Innovative transportation funding and financing

Building and funding new transportation facilities will be a significant challenge given the significantly higher costs associated with underground and elevated construction. This chapter dives deeper into the potential for megacities to fund these transportation network improvements. Critical to this funding will be the widespread adoption of market-based pricing to bring financing into alignment with the primary beneficiaries of the transportation system. Market-based pricing including road user charges will be essential as traditional funding sources such as fuel taxes become less reliable and more variable due to advances in technology (e.g., electric vehicles) and public policies discourage reliance on fossil fuels. Public-private partnerships (PPPs), when properly designed and structured, can facilitate the construction of these new facilities, shift the burden of financing them to users, and protect the public interest. Value capture charges from rising property values resulting from transportation investments and parking fees are reliable sources of revenue and can provide sustainable funding. An effective long-term funding program, the chapter points out, should be tied to the mobility benefits in transportation facility useful service lifespans from these investments. These benefits can be monetized through various technologies such as variable rate tolling, per-mile fees, and traditional user fees. When properly structured, these technologies can monetize benefits to generate sufficient revenues to fund (and maintain) the facilities, ensure users and direct beneficiaries shoulder an equitable portion (possibly all) of the costs, encourage efficient investments in the transportation network, enjoy broad public support, and consider the equity consequences of these investments. Case studies show the potential benefits in Santiago, Chile, land-value capture in Hong Kong, China, Indiana Toll Road privatization in Indiana, USA, and congestion charging in London, UK.