Trump advisers call for privatizing some public assets to build new infrastructure – Washington Post

The Trump administration, determined to overhaul and modernize the nation’s infrastructure, is drafting plans to privatize some public assets such as airports, bridges, highway rest stops and other facilities, according to top officials and advisers.

In his proposed budget released Tuesday, President Trump called for spending $200 billion over 10 years to “incentivize” private, state and local spending on infrastructure.

Trump advisers said that to entice state and local governments to sell some of their assets, the administration is considering paying them a bonus. The proceeds of the sales would then go to other infrastructure projects. Australia has pursued a similar policy, which it calls “asset recycling,” prompting the 99-year lease of a state-owned electrical grid to pay for improvements to the Sydney Metro, among other projects.

In the United States, Chicago Mayor Rahm Emanuel (D) explored privatizing Midway International Airport several years ago but dropped the idea in 2013, after a key bidder backed away. Transportation Secretary Elaine Chao says such projects should be encouraged.

“You take the proceeds from the airport, from the sale of a government asset, and put it into financing infrastructure,” Chao said. St. Louis is working with federal officials to try to privatize Lambert International Airport, she said.

Officials are crafting Trump’s initiative, and he has yet to decide which ideas will make the final cut. But two driving themes are clear: Government practices are stalling the nation’s progress; and private companies should fund, build and run more of the basic infrastructure of American life.

A far-reaching proposal from the Trump administration earlier this year to take the nation’s air-traffic control system out of government hands was fueled, in part, by frustration at sluggish efforts to modernize technology.

To speed up infrastructure projects, officials are preparing to overhaul the federal environmental review and permitting system, which they blame for costly delays. Trump asked advisers whether they could collapse that process, which he said takes at least 10 years, down to four months. “But we’ll be satisfied with a year,” Trump said. “It won’t be more than a year.”

In a bid for broader support, Trump and some of his advisers have also signaled an openness to raising the gas tax to pay for needed projects. The 18.4-cent-per-gallon levy is the federal government’s main source of highway funds and was last raised in 1993.

The infrastructure initiative is being shaped by White House officials and a task force representing 16 federal departments and agencies. In addition, there is a committee of outside advisers co-chaired by billionaire developer Richard LeFrak, a Trump friend.

LeFrak said the administration’s effort, which is being led by Gary Cohn, director of the National Economic Council, Chao and others, is a sweeping attempt to rethink how infrastructure gets built. LeFrak said the issues are intensely personal for Trump, who spent his career in real estate and sees this as an area where he can make a lasting impact.

“He does think he’s the president to rebuild America. He’s a builder. It’s just logical,” LeFrak said. “He’s highly enthusiastic about this idea and getting it done.”

Critics said Trump and his advisers are putting ideology ahead of the national interest and oversimplifying how the process works.

Public stewards should not be “trying to figure out how to extract maximum value” by selling off government assets or “making huge, multibillion-dollar wagers” that span decades, said Kevin DeGood, director of infrastructure policy at the Center for American Progress, a liberal advocacy group. “Building infrastructure faster and without adequate study or time for community input may be good for developers, but it’s lousy for everyone else.”

Still, there are bipartisan concerns that important projects have been stymied by politics and bureaucracy, and that Washington has been unwilling to allocate the money for needed improvements. A civil-engineering group in March tallied a “$2 trillion, 10-year investment gap” in the nation’s roads, transit systems, bridges, water systems, power grids, parks, ports and schools.

In February, Trump told Congress that he would seek legislation “that produces a $1 trillion investment” in infrastructure and creates “millions of new jobs.” Officials have since said that the plan will probably include $200 billion in direct federal funds, which would be used to “leverage” the larger figure over a decade. LeFrak sees the chance for a deal, noting that Senate Minority Leader Charles E. Schumer (D-N.Y.) also “wants a trillion-dollar program.”

“So you’ve already got two important people — one very, very important person and one very important person — both from different sides of the aisle, who come in favor of this,” LeFrak said.

But on Tuesday, when Trump’s budget proposal was released, Schumer condemned the president’s “180-degree turn away from his repeated promise of a trillion-dollar infrastructure plan,” saying the budget contains deep cuts in spending on roads, transit projects, public housing and more.

“The fuzzy math and sleight of hand can’t hide the fact that the President’s $200 billion plan is more than wiped out by other cuts to key infrastructure programs,” Schumer said in a statement.

Trump administration officials disputed Schumer’s calculations, saying they included budget items that should not be considered cuts. They cited a projected “drop-off” in federal highway funds that could be eliminated as part of the broader infrastructure agreement.

The budget places a heavy emphasis on market solutions, such as making it easier for states to toll interstates, saying that the federal government has become “a complicated, costly middleman.” The budget also talks about leasing vacant space in Veterans Affairs facilities and selling off major power facilities as ways of “disposing underused capital assets.”

At a recent White House event, Trump stood alongside one of his top infrastructure aides, DJ Gribbin, who held up a seven-foot-long flow chart illustrating the highway permitting process. The colorful boxes and baffling array of crisscrossing lines were meant to drive home a point about regulatory overreach.

The chart also could have been a graphic representation of the difficulty of crafting a $1 trillion package capable of making it through Congress at a time beset with political division.

Democrats, including Schumer, and some Republicans favor a heavy reliance on federal spending, while others in the GOP want to cut that spending and push more responsibility onto states. Agreeing on ways to better manage arcane state and federal regulations would be tough in even the most forgiving of climates.

Add in the priorities of numerous government agencies, and the puzzle becomes even more complex.

“This is a democracy,” Chao said. “They’re not easy questions.”

So Chao and others crafting the president’s plan have cut the problem into smaller, more digestible pieces: regulation and permitting; government procurement, which Trump officials say is too clunky and doesn’t make enough use of private options; government revenue and private capital; and lessons from abroad.

They also are trying to account for dizzying technological advances. How do you plan for a 10-year broadband expansion, for example, when the technology could easily shift in five years? Chao asked.

LeFrak, who co-chairs the advisory committee with another Trump friend, Vornado Realty Trust Chairman Steven Roth, said they have also been wrestling with another challenge,the controversy over high-speed rail, “which is one of the things people dream about.”

But he has seen studies showing a much lower per-mile cost for using driverless cars instead. So should the government invest in rail, which takes passengers station to station, or in “some kind of road network which is going to allow these cars to travel at relatively high speeds” and take a passenger door to door? he asked.

The administration’s focus on shortening the environmental-review process has concerned environmental groups that point to Trump’s moves to reverse efforts to fight climate change.

Trump’s advisers say it’s possible to speed up projects that have clear support and a good business case — while also doing more to protect the environment. But Trump’s push for strict new deadlines would require major changes to environmental laws, which would face fierce opposition.

“There’s no reason why the U.S. cannot function as efficiently as other Western-style democracies in getting worthy projects through the system and permitted,” LeFrak said. “The math speaks for itself. What we’re doing in six years, seven years, eight years, 10 years, these other countries get done in a year or two.”

DeGood said Trump’s team is relying on exaggerated figures and playing down recent reforms to speed approvals. Administration officials cited a report saying it took the Federal Highway Administration more than six years to approve major environmental reviews for projects that need them. While that was true in 2011, DeGood said, that figure has since dropped to 3.6 years.

Chao said that things still move too slowly and that many permitting processes can be done simultaneously rather than sequentially. Officials will cut “duplicative or wasteful steps,” she said.

“If we can make these construction projects come online faster without compromising the environmental concerns, it’s good for the quality of life of a community. . . . It helps people. It creates more jobs. It creates less congestion,” Chao said. And faster approvals create less-risky, more-attractive opportunities to invest in America. “What I heard from the private sector is there’s lots of money available, but there are not enough projects.”

The administration plans to push states to use public-private partnerships — P3s in industry jargon.

In such arrangements, a private firm might bring together investors and low-cost federal loans to expand a highway, for example, then collect tolls from motorists to recoup costs and earn a profit. Companies can more nimbly tap technology and other innovations in building and maintaining such projects, advocates say. Critics say relying on tolls will not work in rural or distressed communities.

Some of those partnerships have worked as intended, such as the Washington region’s Interstate 495 Express Lanes — 14 miles of toll and carpool lanes that opened in 2012. Although the tolls are unpopular, the partnership gave drivers more options for faster travel. Maryland’s proposed Purple Line light-rail system also would be built with a public-private partnership.

Other such arrangements have failed, with ill-prepared governments saddling themselves with bad deals. Chicago’s inspector general cited the 75-year lease of city parking meters to a private firm for $1.16 billion in 2008. Under the same terms, the city would have earned at least $974 million more by keeping the meters, the IG said.

Australia, which has long advocated privatization, launched its “asset recycling initiative” in 2014. Cohn, a former president of Goldman Sachs, said officials are looking at importing the idea.

“Instead of people in cities and states and municipalities coming to us and saying, ‘Please give us money to build a project,’ and not knowing if it will get maintained, and not knowing if it will get built, we say, ‘Hey, take a project you have right now, sell it off, privatize it, we know it will get maintained, and we’ll reward you for privatizing it,’ ” Cohn told executives at the White House. “The bigger the thing you privatize, the more money we’ll give you.”

So far, one Australian state and two territories have chosen public resources to sell off. The central government kicks in 15 percent of the value of what’s sold.

The Australian treasury said the central government has reached agreements to pay out $1.7 billion in “incentive payments” that will “unlock” $12.6 billion in spending, including for a light-rail line in Canberra. For that project, the Australian Capital Territory sold public housing projects, a tourism information center and a public gambling operation, according to government documents.

Some critics called the moves shortsighted.

“You can’t perform that deal again,” said John Quiggin, a professor of economics at the University of Queensland.

The program has at times been a lightning rod, as when the Northern Territory government leased the Port of Darwin to a Chinese-owned firm for 99 years, sparking a debate over national security.

That still leaves the question: How do you get to $1 trillion?

“Everything’s on the table,” Chao said.

Administration officials are putting together a menu of options to hit that total, including big-ticket possibilities such as “repatriating” funds parked overseas by U.S. firms, and smaller ideas such as privatizing highway service plazas, Chao said.

Chao said congressional leaders — she is married to Senate Majority Leader Mitch McConnell (R-Ky.) — have made clear “the administration has to have a bill with pay-fors before they will accept it. So we understand that.”

LeFrak says that there is money lying around in government assets that can be privatized, and that people can get “socialized” to paying tolls.He said uncollected Internet sales taxes could go to states to help pay the infrastructure bill. He also thinks Washington should borrow large sums at today’s low interest rates.

He also noted that the federal gas tax hasn’t been raised in nearly a quarter-century, and that more than 20 states have raised or indexed their gas taxes since 2013. For federal officials, that presents “a test in political courage,” LeFrak said.

“I’ve come to the conclusion that the wish of everybody is we have divine intervention, that somehow a bridge gets floated down from on high. People say, ‘Wow, we got a free bridge!’ ” he said. “But the answer is, it’s an expensive investment.”

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