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States Find Financing Alternatives to Impact Fees
Iowa and Maine are among a number of states that provide good examples of how statutory language can be used by local governments to pursue innovative infrastructure financing alternatives in support of affordably priced housing, according to a new NAHB report.
Based on research from the National Conference of State Legislatures (NCSL), the report notes that using impact fees to address such problems as aging infrastructure, traffic congestion, overcrowded schools and inadequate water and sewer capacity drives up the cost of housing and has other serious implications.
The publication, “Infrastructure Solutions — Best Practices From Results-Oriented States,” looks at NCSL research on the best state enabling legislation for 11 infrastructure finance alternatives.
The NAHB report is the third in a series designed to help state and local governments find infrastructure finance and management strategies that optimize their finite capital resources.
“Fortunately, there are effective financing alternatives,” the report says. “Forward-thinking state and local governments have been making the most of some of these alternatives, including special districts, municipal lease finance, tax increment financing and state infrastructure banks. These and other mechanisms enable a community to leverage its limited resources most effectively — to get more bang for the buck.”
However, the report further notes that “few states have taken advantage of most of these innovative infrastructure alternatives, and many of the most promising options are overlooked by all but a handful of states.”
For example, tax-exempt municipal lease finance that is being used as an infrastructure-financing tool in Maine is authorized in only four other states. Similarly, statutory language authorizing special infrastructure finance and development districts has only been adopted by five states, including Iowa.
Tax-exempt municipal lease finance is basically a “rent to own” program in which a municipality pays one-year renewable obligations to a third party lessor as rent payments on a given project. These leases are not considered outstanding debt for bond ratings. The financed infrastructure often becomes the property of the lessee once the debt is retired.
In Maine, the program was authorized under the state’s municipal bond bank. A single state agency is charged with administering the law and there is a single point of contact to determine implementation. Maine’s statute calls for a wide range of direct and indirect financing options and sets strong accountability standards for receiving financial assistance.
The program makes available a variety of direct or indirect financing, insurance, borrowing, credit enhancement and other financial tools for the lease, lease-purchase, rental or right of use of public safety and works vehicles, portable classrooms, computer equipment, school buses, telecommunications equipment, energy conservation equipment and renovation projects, and other eligible projects.
The bond bank does not lend money directly to the program. Instead, it conducts the competitive bid process on behalf of the governmental entities.
Although Maine’s program was authorized in 1991, it took several years for it to become operational. Since the first lease was approved in 1998, 63 equipment lease purchases have been approved totaling $14.2 million for such things as modular classrooms and office facilities, school buses, fire trucks and ambulances.
Also since 1998, 18 mortgage lease purchases totaling $9.5 million have been approved, primarily for building additions, bus garages and maintenance garages.
Iowa’s Special Districts statute provides for a variety of special districts, including water, street lighting, law enforcement, recreational, emergency medical, library and sanitary improvement facilities. In addition, the legislature included a real estate improvement district to provide for infrastructure development to lower the costs of developing housing.
The real estate district provides for development of water, sewer, roads and other infrastructure.
Click here for online resources designed to help home builders associations educate their local and state governments on alternative infrastructure financing alternatives that make sense for the state and the community.
For more information, e-mail Debra Bassert at NAHB, or call her at 800-368-5242 x8443.
Two Other Alternative Infrastructure Financing Reports Available Free From NAHB
Better alternatives on infrastructure finance and management strategies that enable state and local governments optimize their finite capital resources are available free in two other reports from NAHB:
- "Building for Tomorrow: Innovative Infrastructure Solutions" is a 32-page report that explains more than 20 innovative financing and delivery mechanisms and presents case studies on how those tools have been applied successfully.
- "Infrastructure Finance: Does Your State Encourage Innovation?" features a matrix of all 50 states, showing which states authorize the use of the 12 most commonly used infrastructure finance tools discussed in "Building for Tomorrow." It highlights a more in-depth research report written by the National Conference of State Legislatures that summarizes state enabling authority for these tools and includes links to the relevant statutes.
Click here for these and other online resources about alternative infrastructure financing, or for more information, e-mail Debra Bassert at NAHB, or call her at 800-368-5242 x8443.
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