Bonds

Bonds are another means of obtaining financing to pay for an infrastructure projects. They are instruments of debt where the public sector borrows against future revenue (taxes or income). Bonds are historically tax exempt making them an attractive and generally safe investment for large funds -unions, state pensions, etc.

Tax-exempt bonds reduce the issuer's borrowing costs because purchasers of such debt are willing to accept a lower rate of interest than that of taxable debt of comparable risk and maturity.

Public-private partnerships also offer incentives in the form of shared savings through finishing on (or before) schedule or under budget. In the case of a guaranteed maximum price contract (GMP), the contract could specify that any difference between the GMP contract amount and actual completed price be shared by the public and private sector resulting in a nice bonus for the private entity and funds returned to the public coffers for other use.