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Trump infra cuts divide industry champions

Cuts to spending in the president’s budget blueprint earned rebuke from US infrastructure advocates but many in the sector remain unfazed.

For those counting on Donald Trump to make good on his $1 trillion infrastructure promise, there was not much to like in the “skinny budget” released by the US president last week.

The preliminary proposal would reduce the Department of Transportation’s coffers by $2.4 billion, or 13 percent, eliminating funding for the TIGER Grant programme while slashing money available for Amtrak and the Federal Transit Administration’s Capital Investment Grants, among others. A range of federal infrastructure advocates have criticised the proposed cuts, with American Public Transportation Association president Richard White saying the group was “surprised and disappointed” by the budget blueprint.

As some see it, though, there is no contradiction between the cuts laid out in the proposal and Trump’s vow to rebuild the country’s infrastructure. The president is simply a believer in private investment, and is scrapping programmes that do not reflect that thinking.

“With the president’s approach, infrastructure funding is like plumbing,” Michael Likosky, head of infrastructure at 32 Advisors, told Infrastructure Investor. “You close one spigot and then you open up another one.” With cuts to public spending, the door would open for federal incentives to more private investment opportunities.

Not everyone sees it that way. Though the TIGER (Transportation Investment Generating Economic Recovery, in full) Grant programme, launched in 2009, is not built around P3s, the grants have been used alongside private investment on some projects, including an expansion of Port Newark in New Jersey.

“The loss of TIGER Grant money could be significant in terms of a revenue source used to create successful P3 projects,” Leslie Combs, a former Kentucky state legislator who authored the state’s P3 legislation, explained to Infrastructure Investor. “Throughout Kentucky as a whole, TIGER Grants have been very valuable and used greatly.”

Other infrastructure cuts in the budget blueprint included the elimination of funding for the Essential Air Services programme, which subsidises rural airports, as well as the $3 billion Community Development Block grant programme, just under 10 percent of which goes to infrastructure.

Hard to stomach

The loss of the popular TIGER Grants, though, would be particularly tough to swallow. In a report on infrastructure drafted last month, the New York City Bar Association recommended that the programme be continued and strengthened.

“In the absence of earmarks, it allows states and localities to implement smaller, purely local immediate projects they couldn’t otherwise afford,” George Miller, a partner at law firm Mayer Brown and a contributor to the team drafting the memo, told Infrastructure Investor. “Cutting it may engender the most opposition of any of the proposed cuts in this sector, along with those proposed to grants for transit projects.”

Trump’s blueprint comes amid uncertainty over what his promised infrastructure plan will look like and when it will move forward. Though interest in promoting infrastructure cuts across party lines, there is less agreement on the details of a plan, including how much of the investment will come from direct federal spending. Items such as healthcare, tax reform and immigration are ahead of infrastructure on the Republican agenda.

Some remain optimistic. Raj Agrawal, head of infrastructure for North America at KKR, met with Transportation Secretary Elaine Chao on Monday. He came away confident the administration is serious about addressing infrastructure and that it sees a large role for private capital.

“This administration is casting a wide net in terms of ideas to spur infrastructure investment,” Agrawal told Infrastructure Investor. “There are a lot of tools in the toolkit and private investment is one of those tools.”

As part of a broader vision, the cuts proposed in the blueprint may be seen as necessary to some and palatable to others in the sector. Standing on their own, they have raised concerns.