On infrastructure, hope remains but skepticism reigns
PHOENIX – Infrastructure advocates are bearish on the near-term success of President Donald Trump’s ambitious plan to “rebuild America’s crumbling infrastructure” following the apparent collapse of his push to repeal and replace the Affordable Care Act, despite the administration’s continuing assurances that transportation, where the backlog is greatest, is a top priority for Trump.
The President’s 10-year $1 trillion infrastructure plan, which likely will rely on incentivizing private investment in certain types of infrastructure including energy and other non-transportation projects, has an uncertain outlook as the administration prepares to present legislation to a Congress deeply divided both along party lines and within the President’s own Republican Party. Transportation Secretary Elaine Chao said at a White House town hall with business executives Tuesday that the legislation could come as soon as May. Trump told the business leaders that his emphasis is going to be on “shovel ready” jobs that can get started very quickly.
“We’re going to be very strong that it has to be spent on shovels and not on other programs,” Trump said. “If you have a job that you can’t start within 90 days, we’re not going to give you the money for it. I don’t want to send $1 billion to New York and five years later find out it was never spent.”
But the President, who ran in part on his reputation as a dealmaker, has struggled to build the coalition of support he needs to advance his legislative agenda. A Republican replacement for the ACA, popularly known as Obamacare, collapsed after House Republican leaders and the White House were unable to convince some of the most conservative Republicans to back the bill. The legislation had no Democratic support, and would likely have had an even tougher time advancing in the more moderate
Senate even if it had cleared the House.
Yet there is bipartisan agreement that infrastructure spending is necessary, with policy groups representing state departments of transportation, road builders, and engineers sounding a near-constant alarm about the crumbling state of America’s infrastructure. The American Society of Civil Engineers released its latest “Infrastructure Report Card” for the U.S. last month, giving the nation’s overall grade a D-plus. The report card cited estimates of hundreds of billions of dollars in unfunded highway projects, as well as much-needed investments in ports, mass transit, aviation, and other critical infrastructure.
Jack Basso, principal and transportation financing consultant at Peter J. Basso & Associates LLC and former chief operating officer of the American Association of State Highway and Transportation Officials, said he believes that the failure of the healthcare legislation hastens the need for an infrastructure bill.
“I think it (failure of healthcare reform) makes the need more urgent,” Basso said. “So I think it may help to move up an infrastructure measure. However, the congressional leadership still seems lukewarm to moving this year.”
Basso said that help for infrastructure finance may be better placed in a comprehensive tax reform bill, another key Trump priority.
“I believe the tax reform bill is the best shot,” Basso said.
Bob Poole, director of transportation policy at the Reason Foundation, also cast doubt on the infrastructure bill’s near-term outlook, though he sees some hope for standalone bills and tax reform efforts.
“I’m still somewhat skeptical that we will see a major infrastructure bill this fiscal year,” Poole said. “The upcoming major policy battle will be over tax reform; that might include something for infrastructure, in the form of repatriated corporate tax revenue, but I wouldn’t count on that since many conservative members want to use those revenues to offset corporate and personal income tax rate reductions.”
“The most likely piece of infrastructure to see action in this fiscal year is air traffic control, which the President has said he wants separated from the Federal Aviation Administration and converted into a user-fee supported nonprofit corporation. That would lead to a large reduction in passenger ticket taxes and the use of revenue bonds
to support large-scale capital modernization of the air traffic control system.”
Chris Hamel, head of U.S. Municipal Finance at RBC Capital Markets, said that the healthcare bill experience could be looked at two ways.
“The healthcare experience represents further evidence of the challenge of getting something through Congress,” said Hamel. “Or you could say it was an excellent
learning lesson on how to approach issues in the future.”
“I am encouraged that infrastructure remains a top three issue among Washington policymakers with respect to what’s on their agenda,” he added.
Hamel said it isn’t clear how impactful the bill will be for the muni market, but hopes that it will encourage P3 development in a way that is positive for the market.
Market participants have so far been frustrated by the lack of specificity from the
Trump administration, which so far has advanced a plan that seems tailored more toward projects with a clear user fee revenue stream available. Fitch Ratings has called for a more specific proposal on how non-revenue-generating projects will be financed.
“The policy goal would be to better facilitate the use of tax-exempt financing in the P3 execution model,” Hamel said.
Gary Cohn, director of the White House National Economic Council, has said that the administration’s infrastructure policy would cover a wide variety of projects, including an upgraded air traffic control system and a modernized electric power grid.
Jim Watts contributed to this report