With tax reform behind him and the repeal of Obamacare off the table for 2018, Donald Trump is expected to focus this year on his plan for infrastructure investment.

Early rhetoric about the administration’s plans to shore up the nation’s deteriorating infrastructure relied on private investors such as private equity (PE) funds to finance Trump’s promised $1 trillion spending on infrastructure projects. Devised by campaign advisors Wilbur Ross (PE magnate and now Secretary of Commerce) and Peter Navarro, their proposal was to encourage PE funds and other private investors to put up a sixth of the $1 trillion infrastructure investment and finance the rest with debt. The Ross/Navarro infrastructure plan proposed a tax credit to these investors equal to 82 percent of their equity investment as an incentive. PE firms geared up for this anticipated bonanza. In February 2017, Joe Baratta, global head of PE at Blackstone Group, the largest PE firm in the world, talked about raising an infrastructure fund with as much as $40 billion of equity. Global Infrastructure Partners raised $15.8 billion and Brookfield Asset Management Inc. raised $14 billion for equity investments in public infrastructure.

The administration’s infrastructure plan has changed in important ways since the days of the presidential campaign. The plan to be announced in the State of the Union is expected to include a substantial role for private investors, including PE funds — but a smaller and less central role than in the plan circulated during the Trump campaign.

The President is expected to announce $200 billion over ten years in federal funds for the infrastructure investment initiative, with half dedicated to an incentive fund available to states, local governments, public authorities, and non-profits.

$200 billion may sound like a lot of money, but in an economy as large as the US, it really isn't. The $200 billion is just 0.1 percent of the U.S. GDP over the ten year period. What's more, states and local governments will be fighting to get a piece of just half of that $200 billion.

Private investors can participate, but only with sponsorship from a public entity. Cash-strapped state and local governments will be asked to compete for federal grants and will need to find new, non-federal revenue sources to cover 80 percent or more of the cost of the infrastructure project. Private investors (public-private partnerships) are likely to be an important source of such funds. The public can also expect a large increase in tolls and user fees. A proposed change in the law that prohibits turning interstate highways into toll roads would enable states to impose tolls on these roads to raise funds for infrastructure projects. States would also be allowed to commercialize interstate rest areas. Private activity bonds — with expanded types of eligible uses of these bonds and a guarantee of that they will remain tax-exempt — are a common, low-cost form of financing for some types of infrastructure investment. Maintaining the tax-exempt status of these bonds is important to localities and local agencies. However, a change in the rules governing these bonds would retain their tax-exemption even if the infrastructure built with them is leased to a private entity.

Another 10 percent of the $200 billion, administered by Ross’ Department of Commerce, will be allocated to transformative infrastructure projects that are exploratory and ground-breaking. For capital projects, the federal government will put up as much as 80 percent of the cost. Projects require minimum equity investments by private investors or non-profits. The federal government would be a financial partner in these projects and would share in the project value if a project generated value.

One element of the Trump campaign’s infrastructure plan has survived — the President’s infrastructure plan to be announced in the State of the Union will gut environmental protection requirements that date back to the 1970s. Under rubrics such as “streamlining the application process,” roads, bridges, and pipelines will be constructed without the necessary protections for clean air, water, and the environment. Some projects would be allowed to proceed before completion of a review by the National Environmental Protection Act.