Cities need to compete more strategically for infrastructure funding as sources evolve, particularly at the federal level.
Infrastructure is the backbone of public health, business development and economic growth. Yet, as demand for reliable and affordable power, water and data intensifies, the U.S. faces a $3.7 trillion infrastructure investment gap, according to the American Society for Civil Engineers’ 2025 Report Card. Considering the uncertainty surrounding federal funding sources, cities must fortify their financial resilience to build their infrastructure resilience.
Traditional funding channels are intact, but the landscape is changing.
Some programs remain, some have been paused, others eliminated. Many are being adjusted with revised priorities.
What to expect:
Delays are common with staff capacity stretched thin and as approval processes and timelines have changed.
As always, recipients and projects must comply with strict federal requirements.
Rural communities will likely have more funding opportunities.
Alternative delivery mechanisms are a strategy for maximizing existing funding. Examples:
Public-private partnerships (P3s) are long-term services agreements (typically 20-50 years). Public and private entities partner to form a Special Purpose Company that provides such services as design, construction, financing, ongoing operations and/or management. Forming a P3 can mean 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, 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 strategy cities 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.
Regardless of the source or method, successful funding strategies require:
Early planning — to align with 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 project schedule, milestones.
Lifecycle thinking — from application to compliance and reporting.
Match readiness — be mindful of program match requirements.
Compliance planning — include requirements in design and delivery, as needed, and implement a compliance plan.
The infrastructure funding landscape is complex and dynamic. More than ever, cities must be forward-looking and holistic in their planning, diversification and partnering approach. Those that work strategically to diversify their capital stack, build strong partnerships and maximize their funding will be in position to meet their goals for infrastructure resilience.
