The 2016 election is over, and the country has a new President-elect. Without getting into the chasms separating the former presidential candidates in terms of policy (and everything else), one thing both of them seem to agree upon is the need for major investments in infrastructure. For a construction lawyer, this sparks some interest.
Throughout his campaign, Donald Trump called out the need for major infrastructure investments in national roads, highways, and bridges. There is strong support for this argument. Every four years the American Society of Civil Engineers “grades” our country’s infrastructure and issues a report card on highways, parks, bridges, water, dams, and other national infrastructure systems. Our last grade was a D+, with an estimated $3.2 trillion needed to be invested before the year 2020 in order to repair and upgrade our current systems. While stock market futures plummeted the night of the election as the prospect of a Trump presidency began to take shape, Wall Street since recovered and has made surprising gains since the election. Why? Because Mr. Trump campaigned on the prospect of a one trillion dollar investment in public infrastructure. Put into context, this would be nearly ten times the $105 billion infrastructure component of the American Recovery and Reinvestment Act of 2009, and the sum alone would eclipse the $ 831 billion dollars in tax credits, health care investments, and other costs making up the entirety of the recovery act. Anticipating the possibility of investments on this scale, shares of Caterpillar stocks rose 11% in just two days following election night.
However, closer review of Mr. Trump’s infrastructure policy reveals little intent to invest public dollars anywhere near the sums cited in stump speeches. Rather, according to the policy outlined on his campaign website, Mr. Trump intends to “support investments” in infrastructure: “NAM estimates a “ten-year funding gap” of approximately $1 trillion. The Trump Infrastructure Plan is aimed at achieving a target of investment to fill this gap. NAM also found that $8 billion in infrastructure tax credits would support $226 billion in infrastructure investment over 10 years. Innovative financing programs also provide a 10-to-1 return on investment.” Translated, that appears to indicate that the Trump plan for infrastructure is to invite private developers to fund construction through offering tax credits and “innovating financing”. Of course, private construction will require that the developer make a profit healthy enough to be an incentive to go forward, which will increase the cost of the construction and with it the new highway and bridge tolls to be imposed on current drivers – in effect, the country would be paying for infrastructure through a “flat tax” imposed on drivers who use the nation’s public infrastructure. All of this makes the future prospect of a bold new infrastructure investment somewhat murky, if not outright doubtful. However, Mr. Trump does have a supportive Congress to work with, and the democrats have already signaled an interest in working with him on infrastructure efforts. It is still possible that a compromise bill may pass which combines public private partnerships with monetary investments in infrastructure from the federal side.
What all of this means to Hawaii contractors is unclear, but based upon what has been suggested to date, it is likely that any infrastructure development arising out of the Trump “target of investment” plan will be in highly populated areas with a greater rate of return on private dollar investments. This means small communities with failing infrastructure will not be the recipient of such investments. Contractors seeking a piece of this pie here in Hawaii, where infrastructure investment is likewise badly needed, will need to start lobbying for clear public/private partnership provisions under state law (which do not currently exist), so that they can hope to participate in any public/private infrastructure proposals put forward by a Trump administration. Current Hawaii public procurement laws do not provide for private development of public roadways or infrastructure, but rather requires that construction projects be competitively let through the public procurement process.