Challenges and Opportunities for Innovation in the Public Works ...

TECHNOLOGY TRANSFER AND PUBLIC INFRASTRUCTURE DEVELOPMENT:
FINANCING CAPITAL IMPROVEMENTS THROUGH THE CREATION OF KNOWLEDGE
Michael B. Goldstein**
The traditional models for the improvement of public infrastructure depend upon
a few sources of capital. By far the largest portion has come directly from the public fisc,
most commonly in the form of debt amortized out of tax revenues. Next in importance
is public debt financing where the revenues generated by the facility amortize the debt.
Finally, there is the commercially-financed facility that is leased for public use: that is, the
capital cost is amortized through lease payments out of current revenue sources, either
tax levy or revenues generated through the use of the facility.
In recent years, two opposing trends have resulted in a rapidly growing backlog
of infrastructure improvements. On the one hand, local, state and federal debt burdens
have grown to a point where the carrying costs represent a significant portion of the
current-fund budget. In the case of state and local governments, statutory or constitutional
debt limits have been reached or approached, while in the case of the federal
government, the magnitude of public debt is seen as jeopardizing the stability of the
economy. At the same time, an aging infrastructure, large portions of which were
constructed during two boom periods -- 1930s and early 40s and again in the 1960s -- is
in need of massive repair and replacement.
The alternative of revenue-driven financing is appears to be available for only a
minority of projects. A highway can generate significant revenues through the imposition
of tolls, a dormitory can create rental income and a dam can result in the generation of
saleable electric energy. If the revenue stream is sufficiently deep and predictable, such
projects can be financed. But absent such sure revenue generators, financing alternatives
are more limited: most needed projects appear not to hold a prospect of immediate
revenues sufficient to pay back a short term advance let along maintain a reasonable
amortization schedule.
In the search for financing alternatives, governments and quasi-governmental
entities (such as universities, which for the purpose of this analysis will be considered
quasi-governmental since they fulfill a public purpose and receive public support) have
sought to capture the value added of newly created knowledge. This "intellectual
property," whether in the form of a breakthrough in molecular biology or a new design for
a snow plow blade, has a monetary value in the marketplace. Yet that value has
historically been underutilized as an institutional financing vehicle.
"Portions of this paper have been published by the National Association of University
Attorneys and the National Association of College and University Business Officers.
"'Partner, Dow, Lohnes and Albertson, Washington, D.C.
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