Trump’s agenda could bring disaster for America’s aging infrastructure

Here’s something that almost everyone can agree on: We need to rebuild and retool the country’s aging infrastructure for the 21st century. The difficult question is how — and President Trump’s infrastructure agenda isn’t the way.

The Trump agenda, while light on details, will surely rely on so-called “public-private partnerships,” which use expensive private financing instead of cheap, reliable public financing. By depending on such deals to rebuild America, the agenda poses serious risks to the public and fails to address the real issue causing our roads to crumble and water pipes to age: the long-term shortage of public funding.

{mosads}Advocates of privately financed and operated infrastructure often claim that contracts shift risks from the public to private investors and operators. But all risks are not created equal. The potential for cost overruns and delays in new construction is real but is, in fact, where risk can be shifted to construction contractors with proven contracting methods such as Construction Manager at Risk and design-build.

There are countless instances of governments using these methods and others, including traditional design-bid-build contracts, without relying on expensive private capital — if contractors fail to meet benchmarks, they are on the hook.

For example, the Milton-Madison Bridge replacement project connecting Kentucky and Indiana came in significantly below budget projections and was completed with a minimum of bridge closures. It’s worth noting that the project received $20 million from the popular federal TIGER grant program, which would be eliminated in President Trump’s proposed budget.

Private financing also poses the risk of outright failure. Earlier this month, the state of Indiana completed a takeover of the construction of highway I-69 between Bloomington to Martinsville. In 2014, then-Governor Mike Pence signed a 35-year public-private partnership with a Spanish firm to finance, construct, and maintain the section of road. But the firm, facing bankruptcy, missed deadlines for months, and has left the state with nearly half of the project left to complete and an unfinished highway.

Construction risk is one thing, but shifting risk when it comes to revenue shortfalls during the life of an asset is another story altogether.

In fact, after numerous public-private partnership bankruptcies across the country, investors are now less willing to take on the risk that traffic projections won’t pan out or water conservation reduces consumption. More and more public-private partnerships now include annual payment guarantees called “availability payments.” This model shifts revenue risk back to the public agency’s budget for the life of the infrastructure, allowing investors to collect a healthy return regardless of actual usage.

And it’s not as though user fee-based public-private partnerships don’t come with risks to public themselves. Keeping public goods affordable is more difficult within the confines of a contract where investors seek to maximize revenues. Whether after new construction or a sale or lease of existing infrastructure, skyrocketing fees punish lower-income residents who must use toll roads or can’t afford their water bill.   

Private investors also minimize their own revenue risk by negotiating contract clauses that protect their profits at the expense of taxpayers and residents. A long-term contract with a multinational consortium to operate the Capital Beltway’s high-occupancy express toll lanes penalizes the state for increased carpooling, even though carpooling helps reach environmental goals.

Chicago’s 75-year lease of its downtown parking meters to a Wall Street-led consortium forbids the city from building competing parking lots for the entire duration of the contract. And if Chicago eliminates parking spots by throwing a street fair or building permanent transit lanes, the city must reimburse investors for lost revenue.

Perhaps the biggest risk posed by President Trump’s agenda is that it ignores the real infrastructure problem: the lack of funding to pay for our water systems, roads, and other vital public assets.  

Private financing does nothing to meet the real challenges faced by governments at the local, state, and federal levels. Our infrastructure needs aren’t growing because of a lack of financing — the tax-exempt municipal bond market is healthy and robust. The problem is a lack of ongoing funding to pay back the debt governments take on to build and operate infrastructure. In fact, the trend towards debt financing has accelerated as federal infrastructure spending has fallen by half over the past 35 years.

America’s public infrastructure needs true federal investment. Trying to avoid what must be done is the biggest risk of all.

Donald Cohen is the executive director of In the Public Interest, a research and policy center on privatization and responsible contracting. Bishop Dwayne Royster is the political director of PICO National Network, a network of progressive faith-based organization, and vice-chair of the Working Families Party National Committee.

The views expressed by contributors are their own and not the views of The Hill.