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70 T R A N S P O RTAT I O N F I N A N C E Accelerate projects by reducing inefficient and innovative projects and promote dialogue throughout unnecessary constraints on states' management of federal the various conference sessions on the plethora of devel- highway funds; opmental factors that must also be improved through Expand investment by removing barriers to private innovation, together with financing innovations. It is investment; our contention that without supporting legislative, Encourage the introduction of new revenue streams, administrative, and programmatic changes in the over- particularly for the purpose of retiring debt obligations; all project development and delivery system, the finan- and cial innovations become far less compelling. Reduce financing and related costs, thus freeing A review of projects that have been completed and the savings for investment into the transportation system are now in service reveals certain predictable patterns. itself. First, it is clear that projects that do not require full environmental documentation and that do not have FHWA's familiar diagram (Figure 1) summarizes the jurisdictional opposition from local governments or various federal innovative financing mechanisms and special-interest groups can be brought online signifi- illustrates how these mechanisms fit with different types cantly more rapidly than projects requiring full envi- of transportation projects. ronmental clearance or having even modest political or Within this basic framework, mechanisms in trans- public opposition. Second, projects that do not require portation finance continue to evolve. TEA-21 provided direct use of federal funds or funding programs and important new mechanisms that have supported innov- thereby avoid the federal environmental impact study ative solutions to fund transportation improvements. process generally can be completed several years Many of these began as pilot programs that have been sooner than otherwise. And finally, the morass of clear- shaped into more formalized federal and state programs ances and regulatory issues that must be considered as and an increasingly common language of acronyms, a prerequisite for project development adds signifi- such as TIFIA (Transportation Infrastructure Finance cantly to the average time necessary to bring a project and Innovation Act), SIB (state infrastructure bank), online. and GARVEE (Grant Anticipation Revenue Vehicle). In While none of us here would advocate that environ- preparation for the reauthorization of TEA-21, confer- mental, permitting, and public involvement processes ences such as this will provide significant input to fur- should be eliminated to expedite project delivery, it is ther refine, broaden, and expand innovative finance clear that the hurdles that must be overcome in the pub- concepts for the remainder of the decade and beyond. lic works delivery process today have become enor- mously complex, costly, and in many cases virtually insurmountable. While sound planning requires that INNOVATIVE FINANCE: THE BROADER CONTEXT political, institutional, environmental, and financial fac- tors all be taken into consideration together with tech- This paper will not review the frequently cited and well- nical factors in the project development process, many known projects throughout the United States and understandably believe that by so doing we have pro- abroad that have achieved success and notoriety vided tools used solely and consciously to delay and through their use of unique and innovative financial inhibit project delivery. mechanisms. Indeed, the program for this conference To make use of many of the financial engineering focuses through its many sessions on just such specific innovations that have been put into play, it would be examples and issues. The statistics are impressive: as of highly advantageous to be able to estimate more effec- June 2002, 32 states with established SIB programs tively the time, cost, and degree of difficulty associated with about $4.06 billion in the dollar value of loan with the development process for specific projects. As a agreements, six states with $2.3 billion in GARVEE small but marginally influential industry, we should be bonds outstanding and more states with enabling legis- willing to broaden our focus to aspects of project deliv- lation contemplated, and nine states under agreement ery not directly related to innovative finance, precisely in for TIFIA credit assistance for 11 projects with $15.4 order to take greater advantage of the available funding billion in transportation investment.2 And the list of and financing tools that have become available. successes continues to grow. Rather than focus on the financial aspects, this paper will focus primarily on the nonfinancial aspects of these IMPEDIMENTS TO PROJECT DELIVERY 2 Statement of JayEtta Z. Hecker, testimony before the Senate In addition to technology, cost, and financial capacity, Committee on Finance and the Committee on Environment and the obstacles to expedient project delivery tend to fall Public Works, Sept. 25, 2002. generally into three broad categories: