President Donald Trump swept to victory last November with overwhelming support from rural white voters across the country who eagerly responded to the billionaire businessman’s pledge to repair and modernize their roads, bridges, and airports and bring back jobs to their remote and sparsely populated communities.
Trump promised to pump at least $1 trillion into new infrastructure projects in the coming years, or twice as much as his Democratic rival, Hillary Clinton, had promised to spend.
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But the outlines of his plan that first surfaced late in the campaign are proving highly controversial. And Republican lawmakers, policymakers, and state transportation officials from predominantly rural states and communities are bridling over a proposed financing mechanism that could largely freeze them out of most of the benefit.
Although neither Trump nor his new Transportation Secretary, Elaine Cho, has formally embraced the approach, the plan is gaining widespread attention. As initially drafted, it calls for the use of new generous tax credits to attract private investors into public-private partnerships, instead of more traditional direct federal and state government spending on infrastructure.
Trump boasted that under his approach, the federal government could avoid having to raise gas taxes or increase the deficit to pay for the new projects. However, a major caveat was that this new strategy could only succeed with projects that generate substantial revenue flows – such as toll bridges and toll roads or airport parking garages. While nearly 30 states collect tolls on roads, bridges and in tunnels, the majority of states that don’t are located in the West, including Wyoming, Montana, Arizona, Oregon and New Mexico.
During a Senate Environment and Public Works Committee hearing on Wednesday, Sen. John Barrasso of Wyoming – the powerful Republican chairman and a member of the Senate GOP leadership -- complained that raising private investment for toll roads and bridges would do little to help his sprawling, sparsely populated state.
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He noted that members of his committee represent both urban and rural areas – from New York City and Newport, Rhode Island to Nebraska City, Nebraska, and Wheatland, Wyoming. “The diversity of these cities and towns make it clear: solutions to address and pay for fixing our nation’s crumbling roads, bridges and dams cannot be one-size-fits-all,” Barrasso said in his opening statement. “What works for Baltimore, Maryland, might not work for Baggs, Wyoming.”
“Funding solutions that involve public-private partnerships, as have been discussed by administration officials, may be innovative solutions for crumbling inner cities, but do not work for rural areas,” he added.
William Panos, director of the Wyoming Department of Transportation, told the committee that public-private partnership ventures to repair or replace highways, roads, and bridges that depend on a steady revenue stream are not an adequate solution for rural America’s needs.
“The traffic volumes on projects in rural states are low, and it’s almost never feasible from revenue generation,” he said in his remarks.
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In opposing the Trump approach, Panos spoke on behalf of transportation officials from Republican strongholds in Idaho, Montana, North Dakota, South Dakota and Wyoming. He stressed the importance of maintaining robust transportation investments in rural communities that are essential to accommodating coast-to-coast truck transportation of agriculture and energy products, as well as providing public access to Yellowstone National Park, Mount Rushmore and other scenic areas.
“Our states face significant transportation funding challenges,” he said. “We can’t provide all these benefits to the nation and ensure a sufficiently connected national system without federal investment. We are geographically large; often include vast tracks of federal and tribal lands; have extensive highway networks; and have low population densities.”
He insisted that any Trump administration infrastructure initiative must continue to provide federal assistance to the states on a formula basis, which would assure them of a steady flow of government support, at least for surface transportation projects.
States and the federal government have struggled to meet the essential highway and bridge construction needs for years using an 18.4 cent-per-gallon federal gas tax that has not be raised since 1993. Congress for years has taken a patchwork approach to funding highway and mass transit projects through the federal Highway Trust Fund.
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Congress enacted a $305 billion, five-year highway and mass transit bill in December 2015, financed by the gas tax and $70 billion of offsets from other areas of the federal budget. The legislation, signed by former President Barack Obama, marked the passage of the first long-term national transportation spending package in a decade.
However, federal funding for infrastructure projects is woefully behind the need. The American Society of Civil Engineers, for example, says that the U.S. needs to invest $1.4 trillion in infrastructure between now and 2025 and $5.2 trillion by 2040.
Trump and Clinton made new infrastructure construction – and the jobs it would generate – a major issue throughout the 2015 campaign. Trump bested Clinton by pledging new spending and doubled the $500 billion she originally proposed.
The outlines of Trump’s plan began to emerge late in the campaign, in the form of a ten-page white paper drafted by wealthy businessman Wilbur Ross, Trump’s nominee to be the next Commerce Secretary and conservative economics professor Peter Navarro, who has been tapped to head the National Trade Council.
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The plan essentially gives investors an 82 percent tax credit to plow money into new state and local government projects – so-called public-private partnerships -- that would obviate the need for the federal government to raise the gasoline tax, increase overall government spending and add to the deficit.
Ross and Navarro portrayed the tax scheme as a win-win for the country. They argued that as little as $137 billion in new tax credits could be leveraged into $1 trillion of new infrastructure investments over ten years. And whatever tax dollars the Treasury would lose by granting the credits would be recaptured by federal income and business taxes on construction workers and contractors involved in the new projects.
The fly in the ointment, according to Barrasso and others, is that projects selected for this special tax treatment must be able to generate a revenue stream to help retire the bonded indebtedness. Tax credits may eventually become part of the overall infrastructure mix, depending on what the Republican-controlled Congress does later this year on tax reform. But many Democrats, economists and transportation experts warn that Trump’s approach could end up rewarding investors in projects that likely would have been built even without the credits.
