President-elect Donald Trump has promised $1 trillion in infrastructure using a “revenue neutral” model of private financing that won’t burden government budgets, says ARCHITECT contributor Elizabeth Evitts Dickinson. But how is he going to do it? While political parties have all recognized that America's infrastructure is a problem, they've disagreed about how to pay to create more. Dickinson writes:
Trump’s senior policy advisers say they have an answer. In late October, Wilbur Ross, a private equity investor, and Peter Navarro, a University at California, Irvine business professor, released a detailed plan for Trump’s vision on infrastructure, which calls for investment in transportation, clean water, the electricity grid, telecommunications, security infrastructure, and “other pressing domestic needs.” Trump’s vision relies heavily on private companies to make American infrastructure great again.
To finance $1 trillion dollars worth of new infrastructure, the Trump plan would entice private companies to invest $167 billion of their own equity into projects. In return, these companies would get a tax incentive equal to 82% of that equity investment, or roughly $137 million in government tax breaks. Companies could then leverage their initial equity investment and tax credit financing to borrow more money on private financial markets, where interest rates are at historic lows. “With interest rates so low, this has got to be the best time from a break-even point of view, from a societal point of view,” Ross told Yahoo! Finance.
In addition, companies would be allowed to receive revenue—in the form of tolls or fees from users of this infrastructure—in order to offset their costs and generate profits.