OUTLOOK: Trump's Infrastructure Plan Challenges Transportation Status Quo

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DALLAS – President-elect Donald Trump's proposed $1 trillion, 10-year infrastructure program based on bringing more private investments to road and bridge projects has the potential to reshape U.S. infrastructure funding.

"It is still too early to say but we are confident transportation infrastructure investment will be addressed in 2017," said Ed Mortimer, executive director of transportation infrastructure for the U.S. Chamber of Commerce. "I think there is a lot of congressional interest in addressing infrastructure needs in 2017."

Don't expect quick work by Congress on the Trump plan, said Blake Rutherford, an attorney in the government and regulatory practice at Cozen O'Connor.

"Passage of an infrastructure bill within the first 100 days is ambitious, particularly considering the president-elect's suggested price tag of $1 trillion," said Rutherford, who was a Hillary Clinton delegate at the 2016 Democratic National Convention. "Congress is going to have to sort out how to pay for it and there is going to be rigorous debate about that."

The proposal developed by Trump economic advisors Wilbur Ross and Peter Navarro relies on $138 billion of federal tax credits to generate up to $1 trillion of private investments in roads, bridges, and public utilities. Trump has said he plans to nominate Ross as his secretary of commerce in the new administration. The president-elect has tapped Peter Navarro to head a newly created White House National Trade Council.

Few details of the infrastructure plan have been released since it was first announced in late October, and comments by the president-elect in an interview with the New York Times after the election seem to indicate that infrastructure is not one of his top priorities.

Asked if infrastructure would be the top priority of his administration, Trump said it would not.

"No, it's not the core, but it's an important factor," he said. "We're going for a lot of things," including tax reform, loosening of federal regulations, and replacing Obamacare.

"I am doing things that are more important than infrastructure, but infrastructure is still a part of it. We're talking about a very large-scale infrastructure bill," Trump said.

Sen. Chuck Schumer, D-N.Y., said in a television interview on Dec. 20 that he told Trump in several post-election conversations that Democrats would support the infrastructure proposal if it is not funded entirely through tax breaks for investors.

"We think it should be large," said Schumer, who will be the Senate minority leader in the new Congress. "He's mentioned a trillion dollars, I told him that sounded good to me."

Trump said he would push for the infrastructure bill even if some Republicans in Congress oppose it, Schumer said.

The biggest challenge to the Trump plan is the need for road and bridge projects with a revenue stream to repay the investors, said Ananth Prasad, director of the transportation practice at infrastructure firm HNTB.

"Most of the time, tolling is that revenue source," he said.

"It's good to have a president who is focused on infrastructure," Prasad said. "The plan will be based on tax credits to bring private investments into the funding mix. Tax credits are a good tool for attracting private equity."

There is no single solution for generating more investment in transportation infrastructure, Mortimer said.

"A variety of options must be considered, including raising and indexing the federal gasoline user fee, other fee options at various points of usage of transportation infrastructure, and possible other tax reform funding sources," he said.  "Each of these options will be politically challenging, but the business community is ready to support our elected leaders in making the tough choices to rebuild and modernize our nation's transportation infrastructure."

It's difficult at this point to determine how Trump's plan would alter transportation funding in the near term, said Michael Lexton head of the transportation public finance group at RBC Capital Markets.

"There are so many unknowns about the Trump plan that it is hard to say anything definitive," he said. "We're not sure what to expect."

The public-private partnerships in the Trump proposal are great alternative delivery system for projects, Lexton said, but there has to be a revenue source for them to work.

"If there's an attempt to use public-private partnerships as a way to bring more private equity into the funding of U.S. infrastructure, there has to be a return on those investments," he said. "It's not certain how that will be accomplished."

Raising the federal gasoline tax has been a "hot button" in Washington for years but it is becoming a diminishing resource for transportation infrastructure as cars become more fuel efficient and some don't use gasoline at all, Lexton said.

"An increase would certainly be a boost for infrastructure spending, but some argue that it is a regressive tax and can serve as a negative stimulus," he said.

Congress has been struggling for years to find a long-term funding solution to shore up federal gasoline tax revenues dedicated to the Highway Trust Fund, Rutherford said.

"That has eluded past presidents, and I am not sure that we will see any meaningful progress in this new Congress," he said. "So that means we might see potentially more modest-term solutions that perpetuate the status quo."

Congress likely will provide some infusion of additional revenue into the HTF before the current five-year federal funding measure, Fixing America's Surface Transportation Act, expires at the end of fiscal 2020, Prasad said.

"We don't know if the source of that revenue is going to be tax reform or if it will be a long-term solution or a one-time fix," he said. "We do know that the gasoline tax is broken and that the Highway Trust Fund is broken."

A change in attitudes is essential, Prasad said.

"The status quo is not working and change is needed," he said. "Whatever is done, we need to be bold and transformative in how we fund infrastructure."

There's an appetite in Congress for a large infrastructure bill but much less agreement on how to pay for it, said Marcia Hale, executive director of Building America's Future, an infrastructure advocacy group.

"Congress always likes to talk about infrastructure, but over the past four to five years most people have recognized the importance of robust infrastructure funding," she said.

"It is not realistic that Congress would be able to pass an infrastructure funding plan in the first 100 days of the Trump administration, and it will be hard to accomplish in the first year. But I know the president-elect is very serious about more infrastructure funding," Hale said.

The political maneuvering is underway, she said.

"What I'm hearing is that the House, Senate, and White House will get together and have one plan," Hale said. "The Democrats will probably have several plans, most of which will include an infrastructure bank of some sort."

Transportation remains as one of the few issues in Washington with true bipartisan support, said Bud Wright, executive director of the American Association of State Highway and Transportation Officials.

"Our hope is that the Trump administration and Congress can build consensus around a package of funding and finance options that everyone can agree on," he said.  "This provides a unique opportunity for the President-elect to come together with both Republicans and Democrats in Congress to get an infrastructure bill across the finish-line within the new administration's first 100 days."

A successful infrastructure package must include more federal funding to states in addition to the incentives for private investments, Wright said.

"A lot of what we've heard from the incoming administration so far has involved financing," he said. "Not all needed transportation projects are right for financing."

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