The Trump Infrastructure Plan: big ambitions, open questions

The plan is out, and it’s ambitious: it aims to transform infrastructure finance and investment in this country. Here are the key takeaways, our take on them, the big questions, and the implications. 

The plan 

Takeaway #1: Going local. For most infrastructure projects in which it participates, the federal government would no longer provide the lion’s share of funding for projects, but only 20%. States and local governments will have to find the rest. 

Our take: Regardless of debate on the proper role for the federal government, the country is in the midst of a soaring budget deficit with no political will for new taxes. Limited federal funds may be the new reality.

trump infrastructure plan, key takeaways

Takeaway #2: Unlocking private finance. To attract more private money, the plan would expand Private Activity Bonds, TIFIA and WIFIA; allow commercial development of rest areas and other facilities on interstates; allow tolls on interstates with revenue recycled to infrastructure; create a capital fund for federal lands to pay for deferred maintenance; and sell government assets.

Our take: There’s a lot of private capital eager to invest in infrastructure, and there’s room for public-private partnerships that create revenue even in projects that aren’t traditional money makers (such as streetlights). Regardless, many projects don’t offer the revenue stream that the private sector needs.

Takeaway #3: Cutting regulations. Among the many measures to ease regulations are: creating a two-year environmental review with a single lead agency and lifting federal oversight and compliance requirements where federal funds play a minimal role.

Our take: Regulations can be burdensome. The US should be able to get projects approved as quickly as other advanced economies — such as Australia — do. The plan’s measures could help if local and state governments can update their procedures and find the right people with the right skills to lead the initiatives.

Takeaway #4: Developing the workforce. The plan has several provisions to increase the supply of skilled workers for infrastructure — including reallocating existing funds to encourage more technical education and apprenticeships. It would also require projects with federal funds to accept out-of-state skilled trade licenses.

Our take: If infrastructure investment really does pick up, we will likely see a shortage of skilled labor — so much so that the plan’s measures may not go far enough.

The questions

There’s a still a lot we need to know before we can judge if this plan will fulfill its potential. Here are the big questions:

  1. Does the federal funding suffice? The plan’s proposals add up to $200 billion, but the President’s budget may cut nearly that much infrastructure spending elsewhere, leaving a net increase of close to zero. Even $200 billion may not be enough to jumpstart the investment this country needs.
  2. Can state and local governments raise the cash? The plan implies they’ll raise $1.3 trillion. That would have to come either from taxes or private investors. But taxes are unpopular, and many projects aren’t suitable for private investment without a big helping hand from government.
  3. Does it do enough for rural communities? The plan allots $50 billion for a rural infrastructure program. That’s not a lot compared to these communities’ deep needs not just for new projects, but to repair, operate, and maintain existing ones.
  4. Will it spur innovation? Under the plan’s “infrastructure incentives program,” only 5% of the evaluation criteria’s weight goes to plans to incorporate new technology, and only 10% goes to updating procurement policies and project delivery approaches. Meanwhile, the pace of innovation in other parts of the world is accelerating.
  5. Will it pass Congress? This bill would need bipartisan support. In the current environment, whether that can happen remains to be seen. 

The implications

If passed, the plan will likely impact all stakeholders.

  • State and local officials: The plan could kick off efforts to bring hybrid state/local/private funded projects to the fore. Many will need to update their skills and processes. 
  • Private investors: With incentives and expanded credit enhancements, the opportunities could surge—especially for innovative PPPs that can create revenue in non-traditional areas. 
  • Builders and suppliers: If the money comes through, we could see a big uptick in orders and more emphasis on innovative projects and delivery methods. 
  • Federal officials: The plan will require new procedures and processes to facilitate the new screening and investment selection processes.

Overall, the plan is promising—but for now, no more than that. We’ll pay close attention as the plan works its way through Congress and as the different stakeholders react.

Contact us

Peter D. Raymond
Global Advisory Leader, Capital Projects & Infrastructure
Tel: +1 (703) 918 1580
Email

Daryl Walcroft
Principal, US Capital Projects & Infrastructure Leader
Tel: +1 (415) 498 6512
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Riz Shah
Principal, US Capital Projects & Infrastructure Public Sector Leader
Tel: +1 (202) 730 4242
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Darin Siders
Partner, Capital projects & infrastructure (Mergers & Acquisitions)
Tel: +1 (646) 818 8086
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