UMD Smith Study Proposes New Model for Infrastructure Financing Reform

The Facts -

Study Advocates for New Approach to Infrastructure Funding: Unlocking Institutional Capital for Local Projects

On July 6, 2026, the University of Maryland's Robert H. Smith School of Business released a study suggesting a significant shift in how the United States approaches financing local infrastructure. Despite a projected $3.7 trillion gap in infrastructure funding over the next decade, the study contends that the issue is less about a lack of funds and more about the structural design impeding effective capital deployment.

Anton Steshenko, a finance candidate at Smith, authored the paper titled "Rethinking Municipal Financing: A Hybrid Institutional Capital Model for Local Infrastructure Development." Steshenko argues that, contrary to popular belief, the key barrier to infrastructure development is not the scarcity of capital but the lack of "institutional architecture capable of deploying it at scale."

The Hybrid Institutional Capital Model

The paper introduces the Hybrid Institutional Capital Model (HICM), which combines public credit enhancements with private investments to enable local governments to access large institutional funds. This model involves:

• Collaboration with local or regional intermediaries to aggregate projects and attract institutional investors.
• Utilizing public funds as first-loss capital to mitigate risks for senior investment tranches.
• Tailored risk allocation that aligns with the mandates of various investors.
• Encouraging institutional investment via standardized investment-grade vehicles.

Steshenko points to examples like the Connecticut Green Bank and the Montgomery County Green Bank as successful intermediaries in this process. These institutions have demonstrated how small public investments can catalyze substantial private capital inflows, achieving leverage ratios as high as 10:1.

International Success Stories

The study underscores that similar models have successfully operated in other countries, such as the UK Green Investment Bank, Germany's KfW, and Australia's Clean Energy Finance Corporation. These examples reinforce the potential for replicating this model across the U.S. to unlock huge sums from institutional investors.

A Practical Path Forward

Steshenko's proposal emphasizes creating intermediaries such as municipal, regional, or state-partnered green banks and integrating with federal initiatives like the Transportation Infrastructure Finance and Innovation Act and the $27 billion Greenhouse Gas Reduction Fund. Long-term governance independence and portfolio-level credit ratings would also be necessary to gain investor confidence.

Reflecting on the enduring need for infrastructure investment, Nima Farshchi, the executive director of Smith's Office of Experiential Learning, states, "The barrier to modernizing America's infrastructure isn't a lack of capital, but a lack of design. The Hybrid Institutional Capital Model shows how thoughtful financial architecture can translate community-level projects into investable opportunities for institutional partners."

The proposed HICM framework represents a scalable solution requiring no new federal legislation, only the implementation of innovative institutional designs. For further insights, read Steshenko's paper "Rethinking Municipal Financing: A Hybrid Institutional Capital Model for Local Infrastructure Development."

About the Robert H. Smith School of Business

The Robert H. Smith School of Business, part of the University of Maryland, is recognized for its leadership in management education and research. It offers a range of degree and certification programs in North America and Asia.

Contact: Greg Muraski, gmuraski@umd.edu

View original news release

---
Read More USA Works News