The long-anticipated Trump infrastructure plan is almost ready, but the preview of that plan as reflected in the administration’s proposed FY 2018 budget has already prompted strong reactions. Two things are clear: the promised $1 trillion dollar investment in infrastructure may be illusory, at best, and the plan’s outline represents a fundamental shift in the federal government’s role in planning and developing infrastructure.
The President’s closest infrastructure advisors have deep background and expertise with public-private partnerships (P3), the most traditional vehicle for inserting private assets into public facilities. These same advisors also likely harbor the frustration felt by many in the infrastructure sector that the U.S. has lagged behind other developed nations in the use of P3s to finance infrastructure development.
It is no surprise then that the proposed budget contains a line item of $200 billion over the next decade to incentivize private and state spending. At the same time, it cuts $96 billion from the Highway Trust Fund over 10 years, almost $1 billion from the FTA’s capital transit program in the next year alone, and (as predicted) slashes $500 million for the locally based TIGER grant program.
The administration argues that the $200 billion in federal spending will encourage additional private and state-level investments, which would add up over time to the overall goal of $1 trillion. While there is little disagreement that P3 activity in the U.S. is a fraction of what it could be, history suggests that the investment seed proposed by the administration may not grow the magical infrastructure beanstalk.
According to the Harvard Kennedy School of Government, from 2005 to 2014, a total of 40 P3 transactions were completed (covering roads, airports, ports, parking, water utilities, and others), with a value of $39 billion. Not bad, but this represents a fraction of the total federal investment in public facilities, and is less than one full year of just the average annual highway spending during that time frame. As my former USDOT colleagues have said repeatedly, P3 can be an effective tool in our country’s infrastructure spending toolbox, but it is only one tool.
Could the proposed bolstering of already successful federal loan programs like TIFIA and financing instruments like Private Activity Bonds create greater private investment activity? Absolutely. Will it create a level of investment equivalent to the $1 trillion talking point? Highly doubtful.
Even with the welcome additional line item for federal loan programs, the proposed budget’s greater significance perhaps lies in the how the spending plan reflects a seismic shift in the federal government’s role in building infrastructure. The administration asserts that federal rules, mostly in the environmental arena, bog down important projects in red tape and permitting delays. Readers of this blog know that I have advocated consistently for reforms in how agencies assess and permit major projects. Yet, blaming the country’s woeful recent record in infrastructure investment on environmental requirements is somewhat misleading.
The administration famously rolled out a complex flowchart of how a typical highway project gets permitted, and the chart quickly went viral. For those of us who have spent a career in the infrastructure arena, it was worth a good chuckle. But even those involved with this effort would likely admit that the graphic bears little resemblance to the permitting of a typical highway project.
John Porcari, the former U.S. DOT Deputy Secretary, recently testified before the Senate Environment and Public Works Committee. He explained what has been understood for a long time: that only 4 percent of all transportation projects require a full environmental impact statement. Almost 90 percent of all projects are approved with the simplest and quickest NEPA approval, a categorical exclusion. Mr. Porcari also detailed the many reforms already in place through recent authorization bills that have successfully streamlined environmental reviews, and other best practices that have led to tremendous successes on projects of regional and national significance. More could be done, he said, but let’s not shift focus away from the more common causes of delay, growing out of local project-specific factors (political and otherwise) which understandably arise during complex project development.
Congress and the administration will soon engage in a heated political philosophical debate in the context of the upcoming budget battle, as well as negotiations over expected infrastructure legislation. Questions on the table include the following:
- What is the most appropriate role of the federal government in infrastructure development?
- Is public financing democratic (little d) when it is implemented through a gas tax or a vehicle mile charge, or does a reliance on federal financing promote unacceptable inefficiencies?
- How much incentivizing is necessary to unlock greater private or state investment, or is it too uncertain to rely on state governments to choose to spend more on infrastructure?
- Can government make environmental streamlining “business as usual,” or are more drastic measures required to reduce the project approval process?
Transportation Secretary Chao is 100 percent correct when she says, “This is a democracy; they’re not easy questions.” How our current political leaders choose to answer these questions will have ripple effects across America, perhaps for generations to come.