Infrastructure Financing: A Guide for Local Government Managers

Transcription

1 Infrastructure Financing: A Guide for Local Government Managers Dr. Can Chen, Assistant Professor Florida International University Dr. John R. Bartle, Professor and Dean University of Nebraska at Omaha 2017 ASPA Conference March 20, 2017

2 Presentation Outline Trends in Infrastructure Investment Traditional and Innovative Infrastructure Financing Status of Local Infrastructure Financing: ICMA Survey Case Studies in Innovative Infrastructure Financing

3 Governmental Role in the Provision of Infrastructure

4 Trends in Local Economic Public Infrastructure Financing

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6 Local Infrastructure Financing: Traditional Methods 6

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8 8 The Status of Local Infrastructure Financing: Summary of 2016 ICMA Survey Valid N=530

9 Local Infrastructure Financing Strategies (Valid N=530)

10 Debt Financing for Local Infrastructure (Valid N=530) Does your government issue general obligation (GO) bonds? Does your government have the financial capacity to issue additional debt for infrastructure improvements? 46% 54% 21% 79% Yes No Yes No Do you believe that your local government has the needed level of support of residents to consider issuing additional municipal debt to address infrastructure needs? Do you believe that your local government s elected officials are open to considering issuing additional municipal debt to address infrastructure needs? 43% 34% 57% 66% Yes No Yes No

11 Local Use of Innovative Infrastructure Financing Tools (1) Valid N=530 P3s Privatization 23% 4% Currently Unavailable 4% 26% 23% Currently Unavailable 6% 5% 59% 24% 25% 0% 10% 20% 30% Private Sector/Foundation Investments 9% 21% 41% Currently Unavailable 4% 25% 0% 10% 20% 30% 40% 50% 0% 20% 40% 60% 80% Private Sector/Foundation Grants 15% 34% 29% Currently Unavailable 3% 19% 0% 10% 20% 30% 40%

12 Local Use of Innovative Infrastructure Financing Tools (2) Valid N=530 Currently Unavailable Institutional Investment (Pension, Insurance, & Other Public/Private Funds) 2% 6% 7% 29% 56% Currently Unavailable Crowdfunding 2% 6% 4% 36% 53% 0% 10% 20% 30% 40% 50% 60% 0% 10% 20% 30% 40% 50% 60% Social Impact Bonds Green Bonds 0% 2% 1% 4% 53% 51% Currently Unavailable 4% Currently Unavailable 3% 41% 41% 0% 10% 20% 30% 40% 50% 60% 0% 10% 20% 30% 40% 50% 60%

13 Local Use of Innovative Infrastructure Financing Tools(3) Valid N=530 Currently Unavailable Local Infrastructure-Specific Tax 5% 19% 20% 22% 35% 0% 10% 20% 30% 40% Currently Unavailable Developer Fees and Exaction 3% 21% 24% 25% 28% 0% 5% 10% 15% 20% 25% 30% Tax Increment Financing Special Districts 27% 23% 22% 21% 28% 33% Currently Unavailable 5% Currently Unavailable 3% 18% 20% 0% 5% 10% 15% 20% 25% 30% 0% 10% 20% 30% 40%

14 Local Use of Innovative Infrastructure Financing Tools(4) Valid N=530 Federal TIFIA Loans GARVEE Bonds 3% 1% 13% 5% 45% 50% Currently Unavailable 2% Currently Unavailable 3% 38% Don't Know 41% 0% 10% 20% 30% 40% 50% 0% 10% 20% 30% 40% 50% 60% Currently Unavailable State Environmental Revolving Funds (Clean and Drinking Water) 2% 23% 22% 27% 26% State Infrastructure Bank Loans 10% 21% Currently Unavailable 4% 29% 36% 0% 5% 10% 15% 20% 25% 30% 0% 10% 20% 30% 40%

15 Case Studies of Local Option Taxes The City of Chicago Description Local motor fuel excise taxes by the City of Chicago and Cook County Local option retail sales tax levied by the City of Chicago, each of the six counties, and the Regional Transit Authority Other innovative revenue sources include value capture, TIFIA and P3 Key Challenges Sales tax applies to fuel purchases, causing a layering of both sales and excise taxes on fuel purchases Complexity of involving multiple levels of governments Local option taxes fund transportation but also general funds Lessons Learned The use of local option taxes makes it easier for the local governments to match federal funding Use one revenue source to leverage another source Reduce the volatility of reliance on a single revenue source

16 Public Private Partnerships: The City of Portland s Extension of Light Rail Line Description A P3 was used to build an extension of the Metropolitan Area Express (MAX) light rail line to Portland International Airport (PDX). Bechtel corporation provided funding for 23% of the project s $128.8 million construction and engineering costs of the rail link. The project was completed more than ten years earlier than had been planned. The public costs to develop the extension were reduced by 23% Key Challenges The City waived bidding requirements and agreed to a sole-source contract with Bechtel Public participation did not happen until after the negotiation and design Lessons Learned The project leveraged values in ways that could not be done without a private sector partner Benefit of completing the project faster and without the lengthy approval processes A high level of trust between the partners was important

17 Crowdfunding: The City of Nephi, UT Description The city established a funding request on the Rockethub website to solicit private donations to install a lighting system for the ball park ($125,000) About $12,500 was raised by crowdfunding. The rest of funding was from foundation grants ($112,500) Key Barriers and Challenges No legal barriers and no restrictions. Not much risk in crowdfunding in this case A slower process Lessons Learned Works well for smaller projects that provide popular recreation facilities The local government needs to keep in mind future costs for operations, repair and replacement

18 Federal TIFIA Loans: Los Angeles County s Crenshaw/LAX Transit Corridor Description In 2012, the US DOT awarded a $545.9 million, 30-year TIFIA loan to Los Angeles County Metropolitan Transportation Authority to help build a new light rail transit line along the Crenshaw corridor The loan interest rate was lower (2.43 percent) than the market rate The TIFIA loan will be repaid from the proceeds of a half-cent sales tax approved by Los Angeles County voters Key Barriers and Challenges TIFIA loan program has becoming increasingly competitive in recent years Need to maintain adequate coverage requirements to ensure repayment Paperwork required to secure a federal TIFIA loan Lessons Learned Access to federal credit expedited project delivery Important for the project sponsor to consult with a financial advisor early

19 State Infrastructure Bank (SIB) Loan Assistance: The City of Gahanna s New Overpass Description In 2010, the Ohio SIB awarded a five-year short-term loan of $6,347,508 to the City of Gahanna for the construction of new overpass Loan interest rate was 3% (lower than the market rate) The SIB loan made it possible for the City to complete the work years ahead of a next round of federal fund distribution Key Barriers and Challenges Administrative work in the loan application and loan enforcement Challenge to negotiate and structure loan term and repayment sources Lessons Learned Access to the state infrastructure bank loan helped expedite project delivery Importance of successful collaboration with regional metropolitan planning organization Value of support from the state government in the use of SIB loan program

20 The City of Saint Paul MN Sewer Revenue Green Bonds Description $8.7 million Sewer Revenue Green Bonds in 2015 (the first sold in Minnesota) Bond proceeds used for clean water and sustainable water management Complies with the International Capital Market Association green bond principles Key Barriers and Challenges Restricted to financing local infrastructure projects with an environmental impact Ensure compliance with green bond principles (project selection and evaluation, use of bond proceeds, and reporting) Lessons Learned Important for a community to buy-in to the green bond best practices Work with municipal finance experts to comply with best practices

21 Denver Social Impact Bond Program to Address Homelessness Description Provide housing services to 250 homeless individuals Attract total private investment of $8.7 million The City only pays for success when specific performance outcomes are achieved (35-40% reduction in jail bed days and 83% housing stability) Key Barriers and Challenges A time-consuming process to get stakeholder buy-in Challenges to work with different agencies and actors Lessons Learned Make selling the idea of using the social impact bonds successful Create synergy and develop partnership among program participants Make sure that the social impact bonds initiative matches the top priority of local governments

22 Summary: Put Innovation into Practice 1 Obtaining legislative approval to authorize the use of financing alternatives Effective education of the public and decisionmakers 2 Strengthen capacity and collaboration skills to manage financing alternatives 3 Ensure transparency and accountability

23 Thank You Your Comments are Welcome