Projects aren't shovel-ready if no one's there to hold the shovels

Projects aren't shovel-ready if no one's there to hold the shovels

In a six-page leaked document, and in his State of the Union, we learned the contours of Donald Trump’s infrastructure plan. The president more clearly defined his vision in Monday morning’s 53-page statement of principles, but local, state and federal lawmakers must do their part too by thinking creatively and courageously. 

Lawmakers also must consider how we’re going to build. America has heart, and grit, but the country also needs workers to come back to an industry — construction — that they fled after the 2008 housing crisis.

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The president has proposed to change federal rules to allow interstate tolling and rest area commercialization. Both ideas will generate opposition from consumer and retail groups, but lawmakers should embrace them anyway.

 

The Obama administration supported tolling because it would improve road safety and provide millions in dedicated funding for future upgrades.  

President TrumpDonald John TrumpArizona GOP Senate candidate defends bus tour with far-right activist Alyssa Milano protests Kavanaugh in 'Handmaid's Tale' costume Bomb in deadly Yemen school bus attack was manufactured by US firm: report MORE also has pledged to reduce the approval timeline for projects from 10 years to two. That’s important. Delaying the start of all U.S. public infrastructure projects by six years prolongs inefficiencies, results in unnecessary pollution and outdated infrastructure and costs $3.7 trillion.

The president clearly wants to recalibrate the federal-state balance for paying for new projects. Right now, the feds assume about 80 percent of the cost. Prior to Monday, it’s been reported that the White House wants to reduce that share to 20 percent. That’s too radical.

The split should be around 60/40 with the states assuming the larger burden. Washington can afford to help out more if it raises the federal gas tax.

Local and state officials still will protest, but that’s because most don’t think innovatively about infrastructure.

Municipalities must sell off current assets like Australia has done. They must also embrace special taxing districts, which the president touched on in his plan. These independent, single-purpose government units carry out certain functions within a limited boundary.

I worked with public and private officials several years ago in Virginia to set up something similar to develop 10 miles of sewer line. The local government didn’t have to supply any money or pledge any of their credit. The private sector took care of it, and we opened up an entirely new area for development and generated millions in revenue for the locality.

Mayors and city council members don’t want to be accused of raising taxes, but these levies aren’t taxes. They’re user fees. As the National Association of Home Builders (NAHB) has explained, residents pay “for public improvements for which they derive benefit” while existing residents, who don’t use the infrastructure, don’t pay anything.

As NAHB says, these districts are “more equitable.” In Washington, D.C., officials could set up a district in Georgetown to repair the Key Bridge. We have the technology to track where drivers land. Businesses that employ individuals traveling over the bridge would pay the levy.

The private sector also can assume more of the burden of paying for infrastructure, and President Trump’s proposed expansion of private activity bonds is a start. 

The president has run hot and cold when it comes to public-private partnerships, but lawmakers must unleash private equity. In 2015 McKinsey & Co. said, “Institutional investors are jumping in with both feet… infrastructure is now seen as an asset class in its own right.”

The firm estimated that, across all investor groups, more than $5 trillion a year was available worldwide to build infrastructure. CNBC reported last year that private equity was raising $30.5 billion for 43 new funds targeting North American infrastructure. That’s just the start.

The private equity infrastructure pipeline is probably 10 times that amount. This industry is like oxygen — it will find places to put money.

It’s encouraging that the president’s infrastructure plan also considered how we’ll build this infrastructure. In the third quarter of 2017, 60 percent of contractors reported difficulty finding skilled workers.

Congress cannot wait to address our labor shortage until after the money is flowing. We need an historic jobs bill that will re-energize and realign our workforce and match and move workers to where the jobs are. 

Projects aren’t shovel-ready if there’s no one to hold the shovels. 

The Trump administration is on the right track, but it’s going to take more than 53 pages to tackle our infrastructure challenges. Washington has waited too long. It’s time to fill in the blanks. 

Todd Hitt is founder of Kiddar Capital, a private equity firm. Hitt is an American businessman and investor whose assets span real estate, construction, energy, finance and hospitality. Follow him on Twitter @ToddHitt.