Preparing for the Trump Infrastructure Plan

A constant theme of President Trump’s stated policies has been a strong infrastructure plan. While specifics are not yet fully known, during the campaign Trump referred to a plan that would attempt to stimulate more private investment through tax breaks. Could this open up the possibility for more toll road projects, and how should key players prepare for this possibility? 

The policy paper released by the Trump campaign noted that this tax break approach could reduce necessary project financing costs by 18-20%, while suggesting the requirement for private investment to realize this tax benefit. 
Key questions are whether this infrastructure plan will lead to more toll projects becoming feasible, and if so, will P3 become a more popular project delivery approach? If the answers to these questions are yes, then what actions should the key players take to prepare? Below we explore possible actions for each type of involved party.

Federal Government

Few toll projects can be completely funded through toll revenue alone, and while the proposed tax break could lower the threshold to make more toll projects feasible, the Federal Government may need to offer more support to improve feasibility and to reduce project development timelines and costs. Below are some possible actions for federal agencies:

• Expand the TIFIA program to ensure authorization is adequately funded to satisfy increasing demand levels that could result from the increasing attractiveness of toll financing.
• Develop efficient ways to accommodate quickly the differences in toll revenues projected by the public sector grantor in their preliminary forecasts used for TIFIA project screening, and in private sector sponsor’s forecasts used in the final finance plan.
• Streamline the environmental review process, particularly to incorporate private sector sponsor Alternate Technical Concepts into the final project design more easily. Without this, project schedules may be further extended, or good design modifications may be discarded because they do not conform to the environmentally-approved design.

Public Sector Grantors 

With the tax break potentially making P3 projects more attractive, public sector grantors may need to consider the below actions:

• Ensure they have sufficient understanding of P3 project delivery options and knowledge of how to conduct Value for Money (VfM) analyses properly to help select the best project delivery option. 
• Understand the new infrastructure plan incentives and how to incorporate them into VfM analyses. 
• Utilize advisors familiar with sponsor’s desires and practices to provide preliminary inputs that will be more consistent with final values to help streamline Federal interactions.
• Streamline the RFP process to provide private sector additional time to innovate, reduce costs and maximize benefits/revenues.

Private Sector Sponsors 

The private sector has appetite and resources for an increased number of projects, but can also take actions to help project flow under the new infrastructure plan. For example:

• Develop and clearly communicate potential innovations and their benefits to the public sector.
• Learn to handle potential risks better to avoid high-profile project failures that have blemished the early track record of toll revenue-risk P3 projects in the US.
• Take additional risk by investing effort earlier in the process to seek more optimum solutions.

While there remains uncertainty about what changes and incentives will materialize, the above are some actions that key players can take to help make the new infrastructure plan a success.