Earlier this year, President Trump revealed his long-anticipated infrastructure program, which had been a recurring campaign promise during the 2016 election. Unsurprisingly, several of these policies will impact the intermodal shipping and transportation industry.
Highlights of Trump’s Infrastructure Proposal
President Trump’s Proposal requested that Congress allocate $200 billion dollars in order to fund transportation improvement programs. Half of this funding is earmarked for incentive programs, meant to reward private and public partnership projects and for the implementation of innovative funding strategies. These incentives are expected to generate $1.5 trillion dollars in infrastructure investment over the next ten years. The remaining funds would be allocated toward maintaining existing infrastructure, such as rebuilding roads and bridges, updating infrastructure in rural areas, and initiating energy development projects to maintain public lands.
According to CNN Money, the proposed allocation of these funds is as follows:
- $100 billion in incentives for local government agencies
- $20 billion for “showcase” projects of national significance
- $50 billion for local block grants with an emphasis on rural areas for transportation, cable, water, waste and power projects.
- The remainder would fund existing infrastructure programs
This proposal is a break from the federal government’s historical policy of contributing the majority of the necessary funding for infrastructure projects. Instead, President Trump’s proposal shifts the burden to state and local governments and to private investors to front costs associated with project design and construction.
Consequently, states and municipalities have substantially more authority in prioritizing and funding these infrastructure projects. Additionally, the streamlined application process will efficiently move project proposals through the various levels of bureaucratic review, while giving preference to those that utilize contemporary technologies and financing strategies.
How the Infrastructure Proposal Affects the Intermodal Industry
While the President’s proposal touches on a broad range of topics, there are a few keys policies that have a direct effect on the intermodal industry. For example, the proposal sets aside $20 billion in federal funding for “Transformative Projects,” or projects that incorporate ambitious and exploratory elements in their proposal. The proposal names transportation (as well as water, energy, and others) as key sectors eligible for funding from the transformative projects initiative. These funds could be applied to make needed improvements at ports, leveraged by railroads and to make local or “last mile” deliveries more efficient.
Other notable features of President Trump’s proposal include the expansion of both the Transportation Infrastructure Finance and Innovation Act (TIFIA) and the Railroad Rehabilitation and Improvement Financing (RRIF) Program. The President’s proposal increases the number of applicants qualified to seek financial assistance under these programs. For instance, the proposal expands RRIF eligibility to include short-line freight rail as a sector that could apply for subsidies or incentive financing.
If the President’s proposal is enacted into law, the intermodal and transportation industries can expect to see a spike in innovative projects. Additionally, proposals for these projects will make their ways through the administrative review processes at a more rapid rate, meaning that if a project is approved, construction could begin sooner. Finally, various forms of transportation used by intermodal companies may be granted access to financing avenues that were previously unavailable, which could pave the way for projects that have been held up due to a lack of available funds.
Next Steps for Trump’s Infrastructure Proposal
However, there are still some unanswered questions. As mentioned above, the President’s proposal will shift the burden of financing these projects onto states, municipalities and private investors. It’s unclear how much local governments will be able to contribute considering their other financial obligations, or if private investors will pursue the incentives meant to encourage investment. If these entities are unable to shoulder the costs, then available financing could be extremely limited. Additionally, increased privatization could have other downsides, such as increased tolls and contract requirements to use certain routes.
What is clear is that Congress has much negotiating in the near future as it begins to take on the country’s infrastructure needs. However, additional sources of funding should be a benefit to the intermodal industry.