Recommendation 6
Provide support for a wider range of innovative local infrastructure financing mechanisms, including tax increment financing, municipal bonds, social impact bonds and crowd source funding approaches.
In response to constraints on traditional sources of infrastructure finance, there has been a great deal of focus on attracting private finance, including pension funds, to invest in resilient and sustainable infrastructure. Not all infrastructure is of an appropriate scale for these forms of finance and not all projects can guarantee sufficient financial returns on investments in the shortterm. Securing finance that is appropriate to the geographic and temporal scale of projects and maximizes the potential to create local social and economic value presents significant challenges. Analysis reveals the potential for alternative forms of local infrastructure finance that are relevant to the scale and outcomes of infrastructure and satisfy restrictions placed on public sector actors (through the prudential borrowing code). Figure 3 shows a number of these that are technically suitable for adapting infrastructure to climate change, such as bonds, revolving funds and crowdsource funding, but are currently under-used in infrastructure delivery.[34*] As with any financing scheme, care must be taken to ensure the business model is viable and aligned with the desired outcomes.
Figure 3. Potential use of alternative funding mechanisms
