Trump’s Transportation Renewal Plan : Priming the Pump

Mr. Trump’s current plan is to stimulate private investments with $16.2 billion for transportation, which is a 13% cut of $2.4 billion from current figures. The question is, how realistic is that goal?

From the day he entered the presidential race to the moment he declared victory, Donald Trump pledged infrastructure renewal. Two weeks before Election Day, Mr. Trump released a plan pledging to spend up to $1 trillion on infrastructure — amounting to $100 billion a year — over the next decade. During his joint address to Congress last month, the President said, “Crumbling infrastructure will be replaced with new roads, bridges, tunnels, airports and railways gleaming across our beautiful land.”

Mr. Trump’s current plan is to stimulate private investments with $16.2 billion for transportation, which is a 13% cut of $2.4 billion from current figures. The question is, how realistic is that goal?

Private Investment

For infrastructure to succeed, investors need to be assured that large scale, long term projects will meet their strategic, technical and financing goals. The Organization for Economic Cooperation and Development (OECD) wrote:

For infrastructure investors, there are two kinds of projects: those that fix and repair existing projects, and those that finance newer, often ‘cooler’, projects like high speed rail. Each has their own financial profile, including the sale of built properties to private industry; government bonds, grants and loan guarantees; revenue from passengers; tax advantages and other incentives and subsidies.

Government support for private industry is not new to this administration. As an example, our railroad system, which revolutionized the transport of goods in the 1800ds, was financed by:

  • Land grants between 1855 and 1871, which provided new railway companies in the uninhabited West millions of acres they could sell or pledge to bondholders.
  • The Pacific Railroad Acts of 1862 and 1864 provided government bonds totaling $16,000 a mile for each twenty-mile section of track completed on the plains. For the plateau between the Rocky and Sierra Nevada Mountains the amount per mile went up to $32,000 per mile and for the mountain regions, $48,000. Each company could also issue its own first mortgage bonds for the same amount as the government bonds, relegating the latter to a second mortgage.
Originally published in TGEink, “Politics we can agree on”.

The poster child for government failure during the Obama years was Solyndra, a very small investment in a very large portfolio. What the company did wrong was bet on the continued rise in silicon costs. As those costs came down, the more expensive technology was no longer competitive.

I. Maintenance and Repair

There is significant decaying infrastructure that has the potential for accidents that can be very costly to taxpayers in emergency repairs and awards to people hurt or killed. The repairs are especially problematic when they fix a temporary problem that may not work to fix the long term degeneration. As an example, in 1994, the Northridge earthquake damaged a retrofitted bridge near Los Angeles, which prompted San Francisco to undertake a major rebuilding of the Bay Bridge from San Francisco to Oakland rather than fixing the damage from the Loma Prieta earthquake in 1989. Other problems include:

The Transportation Investment Generating Economic Recovery (TIGER) grant program was set up by the Obama administration’s 2009 economic stimulus package. The TIGER funds supported innovative projects, including multi-modal and multi-jurisdictional projects, which can be difficult to fund through state and local programs. Since 2009, the TIGER grant program provided a combined $5.1 billion to 421 projects in all 50 states, the District of Columbia, Puerto Rico, Guam, the Virgin Islands, and tribal communities. However, Mr. Trump’s budget disagrees.

The budget

  • “Eliminates funding for the unauthorized TIGER discretionary grant program, which awards grants to projects that are generally eligible for funding under existing surface transportation formula programs, saving $499 million from the 2017 annualized CR level. Further, DOT’s Nationally Significant Freight and Highway Projects grant program, authorized by the FAST Act of 2015, supports larger highway and multimodal freight projects with demonstrable national or regional benefits. This grant program is authorized at an annual average of $900 million through 2020.”

Leveraging Private Funds

The threatened 2016 TIGER round leveraged nearly $500 million in federal investment to support $1.74 billion in overall transportation investments.Demand for the 2016 TIGER grant program continued to far exceed available funds. The Department of Transportation (US DOT) received 585 eligible applications from cities, and towns throughout the United States, collectively requesting over $9.3 billion in funding. During the previous seven rounds, the Department received more than 7,300 applications requesting more than $143 billion.

This interest attests to the demand for support from industry. Acting APTA President and CEO Richard A. White said, “As it stands now, America is already under investing in public transportation, as noted in the recently released American Society of Civil Engineers infrastructure report card.” He believes the proposed cuts would make the existing $90 billion of State of Good Repair gap even worse. Cuts could put public transit projects and the associated thousands of direct and indirect jobs at risk in a number of communities.

Mr. White added that 87% of the 35 million public transportation trips taken each day directly impact the economy, both due to transit workers and the Americans who ride public transit to commute to work or to spend money at retail businesses and entertainment venues.

II. The ‘Cool Stuff’

In contrast, Mr. Trump has expressed interest in high speed rail and for modernizing the Northeast corridor between Boston and Washington DC. His voters agree:

  • A 2016 poll showed that 3 out of 4 Americans support increased public transportation investment.
  • In a November election poll found that 81% of Americans who voted for Donald Trump oppose any cuts to the current levels of public transportation investment.

Congress authorized $2.3 billion annually, through 2020, for the discretionary Capital Investment Grant CIG program in the Fixing America’s Surface Transportation (FAST) Act, which was overwhelmingly approved by bipartisan votes of 83–16 in the Senate and 359–65 in the House of Representatives. In the FAST ACT, Congress authorized nearly $5.5 billion through 2020 for Amtrak’s national network.

CIG Program

The CIG program provides funding for investments in new and expanded rapid rail, commuter rail, light rail, streetcars, bus rapid transit, and ferries, as well as corridor-based bus rapid transit investments that emulate the features of rail. CIG currently has 68 public transit projects in 23 states that could be at risk if the Full Funding Grant Agreements (FFGA) are not funded.

The budget

  • “Restructures and reduces Federal subsidies to Amtrak to focus resources on the parts of the passenger rail system that provide meaningful transportation options within regions. The Budget terminates Federal support for Amtrak’s long distance train services, which have long been inefficient and incur the vast majority of Amtrak’s operating losses. This would allow Amtrak to focus on better managing its State-supported and Northeast Corridor train services.
  • “Limits funding for the Federal Transit Administration’s Capital Investment Program (New Starts) to projects with existing full funding grant agreements only. Future investments in new transit projects would be funded by the localities that use and benefit from these localized projects.”

The California Story — Leveraging Private Funds

California’s infrastructure projects include a total of 51 projects, 25 of which are valued at more than $100 billion. The state’s request for high-speed rail is for $2.9 billion, with $650 million to electrify and modernize Caltrain alone. That project would extend the initial operating segment in San Francisco to San Jose, and Bakersfield. Mr. Trump hasn’t been very specific about how he’d pay for these investments, other than to say the private sector would have a more important role.

  • Political and regulatory barriers
    Some of those recently experienced in California can discourage private interests from spending the massive amount of capital that’s needed upfront. The hope is that Mr. Trump can smooth the wheels of government.
  • Certainty
  • “Giving the private participants certainty about their investment would eliminate one of the biggest barriers of getting the project off the ground,” said Rob Puentes, President and CEO of the Eno Center for Transportation, a Washington policy group. He added that, “It’s [high-speed rail] a proven technology that can be efficient and effective when done right. The challenge is where you do it, and how do you get it done.”
  • Private Business Groups
    In California, for nearly two decades the Silicon Valley Leadership Group, Bay Area Council, SPUR and other regional business organizations have been responsible for modernizing the Caltrain that is running 79 miles between Gilroy and San Francisco. With around 60 months of consecutive ridership increases, Caltrain is running at 125% of ridership capacity.
  • Productivity
    3 out of 5 Caltrain passengers are “choice riders,” meaning that they own cars but choose to ride Caltrain. Employers who call the Peninsula corridor home contribute 14% of the state’s gross domestic product. 52% of all patents filed in California and 43% of all venture capital investment are located in this ‘Innovation Economy’.
  • California Jobs
    A more modern Caltrain will have safety improvements like grade separations, longer station platforms to accommodate more train cars, and elevated platforms for faster boarding. The main goal is to switch from diesel to electric engines. This $1.98 billion upgrade would allow Caltrain to double ridership to 110,000 trips every day. Such improvements are estimated to create 9,600 jobs
  • National Jobs
    The up-grades to Caltrain includes power converters and transformers built in Richmond, VA; the assembly of electric trains in Salt Lake City; the transportation of electric train shells in Humble, Texas; and engineering services in San Mateo.

Beyond California

Other projects, on a list of 50 priority infrastructure projects, drafted by a consulting firm with ties to the Trump transition team includes:

  • The NY-NJ Gateway
    The Program would replace century-old rail tunnels under the Hudson River between New Jersey and New York, allowing a doubling of the number of Amtrak and Commuter trains into Manhattan. Apart from the damage from Hurricane Sandy in 2012, the tunnels slow local NJ Transit trains as they wait for Amtrak to come through. The long-term goal of Amtrak would be to upgrade the entire route between Washington and Boston for speeds above the current maximum of 150 mph.
  • The Texas Central Railway 
    A 250-mile high-speed route between Dallas and Houston will be built with private funds. Trains will be similar to the high speed trains in Tokyo and Osaka, Japan, which have been in operation for more than 50 years. The Texas Central Railroad is, however, awaiting a permit to begin construction. That is where Mr. Trump may aid in accelerating the process.

In the future, the list could grow as the Trump Administration solicits ideas from governors eager for federal assistance with state infrastructure priorities.

Political Will

Despite its many followers and support, transportation has had some opposition from the GOP. All fourteen members of California’s Republican congressional delegation signed a letter to President Trump’s secretary of transportation to act against the recommendation of the Federal Transit Administration. The 14 members of Congress view the modernization of Caltrain and high-speed rail as a boondoggle.

APTA calls on the Administration and Congress to reject these cuts and reaffirm its support for these programs as part of the FY18 budget process. In addition, APTA calls on Congress to include increased investments in public transportation as part of any new infrastructure initiative. As Mr. White said:

Mr. White, CEO APTA
“The proposed budget limits funding for the Federal Transit Administration’s Capital Investment Grant (CIG) program, eliminates funding for the Essential Air Service program, and ends federal support for long-distance Amtrak trains.”

Mr. Trump, who has mentioned admiring what China, Dubai, and Qaran have achieved in their infrastructure, said he does want America to do something similar. Mr. Trump has said,
“The time has come for a new program of national rebuilding. America has spent approximately $6 trillion in the Middle East, all this while our infrastructure at home is crumbling. With this $6 trillion, we could have rebuilt our country twice, and maybe even three times, if we had people who had the ability to negotiate.”

Governor Jerry Brown showed his support by Tweeting, “@realDonaldTrump, California’s ready!” shortly after Trump’s speech on the subject.

It remains to be seen if, in the face of cuts, Governor Brown’s enthusiasm for transportation will, in fact, bring in the billions of dolalrs in private investment needed to keep the US competitive with other developed — and developing — nations.

“The proposed budget limits funding for the Federal Transit Administration’s Capital Investment Grant (CIG) program, eliminates funding for the Essential Air Service program, and ends federal support for long-distance Amtrak trains.”

Mr. Trump, who has mentioned admiring what China, Dubai, and Qaran have achieved in their infrastructure, said he does want America to do something similar. Mr. Trump has said,

“The time has come for a new program of national rebuilding. America has spent approximately $6 trillion in the Middle East, all this while our infrastructure at home is crumbling. With this $6 trillion, we could have rebuilt our country twice, and maybe even three times, if we had people who had the ability to negotiate.”

Governor Jerry Brown showed his support by Tweeting,

“@realDonaldTrump, California’s ready!” shortly after Trump’s speech on the subject.

It remains to be seen if, in the face of cuts, Governor Brown’s enthusiasm for transportation will, in fact, bring in the billions of dollars in private investment needed to keep the US competitive with other developed — and developing — nations.

Addendum: Mr. Trump, after we ran this article, said that he had invented the term “Priming the Pump”. We were delighted for this evidence of our telepathic abilities.

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