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How will President Trump fund his proposed infrastructure projects?

Yogi Berra once said, “It’s hard to make predictions, especially about the future.” It’s even harder when the news cycle is 24 hours – and more than a month between magazine issues.

But I’m going to take a chance as the biggest variable in the funding of transportation in decades is what Trump’s infrastructure plan will look like and what will actually be adopted. I’m calling it Trumpfrastructure because it’s likely to be different from anything we’ve ever seen before.

Let’s start with the promises of candidate Trump and newly elected President Trump. He has made infrastructure a main pillar of his plans. It was not so long ago that we all sat with bated breath to hear it just mentioned in a presidential address. Then it became a tool of economic recovery. And now it’s touted for what it truly is – rebuilding the core of our country.

As always, the key question is how to pay for it. Most road funding comes from state and federal gas taxes and we know that the federal one hasn’t been raised in 20 years. We have seen a handful of states recently raise their gas taxes, which, while a good short-term solution, pays no heed to plug-in electrics and hybrids – but that’s another discussion.

Most of the Trumpfrastructure funding ideas floated rely on public private partnerships (PPP). There has been some talk of repatriating corporate profits held overseas. There has been some talk of long-term infrastructure bonds and even some talk of additional federal funding from the General Fund. All of these will be ‘scored’ by the Congressional Budget Office and Congress will be presented with the bill. Of these, the lowest cost will likely be tax credits for PPPs. In a world of ‘pay fors’, I think we can expect the lowest-cost idea to be the most palatable to the majority of congressional voters.

Here is where the problem arises for the folks that want funding for highways, bridges and ITS. They will not have a revenue stream to attract PPP investment. Toll roads that are financially viable have already been built. Unbuilt projects are unbuilt precisely because they are not financially viable.

There is another problem that’s even more significant. Infrastructure – even Trumpfrastucture – will include dams, water supply, gas lines and the power grid. All are in serious need of investment and have one thing in common that highways lack. They all have an associated revenue stream. Investments in them can be recouped with permission to raise the rate base, but states that want the funding might just offer that permission to the public utilities.

It’s very complicated and one short column does not begin to do the issues justice, but I do think that we in the surface transportation business have reason to be wary of the promises and focus on what is within our control to rebuild the infrastructure. If you’ve been reading this column, you know that means tolls and road user charging.

Larry Yermack is strategic advisor to Cubic Transportation Systems, USA. lyermack@gmail.com

 

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