State and federal funding for PPP projects.

Giving public agencies flexibility in funding projects is essential to creating an efficient PPP program, especially when the costs of these projects are enormous. At the same time, however, restricting public agencies from using public monies to help fund private operations is a way of insulating legislators from the riskiness of these projects (Gougherty 2005b). Fourteen states have provisions in their PPP statutes allowing for public agencies to use both state and federal funding for PPP projects. The Delaware statute is among the best, authorizing the state Department of Transportation to "use any federal, state, or local funds" to finance projects, explicitly allowing public agencies to use any of these sources without limits. Further, the Delaware statute allows the state DOT to apply for federal funding which the DOT can then give as grants or loans to PPP projects.  States should provide for this type of flexibility in their PPP statutes to avoid judicial challenges to financing plans. At the same time, states also need to be aware of the requirements that certain federal funding programs require, such as adherence to Davis-Bacon labor rules, "Buy America" requirements, and others (AECOM Consult 2007). Adopting PPPs for federal interstate projects may also trigger other federal regulations limiting the use of private debt or equity (Gougherty 2005b).