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Trump and P3 Infrastructure: What Now?

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Like much of the transportation infrastructure community, I was stunned and dismayed when President Trump suddenly told several Democratic members of Congress that “P3s don’t work” and are “more trouble than they’re worth.” He even trashed the largely successful experience of Vice President Pence’s home state of Indiana, which is moving toward a toll-financed, P3-delivered reconstruction and widening of its Interstate highway system.
After a week of reflection, and with no confirming actions or announcements from the White House, I’m less dismayed, for a number of reasons. First, nearly all P3 infrastructure projects are developed by state and local governments, which own the infrastructure. They will continue to launch such projects because they make sense—witness the $9 billion announcement by Maryland Gov. Hogan the week before, to use P3 concessions to add express toll lanes to three major highways.
Second, there is bipartisan support in Congress for the P3 infrastructure approach. In September 2014 a special panel of the House Transportation & Infrastructure Committee issued a report, “Public-Private Partnerships: Balancing the Needs of the Public and Private Sectors to Finance the Nation’s Infrastructure.” The report represented the consensus views of this bipartisan panel that included Ranking Democrat Peter DeFazio (D, OR). And just the other day, the House’s New Democrat Coalition released a three-page statement on infrastructure improvements that includes the use of P3s both for long-term fixes to existing infrastructure and to foster innovative solutions.
Third, it’s important to remember the old saw, “The President proposes, the Congress disposes.” Whatever approach the White House proposes, the actual infrastructure bill will be crafted, debated, and eventually passed by Congress. The latest indications are that the White House proposal will focus more on rethinking the respective roles of the federal government versus those of state and local governments. Since the latter own the infrastructure, this kind of rethinking is long overdue, especially given the ever-worsening fiscal position of the federal government. Despite the recent call from what we might call the Old Democrats (in this case, members of the Senate Environment & Public Works Committee) for $500 billion in net new federal spending on infrastructure—funding source unspecified—there is no hat from which to pull out a $500B rabbit.
We have aging highways, leaking municipal water systems, and decrepit locks on the inland waterways for two reasons. First, those who use and benefit from these systems have been unwilling to pay what it actually costs to use them—and seem to think that somebody else should do it for them. Second, those who manage these vital facilities have not leveled with the users about paying the real costs.
Users-pay/users-benefit is still the fairest and most effective way to pay for airports, seaports, waterways, highways, electricity, water supply, and other infrastructure for which the users are the ones who receive the vast majority of the benefits. That makes all of these systems viable candidates for revenue-based P3 reconstruction and modernization, but those decisions are properly made by the governmental jurisdiction responsible for the facilities—not by central planners in Washington.
As the federal government inevitably reduces its role as sugar daddy due to running short of money, there are things it can do to assist states, cities, and counties to become better stewards of their own infrastructure. Some of these were proposed by the Obama Administration: expanding tax-exempt revenue bond financing to all categories of P3 infrastructure, rather than just highway and transit projects; streamlining loan programs such as TIFIA and WIFIA, while continuing taxpayer safeguards; and liberalizing existing pilot programs such as those for airport privatization and toll-financed Interstate reconstruction.
I’d encourage the White House to forget about a grandiose $1 trillion total, and focus instead on giving state and local infrastructure owners better financing tools and assistance in using better procurement methods such as design-build-finance-operate-maintain (DBFOM). More important than an arbitrary dollar total is ensuring that infrastructure investment goes to the highest-value projects, where benefits solidly exceed costs. That’s how to make our economy more productive.
(This article first ran in the October 2017 issue of Surface Transportation Innovations.)
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