American infrastructure has fallen into "disrepair and decay," said President Donald Trump in his inaugural address Friday.
Airports, high-speed rail, and roads, particularly in dense metropolitan areas, could be particularly appealing targets for infrastructure funding under President Trump's $10-year, $1 trillion infrastructure plan.
The President's words on the campaign trail and tendencies as a public figure over decades informed those conclusions from stakeholders and infrastructure experts trying to gauge how Trump might be most interested in directing the 10-year, $1 trillion infrastructure plan he campaigned on. The campaign's only formal plan to date is a relatively brief paper proposing $137 billion of tax credits to be authorized by Congress and available only to investors in revenue-producing projects such as toll roads, toll bridges, and airports.
But while Trump's actual infrastructure plan remains light on specific areas of focus, he has left clues in his words and in his actions as a real-estate developer. Trump made very negative mention of the state of U.S. airports during the campaign, characterizing them during the Sept. 26 debate at Hofstra University in New York as "third world." Trump specifically mentioned several large airports, including LaGuardia Airport and John F. Kennedy International Airport in New York City, Newark Liberty International Airport in New Jersey, and Los Angeles International Airport as being inferior to facilities in the United Arab Emirates, Qatar, and China.
There is a wide range of infrastructure categories, a common list might include general buildings, refineries and petrochemical plants, water and wastewater treatment plants and their accompanying collection and distribution systems, municipal solid waste collection and disposal, pipeline networks, schools, power generation plants.
However, the heart of infrastructure is generally taken to mean transportation: highways, bridges, seaports, airports, mass transit, the lock and dam system on our inland waterways, freight rail and the supply chain. In other words, what we do around here at TranSystems; these are our clients.
The question arises as analysts, the media, and transportation and infrastructure professionals look to bring the Trump infrastructure program into focus, as it has not yet been made concrete, as might be understandable in the very early days of a new administration.
It doesn’t mean that fine people don’t want to spend time speculating so that they can project their sector of the economy as being particularly attractive for investment.
It is the transportation professional’s best guess that the plan does indeed revolve around transportation. Why?
At least as stated throughout the campaign, the Trump plan leans heavily on public private partnerships and full privatization. It suggests that Congress finance $167 billion to be made available to private borrowers to serve as equity in infrastructure projects. It further seeks to give significant tax credits to increase the attractiveness to borrowers.
Along with the borrowers’ own resources it is intended that investments be made in revenue-producing assets – as mentioned, in
transportation this would be tolling or other fees – in contractual agreements with municipal authorities or regional agencies. This, according to the plan, would fund up to a trillion dollars of infrastructure.
This is a financing, not a funding, mechanism and requires that the assets be fee-producing. This is intended by all accounts to run alongside the ordinary distribution and obligation of funds via the FAST Act, the federal surface transportation bill.
Not all states welcome or allow such privatization, though many do, and many others do not have the density of population or the traffic that would support toll revenues.
Importantly, and hopefully this answers the 'why' posed above, very few others of these categories besides transportation lend themselves to privatization, and to somehow monetizing their use. Many of these sectors are already fully private, many others, say schools, essentially generate no revenue at all.
The allotted funds (the $167 billion) are meant to be paid off by the additional taxes generated by the increased economic activity, income taxes in the case of people working on the project, corporate taxes in the case of the companies doing the work. In this way the plan is presented as revenue-neutral, requiring no specific budget outlays and thus not detrimental to the budget resulting in deficits.
There will no doubt be a certain amount of water and watewater treatment privatizations, but from this corner it looks as though the projects most likely to be the target of private investment via the Trump plan (and a plan only it is for now) will be the major transportation assets: highways, bridges, airports, and ports, with passenger rail and freight rail well-positioned by way of their important national and economic security functions to receive some funding as well. -- lsm