DALLAS -- President Trump’s $1 trillion infrastructure renewal program will focus on providing incentives for public-private partnerships that can draw on private capital to finance, build, and operate roads, bridges, and airports, administration officials told state transportation leaders at a White House briefing.
The plan, which is expected to be unveiled this fall, will make it attractive for states and localities to draw private investments to infrastructure projects or even sell them to the private sector to fund new roads and bridges, said Mick Mulvaney, director of the Office of Management and Budget.
“We’re looking at breaking this up into pieces,” Mulvaney said. “The largest piece of the package is going to be wrapped around incentives.”
Mulvaney and Transportation Secretary Elaine Chao met with some 150 state, local, and tribal transportation officials Wednesday.
The incentives aimed at encouraging P3s probably won’t be able to bring in the private sector investments needed for projects in rural areas so they will need more direct federal funding, Mulvaney said.
“We’re talking about targeting some of the money just for rural projects,” he said.
The White House said in May that the $200 billion of new federal funding that will be proposed in President Trump’s infrastructure renewal program will include $25 billion of grants set aside for rural infrastructure projects and $100 billion that states and local entities could use for their own infrastructure needs.
There is a tremendous amount of private money on the sideline waiting to be invested in infrastructure renewal projects, said Michael Likosky, a principal and head of infrastructure at 32 Advisors.
“There is at least $140 billion sitting in infrastructure funds, ready to be deployed,” said Likosky. “That money is available today and comes largely from our pensions, insurers, sovereigns, and family offices. That doesn’t even include the large multinational firms that invest from their bank accounts.”
Large domestic and multinational corporations are already investing in the U.S. infrastructure market by acquiring engineering and construction firms as the renewal effort gets underway, he said.
“You’re already seeing a tremendous upsurge in those mergers and acquisitions in California, which recently raised its gasoline tax to bring over $54 billion to the table over 10 years,” Likosky said.
The fear that a reliance on P3s that require a revenue source could mean more toll roads and bridges may be misplaced, he said.
“That’s a red herring,” Likosky said. “Most of the recent P3s have been based on availability payments, in which the operators receive annual payments, rather than toll revenues.”
States and local governments own almost all the public infrastructure in the U.S. and they should be deciding which projects should be funded rather than the federal government, said Transportation Secretary Elaine Chao.
“This administration wants to be your partner in repairing and revitalizing our country’s critical infrastructure,” Chao said. “The goal is to create a framework for infrastructure renewal that is more flexible and adaptable to the unique needs of your communities.”
Projects with assured financial support from private or public sources will have a higher likelihood of obtaining some of the new federal funding, she said.
The president is interested in transformative ways to build infrastructure projects with new technology, Mulvaney said, including the Hyperloop system of transporting passengers and freight in enclosed pods that would zip through buried vacuum tubes that has been proposed by Tesla and SpaceX developer Elon Musk.
“The president is very interested in trying to find that transformative, infrastructure technology, that is this close to being ready for market,” Mulvaney said. “The one everybody keeps talking about is Hyperloop.”
States and cities will be encouraged to sell some of their infrastructure assets to the private sector to raise money for new roads and airports, Mulvaney said.