Infrastructure

Leaked Trump Infrastructure Plan Leans Heavily on States, Private Funding

After hinting as much, a leaked document outlines the president’s plan to put funding responsibility in the hands of states and private investment.

by Daniel C. Vock, Governing / January 23, 2018
The bulk of the president's plan would be targeted for infrastructure incentives designed to spur development that's largely funded by non-federal sources. (AP)

The Trump administration has hinted for months that its long-awaited infrastructure plan would lean heavily on new spending by states, local governments and the private sector. On Monday, a leaked outline of that plan seems to confirm that the federal government would take a back seat in funding its own infrastructure initiative.

But the outline also proposes a number of controversial changes, such as allowing states to toll existing highways, subsidizing improvements for passenger rail and encouraging states to “commercialize” interstate rest areas.

The outline does not indicate how much money the Trump administration will seek toward its infrastructure plan -- prior reports suggest Trump wants $200 billion in new federal spending to attract another $800 billion of outside investments -- but it does lay out how the administration would like to divide any new money that does materialize.

Half of the money in the plan, according to documents obtained by Politico and Axios, would go toward an infrastructure incentives initiative. It’s the biggest single component of the plan, designed to spur a variety of projects being built by states, local governments, regional agencies, utilities, non-profit agencies or public-private partnerships. 

But there are strict limits on the amount of federal money that could be spent.

The federal grants could not exceed 20 percent of a project’s costs, according to the documents. (By comparison, the federal government generally pays 80 percent of the cost for highway construction on federal routes.) No state could receive more than 10 percent of the total amount. (California has 12 percent of the country’s population; Alaska has roughly 18 percent of the country’s land area.)

The biggest factor in deciding which projects would get that money would be their potential to draw “new, non-federal revenue to create sustainable, long-term funding.” Another major factor would be the applicant’s ability to get new, non-federal money for operations, maintenance and rehabilitation.

In the past, state and local transportation leaders have chafed at the idea of the federal government relying more heavily on lower levels of government for infrastructure improvements. In fact, most states have raised their fuel taxes in the last five years to find more money for transportation projects, but Congress hasn't raised the federal gasoline tax since 1993.

A quarter of the new money would be devoted to a new rural infrastructure program. The rural money would be distributed in block grants to states, based on the state’s proportion of rural highway miles and population. The outline says the program would also address infrastructure needs on tribal lands and U.S. territories.

The idea seems to address criticism of Trump’s push during the 2016 presidential campaign and early in his administration for public-private partnerships. Officials in rural areas complained that the emphasis on P3s would leave rural areas left out, because they don’t have the volume of traffic or users to entice investors to, for example, build toll roads or run airports.

In what appears to be a nod to bigger, Elon Musk-style projects, another 10 percent of the plan would go toward “transformative projects” based on “exploratory and groundbreaking ideas that have more risk than standard infrastructure projects but offer a larger reward profile.”

The Commerce Department would lead the program, and it would cover sectors including transportation, clean water, drinking water, energy, commercial space and telecommunications. (Musk’s companies are working on hyperloops for transportation, better battery storage for the power grid and reusable rockets in commercial space.)

Among the other provisions, the plan would:

  • Increase the use of federal credit programs like Transportation Infrastructure Finance and Innovation Act (TIFIA) loans and Railroad Rehabilitation and Improvement Financing (RRIF) loans
  • Encourage the use of private activity bonds (PABs), which state and local governments authorize on behalf of private companies and nonprofits that build projects with major public benefits. Last fall, the U.S. House of Representatives voted to eliminate PABs entirely as part of its tax overhaul package, but the provision did not make it into the final law. The outline calls for eliminating caps on how many PABs can be issued for certain purposes. 

This story was originally published by Governing