A Guide to Transportation Funding Options
Highway Funding – Bonds
Proposed Build America Bonds
Proposed legislation (Senate Bill 2021) would establish a dedicated infrastructure program backed by a large public bond issue. It proposes raising $50 billion for transportation infrastructure through a one-time bonding program. In lieu of interest, bond holders would receive tax credits. The bonds would be available to corporate and individual investors in different denominations, "providing all Americans with the opportunity to invest in upgrading America's transportation infrastructure."
Bond Proceeds
Many states have legislative authority to issue debt for the purpose of financing transportation projects.
More Information
Innovative Finance Brochure: GARVEEs - FHWA website
Innovative Financing Primer: GARVEEs - FHWA website
Grant Anticipation Revenue Vehicles (GARVEEs)
GARVEEs allow states to issue bonds backed by anticipated Federal transportation appropriations.
Grant Anticipation Notes (GANs)
GANs are similar to GARVEEs but are not necessarily backed by transportation fund appropriations.
Private Activity Bonds (PABs)
More Information
PABs - FHWA PPP website
More recently, the federal government has encouraged states to take advantage of partnerships available with the private sector. Indeed, Section 11143 of Title XI of SAFETEA-LU has allowed for $15 billion in private activity bonds to be issued for highway and freight transfer facility projects. This legislation allows private companies to issue tax exempt bonds to construct transportation facilities. As of January 15, 2008, the US Department of Transportation had approved a total of $ 3.288 billion in private activity bonds. The table below details these projects.
| Project | PAB Allocation |
|---|---|
| Port of Miami Tunnel, Consortium Miami Access Tunnel | $900,000,000 |
| Missouri DOT Safe & Sound Bridge Improvement Project | $700,000,000 |
| Knik Arm Crossing, Alaksa | $600,000,000 |
| Virginia I-495 Capital Beltway HOT Lanes | $800,000,000 |
| TxDOT IH 635 (LBJ Freeway) | $288,000,000 |
| Subtotal | $3,288,000,000 |
Tax Increment Reinvestment Zone (TIRZ)
Much like tax increment financing and special assessment districts, a TIRZ authorizes a municipality create a special district where the increment of the increase in property values is used to pay off debt issued or monies spent for the improvements. Specifically, each taxing unit can choose to dedicate all, a portion of, or none of the tax revenue that is attributable to the increase in property values due to the improvements within the reinvestment zone. The additional tax revenue that is received from the affected properties is referred to as the tax increment. Each taxing unit determines what percentage of its tax increment, if any, it will commit to repayment of the cost of financing the public improvements.
Transportation Reinvestment Zone (TRZ)
Cities and counties are authorized to designate areas as TRZs to fund road projects. A portion of the tax increase from the increased property value would be captured. Municipalities and counties would keep half the revenue earned through the TRZ to be used for any purpose within the TRZ. The other half would be deposited to a fund within the state treasury, earmarked for use within the specific municipality or county and spent on future pass-through financing projects within the municipality or county.
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