Our Mission

Purpose:
To encourage states to utilize innovative financing and contracting methods by removing obstacles to innovative financing and providing incentives for innovative contracting. The resulting increase in innovation will allow state DOT’s to deliver higher quality transportation projects faster while saving tax payer dollars.

To help states understand the value that can be gained by coupling innovative finance with innovative contracting methods.

Background:
Infrastructure needs continue to grow nationwide with increased demand for mobility, freight movement and economic development. Fuel tax receipts are not keeping pace with the soaring rate of vehicle miles traveled. As a consequence, it is becoming difficult for federal, state and local governments to maintain their current system while meeting these increased demands.

Some states have provided leadership with demonstrations of innovative ways to finance, contract, construct and maintain major infrastructure projects. Innovation needs to be encouraged in all of the states because the traditional government resources and methods will never be sufficient to meet the infrastructure needs of the 21st century

What needs to be done:
Innovative Financing: States have utilized a variety of innovative financing methods including public private partnerships, TIFIA, FRANs, SIBs, tolls, etc. But states and the private sector could more fully leverage the value of innovative financing provided that:

1. The limitation preventing TIFIA loans from being used on projects of less than $100 million is removed. That limitation should be lowered to $50 million.
2. Private tax-exempt bonds are allowed for transportation projects as they are for other infrastructure projects, such as water projects. Currently virtually all transportation projects are financed by traditional methods with tax exempt bonds for transportation projects only being issued by government entities.
3. State infrastructure banks (SIB) are revitalized for all fifty states.
4. Limitations on tolling interstates are relaxed if the tolls will be used to finance new capacity. Flexibility could be given for toll rebates to truckers if the additional capacity were truck only lanes.

These changes would give the states a wider variety of financing tools, enhance the utilization of innovative financing and encourage greater private sector participation.

Innovative Contracting: A number of states have also successfully experimented with innovative contracting, but the incentives for state agencies to innovate in this area are few. For this reason, the federal government should follow on the work they have done with the SEP-14 program and provide financial incentives (new money) for states willing to experiment with performance-based contracting approaches (e.g., design-build, pavement warrantees, asset management, public/private management models, value planning, programming, and implementation model). A federal incentive for performance-based contracting will result in projects being built quicker, cheaper, and with higher quality.

Coupling innovative finance and innovative contracting: Innovative financing tools allow states to accelerate funds and to raise new funds. Innovative tools used to secure funds should be coupled with an innovative contracting approach in order to accelerate the use of the transportation funding. Further, innovative contracting combined with innovative financing will attract more private investment and efficiencies to the transportation infrastructure industry.