New Fiscal Reality Tracks Trump Infrastructure Plan

President Trump is touting a major infrastructure plan, but with little direct federal spending on projects. The plan seeks to induce private developer to build highways and bridges and recap their investment through tolls and federal tax credits. There may be few investment-worthy infrastructure projects in Oregon.

President Trump is touting a major infrastructure plan, but with little direct federal spending on projects. The plan seeks to induce private developer to build highways and bridges and recap their investment through tolls and federal tax credits. There may be few investment-worthy infrastructure projects in Oregon.

President Trump has promised a $1 trillion infrastructure investment plan, but it will involve relatively little direct federal spending on roads, bridges, transit systems, dam repairs, rail upgrades and waterworks.

The Trump plan seeks to squeeze out price investment by allowing more tolling on roads and bridges, rolling back environmental regulations and providing tax credits to developers, as reported last year by CFM’s Joel Rubin.

Billed as public-private partnerships, the funding scheme envisioned by Trump’s administration will only be viable in infrastructure investments with some form of a payback. That probably limits the eligible projects to major highways and bridges that can be tolled and large water and sewer projects that can recoup investment costs through rates charged to users.

This new fiscal reality is the motivation behind the Oregon Department of Transportation’s decision to apply for one of three spots in the federal FAST Act tolling program. ODOT indicated it would look at tolls to finance improvements to reduce congestion on I-5 near the Rose Quarter or widening the I-205 Abernethy Bridge over the Willamette River.

ODOT is still in the exploration stage, according to Director Matt Garrett, who also told lawmakers last week “Timing is everything. We’re going to push hard.” If successful, ODOT would have to start at ground zero because currently it doesn’t operate any tolling facilities in the state.

Governors convening in DC before Trump’s address to a joint session of Congress acknowledged the President's plan falls short of what many hoped for to cope with long lists of aging infrastructure. But most don’t see much of a choice.

There are few concrete details of how the Trump public-private partnerships would actually work, and what it would it take to induce developers to undertake major projects. Like old-fashioned federal-state infrastructure spending, it will come down to money. Even though the Trump plan calls for relatively small amounts of direct federal spending, the tax credits that are intended to attract developer interest come at a cost, too, which Congress, with its reluctant conservative wing, may be unwilling to fund.

The profile of projects that might ultimately garner private developer interest are likely to be larger projects in more congested areas – places with a lot of captive traffic to pay tolls and big water projects with lots of built-in ratepayers.It is harder to see how private developers would be interested in transit, dam projects and high-speed trains or light rail investments.

Ironically, the project best suited for a pubic-private partnership is replacement of the I-5 Columbia River Bridge, which for the moment isn’t on the radar screen in either Oregon and Washington, though Southwest Washington lawmakers have signaled an interest in resuming conversations. In the previous Columbia River Crossing project, which faltered in 2015, tolling was looked at, but deemed untenable because commuters could use the relatively nearby I-205 Glenn Jackson Bridge.

A rush for more highway and bridge tolling may have some unintended impacts. As more fuel-efficient and hybrid energy cars have hit the nation’s roadways, federal and state gas taxes have lost ground in terms of what they generate on a miles-driven basis. That has caused many states, including Oregon, to explore shifting in whole or part to a system based on how many miles a motorist drives, not on how much gas he or she buys.

Modern conceptions of highway and bridge tolling involve electronic assessments, not toll booths. As electronic tolling becomes more common in a metropolitan area’s transportation system, there may less resistance to moving to a tax based on miles driven to replace the gas tax. While a gas tax provides an incentive for more fuel efficient vehicles, a vehicle-miles-traveled (VMT) tax in a metropolitan area encourages fewer trips and ridership on public transit.

A VMT tax has faced opposition from rural residents who per force of where they live drive longer distances to work, school, medical clinics and grocery stores. Both urban and rural motorists have expressed privacy concern about the state keeping track of their miles driven – and, by extension, where they are traveling. ODOT has worked on an electronic system that keeps track of mileage, but doesn’t track where the mileage occurs.

All this adds another layer of uncertainty to ongoing talks in Salem about a major state transportation funding package. There is bipartisan agreement on the need for a funding plan, but so far no legislative outline has emerged on what the plan might include and how it would be financed.

Funding for public transportation appears to have bipartisan support, but poses its own unique funding challenge. Under the Oregon Constitution, revenue generated from gas taxes and vehicle registration fees can only be used for highway and bridge improvements. A separate funding source would be required to pay, for example, for new buses powered by electricity or cleaner burning diesel or propane engines.