Report on State Options for Infrastructure Finance Updated
NAHB recently updated its publication listing the options and innovations states and local jurisdictions use to finance infrastructure.
NAHB's newly-updated report, "Infrastructure Finance: Does your state encourage innovation?" is available free from the NAHB Web site.
“Infrastructure Finance: Does your state encourage innovation?” ― part of a three-publication series on infrastructure finance solutions first published several years ago — looks at state enabling authority for 12 of the most commonly used infrastructure finance tools. The publication is based on research conducted for NAHB by the National Conference of State Legislatures (NCSL) and is available free.
Originally released in 2005, the updated publication captures significant movement across the states since that time, highlighting which states have amended their enabling authority as well as added new authority to use alternative tools.
The information can be used by local governments to determine the financing options enabled in their state to pay for roads, schools, parks, water and wastewater services and other public facilities.
The information can also be used by states to identify infrastructure tools that warrant new authorizing legislation.
The dozen most commonly used infrastructure financing options include:
- Community Development Districts (CDD) ― sometimes called Community Development Authorities (CDA). They are quasi-governmental entities with distinct boundaries that provide a limited number of public services. The debt is retired by charging the district’s home owners an annual tax surcharge.
- Certificates of Participation (COPs) ― are portions of incoming municipal lease payments that are sold as issues to raise revenue for financing the project.
- Design/Build ― is a privatization strategy in which the design and building of the infrastructure is done by a private party. Other variations include design/build operate and design/build/operate/finance.
- Electronic Road Pricing ― a user-fee system that charges drivers based on their use of the roadway without the presence of toll booths.
- GARVEE Bonds ― debts secured with anticipated federal funds.
- Partnership Schools ― enable public school systems to contract with a private developer to construct a public school facility to the standards of state and local laws.
- State Revolving Loan Funds (SRFs) ― make low-cost loans available to jurisdictions for infrastructure. Loan repayments are put back into the program to fund additional projects.
- State Infrastructure Banks (SIBs) ― operate the same way as SRFs and are intended to complement the traditional federal highway and transit aid programs by supporting certain projects via loans and credit enhancements.
- Small-Scale Water and Wastewater Systems ― enable developers to use new technologies to provide water and wastewater service to their developments. The developer typically adds the cost of installing these systems to the price of the homes. This technology overcomes development limits based on public sewer and water capacity.
- Special Districts ― are a form of local government that delivers public services such as water, fire protection, police protection and flood control within defined boundaries. Special districts are usually empowered to enter into contracts, employ workers, acquire property, levy assessments and charge fees for services.
- Tax-Exempt Municipal Lease Financing ― 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.
- Tax Increment Financing (TIF) ― takes the difference between a site’s pre- and post-development tax revenues for a proposed development and uses that difference (or increment) to finance the proposed development.
NCSL’s research — examples of existing statutes with citations and summary analysis — can be found online at www.nahb.org/infrastructurefinance.
The International Council of Shopping Centers (ICSC) helped fund this new research.
Report Available Online
“Infrastructure Finance: Does your state encourage innovation?” is available free from NAHB online. To download this publication, click here.
Two companion reports are also available free online from NAHB. They include:
There also are numerous additional resources on impact fees and alternative financing strategies, including the new “Guidebook to Impact Fee and Infrastructure Finance Alternatives,” at www.nahb.org/infrastructurefinance.
While some resources are for NAHB members only, many are available for wider distribution.
For more information, e-mail Thais Austin at NAHB or call her at 800-368-5242 x8343, Blake Smith, x8583, or visit www.nahb.org/infrastructurefinance.