What Happened To Trump's Promises About Massive Infrastructure Spending?

We'll look at the mess the Trump Regime has made of infrastructure in a moment. First though, I want to highlight one crucial part of that in my part of the country. The Republican-led Congress and the Trump Regime are screwing with California, Oregon and Washington over the earthquake early warning system-- enough time for people to take cover or pull their cars over-- the federal government was committed to, something NPR highlighted this week. An early warning system along the West Coast from the Canadian border to the Mexican border has been in the works for over a decade and is in beta testing now. NPR reported that Thomas Heaton, an engineering seismologist at the California Institute of Technology, has worked on this idea since 1985. 

“It's running right here in my office, and it has been running in my office for about 10 years, and I run it in my home,” Heaton said.

The sample earthquake scenario he pulled up on his computer showed a map of California with seismic waves radiating from the epicenter of a quake. Alarms rang, and an electronic voice called out a verbal warning, “Earthquake. Earthquake. Moderate shaking expected in six seconds.”

How such alerts would be sent to the public still needs to be ironed out, with some hoping warnings could be sent to mobile phones located in soon-to-be affected areas.

Heaton said a full rollout along the West Coast would take about 1,200 sensors. So far, there are 800 installed, half of which are in Southern California. Limited public rollout of the warning alert system has been planned for next year, but that depends on continued federal funding. The roughly $10 million the U.S. Geological Survey gets for the program would be wiped out under Trump’s proposed budget.

“If it goes through, there will not be an early warning system,” Heaton said. “I'm pretty confident about that.”

Los Angeles has already spent millions of dollars on its own to install its warning system sensors.

“We’re going to raise our own money and try to get this done, even if the federal government doesn’t help,” said Jeff Gorell, the city’s deputy mayor for public safety.

But L.A. can’t fund the full estimated cost, $16 million a year, to cover California and the whole Pacific Northwest. Lucy Jones, scientist emerita at USGS, where she helped get the early warning system going, said earthquake warnings need to come from the federal government, because research centers don’t want to own the system.

“The universities have uniformly said 'We don't want the liability of releasing these messages,'” Jones said.

The proposed federal cuts are getting pushback from Congress. A House subcommittee voted last week to keep funding at current levels. The funding proposal has more votes ahead in the House and Senate. What actually shakes out of the budget approval process is anyone’s guess, but California Rep. Ken Calvert, a Republican from Corona who chairs the subcommittee, said it has wide support.

Calvert, a Trump rubber-stamp says he has "bipartisan agreement [and] "We’re moving ahead"-- at least on the Appropriations Committee's subcommittee on Interior and Environment. He's the only Californian on the subcommittee, although Oklahoma Republican Tom Cole is a member and fracking-related earthquakes are shaking up his constituents lately.

Ted Lieu, who represents the west side of L.A. is concerned about Trump's decision to end the funding. This afternoon he said, "To borrow the President's phrase, not funding earthquake early warning systems would be 'dumb as a rock.' Such systems will save countless lives. The President's lack of an infrastructure plan shows the continued chaos at the White House. Cutting infrastructure funding with no plan will harm the American people. That's why Congress needs to pass the 21st Century New Deal for Jobs Act that I wrote, which will provide 2 trillion dollars of much needed infrastructure funding and create millions of jobs."

The Trump Regime's entire attitude towards infrastructure in basically the same-- stop spending money on anything and everything. Tom Scheck reported the story for NPR's Marketplace last week-- and who gets hurt the most? Folks in the rural areas who backed Trump most strongly in the election: Trump's desire for private infrastructure money will narrow his choices to mostly urban projects. The ignoramus in the White House insists that "business-- not government-- can deliver better services to Americans," which has sent officials in states, cities and counties scurrying for private money for public infrastructure projects like roads and bridges. They looked at 46 transportation and water-related projects in 23 states where private money-- "investment opportunities"-- is what the Trump Regime is pushing for.

We asked two Orange County candidates whose districts are plagued with infrastructure problems. Kia Hamadanchy is running for the seat held by Trump rubber stamp Mimi Walters do doesn't live in the district and isn't really aware about what people in CA-45 face. He told us that "This country-- and Orange County in particular-- needs immediate and dramatic investment in our infrastructure. Our roads and bridges are in an incredible state of disrepair and every dollar we fail to spend today is going to lead to an even higher cost down the road. Donald Trump promised time and time during his campaign he would invest in and fix infrastructure and more then six months into his administration we have yet to see a plan to do so. What we need is the right kind of investment that actually addresses the problems we have in this country and the answer certainly isn't more privatization and the selling off of our public assets. The solution must be driven by the federal government, working in concert with state and local governments."

And Sam Jammal, the progressive running against Ed Royce in CA-39 told us that "Every voter-- no matter whether they lean right or left-- has the basic expectation that government will invest in infrastructure. Unfortunately, we are years behind in these investments thank to a Republican Congress that has ignored the basics. Trump made his promise knowing full well that voters expect roads without potholes, safe bridges and the deployment of new infrastructure to modernize our economy. But, like so much else, his rhetoric doesn't meet reality. We need a real investment in infrastructure that moves us towards 2030, not backwards. To me, this means making sure we have our bridges modernized, roads paved and investments in clean energy infrastructure that promotes electric vehicles and renewable energy. This will create jobs and ensure economic growth. We lead when we invest in our country and right now, we aren't doing that. Just take a ride on any of our freeways in Orange County and its clear we aren't investing in the basics. Voters rightfully expect more and infrastructure must be a priority."

Trump may love it but "privately financed projects have proven unpopular in at least two states after citizens learned they had to pay higher fees and tolls to private investors. And a federal loan program Trump is pushing to broaden has lost money on three projects that featured private investment." On top of this, most of the projects private capital is willing too invest in "serve high population, urban centers. That means rural voters, who helped elect Trump, could be left out of the potential infrastructure boom unless he either directs a significant amount of taxpayer money to rural projects or convinces investors to steer money there."

Forty of the 46 projects on the list are transportation related. The remaining six are water projects. Eight of the projects are entirely private enterprises with limited or no government involvement.

The others rely on a financing mechanism known as a public-private partnership, which can include a variety of models. The most common is a government receiving upfront financing to build or fix a project in exchange for either payments to the investors or rights to the investors allowing them to earn money on the project from, say, charging tolls on a highway.

...13 of the 46 projects on the list collected by the White House since November are road and bridge projects. That's more than half the total number of highways-- 21-- that relied on private financing between 1989 and 2012, according to a 2012 report by the Congressional Budget Office.

Trump has not released specifics about what he calls his $1 trillion infrastructure plan or the timing, but he has emphatically embraced public-private partnerships as a solution to a problem that he's identified as critical to America and what most political observers say could deliver a badly needed political win.

The American Society of Civil Engineers gave the nation's infrastructure poor marks in a report card released earlier this year. The group said it will cost $4.6 trillion to address the nation's roads, bridges, ports and water systems.

The White House budget plan clearly indicates that private investment will be a strategy. "Providing more federal funding, on its own, is not the solution to our infrastructure challenges," the document said.

...It isn't certain, though, how many projects will get financed with private money.

Investors may balk at a proposal because there isn't a revenue guarantee. Government officials may also decide that it's more cost effective to use traditional borrowing rather than private financing.

What's clear is that investors are eagerly moving to put more money into infrastructure. It's considered a safer and steadier investment than the stock market, yet has higher returns than bonds.

Wall Street is already lining up. Global Infrastructure Partners closed on a $15.8 billion fund in the first quarter of 2017, according to the data analysis firm Preqin.

The fund was the largest infrastructure fund at the time but was soon surpassed in May when Saudi Arabia announced it would invest $20 billion in a $40 billion infrastructure fund run by Blackstone Group, a private equity firm.

Other fund managers, state and national pension funds and foreign governments are also looking to profit. Preqin found $71 billion ready for infrastructure spending in North America even before the Saudi pledge.

"There has been reasonable investment within infrastructure in the U.S., so it's more of whether we're going to see a real explosion going forward," said Tom Carr, a Preqin analyst.

But private financing comes with risks and drawbacks:

• Last month, Texas-- an early adopter of privatizing transportation projects-- rejected efforts to authorize additional private investment.
• Private investors in road projects in South Carolina, Texas, California and Indiana have declared bankruptcy. In some instances, the bankruptcies resulted in a financial loss for the federal government.
• A 2015 Congressional Budget Office study found that private financing will speed up the construction of a road but doesn't reduce overall costs or increase with other transportation spending.
• Rural communities may lose out since they don't have the population willing to finance projects that can cost billions.

And critics of privatization warn against selling rights to what has long been considered a public asset. They also say private backers are looking for investment returns that could make the projects more expensive to the taxpayer.

Donald Cohen, executive director of the anti-privatization group In the Public Interest, called Trump's vision an attempt to "sell off America" to Wall Street investors. He said private investors will collect their returns by creating toll roads, increasing fees or finding other sources of revenue to get a return on their investment. "There may be lots of folks who actually want to rebuild America but their top job is to generate returns, and they're going to do pretty well under Trump's plan," Cohen said.

Despite the risks, the Trump Administration continues to push for increased private investment. "The private sector can provide valuable benefits for the delivery of infrastructure, through better procurement methods, market discipline, and a long-term focus on maintaining assets," a White House budget document said.

It's unclear, though, when the president will roll out the specifics of his plan or how it will fit into a congressional agenda bogged down by a stalled health care bill, a desire to overhaul the tax code, a measure to lift the debt ceiling and a budget plan that includes infrastructure spending cuts.

Kathrin Heitmann, an infrastructure analyst with Moody's, said that's why she doesn't expect an impact from Trump's plan in the short-term. "We are very cautious that the $1 trillion infrastructure investment can be realized," she said.

Heitmann also pointed that it will take a long time for projects to get started even if Trump's plan becomes law later this year. The lag between funding approval and project completion could mean that nothing substantial happens until the end of Trump's term in 2020. "It looks like that some of this funding will only peak at the end of the current administration's term," she said.

Adding to the uncertainty, public records show Trump's top infrastructure adviser is pushing states to finance construction projects without any help from the federal government, a quiet shift in rhetoric that reflects the president's onerous budget realities. That could be a blow to local governments since many have historically relied on federal funding to complete infrastructure projects.

...Larger population centers are the primary focus for private investment. Of the 46 projects that could rely on private investment, just two are located in and would serve rural America. Both are in Alaska.

Eight projects are located in rural communities but primarily serve urban population centers, including two privately financed projects that would allow companies to ship water from rural parts of California and New Mexico to urban areas.

The lack of financing opportunities for rural America is a bipartisan concern in Congress. Lawmakers worry that private money will chase the highest return, typically found in higher population centers instead of financing the neediest projects.

"There are thousands of miles of highway and tens of thousands of bridges that need work that can't make money," said U.S. Rep. Peter DeFazio, D-Ore. "No private sector person is going to buy them and repair them, because there isn't enough volume."

...Meanwhile, the nation's largest metropolitan areas are receiving unsolicited bids from private funds.

In November, voters in Los Angeles County approved a new half-cent sales tax and extended an existing half-cent sales tax. The increase is projected to raise $120 billion over 40 years. Even before the measure passed, private investors submitted unsolicited proposals to the Los Angeles County Metropolitan Authority.

California Gov. Jerry Brown asked the Trump Administration to include three Los Angeles County transit projects in its infrastructure plan. They are a 9-mile extension of an existing transit line, a connector to the airport and a bus rapid-transit line.

Experts say financing projects like those in Los Angeles County are perfect for investors looking to capitalize on long-term projects. The city is the second largest in the country, and county voters just approved a long-term funding stream that's attractive to private investors.

...Private financing is becoming a more attractive option as cities, counties and states grapple with tight budgets, a transportation system that is costly to maintain and a desire to build new projects that serve a growing population. The financing mechanism also allows state officials to finance projects without raising gas taxes.

"States are becoming more enamored of this because they're able to deliver projects sooner," said Shailen Bhatt, executive director of the Colorado Department of Transportation. "It allows you to advance a project without necessarily, say, raising your gas tax."

But Bhatt says there are only so many projects that can be financed with private money. And he said federal and state officials should not ignore a gas tax increase as an option. Since Colorado is an early adopter in public-private partnerships, Bhatt would prefer Trump focus his plan on directly funding projects.

"If the president's plan was just more financing opportunities, well, we're already moving on that path on our own," he said.

The trade group for the national construction industry is also directing most of its efforts on states when it comes to public-private partnerships and infrastructure investment.

Ben Brubeck, an executive with Associated Builders and Contractors, said his organization has been pushing for an infrastructure package on the federal level but said the states are where he sees the most action. "If you look at the deal flow here in the United States, it's happening at the state level and not really happening at the federal level," he said.

Since President Trump was elected, anticipation has grown that the real estate billionaire would deliver on his promise to spend $1 trillion on infrastructure. He's met with union leaders, state and local officials and private business leaders trying to build support.

He's also assembled an infrastructure team led by New York real estate investors Richard LeFrak and Steven Roth. LeFrak has personal ties to the president, and Roth and Trump have a business relationship.

In May, the White House released Trump's budget proposal, which included spending $200 billion in "federal outlays to the infrastructure initiative," but didn't specify how the money will be spent.

And from some departments, Trump cut infrastructure funding.

He proposed a 13 percent reduction to the U.S. Department of Transportation general fund budget, eliminating funds for new transit projects and gutting a $499 million grant program that has paid for road, bridge and transit projects. The plan also eliminates a $500 million water and wastewater loan and grant program at the U.S. Department of Agriculture, but boosts funding for water and wastewater infrastructure at the U.S. Environmental Protection Agency.

Since then, there have been few other details. In June, during a week devoted to promoting his ideas about infrastructure, Trump pledged $25 billion to rural projects and $15 billion to spur what he called "transformative" projects. An accompanying document didn't elaborate on the spending or say whether the funds are included in his $200 billion request.

And despite pleas by White House officials that journalists cover the president's policy agenda instead of allegations of Russian interference in last year's election, they didn't return repeated requests for comment about Trump's infrastructure plan.

The lack of specifics regarding infrastructure-- and a budget that weakens infrastructure-related programs-- have left state and local government officials wondering when a plan will be released and whether it will benefit them.

Documents show White House officials were still working to craft a policy in March despite a campaign rollout in October, a two-month presidential transition that focused on assembling wish lists from states and multiple meetings since the inauguration to discuss policy.

During a conference call with state leaders on March 23, D.J. Gribbin, the president's infrastructure policy adviser, was reluctant to embrace any plan and emphasized that he was only speaking for himself, not for Trump or other White House officials, according to a readout of the call.

And adding to the uncertainty, notes from the call-- captured in an email from Adam Zarrin, a policy adviser to Colorado Gov. John Hickenlooper-- show that Gribbin wants states to build projects without federal help. "They really are most excited ‘about projects [states] are paying for' and not the federal government. Want states to help themselves," read Zarrin's email.

Gribbin did not respond to an interview request.

The White House has aggressively courted states on infrastructure. In December, Trump's transition team requested a list of "shovel-ready" projects from governors. The White House also met in June with a group of county officials, mayors and Native American leaders to discuss infrastructure needs. The vast majority of those in attendance were Republicans.

Through the National Governor's Association, governors submitted a list of projects to the White House. Union officials, infrastructure consultants and campaign aides also submitted requests. It isn't certain whether White House officials are relying on those lists as it crafts its policy.

Others say they weren't approached to submit a list of projects. Oklahoma City Mayor Mick Cornett, who served as president of the U.S. Conference of Mayors through June, said his organization wasn't solicited. He's skeptical that any plan relying solely on private investment will work.

"I wouldn't get overly optimistic that the private sector is going to come to the rescue for America's infrastructure projects," Cornett said. "I don't think that's likely. And if that's the hope and dream, then we're probably going to be waiting a long, long time."

Cornett said that it's often cheaper for government officials to finance projects through government borrowing. He says cities, counties and states with a solid credit rating will likely get a cheaper rate than the private sector.

...Texas State Highway 130 offers a vivid example of how Trump's vision for infrastructure could spark projects. It also shows how some Texans have revolted against toll roads that have been privately financed.

In 2012, Gov. Rick Perry appeared at the grand opening of the highway. His speech focused on how the 41-mile stretch of road between San Antonio and Austin would reduce congestion on another busy freeway, Interstate 35. Perry, who now serves as Energy Secretary in the Trump Administration, also targeted critics of privatization.

"When we debated this concept back in 2003, there was no shortage of individuals both inside and outside the Capitol that said it wouldn't work," Perry said at the time. "Today's proof that the concept is complete, and it can be seen in concrete and asphalt."

His vision focused on the financing of public and private toll roads to spur road construction. The record shows Perry was successful.

A state report last year showed 53 toll roads spanning 671 miles in Texas. Many were built in the past two decades. Some, like State Highway 130, are privately operated. Others are managed by local governments or the state.

State officials claim that 10 public-private partnerships established since 2003 have generated $17 billion in construction. And Marc Williams, deputy executive director of the state's transportation department, said public-private financing was critical to speedy completion.

But swift, private construction and tolling doesn't guarantee a healthy return on investment. In 2016, the SH 130 Concession Company, which built the highway, declared bankruptcy. The firm-- owned by Cintra, a Spanish company, and a consortium of Australian entities-- cited less traffic than projected, according to bankruptcy records.

The combination hasn't proven politically popular, either.

Critics say the financial failure should be a warning to the Trump Administration about the unpopularity of toll roads in Texas. "If you want to lose a voter, the fastest way you do it is to take $300 or $400 out of their pocket every month," said Terri Hall, who runs Texans for Toll-Free Highways.

Hall, a Republican who says she voted for Trump, intends to lobby against increased private investment in transportation. She said Trump and others who back privatization will have a political problem on their hands. "They're going to have a rude awakening if they think that this is going to be something acceptable to the average Joe," she said.

Hall's lobbying appears to have been successful in Texas. Gov. Gregg Abbott opposes more toll roads, and the Texas House of Representatives defeated a bill in May that would have allowed communities to negotiate private financing for 10 projects.

No matter; Texas communities seem undaunted and state transportation officials are still lobbying the Trump Administration to include an expansion of I-635 in its infrastructure plans.

Douglas Athas, mayor of Garland, Texas, said private investors are interested in expanding the highway from 10 lanes to 15 lanes. He said the $1.6 billion proposal would ensure the project is finished more quickly. The program relied on allowing the investors to collect tolls on a few of the managed lanes that run near existing lanes.

Like the federal government, Texas has not raised the gas tax since the early 1990s, which has slowed new road construction that's led to congestion as the state's population soars.

"Politicians are scrambling to solve a problem," said David Ellis, a research scientist at the Texas A&M Transportation Institute, and manager of the Infrastructure Investment Analysis Program. He said some toll roads, specifically in the Dallas-Ft. Worth area, have been effective. After all, said Ellis, while no one likes paying a toll, the alternative is waiting in traffic.

Drivers along SH130 say they've been forced to weigh those options.

D.J. Shaw, a daily commuter on that Texas highway, said he hates paying $15 a day in tolls to drive from Seguin to Del Valle. But he said it's better than spending an extra 30 minutes on I-35. "It costs so much money and there's no other way to go," he said. "Nobody likes sitting on I-35 so they kind of got you cornered."

Williams, the state transportation official, said the legislative action means it's unlikely that any new toll roads will be financed over the next two years. But he's confident his department will secure federal funding when Trump's infrastructure plan is introduced. Williams also said Texas will spend as much as $3 billion a year more on transportation projects after voters approved a ballot measure dedicating general fund money to projects.

...[C]ritics and even some supporters of public-private partnerships warn that the public loses control over infrastructure assets when a deal is done. A citizen upset with a road project or a new toll, for example, can't complain to an elected official and get relief.

"When you enter into the P3, you now have a third party that is now in the process," said Aubrey Layne, Jr., Virginia's Secretary of Transportation.

Unwinding a deal, he says, no longer means taking a vote in the Legislature or at a city council meeting. Instead, private investors want something in return if a government reopens a contract.

Layne said governments going into P3 agreements need contractual precision and an amount of prescience because deals could last decades.

Moreover, attorneys and financial consultants are critical to protect the public's interest, he said, because private investors are typically armed with savvy financial analysts, lawyers and contractors who have negotiated these complex deals in the past.

Cities and counties, particularly those with smaller population centers, may not have the same experience or budget to retain a high level of expertise to protect their interests. "These are some of the most sophisticated investors in the world you're going to be negotiating with," Layne said, cautioning that naivete will result in a bad deal for the public.

Cohen from In the Public Interest analyzes the choice more cynically, saying that too many policy leaders look for private investment instead of making the difficult choice of raising taxes. He said there's little worry because the policy leaders often leave office before there's blowback from an increase in fees or tolls. "They don't have to answer the question in eight years about what happened to the tolls when they're tripled," Cohen said.

In fact, a key selling point of public-private partnerships has been the financial protection of taxpayers. The private sector typically assumes most of the risk in the deal. When the private backers of the Indiana toll road filed for bankruptcy in 2014, for example, taxpayers there didn't see a loss.

However, that's not always the case.

At least three times in the past seven years taxpayers have been on the hook for business failures, each stemming from a federal loan program-- called the Transportation Infrastructure Finance and Innovation Act (TIFIA)-- which President Trump wants to grow.

The program helps finance transportation projects through direct loans, loan guarantees and lines of credit. In budget documents, the Trump Administration claims TIFIA is a success.

"One dollar of TIFIA subsidy leverages roughly $40 in project value. If the amount of TIFIA subsidy was increased to $1 billion annually for 10 years, that could leverage up to $140 billion in credit assistance, and approximately $424 billion in total investment," the document states.

But TIFIA loans have put taxpayers at risk:

• In 2010, the private investors of the South Bay Expressway in California declared bankruptcy. When the investors emerged from bankruptcy in 2011, the U.S. Department of Transportation took a $47 million loss on a $140 million loan that helped finance the road.

• In 2014, the U.S. Department of Transportation sold a federal loan it held on the Pocahontas Parkway in Virginia to private investors at a 59 percent loss. Anthony Foxx, who was the Transportation secretary, said he chose to sell the loan after private investors signaled they were losing money on the nearly 9-mile toll road near Richmond.

• And the bankrupt Texas highway-- State Highway 130-- was initially financed with a $430 million federal loan. It emerged from bankruptcy in June with new ownership and $260 million in new financing. The federal government received $16 million for the loan.

The Texas agreement also brings an ironic twist: The investors who insisted the private sector could manage transportation projects better than the public sector will now answer to a new owner: the federal government, which now has a 34 percent stake in the toll road.

"I think you only need to look at Texas to get an idea of what Trump’s infrastructure plan will look like down the road," said Tom Wakely, an economic populist who is running for Texas governor on a progressive platform. "Texas infrastructure, roads, bridges and damns, is to be kind in shambles but if we are telling the truth it is nothing short of FUBAR. Decades of failed Republican policies that emphasized private infrastructure money back by government guarantees over sound fiscal public infrastructure investment have left Texans sitting in traffic for hours.

Tom Wakely 

"A perfect example of this is Texas Toll Road 130. It was by built 130 Concession Co., a joint venture between Cintra, a Spanish developer and Zachry Construction Co., a San Antonio based company. It was build with a half-billion dollars in federal loans and another billion or so in private loans but it is nothing more than a 41 mile highway of broken concrete and promises. It was built by Republican Governor Rick Perry, now Trump’s Energy Secretary. The highway connects San Antonio and Austin but only if you drive a hell out of your way to get there. It causes flooding in nearby towns. It is nothing more than a public albatross and private get rich quick scheme.

"Another example of an infrastructure project here in Texas that is surely headed for bankruptcy is the flawed Vista Ridge pipeline. It is a $3.4 billion water project requiring the construction of a 142 mile pipeline from San Antonio north to rural Burleson County. This transfer of water will be the biggest in Texas history and has been described by financial advisers as one of the U.S.’ largest public-private partnerships in the water sector. To put it bluntly, it is morally wrong to grow a city like San Antonio by taking water from a distant ecosystem which will eventually need that water."