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June 23, 2017Published Article

Trump Infrastructure Proposals Continue to Evolve

President Trump has started adding more details to his campaign pledge to catalyze investment in American infrastructure. Candidate Trump called for $1 trillion in new investments into infrastructure over 10 years, with most of those dollars presumed to come from private investors who would increase their participation in revenue generating infrastructure projects, including toll roads and airports, rather than from an infusion of new or reallocated funds from the federal government.

In March of this year, the Wall Street Journal reported that the president was giving further consideration to priority infrastructure projects, including new high-speed railroads, auctioning the broadcast spectrum to wireless providers, and next-generation transportation systems, including those promoted by Tesla founder Elon Musk.

The president’s budget, released in late May, includes a variety of proposals to redesign the financing and delivery of aspects of America’s transportation, veterans’ health care, water, and energy infrastructure. The president has described these proposals as a $200 billion investment in infrastructure. With the release of its proposed budget and accompanying infrastructure initiative fact sheet, the Trump Administration has set forth several “key principles” that will inform its evaluation of infrastructure priorities. Those include:

  • Targeting federal resources to drive long-term changes in “how infrastructure is designed, built, and maintained,” as well as those projects that are a high priority from the perspective of a local region or the nation overall;
  • Supporting efforts by local communities, including tribal nations and state governments, to address their own infrastructure needs;
  • Leveraging private sector attributes that relate to infrastructure projects, including procurement methods, market based solutions, and a long-term focus on maintaining assets; and
  • Identifying opportunities for the federal government to exit from certain infrastructure functions and turn those functions over to the private sector.

Some elements of the infrastructure initiative that bear watching include proposals to:

  • Expand the authority of the U.S. Department of Transportation to issue tax-exempt bonds on behalf of private entities engaged to construct highways;
  • “Liberalize tolling policy”, allowing states to evaluate their transportation needs and creating more opportunities for private sector companies to construct and operate interstate rest areas; and
  • Leverage private investment in drinking water and wastewater infrastructure through the Water Infrastructure Finance and Innovation Act program, which funds up to 49% of eligible project costs.

President Trump used the week of June 5 to begin a more public unveiling of his plans for infrastructure investments. On June 5, the president singled out his proposal to create a “non-governmental entity” to manage the nation’s air traffic control system, in an effort to modernize and lower flying costs. Executives from United, Hawaiian, American, and Southwest Airlines were in attendance for the president’s speech. Major airlines have expressed support for the president’s privatization efforts. The plan is opposed by many Democrats and some Republicans, with some expressing concern that spinning off air traffic control from the Federal Aviation Administration would give control of a key asset to large airlines and special interests.

On June 8, the president delivered a speech in Cincinnati, Ohio, reviewing key elements of his infrastructure approach. He emphasized his plan to leverage $200 billion from the budget into $1 trillion in projects aimed at privatizing the air traffic control system, strengthening rural infrastructure and repair bridges, roads and waterways. The plan also seeks to lower the average permit time from 10 years to two years. In the speech, the president also pointed to the Transportation Infrastructure Finance and Innovation Act, low-cost government loans accessible to the private sector, as part of his solution.

Closer to home, Waukesha County Executive Paul Farrow and Assembly Speaker Robin Vos recently attended an ‘infrastructure summit’ at the White House, along with other state and local government leaders, to discuss federal transportation and infrastructure issues. Following the meeting, both Farrow and Vos expressed support for the Trump’s administration’s efforts to give more power and flexibility to states when it comes to infrastructure spending decisions.

Democratic leaders in Congress have argued that the effect of the president’s budget proposals in total would be to reduce overall federal investment in infrastructure, as the budget also proposes cuts to infrastructure programs including funds that support highways, airports, and Amtrak train service. Democrats are proposing $1 trillion in a federal spending plan for roads, bridges, water systems and schools, and expanding broadband. Some commentators have further noted that it may be difficult to attract private investment in public infrastructure projects, as the president has suggested, as infrastructure investments average a 5% rate of return, while private sector returns can be double.

Although the president has not yet discussed many specifics of his infrastructure agenda, Transportation Secretary Elaine Chao advised that a detailed legislative proposal is expected sometime between July and September.  

In Wisconsin, a per-mile fee for heavy trucks has been proposed as an alternative to tollways. On June 13, amidst contentious state budget negotiations, a state Republican representative floated the idea as an easier-to-implement alternative that would close the funding gap for Wisconsin’s road fund. While some majority members have stated “all options are on the table,” Senate Majority Leader Fitzgerald has not yet commented on the proposal. Unsurprisingly, the Wisconsin Motor Carriers Association, a key group in the industry, has declined to back the proposal citing concerns about margins and prices being passed to consumers. And Democrats continue to push for increasing existing gas tax to generate more revenue for transportation infrastructure.

On the national level, at the SelectUSA Investment Summit in Washington (June 18-20), the White House stressed the importance of foreign investment’s role in the president’s infrastructure plan. Treasury Secretary Steven Mnuchin stated foreign investment will be critical in insuring American taxpayers do not burden the full cost of infrastructure projects. Current foreign infrastructure investors include regions such as Australia, Canada, Europe, and the Middle East. The White House also recognized asset recycling – in which public assets are sold and the proceeds are used to fund other projects -- as a viable option.

Additional public announcements of other aspects of the president’s infrastructure proposals are expected in the coming days and weeks.

MBS Intern John Zordani contributed research to this article.

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