Infra Insight Blog

State and local strategies to bridge the gap between traditional funding and current needs – which has been referred to as alternative finance – are now becoming mainstream. 

Consider Los Angeles Mayor Antonio Villaraigosa’s plan to speed up the development of LA’s transit infrastructure, which the LA Times reports would include financing from ‘a combination of private financing and bonds, such as Build America Bonds, established in the economic recovery bill to cut interest costs for local and state infrastructure projects.’ 

In fact, this model has already been used in several states for highway projects (see Texas and Florida for recent examples).  Recent changes in TIFIA rules and the Obama administration’s so-called ‘livability’ criteria may indicate the federal credit program’s shift of emphasis toward funding transit programs.  And enhanced versions of existing credit programs, such as the proposal to establish and capitalize a National Infrastructure Bank, could present a new vehicle to make these financing options available.

Public agencies responsible for developing high speed rail will also have to consider alternative financing methods.  The ARRA grant funds allocated for these projects, although impressive, will only make up a portion of the monies necessary to provide a viable service.  The choice comes down to this: wait years or even decades for the federal government to dole out enough funds on a pay-as-you-go basis to build the infrastructure we need, or creatively finance critical deals using low cost federal credit, bonds, and private equity so that we can reap the benefits of increased mobility sooner.  After sitting in L.A. traffic this morning, I can certainly tell you which option I would prefer.