Implementation:Putting the Strategy into Practice

Financial strategies require a lot of upfront investment of staff time to deliver. The investment doesn’t stop at the point of implementation. Even after implementation, public agencies will face ongoing demands, including disclosure requirements, post-implementation evaluation, re-negotiations, economic changes, and revenue shortfalls.

Estimating Cash Flow Needs and Timing

  • Once options have been identified, the city needs to compare the timing of the funding to the anticipated funding needs of the project.

Financial management best practices are to match costs with funding as closely in time as possible. It doesn’t make sense to pay interest on capital funds that won’t be needed until later in the process. Yet new kinds of capital projects may have different expenditure patterns than traditional ones. For example, infrastructure reuse projects may feature lower initial capital investment (because most of the infrastructure is being recycled) but higher operations and maintenance cost.

Integrating Project Delivery Innovations with Financing

  • In some cases, innovative delivery strategies can affect the timing of costs.

For example, incentives in long-term P3s may encourage developers to finish projects early, but the project’s cash flows may be aligned to the original schedule. It doesn’t help to design an innovation to deliver a project early and then be unable to pay the bill if it happens. Some agencies have addressed this cash flow concern by specifying a maximum payout curve in the P3 contract. With this contract provision in place, if the contractor earns a higher payment for meeting performance targets, the payment will be made over a more predictable time period.

Staging: Matching Project Timing with Other Processes

  • Implementing a capital project involves walking through numerous approval and negotiation processes, each with its own timing and requirements.

In one implementation calendar, a city might have to integrate:

  • Legislative and regulatory steps required to obtain revenue and finance tools or enter into alternative delivery arrangements, or simply to construct the project (This can be complex in states where legislatures only meet every two years, or when cities want to strategize to put referenda on the ballot in presidential election years).
  • Negotiations with utilities and other affected stakeholders, such as community groups and residents;
  • Grant and credit application processes (including obtaining a credit rating, if applicable);
  • Alternative or traditional procurement processes;
  • Environmental clearance processes; and
  • Construction staging/impact mitigation plans.

These processes can be interdependent. For example, an agency may be unable to obtain a federal grant or credit assistance until it has environmental clearance; and it may be unable to obtain environmental clearance without showing that it has enough funding to complete the project.

Implementing a capital project involves walking through numerous approval and negotiation processes, each with its own timing and requirements.