Innovative Infrastructure? Don't Sell the Trump Plan Short.

In its call for 'transformative' projects, it has some ideas that are worth paying attention to.
April 5, 2018
Telsa CEO Elon Musk peeks inside the Hyperloop track door. (AP Photo/Damian Dovarganes)
By Hamada Zahawi  |  Contributor
A non-resident fellow at Harvard's Ash Center for Democratic Governance and Innovation

There is plenty to debate about the Trump administration's $1.5 trillion, 10-year infrastructure plan. What form it might take when -- and if -- it emerges from Congress is anyone's guess. But one of the more forward-leading aspects of the White House proposal, the Transformative Projects Program (TPP), deserves special attention. That's because TPP has the potential to foster stronger financial cooperation between the private and public sectors, create processing efficiencies, and increase innovation for service-related infrastructural projects.

The White House plan would allocate $20 billion under TPP to what it describes as "bold, innovative, and transformative infrastructure projects" that pose "significantly more risk than standard infrastructure projects, but offer a much larger reward profile."

In primarily targeting the transportation, water, energy, space and broadband sectors, the Trump plan says the projects must be "commercially viable" while also "significantly improving performance, from the perspective of availability, safety, reliability, frequency, and service speed" and "substantially reducing user costs for services."

So just what kind of bold and innovative projects might a program like TPP help to jump-start or see through? Not surprisingly, two of Tesla/SpaceX entrepreneur Elon Musk's ideas have already drawn speculation. Musk's Hyperloop, a network of tunnels that would transport pods of freight and people between cities at speeds of 700 mph, has received a D.C. government permit for preliminary excavation. A different Musk-envisioned system of tunnels, in which cars would ride on "electric skates" at more than 120 mph, has received permitting to dig a test tunnel in traffic-congested Los Angeles. And then there's Uber Elevate, which aims to transport commuters via flying drones.

Potential applications of TPP funding go beyond transportation, taking in efforts to build "smart cities." One Concern, for example, aims to provide disaster prediction through data science and machine learning in major cities, aligning well with efforts like the Rockefeller Foundation's Resilient Cities initiative.

But innovation is one thing. Paying for it is quite another. The Trump infrastructure plan envisions states and, by extension, their local governments taking on 80 percent of project costs. Such a burden on already strained budgets could force higher state and local taxes and fees. This could include surcharges for passengers at small airports or higher water and sewer fees to make up for the funding shortfall, especially for higher-risk transformative projects.

Moreover, breakdowns in cooperation could develop between cities and states. Cities want more autonomy to allocate and expend funds on localized exploratory projects. States, tasked with overseeing the purse strings of federal funding, could impede such projects due to divergent priorities or their own inefficient, slow-moving bureaucracies. And critics argue that the plan would support cash-generating projects at the expense of those providing social returns.

While the overall Trump plan looks likely to face a steep uphill battle, there's some reason to hope that TPP might survive for the following reasons:

• Celebrated innovators such as Elon Musk will throw their weight and credibility into TPP-type projects, thereby helping source private-sector financing. Additionally, given the potential financial upsides of such projects, funding from non-traditional sources such as public-private partnerships and even sovereign wealth funds such as China's and Saudi Arabia's may be more readily available.

• The plan would require that the federal government, through the Department of Commerce, enter into a partnership with project developers to specify terms and conditions, including retaining a share of project value and outlining "major milestones, and other key metrics to assess performance." This would hold project leaders accountable for their actions, reduce bureaucratic red tape and create process efficiencies, given that the federal government would have a financial and regulatory stake in each project.

• By prioritizing innovation and private investment, governors, mayors, social advocates, universities, city planners and other civic leaders could use the program as a platform to collaborate with the private sector to source innovative financing, leverage technical expertise and push forward-leaning projects to the starting line.

The coming months will be trying for the Trump administration's infrastructure proposals as they make their way through Congress. Indeed, policymakers must strike a balance between the need to fund traditional projects, such as a new Hudson River rail tunnel, while supporting ground-breaking initiatives that will ensure the future of infrastructure. But TPP has started a much needed conversation.