budgetinfrastructurepolicy

How State Highway Projects Are Funded: Bonds, Federal Grants and Public-Private Partnerships

ggovernments

2026-02-12

9 min read

Why funding matters now: the pain of traffic, budget strain and unclear trade-offs

Commuters, students and local officials are facing the same dilemma: congestion and aging roads but limited public dollars. When a state announces a multi‑billion dollar highway plan — like Georgia’s recent $1.8 billion proposal to add toll express lanes on I‑75 — the most important questions are not only "what will be built" but "how will it be paid for, who bears the risk, and what will it cost taxpayers over time?" For sector signals that matter to freight and logistics, see a recent Transportation Watch briefing.

Quick takeaways: what to watch on any major highway financing plan

Financing source determines who pays and who carries the risk: general‑obligation bonds shift risk to taxpayers; revenue bonds or tolls push risk to road users; federal grants reduce local cost but often add conditions.
P3s can speed delivery but often transfer long‑term service risk to the private partner — and require strong contract oversight to protect the public interest. Related operator models for repurposed public space are discussed in Neighborhood Anchors: Turning Underused Parking Lots into Micro‑Event Hubs.
Interest rates and federal program rules in 2025–26 changed the math: higher borrowing costs and more pairable federal funding pushed states to combine tools (grants + loans + tolling + bonds).

The financing toolbox: the major options states use

1. State bonds

States commonly use bonds to raise large sums up front. Bonds fall into several categories:

General obligation (GO) bonds — backed by the state’s taxing power. They usually carry lower interest rates because repayment is guaranteed by a broad pledge of tax revenue, but issuing GO debt often requires legislative approval or a voter referendum and competes with other public priorities.
Revenue bonds — backed by project revenues such as tolls. These concentrate risk on users and the project; if tolls fall short, bondholders are repaid before other claims and the issuer may face default risks.
GARVEE bonds (Grant Anticipation Revenue Vehicles) — issued against expected future federal highway reimbursements. GARVEEs let states accelerate projects by borrowing now and repaying from future federal apportionments. For broader macro context about interest-rate-driven project math see the Q1 2026 macro snapshot.

2. Federal grants and credit programs

Federal funds remain a centerpiece of surface transportation finance after the Bipartisan Infrastructure Law (also called the IIJA) accelerated discretionary and formula dollars into state highway programs. Two tools commonly used:

Discretionary grants (INFRA, RAISE, and other USDOT programs) can provide large shares of a project’s capital cost but are highly competitive and slow. Successful grant applications often depend on demonstrated freight benefit, safety improvements and economic development potential. Monitoring available opportunities and deal flows can be helped by trackers such as the Green Tech Deals Tracker, which highlights federal and private flows into resilient infrastructure.
Credit assistance (TIFIA and the Build America Bureau tools) provides low‑cost loans, loan guarantees and lines of credit. TIFIA loans typically carry below‑market rates and long tenors — attractive when states want to reduce interest costs and preserve bond capacity. For procurement and market tools that planners review, see the Q1 tools & marketplaces roundup.

3. Tolling and user fees

Tolls are a clear way to match the cost of a roadway with its users. For projects like the Georgia I‑75 express lanes proposal, tolls underpin revenue bonds or private concession payments. But tolling raises policy questions about equity (who can afford tolled lanes), diversion to local streets, and the reliability of revenue forecasts.

4. Public‑Private Partnerships (P3s)

P3s bundle design, construction, financing and operations into a contract with a private partner. Structures include availability payments (public pays the private operator based on performance and availability), toll concessions (private operator collects tolls), and hybrid forms. P3s can transfer construction and performance risk to the private partner, accelerate timelines, and bring private capital — but they require strong procurement, clear performance metrics and active public oversight. Successful P3s include independent oversight bodies and clear reporting; procurement teams should build transparency requirements into concession agreements and consider third-party audits.

Comparing the tools: speed, cost, transparency and taxpayer exposure

To evaluate any proposed financing package — such as Georgia’s $1.8 billion I‑75 plan — compare four dimensions:

Speed of delivery: Bonds and P3s accelerate project start by providing capital up front. Federal grants can delay projects while agencies award funds.
Cost of capital: GO bonds usually have the lowest rates; federal credit programs like TIFIA are also attractive. Market‑rate P3 financing may be more expensive up front but can be justified if private efficiency reduces overall lifecycle costs.
Risk allocation: Who pays if traffic (and tolls) falls short? Revenue bonds and toll concessions push risk to users; GO bonds put risks on the taxpayer balance sheet. P3s shift some risk to the private partner, but implicit public guarantees and renegotiations can move risk back to taxpayers.
Transparency and oversight: Bond covenants, concession agreements, and grant terms determine how much data the public gets. Complex P3 contracts can hide long‑term obligations if they are not publicly disclosed or independently reviewed — use contract and marketplace review tools to surface obligations early.

Georgia’s I‑75 proposal: how these tools could combine and what it means for taxpayers

Governor Brian Kemp proposed spending $1.8 billion to add an express toll lane in each direction on a 12‑mile segment of I‑75 in Henry and Clayton counties, expanding on existing reversible lanes. He argued these lanes will improve mobility and economic competitiveness for the Atlanta region. As he put it, "When it comes to traffic congestion, we can’t let our competitors have the upper hand." (Insurance Journal, Jan. 16, 2026).

Likely financing components

Projects like this typically use blended financing:

Tolls to justify revenue bonds or to support a private concession. The more reliable the traffic and toll forecast, the cheaper the revenue bond.
Federal grants or TIFIA credit to reduce the state’s upfront burden and lower debt service.
State bonds (GO or dedicated transportation revenue bonds) to close funding gaps or pay predevelopment costs.

Taxpayer implications

For Georgia taxpayers the questions are:

Will the state issue GO bonds that obligate general revenue, or will the project be financed primarily by toll‑backed revenue bonds? GO bonds create direct taxpayer exposure.
If the state uses GARVEE or TIFIA, will that crowd out future federal or state transportation priorities when repayments come due?
If a P3 is used, will contract terms protect against revenue shortfalls, toll rate shocks, and long‑term hidden contingencies?

Real‑world lessons: what past projects teach us

Indiana Toll Road (cautionary example)

The 2006 long‑term lease of the Indiana Toll Road to a private consortium generated a large upfront payment for the state but later produced problems: lower‑than‑expected toll revenue and a 2014 bankruptcy by the concessionaire showed that optimistic forecasts and overreliance on private capital can put long-term service at risk. The main lesson: when a state sells or grants long concessions, it trades future revenue and control for one‑time cash — and the public often retains ultimate exposure if the private partner fails to meet obligations. For freight and logistics signals tied to carrier performance, see a recent transportation industry update.

Successful hybrid deals

Other projects show best practices: blending federal TIFIA credit with moderate revenue bonds, including strong performance-based maintenance clauses, and creating independent oversight bodies. These measures can lower lifecycle cost and keep taxpayers insulated from downside risk.

2026 trends shaping infrastructure finance

Recent developments from late 2025 into 2026 changed the financing environment:

Stimulus and IIJA flows stabilized: Federal discretionary programs have matured, and states that learned to align grant narratives with freight, resilience and equity priorities capture larger awards.
Credit markets adjusted: Higher rates in 2022–24 pushed states to mix lower‑cost federal credit with limited taxable debt; in 2026 some interest rate easing has improved bond math, but borrowing costs remain above the 2010s lows. For macro context on rates and market flows see the Q1 2026 macro snapshot.
Private capital shows interest in green and resilient infrastructure: Institutional investors are targeting predictable revenue streams. That can expand P3 options but raises scrutiny on contract transparency and public value. Track private green capital activity at the Green Tech Deals Tracker.
Equity and resilience filters are now standard in federal review criteria, increasing project complexity but also broadening benefits to disadvantaged communities when applied well.

How to evaluate a highway financing plan: practical checklist for citizens and local officials

Whether you’re a taxpayer, a student researching public policy, or a local official assessing the I‑75 proposal, use this checklist:

Ask for the financing package in plain language: What combination of bonds, federal grants, loans and toll revenue will pay for construction and long‑term maintenance?
Request independent traffic and revenue studies: Who produced them and what assumptions do they use (population growth, toll elasticity, business travel)?
Inspect the bond docs and covenants: Find offering statements on EMMA (Municipal Securities Rulemaking Board’s Electronic Municipal Market Access) to see repayment priorities and reserve requirements.
Check for contingency plans: If toll revenue is lower than forecast, who makes up the shortfall? Is there an affordability plan for low‑income commuters?
Demand contract transparency: For P3s, obtain full concession agreements, performance standards, and termination clauses. Look for public oversight and independent audits; use procurement and marketplace review tools to surface red flags early (see tools roundup).
Compare alternatives: Could targeted transit or managed lanes, not full widening, yield better cost‑benefit ratios? Are demand management strategies considered?

Actionable steps: where to find documents and how to influence outcomes

Find core documents and engage early:

State DOT project pages — in Georgia, the Georgia Department of Transportation (GDOT) posts project descriptions, environmental assessments, and public hearing schedules.
State budget and treasury offices — for proposed bond authorizations, bond rating agency reports and debt affordability analyses.
EMMA (MSRB) — search for municipal offering statements and continuing disclosures to inspect bond structures and covenants. For monitoring and alert-based workflows, tools that track disclosures can help — see monitoring guides.
USDOT Build America Bureau and TIFIA pages — for credit assistance terms and federal grant award notices; procurement teams often cross-check these with marketplace toolkits.

Attend public hearings, submit written comments, and ask legislators for independent fiscal notes on proposed legislation authorizing bonds or P3 contracts. For community engagement tactics and small-scale outreach playbooks that help teams mobilize public input, consider playbooks like the Weekend Micro‑Popups Playbook. For educators and students, using these primary documents in class builds civic literacy and real‑world analytical skills.

Advanced strategies for state leaders and planners

States can adopt a few advanced practices to maximize value and protect taxpayers:

Use blended finance — pairing grants, TIFIA credit and modest revenue bonds — to lower overall cost and diversify risk.
Require independent revenue risk analysis as a procurement prerequisite and stress testing for downside scenarios.
Include lifecycle maintenance and performance payments in contracts to avoid deferring upkeep costs.
Build transparency and public reporting into bond covenants and concession agreements, with performance dashboards and independent auditors. Procurement teams should use review toolkits and marketplace audits to spot unfavorable clauses early.
Design equitable pricing strategies — dynamic toll discounts, low‑income toll credits, or dedicated transit reinvestments to mitigate distributional impacts. For examples of equity-focused funding flows and private capital targeting, see the Green Tech Deals Tracker.

What the public should expect from the I‑75 debate

With Georgia’s announcement, public debate should focus less on abstract

governments

Contributor

Senior editor and content strategist. Writing about technology, design, and the future of digital media. Follow along for deep dives into the industry's moving parts.

Up Next

How to Claim Verizon’s $20 Outage Credit: A Step-by-Step Guide

data•8 min read

Futureproofing Local Campaigns: Advanced Attribution for Multi-Channel Government Outreach (2026 Playbook)

procurement•9 min read

Procurement for Resilient Cities: How Microfactories and Circular Sourcing Reshaped Local Supply Chains in 2026

2026-01-25T04:34:15.540Z