Infrastructure Investors Focused on State and Local Markets That Shoulder 74% of Highway Funding

(Investorideas.com Newswire) State and local governments fund approximately 74% of U.S. highway outlays. This funding structure, documented in Citi Research's May 2025 infrastructure investment analysis, reflects a decades-long shift in responsibility for maintaining the nation's roads and bridges, a shift away from Washington and toward thousands of individual jurisdictions. 

While federal highway legislation occurs roughly every four to seven years and sets national spending priorities, the bulk of actual project execution happens through state departments of transportation and local public works agencies, and these entities must navigate their own budget cycles, voter-approved measures, and increasingly constrained revenue streams.

"Infrastructure is a local problem," says Bob Hellman, CEO of American Infrastructure Partners. The firm, which works with local governments to provide private capital for infrastructure development, has structured its operations around this reality, developing specialized platforms that work on projects ranging from bridge replacements to school renovations. 

Gaps In Federal Infrastructure Funding

U.S. federal non-defense infrastructure spending has declined from nearly 90% of GDP to approximately 60% over the past 50 years, according to the Citi analysis. State and local infrastructure spending, by contrast, has grown over the past decade. According to Brookings Institute data, states and localities accounted for 79% of all public infrastructure spending in 2023, a total of $494.2 billion. This inversion reflects changing political priorities, budget constraints, and the practical reality that infrastructure maintenance often falls to whichever government entity owns the asset.

The federal government's role increasingly centers on providing catalytic funding that unlocks larger state and local investments. The 2021 Infrastructure Investment and Jobs Act exemplifies this approach: it appropriated $550 billion in new spending, split between transportation and other core infrastructure, but that money often flows through local and state agencies.

The availability of federal funds sends an important signal to state legislators, giving states confidence to begin major projects when a steady stream of federal funding appears secure. But transportation construction generally lags initial federal highway outlays, as state governments await confirmation of federal commitments before moving forward.

Need and Available Funding

Divided evenly, the IIJA would provide approximately $80 million per state annually over six years for bridge repair. But a single bridge can cost roughly $100 million, meaning that even if funds were divided this way, the bill would fund only one bridge per state. And as it stands, larger, more populated states receive more funding, leaving rural areas with infrastructure needs at a disadvantage. This gap explains why 42,067 U.S. bridges remain in poor condition despite recent federal investments.

State and local governments face similarly constrained budgets. Property tax revenues and fuel taxes—traditional funding sources for local infrastructure—may grow slowly or not at all, while maintenance needs compound. The American Society of Civil Engineers estimates a $3.7 trillion investment gap between projected infrastructure spending and what's needed to bring assets into good repair through 2033.

American Infrastructure Partners operates within these constraints by offering municipalities an alternative to waiting for adequate public funding. In one recent project, United Bridge Partners, the firm’s dedicated bridge platform, completed the Jordan Bridge in Chesapeake, Virginia, at a cost of $143 million, more than $50 million below the state's original estimate of over $200 million. The project used private capital rather than competing for scarce state transportation dollars. 

Working at the Municipal Level

Local infrastructure ownership creates thousands of individual decision points rather than a centralized procurement system.

Some local governments lack the in-house expertise needed for large capital projects. Private infrastructure firms can offer concentrated experience developed through repeated project cycles across multiple jurisdictions.

The Houbolt Road Extension in Joliet, Illinois, demonstrates how private capital can address specific local needs. This project, another developed through American Infrastructure Partners' bridge platform UBP, established new Interstate 80 access and is estimated to reduce truck idle time by 20,540 hours annually. The city gained critical transportation infrastructure without diverting limited municipal funds from other priorities.

Federal Funding Lags and Local Decision Cycles

Only approximately one-third of total IIJA highway and bridge funding allocated through fiscal year 2026 had been spent as of the Citi Research analysis in May 2025. The lag reflects the time required for federal agencies to distribute money to states, for states to award contracts, and for actual construction to begin.

There can be a six to 18-month lag between contract awards and the start of sales for construction materials producers, according to industry data cited in the Citi report. Even when federal funding commitments exist, communities may wait years before seeing tangible improvements.

Private infrastructure models can potentially compress these timelines. Firms like American Infrastructure Partners make investment decisions based on project economics and community need rather than waiting for federal appropriations processes or state legislative sessions. 

This approach requires understanding varied regulatory environments, building relationships with local officials, and structuring deals that work within different state laws governing public-private partnerships. 

The firm's platform structure—creating specialized companies focused on specific infrastructure categories like bridges, schools, or postal facilities—allows each team to develop expertise relevant to state and local decision-makers. 

The Infrastructure Investment and Jobs Act expires in 2026. Whatever Congress does next will shape the infrastructure funding environment for years to come, but the fundamental reality persists: a substantial amount of U.S. highway infrastructure funding comes from state and local sources, and most infrastructure assets are owned by local authorities. Faced with uncertainty surrounding future government funding initiatives, private-public partnerships are one way to continue to support local infrastructure development.