In late September, President Donald Trump changed his mind on PPPs or Public-Private Partnerships, one of his bedrock funding mechanisms for funding infrastructure. He campaigned on the idea of utilizing PPPs and seemed to be for the idea all the way up until he reversed his support when talking to the House Ways and Means Committee about tax reform on September 27. NY Representative Brian Higgins told reporters that during the meeting, Trump “emphatically rejected what everybody assumed was his position relative to financing infrastructure.” Higgins added, “He dismissed it categorically and said it doesn’t work.”
Earlier in the summer, the Trump administration revealed only one specific of the upcoming infrastructure plan—allow the federal government to kick off the program with $200 million in direct spending which was intended to spur enough private investment to cover the remainder of the at least $1 trillion currently needed.
The NMA wrote a newsletter about PPP Myth Busters in March 2016. Three different failed PPPs are mentioned with passing reference made to Indiana’s most recent and ongoing PPP disaster which occurred on Governor (now Vice President) Mike Pence’s watch. Pence has been the Trump administration’s point man on rebuilding the country’s infrastructure.
Perhaps the president needs Democrats to pass his infrastructure plan and is trying to find a connection to get Dems to help. In late September, Trump advisor/son-in-law Jared Kushner told business leaders during a Manhattan breakfast meeting that Trump is closer to Senate Minority Leader Chuck Schumer than to Senate Majority Leader Mitch McConnell when it comes to infrastructure spending.
Fox Business News reported that this pivot might not sit well with Wall Street. A White House official confirmed that the administration was looking at other ways to fix infrastructure. The unnamed official added, “Just like with any new policy, there are legitimate questions about how PPPs can best be incorporated into our nation’s infrastructure program.” The official later added that PPPs “are certainly not the silver bullet for all of our nation’s infrastructure problems and we will continue to consider all viable options.” That is perfect politico speak for “The PPP option isn’t dead yet despite what you hear from us.”
PPPs have been part of the infrastructure industry for over ten years. Banks and even foreign consortiums generally serve as financial advisers or investors in order to jumpstart bridge and toll road projects. The financial sector can make big money serving as advisers. Private investors often set road user fees, usually through tolling, with few controls in place to protect motorists from rate gouging.
The president also indicated at the meeting last month that his administration would seek to pay for upgrades through direct federal spending—either by paying for projects with new tax revenue or taking on debt. He expects state and local governments to do the same.
This past week, Transportation Secretary Elaine Chao said in a speech that Congress will more likely not address infrastructure before tax reform. Speaking in Phoenix, Arizona before the American Association of State Highway and Transportation Officials, Chao said, “The congressional legislative calendar is really packed for the rest of the year, so tax reform will come first.”
Some Washington observers and industry groups want Congress to use tax reform to carve out more revenue for the Highway Trust Fund to put it on more sustainable footing. The Trust Fund will run out of money in 2020 after the current five-year funding measure expires.
In the meantime, Chao said that the Department of Transportation (DOT) is streamlining regulations, particularly around environmental reviews. The DOT continues to fund projects through the Infrastructure for Rebuilding America (INFRA) and Transportation Investment Generating Economic Recovery (TIGER) grant programs.
Government continues to grind on; we must be ever watchful that another position reversal doesn’t bring public-private partnerships back to the forefront of proposed infrastructure funding mechanisms.