Authored by Lynne Brockman, Marketing Director, Black & Veatch
The funding landscape for infrastructure projects is complex and dynamic. Facing intensifying challenges from extreme weather to aging systems, cities, towns and villages must be strategic in their infrastructure planning, diversification and partnering approach. Those that plan holistically, build strong partnerships and maximize their funding opportunities will be in a position to meet their goals for resilience and growth.
Strong Systems, Strong Cities: Linking Financial Resilience to Infrastructure Resilience
Infrastructure is the backbone of public health, business development and economic vitality. Yet, as demand for reliable and affordable power and water intensifies, the U.S. faces a $3.7 trillion infrastructure investment gap, according to the American Society for Civil Engineers’ 2025 Report Card (PDF). Strictly in terms of disasters, from extreme storms to wildfires, the U.S. Chamber of Commerce notes that every $1 not invested in resilience can cost communities up to $33 in lost future economic activity. Especially with the uncertainty surrounding federal funding sources, the need is clear. Cities must fortify their financial resilience to build their infrastructure resilience.
Navigating the New Infrastructure Funding Landscape
See below for a look at how funding sources are evolving:
Federal Funding
Some programs remain the same, some have been paused or frozen and others have been eliminated. Many programs are being adjusted based on revised priorities.
What to Expect
- Delays are common, with staff capacity stretched thin and a shift in approval processes and timelines.
- As always, recipients and projects must comply with federal requirements.
- Competition for funds will likely increase.
- Rural communities may have more funding opportunities.
State Funding
States are expected to launch new programs, particularly around hazard mitigation, preparedness and disaster response.
What to Watch For
- Many states are waiting for clarity at the federal level; for example, regarding FEMA’s future. The capacity to develop and implement funding programs varies by state.
- Competition for funds will likely increase.
- As always, recipients and projects must comply with state funding requirements.
Revenue Generation
Cities can examine local options for raising revenue (where not preempted by state law), such as increases in sales tax or special ballot initiatives.
Why They Work
- Programs can benefit when communities communicate understandable and significant benefits for just a penny of investment.
- For example, the Penny for Pinellas program in Florida has funded roads, stormwater and public safety projects.
Corporate/Private/Partnership Funding
Cities are increasingly partnering with industrial users, utilities and business enterprises to co-fund infrastructure.
Examples
- An industrial user helps a community cover the cost of a water plant expansion.
- Tech companies have water stewardship programs that can include grant and sponsorship money.
- While not subject to federal or state rules, such funding has its own requirements and tends to be very specific and limited.
NGOs
Many non-governmental organizations (NGOs) offer grant or sponsorship money for projects.
Key Points
- Eligible project types and locations tend to be narrowly defined.
- Funding is limited and competitive.
- While not subject to federal or state rules, such funding has its own specific requirements and metrics.
From Vision to Execution: Alternative Delivery Mechanisms That Offer Flexibility in Financial Structuring
Examples include:
- Public-private partnerships (P3s) are long-term services agreements (typically 20-50 years). Public and private entities partner to form a Special Purpose Company (SPC) or Special Purpose Vehicle (SPV) that provides such services as design, construction, financing, ongoing operations and/or management. A P3 can yield lower lifecycle costs, efficient project funding and delivery, the ability to smooth rates over time and optimal allocation of risk. Additionally, a P3 can support regulatory compliance, provide strong asset management, promote operations and maintenance best practices and mitigate cost overruns.
- Design-build is where a single entity — typically a firm or consortium — is responsible for both the design and construction of a project. The integrated approach streamlines communication, accelerates timelines and reduces costs by eliminating the traditional separation between designer and builder. For cities, towns and villages, design-build offers faster delivery, fewer change orders and improved collaboration, making it especially effective for complex or time-sensitive infrastructure projects.
- Pay-for-performance ties compensation directly to the achievement of specific, measurable outcomes. Payment is based on how well the project performs — such as meeting water quality targets, energy savings or stormwater runoff reductions. The approach reduces financial risk for the public sector, incentivizes innovation and promotes accountability. It can be valuable for infrastructure projects where long-term performance is critical.
Another funding mechanism local governments use are special districts. For example, forming a stormwater utility or infrastructure improvement district can help a city unlock dedicated revenue streams and improve long-term planning.
Anticipating Funding Needs: What Cities Can Do Now
Regardless of the source or method, successful funding strategies require:
- Early planning. Fully understand funding needs and plan for funding cycles.
- Understanding eligibility. Check to see if funds are available only to a specific city entity, such as a utility.
- Timing awareness. Align timing of funding with the project’s schedule and milestones.
- Lifecycle thinking. Plan from application to award, through compliance and reporting.
- Matching requirements. Ensure program funding match requirements are met.
- Compliance planning. Include requirements in design and delivery as needed and develop and implement a compliance plan.
The funding landscape is evolving as federal, state and local priorities shift. Fresh, forward-looking funding strategies can help cities, towns and villages move projects from planning to implementation with confidence.
Visit the NLC Strategic Partnerships page to learn more about the organizations like Black & Veatch dedicated to making NLC the premier resource for local governments.
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