Trump’s infrastructure plan is more concerned with its financing than what will actually be built. From Leonard Hyman and Bill Tilles at wolfstreet.com:
Private equity tail wagging the public infrastructure dog?
About two years, we came across an article discussing infrastructure in a relatively obscure engineering journal. The authors of the piece were Wilbur Ross, now Commerce Secretary in the Trump cabinet, and Peter Navarro, a Trump economic advisor.
What struck us about the piece, supposedly elaborating their infrastructure plan, was that there was really nothing in particular that they wanted to build – nothing that would excite the imagination: no space race, or federal highway initiative, and heaven forbid certainly no new deal.
Thinking about it in accounting terms, the asset side of their infrastructure balance sheet was a compete blank. But the liability side of the ledger was the real focus of the Ross/Navarro exercise. They provided an answer to a question that almost no one was asking: How much leverage can one get away with and still control a federal infrastructure project? Their answer was 6-to-1.
On Monday, the White House released its long awaited “Legislative Outline for Rebuilding Infrastructure in America.” It boils down to this: The federal government claims it can facilitate a $1.5-trillion program with only $200 billion of federal money. That’s a leverage ratio of 7.5-to-1. That’s it.
And they still can’t be bothered in the text to name even one actual project they care about.
But the leverage – the debt, that is – is supposed to come from state and local sources, which are not exactly flush with cash. The states could have financed many of these projects if they had wanted to by charging tolls. The document released by the White House is anything but clear on how private investors would horn in on the goodies so to speak.
But it looks as if private investors could collect incentives for their own projects and do all sorts of lease deals with the governments that financed the projects. We would expect investment firms of every stripe to be interested. Terms this generous are seldom on offer.
To continue reading: Infrastructure Plan Is Dominated by Profits for Wall Street
This may be the Ross and Navarro, the authors commented on:
http://peternavarro.com/sitebuildercontent/sitebuilderfiles/infrastructurereport.pdf