Donald Trump’s victory has been widely criticized at both national and international level. However, on 20 January 2017, he was invested President of the United States of America. Consequently, most railway associations have already begun to ask the new President and his team to concentrate budgets and policies to develop this transport mode.
For the USA, the transport system is an important economic growth engine which has to be supported by implementing strategies and granting public investments which, together with private investments, will help develop a system that would meet freight and passenger mobility needs.
Programmes such as “Grow America”, “21st Century Clean Transportation System”, initiated by Barack Obama, identify the projects necessary to meet the development objective of a sustainable transport system. Currently, the transport system imposes a hidden tax through congestion, which every year costs families USD 160 billion and businesses almost USD 30 billion. The “21st Century Clean Transportation System” Plan includes investments of USD 20 billion to reduce traffic and create new routes to increase access and stipulates the extension of the transit systems in the cities, suburbs and rural areas, the construction of new high-speed railway networks and the allocation of investments in new technologies (such as maglev) and the modernisation of the freight transport system. The total estimated budget for projects within this strategy is USD 320 billion for the next decade. The “Grow America Act” is a USD 478 billion proposal in six years focused on increasing and stabilising the financing of road, rail and transit transport infrastructure projects. As over the past decades, the lack of railway investments has accentuated, the Federal Railroad Administration has focused on preserving the existing railway services and the infrastructure, but also on extending and optimising the railway network.
The Grow America Act supports these objectives by estimating investments including USD 29 billion for improving safety and investments in a performing railway system. Apart from amending the existing projects, the Grow America Act proposes new programmes including the establishment of new grants for Amtrak, the implementation of the project on the improvement of the railway passenger transport service, the establishment of new partnerships through the regional authorities of railway development.
Another programme for the allocation of transport investments is Fixing America’s Surface Transportation Act (FAST Act), through which President Obama signed the first federal law in the past decades on the supply of financing for transport projects. The Act authorises the allocation of USD 305 billion for 2016-2020 to road, railway, public, transport safety projects, research, technology and programmes.
The level of investments is encouraging for the transport system, especially for rail and public rail transport, as well as for the industry, but new policies and financing will depend on the new American Administration.
USD 550 billion infrastructure investment
During his campaign and in his speech after winning the elections, Donald Trump declared that he and his team will focus on upgrading the transport infrastructure and creating new jobs. “We are going to build our highways, bridges, tunnels, airports (…) we are going to rebuild our infrastructure,” Trump said.
His vision relies on an “America’s Infrastructure First” policy that supports investments in transport, clean water, a modern and reliable electricity grid, telecommunications, security infrastructure, and other pressing domestic infrastructure needs. According to Tump’s infrastructure vision, its administration will “implement a bold, visionary plan for a cost-effective system of roads, bridges, tunnels, airports, railroads, ports and waterways, and pipelines.”
His proposal on the necessity of allocating infrastructure investments has a cost estimated at USD 1 trillion for the next 10 years, a significant share of which coming from > > public-private partnerships, but also by applying new tax measures.
According to Peter Navarro, senior policy advisor to the Trump campaign, the Trump’s infrastructure plan features a major private sector, revenue neutral option to help finance a significant share of the nation’s infrastructure need. “For infrastructure construction to be financeable privately, it needs a revenue stream from which to pay operating costs, the interest and principal on the debt, and the dividends on the equity. 
The difficulty with forecasting that revenue stream arises from trying to determine what the pricing, utilization rates, and operating costs will be over the decades. Therefore, an equity cushion to absorb such risk is required by lenders. The size of the required equity cushion will of course vary with the riskiness of the project. However, we are assuming that, on average, prudent leverage will be about five times equity. Therefore, financing a trillion dollars of infrastructure would necessitate an equity investment of USD 167 billion”, according to the analysis.
To encourage investors to commit large amounts, and to reduce the cost of the financing, the government would provide a tax credit equal to 82% of the equity amount. This would lower the cost of financing the project by 18% to 20%, the analysis mentions.
Apart from the plans of massive implication of the private sector, in order to establish a reliable and efficient transport network, the Trump Administration plans to invest USD 550 billion. Without identifying the projects and providing details on transport infrastructure, Trump’s transition team says that this investment will be made “to ensure freight exports and the citizens’ mobility in a fast and safe manner”.
Organisations call on railway investment
To make sure they can count on the support of the new Trump team, various American associations and organisations have expressed their availability to collaborate and have elaborated several recommendations and open letters with the purpose of stimulating investments in railway transport.
For the USA, public transport is a very important mobility factor. 10.6 billion journeys were made in 2015. On average, the transit systems ensure 60% of commuter public transport journeys. The American Public Transportation Association (APTA) said that “a significant portion of his infrastructure proposal should be dedicated to public transportation. The U.S. public transport industry looks forward to working with President-Elect Trump and Vice President-Elect Pence in moving our country forward with public transportation infrastructure investment.”
According to a study developed by Heart+Mind Strategies for APTA, published in December and drafted right after the presidential elections, 70% of Americans support the allocation of investments in the modernisation and improvement of public transport. Also, 81% of Trump’s electors oppose to a cut in the current public transport investment level, 69% of all voters support the use of taxes for public transport (the figure includes 53% of Trump’s electors), while over 69% of all Americans believe the public transport infrastructure faces a crisis. “Americans understand that investment in public transport creates jobs and that public transport will produce greater economic growth for our local communities. There is a bright future ahead for our country when we unite to make smart investments in public transport that connect and grow our communities. This survey demonstrates that Americans agree. We urge Congress to take note and act swiftly,” APTA’s CEO Richard White said.
The American Short Line and Regional Railroad Association (ASLRRA) has also expressed its availability to work with the new Administration on problems related to regulations, infrastructure.
“We will work with them to take up the issues of critical importance to our members from balanced regulation to two stated priorities of the incoming Administration and Congress: infrastructure and tax reform. By making the 45G railroad rehabilitation tax credit permanent, we will promote jobs and invest in a strong and sustainable rail infrastructure reaching rural communities and small town America,” Linda Bauer Darr, ASLRRA president said.
The organisation represents 550 regional and short-line operators in North America which operate a total network of over 80,000 km of line or 40% of the national railway network.
The railway freight sector is a vital component of the national economy generating, in 2014, a economic impact of USD 274 billion (almost equal to Finland’s GDP), 1.5 million jobs and USD 33 billion in taxes (local and state). For the development of the system, the Association of American Railroads (AAR) said America’s rail sector, especially the freight segment, will cooperate with the new Administration and the new Congress.
“Leaders of both parties in Congress, particularly the Senate Commerce Committee, have long recognised the value and impact of our private freight rail network. We look forward to continued dialogue on our most important issues – including stopping unfounded regulatory efforts at the U.S. Surface Transportation Board – and are eager to begin a new legislative session,” Edward Hamberger, AAR CEO said.
AAR asks the American political class to consider a series of measures to announce the industry’s priorities for 2017. AAR published a series of recommendations regarding the macro-economic policy, the specific industry policy, the infrastructure package and policy deep dives (economic regulation, rail safety, PTC, tax policy, etc.).
Regarding the macro-economic policy recommendations, ARR refers to:
Tax reform – the sector needs a simpler and fair tax code to reduce the corporate rate;
Improving regulation – new norms should be supported by cost-benefit analyses and oriented towards an innovative economy;
Infrastructure investments – the elected officials should set a system that eliminates the practice on the transfer of money from the general fund to the Highway Trust Fund. The policies should require the highway users to pay for the use of infrastructure and to implement sustainable and realistic plans;
Comprehensive Energy Plan – innovation should be adopted to lead America to an energy revolution and to help reduce energy dependency;
Fair and open trade – to help the small business sector to access new markets, it will contribute to the diversification of available goods and favour competition.
For the specific industry policy, it is necessary to advance measures to make sure the industry will continue operations in a safe and efficient manner. To that end, AAR would propose two steps: a fully functional Surface Transportation Board operating with Congressional Charter – United States Surface Transportation Board (STB) proposed a series of regulations to undermine the availability of the US rail freight network. Thus, the industry believes that STB should evaluate the costs and benefits of the regulations proposed and the cumulated impact of the proposals on the rail industry and on the economy; and forward-thinking safety regulations – the advanced technologies that determine the efficiency and safety of the system. For infrastructure regulations, AAR stipulates that the private rail freight operators which in 2015 invested USD 30 billion are opened to a discussion on infrastructure legislation. ARR publishes 5 recommendations including the support of the industry on corporate tax reform which reduces the rate to at least 25%; targeted reforms within the Department of Transportation; the decision makers should implement more PPPs for projects of improving the rail freight transport infrastructure; level-crossing safety is considered (both engineering solutions, and public education solutions); moreover, the rail freight industry supports the passenger transport sector by asking for federal funds for PTC implementation. If the freight sector is in the PC implementation “schedule”, the commuter and passenger sector is facing troubles.
The Coalition for America’s Gateways and Trade Corridors (CAGTC), representing 60 public and private organisations that will contribute to extending the freight transport infrastructure, has committed to draw the attention of the new President. The group has sent a letter to the new President welcoming Trump’s initiative on the necessity of freight transport infrastructure investments and identifying 7 actions that could be considered by the new Administration.
CAGTC recommends the authorities to prioritise freight transport investments against all other transport investment plans, to establish a public-private federal consultancy committee and to develop a detailed evaluation of the necessities. Apart from that, CAGTC demands the FASTLANE administration with focus on the freight sector and the optimisation of the programme transparency (FASTLANE funds critical freight and highway projects in the US). As part of the TIGER programme, CAGTC asks the administration to increase the freight transport investment (the TIGER programme ensures financing for road, rail, transit and port projects aimed at meeting national objectives).
At the end of October 2016, the Department of Transportation announced the financing of 18 projects within FASTLANE. The grants have a total cost of USD 800 million and, combined with federal, state, local and private funds, will support investments of USD 3.6 billion in infrastructure in 15 states and in the District of Columbia.
Within TIGER, from 2009 so far, the US Congress allocated financing of USD 4.6 billion through seven competitive financing processes for freight and passenger transport. At the beginning of 2016, the Department of Transportation announced the availability of USD 500 million for transport projects through TIGER.
by Pamela Luica
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