US president Donald Trump will win support for his infrastructure plan from those who want more self-help from cities on providing – and paying for – infrastructure.
The Axios website released a link (see below) to a draft of the infrastructure plan last week and the president may release detail of the actual plan in his state of the union address (starting 3pm today NZ time).
Strong Towns founder set the scene
The founder of the Strong Towns website in the US, Charles Marohn, wrote to the new president, Donald Trump, last January explaining how the normal method of federal money funding new infrastructure projects didn’t work, and the result was a nation of broken infrastructure.
It seems Mr Trump may have listened to some of that message – though more likely adopting his own view that just because he announced a $US1 trillion programme didn’t mean his sources would fund it.
Mr Marohn explained: “To borrow a real estate term, America’s infrastructure is a non-performing asset. For nearly every American city, the ongoing cost to service, maintain & replace it exceeds not only the available cashflow but the actual wealth that is created.
“For example, we did a deep financial study of the city of Lafayette, Louisiana. We found that the city had public infrastructure – roads, streets, sewer, water, drainage – with a replacement cost of $US32 billion. In comparison, the total tax base of Lafayette is just $US16 billion. Imagine building a $US250,000 home and needing an additional $US500,000 in infrastructure to support it. This seems incredible. But not only is it common, it is the default for cities across America.
“This imbalance is caused by incentives we embed in our current approach. When the federal government pays for a new interchange or the extension of utilities, local governments gladly accept that investment. The city, while spending little to no money of their own, has an immediate cash benefit from the jobs, permit fees & added tax base. The only thing the local government must do is promise to maintain the new infrastructure, a bill that won’t come due for decades.
“Here’s the catch: when we look at that bill, our cities almost always can’t pay it. Cities never run a return-on-investment analysis that includes replacement costs. Cities never even compute the tax base needed to financially sustain the investment. There’s no incentive to do it and every reason not to.”
Mr Marohn’s 4 principles for a solution:
- Prioritise maintenance over new capacity
- Prioritise small projects over large
- Spend far more below ground than above, and
- Prioritise neighbourhoods more than 75 years old.
Asked to comment on the leaked infrastructure plan this week, Mr Marohn commented: “My nightmare scenario was another Obama-style stimulus bill ($US831 billion total with $US105 billion spent on infrastructure) only focused on handing out federal dollars primarily for new highways, interchanges, frontage roads & other build-it-and-they-will-come kinds of investments. This is nowhere near that. Breathe a sigh of relief.
“Half of the undisclosed amount of money (widely believed to be in the $US200 billion range) would go into something called the Infrastructure Incentives Initiative. This has all the hallmarks of the worst of federal infrastructure spending: anything infrastructure-related is eligible, any government or public authority can apply, scoring is heavily weighted to induce local governments to take on lots of debt and there is only faint concern for long-term maintenance costs or return on investment. Yuck!
“But the plan has one provision that changes all of this: Grant awards can’t exceed 20% of total project costs… For a state or local government to get the federal money, they will need to have some serious skin in the game to the tune of 80% of the funding. If that provision makes it through Congress (count me doubtful), it would be transformative.
“With state & local governments picking up 80% of the tab, I suspect projects will naturally gravitate towards those of the smaller maintenance variety, particularly projects that have a positive return on investment (small, underground, and in older neighbourhoods).”
For this article, I’ve provided links to Axios & Strong Towns here, followed by further links & comment below that.
Axios, 23 January 2018: Scoop: Read the draft White House infrastructure plan
Axios, leaked draft
Strong Towns, 29 January 2018: A review of the White House infrastructure plan
Strong Towns, 23 January 2017: A letter to POTUS on infrastructure
Other views on infrastructure changes
Daniel Vock wrote on the Governing website: “At a time when many state transportation officials are clamouring for more financial help from Washington, an outline of the president’s infrastructure plan depends heavily on an influx of state & private funds.”
Governing, 22 January 2018: Leaked Trump infrastructure plan would put onus on states
In a second story, about where the money would come from and its journey to the user, he wrote: “When big-city mayors met in Washington last week, one of their primary messages regarding infrastructure was that the federal government should send new money directly to cities, rather than through states. The Trump administration seems open to the idea.”
Politico said: “The president’s long-awaited infrastructure package will expect cities & states to pick up much more of the costs for their projects.
In its coverage of the plan, Laura Gardner wrote: “President Donald Trump won the White House promising a $US1 trillion, 10-year blueprint to rebuild America — an initiative he said would create millions of jobs while making the nation’s highways, bridges, railroad & airports ‘second to none’.
“But the infrastructure plan he’s poised to pitch in Tuesday’s State of the Union is already drawing comparisons to The Hunger Games.
“Instead of the grand, New Deal-style public works programme that Trump’s eye-popping price tag implies, Democratic lawmakers & mayors fear the plan would set up a vicious, zero-sum scramble for a relatively meagre amount of federal cash — while forcing cities & states to scrounge up more of their own money, bringing a surge of privately financed toll roads, and shredding regulations in the name of building projects faster.
“The federal share of the decade-long programme would be $US200 billion, a sum Trump himself concedes is ‘not a large amount’. The White House contends it would lure a far larger pool of state, local & private money off the sidelines, steering as much as $US1.8 trillion to needs as diverse as highways, rural broadband service, drinking water systems & veterans hospitals.”
Politico noted that what the Trump plan did signal was a move away from the policy of the federal government deciding everything, and trickling tax money back to the states, with tags. Laura Gardner wrote: “The White House defends its approach as an overdue shift from decades of federal spending & control.”
She quoted a statement from deputy White House press secretary Lindsay Walters: “The Washington establishment still thinks that infrastructure can only be built correctly if they make all the decisions and control the purse strings, but one look at the crumbling bridges & roads across America shows that approach has failed.
“Instead of sending taxpayer money to DC only to have it eventually trickle back down to communities along with a host of new restrictions & requirements, the president wants to allow communities to keep more of their funds and make their own decisions, and to simplify the federal bureaucratic maze.”
Governing, 29 January 2018: Mayors sceptical of trump infrastructure plan
Politico, 28 January 2018: Trump’s $US1 trillion plan inspires ‘Hunger Games’ angst
Politico, 9 November 2016: Donald Trump victory speech 2016, full video
Attribution: Axios, Strong Towns, Politico, Governing.