President Donald Trump used part of his high-profile State of the Union address on Tuesday to lay out what he will support in an upcoming push to enact infrastructure spending legislation.
His remarks, along with a statement released by the White House, called for Congress to produce a bill that generates $1.5 trillion of investment by using partnerships between federal, state and local governments that work with the private sector “where appropriate”.
“Every federal dollar should be leveraged by partnering with state and local governments and, where appropriate, tapping into private sector investment – to permanently fix the infrastructure deficit,” Trump said.
The president also proposed shortening a project’s permitting and approval process to between one and two years.
Here are reactions from market participants to Trump’s focus on infrastructure during the speech:
Aoifinn Devitt, chief investment officer, Chicago Policemen’s Annuity and Benefit Fund:
“Pledges like the one made by the president [on Tuesday] obviously raise the level of enthusiasm and momentum for infrastructure spending, which has been mounting for years. However, it is less clear how this $1.5 trillion will be funded, and I am not expecting to see much in the near term – although the private sector will continue to be a vital source of infrastructure investment (and currently holds a lot of dry powder). We have increased our infrastructure allocation to 4 percent but have experienced some delay in actually getting those dollars to work.”
George Miller, partner, Mayer Brown’s Global Projects, Infrastructure and Asset Finance practice:
“I think that ‘where appropriate’ is probably a concession to critics of PPPs, so I guess the idea is to use them judiciously. You still have the fundamental political conflict between Republicans, who are leery of spending federal dollars, and Democrats, who are leery of private investment in infrastructure.
One of the things you’re seeing from this administration is a desire, which I think is prudent, to build on what already works – TIFIA, WIFIA, private activity bonds – and initially at least to push the coverage of those programmes further as a way of expanding federal support for infrastructure development and seeing if that can attract more private capital on a less politically controversial basis.
Andrew Marino, The Carlyle Group, co-head of Carlyle Global Infrastructure Opportunity Fund:
“We applaud the president and his administration for continuing to streamline the permitting process. Streamlining and accelerating these processes unlocks capabilities. It is imperative that our government use every tool in the toolbox. Private capital is at work now, and we should embrace it.”
Joseph Kane, The Brookings Institution’s Metropolitan Policy Program, senior research associate and associate fellow:
“There are still significant questions as to what level of support we are talking about here from states and localities, and in particular for localities that may not have the general revenues or financial capacity to spend more on infrastructure. So, if the expectation on the federal side is that localities are going to pony up more of their own resources, whether that comes from ballot referendums or an influx of private investment, is still very much unknown.”
Anne Selting, S&P Global, head of North American P3 and Project Finance Ratings:
“The infrastructure gap is so significant in this country and there’s bipartisan agreement on that fact. When you look at closing the gap, rational people will have to get to a point, whether the politics are palatable or not, where they recognise there’s going to have to be a variety of solutions brought to bear on the problem. And I think private investment in infrastructure will have to be part of that solution.”