFIA loan, ushering in a series of updates to the federal program. Among the key changes introduced by the IIJA, the Act extends the period for contingent commitments under a TIFIA master credit agreement from three years to five, providing a more extended timeframe for project development. Additionally, the threshold requiring more than one credit rating for an eligible project's Federal credit instrument is raised from $75 million to $150 million, streamlining the rating process for projects within the specified range. The potential maturity of a TIFIA loan for a capital asset with an estimated useful life of more than 50 years is extended to the lesser of 75 years after substantial completion or 75% of the asset's estimated usable life. IIJA also further expanded the scope of eligible projects to include Transit-Oriented Transportation Projects, Airport-related projects, and those acquiring plant and wildlife habitats in accordance with an approved environmental mitigation plan. Importantly, the IIJA mandated that projects utilizing the TIFIA program must demonstrate appropriate payment and performance security, irrespective of the obligor's nature. Additionally, a streamlined application process has been introduced for projects with a reasonable expectation that the contracting process can commence within 90 days after a federal credit instrument is obligated.

The Railroad Rehabilitation and Improvement Financing Program (RRIF)

RRIF Program was established under the Transportation Equity Act for the 21st Century (TEA 21). This program provides direct loans and loan guarantees to finance the development of railroad infrastructure. The DOT is authorized to provide direct loans and loan guarantees up to $35.0 billion for this purpose, with a minimum of $7.0 billion reserved for projects benefiting freight railroads other than Class I carriers. RRIF credit assistance is awarded by the DOT to eligible applicants, including state and local governments, interstate compacts, government-sponsored authorities and corporations, railroads, limited option rail freight shippers that own or operate a plant or other facility, and joint ventures including at least one of the entities.

Grant Anticipation Revenue Vehicles (GARVEEs)

In essence, a GARVEE (Grant Anticipation Revenue Vehicle) functions as an anticipation vehicle, a type of debt instrument issued based on anticipated funds from a specific source to provide upfront financing for a particular need. In transportation finance, GARVEEs specifically rely on expected Federal-aid grants as their revenue source.

In highway finance, GARVEE refers to a debt instrument secured by future Title 23 Federal-aid funding. Importantly, it allows states to receive Federal reimbursements for debt service and related financing costs. These costs can include interest payments, repayment of principal, and other expenses associated with issuing bonds, notes, certificates, mortgages, or leases to finance projects eligible under Title 23. Typically, bonds are the most commonly used form of debt instrument under GARVEE, as specified in Section 122 of Title 23.

GARVEEs enable states to accelerate construction schedules and spread the financial burden of transportation projects over their useful lifespan, rather than solely during the construction phase. They also provide states with expanded access to capital markets, supplementing potential general obligation or revenue bonding capabilities. However, it's essential to weigh the upfront financial benefits against the commitment of future Federal-aid funds to cover debt service.

The concept of advance construction and partial conversion introduced with GARVEEs allows states to issue debt backed by anticipated Federal-aid funds and later convert these funds into reimbursable costs through partial advance construction conversion. This approach contrasts with previous requirements, where Federal funds had to be obligated within a single authorization period. The introduction of GARVEEs under the NHS Act in 1995 expanded flexibility, enabling longer-term financing of Federal-aid eligible projects and enhancing states' financial planning capabilities.

Section 129 Loans

Section 129 of Title 23 permits Federal involvement in state loans that support projects funded by dedicated revenue streams such as tolls, excise taxes, sales taxes, real property taxes, motor vehicle taxes, incremental property taxes, or other beneficiary fees.

Similar to State Infrastructure Banks (SIBs), Section 129 loans enable states to leverage additional transportation resources and recycle assistance to fund other eligible projects. States have flexibility in negotiating interest rates and other loan terms under Section 129. When a loan is repaid, the state must use the funds for another Title 23 eligible project or for credit enhancement activities, such as purchasing insurance or establishing a capital reserve to enhance credit market access or reduce interest costs for a Title 23 eligible project.

One significant difference between SIB loans and Section 129 loans is that projects benefiting from repaid Section 129 loans are not subject to the same extensive Federal requirements as those utilizing SIB loans.

Section 129 of Title 23 was initially modified by the Intermodal Surface Transportation Efficiency Act (ISTEA) to allow Federal participation in state loans for toll projects. Subsequently, the 1995 National Highway System Act broadened Federal-aid eligibility to encompass state loans supporting non-toll projects with dedicated revenue streams, reflecting lessons learned from the Transportation Equity Act for the 21st Century (TEA-21).

Build America Bonds

Build America Bonds (BABs) were introduced under the American Recovery and Reinvestment Act (ARRA) of February 2009 and are overseen by the Treasury Department. These bonds are issued by state or local government entities for governmental purposes, excluding private activities, and the interest on these bonds is taxable. In exchange, the issuer receives a federal interest subsidy. BABs can be utilized to finance various projects, including surface transportation, without a volume cap during the years 2009 and 2010.

There are two main types of Build America Bonds: Tax Credit BABs and Direct Payment BABs. Tax Credit BABs provide investors with a tax credit equal to 35 percent of the interest paid by the issuer, effectively reducing the issuer's interest expense by approximately 26 percent. Investors can apply these tax credits against their regular income tax liability or alternative minimum tax, with the option to carry forward unused credits to subsequent years. This structure allows issuers to attract investors seeking tax-advantaged investments while reducing their borrowing costs.

Direct Payment BABs, on the other hand, offer a more straightforward subsidy where the Treasury Department provides a refundable tax credit directly to the issuer equivalent to 35 percent of the gross interest payable to investors. This subsidy is paid in cash and does not depend on the investor's tax liability, making Direct Payment BABs highly attractive and easily marketable. Unlike Tax Credit BABs, Direct Payment BABs are primarily intended for new construction projects and are not applicable for refinancing or working capital purposes.

In comparison, Direct Payment BABs provide a higher subsidy rate (35 percent) than Tax Credit BABs (26 percent) and eliminate the need for investors to consider their tax situation when investing. However, their use is restricted to new construction projects, limiting their flexibility compared to Tax Credit BABs. From an investor's standpoint, Direct Payment BABs resemble conventional taxable bonds because the return is received entirely in cash without the tax credit component.

In summary, BABs represent a significant innovation in municipal finance by providing states and local governments with flexible financing options to stimulate infrastructure development, particularly during economic downturns. The choice between Tax Credit BABs and Direct Payment BABs depends on the specific financing needs of the issuer and the preferences of potential investors seeking either tax advantages or cash payments.

Funding for Operational Expenditure

Transportation assets, including highways and transit systems, have regular life cycles requiring ongoing maintenance, repair, and occasional replacement. Deterioration is not linear; it occurs slowly when the asset is new but accelerates as the asset ages, especially if not properly maintained, which increases operating and maintenance costs. Highway infrastructure operating costs encompass activities like fixing potholes, replacing guardrails, and snow removal. Transit infrastructure operating costs include not only maintenance and repair of vehicles and rails but also labor, fuel, and insurance. In 2020, 62% of total transit operating expenses were allocated to employee salaries, wages, and fringe benefits (APTA Factbook). The remaining operating expenses covered capital costs such as purchasing new buses (CRB).

With the launch of the Interstate Highway Program as part of the Federal-Aid Highway Act of 1956, the federal government committed to paying 90% of the construction costs of interstate highways. However, the Act did not include maintenance stipulations. The original Federal-Aid Highway program, established by President Woodrow Wilson in 1916, designated states as the owners of the interstate highways and responsible for their maintenance (FHWA-intmaint). Twenty years later, the Federal-Aid Highway Act of 1976 authorized $175 million annually to address maintenance costs for untolled highways, with the federal government covering 90% of operating costs (FHWA-intmaint). This was followed by the Surface Transportation Assistance Act of 1978, which made Interstate “3R” (resurfacing, restoring, and rehabilitating) funding a permanent category within the Act, also making tolled highways eligible for 3R funding. In 1981, "reconstruction" was added as a fourth "R" to replace aged infrastructure that no longer met acceptable levels of service. In 1982, President Ronald Reagan increased the federal gas tax by 5 cents per gallon, with 4 cents going toward the Highway Trust Fund and 1 cent to the Transit Account (FHWA-intmaint). This program went through various iterations until 2005, when the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) was approved. SAFETEA-LU allotted $100 million annually for 4R work within the Interstate system (FHWA-intmaint). This program expired in 2009, leading to the establishment of the Moving Ahead for Progress in the 21st Century Act (MAP-21) in 2012 (FMCSA), which includes clauses addressing reconstruction, resurfacing, restoration, rehabilitation, and preservation of highways and bridges (t4america).

In 2022, 96% of all federal spending ($50 billion) went to capital investments, with the remainder going toward operating expenditures. All federal funds are distributed to states through formula funding, based on amounts received in previous years. Additionally, funding is not project-specific and is limited to the interstate highway system, excluding local roads (Highway Trust Fund document). Given this history and the responsibility placed on states and local governments to maintain highway infrastructure, federal funding for highway operating costs remains highly limited.

Federal funding for transit infrastructure falls under a separate account from the Highway Trust Fund. In the 1960s, transit was mostly privatized and generated enough profits to maintain service. With the 1973 oil crisis, transit usage increased, leading to the National Mass Transportation Act of 1974, which provided federal support for transit operating costs at a maximum share of 50% (CRB). This Act was popular with many transit operators obtaining federal funding, but in the 1980s, the federal share for transit operating costs was reduced to 30% and further reduced to 25% in the 1990s. Additionally, the Transportation Equity Act for the 21st Century (TEA-21), passed in the 1990s, eliminated federal support for transit operating costs in urbanized areas with more than 200,000 people while maintaining support for smaller urban areas, rural areas, and small bus operators in large cities starting in 2013. This change was accompanied by a broader definition of capital expenses, allowing traditional operating costs such as preventive maintenance to be considered capital expenses, thus increasing funding (CRB). The chart below shows sources of funds for transit operating expenditures from 2006 to 2016.

(ADD CHART)

Source: 24th Ed. Status of the Nation's Highways, Bridges, and Transit Conditions and Performance Report

In 2019, with the onset of the Coronavirus Pandemic (COVID-19), transit ridership and revenues rapidly declined, but agencies continued to provide service to support essential workers. From 2019 to 2020, fares and revenues decreased by 40%, local support fell by 16.7% to $16.3 billion, and state support decreased by 0.9% to $12.7 billion (APTA). The federal government supported transit agencies during this time with a total of $69.5 billion in 2020 and 2021 (CRB), a significant increase from the $12 billion received in 2019 and the $19 billion from fares and other revenues (CRB) during the same year. Prior to COVID-19, transit fares and revenues covered about 25% of the total cost of providing transit service (CRB). This support was part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which allocated $25 billion through formula funds to urban and rural areas to maintain transit services during the pandemic (transit.dot.gov/cares).

Below is a list of IIJA grant programs that provide opportunities to obtain federal funding for transportation operating costs (gfoaorg.cdn.prismic.io),

• State of Good Repair Grants
• The Restoration and Enhancement Grant Program
• Urbanized Area Formula Grants
• Formula Grants for Rural Areas
• Enhanced Mobility of Seniors and Individuals with Disabilities
• Ferry Service for Rural Communities
• Public Transportation on Indian Reservations Formula
• Appalachian Development Public Transportation Assistance Program
• Charging and Fueling Infrastructure Grants (Community Charging)
• Charging and Fueling Infrastructure Grants (Corridor Charging)
• Growing State Apportionments
• Growing States and High-Density States Formula

Finance for Operational Expenditure

Federal financing for operational expenditure is very limited as this financial tool is mostly used to fund capital investments and build assets rather than maintain them. Most federal financing mechanisms, such as TIFIA loans, State Infrastructure Banks (SIBs), and Grant Anticipation Revenue Vehicles (GARVEEs), are used to pay for construction costs. These financing tools leverage future revenues to pay for the initial investment, and thus are not a good tool to pay for daily expenses and repairs. These tools can support operating expenditures in some instances, but they are not primarily used for this purpose. At the federal level, funding sources are a more appropriate tool, but more commonly, state and local funding options are used to cover these expenses.

Funding and Finance at the State and Local Level

In the United States, the "user pays" principle has long served as the foundation for transportation funding. This principle asserts that those who derive the most benefit from public services, such as transportation infrastructure, should bear a greater share of the costs. Consequently, both federal and state governments have heavily relied on fuel taxes, supplemented by vehicle-related fees and taxes, to finance transportation projects. These mechanisms effectively link usage levels to contributions for maintenance and development.

However, as detailed in Chapter 2.1.1, this heavy reliance on fuel tax revenues has precipitated a well-documented and worsening funding crisis. Investment needs are now outpacing available revenues at all levels of government. Therefore, effective funding and finance mechanisms at the state and local levels are crucial for the successful implementation and maintenance of various public infrastructure projects. This section explores different capital funding sources and financial programs available to state and local governments. Understanding these mechanisms is essential for the efficient allocation of resources and ensuring the sustainability of projects over time.

Funding for Capital Investments

State Fuel Taxes and Fees

States employ a diverse array of taxes and fees to fund roads, bridges, and various transportation modes, however, state taxes on motor fuels serve as the primary source of revenue for state highway projects, contributing over 25% of such funding nationwide. Although this percentage is substantial, it is less than the share of federal revenue derived from motor fuel taxes. Each state sets its own tax rates for motor fuels. As of January 2022, these rates ranged from approximately 15 to 68 cents per gallon for gasoline and 15 to 100 cents per gallon for diesel fuel. These taxes often include additional levies, such as sales taxes, environmental fees, fees for underground storage tanks, and local taxes.

US National Average	Gasoline	Diesel
State Excise Tax	26.16 ¢ per gallon	26.72 ¢ per gallon
Other State Taxes/Fees	12.53 ¢ per gallon	13.52 ¢ per gallon
Total State Taxes/Fees*	38.69 ¢ per gallon	40.24 ¢ per gallon
Total State and Federal Taxes	57.09 ¢ per gallon	64.64 ¢ per gallon

*The national average is weighted by volume and considers fuel consumption across each state.

To maintain the effectiveness of these revenues, an increasing number of states have adopted variable-rate fuel taxes that adjust over time. Some of these taxes are periodically modified based on inflation measures, such as the consumer price index, producer price index, or the National Highway Construction Cost Index. Other states calculate fuel taxes as a percentage of wholesale or retail fuel prices, or by other criteria. In certain states, variable components are added to a fixed-rate tax, while in others, the entire fuel tax is regularly recalculated. Additionally, several states have indexed their motor fuel tax rates to local consumer price indexes or wholesale fuel prices to ensure revenues keep pace with economic changes.

For interstate motor carriers, fuel taxation is regulated by the International Fuel Tax Agreement (IFTA), which simplifies the reporting of fuel use by carriers operating in multiple jurisdictions. The International Fuel Tax Association, a non-profit organization, manages and administers the IFTA. The allocation of state-imposed fuel tax revenues varies significantly by state. These funds can be directed to state departments of transportation, special road or bridge funds, county governments, or state general funds. State sales taxes on motor fuels may also be included in a state’s motor fuel excise tax, representing a notable portion of state motor fuel tax revenue.

State Vehicle Taxes and Fees

Beyond fuel taxes, most states also depend on a variety of vehicle-related fees and taxes to finance transportation projects. These include registration fees for passenger vehicles, which can be flat-rate or calculated based on vehicle-specific factors such as weight, value, age, or horsepower. The structure of these fees varies significantly across states, with some applying a uniform rate and others using a tiered approach based on vehicle characteristics. Not all states allocate the revenue from these fees exclusively to transportation. For instance, Alaska and Georgia do not earmark all registration fee revenues for transportation projects. Besides registration fees, states commonly levy vehicle title fees, truck registration fees based on gross vehicle weight, and special permit fees for oversize or overweight vehicles. States like Georgia, South Carolina, Utah, Vermont, and Washington impose additional fees on heavy vehicles.

To address inflation, several states have indexed their vehicle-related fees to the Consumer Price Index (CPI) or similar measures. For example, North Carolina, Pennsylvania, Utah, and West Virginia have tied their vehicle registration or title fees to the CPI. California has further indexed its transportation improvement fee, collected with registration fees, to the California Consumer Price Index. By structuring vehicle-related fees to adjust over time, states can ensure a more stable and sustainable revenue stream for maintaining and improving transportation infrastructure, thus effectively covering the associated costs.

Road Usage Fees

Status of RUC Pilots in the United States (Source:https://www.ibtta.org/road-usage-charge-ruc)

Road usage charging (RUC), also referred to as vehicle miles traveled (VMT) fees or mileage-based user fees (MBUF), is a policy that requires motorists to pay based on the distance they travel on the road network. Over the past decade, this concept has gained considerable attention as a sustainable and fair approach to funding transportation infrastructure maintenance and operations, particularly as fuel tax revenues continue to decline.

RUC is grounded in the "user pays" principle, akin to tolling, but with a broader scope. While tolls are typically limited to specific roadways like expressways, bridges, or tunnels, RUC applies universally to all roads within a certain jurisdiction. The methods for implementing RUC range from basic paper licenses and odometer readings to sophisticated automated technologies, including in-vehicle devices and telematics systems.

The impetus for adopting RUC comes from two ongoing trends: increasing population and vehicle miles traveled, and the steady decline in fuel tax revenues. As more consumers opt for fuel-efficient and electric vehicles, the per-mile contribution to fuel tax revenues decreases, and in some cases, these vehicles avoid fuel taxes entirely.

To address these challenges, many states have explored per-mile fees as either a supplement to or a replacement for traditional fuel taxes. From 2016 to 2021, the federal government bolstered these initiatives through the Surface Transportation System Funding Alternatives (STSFA) grant program, awarding a total of $73.7 million to 37 state-level demonstration projects. The Infrastructure Investment and Jobs Act (IIJA) furthered these efforts by renaming the grants to "Strategic Innovation for Revenue Collection" and launching the first national per-mile user fee pilot program.

Tolls

Tolls play a crucial role in state transportation funding, serving as direct user fees imposed on specific roads, lanes, or bridges in at least 19 states. These toll revenues are earmarked by law for maintaining and improving the infrastructure they serve. Some states, like Indiana, New Jersey, and Pennsylvania, allocate toll revenues to their Departments of Transportation or broader multimodal transportation initiatives. Modern tolling strategies include congestion pricing models that adjust toll rates based on traffic conditions, such as express lanes and high-occupancy toll lanes. Despite variations in state approaches, tolls are increasingly recognized as a stable revenue source that also helps manage traffic congestion effectively.

Historically, toll roads were prominent in the 18th and 19th centuries when private tollway companies built and maintained roads, charging users directly. The advent of rail travel and toll evasion reduced their significance, but public toll road programs were revived in the 1930s to meet growing demands from automobiles and commerce. Tolling faced a setback in 1956 with the establishment of the Federal motor fuel tax, which prohibited tolls on new federally funded highways. However, in recent decades, tolling has experienced renewed interest as states seek additional revenue sources amid constrained public funding. Federal legislation since ISTEA in 1991 has encouraged public-private partnerships and innovative tolling practices to fund transportation infrastructure. Despite challenges like borrowing costs and equity concerns, modern tolling technologies have mitigated traditional drawbacks, making tolls a critical tool in state transportation funding strategies today.

General Funds and Taxes

In addition to traditional funding methods, states have supplemented transportation funding with general taxation, similar to the federal government's approach. This involves either making legislative appropriations from a general fund or dedicating a portion of general taxes specifically for transportation purposes.These funds are flexible and can be appropriated to support any transportation mode. Approximately half of the states currently use general funds for transportation, including funding for highways, public transit, rail, aviation, ports, waterways, and pedestrian and bicycle projects. The allocations often vary yearly based on state budget priorities and available funds. However, some states, such as Arkansas, Colorado, Maine, Washington, and Wisconsin, have established recurring transfers from the general fund for transportation purposes. New York's dedicated fund for highways and bridges, which now requires substantial annual support from the state’s general fund, is another example of this approach. In spite of their widespread use, historically, general funds collectively account for only small amount of total state highway funding.

Transportation Sales Tax Districts

A Transportation Sales Tax District (TSTD) is a designated region where an additional sales tax is levied to generate revenue for specific transportation facilities or services. These districts are meticulously mapped to encompass areas that will benefit from new or enhanced transportation infrastructure. The establishment and governance of TSTDs are dictated by state authorizing statutes, which outline permissible uses, procedures for establishment, and potential duration limits that may be subject to renewal.

TSTDs are typically created in cities and counties where state authorization is in place, following local legislative processes in accordance with state guidelines. Since each sale generates a relatively small amount of revenue, TSTDs are usually formed in areas with high volumes of taxable sales, often encompassing entire cities, counties, or multiple jurisdictions. This approach ensures that sufficient funds are raised to support transportation projects. TSTDs have been effectively implemented in various states, including Illinois, Missouri, Kansas, and California. The types of taxes and fees that can be levied by local jurisdictions are determined by state constitutions and statutes. If a jurisdiction has the authority to impose a sales tax, adjusting the rate within a TSTD is generally an exercise of existing authority. However, imposing a sales tax increase in only certain parts of a jurisdiction typically requires legislative justification at both the state and local levels to avoid legal challenges related to uniformity.

The activities financed by TSTDs are governed by the state or local statutes that authorize their creation, as well as by the local statutes or ordinances that establish specific TSTDs. These districts can fund both capital and operational expenditures, supporting a wide range of transportation investments. TSTDs are particularly effective in raising substantial funds in areas with significant sales activity, thereby facilitating the development and maintenance of essential transportation infrastructure.

Local Option Sales Taxes (LOST)

Local Option Sales Taxes (LOST) are taxes imposed by local governments, with voter approval, to fund specific projects or services. These taxes are an important tool for generating revenue at the local level, allowing communities to directly support and invest in their infrastructure and public services.Local option sales taxes have become a popular method for funding transportation investments, especially for transit projects. For instance, in San Diego County, California, the TransNet program levies a half-cent sales tax to support local transportation projects. In Texas, the Capital Metro area imposes a 1% sales tax across nine jurisdictions in Williamson and Travis Counties to help fund the Capital Metro budget. Similarly, the Metropolitan Atlanta Rapid Transit Authority (MARTA) in Georgia collects a 1% sales tax in Fulton and DeKalb Counties to support its budget. Additionally, the Dallas Area Rapid Transit (DART) in Texas levies a one-cent sales tax across 13 cities in the metropolitan area to fund its budget.

Development Impact Fees

Impact fees are charges imposed on new developments to cover the costs of additional public services and infrastructure necessitated by the development. These fees help local governments manage growth and ensure that developers contribute to the community’s needs, such as schools, roads, and parks.

These fees are typically calculated using a formulaic approach rather than negotiated agreements with developers. Widely adopted across the United States, impact fees are a key funding mechanism for transportation improvements. There are two main methods for determining impact fees. The inductive method estimates the cost of expanding infrastructure capacity, such as adding lanes to roads, based on predetermined facility capacities and costs. Developers pay a share proportional to the increased demand caused by their developments. In contrast, the deductive method tailors fees to specific development plans and local needs. It involves detailed engineering assessments to identify required infrastructure improvements and assigns costs based on geographic factors and service levels. Impact fees gained popularity in the 1970s and 1980s, particularly in fast-growing areas reluctant to use general revenues for growth-related expenses. Legally, impact fees must pass the "rational nexus" test, demonstrating a logical connection between the fees collected and the infrastructure provided. Once collected, these fees must be promptly spent on designated infrastructure projects and cannot generate surplus revenue beyond what is needed for the improvements they finance.

Other Local Level Funding Sources

Other local revenue sources for transportation improvement projects include various sources such as fares, advertising, naming rights, shared resources, concessions, and transportation utility fees. Fares, for instance, are fees collected exclusively from public transit users at the local level, primarily funding ongoing transit operations and maintenance. Transit agencies often issue revenue bonds against future farebox receipts to finance capital improvements. Advertising revenue is generated by selling ad space on transportation assets like transit vehicles, stations, or highway billboards. While the contribution of transit advertising to operating budgets is relatively small as a percentage, the total revenue can be substantial. Major transit agencies, excluding New York, average $6.1 million annually from advertising programs. Naming rights revenue comes from selling the rights to name transportation assets such as toll roads or transit stations to private entities. This practice provides additional funding streams and is increasingly adopted by local agencies nationwide. Shared resources involve private donations of telecommunications technology, typically fiber optic communications, and sometimes cash, in exchange for access to public rights-of-way. This approach helps states build technological infrastructure for intelligent transportation systems (ITS) while leveraging private sector investments to meet project matching requirements.

Finance for Capital Investments

State Infrastructure Bank (SIB)

State Infrastructure Banks (SIBs) are state-managed investment funds specifically designed for surface transportation infrastructure. Similar to private banks, SIBs provide a variety of loans and credit enhancement products to support public and private sponsors involved in Title 23 highway construction projects or Title 49 transit capital projects. Repayments to SIBs, whether from Federal or non-Federal sources, are considered Federal funds under the requirements of Titles 23 and 49.

SIBs empower states to maximize the efficiency of their transportation funds and significantly amplify Federal resources by attracting additional public and private investments. Alternatively, SIB capital can serve as collateral for borrowing in the bond market or establishing guaranteed reserve funds. States must carefully assess factors such as loan demand, timing of infrastructure needs, and debt financing considerations when considering the strategic use of leveraged SIB approaches.

Initially capitalized with Federal-aid surface transportation funds matched by state contributions, SIBs play a crucial role in financing transportation projects. Some states have also established SIBs or separate accounts funded exclusively by state resources. As loans and other forms of credit assistance are repaid to the SIB, its initial capital is replenished, enabling continuous support for new cycles of infrastructure projects.

State Transportation Bond Programs

State transportation bond programs involve the issuance of bonds to raise capital for transportation projects. These bonds are typically repaid over time using specified revenue sources, such as tolls or taxes. By utilizing bond programs, states can swiftly secure funding for critical transportation initiatives, thereby enhancing infrastructure and connectivity. Bonds are financial instruments through which states borrow money from investors, promising repayment with interest. Types of bonds include general obligation bonds, which are backed by the state's full faith and credit, and revenue bonds, secured by specific revenue streams like tolls. Municipal bonds are often issued by states, offering tax-exempt interest to investors, which is typically exempt from federal and state income taxes.

State P3 Programs

State Public-Private Partnership (P3) programs foster collaboration between public and private sectors to finance, construct, and manage infrastructure projects. These initiatives harness private investment to supplement public funding, enabling the development of projects that may otherwise be financially challenging. P3 programs enhance project efficiency, expedite timelines, and distribute risk between public and private entities. These partnerships encompass diverse arrangements where private partners design, build, finance, operate, or maintain facilities in exchange for revenue from tolls or other compensation.

While P3s can unlock additional financing avenues and generate cost efficiencies for projects, they do not directly provide new state revenues. Instead, states must repay private investments using traditional funding sources like taxes or tolls. Most states now have legislation enabling public-private partnerships to varying extents, with numerous states actively engaged in P3 projects. Recent expansions in state financing options and alternative procurement methods reflect a growing trend across states like Alabama, Arkansas, California, and others, signaling increased exploration of innovative financing mechanisms to support infrastructure development.

Transportation Improvement Districts (TIDs)

Transportation Improvement Districts (TIDs) are specialized districts created to fund transportation projects, employing various financing mechanisms like special assessments or tax increments. These districts focus on enhancing transportation infrastructure and services within their designated zones, which often span multiple local or regional jurisdictions. Unlike traditional special assessment districts that target specific project benefits, TIDs take a broader, programmatic approach aligned with adopted land use or development plans.

TIDs facilitate cooperation among multiple jurisdictions, pooling and strategically managing transportation funding resources to implement system-wide improvements. Governed by a board of directors representing constituent members, typically under the oversight of a lead entity such as a county commission, TIDs operate as distinct governmental bodies authorized by state legislation. They levy special assessments on property owners or sales taxes on consumers benefiting from district improvements, with the ability to issue debt against projected future revenues and engage in contracts related to infrastructure enhancements.

By consolidating efforts across jurisdictions, TIDs streamline the implementation of complex transportation projects that might otherwise pose challenges for individual local entities. They are well-positioned to address anticipated regional growth and often leverage targeted transportation improvements to stimulate economic development within their areas.

Tax Increment Financing (TIF)

Tax Increment Financing (TIF) is a tool employed by local governments to stimulate economic growth and redevelopment. It operates by capturing the future tax revenues generated from increases in property values within a designated area to finance current improvements. TIF districts, established under state laws across the United States, focus on specific geographic zones where planned improvements are intended to boost property values and spur development. Over a typical span of 20 to 25 years, any incremental real estate tax revenues above a baseline rate are redirected into the TIF fund.

These funds can be utilized to repay bonds issued for initial project costs or to finance ongoing infrastructure projects as they progress. In some cases, private developers may finance improvements upfront, with reimbursement from TIF revenues as tax proceeds accrue. TIF districts are often targeted at blighted or underdeveloped areas to catalyze investment and development where it might otherwise be stagnant. While predominantly used for urban revitalization and housing initiatives, TIF has also been selectively authorized for transportation infrastructure funding in certain states, although this application remains less common compared to its use in other development contexts.

Funding for Operational Expenditure

Since state and local governments own highway infrastructure, they are responsible for maintaining and servicing it. Counties own over 38% of bridges and have built and maintain 46% of public roads (NACO). In 2022, operation and maintenance accounted for 57% of state and local highway spending (Highways Trust Fund document). Operating and maintenance not only includes snow removal and filling potholes but also highway-related programs such as education about highway safety (Highways Trust Fund document). State DOTs oversee the funding of projects, including assessing eligibility for federal grants. Since states are also the “grantees” of federal funds, they must receive the funds and distribute them to local public agencies (LPAs) (FHWA-Value Capture).

For a state or local government to receive funds from the federal government, it must submit a project that is included in the State’s Transportation Improvement Program (STIP). This program results from collaboration between the State DOT, metropolitan planning organizations (MPOs), and local governments. Additionally, federal government funds are either reimbursed or matched with state and local resources (FHWA-Value Capture). In 2018, counties spent over $122 billion on building infrastructure, including transportation (NACO).

State Fuel Taxes

State fuel taxes, colloquially known as the “gas tax,” are the most significant source of funding for transportation infrastructure at the state and local levels, with roughly 30% of state highway funding coming from fuel taxes in 2017 (ITEP). States have been levying fuel taxes since 1919, and by 1946 all states and the District of Columbia had implemented a fuel tax. The average state fuel tax in 2020 was 25.6 cents per gallon across all states. The diesel fuel tax is slightly higher at an average of 37.5 cents per gallon across all states. The diesel tax is slightly higher since diesel vehicles are usually larger and create more damage (Tax Foundation/Road Funding). In 1975, the federal government passed the Corporate Average Fuel Economy (CAFE) standards, which required more fuel-efficient vehicles that could travel farther with the same amount of gas (NHTSA/Laws and Regulations/Corporate). From 1990 to 2017, fuel efficiency rose by 17.2% (ITEP), resulting in fewer taxes being raised through state and local fuel taxes (Tax Foundation/Road Funding).

As of 2020, twenty-four states raise funds through a variable-rate fuel tax. These twenty-four states represent most of the country’s population. Of these variable-rate fuel taxes, there are over 12 different ways to set the rate (ITEP). Some states set the fuel tax based on the gas price, others include a measure for inflation or use the Consumer Price Index (CPI) to set the fuel tax. Maryland, Michigan, and Utah consider both the price of fuel and inflation to set their fuel tax (ITEP). Fuel taxes are used to fund both highway and transit projects (ITEP). However, with increasing construction costs and more efficient vehicles, state and local governments need to supplement fuel taxes with other sources of funds. Construction costs increased by 62.3% from 1990 to 2017 (ITEP). As of 2023, vehicle registration fees and license fees were the second-highest source of state and local funding for transportation infrastructure after fuel taxes, with registration fees representing 19.7% of revenues (NASBO). The table below shows the states that use variable-rate fuel taxes, the rate structure, and the year of the last increase.

State	Variable Gas Tax Structure	Year of Last Increase
Alabama	Tax indexed annually to the National Highway Construction Cost.	2019
Arkansas	Tax based on the average wholesale price of gas and diesel, with a floor (prevents the tax from dropping if the 12-month average wholesale price of fuel is less than the previous year) and a ceiling (limits the increase to no more than .1 CPG).	2019
California	Tax varies with inflation.	2020 (per 2017 legislation)
Colorado	Beginning in fiscal year 2032-33 the 8 cent road user fee, which is levied on gasoline, will be indexed to Highway Construction Cost Index inflation.	(2032) (per 2021 legislation)
Connecticut	Tax varies with gas prices.	2013
Florida	Tax varies with CPI.	2015
Georgia	Tax varies with vehicle fuel-efficiency and CPI.	2015
Hawaii	Variable rate only because general sales tax applies to gas.	**
Illinois	Tax varies with CPI.
Indiana	Tax varies with inflation and general sales tax applies to gas.	2017
Kentucky	Tax varies with gas prices.	2015
Maryland	Tax varies with gas prices and CPI.	2013
Michigan	Tax varies with inflation.	2022 (per 2015 legislation)
Minnesota	Tax varies annually with increases in the Minnesota Highway Construction Cost Index. The rate will be 28.3 cents in 2024.	2023
Nebraska	Tax varies with gas prices and appropriation decisions.	2016
New Jersey	Tax varies with gas prices and revenue collection.	2016
New York	Tax varies with gas prices.	2013
North Carolina	Tax varies with population and CPI.	2015
Pennsylvania	Tax varies with gas prices.	2015
Rhode Island	Tax varies with CPI.	2015
Utah	Tax varies with gas prices and CPI.	2015
Vermont	Tax varies with gas prices.	2015
Virginia	Tax varies with CPI.	2020
West Virginia	Tax varies with gas prices.	2017
D.C.	Tax varies with CPI.	2020

Source: https://www.ncsl.org/transportation/variable-rate-gas-taxes

Road Usage Fees (VMT)

Given the decrease in funding from fuel taxes, road usage fees, which tax drivers based on their vehicle miles traveled (VMT), are growing in popularity. VMT fees have the additional advantage of charging users for the service they use. Like fuel taxes, VMTs can be set at a fixed rate or through a variable rate. This would require regular odometer readings or a type of transponder inside vehicles that electronically transmits odometer readings to a central office (Tax Foundation/VMT). A VMT tax would allow state and local governments to have more funds available to operate and maintain both local roads and interstate highways. VMTs can also vary depending on vehicle type, weight, or size.

VMTs are challenging to implement because they require a central office and pilot program to establish how taxes will be collected. Similarly, it is not clear who would receive the tax if a driver crosses state lines. This is particularly relevant in places like Washington D.C., which receives thousands of drivers from both Virginia and Maryland. There are pilot programs currently in place, such as Oregon’s OReGO, but they rely on voluntary registration, and users are charged twice since they are still subject to a fuel tax. Users would have to take the extra step to obtain a credit to avoid being double charged (Tax Foundation/VMT).

Toll Revenue

Tolls are another way to increase state and local governments’ funds by charging users for using the infrastructure. In 1956, Congress allowed tolls to be included in the Interstate Highway System to increase road connectivity without increasing costs (Highways.dot/History). By the 1980s, transportation assets were showing wear and tear, highlighting the need to increase maintenance and operating costs. The implementation of TEA-21 in 1998 created a pilot program where states were able to collect tolls on interstate highways to rehabilitate them (FHWA/Policy Info). Further, MAP-21 removed a clause that restricted states or LPAs from establishing a toll without the permission of the FHWA (FHWA/IPD/Tolling Pricing).

The main challenge with fuel taxes, license or registration fees, and tolls is that they are highly politically unpopular. Another challenge is that collecting the toll is also expensive. Traditionally, toll booths had to be built on the road being tolled, and more recently, gantries are being built over roads to capture license plates or transponder information for each vehicle. It is also important to consider whether there is enough traffic using the tolled road to cover the costs of collecting the toll and increasing state and LPA funds (CSR/R44910/5). Nevertheless, Section 129 General Tolling Program was passed, allowing tolling on new highways or new lanes. A new program, Section 166 HOV/HOT Lanes, allows non-HOVs to use HOV lanes for a toll (FHWA/IPD/Federal Tolling Programs). The table below shows state and local road spending covered by tolls, user fees, and user taxes in 2018.

Share of State & Local Road Spending Covered by State & Local Tolls, User Fees, & User Taxes (FY 2018)
State	State Infrastructure Revenue	Motor Fuel Tax Revenue as % of Infrastructure Revenue	License Revenue as % of Infrastructure Revenue	Tolls and Charges as % of Infrastructure Revenue	State Share of Highway Spending	% of Highway Spending Funded with Transportation Taxes, Licenses, and Fees
Alabama	$1,005,256,000	74%	24%	1%	$2,096,229,538	48%
Alaska	$180,796,000	26%	32%	42%	$1,049,724,632	17%
Arizona	$1,121,782,000	77%	21%	2%	$1,897,356,648	59%
Arkansas	$665,839,000	74%	25%	1%	$1,475,428,608	45%
California	$11,994,405,000	53%	39%	8%	$12,028,601,965	100%
Colorado	$1,776,573,000	38%	39%	23%	$2,772,456,079	64%
Connecticut	$734,855,000	66%	32%	1%	$1,624,393,202	45%
Delaware	$514,989,000	26%	11%	63%	$583,560,989	88%
District of Columbia	$66,453,000	40%	59%	1%	$433,172,639	15%
Florida	$7,255,636,000	50%	20%	30%	$9,149,817,994	79%
Georgia	$2,285,872,000	79%	17%	4%	$3,041,441,116	75%
Hawaii	$588,588,000	30%	69%	1%	$700,173,043	84%
Idaho	$611,791,000	59%	33%	7%	$735,035,798	83%
Illinois	$4,587,377,000	33%	36%	31%	$6,351,456,099	72%
Indiana	$1,814,581,000	78%	21%	1%	$1,608,662,790	100%
Iowa	$1,359,242,000	49%	50%	0%	$2,413,757,285	56%
Kansas	$852,289,000	54%	30%	16%	$1,300,095,656	66%
Kentucky	$994,139,000	71%	22%	8%	$1,568,414,015	63%
Louisiana	$768,565,000	82%	11%	7%	$1,396,341,731	55%
Maine	$513,049,000	49%	22%	29%	$785,498,103	65%
Maryland	$2,346,694,000	46%	21%	32%	$3,073,226,970	76%
Massachusetts	$2,240,354,000	34%	20%	46%	$2,820,488,160	79%
Michigan	$2,914,169,000	50%	45%	5%	$3,561,316,511	82%
Minnesota	$1,956,224,000	48%	42%	10%	$4,154,896,242	47%
Mississippi	$623,279,000	71%	25%	3%	$1,229,031,074	51%
Missouri	$1,064,220,000	67%	30%	3%	$1,561,177,182	68%
Montana	$446,746,000	57%	36%	7%	$433,591,746	100%
Nebraska	$618,280,000	60%	33%	7%	$1,321,709,603	47%
Nevada	$836,044,000	75%	24%	1%	$1,717,267,299	49%
New Hampshire	$419,101,000	44%	20%	37%	$586,801,288	71%
New Jersey	$3,376,399,000	14%	19%	67%	$3,982,997,979	85%
New Mexico	$460,410,000	50%	47%	3%	$572,029,177	80%
New York	$7,836,570,000	21%	20%	59%	$13,034,850,267	60%
North Carolina	$2,994,714,000	66%	32%	2%	$4,638,624,873	65%
North Dakota	$335,827,000	59%	37%	5%	$1,149,956,181	29%
Ohio	$3,162,061,000	60%	29%	11%	$4,608,355,216	69%
Oklahoma	$1,586,164,000	31%	49%	20%	$1,931,412,570	82%
Oregon	$1,230,917,000	47%	45%	8%	$1,581,015,574	78%
Pennsylvania	$6,003,784,000	56%	20%	24%	$9,079,177,201	66%
Rhode Island	$147,305,000	54%	14%	32%	$316,365,174	47%
South Carolina	$1,211,199,000	53%	35%	12%	$1,642,141,422	74%
South Dakota	$315,547,000	59%	37%	4%	$666,259,918	47%
Tennessee	$1,613,688,000	67%	33%	0%	$1,602,780,484	100%
Texas	$8,591,051,000	43%	32%	25%	$11,542,374,988	74%
Utah	$736,694,000	68%	30%	2%	$1,665,680,229	44%
Vermont	$158,249,000	52%	46%	1%	$452,556,470	35%
Virginia	$2,755,628,000	40%	25%	35%	$4,484,927,457	61%
Washington	$3,525,274,000	49%	36%	16%	$3,716,875,084	95%
West Virginia	$559,850,000	75%	1%	24%	$846,427,681	66%
Wisconsin	$1,776,622,000	59%	30%	11%	$3,935,721,697	45%
Wyoming	$238,314,000	48%	48%	5%	$409,774,278	58%
U.S.	$101,773,461,000	49%	30%	21%	$145,331,426,925	70%
Note: Federal highway funding to the states is subtracted from spending figures. Percentages reflect only the share of the spending that state and localities are responsible for. Sources: Tax Foundation calculations from the Census Bureau, State and Local Government Finance and Federal Highway Administration data. https://taxfoundation.org/data/all/state/state-infrastructure-spending/

State General Funds and Other Taxes

State general funds are usually funded by individual income, corporate income, and sales and use taxes. Each state decides what is included and how to spend its general fund. In the state of Virginia, the general fund totaled $43.5 billion from 2020-2022. This included $31.5 billion from individual income taxes, $6.8 billion from sales and use taxes paid by individuals and businesses on goods, and $2.2 billion from corporate income taxes (dpb.virginia.gov). However, most of this general fund goes to other sources aside from transportation. In 2021, state governments spent 6% on average on highways and road expenditure. In the same year, state governments spent more on highways and roads (7%) compared to local governments (4%) (Urban.org). In 2023, general fund spending on transportation increased by 96% on average across all states. Although, as previously mentioned, general fund spending on transportation is quite low (NASBO).

Finance for Operational Expenditure

Financing is an important tool for state and local governments to not only fund projects but also access federal grants. Federal grants are usually given as reimbursements, meaning that local governments must have access to the funds prior to receiving the grant. They can also be given through matching programs, where the federal government supplies a percentage of the cost and the local government must supply the rest (FHWA-Value Capture). Financing is generally used to pay for capital investments rather than recurring expenses like operating costs and maintenance. Taxes and tolls are more commonly used to pay for operating expenses. The following are some financing options at the state and local level that can be used to pay for capital investments. These are general guidelines, as each state or LPA will develop a bespoke option to fit their financial needs.

State Infrastructure Banks (SIBs)

State Infrastructure Banks provide loans or credit enhancements to fund transportation projects. They give states the option to increase their transportation funds through private investment (FHWA/SIB). SIBs can also be used as collateral to borrow from the bond market or to guarantee funds. They can be coupled with a TIFIA loan from the federal government, especially to finance infrastructure projects in rural communities (buildamerica/SIB). SIBs are subject to federal approval and must comply with federal requirements. Additionally, projects financed through a SIB must have annual reports reviewed by the FHWA division office to ensure appropriate controls and accounting procedures, proper investment of SIB funds, proper record-keeping, compliance with administrative cost limits, and maintenance of investment-grade ratings (FHWA/SIB).

Municipal Bonds

Municipal bonds are issued by states, counties, cities, or other LPAs to raise capital to fund projects, which will be paid overtime with interest. These debt securities are mostly used for capital investment in infrastructure projects, including schools, highways, and sewage systems. They can be short-term bonds, typically paid back within 1-3 years, or long-term bonds, which can be paid back a decade or longer after issuance (sec.gov). Municipal bonds are often advantageous due to their tax benefits to the holder and are considered low risk. Types of municipal bonds used to finance infrastructure capital investments include revenue bonds, general obligation bonds, limited and special tax bonds, tax credit bonds, grant anticipation revenue vehicles (GARVEEs), grant anticipation notes (GANs), and private activity bonds (financingtransportation.org).

State P3 Programs

As mentioned above, P3s are collaborations between the public and private sectors to finance, construct, and manage infrastructure projects. Depending on the agreement, operating costs and maintenance may be included. There are three main types of P3s: design-build (DB), design-build-finance (DBF), and design-build-finance-operate-maintain (DBFOM). DBFOMs allow for greater participation from the private sector, as they agree to perform operations and maintain the transportation infrastructure asset for the agreed-upon period (FHWA/P3 options).

Case Studies

San Francisco Bay Area Case Study​

The San Francisco Bay Area is a densely populated and economically vibrant region with a population of approximately 7.75 million people. It boasts high household incomes, largely driven by the prosperous tech industry. The governance structure in the Bay Area is intricate, involving multiple counties such as San Francisco and Alameda, alongside numerous cities, towns, and special districts. Each governmental unit plays a significant role in shaping regional policies and infrastructure development.

The funding landscape for transit agencies in the Bay Area is diverse and complex, as illustrated by the various sources of revenue these agencies rely on. This complexity often fuels arguments against greater integration and revenue sharing, as coordinating funds across different localities can appear impractical due to significant differences in local funding mechanisms. However, these perceived disparities may be overstated when considering the absolute sizes of transit agency budgets. By adjusting data to reflect total budget sizes, a clearer picture of the funding landscape emerges.

The funding sources for Bay Area transit agencies reveal a notable distinction between local-serving and regional-serving agencies. Local-serving agencies, comprising five key entities that primarily serve areas within county boundaries, rely heavily on sales tax revenues. These funds, typically approved by county voters, are crucial for maintaining and expanding local transit services, ensuring they meet the community's needs effectively.

In contrast, regional-serving agencies such as Bay Area Rapid Transit (BART), Caltrain, and SF Bay Ferry depend significantly on farebox revenue. These agencies serve broader, more interconnected areas, necessitating a reliable income from passenger fares to sustain their operations. The distinction in funding sources underscores the differing financial strategies required to support local versus regional transit services.

Understanding the distribution of funding among Bay Area transit agencies provides a nuanced view of the region's financial landscape. While there are notable differences in funding sources between local and regional agencies, these disparities can be mitigated by considering the absolute sizes of budgets. The percentage gaps in funding sources might be relatively small when viewed in the context of the total budget size of each agency.

Despite apparent disparities, there are potential areas for collaboration and funding alignment. By recognizing the distinct roles and funding mechanisms of different agencies, the Bay Area can explore more integrated and cooperative approaches to transportation funding and management. Such collaboration could lead to more efficient use of resources and improved transit services across the region.

Infrastructure projects in the Bay Area vary in importance and impact based on regional needs. Some regions prioritize building resilient systems capable of withstanding environmental and economic challenges, while others rely more heavily on federal funding to support their projects. This diversity in priorities reflects the unique needs and goals of different areas within the Bay Area, ensuring that infrastructure development is tailored to specific regional contexts.

Regional resilience is a significant focus for some Bay Area initiatives. Projects like Seamless Bay Area highlight the potential for a regional approach to transportation funding and management. Seamless Bay Area aims to create an integrated, user-friendly transit system across the region, exemplifying the benefits of regional collaboration and a unified funding strategy. By fostering cooperation among various transit agencies and aligning funding mechanisms, this initiative seeks to improve the efficiency and effectiveness of transportation services throughout the Bay Area.

Understanding these infrastructure project priorities provides insight into the strategic planning and resource allocation within the Bay Area. Regional resilience projects emphasize the need for robust systems capable of adapting to various challenges, while initiatives reliant on federal funding illustrate the importance of securing diverse financial sources to support infrastructure development. The combination of these approaches underscores the Bay Area's commitment to building a sustainable and resilient transportation network.

The San Francisco Bay Area's transportation funding and finance system is multifaceted, reflecting the diverse needs and governance structures of the region. By understanding the different funding sources and their implications, stakeholders can identify opportunities for greater collaboration and efficiency. Initiatives like Seamless Bay Area provide a model for how regional approaches can enhance the effectiveness and sustainability of transportation systems, ultimately benefiting the entire Bay Area community.

Washington Metropolitan Area Case Study

The Washington Metropolitan Area (WMA) has a population of approximately 6.64 million people. The average income in the region is around $98,000 per year, reflecting a relatively high standard of living. The WMA comprises multiple counties, such as Fairfax and Montgomery, cities including Washington D.C., towns, and various special districts, creating a diverse and complex governmental landscape.

The WMA is experiencing significant population and job growth, leading to an increased demand for transit services. This case study examines the expected expenditures and funding sources for transportation projects in the WMA from 2023 to 2045, highlighting the financial strategies and investments necessary to meet the region's growing transit needs.

The total projected transportation expenditures for the Washington Metropolitan Area (WMA) from 2023 to 2045 amount to $222.3 billion. The majority of these expenditures are allocated to the operations and maintenance of public transportation and highways, ensuring that the region's infrastructure remains functional and efficient.

Within the allocation of expenditures, the Washington Metropolitan Area Transit Authority (WMATA) accounts for 45% of the revenues. Other public transportation projects receive 22%, while highways are allocated 32%. Bicycle and pedestrian projects, although vital for sustainable urban mobility, receive a smaller share at 0.4%.

Several notable capital projects are planned for this period, including the K Street Transitway, the I-270 project, the I-495 "Op Lanes," the American Legion Bridge Project, and the Transforming Rail Initiative in Virginia. These projects are critical for enhancing the region's transportation network and accommodating future growth.

The primary source of funding for transportation projects in the Washington Metropolitan Area (WMA) is expected to come from state contributions. The Infrastructure Investment and Jobs Act (IIJA) is anticipated to significantly boost funding for the District of Columbia, Maryland, and Virginia. Specifically, the IIJA extends the Passenger Rail Investment and Improvement Act, providing annual funding towards the Washington Metropolitan Area Transit Authority's (WMATA) Capital Program. This funding is matched by contributions from the District of Columbia, Maryland, and Virginia, ensuring a substantial financial base for these critical projects.

The allocation of state and local funding varies across different jurisdictions within the metropolitan Washington region. This variation presents challenges due to the complex government structure in the area, making it difficult to adopt a unified regional funding approach. Despite these complexities, there are significant initiatives by public officials aimed at enhancing regional coordination. One notable initiative is Visualize 2045, which outlines the progress towards regional investment strategies and coordination.

The IIJA plays a critical role in increasing funding for the region. It supports the WMATA Capital Program and other infrastructure projects, promoting improved transit services and regional connectivity. This federal support is essential for meeting the growing transportation needs of the WMA, fostering sustainable development and economic growth.

The Washington Metropolitan Area faces substantial demands for transit services due to ongoing population and job growth. Addressing these demands involves considerable expenditures primarily focused on maintaining and expanding public transportation and highway infrastructure. State funding, bolstered by federal initiatives like the IIJA, plays a crucial role in financing these projects. Despite the challenges posed by the region's complex government structure, efforts such as Visualize 2045 are vital in fostering regional collaboration and effective investment strategies.

Courses and Reading List (Valentina)

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Funding and Financing Highways and Public Transportation Under the Infrastructure Investment and Jobs Act (IIJA) (R47573). Retrieved from https://crsreports.congress.gov/product/pdf/R/R47573

Congressional Research Service. 2017. Public Transportation Infrastructure: Background for the 116th Congress (R45010)*. Retrieved from https://sgp.fas.org/crs/misc/R45010.pdf

Congressional Research Service. 2021. Highway Infrastructure: Issues in the 117th Congress (R45516). Retrieved from https://crsreports.congress.gov/product/pdf/R/R45516

Congressional Research Service. 2022. Public Transportation in the United States: An Overview (R46826) . Retrieved from https://sgp.fas.org/crs/misc/R46826.pdf

Esty, Benjamin. 2003. "Teaching Project Finance: An Overview of the Large-Scale Investment Course at Harvard Business School."

Esty, Benjamin C. 2004. “Why Study Large Projects? An Introduction to Research on Project Finance.” European Financial Management 10(2):213–24. doi: 10.1111/j.1354-7798.2004.00247.x.

Flyvbjerg, Bent, and David Gardner. 2023. How Big Things Get Done. Currency.

Tan, Willie. 2007. *Principles of Project and Infrastructure Finance. Routledge.

Taylor, Brian D., Eran A. Morris, and Jeffrey R. Brown. 2023. The Drive for Dollars. Oxford University Press.

Walter, Ingo. 2016. The Infrastructure Finance Challenge. Open Book Publishers.

Too Big to Fall: American's Failing Infrastructure and the Way Forward

Funding Federal-Aid Highways - FHWA - Office of Policy and Governmental Affairs

Infrastructure and the Economy - Lida R. Weinstock

Public-Private Partnerships (P3s) in Transportation - William J. Mallet

The Transportation Infrastructure Finance and Innovation Act (TIFIA) Program - William J. Mallett

Taylor, Brian D. “The Geography of Urban Transportation Finance” in Hanson, Susan, and Genevieve Giuliano, eds. The Geography of Urban Transportation. Guilford Press, 2004. ISBN: 9781593850555.

Banister, David, and Yossi Berechman. “Transport Investment and the Promotion of Economic Growth.” Journal of Transport Geography 9, no. 3 (2001): 209-218.

Downs, Thomas M. “Is There a Future for the Federal Surface Transportation Program?” Journal of Transportation Engineering 131, no. 6 (2005): 393-396. (Originally presented at the Annual Convention of the American Society of Civil Engineers, October 16, 2004 in Baltimore, Maryland)

Wachs, Martin. “Local Option Transportation Taxes: Devolution As Revolution.” ACCESS Magazine 1, no. 22 (2003).

Chapter 9 (section 9.3) in Meyer, Michael and Eric Miller. Urban Transportation Planning. McGraw-Hill. 2000. ISBN: 9780072423327.

Lukmann, Andrew T. “Unintended Effects of Federal Transportation Policy: A Look at the Lifecycle Costs of the Interstate System.” PhD diss., MIT, 2009. (Abstract and introduction)

Supplementary Reading

Antos, Justin David. “Paying for Public Transportation: the Optimal, the Actual, and the Possible.” PhD diss., MIT, 2007. (Abstract and introduction)

Infrastructure as an Asset Class, by Barbara Weber, Mirjam Staub-Bisang, and Hans Wilhelm Alfen, 2016 

Infrastructure Finance, by Martin Blaiklock  Project Finance in Theory and Practice, by Stefano Gatti 

Public-Private Partnerships for Infrastructure, by E. R. Yescombe and Edward Farquharson

A risk-management approach to a successful infrastructure project （https://www.mckinsey.com/capabilities/operations/our-insights/a-risk-management-approach-to-a-successful-infrastructure-project）

C40 Infrastructure Interdependencies and Cascading Climate Impacts Study (https://unfccc.int/sites/default/files/report_c40_interdependencies_.pdf)

Alova, G., Trotter, P.A. & Money, A. A machine-learning approach to predicting Africa’s electricity mix based on planned power plants and their chances of success. Nat Energy 6, 158–166 (2021). https://doi.org/10.1038/s41560-020-00755-9

Andonov, A., Kraeussl, R. and Rauh, J., The Subsidy to Infrastructure as an Asset Class, Stanford University Graduate School of Business Research Paper, 2019, 18-42. (Available at SSRN).

Bitsch F., Buchner A., and C. Kaserer (2010), Risk, return and cash flow characteristics of infrastructure fund investment, EIB papers, Volume 15, No.1

Blanc-Brude F. (2013A), Towards efficient benchmarks for infrastructure equity investments, EDHEC Risk Institute

Blanc-Brude F. and O.R.H. Ismail (2013B), Who is afraid of construction risk? Infrastructure debt portfolio construction, EDHEC Risk Institute

Blanc-Brude F. and O.R.H. Ismail (2013C), Measuring infrastructure debt credit risk, EDHEC Business School

Blanc-Brude, F. and Hasan, M., A Structural Credit Risk Model for Illiquid Debt, Journal of Fixed Income, 2016, 26:1, 6-19.

Blanc-Brude, F. Whittaker, T. and Wilde, S., Searching for a Listed Infrastructure Asset Class Using Mean-variance Spanning, Financial Markets and Portfolio Managements, 2017, 31, 137-179.

Blanc-Brude, F., Hasan, M. and Whittaker, T., Calibrating Credit Risk Dynamics in Private Infrastructure Debt, Journal of Fixed Income, 2018, 27:4, 54-71.

Blanc-Brude, F., Long-Term Investment in Infrastructure and the Demand for Benchmarks ASSA The Finsia Journal of Applied Finance, 2014, 3, 57-64.

OECD (2016), Green investment banks: scaling up private investment in low-carbon, climate-resilient infrastructure, Green Finance and Investment, OECD publishing, Paris

Peng H.W. and G. Newell (2007), The significance of infrastructure in investment portfolios, Pacific Rim Real Estate Society Conference, Freemantle, January

Sawant R.J. (2010), Infrastructure investing: Managing risks and rewards for pensions, insurance companies and endowments, Wiley: chapters 1, 2, 3, 4, 7, 8

UBS (annual) Q-series: Global Infrastructure and Utilities (Index)

Weber B. and H. Alfen (2010), Infrastructure as an asset class, Wiley: chapter 2

Begg, Vernasca, Fischer and Dornbusch, Economics (Twelfth Edition, 2020). McGraw-Hill. (Available online through UCL Library.)

Krugman, Paul and Robin Wells, Economics (2015). Worth Publishers. (Available in hard copy in UCL library.)

Välilä, T., 2005. How expensive are cost savings? EIB Papers, Volume 10, No 1, pp. 94-119. - https://www.eib.org/en/publications/eibpapers-2005-v10-n01

Välilä, T., 2020. An overview of economic theory and evidence of public-private partnerships in the procurement of (transport) infrastructure. Utilities Policy, 62 (February 2020).

Välilä, T., 2020. Infrastructure and growth: A survey of macro-econometric research. Structural Change and Economic Dynamics 53: 39-49.

BIS (Bank for International Settlements) (2014), Understanding the challenges for infrastructure finance, BIS Working Papers No 454, www.bis.org

Brealey R., Cooper I. and Habib M. (1996), Using Project Finance to Fund Infrastructure Investments, Journal of Applied Corporate Finance, Volume 9, No.3, 25-38

Brealey R., Cooper I., and Habib M. (2000), The Financing of Large Engineering Projects, in Miller R. Lessar D. (eds), The Strategic Management of Large Engineering Projects: Shaping Institutions, Risk and Governance, MIT Press

Brealey R., Myers S. and Allen F. (2020), Principles of corporate finance (13th eds), McGraw Hill Collier P.M. (2015), Accounting for Managers (5th edition), Wiley

Damodaran A. (2011), Applied Corporate Finance (3rd edition), Wiley

Estache A. (2010), Infrastructure finance in developing countries: An overview, EIB papers, Volume 15,No2, 60-88

Esty B.C., Chavich C. and Sesia A. (2014), An Overview of Project Finance and Infrastructure Finance—2014 Update, Harvard Business School Background Note 214-083

Finnerty J.D. (2013), Project financing: asset-based financial engineering, New York, John Wiley: chapters: 1-5, 9-11, 13

Gatti S. (2013), Project finance in theory and practice: designing, structuring and financing private and public projects, Academic Press: chapters 1, 2, 5, 6, 8

Merna T. and Al-Thani F.F. (2018), Financing infrastructure projects, 2nd edition, ICE Publishing, chapters 1, 2, 4, 6, 7

Weber B., Straub-Bisang M. and Alfen H.W. (2016), Infrastructure as an asset class, 2nd Edition,Wiley: chapters: 6, 7

Yescombe, E.R., 2013. Principles of project finance. Academic Press.

For those who lack a finance background:

Benninga, S. (2010) Principles of Finance with Excel, 2nd Edition U.S.: MIT Press. Take advantage of F1F9’s free financial modeling course for the project finance industry (excel tips, best practices) http://info.f1f9.com/31-day-better-financial-modelling-course

Goldman, Todd, Sam Corrett, and Martin Wachs. “Local Option Transportation Taxes: Part Two.” Berkeley, CA: University of California, Berkeley, Institute of Transportation Studies, 2001.