As Donald Trump embarks on his second term as President of the United States, in his inaugural address, he cited that his administration will emphasize a robust commitment to infrastructure construction. This message served as a double down for the construction industry as many contractors continue to wait for projects under the previous administration to receive funding. President Trump’s vision for rebuilding and reinvesting in the country’s infrastructure, coupled with funded shovel-ready projects, has the potential to usher in a golden age construction that will modernize America’s public works and stimulate economic growth.
Increased Infrastructure Spending
One of the key pillars of Trump’s infrastructure policy is significant investment in public works. While there is excitement around data center construction across the United States, the broader plan will focus on upgrading our highways, bridges, tunnels, airports and other public facilities to ensure our infrastructure meets the demands of our lives. Put another way, we must get people to work and home safely and timely while providing access to cutting-edge roadways, rail, etc. Not to be overshadowed in any of this is the recent devastation in California. Part of this next wave of infrastructure spending has to consider the research and development of more resilient materials that can withstand the modern natural disasters that are all too common today.
Streamlined Permitting Processes
The President has often sought to foster business growth through deregulation. And to no one’s surprise, the Trump administration is committed to simplifying permitting processes and reducing regulatory burdens to accelerate infrastructure construction. For example, environmental reviews, which have historically slowed development, would be streamlined, thereby cutting down on some of the “red tape” that has often delayed construction projects. Granted, this would apply at the federal level. The hope is that once states and localities see how the industry can build efficiently while still being environmentally sound, streamlining best practices will trickle down. Ultimately, the goal at any level is to make processes more efficient and expedite critical infrastructure project completion.
Public-Private Partnerships
Public-private partnerships (P3s) are nothing new, and when utilized properly, they have been successful. Trump supports using P3s to finance infrastructure projects, as these leverage private sector investment to complement public funding, providing a viable solution for large-scale projects, creating alignment for all parties involved. The companies involved have to have the financial capacity to navigate the complexities of such funding, fostering innovation and efficiency in project execution. Notable P3s one can look at for success are the LaGuardia Airport Redevelopment in New York and the Purple Line Light Rail in Maryland.
Tax Reform and Fiscal Stimulus
With many of the provisions under the 2017 Tax Cuts and Jobs Act set to expire at the end of 2025, we are all carefully watching what happens, if anything, in terms of tax reform. Most would be hard-pressed to see Trump make significant modifications to his own tax act, especially when this could be another key element of the overall infrastructure strategy. Lower tax rates are designed to provide fiscal stimulus to the construction sector, encouraging investment and job creation. If any tax reform were to occur, the industry would enjoy the legacy treatment of Code Section 174 expenses (research and development), not to mention increasing bonus depreciation back to 100%.
Trump has also expressed a desire to lower interest rates and continue to battle inflation. While increasing interest rates is usually the way to get inflation under control, the overarching sentiment is to get business costs back down whereby contractors can utilize their line of credit to float requisitions at a reasonable rate, and they know material costs will be consistent whether they buy them from vendor A, B or C.
The administration aims to create a more favorable environment for infrastructure development by reducing the tax and fiscal burdens on the construction industry.
Challenges Ahead
Despite these ambitious plans, challenges remain. The construction sector faces issues such as skilled labor shortages and rising material costs, which could impact the pace and cost of infrastructure projects. Addressing these challenges will be crucial for successfully implementing Trump’s infrastructure vision.