Trump administration’s heavy hand on infrastructure funding

Nine months into the Trump administration, the question for infrastructure finance professionals is whether volatility and executive control around federal project funding is a quirk of the current White House or if it is here to stay.

“We are definitely looking at an unprecedented approach to executive power with regard to infrastructure policy,” said Paul Creedon, managing director and head of national infrastructure at Janney Montgomery Scott LLC, during a panel discussion at The Bond Buyer’s infrastructure conference in Boston, Mass. “Nine months in, we’re in uncharted territory.”

As federal funding becomes less reliable, it also may become less attractive to municipal market participants, panelists said, and state, local and even private funds may become more important parts of the financing.

“What should we be thinking about going forward?” Creedon asked. “It may require folks to be more thoughtful about the capital stack.”

President Donald Trump, when taking office in January, almost immediately signed executive orders to pause federal funds and grants — most of which have since started to flow — launching an environment of general uncertainty among issuers about the fate of their federal funds. Under the administration, the U.S. Department of Transportation has taken several actions to unwind already obligated dollars, like its rescission of $4 billion of federal grants for California’s high-speed train. The DOT has also moved to yank federal funds from issuers that are embarking on projects that the administration disagrees with, such as its threats to pull highway funds for New York unless the state halts its congestion pricing program.

Previous administrations have sought to put their stamp on how federal infrastructure funds are spent, as seen most recently in the criteria under the Biden administration’s Infrastructure Investment and Jobs Act and early moves by Biden’s DOT to restrict highway expansion projects. But Trump’s willingness to use the executive office to control projects marks a new level, panelists at the conference said, raising the question of whether future administrations will continue the trend now that the “genie is out of the bottle,” as Creedon put it.

The issue is worrying investors as well, added Michael Lexton, principal at Lexton Infrastructure Solutions, who moderated the panel titled “Washington Policy Shifts & the Infrastructure Funding Challenge Ahead.”

Meanwhile, early signs point to the Trump administration being open to inviting more private money into public projects, but it remains to be seen whether that translates into a pipeline, panelists said.

“It’s too early to tell, we are only nine to 10 months in,” said David Narefsky, partner at Mayer Brown.

Transportation Secretary Sean Duffy has established an advisory board with high-profile members that want to advance public-private partnerships and attract more American capital, including pension funds, to improve transportation infrastructure, Narefsky noted.

And issuers will now be able to tap the well-known Transportation Infrastructure Finance and Innovation Act program for nearly half their costs under a policy shift announced in July by the Trump administration, a move that has prompted “a really healthy amount of interest” from governments, Narefsky said.

With the overwhelming majority of U.S. public infrastructure financed by state and local governments, the role of the federal government is limited, he added.

“The federal government can be helpful with respect to financing tools, but the decision rests with state and local governments,” he said.