Presidents Infrastructure Plan to tap Private Sector for $1 Trillion

WASHINGTON—President Donald Trump’s plan to tap the private sector to rebuild $1 trillion worth of roads, bridges and rails has encountered an early problem: geography.

The administration says it will rely on private investors to supply the vast majority of cash to support a decadelong infrastructure rebuilding effort. But members of Congress from rural areas are wary.

That is because private investors are looking for infrastructure projects that throw off steady streams of revenue, from which they derive their profits, and those tend to be found near population centers.

Some rural lawmakers have already begun to raise doubts about the few specific infrastructure proposals Mr. Trump has made.

Country Trail going into city

Republicans such as Sen. Jerry Moran of Kansas have questioned Mr. Trump’s endorsement of a plan to privatize the air-traffic control system, saying private ownership could give short shrift to small rural airports.  Sen. John Barrasso, (R., Wy.), chairman of the Senate’s environment and public-works committee, has told local media outlets that an infrastructure package shouldn’t require tolls on the lightly traveled highways in his state, the least populous in the country.

Support from Republicans, many who represent rural areas, will be crucial in getting a large infrastructure package through the GOP-led Congress, since many Democrats have said they would oppose efforts to rely on tolls, rather than federal aid, to pay for building projects.

Mr. Trump’s fellow Republicans have expressed concern about his proposals to rely on private investors to fulfill his $1 trillion promise since the administration’s first days. Sen. Shelley Moore Capito, (R., W.Va.), quizzed Transportation Secretary Elaine Chao during her confirmation hearing in January about how the administration would apply its plan in rural states, which can lack the traffic necessary to raise funds for investors through tolls and user fees.

Ms. Chao avoided the question. “It’s a huge issue that demands the best thinking of all of us,” she said.

That question looms large now that the administration has said it would intentionally shift more responsibilities to pay for infrastructure to cities and states, in some cases providing incentives to those local governments that are willing to raise fees and tolls on residents to do so.

Incentives to bring in private investment will be beneficial, said Ananth Prasad, a senior vice president at HNTB and former secretary of transportation for the state of Florida.

But, he said, it “doesn’t solve the overall problem” of finding the revenue to pay for investments.

Whether construction is funded and managed through traditional government outlays or through private investment consortia, Mr. Prasad and others in the construction business say, someone has to pay.

Amid a whirl of other controversies such as the hearings on Russia’s involvement in the election, Mr. Trump is continuing a series of events this week to highlight his commitment to infrastructure building, though the administration hasn’t issued a detailed proposal and aides wouldn’t say when one might emerge.

The president was set to meet Thursday with mayors and governors at the White House to hear their views and concerns. And senior administration officials said the president would visit the Transportation Department on Friday to repeat his calls to cut back on permitting requirements that can delay the launching of major construction projects.

The administration has signaled its openness to rural concerns. The White House told reporters on the way to a presidential speech in Ohio on Wednesday that the president’s program would include federal grants for bridges, roads and waterways in rural areas. Because the administration hasn’t released a concrete plan, it isn’t clear whether similar grants will be offered to urban areas.

Mr. Trump hinted at a willingness to raise the gas tax as one alternative way to fund an infrastructure package in an interview with Bloomberg last month. But White House press secretary Sean Spicer walked that back within hours, telling reporters Mr. Trump hadn’t endorsed the idea.

Mr. Prasad said that a gas-tax increase could be beneficial and that Congress should take its lead from Republican-leaning states, including Tennessee, Utah, Georgia and South Carolina, that have raised their own gas taxes to fund highway repairs.

Some urban areas will be able to fund new projects like the Port of Miami tunnel, a public-private partnership Mr. Prasad helped oversee. That project is a 30-year partnership in which the state is reimbursing private investors who financed the construction through a series of “availability payments,” paid out of Florida gas tax revenues, as an alternative to a toll.

“It’s a good model of public-private partnership,” Mr. Prasad said, but one that requires a large and steady tax base, or a large stream of traffic that states are willing to toll to raise revenue.

“That can’t work on a reconstruction of I-70 in Kansas and Missouri,” he said, “because if you’re not going to toll that, they don’t have the revenue to put together an availability payment.”

Write to Ted Mann at ted.mann@wsj.com

Appeared in the June 9, 2017, print edition as ‘Infrastructure Runs Into a Divide.’

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