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The 2016 national election results could have important policy, regulatory and funding implications for the P3 community. In this issue, we examine some of the opportunities and challenges the new Trump administration, a Republican-dominated Congress and the outcomes of other election contests pose for P3 developers, investors and other stakeholders.
P3s have a prominent place in president-elect’s plans. In his Nov. 9 acceptance speech, Donald Trump declared that improving domestic infrastructure was a top item in his agenda. Until the new administration rolls out a formal plan, the list of policy positions the Trump campaign issued on infrastructure can provide a potential forecast of future developments. Before the election, the campaign pledged to:
- Introduce a deficit-neutral plan targeting substantial new infrastructure investments;
- Pursue a policy that supports investments in transportation, clean water, a modern and reliable electricity grid, telecommunications, security infrastructure and other domestic infrastructure needs;
- Leverage new revenues and work with financing authorities and public-private partnerships;
- Make clean water a high priority, in part by tripling funding for state revolving loan fund programs to help states and local governments upgrade drinking water and wastewater infrastructure; and
- Institute regulatory reforms that eliminate unnecessary red tape would lead to speedier and less expensive project completion.
Trump promised to “work with Congress to introduce the American Energy & Infrastructure Act, which “[l]everages public-private partnerships, and private investments through tax incentives, to spur $1 trillion in infrastructure investment over 10 years.” In an op-ed in Forbes, Chuck DeVore, vice president of national initiatives at the Texas Public Policy Foundation, provided a bit more detail on the tax incentive, reporting that it would provide investors with an “82 percent tax credit on equity invested in infrastructure paired with federally subsidized loans at a 5-to-1 leverage ratio.”
Another sign that Trump is serious about focusing on P3s as part of an infrastructure-funding solution is his choice of Martin Whitmer to serve as the transition team’s point person for transportation and infrastructure policy, reported, Politico. Whitmer, a lobbyist and head of the transportation and infrastructure practice at Whitmer & Worrall, is also a member of the board of the Eno Center for Transportation. He has served as deputy chief of staff at the U.S. Department of Transportation (DOT) and as vice president of government relations at the American Road & Transportation Builders Association, for which he also directed the public-private ventures division. Trump also apparently has asked Shirley Ybarra to lead his administration’s approach to managing DOT, Politico reported. Ybarra is a staunch P3 proponent who once served as Virginia’s secretary of transportation and wrote the state’s Public-Private Transportation Act of 1995, reported the Reason Foundation, for which she once served as senior transportation analyst. Meanwhile, former Texas Gov. Rick Perry, who favors private investment in highways and, unlike many former constituents, in toll roads, may play a role in the Trump administration, reported the Houston Chronicle.
Trump also has suggested creating a federal infrastructure fund supported by government bonds that investors and citizens could purchase, according to the New York Times. Like Sen. Chuck Schumer (D-N.Y.) who just won re-election, Trump has proposed imposing a one-time tax on repatriated off-shore earnings to fund an infrastructure plan, reported CQ Roll Call (paywall). Meanwhile, House Minority Leader Nancy Pelosi (D-Calif.) signaled that both parties could unite to support an infrastructure jobs bill, reported The Hill.
Not so fast … Senate Majority Leader Mitch McConnell (R-Ky.) said that Trump’s proposal to address the nation’s infrastructure woes is not a top priority for Congress, according to NPR, and many Republicans are intent on reducing federal spending. Several conservative groups have weighed in as well. Dan Holler, spokesman for the Heritage Action for America, the Heritage Foundation’s political arm, said: “Conservatives do not view infrastructure spending as an economic stimulus, and congressional Republicans rightly rejected that approach in 2009,” reported Politico. Marc Scribner, a fellow at the Competitive Enterprise Institute, a conservative group from which the Trump transition team sought advice on his environmental policies, agreed, noting in a blog post: “There is little evidence that these public works projects promote long-run economic growth.” House Transportation and Infrastructure Committee Chairman Bill Schuster (R-Pa.), who just won a ninth term, and Senate Environment and Public Works Committee Chairman James M. Inhofe (R-Okla.) insist that the five-year highway and transit reauthorization bill known as the FAST Act (PL 114-94), passed in 2015, is the fiscally responsible way to solve many of the nation’s infrastructure woes. In addition, House Ways and Means Committee Chairman Kevin Brady (R-Texas) has said that an infrastructure and international tax package should be a “last resort,” reported CQ (paywall).
Trump’s infrastructure funding proposals already may be causing some investor angst. “Concerns about how to pay for infrastructure improvements may be one of the main reasons why yields for U.S. Treasury bonds rose Wednesday. Bond rates rise when prices fall, such as when investors are selling bonds. Yields on U.S. Treasury bonds are rising, a possible indication of increased selling. Fitch Ratings also warned recently that concerns about higher infrastructure spending could be one factor why Trump’s election win that could negatively affect U.S. creditworthiness over the next few years, according to a report from CNN. On the other hand, if the Trump administration provides money for transportation through grants or loans to states and localities, the issuance of municipal transportation bonds could sharply increase, reported Reuters.
State and local election developments. A variety of state- and county-level transportation funding measures that could lead to more P3 projects were passed Nov. 8. Illinois voters strongly supported a constitutional amendment to require that all transportation taxes be spent solely on transportation projects, a proposal that had passed easily in the state general assembly. New Jersey passed a similar measure. … In Los Angeles County, nearly 70 percent of voters approved Measure M, which will impose a half-cent sales tax on residents to raise about $120 billion over 40 years to ease congestion, fix roads and and pursue rail and transit projects. Through other ballot measures. Maine approved a $100 million transportation bond issue … Rhode Island approved $70 million in bonds for port projects … Georgia approved local sales tax increases to raise nearly $4 billion for road and transit projects in metropolitan Atlanta …Washington state voters approved a 25-year, $54 billion revenue package to expand light rail and bus routes. In Louisiana, a task force on transportation investment formed by Gov. John Bel Edwards has endorsed consideration of two approaches to financing state transportation projects, such as the construction of a new bridge over the Mississippi River in Baton Rouge, at a cost of more than $1 billion. The first option involves P3s; the second would involve tolls, which the state rarely has imposed. Also in Louisiana, voters approved Amendment 5, which will create a Revenue Stabilization Trust Fund into which surplus oil and gas revenue and corporate taxes would be deposited. Once the fund reaches $5 billion, up to 10 percent of the money could be spent on construction projects and roadwork.
Meanwhile, in Florida, the re-election of Miami-Dade Mayor Carlos Gimenez, a staunch P3 proponent, paves the way for his continuing campaign to build a six-line “SMART Plan” rail system, which could be funded through a variety of mechanisms, including P3s. Thus far, only a few miles of rail to Miami International Airport have been built since voters approved a half-percent sales tax in 2002 to help fund the project. In New Hampshire, Gov. Maggie Hassan, who signed P3-enabling legislation in June and has pressed for using this procurement method to build a rail line, won her U.S. Senate bid.
Although these state and local ballot initiatives could give a number of proposed transit projects a much-needed financial boost, they probably have been driven partly by declining federal funding for such projects, a trend that is likely to continue in a Republican-dominated legislature, predicted Politico. All or most still will require some federal matching funds, but Rob Puentes, executive director of the Eno Center for Transportation, warned that such support may not be forthcoming. “The GOP platform talks about wanting to zero out federal support for transit,” he pointed out.
Wondering how the 2016 election results will affect defense and other federal water and energy projects? How will the new administration change the regulatory landscape? Join leaders from across the nation to discuss the most pressing issues federal agencies face in working to sustain federal energy and water assets at the 2016 DoD/Federal Energy & Water Forum. NCPPP and the Association of Defense Communities will host this event Dec. 2 at the FHI 360 Conference Center in Washington, D.C., to discuss ways to develop and enhance energy efficiency, utilities privatization, renewable energy sources and water/wastewater/stormwater systems. Public and private leaders will share lessons learned. Featuring a mix of expert panels and interactive discussions, the forum offers industry leaders the opportunity to provide critical feedback on current federal initiatives and develop solutions. For more information and to register, visit the event website.
Kentucky issued an RFI to identify developers to build, finance, operate and maintain an urban, mixed-use development project on about eight acres of land in downtown Frankfort, the state capital. The selected developer would demolish an office tower, a parking garage and an above-street plaza and build two low-rise office buildings and surface parking on the land. The Capital Plaza Tower Area project also entails development of the remaining property for a mix of residential, commercial, cultural, institutional or industrial uses. Responses are due Dec. 14. The state will decide whether to issue an RFP for the project by Jan. 31, 2017. For more information, contact Nancy Brownlee (firstname.lastname@example.org).
The San Francisco County Transportation Authority has issued an RFQ for on-call project management oversight and general engineering consultant services in connection with a broad range of projects. Desired expertise includes the ability to conduct public-private partnership analysis (e.g., value-for-money analysis). Responses are due Nov. 30.
WHAT’S GOING ON AT NCPPP?
Here’s a quick peek at the upcoming NCPPP calendar.
- Great Lakes Infrastructure Exchange — Nov. 15 — Toronto
- P3Bootcamp — Nov. 16-17 — Jackson, Miss.
- DoD/Federal Energy & Water Forum — Dec. 2 — Washington, D.C.
- P3Bootcamp — Dec. 13-14 — Chicago
- Emerging Markets Forum — TBA — Miami
- P3Bootcamp — TBA — Miami
For more information about event programs, registration and sponsorship, please visit NCPPP’s website.
The next issue of P3 Digest will hit your mailbox on Monday, Nov. 21.