Trump eyes public-private partnerships as future of infrastructure projects

Blog Post

Throughout his campaign, President Donald Trump promised to pour $1 trillion into rebuilding the nation’s infrastructure. Now, for the first time, the White House has put into writing an outline of the president’s infrastructure plan.

The president’s budget proposal sets aside $200 billion in federal funding for direct infrastructure spending over the next 10 years and vows to meet Trump’s stated goal by incentivizing private development and proceeding with projects the prior administration rejected, such as the Keystone XL pipeline. The administration is also drafting plans to incentivize states and cities into selling their assets to private firms (through federally funded bonuses to the states and cities that do so) and then funneling the proceeds of the sales into other infrastructure projects. The administration admits that the infrastructure plan relies heavily on what it calls “self-help.”

"Great rebuilding of America"

In a June 7, 2017 speech in Cincinnati, Trump said that businesses “are ready to invest in creating jobs, but we’ve been waiting for a responsible partner in federal government.” Trump called on Democrats and Republicans to join together “in the great rebuilding of America.”

Trump clarified that he will task a team, led by real-estate developers Richard LeFrak and Steven Roth, to oversee all projects included in his infrastructure bill to ensure timely and efficient delivery, vowing that “we’ll have people watching over each of these jobs, and every penny will county to them.”

In addition, the administration has outlined broad details of Trump’s rebuilding proposal that involve rolling back regulations that can slow down transportation projects and streamline the construction approval and permitting process. In particular, the administration is considering allowing permitting process steps to occur simultaneously instead of sequentially and enforcing page-limit restrictions for environmental reports, which can often reach tens of thousands of pages. The idea behind such options is to streamline the regulatory process to reduce costs and improve the environmental outcomes by delivering the improvements more quickly so that resources are spent on environmental mitigation rather than paperwork. Trump noted in his Cincinnati speech that the goal of these procedural changes will be to bring the timeline from as long as 10 years down to two years, calling it “massive permit reform.”

Ed Mortimer, executive director of Transportation Infrastructure at the U.S. Chamber of Commerce, said public-private partnerships are likely to always be part of the transportation funding solution but that only a small number of projects in densely populated areas can work as public-private partnerships. He estimated that there are “only about 10 percent of transportation projects that would even be amenable to P3s.”

Sources have also indicated that the administration’s infrastructure proposal will include mandated prevailing wage rates. That concession is thought to be necessary to bring Democrats on board with the plan.

Hurdles ahead for Trump's infrastructure plan

There will still be hurdles before this infrastructure plan is put into place. Senate Democrats contend that the president’s budget also proposes cutting the Department of Transportation’s infrastructure budget by more than 12 percent and the Army Corps of Engineers’ by more than 16 percent. Those Senate Democrats released an analysis showing a net cut to infrastructure programs of $145 billion over 10 years, including Amtrak, the Highway Trust Fund, and others.

The infrastructure proposal will be divided into four funding categories:

  1. Grants for rural areas to rebuild crippled bridges, roads, and waterways
  2. Loans for regionally or nationally significant projects
  3. Grants for states and cities to directly meet local transportation needs
  4. Incentive programs to help spur private sector investment in “transformative projects”

The administration has said it plans to have a legislative package ready by the third quarter. However, experts have suggested that even the Republican-controlled Congress may not support some of its proposed cuts. Senator Susan Collins (R-Maine), the lead appropriator on the Senate Appropriations panel that sets Department of Transportation spending said the appropriations committee would look at the president’s budget, but she expects that the committee will come up with its own approach, adding “in all the time that I’ve been here, I’ve never seen a single president’s budget survive the appropriations process.”

State and local governments, industry trade groups, and concerned citizens will certainly watch with great interest as the debate over the country’s infrastructure continues. Public-private partnerships remain a relatively new and seldom-used delivery method for projects, and all involved will need to gain expertise quickly to capitalize on the opportunities that are sure to exist in the coming years.

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