Who Pays for That? A Simple Guide to Infrastructure Funding & Financing
At its core, transportation infrastructure serves as the lifeblood of our interconnected Pacific Northwest region, facilitating the movement of people and goods through robust economies and diverse territories. Whether it’s driving on a road, crossing a bridge or watching a train rumble by, we generally know when transportation infrastructure is working well – and when it needs an upgrade – but who pays for that? The PNWER Regional Infrastructure Accelerator (RIA) Bridging the Gap blog is introducing a new series that will explore various funding and financing mechanisms to help project sponsors, communities, and policymakers get their infrastructure projects across the finish line.
Why is this guide important?
The PNWER RIA, through its Build Northwest Center of Excellence, aims to empower Pacific Northwest communities to identify, understand and navigate funding opportunities for transportation infrastructure projects, including innovative financing solutions that otherwise might go unused. This effort is part of the program’s broader mission to help realize an enhanced, efficient and safe multimodal transportation network for the region.
Who is this guide for?
Anyone who uses transportation infrastructure in the U.S. and has ever wondered, “why doesn’t the city fix this?” (The short answer may be that the city isn’t responsible for it! Even then, it’s hard to know who is responsible for which pieces of infrastructure - but that’s a topic for another time).
This guide is specifically geared towards:
Project sponsors looking to close funding gaps in planned transportation infrastructure projects;
Policymakers responsible for allocating infrastructure funding;
Community members and advocates for enhancing infrastructure in their communities.
Transportation infrastructure funding is very complicated. Our hope is that by providing clear, easy to understand resources breaking down infrastructure funding, and amplifying lesser-known financing mechanisms, we can help project sponsors deliver new and upgraded infrastructure to their communities and growing economies.
What’s the difference between funding and financing, anyway?
We’re starting by going back to the basics: funding and financing. Although these terms are sometimes used interchangeably, funding and financing are not the same thing when it comes to paying for infrastructure. Most projects end up using a combination of both funding and financing depending on the size of the project and the financial options available.
Funding: money set aside for a project that does not need to be repaid. Funding can come from a variety of sources, such as:
Federal and state government budgets
Tolls or user fees
Grants
Think of funding as money available right now to pay for transportation infrastructure assets.
Financing: money borrowed for a project that must be repaid over time. Projects generally need financing to get off the ground in the short term, which is paid back through longer-term funding arrangements. Financing options include:
Loan and credit programs
Private infrastructure investment
Issuing bonds
Think of financing as a way to pay for a project over time, instead of having to pay for the whole project at once. Governments can issue bonds or take out low-interest loans from specific banks or agencies - including U.S. DOT’s Build America Bureau. Private investment through public-private partnerships (P3s) is another repayment option, but is generally less common in the U.S. than most other countries.
Why can’t we just use funding to pay for projects?
That’s an excellent question! There are several reasons why funding alone is not always the best option to pay for infrastructure projects. One issue is that federal and state legislators have a lot of projects that need to be invested in, and it takes a long time to save up for all the projects communities need. If we waited until there was enough money saved up to pay for a project entirely, the cost of the project would have likely increased, and we would have to wait even longer to get started on that project.
Today is the cheapest it will ever be to build infrastructure.
Financing a project would allow the project sponsor to pay for a project upfront, and dedicate a revenue source or repayment option to repay that money over time. However, if a project sponsor doesn’t have a way to pay back the borrowed money, financing may not be a good fit.
We’ll dive a little deeper into this topic as we move through the “Who Pays for That?” blog series.
What’s next?
Over the next several months, our “Who Pays for That?” series will delve into the basics of infrastructure funding and financing, including:
Exploring different types of transportation infrastructure in the Pacific Northwest
Understanding the importance of innovative funding and financing options
Examining federal funding and financing opportunities
Examining state funding and financing opportunities in Alaska, Idaho, Montana, Oregon and Washington
So, who pays for that? Wrapping up our guide on funding and financing for transportation infrastructure
Have a specific question about funding a transportation infrastructure project? Fill out this form, and we’ll answer your question in a future blog post.
Event Highlight
PNWER is celebrating the launch of its expanded Regional Infrastructure Accelerator program, which is bolstered by a second, $2 million grant from U.S. Department of Transportation! We’re hosting a virtual launch event May 9 at 11:30 am Pacific to highlight our new program areas, projects and subrecipients. Learn more and register here.
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