Innovative Financing Strategies

Because mass transit is a public service, authorities rarely can charge market rates for public transportation, except in a few of the densest urban areas. The traditional American concept of public transportation, combined with declining overall government support, has resulted in a mass transit funding shortfall of more than $43 billion — a staggering sum that is increasing annually.

While federal funding often is available for mass transit capital expenditures, such as building a light-rail line or expanding access to bus routes through construction of park-and-ride facilities, federal funding rarely is available to support the ongoing operation of these programs. Perversely, this means that public authorities may be able to afford to build something they cannot afford to operate.

Unfortunately, these challenges loom as rising gasoline prices and sustained economic growth in the United States are increasing demand for mass transit. Mass transit is an indispensable element of most communities' economic growth and job creation opportunities because highways simply cannot provide all the necessary access within the desired commute times.

The addition of rail or bus rapid transit to a community's transportation infrastructure can improve commute times and air quality, and relieve congestion. In fact, during the past several years, use of public transportation has grown faster than vehicle and air miles traveled as a whole.

Although many mass transit officials feel they cannot afford to miss a golden opportunity to capitalize on the public's increased interest and acceptance of mass transit, they are frustrated by the glacial response of funding authorities. Some are beginning to look to financing models pioneered in the highway infrastructure industry as possible solutions.

RESPONDING WITH INNOVATIVE SOLUTIONS

Achieving 21st century public transportation goals will require mass transit authorities to grow — institutionally, experientially, intellectually and philosophically — beyond their traditional operational funding base of fares and advertising.

To overcome the challenges confronting the mass transit community there is a variety of opportunities, some of which may seem unusual to public transportation officials. Funding of highway, road and bridge construction increasingly takes advantage of innovative financing, such as public-private partnerships and tolling. Mass transit authorities should explore ways to leverage these emerging trends to support both capital and ongoing expenditures for public transportation. These innovative solutions include:

1. Tax increment or benefit assessment financing that provides revenue needed to service debt for mass transit infrastructure improvements based on the future value of property appreciation and incremental property taxes; or benefits to property owners from new or improved public transportation services.
2. Multimodal projects that piggyback traditional mass transit on private or other transportation projects, such as the T-REX project in Denver that includes a train line running down the median of Interstate 225.
3. Public-private partnerships that allow transportation agencies to leverage private technical, management and financial resources to achieve public objectives, such as greater cost and schedule certainty, supplementing in-house staff, innovative technology applications, specialized expertise or access to private capital.

Compared to traditional procurement methods, public-private partnerships are any situation in which the private sector assumes a greater role in the planning, financing, design, construction, operation and maintenance of a transportation
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