Minnesota Department of Transportation

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Alternative Transportation Finance

Innovative ways to fund and finance transportation projects

Benefits of Alternative Transportation Finance

Transportation Financial Resource Expansion

  • New Revenue: New revenue can be generated from tolls, other types of user fees, value capture approaches, direct private contribution, and asset revenue generating techniques.
  • Revenue/Cost Sharing: New types of partnerships and cost sharing arrangements with local and regional governments; port, rail and transit authorities; contractors; investment groups and other private entities can expand the sources of revenue available for projects. 
  • New Sources/Types of Financing: New sources of financing capital can become available such as private equity, private debt, and TIFIA as well as a wide variety of new financing mechanisms (e.g. availability payments, pass-through financing, toll revenue bonds, private activity bonds, TIF, etc.).
  • New Funds Management Techniques: New ways of managing existing funds can stretch dollars to deliver more projects.

Better Alignment of Transportation Use/Benefit and Financial Responsibility

If strategies can better link the costs of a transportation improvement with those who benefit from the improvement (e.g. toll projects, private contributions to specific projects, value capture strategies). When benefiting users and property owners are required to pay closer to the real cost of transportation improvements, revenue increases for some projects and demand decreases for other projects.

Public Private Partnership (P3) Cost Savings

  • Life Cycle Cost Savings: Some P3s like long term (30+yr.) DBFOM contracts can save money by taking new life cycle cost approaches that allow the private sector to develop a project in a more unified, efficient manner. Lengthy contractual obligations reduce the incentive to look for the lowest up-front costs. This new paradigm can reduce future maintenance, reconstruction and lane closure costs.
  • Risk Allocation Savings: P3s can save the state money through better risk allocation and management. The partner that is in the best position to manage certain risks assumes those risks lowering the overall cost of the project.
  • Innovation Savings: Some P3’s foster greater innovation and efficiency because they are more performance-based and outcome-oriented than traditional approaches. Some P3s dramatically shift the incentives for private partners (i.e. quick completion, but cannot cut corners) 
  • Tax Savings: Some P3s enable the private partner to have enough of an ownership interest in a project that it can depreciate the transportation asset providing the private partner with tax savings that can be shared with the public sector.

Project Acceleration Benefits

Inflation savings, accelerated public benefits, economic development and growth.

Diversifying the Transportation Funding/Financing Portfolio

No one or two funding sources or financing techniques can come close to meeting today’s diverse transportation needs. It will take many sources and techniques properly aligned to the areas where they can most efficiently and effectively achieve the desired results.