Donald Trump will be the next U.S. president, and he touted infrastructure investment during his campaign.
“Infrastructure was at the heart of his economic plan, yet his approach to infrastructure is not well known,” says Michael Likosky, head of infrastructure with 32 Advisors. “I would say that prudent innovation is the cornerstone of his approach. It is revenue neutral and yet aims to bring $1 trillion of infrastructure projects to market within the next 10 years.”
The 10-year $1 trillion infrastructure investment plan was developed with the help of Peter Navarro, an adviser to Trump and a public-policy professor at the University of California, Irvine.
According to Likosky, Trump’s approach will likely include four prudent innovative financing tools: (1) public-private partnerships or P3s, (2) a federal tax-credit bond, (3) rationalizing the regulatory process, and (4) repatriating U.S. dollars to pay for infrastructure together with tax reform.
Likosky notes, “President-elect Trump has as the cornerstone of his approach equity participation in public infrastructure projects. His view is much of infrastructure can be funded through private equity, which adds a discipline and involves cheaper design and building costs. However, he definitely does not see private participation in public projects as happening to the exclusion of government. In fact, government must play the role of active financing partner under Trump’s plan. It will provide credits to make projects more affordable and stable over the long term. On average, the expectation is that projects will return 9–10 percent.”
The Trump infrastructure plan is not without challenges. “To my mind, the biggest challenge for President-elect Trump’s infrastructure plan will be politics,” says Likosky. “Today, many projects do not happen not because of lack of private and federal money. Instead, P3 participants have difficulty dealing with government.”