Other Funding Techniques Including "Innovative

Techniques"
Contents
 Introduction
 Washington State Funding Techniques
 Public-Private Initiatives Act
 State Infrastructure Banks (SIBs)
 Tax Increment Financing
 Bonds
 Toll Roads
 General National and State Information

Introduction

Traditional funding for transportation projects at national, state and local levels has been
through gas taxes, property taxes and motor vehicle excise taxes. At the federal level
particularly, Congress has long funded transportation infrastructure through grants from
the Highway Trust Fund, with revenues almost entirely from gas tax revenues.

Innovative funding techniques are alternatives to traditional, grant-based funding.

Innovative finance includes such measures as new or non-traditional sources of revenue,
financing mechanisms designed to leverage resources, funds management techniques,
and institutional arrangements. While a number of innovative funding techniques have
been developed nationwide, their use in any individual state depends on that state's
enabling statutes. To use innovative transportation finance programs, state and local
governments must first enact enabling legislation to the programs and govern they way
in which they work. Local legislation governs implementation of federal programs as well
as local funding.

The primary objectives of innovative finance are to:

 Maximize the ability of states and other project sponsors to leverage Federal
capital for needed investment in the nation's transportation system;
 More effectively utilize existing funds;
 Move projects into construction more quickly than under traditional financing
mechanisms; and
 Make possible major transportation investments that might not otherwise receive
financing.

Innovative funding techniques tend to be geared toward projects administered by State

DOTs rather than local agencies.

[Introduction based on material from AASHTO's Innovative Finance.org website and

FHWA's Project Finance Primer.]

Washington State Funding Techniques

Public-Private Initiatives Act

 Public-Private Initiatives Act Overview ( ) from the Washington State Joint
Transportation Committee's Transportation Resource Manual, last updated in January
2005. This summarizes the Public-Private Initiatives (PPI) law. RCW 47.46.010 notes that
the "ability of the state to provide an efficient transportation system will be enhanced by
a public-private sector program providing for private entities to undertake all or a portion
of the study, planning, design, development, financing, acquisition, installation,
construction or improvement, operation, and maintenance of transportation systems and
facility projects. A public-private initiatives program will provide benefits to both the
public and private sectors. Public-private initiatives provide a sound economic investment
opportunity for the private sector. Such initiatives will provide the state with increased
access to property development and project opportunities, financial and development
expertise, and will supplement state transportation revenues, allowing the state to use its
limited resources for other needed projects."

State Infrastructure Banks (SIBs)

Washington State is one of a number of states that have established State Infrastructure
Banks (SIBs). A SIB can provide many types of financial assistance, ranging from loans
to credit enhancements. Forms of assistance may include interest subsidies, letters of
credit, capital reserves for bond financing, construction loans, and purchase and lease
agreements for highway and transit projects.

 State Infrastructure Bank Program, Federal Highway Administration

 State Infrastructure Banks, American Association of State Highway and
Transportation Officials

Tax Increment Financing

Tax Increment Financing (TIF) allows cities, counties and port districts to create special
districts (tax increment areas) and to make public improvements within those districts
that will generate private-sector development. During the development period, the tax
base is frozen at the predevelopment level. Property taxes continue to be paid, but taxes
derived from increases in assessed values (the tax increment) resulting from new
development either go into a special fund created to retire bonds issued to originate the
development or leverage future growth in the district. See MRSC's page Community
Revitalization Financing (Tax Increment Financing)

Bonds
Bonds overview ( ) from the Washington State Joint Transportation Committee
Transportation Resource Manual, last updated in January 2005. This summarizes how
state transportation bonds are authorized, sold, and repaid and a compilation of
arguments for and against bond financing. Cities and counties may also sell bonds for
transportation purposes; however, local bonds are not discussed in this report.

At the State level, Washington State utilizes bond revenues for a number of purposes,
among them:

 State and Local Highways Bonds

 Advance Highway Construction Bonds
 Local Programs Bonds
 Public-Private Partnership Transportation Bonds
 Multimodal Project Bonds
 Toll Roads
 Tolling and Pricing Program - Federal Highway Administration
 Road Pricing: Congestion Pricing, Value Pricing, Toll Roads and HOT Lanes -
Victoria Transport Policy Institute
 Tolling - Washington State Department of Transportation

General National and State Information

Provided in this section are links to two websites (by AASHTO and FHWA) with material
applicable nationwide and to websites from other states that capture the 'state of the art'
in innovative techniques.

American Association of State Highway and Transportation

Officials (AASHTO)
Innovative Finance.org is a very comprehensive site by the American Association of State
Highway and Transportation Officials, and provides information on almost all areas of
surface transportation finance innovation. Particularly useful are links to Federal, State
and Local Legislation, Funding Sources, Financing Mechanisms, and Mechanisms to
Leverage Federal Aid.

Federal Highway Administration (FHWA)

The Innovative Finance webpage links to Federal Credit Concepts/Issues, State
Infrastructure Banks, Quarterly Innovative Finance Newsletter, TE-045 Research
Program, Program Guidance, and the Transportation Infrastructure Finance and
Innovation Act of 1998 (TIFIA)

In addition, FHWA has put together an Project Finance Primer, which explains the nature
of different innovations, discusses what kinds of projects are good candidates for use of
innovative techniques, catalogues some of the key requirements that attach to use of the
techniques, and offers a step-by-step overview of how these techniques function in
practice.

Oregon State
The Oregon Office of Innovative Partnerships and Alternative Funding Program (OIPP)
was created to develop transportation projects for solicitation of private sector proposals
for partnership and to respond to proposals initiated by private firms and units of
government. See their brochure

Oregon Road User Fee Task Force - "As well as the gas tax has served the road needs of
Oregonians in the past, it will soon become a declining revenue source. The Road User
Fee Task Force is charged with the duty of designing a new revenue collection system for
road funding to ultimately replace the gas tax. Oregon will be well served in finding a
solution to this concern before it becomes an emergency." ~ Senator Bruce Starr, Road
User Fee Task Force Chair

South Carolina
Transportation Funding Series - Three reports from the Jim Self Center on the Future at
Clemson University that address transportation infrastructure funding needs for South
Carolina.

Virginia
Public-Private Transportation Act of 1995, Established innovative finance mechanisms for
transportation projects.

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KATHMANDU, DEC 11 - The detailed project report (DPR) of the Kathmandu-Hetauda Tunnel Highway has
showed that the tunnel road requires a minimum investment of Rs 23 billion. 
Nepal Purbadhar Bikas Company, established to undertake the project, has targeted to start construction by
February next year.
The company, which recently submitted the DPR to the Ministry of Physical Planning, Road and Transport
Management, has requested the latter to sign a concession agreement within December, according to the
ministry.
The company plans to build the highway under ‘4P’ model—public, private, people partnership—a new
investment concept. Earlier, the company had estimated the cost at Rs 20 billion. 
The 51km route connecting the Capital with Hetaula (and hour’s drive) will have tunnels in some sections
like Bhimpendi-Kulekhani. Company officials said the actual size of the investment will be known once the
government reviews the DPR and decides on issues like tax holiday, toll fee and other services to be
provided.
“The cost for the tunnel highway can go above Rs 23 billion, depending on the government facilities to the
company and toll fee for vehicles,” sail Lal Krishna KC, vice-chairman of the company, who is also the
project manager.
As shareholders, the Federation of Nepalese Chambers of Commerce and Industry, the Federation of
Contractors Associations of Nepal, non-resident Nepalis and over 50,000 locals from 26 VDCs in Kathmandu,
Lalitpur and Makwanpur districts are investing in the project. Under the ‘4P’ model, locals and the general
people are able to invest at least Rs 10,000 in the project and there will be around 100,000 shareholders.
The company plans to complete the construction within three and half to four years. KC said they have
submitted the environment impact assessment report to the government for approval and for paving the
way for tunnel pathways. He added work on acquiring private land required for the tunnel road is underway
and the government would help acquiring government-owned land and help settle forest issues.
The government is mulling developing the tunnel highway in Asian Highway standard. The Phsycal Planning
Ministry and the company in May had signed a memorandum of understanding to construct the tunnel
road. 
A ministry official said they are going through the report and the ministry ‘is serious’ about signing a final
agreement at the earliest. “We also need to seek suggestions from the National Planning Commission,” he
said.
The tunnel road will be the shortest route to Hetauta from Kathmandu via Kulekhani. Currently, commuters
have to take the Tribhuvan Highway (133km) or Kathmandu-Mugling-Hetauda route (227km).
Posted on: 2012-12-12 08:29

Kush Kumar Joshi, Chairman of the Nepal Purbadhar Bikas Company Limited (NPBCL), said that
the construction of the Kathmandu-Kulekhani-Hetauda Tunnel Highway would turn out to be
more economical and efficient for the country.

The NPBCL has set to construct the Tunnel Highway based on a concept of ‘4Ps’ i.e. Public,
Private and People Partnership, model. The people living along the highway can also invest in the
project. The total cost of the project is estimated around Rs. 20 billion.

With the completion of the road, it will take around one hour to reach Hetauda from Kathmandu.
There are two to three alternative ways at present to reach Hetauda from Kathmandu. All these
roads take around 7-8 hours. According to him, the construction of the highway would save
around Rs. 7 billion in the present fuel consumption.

Talking to The Rising Nepal, Joshi said that the road would turn a lifeline for the country if it was
completed within the stipulated timeframe.

He informed that it will take around six months for the detailed feasibility study of the project
and around three and a half years to complete the whole project.

"The tunnel highway road will come into operation within next three and a half years," said Joshi.
He said that the detailed project report would be completed within the next two months.

The NPBC shareholders include the Federation of Nepalese Chambers of Commerce and Industry,
the Federation of Contractors Association of Nepal, Non-resident Nepalis, and 50,000 locals from
26 village development committees of Kathmandu, Lalitpur and Makawanpur districts. The locals
would invest Rs 10,000 each in the project, according to the company.

Of the total length 50 km of the project, a 3-km long tunnel road will be built between Bhimphedi
and Kulekhani in Makawanpur district that can be crossed in three minutes, according to the
NPBC.

The tunnel stretch alone will need an investment of around Rs 10 billion. 

Fulbright Consultancy has prepared proposal for the Kathmandu-Hetauda Tunnel Highway. The
road was planed to reduce the travel time to Hetauda. Currently, people travelling to Hetauda
have to take either the 133-km long Tribhuvan Highway or the Kathamndu-Mugling-Hetauda
route that is 227-km long.

Once the highway comes into operation, the planned four-lane tunnel highway will serve a daily
traffic of 6,000 vehicles.

The Tribuvan Highway, which was built 55 years ago under the Government of India’s grant
assistance, is used by around 200 vehicles for travelling to Hetauda everyday.

Recently, the Ministry of Physical Planning and Works and the NPBCL have signed the preliminary
agreement at the presence of Prime Minister Dr. Baburam Bhattarai.