Trump Vowed to Fix US Infrastructure — but His Budget Stiffs Small Towns

This story was originally published by Reveal from The Center for Investigative Reporting, a nonprofit news organization based in the San Francisco Bay Area. Learn more at revealnews.org and subscribe to the Reveal podcast, produced with PRX, at revealnews.org/podcast.

Orange Cove, California, whose nearly 10,000 residents include many Central Valley farmworkers, needed to quit sending dirty water into a nearby creek. Thorp, Wisconsin, a village of about 1,600, needed to install an elevator to make the public library more accessible to disabled residents. St. Joseph, Louisiana, population 1,100, needed to fix a Flint, Michigan-like problem with corroding pipes that had leached lead and copper into drinking water.

All these communities have small tax bases and treasuries, enabling them to tap into the $3 billion Community Development Block Grant program, one of the oldest infrastructure programs administered by the federal government. Since 1974, when the CDBG program won bipartisan support from Congress, it has helped more than 1,200 communities annually. Many of them are small municipalities with few resources of their own to pay for crucial infrastructure.

But the block grant program and other federal programs that have assisted communities with about $8 billion annually for cleaner water, safer sidewalks, streetlights and sewage treatment are on the chopping block in Washington.

Orange Cove, Calif., used federal Community Development Block Grant money to construct this recycling system to reuse water that had cleaned its filtration system.Credit: Ramin Rahimian for Reveal

Despite President Donald Trump’s promise to rebuild America’s ailing infrastructure, much-needed financial support for small communities is threatened by details deeply embedded in the Trump administration’s 2018 budget and tax plans.

Among resources slated for elimination or substantial cuts: the CDBG program, which has been zeroed out in the Department of Housing and Urban Development’s budget; small programs for clean water at the Environmental Protection Agency and the Department of Agriculture; and a pot of discretionary funds at the Department of Transportation, a potential source of money for small transit systems.

Gary Horn, whose Fresno, California, firm provides engineering to several small communities, has seen block grant funds used to build parks, improve stormwater drainage systems to prevent flooding and install streetlights.

“It is a really valuable source of community development, especially for disadvantaged communities,” Horn said.

Orange Cove, where the median household income is about $28,000 per year, used CDBG money to construct a recycling system to reuse water that had cleaned its filtration system. Now, interim City Manager D-B Heusser has identified new needs. He recently drove around to inspect the 1.8-square-mile city’s roads and found most of them desperately in need of repair.

“Only about one-quarter of the streets are passable,” he said. “In communities like ours, CDBG is the only way to get basic services fixed.”

Armando Gonzalez, 28, who became paralyzed after a car accident when he was a teen, walks with his father, Armando Sr., in the street because of a lack of sidewalks in Orange Cove, Calif. Since 1974, a federal block grant program has assisted communities with funding for cleaner water and safer sidewalks.Credit: Ramin Rahimian for Reveal

Trump administration officials have said that its budget proposal and tax plan would have a positive ripple effect across the US economy, freeing up capital that could then be used by Wall Street to invest in fixing the nation’s crumbling infrastructure — pothole-filled roads, poisoned water systems, broken sidewalks. Trump has called the plans “rocket fuel” for the economy.

But neither the budget proposal nor the tax plan offer much incentive for Wall Street to invest in small, local projects. Instead, the $1 trillion budget plan for public and private investment is focused on paying for big projects by attracting big investors, looking for a substantial return on their investment.

“We work with very small communities. They don’t have a lot of people to spread the debt,” said Traci Watts, Louisiana’s director of community development. Watts administers the CDBG program that helped St. Joseph obtain a $553,000 grant, part of the $9 million fix for its drinking water.

“It’s hard to get private financing,” she said.

In St. Joseph, where residents had endured discolored drinking water for years, Gov. John Bel Edwards in 2016 declared an emergency after lead and copper were discovered. The governor told residents not to drink, brush their teeth or cook with the water coming out of their taps.

But because of the federal block grant program, and state aid, by early next year, St. Joseph residents should be able to use the public water system again.

In Thorp, Wisconsin, the block grant program helped pay for modernizing the public library, including installing an elevator and making the library accessible to people with disabilities. The $130,000 CDBG grant covered about one-third of the cost of the renovation.

If Congress goes along with the president’s plans to scuttle or substantially reduce the small infrastructure funding programs, communities such as St. Joseph, Orange Cove and Thorp would have to turn to often cash-strapped state treasuries to try to fill the gap — or simply let their infrastructure erode. State and local treasuries, however, also are being dinged by key elements of the Trump administration’s budget and tax proposals, which critics say already transfers responsibility and expense from Washington D.C. to state and local governments.

“Even more than in the past, state and local governments are going to have to pick up the slack,” said John Porcari, a former Maryland transportation secretary and Obama administration official now consulting on large infrastructure projects such as rebuilding the tunnel system that connects New York City and New Jersey.

Besides zeroing out the CDBG program, Trump’s budget stripped out funding for the USDA’s $511 million Water and Waste Disposal Loan and Grant Program, to help rural communities improve their drinking water and fix ailing sewer systems.

The administration points to an alternative, the Drinking Water State Revolving Fund, but instead of increasing it by the more than $500 million advocates say would help plug the gap, the administration proposal enriches that program by only $1.6 million. The Trump budget proposal adds $162 million for a new Agriculture Department rural infrastructure program, which also does not make up for the cuts, and budget documents provide few details about what the new program would entail.

The Trump budget also proposes cutting more than $1 billion from the federal Department of Transportation’s capital investment in transit projects, some of which would be available to smaller communities.

Other threats to these community funds are contained in the tax bill in Congress, which Trump has applauded and said he will sign.

Members of Congress hammering out a final version of the tax bill last week retained several key infrastructure financing tools. The measure, slated for a final vote this week, reversed a House move to end tax benefits for investors who buy private activity bonds; retained for two years the new markets tax credit; and kept the historic preservation tax credit in many cases. The measure, which has wide backing from Republicans, eliminates a widely used financing tool that allowed jurisdictions to charge lower interest rates for municipal bonds.

Carolyn Coleman, executive director of the League of California Cities, said the risks are growing for municipalities. Coleman is acutely familiar with the lay of the land in Washington, having previously lobbied there for the National League of Cities.

“We continue to see in the appropriations process in Washington disinvestment in our cities and towns,” she said. “There is already a backlog of road projects, water projects and affordable housing.”

Michael Wallace, who tracks programs such as CDBG for the National League of Cities, said expecting Wall Street to step in is unrealistic.

“CDBG fills that niche for small cities for capital improvements that are critical,” he said. “This is how they do infrastructure. Their tax base can’t cover it.”

Jeremy Ebie runs the Phoenix Infrastructure Group, a firm that seeks out infrastructure investments. He recently looked at projects in Gary, Indiana, a city struggling to make a comeback more than a decade after manufacturing jobs disappeared. In the end, he took a pass, saying the risk to investors was too high.

“I have to say it is a tough road out there, and in some ways, the market is going to talk,” he said at a recent meeting of infrastructure experts in Washington.

Michael Mandel, an economist at the Progressive Policy Institute, said the government must step in and act when the private market does not. To do otherwise, he said, will exacerbate inequality across the country.

Through much of this year, crews have dug along streets in St. Joseph, La., to install new water distribution pipes. A federal grant that helped fund the project is zeroed out in the Trump administration’s 2018 budget.

“Local funding needs to continue to have a strong federal component, unless you want us to be balkanized and have some states invest in their infrastructure and others not,” Mandel said.

And allowing market forces to dictate who gets help and who gets left out, could have other, far-reaching effects, he said.

“The hard-hearted economic view is that if your community is not economically viable, you should just leave,” Mandel said. “But we have an obligation to help the people who are being left behind by the economy to stay where they are if they want to stay.”

Sam Jones, a Louisiana state representative and former mayor of Franklin, Louisiana, worked closely with several communities in the CDBG program while he was in state government. Focusing public attention on infrastructure is not easy, he acknowledged.

“This is not a sexy topic,” Jones said. “It’s not like taking away somebody’s Medicaid.”

The experience in St. Joseph was typical of many Louisiana communities suffering with poor water systems. The community itself has shrunk in recent years, steadily losing population and seeing its already small tax base decline even more. As a result, the water system was allowed to atrophy.

“They did not have the dollars to do the investment necessary,” Jones said. “Are we going to abandon a community like that, or not?”