While we got a sneak peak of President Trump’s proposed infrastructure plan back in January, on Feb. 12, 2018, we got the full outline of the President’s plan. Combined with the President’s budget, which was released the same day, it has become clear where the White House’s focus, in terms of an infrastructure plan, has been directed.
The plan released by the White House focuses on four primary funding objectives for building infrastructure: incentive grants, rural infrastructure grants, transformative projects, and current program reforms. Additionally, the plan contains an added workforce development component to address the potential employment needs associated with increased infrastructure investment. The plan calls for an investment by the federal government of $200 billion which will, once leveraged with additional financing mechanisms, provide at least $1 trillion in infrastructure investment.
The first and largest component of the White House’s plan is incentive grants. Under the proposal, the U.S. Department of Transportation, the Army Corps of Engineers, and the EPA would administer the allocation of incentive grants to applicants to provide the final financing component needed for the project to move forward. In other words, potential recipients will apply for funding for projects that already have a substantial portion of the project financed. Applications will be assessed based on a weighting system that includes the dollar value of the project, evidence of sustainable, non-federal, and long-term funding for both the project’s construction and the upkeep and maintenance after completion, and efficiency and operational improvements. Successful projects cannot receive grants of more than 20% of total project costs and no state can receive more than 10% of available funds. Adhering to the President’s budget, this program would receive $100 billion in funding.
Second, grants for rural areas will support rural areas without the financial resources, credit worthiness, or tax base to build infrastructure. Acknowledging that the White House’s own formula, which weighs size and cost in determining grant awards, disadvantages rural areas in competition for incentive grants, the rural grant program will provide block grants to states based on a ratio of rural population and rural road-miles that has not yet been revealed. Eighty percent of the $50 billion allocated ($40 billion) will be used for these block grants while the remaining 20 percent would be reserved for “performance grants” to states that prove to be good stewards of their block grant allocation with a preference to those states that prove most effective at leveraging funds from existing federal programs.
The third component to the President’s infrastructure plan is the transformative project program. The Department of Commerce would be in charge of administering this program to provide “bold, innovative, and transformative infrastructure projects that could dramatically improve infrastructure.” These types of projects are capable of generating revenue, but may have a difficult time securing private investment due to the size, innovation, risk, or degree of proven applicability. Federal money for these projects can be used for trial demonstration, project planning, and capital construction with escalating maximum allocations. Think of these sorts of projects as a new use of technology, building method, or infrastructure that would provide significant positive impact on the nation, state, and/or metropolitan area. The White House suggests these types of projects will support and incentivize research and development in infrastructure.
Finally, reforming and changing the scope of existing federal programs round out the infrastructure plan. $14 billion will be given to existing infrastructure programs (TIFIA, WIFIA, RRIF, RUS) to expand the credit subsidy authority to make new loans and loan guarantees. These programs, and the leveraging they utilize, provide the bulk of the leveraging the plan counts on to reach the $1 trillion in investment figure the President promised on the campaign trail, and the plan outlines ways to make these programs easier to use by widening the scope of projects eligible for funds. $10 billion will endow a revolving fund to allow the General Services Administration to purchase real estate. Lastly, $6 billion represents the cost, in terms of lost revenues to Treasury, of removing the volume cap for transportation and infrastructure project Private Activity bonds, but will require some level of state or local ownership.
Additionally, the plan outlines a series of changes to existing programs, the biggest of which is the idea that projects with minimal federal funding will be exempt from certain paperwork burdens. The plan also outlines significant statutory changes for specific infrastructure modes. As examples, the plan proposes allowing states to toll highway miles so long as the revenues are used for infrastructure, the Clean Water State Revolving Fund would be allowed to lend to private owners (the Safe Drinking Water Revolving Fund already does this), and would allow small hub airports to apply for permission to utilize passenger facility charge (PFC) for airport infrastructure projects with much smaller regulatory burdens. The permitting process for federal agencies will also be streamlined and synchronized to work concurrently rather than sequentially.
The White House acknowledges, as the infrastructure construction industry has been advocating for years, that investment in infrastructure creates jobs. With the increased investment for construction and maintenance of infrastructure through this infrastructure plan, the demand for skilled workers will increase. To prepare the industry for what could be a boon in new projects, the President’s plan calls for three significant changes to the access to education and workforce development programs. First, the expansion of Pell Grant eligibility to high-quality, short-term programs will allow vocational students greater access to federal student-aid. Second, reauthorizing and reforming career and technical education (CTE) to allow greater flexibility in apprenticeships, on-the-job training, and eliminating bureaucratic barriers between industry and education institutions will ensure students receive high-quality education and skills for the workforce. Third, reforms to the Federal Work Study program (FWS), which are currently targeted to four-year colleges, to better distribute aid to in-need students in vocational schools will allow greater access to these programs for low-income and low-skill students seeking assistance with their education.
There are some things missing from the plan; two big things in particular. First, there is no mention of how the $200 billion will be paid for, which could add to the time and complexity of any plan moving through Congress. Additionally, the plan makes no mention of how to address the looming insolvency of the Highway Trust fund, a potentially $150 billion, or so, additional cost to the bill when it stars moving in Congress.
Lastly, it’s unclear how Congress will respond both in terms of structure and in terms of specific policy. The House Transportation and Infrastructure Committee has expressed in its priorities the need to get an infrastructure bill done, but remains sparse on details. House Ways and Means Committee Chairman Kevin Brady (R-TX), who tried to kill PABs in tax reform, has said he opposes the expansion of PABs in the infrastructure package. Chatter from both Democrats and Republicans in Congress can be categorized as conceptually in favor of investing in infrastructure with a range of opinions on how, where, and at what cost.
What is clear, is this issue will be heating up this spring in time for NUCA’s Washington Summit.
Will Brown is NUCA’s director of Government Affairs.