It’s official. We got a D+! That’s the score for our nation’s infrastructure given to us by the American Society of Civil Engineers (ASCE) in their latest Report Card on America’s Infrastructure. ASCE publishes the report card every four years to identify the performance and capacity of our public works. A worrying trend seen in each of the seven published reports starting from 1988, is the concern that fiscal investment is inadequate to meet the current operational costs and future demands on our infrastructure system.
We received the score D+ from the previous 2013 report card but the significant difference is that 4 years ago the ASCE estimated it would take $3.6 trillion over eight years to fix. This year it would take $4.59 trillion over 10 years to fix.
As logistics professionals we rely on the good health of our infrastructure to move goods around the nation. But with the Aviation, Bridges, Inland Waterway, Port and Road categories all getting failing grades of C+ or below it makes the need for Trumps infrastructure plan much more urgent. The only relatively good news is that the Rail category received a B which essentially resulted from the private freight rail companies continuing to make significant capital investment – $27.1 billion in 2015 – to ensure the networks good condition. So is President Trump paying attention?
The Infrastructure Plan is Slowly Taking Shape
“Pres. Trumps $1 trillion infrastructure package is slowly beginning to take shape.”
Pres. Trump has held a number of White House meetings on the subject, states have submitted transportation proposals and Congress has held a hearing to explore potential funding options. But a timeline and financing options are still unclear.
“Pres. Donald Trump is pushing his White House team to craft a plan for $1 trillion in infrastructure spending that would pressure states to streamline local permitting, favor renovation of existing roads and highways over new construction and prioritize projects that can quickly begin construction.”
It’s an interesting statement in that maintenance and renovation is favored over new projects and there is a recognition that state permitting processes are a burden.
“We’re not going to give the money to states unless they can prove that they can be ready, willing and able to start the project,” Mr. Trump said. “We don’t want to give them money if they are all tied up for seven years with state bureaucracy.”
Trump and his team’s exploratory discussions raise three recurring themes:
- How does the financing work?
- How are projects prioritized and how is maintenance and renovation factored into that?
- How to cut through states burdensome approval processes?
How Do We Finance This?
Trumps initial idea outlined in his white paper is for public/private partnerships “P3s” where private investors would be given tax credits. But this is been getting a lot of pushback because it means that only profitable projects will be undertaken.
“You get a tax cut [to repair a road] and then you get to toll it for 100 years? I’ll quit Congress and start a P3,” Rep. Peter DeFazio, ranking member of the House Transportation and Infrastructure Committee and Oregon Democrat, told NBC news.
But real estate developer Richard LeFrak, who is tasked with Steven Roth to lead a new Council of builders and engineers to oversee infrastructure spending plans and vet potential projects, is discussing other financing options too.
In this CNBC video he discusses raising the gas tax and also the role that private companies have in building public infrastructure.
Clearly finding the right financing options is still a work in progress but there is definitely an increasing momentum to resolve the issue.
How Do We Prioritize Projects?
Richard LeFrak in the same interview breaks down three categories of project:
- Emergency projects that deal with the repair of critical infrastructure
- Projects that deal with the economy, that make the economy better, that are good investments
- Projects that have been neglected like getting broadband into rural areas
So contrary to initial impressions it looks like there is serious discussion on a whole range of different types of infrastructure projects – not just projects that create profits for private investors.
The “Forever” Approvals Process
“Australia, Canada and Germany typically take two years to approve infrastructure projects compared with 10 years in the United States.” Richard LeFrak stated in an interview with Reuters.
His proposal to cut through all the red tape is to create an arbitration process similar to that used in bankruptcy courts.
“Somebody in authority would make the decisions, all the mitigation that should be coming out of it, whether it’s environmental mitigation, other mitigation, gets decided at that moment and that’s it.”
LeFrak cited the example of replacing the Minneapolis bridge that collapsed killing 13 people was replaced within 14 months without compromising standards.
It’s not all plain sailing however. Pres. Trump released his budget yesterday in which he proposes some infrastructure cuts. Mick Mulvaney, the president’s budget director, acknowledges that but states:
“Some proposed cuts to infrastructure funding could be reversed if the Trump administration is successful in pushing a proposed $1 trillion infrastructure bill through Congress later this year.”
But he also stated to reporters that infrastructure isn’t the most urgent priority.
“We think the order is healthcare, tax policy and then infrastructure,” Mr. Mulvaney said.
So breaking ground on Pres. Trumps new infrastructure plan might start later than we originally anticipated, but it gives more time for a thoughtful, deliberative process on how to execute. That’s a process that has already been kick-started and is ongoing. As logistics professionals we should have confidence that our infrastructure needs are finally going to be addressed, and we will get to do our jobs smarter, faster, more efficiently and more profitably.
If you’re interested in learning how shipping by rail might better meet your freight transportation needs, or need warehousing to bring your goods closer to your customers, call New Mexico Transloading at 505 – 908 – 1911. We’d be delighted to have a conversation with you.
IMPORTANT NOTE: This is a logistics industry blog, not a political blog. NMT is not commenting on any party’s views on the issues nor is NMT publicly supporting any party.