12.2 Infrastructure funding and public-private partnerships

Infrastructure funding and public-private partnerships are crucial for developing and maintaining transportation systems. Traditional methods like gas taxes and municipal bonds are being supplemented by innovative approaches such as VMT fees and toll roads to address funding challenges.

Public-private partnerships offer a way to leverage private sector expertise and capital for public infrastructure projects. These collaborations can take various forms, from Build-Operate-Transfer models to comprehensive Design-Build-Finance-Operate-Maintain contracts, each with unique benefits and challenges.

Infrastructure Funding Sources

Traditional Funding Mechanisms

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• Highway Trust Fund finances federal highway and mass transit projects through dedicated revenue sources
• Gas tax serves as a primary funding source for transportation infrastructure, collected at federal and state levels
• Municipal bonds enable local governments to raise capital for infrastructure projects by borrowing from investors
• Federal grants provide financial assistance to state and local governments for specific infrastructure initiatives

Innovative Funding Approaches

• Vehicle Miles Traveled (VMT) fee proposes charging drivers based on distance traveled rather than fuel consumption
  • Addresses declining gas tax revenues due to increased fuel efficiency and electric vehicles
  • Requires advanced tracking technology and raises privacy concerns
• Toll roads generate revenue by charging users directly for road access
  • Can be implemented on new or existing highways
  • Often used to finance construction and maintenance of specific road segments

Public-Private Partnership Models

Fundamentals of Public-Private Partnerships

• Public-Private Partnerships (P3s) involve collaboration between government entities and private sector companies
• P3s aim to leverage private sector expertise and capital for public infrastructure development
• Benefits include risk sharing, improved efficiency, and access to additional funding sources
• Challenges involve complex contract negotiations and potential conflicts of interest

Specific P3 Contract Structures

• Build-Operate-Transfer (BOT) model assigns responsibility to private sector for construction and operation
  • Private entity builds and operates the infrastructure for a specified period
  • Ownership transfers to the government after the concession period ends
• Design-Build-Finance-Operate-Maintain (DBFOM) contracts encompass entire project lifecycle
  • Private partner handles design, construction, financing, operation, and maintenance
  • Government retains ownership while benefiting from private sector efficiency

Key Legislation

Infrastructure Investment and Jobs Act

• Signed into law in November 2021, allocates $1.2 trillion for infrastructure improvements
• Provides funding for roads, bridges, railways, broadband internet, and clean energy initiatives
• Aims to create jobs, enhance economic competitiveness, and address climate change
• Establishes new grant programs and expands existing funding mechanisms for infrastructure projects
• Encourages the use of innovative financing tools, including expanded use of P3s