[Senate Hearing 107-668]
[From the U.S. Government Publishing Office]



                                                S. Hrg. 107-668, Part I
 
                       REAUTHORIZATION OF TEA-21
=======================================================================

                                HEARINGS

                               BEFORE THE


                    SUBCOMMITTEE ON TRANSPORTATION, 
                   INFRASTRUCTURE, AND NUCLEAR SAFETY

                                AND THE

                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                                   ON

      REVIEW OF PROPOSALS TO REAUTHORIZE PUBLIC LAW 105-178, THE 
         TRANSPORTATION EQUITY ACT FOR THE TWENTY-FIRST CENTURY

                               __________

                            JANUARY 24, 2002
                           FEBRUARY 11, 2002
                             MARCH 19, 2002
                              MAY 15, 2002
                             JULY 30, 2002
                           SEPTEMBER 9, 2002
                           SEPTEMBER 19, 2002
                           SEPTEMBER 25, 2002
                           SEPTEMBER 30, 2002

                               __________

  Printed for the use of the Committee on Environment and Public Works











                      U.S. GOVERNMENT PRINTING OFFICE

81-723                       WASHINGTON : 2003
_______________________________________________________________________
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              COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS\1\

                      one hundred seventh congress
                  JAMES M. JEFFORDS, Vermont, Chairman
MAX BAUCUS, Montana                  BOB SMITH, New Hampshire
HARRY REID, Nevada                   JOHN W. WARNER, Virginia
BOB GRAHAM, Florida                  JAMES M. INHOFE, Oklahoma
JOSEPH I. LIEBERMAN, Connecticut     CHRISTOPHER S. BOND, Missouri
BARBARA BOXER, California            GEORGE V. VOINOVICH, Ohio
RON WYDEN, Oregon                    MICHAEL D. CRAPO, Idaho
THOMAS R. CARPER, Delaware           LINCOLN CHAFEE, Rhode Island
HILLARY RODHAM CLINTON, New York     ARLEN SPECTER, Pennsylvania
JON S. CORZINE, New Jersey           PETE V. DOMENICI, New Mexico
                 Ken Connolly, Majority Staff Director
                 Dave Conover, Minority Staff Director
                                 ------                                
   Subcommittee on Transportation, Infrastructure, and Nuclear Safety

                      HARRY REID, Nevada, Chairman
MAX BAUCUS, Montana                  JAMES M. INHOFE, Oklahoma
BOB GRAHAM, Florida                  JOHN W. WARNER, Virginia
JOSEPH I. LIEBERMAN, Connecticut     CHRISTOPHER S. BOND, Missouri
BARBARA BOXER, California            GEORGE V. VOINOVICH, Ohio
RON WYDEN, Oregon                    LINCOLN CHAFEE, Rhode Island

\1\Note:  During the second session of the 107th Congress, 
    Senator Ben Nighthorse Campbell of Colorado resigned from the 
    committee, and on April 23, 2002, Senator Pete V. Domenici of 
    New Mexico was appointed to fill the vacancy.

                                  (ii)

  














                            C O N T E N T S

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                                                                   Page

                            JANUARY 24, 2002
         PERSPECTIVES FROM THE FEDERAL, STATE, AND LOCAL LEVELS
                           OPENING STATEMENTS

Baucus, Hon. Max, U.S. Senator from the State of Montana.........     8
Campbell, Hon. Ben Nighthorse, U.S. Senator from the State of 
  Colorado.......................................................     7
Carper, Hon. Thomas R., U.S. Senator from the State of Delaware..    41
Corzine, Hon. Jon S., U.S. Senator from the State of New Jersey..    12
Graham, Hon. Bob, U.S. Senator from the State of Florida.........    40
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...    11
Jeffords, Hon. James M., U.S. Senator from the State of Vermont..     1
Reid, Hon. Harry, U.S. Senator from the State of Nevada..........     5
Smith, Hon. Bob, U.S. Senator from the State of New Hampshire....     3
Warner, Hon. John, U.S. Senator from the Commonwealth of Virginia    42

                               WITNESSES

Clavelle, Hon. Peter, Mayor, Burlington, VT, on behalf of the 
  National League of Cities......................................    24
    Prepared statement...........................................    53
    Responses to additional questions from Senator Campbell......    56
Coles, Hon. H. Brent, Mayor, Boise, ID, on behalf of the U.S. 
  Conference of Mayors...........................................    26
    Prepared statement...........................................    57
Hart, Hon. Chris, Commissioner, Hillsboro County, Florida, on 
  behalf of the National Association of Counties.................    28
    Prepared statement...........................................    60
    Responses to additional questions from:
        Senator Campbell.........................................    63
        Senator Graham...........................................    62
Mineta, Hon. Norman Y., Secretary of Transportation..............    14
    Prepared statement...........................................    43
    Responses to additional questions from:
        Senator Campbell.........................................    47
        Senator Graham...........................................    48
        Senator Jeffords.........................................    47
Scheppach, Ray, Executive Director, National Governors' 
  Association, on behalf of Hon. Robert Wise, Governor, State of 
  West Virginia..................................................    32
    Prepared statement of Governor Robert Wise...................    48
    Responses to additional questions from:
        Senator Campbell.........................................    50
        Senator Graham...........................................    51
        Senator Jeffords.........................................50, 51

                          ADDITIONAL MATERIAL

Statement, Barr, Mayor Ken, City of Ft. Worth, TX................    58
                                 ------                                

                           FEBRUARY 11, 2002
         DEPARTMENT OF TRANSPORTATION'S FISCAL YEAR 2003 BUDGET
                           OPENING STATEMENTS

Baucus, Hon. Max, U.S. Senator from the State of Montana.........    70
Campbell, Hon. Ben Nighthorse, U.S. Senator from the State of 
  Colorado.......................................................   106
Carper, Hon. Thomas R., U.S. Senator from the State of Delaware..   104
Chafee, Hon. Lincoln, U.S. Senator from the State of Rhode Island    73
Graham, Hon. Bob, U.S. Senator from the State of Florida.........    88
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma..69, 105
Jeffords, Hon. James M., U.S. Senator from the State of Vermont..   103
Reid, Hon. Harry, U.S. Senator from the State of Nevada..........    65
Smith, Hon. Bob, U.S. Senator from the State of New Hampshire....   106
Wyden, Hon. Ron, U.S. Senator from the State of Oregon...........    68

                               WITNESSES

Fay, William, President and CEO, American Highway User's Alliance    93
    Prepared statement...........................................   123
    Report, Motor Fuel Excise Revenue Leak Analysis, Center for 
      Balanced Public Policy....................................128-148
Hill, Tom, chief executive, Oldcastle Materials, Inc., on behalf 
  of the American Road and Transportation Builders Association...    95
    Responses to additional questions from:
        Senator Reid.............................................   154
        Senator Smith............................................   157
Peters, Hon. Mary E., Federal Highway Administrator, U.S. 
  Department of Transportation; Accompanied by Hon. Donna McLean, 
  Assistant Secretary for Budget and Programs, U.S. Department of 
  Transportation.................................................    74
    Prepared statement...........................................   107
    Responses to additional questions from:
        Senator Inhofe...........................................   117
        Senator Reid.............................................   112
        Senator Smith............................................   114
Stephens, Hon. Thomas E., Director, Nevada Department of 
  Transportation, on behalf of the American Association of State 
  Highway and Transportation Officials...........................    91
    Prepared statement...........................................   117
    Responses to additional questions from:
        Senator Reid.............................................   121
        Senator Smith............................................   123

                          ADDITIONAL MATERIAL

Report, Motor Fuel Excise Revenue Leak Analysis, Center for 
  Balanced Public Policy.........................................   128
Statements:
    Duit Construction Company, James Duit........................   149
    Hecker, JayEtta, General Accounting Office...................   157
    Lyon, Andrew, U.S. Department of the Treasury................   161
    Wert, Kenneth K., Associated General Contractors of America..   163
                                 ------                                

                             MARCH 19, 2002
         TRANSPORTATION MOBILITY, CONGESTION AND INTERMODALISM
                           OPENING STATEMENTS

Graham, Hon. Bob, U.S. Senator from the State of Florida.........   173
Jeffords, Hon. James M., U.S. Senator from the State of Vermont..   165

                               WITNESSES

Downs, Anthony, senior fellow, Brookings Institution.............   178
    Prepared statement...........................................   216
    Responses to additional questions from Senator Smith.........   220
Lomax, Tim, research engineer, Texas Transportation Institute, 
  Texas A&M University...........................................   168
    Prepared statement...........................................   207
    Responses to additional questions from:
        Senator Graham...........................................   211
        Senator Jeffords.........................................   211
        Senator Smith............................................   210
Orski, C. Kenneth, Urban Mobility Corporation....................   180
    Prepared statement...........................................   222
    Responses to additional questions from:
        Senator Graham...........................................   227
        Senator Jeffords.........................................   227
        Senator Smith............................................   225
Murray, Hon. Patty, U.S. Senator from the State of Washington....   170
Pisarski, Alan, chairman, Transportation Research Board Committee 
  on National Transportation Data................................   166
    Prepared statement...........................................   193
    Responses to additional questions from:
        Senator Graham...........................................   205
        Senator Jeffords.........................................   205
        Senator Smith............................................   203
Salvucci, Frederick, Massachusetts Institute of Technology.......   182
    Prepared statement...........................................   228
    Responses to additional questions from:......................
        Senator Graham...........................................   234
        Senator Jeffords.........................................   234
Sims, Hon. Ron, King County Executive, Seattle, Washington.......   177
    Prepared statement...........................................   211

                          ADDITIONAL MATERIAL

Letter, Defenders of Wildlife....................................   240
Statements:
    Florida Department of Transportation, Elizabeth Stutts.......   235
    League of American Bicyclists, Elissa Margolis...............   239
                                 ------                                

                              MAY 15, 2002
                TRANSPORTATION PLANNING AND SMART GROWTH
                           OPENING STATEMENTS

Chafee, Hon. Lincoln, U.S. Senator from the State of Rhode Island   254
Jeffords, Hon. James M., U.S. Senator from the State of Vermont..   241
Reid, Hon. Harry, U.S. Senator from the State of Nevada..........   242

                               WITNESSES

Burbank, Cynthia, Program Manager, Planning and Environment, 
  Federal Highway Administration.................................   243
    Prepared statement...........................................   274
    Responses to additional questions from Senator Smith.........   278
Cotugno, Andrew, Planning Director, METRO, Portland, OR..........   256
    Prepared statement...........................................   293
    Responses to additional questions from:
        Senator Jeffords.........................................   297
        Senator Smith............................................   298
Cox, Wendell, Wendell Cox Consultancy, Belleville, IL............   261
Downs, Tom, Director, National Center for Smart Growth Education 
  and Research, University of Maryland, Baltimore, MD............   265
    Prepared statement...........................................   307
Espinosa, Judith, Director, Alliance for Transportation Research, 
  Albuquerque, NM, on behalf of the Surface Transportation Policy 
  Project........................................................   259
    Prepared statement...........................................   298
    Responses to additional questions from:
        Senator Jeffords.........................................   305
        Senator Smith............................................   306
Gregory, Peter, Executive Director, Two Rivers Ottauguechee 
  Regional Commission, Woodstock, VT, on behalf of the National 
  Association of Regional Councils...............................   250
    Prepared statement...........................................   290
Kirby, Ronald, Transportation Director, Metropolitan Washington 
  Council of Governments, on behalf of the Association of 
  Metropolitan Planning Organizations............................   247
    Prepared statement...........................................   287
    Responses to additional questions from:
        Senator Jeffords.........................................   289
        Senator Smith............................................   289
Leonard, Kenneth J., Director, Division of Transportation 
  Investment Management, Wisconsin Department of Transportation, 
  Madison, WI, on behalf of the American Association of State 
  Highway and Transportation Officials...........................   245
    Prepared statement...........................................   279
    Responses to additional questions from:
        Senator Jeffords.........................................   285
        Senator Smith............................................   286
Wilson, Jennifer Joy, President, National Stone, Sand and Gravel 
  Association, Arlington, VA.....................................   263
    Prepared statement...........................................   309

                          ADDITIONAL MATERIAL

Statement, Richard Stolz, Deputy Director of Public Policy, 
  Center for Community Change....................................   314
                                 ------                                

                             JULY 30, 2002
                     TRANSPORTATION AND AIR QUALITY
                           OPENING STATEMENTS

Bond, Hon. Christopher S., U.S. Senator from the State of 
  Missouri.......................................................   411
Carper, Hon. Thomas R., U.S. Senator from the State of Delaware..   446
Chafee, Hon. Lincoln, U.S. Senator from the State of Rhode Island   418
Clinton, Hon. Hillary Rodham, U.S. Senator from the State of New 
  York...........................................................   417
Corzine, Hon. Jon, U.S. Senator from the State of New Jersey.....   448
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...   409
Jeffords, Hon. James M., U.S. Senator from the State of Vermont..   321
Smith, Hon. Bob, U.S. Senator from the State of New Hampshire....   323
    MPO surveys.................................................326-409
Voinovich, Hon. George V., U.S. Senator from the State of Ohio...   415

                               WITNESSES

Harris, Hon. Ron, Judge, Collin County, Texas....................   434
    Prepared statement...........................................   500
Holmstead, Hon. Jeffrey, Assistant Administrator, Office of Air 
  and Radiation, Environmental Protection Agency.................   420
    Prepared statement...........................................   470
    Responses to additional questions from:
        Senator Baucus...........................................   496
        Senator Jeffords.........................................   476
        Senator Smith............................................   491
        Senator Voinovich........................................   488
Johnstone, Hon. Scott, Secretary, Vermont Agency of Natural 
  Resources......................................................   432
    Prepared statement...........................................   497
Peters, Hon. Mary E., Administrator, Federal Highway 
  Administration, Department of Transportation...................   419
    Prepared statement...........................................   449
    Responses to additional questions from:
        Senator Jeffords.........................................   455
        Senator Smith............................................   467
        Senator Voinovich........................................   465
Replogle, Michael, Transportation Director, Environmental Defense   439
    Letters, Transportation and air quality issues, several 
      environmental organizations...............................602-607
    Memorandum, Emission Effects of Atlanta Speed Study.........554-558
    Prepared statement...........................................   513
    Responses to additional questions from:
        Senator Jeffords.........................................   625
        Senator Smith............................................   631
        Senator Voinovich........................................   628
    Reports:
        Critique of Transportation Planning Board Demand and Air 
          Emissions Models......................................571-602
        Preliminary Toxicological Review of Roadway Traffic 
          Pollution.............................................562-568
        Review of Exposure to Toxic Air Pollutants from Mobile 
          Sources...............................................568-571
    Study, 1997 Federal Highway Cost Allocation.................535-554
    Summary, Recent Studies on Regional Transportation Models...560-562
    Tables, Access to Jobs in Atlanta TIP........................   559
Stephenson, James, President, Yancy Brothers Company.............   438
    Prepared statement...........................................   502
    Responses to additional questions from:
        Senator Jeffords.........................................   510
        Senator Smith............................................   512
        Senator Voinovich........................................   511
Terry, Lynn, Deputy Executive Officer, California Air Resources 
  Board..........................................................   436
    Prepared statement...........................................   501

                          ADDITIONAL MATERIAL

Letter, Air quality issues, AASHTO...............................   643
Statements:
    National Association of Home Builders........................   640
    Stephenson, John B., Director, Natural Resources and 
      Environment, General Accounting Office....................607-625
Surveys:
    Atlanta Regional Commission..................................   326
    Baltimore Metropolitan Council...............................   369
    Denver Regional Council of Governments.......................   335
    Galveston Planning Organization..............................   339
    Kyova Planning Commission....................................   392
    Mecklenberg Union Metropolitan Planning Organization.........   395
    Metro and Oregon Council of Governments......................   343
    Metropolitan Transport Commission, Oakland, CA...............   374
    Metropolitan Washington Council of Governments...............   347
    New York Metropolitan Planning Organization..................   403
    North Central Texas Council of Governments...................   330
    North Jersey Planning Organization...........................   398
    OKI Council of Governments...................................   351
    Sacramento Council of Governments............................   354
    San Joaquin Council of Governments...........................   355
    Southern California Council of Governments...................   363
                                 ------                                

                           SEPTEMBER 9, 2002
     JOINT HEARING WITH SENATE COMMITTEE ON COMMERCE, SCIENCE, AND 
                             TRANSPORTATION
                             FREIGHT ISSUES
                           OPENING STATEMENTS

Breaux, Hon. John B., U.S. Senator from the State of Louisiana...   645
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...   650
Jeffords, Hon. James M., U.S. Senator from the State of Vermont..   648
Reid, Hon. Harry, U.S. Senator from the State of Nevada..........   646

                               WITNESSES

Caruthers, John D., Jr., Chairman, I-69 Mid-Continent Highway 
  Coalition......................................................   674
    Prepared statement...........................................   770
Dusenberry, Katie, Chairman, Arizona Department of Transportation 
  Board..........................................................   664
    Prepared statement...........................................   712
Hamberger, Edward R., President and Chief Executive Officer, 
  Association of American Railroads..............................   668
    Prepared statement...........................................   732
    Responses to additional questions from:
        Senator Jeffords.........................................   758
        Senator Reid.............................................   757
Hecker, JayEtta, Director, Physical Infrastructure Group, U.S. 
  General Accounting Office......................................   653
    Prepared statement...........................................   695
    Responses to additional questions from:
        Senators Reid and Jeffords...............................   708
        Senator Reid.............................................   704
Huerta, Michael P., Senior Vice President and Managing Director, 
  ACS State and Local Solutions, on behalf of the Coalition for 
  America's Gateways and Trade Corridors.........................   672
    Prepared statement...........................................   765
    Responses to additional questions from:
        Senator Jeffords.........................................   769
        Senator Reid.............................................   767
Larrabee, Rick, Director of Port Commerce, Port Authority of New 
  York and New Jersey............................................   670
    Prepared statement...........................................   759
    Responses to additional questions from Senator Reid..........   762
Shane, Jeffrey N., Associate Deputy Secretary and Director, 
  Office of Intermodalism, U.S. Department of Transportation.....   651
    Prepared statement...........................................   683
    Responses to additional questions from:
        Senator Jeffords.........................................   693
        Senator Reid.............................................   690
Wickham, Michael W., Chairman and Chief Executive Officer, 
  Roadway Express, Inc., on behalf of American Trucking 
  Associations...................................................   666
    Prepared statement...........................................   715
    Responses to additional questions from:
        Senator Jeffords.........................................   730
        Senator Reid.............................................   728

                          ADDITIONAL MATERIAL

Statements:
    Evaluation of Transportation Research Board Special Report 
      267, Gerard J. McCullough..................................   741
    Los Angeles County Economic Development Corporation..........   777
    Magtube, Inc., Jim Fiske.....................................   774
    McGovern, Hon. James P., U.S. Representative from the 
      Commonwealth of Massachusetts..............................   782
                                 ------                                

                           SEPTEMBER 19, 2002
             PROJECT DELIVERY AND ENVIRONMENTAL STEWARDSHIP
                           OPENING STATEMENTS

Baucus, Hon. Max, U.S. Senator from the State of Montana.........   791
Bond, Hon. Christopher S., U.S. Senator from the State of 
  Missouri.......................................................   786
Corzine, Hon. Jon, U.S. Senator from the State of New Jersey.....   833
Crapo, Hon. Michael D., U.S. Senator from the State of Idaho.....   789
Jeffords, Hon. James M., U.S. Senator from the State of Vermont..   783
    Executive Order, President George W. Bush....................   785
Smith, Hon. Bob, U.S. Senator from the State of New Hampshire....   834
Voinovich, Hon. George V., U.S. Senator from the State of Ohio...   794
Wyden, Hon. Ron, U.S. Senator from the State of Oregon...........   788

                               WITNESSES

Frankel, Hon. Emil Frankel, Assistant Secretary for 
  Transportation Policy, Department of Transportation............   796
    Prepared statement...........................................   835
Hales, Charles, Transit Planning Principal, HDR, Inc.............   823
    Prepared statement...........................................   986
Kassoff, Hal, Vice President of Highway Programs for Parsons 
  Brinckerhoff...................................................   821
    Prepared statement...........................................   982
Mead, Hon. Kenneth M., Inspector General, Department of 
  Transportation.................................................   801
    Prepared statement...........................................   845
    Responses to additional questions from Senator Jeffords......   849
Morefield, Kenneth, Assistant Secretary for Planning and 
  Engineering, Florida Department of Transportation..............   816
    Prepared statement...........................................   870
    Responses to additional questions from Senator Jeffords......   872
Murray, Hon. Carol, Commissioner, New Hampshire Department of 
  Transportation.................................................   813
    Prepared statement...........................................   869
Siggerud, Kate, Acting Director of Physical Infrastructure 
  Issues, General Accounting Office..............................   803
    Prepared statement...........................................   851
    Responses to additional questions from Senator Carper........   868
Suarez, Hon. John Peter, Assistant Administrator, Office of 
  Enforcement, Compliance and Assurance, Environmental Protection 
  Agency.........................................................   799
    Prepared statement...........................................   841
    Responses to additional questions from:
        Senator Carper...........................................   843
        Senator Voinovich........................................   844
Wadhams, Emily, State Historic Preservation Officer, Vermont 
  Department of Housing and Community Affairs....................   818
    Prepared statement...........................................   894
    Responses to additional questions from Senator Jeffords......   898

                         ADDITIONAL STATEMENTS

Manual, Standards and Guidelines, Vermont Transit...............899-982
Report, Florida's ETDM Process..................................873-894
Statements:
    American Society of Civil Engineers..........................   993
    Defenders of Wildlife........................................   990
                                 ------                                

                           SEPTEMBER 25, 2002
            JOINT HEARING WITH THE SENATE FINANCE COMMITTEE
          INNOVATIVE FINANCING: BEYOND THE HIGHWAY TRUST FUND
                           OPENING STATEMENTS

Baucus, Hon. Max, U.S. Senator from the State of Montana.........  1001
Corzine, Hon. Jon, U.S. Senator from the State of New Jersey.....  1030
Crapo, Hon. Michael D., U.S. Senator from the State of Idaho.....  1008
Grassley, Hon. Charles, U.S. Senator from the State of Iowa......  1003
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...  1009
Jeffords, Hon. James M., U.S. Senator from the State of Vermont..  1004
Reid, Hon. Harry, U.S. Senator from the State of Nevada..........  1006

                               WITNESSES

Carey, Jeff, managing director, Merrill Lynch & Co., Inc., New 
  York, NY.......................................................  1025
    Articles:
        Road to Revolution Coming?, Bond Buyer...................  1099
        Senate Panel Leaders Lobby DOT to Use Innovation in Its 
          Funding, Bond Buyer....................................  1097
        Senate Panel Tells TIFIA Program to Make Do With 2002 
          Leftovers, Bond Buyer..................................  1098
        Transportation for Upcoming Reauthorization of TEA-21, 
          Transportation Watch...................................  1103
    Prepared statement...........................................  1093
    Responses to additional questions from:
        Senator Baucus...........................................  1095
        Senator Jeffords.........................................  1096
Hahn, Hon. Janice, Councilwoman, City of Los Angeles, Los 
  Angeles, CA, on behalf of the Alameda Corridor Transportation 
  Authority......................................................  1019
    Prepared statement...........................................  1080
Hecker, JayEtta, Director of Physical Infrastructure Issues, 
  General Accounting Office......................................  1015
    Prepared statement...........................................  1066
    Responses to additional questions from:
          Senator Baucus.........................................  1077
          Senator Jeffords.......................................  1078
Horsley, John, Executive Director, American Association of State 
  Highway and Transportation Officials...........................  1023
    Prepared statement...........................................  1086
    Responses to additional questions from Senator Jeffords......  1092
Rahn, Hon. Peter, Secretary, New Mexico Department of 
  Transportation, Santa Fe, NM...................................  1022
    Prepared statement...........................................  1084
    Responses to additional questions from Senator Baucus........  1085
Scheinberg, Phyllis, Deputy Assistant Secretary for Budget and 
  Programs, Department of Transportation.........................  1013
    Prepared statement...........................................  1059
    Responses to additional questions from Senator Jeffords......  1065
Seltzer, David, Distinguished Practitioner, Mercator Advisors, 
  Philadelphia, PA, on behalf of the University of Southern 
  California Los Angeles, CA National Center for Innovations in 
  Public Finance.................................................  1011
    Prepared statement...........................................  1031
    Powerpoint slides............................................  1033
    Report, Findings and Recommendations for Innovative 
      Financing, National Center for Innovations in Public 
      Finance....................................................  1047
    Response to additional question from Senator Baucus..........  1058
    Table, Key Drivers on Innovative Finance.....................  1057

                          ADDITIONAL MATERIAL

Statements:
    American Highway Users Alliance..............................  1104
    American Society of Civil Engineers..........................  1106
    Forkenbrock, David J., Public Policy Center, University of 
      Iowa.......................................................  1114
    Karnette, Betty, California State Senator....................  1111
    National Association of Railroad Passengers..................  1109
    Texas Transportation Commission..............................  1120
    Transportation Departments of Montana, Idaho, North Dakota, 
      South Dakota and Wyoming...................................  1105
                                 ------                                

                           SEPTEMBER 30, 2002
      CONDITIONS AND PERFORMANCE OF THE FEDERAL-AID HIGHWAY SYSTEM
                           OPENING STATEMENTS

Jeffords, Hon. James M., U.S. Senator from the State of Vermont..  1146
Reid, Hon. Harry, U.S. Senator from the State of Nevada..........  1135
Voinovich, Hon. George V., U.S. Senator from the State of Ohio...  1143

                               WITNESSES

Buechner, William R., Vice President, Economics and Research, 
  American Road and Transportation Builders Association..........  1167
    Prepared statement...........................................  1377
    Responses to additional questions from:
        Senator Reid.............................................  1389
        Senator Voinovich........................................  1388
Byrd, Hon. Robert C., U.S. Senator from the State of West 
  Virginia.......................................................  1137
    Prepared statement...........................................  1172
Hecker, JayEtta, Director of Physical Infrastructure Issues, 
  General Accounting Office......................................  1151
    Prepared statement...........................................  1264
    Responses to additional questions from:
        Senator Jeffords.........................................  1277
        Senator Reid.............................................  1278
        Senator Voinovich........................................  1275
Jackson, Thomas L., President-Elect, American Society of Civil 
  Engineers......................................................  1166
    Prepared statement...........................................  1365
    Responses to additional questions from:
        Senator Voinoivich.......................................  1374
        Senator Reid.............................................  1375
Perkins, Hon. Joseph, Commissioner, Alaska Department of 
  Transportation and Public Facilities...........................  1150
    Prepared statement...........................................  1192
Peters, Hon. Mary E., Administrator, Federal Highway 
  Administration, Department of Transportation...................  1148
    Prepared statement...........................................  1175
    Responses to additional questions from:
        Senator Jeffords.........................................  1189
        Senator Reid.............................................  1191
        Senator Voinoivich.......................................  1186
Proctor, Gordon, Director, Ohio Department of Transportation.....  1164
    Prepared statement...........................................  1362
    Responses to additional questions from:
        Senator Reid.............................................  1365
        Senator Voinoivich.......................................  1364

                          ADDITIONAL MATERIAL

Reports:
    The Bottom Line, AASHTO...................................1198-1264
    Surface Maritime Transportation, General Accounting Office1282-1362
Statements:
    Ankner, William P., Rhode Island Department of Transportation  1390
    Dull, Garth, Nevada for Safe Roads...........................  1153

















                       REAUTHORIZATION OF TEA-21

                              ----------                              


                       THURSDAY, JANUARY 24, 2002

                               U.S. Senate,
         Committee on Environment and Public Works,
                                            Washington, DC.

                 PERSPECTIVES FROM THE FEDERAL, STATE, 
                            AND LOCAL LEVELS

    The committee met, pursuant to notice, at 9:33 a.m. in room 
406, Senate Dirksen Building, Hon. James M. Jeffords (chairman 
of the committee) presiding.
    Present: Senators Jeffords, Smith, Campbell, Inhofe, Crapo, 
Chafee, Warner, Baucus, Corzine, and Reid.

OPENING STATEMENT OF HON. JAMES M. JEFFORDS, U.S. SENATOR FROM 
                      THE STATE OF VERMONT

    Senator Jeffords. The committee will come to order. Good 
morning and welcome to this the first in our series of hearings 
on reauthorization of the Nation's Surface Transportation 
Program.
    Our nation's transportation system is one of the best in 
the world. Nearly every American relies upon our roads, 
bridges, highways, or mass transportation to get them where 
they need to go. But this reliance can also be a source of 
great frustration in the lives of our citizens.
    As we open our first of 11 hearings on this matter, we 
begin a process that will examine what works and what does not 
work, and our nation will be better off for the exercise.
    The Committee on Environment and Public Works has primary 
responsibility for the reauthorization process. EPW has a 
distinguished record of service in this regard; most recently 
and most importantly, through its work under Chairman Moynihan 
in 1991 and Chairman Chafee in 1997.
    Their leadership unified the committee to produce the 
Intermodal Surface Transportation Efficiency Act, referred to 
as ISTEA, and the Transportation Equity Act for the 21st 
Century, TEA-21. I intend to continue this effective bi-
partisan tradition during 2002, and on toward the 
reauthorization in 2003.
    Our committee today includes many distinguished 
participants from those prior authorization efforts. Senators 
Warner, Smith, Inhofe, Bond, Baucus, Reid, Graham, Lieberman, 
Boxer, and Wyden have all been key contributors in the past, 
and I look forward to using their wisdom and experience during 
the coming months. I, too, had the honor to serve on the 
committee during the enactment of ISTEA.
    In TEA-21, we have inherited a transportation policy and 
program that is basically sound. Our task this year will be to 
refine and evolve the program, based on the lessons learned 
over the past 10 years. We also examined the current and 
projected state of our transportation system, and the demands 
that it must meet.
    Along with Ranking Member Smith and Subcommittee Chairmen 
Reid and Ranking Member Inhofe, I have announced an ambitious 
hearing agenda for the coming year. Hearings will be held at 
both the full and the subcommittee level.
    This will be a year-long dialog with the many stakeholders 
in the transportation community. We will seek the best ideas 
from the brightest minds. We will hear from government, 
industry and system users. My goal is an inclusive process, 
open to all points of view from all parts of the nation.
    With Senator Reid and Inhofe at the helm, members of our 
Transportation Infrastructure Subcommittee will examine the 
transportation program in detail. There will be technical brain 
trusts. We will also work very closely with other Senate 
committees' jurisdiction for reauthorization: Banking, Budget, 
Commerce and Finance.
    EPW will be the workshop for crafting the next 
authorization language. I invite proposals from my many 
colleagues on the wide range of issues that will make up the 
final committee package. I offer this committee as the forum 
for blending these proposals. As chairman, I extend my good 
offices to achieve that blend.
    A few common threads run through our upcoming hearing 
projects. These include safety and security, economic growth, 
community enhancement, and the balancing of interests. These 
are challenging matters, made more difficult by our nation's 
current financial uncertainties.
    In fact, concern over future resources unites all the 
stakeholders in transportation. Success will require strength 
through unity. This committee will provide a common ground.
    The nation's transportation program is a model of effective 
federalism. The program is de-centralized, collaborative and 
flexible. It draws on resources from Federal, State, local, and 
private sources. In recognition of this, we are joined today by 
our partners from the Cabinet, the States, and local 
government.
    Our hearing today will begin with the Honorable Norman 
Mineta, Secretary of the U.S. Department of Transportation, and 
my close colleague in the House. Norm has taken a break from 
inspecting the baggage at BWI to join us this morning, and we 
appreciate that.
    [Laughter.]
    Senator Smith, Secretary Mineta will be followed by a panel 
of elected officials from around the country. Bob Wise, the 
Governor of West Virginia, unfortunately was scheduled to be 
here, but his plane is grounded. So he will not be here, but we 
will have his testimony.
    Bob also served with me in the House, and served on the 
House Transportation Infrastructure Committee. So he knows a 
thing or two about the reauthorization.
    Commissioner Chris Hart of Hillsborough County, FL, will 
represent the National Association of Counties. Chris chairs a 
NACo Transportation Committee.
    Boise, Idaho Mayor H. Brent Coles will represent the U.S. 
Conference of Mayors. He is the immediate past president of the 
conference.
    Finally, from my great State of Vermont, my friend, 
Burlington Mayor Peter Clavelle will represent the National 
League of Cities. I am especially pleased to welcome a fellow 
Green Mountain Boy to these proceedings. In Vermont, we put a 
high value on balancing our environmental concerns and our 
transportation needs. I pledge to move forward on the bill, 
which will encompass a balance in the years to come.
    I am pleased to be joined by such very knowledgeable 
witnesses. We will need their wisdom when we reconsider the 
authorization here.
    I want to know how our transportation policy works for 
Americans, for voters, for customers, users, citizens, and 
constituents. I want to know how the program is blended with 
other public objectives, social, environmental, and economic.
    Finally, I want to explore the ways to best meet future 
challenges. I look forward to our distinguished witnesses 
coming forth. But let me now turn to my good friend, Bob Smith.

  OPENING STATEMENT OF HON. BOB SMITH, U.S. SENATOR FROM THE 
                     STATE OF NEW HAMPSHIRE

    Senator Smith. Well, thank you very much, Mr. Chairman, and 
good morning, Mr. Secretary. It is always a pleasure to see you 
here.
    I want to just point out, as you did, Mr. Chairman, that 
this is the first in a series of hearings that we are going to 
be having for the reauthorization of the so-called 
Transportation Equity Act, or TEA-21. It is a lot of work. We 
have a lot more to do.
    I can remember 4 years ago, I was a member of the 
conference committee on the TEA-21 legislation. We worked hard. 
I think we did some good things, and there is always room for 
criticism, I guess. But I feel that overall, we did a good job 
with this legislation, and we made some significant changes.
    Over the next year or so, as we prepare for this 
reauthorization, this is really one of the most significant 
things that Congress does. Virtually every American, in one way 
or another, is impacted by either a car or a road. Our economy 
is so closely linked with the capabilities of our 
transportation system, it just takes on huge importance. It is 
vital to each one of our States, as well as us, personally.
    What you hear most often about TEA-21 is that it provided 
for about a 40 percent increase in transportation funding over 
the previous law, which was called ISTEA.
    But another highly touted feature was that it provided 
funding guarantees, so that the tax revenues that came into the 
trust fund would be spent on transportation, which is the way 
it should be.
    But some of the cornerstone achievements of TEA-21 
unfortunately appear to be threatened by the shortfalls in the 
so-called RABA calculations revenue-aligned budget authority. 
There is a $5 billion reduction predicted there from TEA-21's 
guaranteed levels, if you will, for fiscal year 2003.
    We could not really anticipate, and I have never run into 
anybody yet, that could totally predict what the budget is 
going to be on a given year. But this issue has enormous 
unintended consequences, and I think you know, Mr. Secretary, 
that we are all going to have to deal with it.
    But I appreciate your sharing these calculations with us in 
the past few days, in the interest of honesty here, so that we 
have some time to digest the impact before the release of the 
President's budget, and we really appreciate that. We will 
treat it in that spirit, as well.
    We are going to be having a hearing very soon, after the 
budget is released, I know, Mr. Chairman, to explore in detail 
the revenue forecasts, the firewall principles, and the RABA 
mechanism. But for now, I have just asked my staff to 
thoroughly examine the provisions with the help of the 
documentation that you have provided us, Mr. Secretary, so we 
can adopt or develop a prudent course as we move forward on 
this bill.
    I want to briefly bring three points to the attention of 
the chairman and my fellow committee members and the Secretary 
on some areas that I think we are going to have to focus a good 
deal of effort on, and it is something that I have been 
involved in.
    First is environmental streamlining. It is a very important 
issue, because it oftentimes is unintended--sometimes intended, 
I suppose--and slows down and increases the costs of many of 
the highway projects in our country.
    We are working on a pilot, if you will, in New Hampshire, 
on the I-93 corridor, where we have everybody sitting down 
periodically and talking and working together, so that we do 
not have to do this sequential business; but we can rather work 
together. It is working very well. It is just a widening 
project, but it is a little more than that. There are some 
other things that have to be involved there.
    It is working, and I think with this streamlining, we are 
trying to make the streamlining language, which I helped to 
draft, work in a way that is productive. I think it is working. 
But if the project is consistent with environmental protection, 
then it should not be subject to excessive delays, and 
oftentimes, it is.
    The second area that I will be focusing on is that of the 
freight movement in this country and the capacity. From 1990 to 
1998, there was a 22\1/2\ increase in vehicle miles traveled. 
During that same period, there was only a 1 percent increase in 
the number of lane miles on the roadway.
    So transportation is not just about accommodating 
commuters. It is also a very efficient system, vital to moving 
consuming goods from one part of our country to the other. If 
we neglect this issue, it is going to have even more of a 
negative impact on our economy.
    Finally, let me mention briefly the issue of air quality. 
There are some loose ends that remain from some of the court 
decisions on this issue. Myself and other members of the 
committee want to work closely with the U.S. Department of 
Transportation and EPA on resolving these loose ends, so 
called, so that we can accomplish our air quality goals, 
without burdening the transportation community, or causing 
unnecessary delay.
    I do not believe we have to burden or cause unnecessary 
delay to meet those standards. It is about cooperation and 
partnership, rather than confrontation.
    So I look forward to working with you, Mr. Secretary, on 
those issues. Again, I thank you for coming here today, and 
thank you for your strong commitment to our nation's 
transportation system, and thank you for serving; and thank 
you, Mr. Chairman, for holding this hearing.
    Senator Jeffords. Well, thank you for a good statement.
    Senator Reid.

  OPENING STATEMENT OF HON. HARRY REID, U.S. SENATOR FROM THE 
                        STATE OF NEVADA

    Senator Reid. Thank you very much, Senator Jeffords. I 
appreciate your recognizing me. I have to get back to the floor 
by 10 o'clock.
    This is the first in a series of hearings reauthorizing our 
Nation's Surface Transportation Program. I am happy to be able 
to chair the Transportation Subcommittee. I recognize that that 
was given to me by virtue of Senator Baucus, who is heavily 
engaged in other matters. I appreciate that very much.
    I look forward to working with you, Mr. Chairman, Senator 
Smith, and of course, Senator Baucus, who has to be an integral 
part of anything that we do in this legislative session with 
this bill; not only because he has chaired this full committee 
in the past, but also because he is chairman of the Finance 
Committee.
    As some of you will soon recognize, if we are going to be 
able to do the things that need to be done with transportation 
in this bill, we are going to have to get some help from the 
Finance Committee, because of the monetary shortfall that we 
have.
    The problems in Nevada, I think, are representative, but to 
an exaggerate point, of the problems that we have in America 
today. We are a very large State; the sixth largest State in 
the Continental United States, seventh now with Alaska.
    We have not only wide areas; the length of the State is 
some 700 miles long. We have growth in Southern Nevada that is 
10,000 a month coming in to that area. We have really serious, 
serious problems that we need help with.
    I recognize the budget shortfall that we are going to have 
unless something changes. In the State of Nevada, if things go 
the way they are, we will have a budget shortfall of about $60 
million in just highway transportation funds. That is a 
significant amount of money in a Highway Bill for a State like 
Nevada.
    But having said that, it is our job to build upon the 
successes of ISTEA and TEA-21, and protect the gains, identify 
the weaknesses, and improve our transportation system.
    Throughout this hearing process, we are going to look at 
ways to meet the transportation challenges of a new century. 
Chairman Jeffords and I have worked together so that we are 
going to have about one hearing a month, the full committee or 
the subcommittee.
    We want to make sure that people who have concerns about 
transportation in this country have an opportunity to voice 
their opinions. We will investigate how multi-modal approaches 
can help us address transportation problems and improve 
mobility. We will examine the physical condition of our 
highways; the bridge infrastructure.
    We will study the transportation sector's impact on the 
economy and the environment. We will look for innovative 
approaches to transportation problems.
    Last fall, I worked very hard in trying to come up with an 
infrastructure investment package for purposes of having a 
stimulative effect to this economy. There is nothing that 
stimulates the economy more than road building. It is very, 
very labor intensive.
    Every billion dollars means 42,000 new jobs. Every person 
who has a job is paying taxes. They are buying homes, cars, 
refrigerators. We need to do whatever we can to stimulate that 
sector of our economy.
    Having said all that, I hope that we have the resources 
that we need to meet the demands of Nevada and the rest of this 
country.
    Mr. Chairman, I appreciate your courtesy, and I will ask 
unanimous consent that my full statement be made part of the 
record.
    Senator Jeffords. It will be admitted.
    [The prepared statement of Senator Reid follows.]
  Statement of Hon. Harry Reid, U.S. Senator from the State of Neveda
    Welcome to the first in a series of hearings on the reauthorization 
of our nation's surface transportation program. I am pleased to have 
the opportunity to chair the Subcommittee on Transportation, 
Infrastructure and Nuclear Safety and look forward to working closely 
with Senator Jeffords and other members of the committee to write the 
legislation reauthorizing the Transportation Equity Act for the 21st 
Century, known as TEA-21.
    This legislation is critically important to each of our States and 
to the Nation as a whole. I represent Nevada, the fastest growing State 
in the country, and I have seen how such rapid growth has placed 
tremendous demands on our road system and our entire transportation 
infrastructure. I understand the problems and needs of Nevada, and 
that's why I will continue to provide leadership on this issue. I want 
to make sure that in my State and across America we have a 
transportation system that promotes economic growth, improves safety, 
enhances quality of life, and protects the environment.
    Ten years ago, the Intermodal Surface Transportation Efficiency Act 
B ISTEA--revolutionized transportation policy. TEA-21, enacted in 1998, 
maintained the principles of ISTEA while bringing significant new 
resources to our highway and transit infrastructure. TEA-21 shifted 4.3 
cents of the gas tax from the General Fund to the Highway Trust Fund 
and created the budgetary firewalls which ensure that all revenues into 
the trust fund are dedicated to transportation investments.
    Now it is our job to build upon the successes of ISTEA and TEA-21--
to protect the gains, identify the weaknesses, and improve our 
transportation system.
    Throughout this hearing process we will look at ways to meet the 
transportation challenges of a new century.
      We will seek to use new technologies to improve 
operations, alleviate congestion and enhance security in metropolitan 
areas;
      We will investigate how multi-modal approaches can help 
us address transportation problems and improve mobility;
      We will examine the physical condition of our highway and 
bridge infrastructure;
      And we will study the transportation sector's impact on 
the economy and the environment;
    As we look for innovative approaches to transportation problems, we 
must recognize that ensuring adequate funding will be perhaps our 
biggest challenge.
    Last fall, I was the leading proponent of including infrastructure 
investment funds in the economic stimulus package. My view was, and 
still is, that investing in our infrastructure creates jobs and 
economic activity in the short-run and results in permanent 
improvements that also benefit our economy in the long run.
    Unfortunately, in Fiscal Year 2003 we face a $9 billion decrease in 
highway funding. This is just the opposite of an economic stimulus B it 
is more of an economic depressant. This loss of funding is of great 
concern, especially during a recession, and in the long run will 
diminish the productivity of our transportation sector. I hope that the 
President's budget will somehow consider this important economic issue. 
It will continue to be a top priority for me.
    The Transportation, Infrastructure, and Nuclear Safety Subcommittee 
that I chair will hold a hearing devoted to the fiscal year 2003 
Federal Highway Administration budget proposal and TEA-21 
reauthorization in February. I look forward to addressing funding 
issues in much greater detail at that hearing.
    For now, I am very pleased with the excellent slate of witnesses we 
have on hand for this opening hearing to provide the committee with 
perspectives on reauthorization from the Federal, State, and local 
level. Mr. Secretary, I welcome you here today. We could ask for no 
better partner in this process and I am delighted at the opportunity to 
work with you again. I look forward to your testimony.
    Senator Jeffords. Senator Campbell.

OPENING STATEMENT OF HON. BEN NIGHTHORSE CAMPBELL, U.S. SENATOR 
                   FROM THE STATE OF COLORADO

    Senator Campbell. Thank you, Mr. Chairman, and I apologize 
for being late. Has the Secretary made his statement yet?
    You have not? We are still rattling around. I would rather 
listen to him speak than hear myself. I have been a friend of 
Norm Mineta for years and years, serving with him in the House. 
We also have a connection in San Jose, where we both spent an 
awful lot of years.
    I would like to say that if you look at the numbers, 
Nevada, where Senator Reid hails from, is the fastest growing 
State; Arizona, second, and Colorado, third. Because we are 
such fast growing States, the importance of a new Highway Bill 
is going to take on huge proportions.
    When we passed TEA-21 in 1998, the total overall funding 
represented a 40 percent increase over the previous 
authorization. But for Colorado, it meant a 52 percent increase 
over the money that we had received before that, to the tune of 
about $100 million more than we had gotten.
    Certainly, we were grateful for that and put it to good 
use. But it seems like in those fast growing western States, we 
are always behind the curve. No matter how much money we put 
into transportation, we still need more, because of the influx 
of people.
    I personally believe, as Senator Reid does, that we need to 
concentrate a great deal on highway development. It seems to me 
that we ought to be learning more from those countries who have 
had such great success with moving people like Japan has, as an 
example, with light rail and fast rail and alternative ways of 
moving people.
    Because I am beginning to think that you cannot simply 
build your way out in these high growth areas; just build your 
way out of things by adding more and more lanes, which just 
seems to increase more an more congestion. So I would hope as 
we move along, we put emphasis on alternative ways of moving 
people.
    Last, Mr. Chairman, just let me say that I am particularly 
interested, and I do not know if the Secretary is going to say 
anything about this today, but we reached kind of a compromise 
agreement last year on the issue of Mexican trucks coming into 
America.
    As we move along this year, I am going to be very 
interested in seeing how that is going to develop, and what 
kind of problems it has created and what kind of problems it 
has solved with that compromise. So with that, just let me say 
welcome, Norm. It is very nice to see you again, and I look 
forward to working with you.
    [The prepared statement of Senator Campbell follows:]
Statement of Hon. Ben Nighthorse Campbell, U.S. Senator from the State 
                              of Colorado
    Mr. Chairman, Senator Smith, I would like to thank you for 
scheduling this important hearing. I would also like to welcome these 
distinguished panels and thank them for taking the time meeting with us 
today.
    As we begin this new year, the country faces many challenges. Among 
these includes the transportation crisis in this country.
    Each year, traffic congestion costs the United States billions of 
dollars. As Mayor Coles will discuss in his testimony, the Western 
United States is booming. However, along with growth and progress come 
growing pains that many States have been dealing with for many years.
    The passage of Transportation Equity Act for the 21st Century (TEA-
21) in 1998 has helped solve many of the transportation problems across 
the country. The overall total funding in TEA-21 represents a 40 
percent increase over the previous authorization Intermodal Surface 
Transportation Efficiency Act (ISTEA), which was enacted in 1991. Under 
TEA-21 Colorado saw a 52 percent increase over the State's ISTEA 
distribution. With the Federal funds that were authorized in TEA-21 by 
this committee and appropriated by the Senate Appropriations Committee, 
upon which I also serve, the Colorado Department of Transportation has 
moved from a $200 million annual budget to more than a $300 million 
annual budget.
    This higher level of funding has allowed COOT to move forward with 
transportation projects that would not have been able to be completed 
without TEA-21. In fact, the COOT has been able to take advantage of 
innovative financing techniques, which were also authorized by this 
committee, to allow them to accelerate many projects.
    For example, the Federal Grant Anticipation Revenue Vehicle 
(GARVEE) Program has allowed COOT to accelerate 28 key Strategic 
Projects statewide. Many of the projects would have taken 50 years to 
complete. What the Federal program has allowed COOT to do is accelerate 
completion of those projects to under 10 years, a substantial cost 
savings.
    However, recent budget projections predict a $4.9 billion shortfall 
from what was originally predicted in the fiscal year 2003 budget and 
over $9 billion less than what was allocated in the fiscal year 2002 
budget. This budget shortfall will be a challenge to all of us as we 
move forward on this first step to re-authorization. I look forward to 
working with this committee on a wide range of priority topics over the 
course of the year and welcome input from all levels of government, 
system users and private industry.
    Thank you Mr. Chairman.
    Senator Jeffords. Senator Baucus.

  OPENING STATEMENT OF HON. MAX BAUCUS, U.S. SENATOR FROM THE 
                        STATE OF MONTANA

    Senator Baucus. Thank you very much, Mr. Chairman. It is a 
real pleasure to be with you today. I very much commend you and 
the leadership of this committee for setting out a very 
ambitious and aggressive hearing schedule.
    It is my experience, frankly, that the more we begin early 
with hearings and deeply examine the various aspects of this 
issue, the more likely it is that we are going to have a good 
product when we reauthorize this bill, I might say with some 
bemusement, in another Congress. Nevertheless, it is very 
important this year to get all this out and have the hearings.
    I would remind you that we did get a significant increase, 
as we all remember, last year from the previous Highway Bill, 
because of the diversion of the 4.3 cents from general revenue 
into the Highway Trust Fund.
    That gave us a big shot in the arm. On average, each State 
got about a 40 percent annual increase in highway fund. At that 
time, we had the assistance of Senator Byrd, Senator Graham, 
and the others who were very helpful in making that change.
    With the problems with so-called RABA, it is apparent that 
we are going to have to look for other ways to increase revenue 
to the trust fund. I have some ideas on how to do that.
    In addition, we might look at potential greater use of the 
trust fund to get additional obligation authority, to make sure 
no State gets a cut or reduction in highway funds, and perhaps 
even may get an increase. Mr. Secretary, I hope at the 
appropriate time you can address the degree to which you think 
that is appropriate.
    Highways are the life blood of my State, Montana. We have 
more Federal highway miles per capita than any other State in 
the nation. We have more than Alaska, but of course, Alaska 
does not have quite the number of people that we do, and not 
the number of highways, either, because you fly in Alaska; you 
do not travel the road. But nevertheless, we have more Federal 
highway miles per capita than any other State.
    The program provides about 11,000 jobs in Montana. Those 
are high paying jobs. They say that because, regrettably, 
Montana has slid from about tenth in the nation in per capita 
income in 1946 to now, depending on how you calculate it, 50th, 
49th, or 80th. So these are jobs that are good paying jobs. It 
makes a heck of a difference to say nothing about the greater 
ease of transportation in our State.
    I look forward very much, Mr. Chairman, to working with you 
under your leadership on the committee. I plan to introduce a 
bill in the next period of time, but I am not exactly sure when 
it will be.
    It will be some what of a western States' bill, but I want 
to underline here and emphasize that it is going to be a 
national bill, too. I do not want to introduce legislation that 
is going to work to the detriment of other parts of the nation.
    In the last Highway Bill, TEA-21, essentially we worked 
very well. It was myself, representing primarily the western 
States, and our good friend, John Chafee, representing the 
northeastern States, and Senator Warner, the daughter States. 
We had meeting after meeting after meeting, with formula change 
after formula change after formula change.
    But we finally worked it out, after lots of different 
meetings, and so on and so forth. There is no doubt in my mind 
that you are going to have the same approach, which worked very 
well.
    I might say also that on the Finance Committee, I am going 
to be holding hearings on all the trust funds, looking at ways 
to, first of all, examine them taking stock, but also ways, 
particularly with respect to the Highway Trust Fund, to see if 
we can find additional dollars. Again, as I mentioned, I have 
some ideas how we can place more dollars into the trust fund.
    I mentioned the RABA situation. We have got to address 
that. I want to commend my good friend from New Hampshire in 
mentioning environmental streamlining. I know members of this 
committee will remember a couple 3 years ago when we were quite 
concerned with the inadequate environmental streamlining.
    We asked the department to come up with some streamlining 
of environmental regulations, and my gosh, they came back with 
a flow chart that would make the flow chart of the whole 
committee system in the Congress look like a grapevine.
    It was so complicated that it made things more worse than 
better. I, therefore, think, Mr. Chairman, that the real answer 
to environmental streamlining is for us, in legislation, to be 
much more specific. I have some ideas there, which I will 
include in my legislation, on how to deal with environmental 
streamlining, because it is a huge problem particularly, I 
know, in western States.
    But the main point, Mr. Chairman, is just I really commend 
you. You have got a great schedule outlined. You have got a 
reputation of really working together, and I pledge to work 
with you and also on the Finance Committee, to try to help this 
committee do its jobs with extra revenue.
    [The prepared statement of Senator Baucus follows:]
   Statement of Hon. Max Baucus, U.S. Senator from the State Montana
    Thank you Mr. Chairman. It is my pleasure to be here today to 
discuss the reauthorization of a law that I am privileged to have 
helped write. Along with Senators Warner and Chafee and others on this 
committee and on other committees, we hammered out a bill that I 
believe was equitable to all States and that served this nation's 
transportation system well.
    TEA-21 staked out new ground by putting into law the requirement 
that all gas tax revenues be devoted to highways. Some of the members 
in this room were instrumental in achieving that goal. Now I don't have 
to remind you of the difficult debates we had over funding formulas 
among the three main groups, northeast States, donor States, and 
western States. But in the end, we achieved a bill that was supported 
by the vast majority of Senators. So the final result, while not 
perfect, was a good compromise and was broadly supported.
    I look forward to working with the leadership on this committee and 
other committees to develop a new highway bill that will help to 
continue many of the ideas that TEA-21 began--the integrity of the 
Trust Fund, the budget firewalls and an equitable distribution of 
formula dollars.
    I plan to hold hearings on the Finance Committee addressing the 
balances in the Highway Trust Fund and on innovative ways of financing 
transportation projects.
    I plan to use my role as chairman of the Finance Committee to gain 
more funding for the program and to protect the Highway Trust Fund. As 
always I am committed to highways and to the Highway Trust Fund.
    I personally have several ideas about what I would like to see in a 
new bill and as I do for every reauthorization, I will be introducing a 
highway bill in the coming months. I have been working with the Montana 
DOT and other western States to develop ideas for the next several 
years of highway policy. I assure you that my bill will not serve the 
West to the detriment of other States. Quite the contrary. My bill will 
be a national bill and a decidedly pro highway bill.
    Once again, I look forward to being very active and assisting the 
leadership of this committee as much as I can, as we embark on this new 
chapter in highway law. There is something of concern that I would like 
to mention here today, particularly in the presence of our 
distinguished Secretary of Transportation. It has come to my attention 
that because of various factors, the RABA for this year will be 
negative. In fact I have heard predictions that we are looking at a 
program that is $9 billion less than the fiscal year 2002 program. We 
must do something about this. We cannot go into the next 
reauthorization with such a low baseline. If this is in fact the case 
and we are looking at a lower program over the next few years, I would 
support the influx of new obligation authority to the States for the 
next 2 years. This would prevent the base numbers for the next highway 
bill from going down too much. I hope that Secretary Mineta will 
address this in his remarks today and that this committee, the Finance 
Committee and the Administration can work together to alleviate this 
problem that will plague our reauthorization efforts if not addressed.
    I look forward to today's hearing and future hearings as we prepare 
for the next reauthorization.
    Senator Jeffords. Well, thank you, and I look forward to 
working with you.
    Senator Inhofe.

 OPENING STATEMENT OF HON. JAMES M. INHOFE, U.S. SENATOR FROM 
                     THE STATE OF OKLAHOMA

    Senator Inhofe. Thank you, Mr. Chairman.
    Between the comments from the Senator from Montana on RABA 
and the problem, and I was going to get into that, you have 
pretty much said what my feelings are. The announcement on 
January 18 that it could be a negative RABA is something that 
we are going to have to deal with, and we have some problems 
there.
    I have to also say that I spent 8 years in the House, 
working under the supervision of and working for Secretary 
Mineta. We have always worked very closely together. Quite 
frankly, I was thrilled when I heard the announcement that you 
were going to be our Secretary of Transportation.
    You will remember, the years that we spent trying to do the 
very thing that was accomplished in TEA-21, and that is to 
assure that all these highway dollars, the Highway Trust Fund, 
was going to go to highway projects.
    We have accomplished a lot of that. We have accomplished a 
lot of the problems with donor States, that Oklahoma was 
certainly in an awkward situation on; and also for the 
flexibility to allow the States and the cities and local 
jurisdictions to participate in this process in a way, and I 
think this hearing shows that.
    We are going to have input from people that are closer to 
the problem, back in the States. That has always been 
consistent with what you have stood for and what we have stood 
for, back in the 8 years that we have worked together.
    So I am looking forward to continuing this, after this 
first hearing, and actively trying to do something to address 
the serious problems that we have, that we have talked about 
this morning.
    Thank you, Mr. Chairman.
    [The prepared statement of Senator Inhofe follows:]
   Statement of Hon. James M. Inhofe, U.S. Senator from the State of 
                                Oklahoma
    Thank you Mr. Chairman. As you have indicated, today is the first 
of series of hearings to prepare us for reauthorization of the Federal 
Highway Program. I look forward to working with you and our colleagues 
to further the progress made in TEA-21 for greater flexibility and 
allowing States to keep more of their gas tax dollars. As we begin the 
reauthorization process, I am anxious to hear from our State and local 
partners how we at the Federal level can assist them in meeting their 
unique transportation needs.
    One such need that is universally felt is mobility. Not only is it 
important to increase mobility for personal travel, but we must also 
address the critical congestion choke points affecting freight 
movements. Continue economic growth depends on an efficient and cost 
effective transportation system, which includes the movement of people, 
goods and services.
    The challenge before us will be to increase capacity without 
increasing costs by making better use of existing resources. Nothing 
better illustrates this point than the announcement on January 18th 
that the President's budget for fiscal year 2003 will report a negative 
RABA. [Revenue Aligned Budget Authority] As devised, RABA's purpose is 
to protect the principal that every dollar into the Highway Trust Fund 
is spent on highway transportation projects as opposed to accumulating 
large balances as was the practice prior to TEA-21. Up until this 
point, we have enjoyed a positive RABA which has meant more spending on 
transportation infrastructure than estimated by TEA-21. Just as RABA 
provides for windfall it also means we could have a situation where 
TEA-21 estimates overstate actual revenues received. It would appear 
that is the case for fiscal year 2003.
    Not surprisingly many questions have been asked about the 
calculations used to determine the fiscal year 2003 RABA number. These 
are legitimate questions that need serious examination and thought. 
Certainly if we can soften the extreme negative effect of RABA for 
fsical year 2003, I would be supportive as long as we operate with the 
parameters of the existing statute and do not use funds outside of the 
trust fund to offset the loss. I am certain that several needed 
improvements to the RABA will be identified during this process which 
will be part of our reauthorization deliberations. My concern is that 
we proceed carefully and make sure that any immediate response 
contemplated to the fiscal year 2003 negative number does not tie our 
hands down the road.
    Mr. Chairman I recognized that in an election year it will tempting 
to ignore RABA and merely ``fix'' the problem through an infusion of 
cash from general revenue. However, I believe that would be a mistake 
because we need to protect the integrity of the Highway Trust Fund 
which means we should structure the program around the actual receipts 
of the fund, be they negative or positive.
    I am anxious to hear from our witnesses representing State and 
local interests on how a negative RABA number will affect your highway 
program. Of course I am always pleased to hear from my good friend Norm 
Mineta. I doubt there is anyone who understands the current program 
better than Secretary Mineta. As one of the principle architects of 
ISTEA, he has a clear understanding of not only the policy embedded in 
the program, but also the politics of bringing diverse interests 
together in a final bill. In that light, Norm, I want to give you fair 
warning that the No. 1 issue for me in ISTEA, i.e., increasing donor 
State returns, will continue to be my No. 1 issue in reauthorization of 
TEA-21. I suspect we may have some spirited discussions on how to 
address this, but I look forward to working with you on writing a bill 
that we can all support.
    Thank you Mr. Chairman and I look forward to working with you and 
Subcommittee Chairman Reid as we begin the reauthorization process.
    Senator Jeffords. Thank you.
    Senator Corzine.

OPENING STATEMENT OF HON. JON S. CORZINE, U.S. SENATOR FROM THE 
                      STATE OF NEW JERSEY

    Senator Corzine. Thank you, Mr. Chairman.
    Secretary Mineta, it is good to see you, again, welcome.
    I, too, join with all of you in congratulating and 
complimenting you on holding this series of hearings, Mr. 
Chairman. I look forward to both learning the intricacies of 
this, as a new member of the Senate, but also participating in 
trying to emphasize the importance of transportation broadly to 
all of our States, wherever we are.
    New Jersey is a complicated State. It is the most densely 
populated one in the country. The general studies will show you 
that we spend about 15 hours a week, the average citizen, stuck 
in traffic. While we may not be building as many highways, we 
have got a lot of underpasses, overpasses, bridges, and 
unlocking choke points that are necessary.
    That 15 hours a week, the way some people calculate it, is 
some place between $7.5 billion and $10 billion worth of lost 
economics from people not being on jobs, lost time at home, and 
has an obvious stress impact.
    Being a 25-year commuter to New York City, I can promise 
you, it is real. It is not a figment of somebody's imagination 
or hyperbole. The gridlock problem is serious, and I think it 
needs to be combined, as Senator Campbell suggested, with an 
attention to mass transit. I am glad I am on the Banking 
Committee, which will be dealing with some of those issues as 
we go forward.
    Then we have the donor/donee issue. While I know everyone, 
in their best interests, is trying to arrange all these things 
well, somehow or another, my State has ended up being in the 
donee position, in that 9.5 baseline.
    So it is an issue that is very much on the minds of the 
people of our State. I know it is absolutely vital to the 
effective economic well being of all of our States and nation. 
So I think it is terrific that you are holding these hearings. 
I will place my full statement in the record, and I look 
forward to being an active participant.
    [The prepared statement of Senator Corzine follows:]
 Statement of Hon. Jon S. Corzine, U.S. Senator from the State of New 
                                 Jersey
    Thank you, Mr. Chairman, for holding this first in a series of 
hearings on reauthorization of the Transportation Equity Act for the 
21st Century--TEA-21, and I'd like to join you in welcoming our 
witnesses.
    As a member of the Environment and Public Works Committee as well 
as the Banking Committee, I look forward to being an active participant 
in drafting a bill that helps fund our highway and mass transit needs.
    Mr. Chairman, drivers in New Jersey spend nearly 50 hours a year 
stuck in traffic, according to the New Jersey Institute for Technology. 
And, for many parts of our State, the total is significantly higher. 
For all this time stuck in traffic, that's an average cost of $1255 per 
licensed driver in wasted gasoline and lost productivity--for a total 
cost of $7.3 billion a year. A different study by the Texas 
Transportation Institute estimates a much higher cost--as much as $10 
billion a year.
    All this gridlock is dramatically affecting New Jerseyans' quality 
of life, both economically and emotionally. It means lost time at work, 
lost time with family and friends, and more stress. It also means more 
air pollution. And it's one of the important reasons that much of New 
Jersey fails to meet Clean Air Act standards.
    As a 25-year commuter to New York City from New Jersey, I can 
personally attest to the frustrations of the gridlock on our roadways. 
Figures from the 2000 Census back this up: our State has 8.4 million 
people, 3 percent of the nation's population. Yet those people drive 
over 67 million ``vehicle miles'' in our State. This leads to intense 
gridlock.
    Solving this gridlock problem, Mr. Chairman, will require a 
comprehensive approach to transportation. Clearly, there is a need for 
more roads in many areas and the construction of overpasses, 
underpasses and bridges also will help unlock existing traffic 
chokepoints. But we'll never solve gridlock simply by pouring concrete. 
We also need to focus on other modes of transportation, including rail 
and transit. And we need to promote innovative approaches to traffic 
management that take advantage of emerging technologies, such as the EZ 
Pass system, and also promote tried-and-true approaches such as 
carpools and telecommuting.
    As you might imagine, Mr. Chairman, I am especially focused on the 
needs of my State of New Jersey. And it is very disturbing to me that 
New Jersey receives so little in highway funding for all the gas tax 
and sales taxes on tires, trucks and buses that we send to Washington. 
Figures for the most recent year available show that our State now 
receives the minimum allowed for any State, 90.5 cents back for every 
dollar sent to Washington. This, Mr. Chairman, is an important reason 
that New Jersey ranks 49th out the 50 States in the amount of total tax 
dollars we receive back from Washington. In the case of highway funding 
that is especially not fair, considering our State's aging 
infrastructure and severe transportation needs.
    I look forward to working with you, Mr. Chairman, on these and 
other issues as our deliberations move forward, especially what level 
of environmental review must exist before a project is begun. I am in 
favor in general of the efforts in TEA-21 to streamline our 
environmental review process in order to begin road and rail projects 
more quickly. However I strongly believe that we can only do so in a 
way that protects our quality of life.
    In addition, I also expect to be active in the Banking Committee, 
as well, in efforts to promote transit, which also is critical to my 
State, and that effort in particular will be focused on building a 
critically needed tunnel under the Hudson River for rail transportation 
which will go a long way toward breaking down existing gridlock in our 
rail transit system.
    In closing, Mr. Chairman, let me again thank you for your 
leadership in this area, and I look forward to working with you and 
hearing from our witnesses.
    Senator Jeffords. Thank you very much, Senator, and I want 
to thank all of my colleagues for their excellent statements.
    Mr. Secretary, it is a pleasure to have you here. We look 
forward to working with you.

STATEMENT OF HON. NORMAN Y. MINETA, SECRETARY OF TRANSPORTATION

    Secretary Mineta. Thank you very much, Mr. Chairman. It 
really is a pleasure for me to have this opportunity to appear 
before you and the Senators of this committee. I want to thank 
you for this opportunity to share some thoughts with you about 
the lessons that we have learned from TEA-21, as well as the 
predecessor legislation, ISTEA, the Intermodal Surface 
Transportation Efficiency Act of 1991. Mr. Chairman, I want to 
thank you for your leadership in having this first hearing on 
the reauthorization of TEA-21.
    All of us at the Department of Transportation and in the 
Bush Administration look forward to working with the Senators 
of this committee and with Congress as a whole in shaping 
proposals for the reauthorization of this very important 
legislation.
    Today, America's transportation sector faces a period of 
not only extraordinary challenge, but also of extraordinary 
opportunity, as you are so very well aware.
    On September 11, 2001, a determined and remorseless enemy 
attacked one of America's most cherished freedoms, the freedom 
of mobility. The horrific events of that day and the weeks and 
months that have followed have reaffirmed the critical 
importance of our nation's transportation system, both to the 
security of every American and to our economic well being. The 
committee wisely begins the reauthorization process by looking 
to the lessons of TEA-21 and its predecessor.
    As many of you may know, I helped author ISTEA, working 
with all of you at that time during my tenure as chair of the 
Subcommittee on Surface Transportation of the House Committee 
on Public Works and Transportation.
    This landmark legislation established several new 
principles for the nation's surface transportation programs, 
which have proven out over time the importance of building 
strategic partnerships with State and local officials and with 
private industry; a new commitment to intermodalism; and a 
heightened sensitivity to the impacts of transportation on the 
shape and character of America's communities, to name but 
three.
    Building on this firm foundation, TEA-21 strengthened our 
transportation system in five distinct areas: No. 1, 
predictability, equity, and flexibility of funding; No. 2, 
safety; No. 3, mobility in system upgrading; No. 4, the 
application of innovative technologies; and No. 5, improving 
the quality of life.
    Now I would like to touch very briefly on some lessons 
learned. My written testimony expands on each of these five 
areas. Mr. Chairman, I would like to request unanimous consent 
that my full testimony be made a part of the record.
    TEA-21 revolutionized transportation funding and authorized 
record levels of investment for transportation. Minimum 
guarantees in the Highway Trust Fund firewalls created 
confidence among grantees regarding Federal funding, which is 
an extremely important aspect of the program delivery for State 
and local officials.
    Just as importantly, the funding flexibility that was first 
included in ISTEA, and then continued in TEA-21, enabled State 
and local decisionmakers to consider a variety of 
transportation options, and allows them to tailor their 
transportation choices to meet the unique needs of each of 
their local communities.
    Increased TEA-21 funding also allowed the States to make 
needed safety improvements. Under TEA-21, States may use their 
Surface Transportation Program, inter-state maintenance, and 
National Highway System funds for safety improvements and, in 
fact, many do.
    TEA-21 also enabled improved connectivity access across the 
modes, particularly in the area of freight movement. TEA-21 
also authorized the job access and reverse commute program to 
address transportation gaps in the public transit system, and 
to reduce the barriers for those moving from welfare to work.
    TEA-21 continued, and increased funding for several quality 
of life programs, originally authorized in ISTEA, broadened 
eligibility for others, and then established the new 
Transportation and Community and System Preservation Pilot 
Program, all of which continued to help States and communities 
improve the environment.
    TEA-21 also directed us to streamline environmental 
reviews. As a result, the average time to process environmental 
documents for major projects has been cut by almost 8 months, 
and we are well positioned for significant future progress.
    Now while we have begun the job of streamlining, more can 
and must be done. In short, the programmatic and financial 
initiatives of these two very historic surface transportation 
bills provided us a solid and balanced structure, around which 
we can shape this new reauthorization legislation. However, 
while we should build upon the best of ISTEA and TEA-21, we 
have an obligation or opportunity to do even better.
    Now as we move forward, we ought to adhere to certain core 
principles and values. We must continue to assure adequate and 
predictable funding for investment in the nation's surface 
transportation system. We must preserve funding flexibility to 
allow the broadest application of funds to the best 
transportation solutions identified by our States and local 
partners.
    We must also build on the intermodal approach that was 
found in ISTEA and TEA-21, and we must expand and improve the 
programs of innovative financing, in order to encourage private 
sector investments in the transportation system, and look for 
other incentives or other inventive means to augment existing 
revenue streams.
    We must emphasize the security of the nation's surface 
transportation system, providing the means and the mechanisms 
to perform risk assessment and analysis, incident 
identification, responses, and when necessary, evacuation.
    We must continue to focus on making substantial improvement 
in the safety of the nation's surface transportation system. 
None of us should consider it acceptable that we suffer 40,000 
deaths and over 3 million injuries annually on our highway 
system.
    Finally, we must continue to develop and deploy innovative 
technology with the ultimate goal of making ``intelligent 
transportation system'' an unnecessarily redundant phrase.
    Mr. Chairman, you have proposed an ambitious hearing 
schedule that will allow us to explore all of these topics in 
detail, and I want to commend you for that. We, at the 
Department of Transportation, look forward to working with all 
of you, with both houses of the Congress, with State and local 
officials, and with stakeholders, in shaping the Surface 
Transportation Reauthorization legislation.
    This is a moment of great opportunity, a moment that we 
must not let pass by. I am confident that by working together, 
we can build on the lessons learned from ISTEA and TEA-21, to 
develop reauthorization legislation that will best serve the 
American people.
    Mr. Chairman, before I close, everyone has made mention of 
the provision in TEA-21 that I know is on the minds of all of 
you. That is the revenue-aligned budget authority, or RABA.
    When TEA-21 passed, the goal was to ensure that the highway 
taxes paid by users be spent and not languish in the Highway 
Trust Fund as an unobligated balance. Now I agree with that 
philosophy. RABA was included in TEA-21 to annually adjust 
actual spending to tax receipts.
    Now the RABA mechanism has provided over $9 billion of 
additional highway spending over the past 3 years. 
Unfortunately, with the decline in the economy, combined with 
the overly optimistic revenue estimates in past years, the RABA 
calculation for 2003 is a negative $4.965 billion. Even with 
this RABA over the past 4 years, it has provided a net gain of 
some $4 billion.
    Now the RABA calculation is based on two factors. One is a 
look back and a look forward; $3.468 billion or 70 percent of 
the negative RABA is because the actual 2001 tax receipts are 
below the estimated tax receipts used in the fiscal year 2001 
RABA calculation. This is the look back correction.
    Now $1.497 billion of the $4.965 billion negative RABA is 
because the tax revenue estimate for fiscal year 2003 is below 
the level that was estimated in TEA-21 for fiscal year 2003, 
and this is a look ahead provision.
    The RABA calculation is not a policy call or a policy 
interpretation. It is a simple budgetary, arithmetic 
calculation, based on law. As we discuss the reauthorization of 
TEA-21, we need to discuss the design of RABA, and how its 
current swings in positive and negative directions could be 
smoothed out over time.
    So, again, Mr. Chairman and members of the committee, let 
me thank you for this opportunity to testify before you. I look 
forward now to responding to the questions that you might have.
    Senator Jeffords. Thank you very much, Mr. Secretary. There 
seems to be a general support in the current program and 
universal support for its funding protections.
    Unlike years past, where stakeholders and States were 
divided, this year, the parties seem to have much more in 
common. Do you concur with that statement?
    Secretary Mineta. I am sorry, I did not hear the first part 
of that, Senator.
    Senator Jeffords. There seems to be general support for the 
current program, and universal support for its funding 
protections. Unlike years past, when stakeholders and States 
were divided, this year the parties seem to have much more in 
common.
    Secretary Mineta. I believe, Mr. Chairman, you are correct 
on that observation. I think, again, this deals with the kind 
of flexibility that is there in the legislation, in TEA-21, 
that allows, with the NHS and the STP pot, to be able to be 
used, to be able to respond to the needs that exist in States 
and localities. I think because of that flexibility, there is a 
great deal of acceptance about the major underlying provisions 
of TEA-21.
    Senator Jeffords. Well, I look forward to working with you, 
and we all do. I thank you for a very excellent statement.
    Senator Smith.
    Senator Smith. Mr. Secretary, this whole reauthorization 
process for coming up with another Transportation Bill, or you 
can call it whatever it is going to be called, TEA-21 plus or 
whatever, it is about as nonpartisan as anything we do. I mean, 
it basically is an issue where all of the States try to work 
together to make the formula as fair as possible.
    I would just like to probe a little bit into how you will 
work with us on that, as we begin to have these hearings. Are 
you going to be providing us specific details on some of your 
core principles, or are you just going to give us general 
details? Can you tell us just a little bit in terms of how we 
might work with you, as we proceed along this process over the 
next year? I am not asking for a lot of detail here, but just 
conceptually, how you would work with us on the committee.
    Secretary Mineta. First of all, I intend to work very 
closely with all of you, and with the members of the other 
body. What I have laid out is a very broad area in terms of 
principles. But during the course of this year, I will be 
becoming more specific about where we are going. I am hoping 
that when you reconvene in 2003 to have a legislative proposal 
ready for Congress' consideration.
    But during the course of this year, I think with the give 
and take of our conversations back and forth, we will refine 
what we are hearing from the stakeholders, from State and local 
governments, from private sector organizations, contractors, 
and everyone involved, in order to refine where we will be 
going in terms of a specific legislative proposal, which I 
would like to have ready for presentation to the Congress in 
2003, early right after we convene.
    Senator Smith. I commend you for that, because I think that 
is going to make it a lot easier to come up with a final 
product, if we are all working together on it along the course 
of the next year, rather than just simply dropping a proposal, 
``the Administration proposal,'' on the committee and on the 
Congress, essentially next year.
    We both mentioned this. You mentioned in your testimony and 
I mentioned in my opening statement the issue of streamlining. 
When I was chairman last year, we had a couple of hearings on 
this with the previous Administration on the streamlining 
regulations.
    The process and the result, I think, were flawed. I do not 
know if there was some misunderstanding or disagreement. We 
could not seem to get a handle on what we actually meant. There 
was a difference of opinion as to what we actually meant in 
terms of these streamlining provisions. I think Senator Baucus 
mentioned that they were probably too general, not specific 
enough, and there was too much room for differences of opinion.
    There has been no final action on those regulations. I 
would just ask you, what does DOT propose to do on those 
regulations; go back to the drawing board, or hold off until 
the next reauthorization?
    Secretary Mineta. Well, I guess the debate that we are 
having is, should we just go ahead and withdraw those proposed 
regulations, to look at the reauthorization process as part of 
the way to incorporate any improvements we might make on 
streamlining.
    I do not think that where we are with the proposed 
regulations out there that we will move forward with that at 
all. My feeling is that we should really be working toward 
improving the legislative or the environmental process right 
now, and look toward the reauthorization process to refine, 
again as I said earlier, all of these different elements that 
we have right now as general principals, but to refine that for 
legislative purposes.
    Senator Smith. I agree with you. I think that makes sense. 
We are learning a lot. I think some of us had different views 
as to how these streamlining provisions worked. I have a pilot 
project going in New Hampshire and others do too.
    I think we are learning a lot about how to streamline and 
what the intent of the Congress was. Perhaps working together 
like this, rather than to go back and try to finalize something 
that there was a lot of concern about; let us try to work 
together and incorporate it into the next authorization. I 
think it is a good point. I appreciate you saying it.
    Thank you, Mr. Chairman.
    Senator Jeffords. Senator Baucus?
    Senator Baucus. Thank you, Mr. Chairman.
    Mr. Secretary, I was wondering whether we had the support 
of the Administration to give States additional obligation 
authority to alleviate the RABA problem.
    Secretary Mineta. Well, I think it is too early. We have 
not gotten to that point yet of how we are going to solve or 
deal with the issue of the drop in RABA. I think my basic 
approach is how do we smooth out the peaks and valleys about 
RABA?
    We have had the good fortune of having an increase since 
the inception of TEA-21; this year being the first year that 
are experiencing this kind of a negative RABA. How to deal with 
that, I have not looked at that.
    It seems to me that part of the legislative response is 
going to have to be to try to smooth that out, so we do not 
have these peaks and valleys. Because I think from a State and 
local perspective, predictability of funding and the 
consistency of that funding is very important.
    As I believe Senator Inhofe mentioned, or whoever might 
have mentioned it, about the fact that there are 42,000 jobs 
generated from $1 billion being spent in transportation. This 
is a very significant economic stimulator, as well. So we are 
concerned about what this kind of a precipitous drop has.
    Senator Baucus. I appreciate that. One way to even that out 
is to add the additional obligation authority for this year.
    Secretary Mineta. It is. But the only problem there is, if 
I were to put on a budget hat, it would be looking at the 
increased deficits in the total budget. I know that this is 
something that the Administration will be looking at, in terms 
of what that deficit picture looks like. If you take more money 
out of the general fund, or more money out of the trust fund.
    Senator Baucus. That is right but, of course, the trust 
fund surplus has amassed true deficits. It has been a budgeting 
gimmick.
    Secretary Mineta. That is why RABA got there in the first 
place.
    Senator Baucus. Those funds are dedicated to the highways, 
so they might as well be spent for highways.
    Secretary Mineta. Absolutely, I am a believer in that.
    Senator Baucus. Additional obligation authority.
    Secretary Mineta. I will jot it down, and we will take a 
look at that.
    [Laughter.]
    Senator Baucus. You know, Mr. Secretary, clearly this is a 
very serious subject. You mentioned the economic stimulus. You 
mentioned the adverse yo-yo effect with the current RABA. So I 
urge you to very firmly look at ways to deal with that.
    Will the Administration be sending up a bill?
    Secretary Mineta. I am hoping to do that, as I mentioned 
earlier, within the first month in January of 2003.
    Senator Baucus. I trust that that bill will preserve the 
firewalls.
    Secretary Mineta. I am a very big supporter of firewalls. 
This is going to be something that we will still have to be, I 
think, arm wrestling within the Administration before we have a 
final answer. But I happen to be supportive of the treatment of 
the revenues, both in TEA-21 and AIR-21.
    Senator Baucus. I further trust that the legislation that 
we will provide the Administration will protect the fund from 
invasion from other modes?
    Secretary Mineta. Yes, I think that is where we will be. 
One of the basic principles, though, that we have always found 
in TEA-21 is the intermodal nature of it, especially as it 
relates now to freight movement, and the question as to how to 
make sure that we have that inter-connectivity between ports 
and onto our highway system.
    But within the TEA-21 modes absolutely there will be some 
flexibility. But from other non-TEA-21 modes, I would say my 
personal opinion is, we should minimize or say no to any of 
those invasions.
    Senator Baucus. Well, I appreciate that. We have got a lot 
of work ahead of us, and I thank you very much, Mr. Secretary.
    Secretary Mineta. Thank you very much, Senator.
    Senator Jeffords. Senator Inhofe?
    Senator Inhofe. Thank you, Mr. Chairman.
    Mr. Secretary, Section 1016 of the Patriot Act declares 
that it is the U.S. policy that for any physical or virtual 
disruption of critical infrastructure in the United States, 
that it be brief and minimally detrimental to the economy.
    As you will recall, I have a background of some 45 years in 
aviation. I think right now I am the last active commercial 
pilot, certainly in the Senate, and maybe in the House, too.
    Consequently, I got more of the calls than I think most of 
the other members did about the disastrous effect it had on the 
GA economy. The closing of Class B airspace for an extended 
period of time actually put people in Oklahoma and throughout 
the Nation out of business.
    I felt that at that time, and I am not saying this 
critically, because everyone was hysterical and trying to do 
the right thing, that we did not have the right adequate input 
of the general aviation community in making those decisions 
insofar as airspace is concerned. Now I agree that we needed to 
do what we did. But I do not think we needed to do what we did 
in some areas of the country, as long as we did it.
    Is there any step that you are going to propose to be taken 
to include more input from the general aviation community, so 
that we can be anticipating if something should happen in the 
future, and how to handle this differently than we did this 
last time?
    Secretary Mineta. Well, I think what we have done since 
September 11th, right after the 11th, I set up what I referred 
to as National Infrastructure, a NISK, within the department, 
to deal with various modes and the security issues relating to 
each of those modes.
    In the infrastructure committee that we set up, we have 
what we call direct action groups. Those direct action groups 
reach out to the user community. So in the instance of the DAG 
as relates to aviation, they reach out to general aviation to 
commuter airlines, the very user communities.
    I know that here in the Maryland area, there has been a 
great deal of conversation about general aviation airports that 
still remain closed. Maybe by the end of next week, I am hoping 
to resolve an issue where we will have the three remaining 
airports in the Greater Washington D.C. area opened.
    Senator Inhofe. Mr. Secretary, I know that there is a 
reason for that. This is the area that was the targeted area, 
and I understand that. But there are a lot of parts of the 
country that were not. So I think that the action that you are 
taking is going to help a great deal, and I would encourage you 
to use the general aviation community as that comes up.
    I want to quickly touch on two other areas here before my 
time expires. The DOT Appropriations Bill of 2002, as sent to 
Senate of Congress regarding hours of service, and that is at 
Section 356, states that no action shall be taken that would 
diminish or revoke any exemption granted in Section 345 of the 
National Highway System designation, unless it is shown such 
exemptions create a public safety risk.
    As you may know, there has been an ongoing concern that 
those exemptions that have been granted to certain types of 
drivers such as ag. drivers and oil services and this type of 
thing be changed. Can you update us at all on that?
    Secretary Mineta. Last week, we had a discussion on the 
pilot on hours of service duty time as it relates to pilots. At 
that meeting, I also had Joe Clapp, who is the head of our 
Federal Motor Carrier Service Administration and Safety 
Administration, taking a look at the whole issue of circadian 
balance or rhythm as it affects pilots and as it affects truck 
drivers.
    So we are hoping that the Federal Motor Carriers Safety 
Administration will be able to come to a conclusion on the 
hours of service provision. Now as to when that would be, I 
would be guessing right now. But I would assume it would still 
take another four to 5 months before we finalize our thoughts 
on hours of service.
    Senator Inhofe. I would request that you put me in the loop 
on this, so that as this progresses, we will be able to have 
some input.
    I have one last question, and I know my time has expired. 
But I can remember when you and I and Congressman Oberstar and 
others, back after Pan Am 103, were concerned about the 
detection technology that has been used. We actually took some 
trips, and explored what technology is out there.
    This is a similar problem that we have at DOD and in 
Customs, that we have used the same old technology. People are 
concerned, as far as airline traffic, more than any other 
single thing, on checked luggage, on what is out there.
    I started, after the 1995 explosion in Oklahoma City, to 
look at this, and we found different technologies. One was 
PFNA, Pulsed-Fast Neutron Analysis, which would take a sealed 
container and get a three dimensional look at everything in 
there, along with also the chemical composition that might be 
in there.
    We have put language in the Airline Security Act to 
encourage you to look at other technologies. Is there any 
update that you can give us on that?
    Secretary Mineta. Absolutely; one of the things that we did 
as a result of the Aviation and Transportation Security Act 
passing, or actually prior to that, because there has been a 
great deal more work done on it, since the passage of ATSA, we 
have what we call rapid response teams. The one dealing with 
technologies is very, very ambitious in terms of what they want 
to do.
    So we are looking, as the legislation talked about, at 
advanced technologies. We are looking at back scatter and a 
number of other technologies to look at how to meet the 
requirement of the law that all bags will be screened by an 
explosive detection system by December 31, 2002.
    Senator Inhofe. That is very good news and it is welcome. 
We have been working on this for many, many years.
    Secretary Mineta. Absolutely.
    Senator Inhofe. There has been a resistance to change, as 
there always is. But we just need to have a more advanced 
technology. The technology is out there. We need to use it, and 
I appreciate your efforts in that.
    Secretary Mineta. With the sophistication and the 
innovativeness of the terrorists, whether it be ceramic knives, 
whether it be, let us say, a Glock 17, a plastic gun, they are 
very, very difficult to detect with our x-ray technology and 
other systems that we have right now.
    So that is why we are getting into these other areas that 
can detect explosives that are not based on nitrates, looking 
at back scatter radar, to be able to pick up objects that would 
not be able to be distinguished in an x-ray technology.
    So we have a number of innovative approaches, using 
advanced technologies. Believe me, we have got every technology 
company that thinks they have the best thing since the 
invention of sliced bread to solve all of our problems. So we 
are examining all of them, sir.
    Senator Inhofe. Thank you, Mr. Chairman.
    Senator Jeffords. Senator Chafee?
    Senator Chafee. Thank you, Mr. Chairman, especially for 
getting an early start on these hearings and scheduling 
frequent hearings. I look forward to working with the 
Secretary. Certainly, this has been one of the great success 
stories of the last decade, and I am sure it will be successful 
in the future, as we go through this reauthorization process.
    I especially look forward to working with you as one of the 
original architects of ISTEA on the issues that you highlighted 
in your opening statement: safety, mobility, new technology, 
and especially quality of life.
    I really do not have any questions, Mr. Chairman, thank 
you.
    Senator Jeffords. Thank you. I would like to followup a 
little bit on one of your comments with Senator Baucus.
    I want to make it very clear that I want to have a balance 
to the system. I was a little concerned, as I have a strong 
belief that railroads should play a more important role in 
trying to get a lot of the freight off the highways. I want to 
inquire as to what your attitude is with respect to rail, 
because you seem to be pretty pro-highway here.
    Secretary Mineta. Well, the part that I was referring to 
earlier was the whole issue of inner-connectivity of the 
various modes. I think the Alameda Corridor is a good example 
of a project that is vitally needed. It will be completed in 
April of this year.
    I think as we look at financing mechanisms in the new 
legislation, I think we have to look at new innovative methods 
of financing. Alameda Corridor utilizes, I believe, TFIA 
financing.
    So it really deals with the inner-connectivity of railroads 
and highways, and yet it does not dip into the Highway Trust 
Fund to finance the project. There are some highway moneys in 
there. But the vast majority is non-highway moneys.
    So I think that the kind of question that I believe Senator 
Baucus was alluding to is, do we use the trust fund to finance 
other modes that are not eligible for Highway Trust Fund 
moneys? I think in terms of protecting the integrity of the 
Highway Trust Funds, unless there are additional taxes that 
would be thought of by the Congress, I do not see any other way 
to finance those kinds of non-Highway Trust Fund modes of 
transportation.
    Senator Jeffords. Then we would never get out of the mess.
    Secretary Mineta. Well, no, I think there are ways of 
getting out of the mess. I think innovative financing is one of 
the those ways that we can do that. I think TFIA is a good 
example of where it has been used for various modes, and that 
it can be utilized.
    I think what we ought to be doing is being able to say, if 
it is worth doing, than there ought to be some private sector 
investment interest, as well. Private sector bonds do that 
right now with highways. What about getting other kinds of 
bonding mechanism or other approaches, in terms of one of our 
authorizing principles in reauthorization, intermodal?
    So, again, I think there are distinct areas of financing 
that we have right now that have to be, I do not want to say 
maybe protected, but they have not to be assured that that 
funding is going to continue. I think these other kinds of 
approaches, unless the other non-Highway Trust Fund potential 
users would like to have additional taxes imposed on them, then 
there is no alternative.
    I think the whole issue, we have moved over the 4.3 cents; 
and the question of, are there, let us see, what is it, 2.3 
cents right now from the railroads? Is the railroads that pay? 
Let us see if I can get some help here.
    I am sorry, all 4.3 goes to the general fund. I thought 
some portion of it was going to the trust fund. But in any 
event, I just feel that because of the continued needs, in 
terms of the national highway system, we just, I think, have to 
minimize who is going to be at the table, drawing on those 
funds; yet, recognizing the importance of the intermodal nature 
of TEA-21.
    Senator Jeffords. Well, thank you, we will be talking about 
these issues as we go along.
    Secretary Mineta. Absolutely.
    Senator Jeffords. This is just the beginning.
    Secretary Mineta. This is just the beginning; yes, sir.
    Senator Jeffords. Right; thank you very much, and thank you 
for excellent testimony.
    Secretary Mineta. Thank you very much.
    Senator Jeffords. I have to tell you how much I look 
forward to working with you.
    Secretary Mineta. Great; thank you.
    Senator Crapo. I would like welcome the second panel. I 
would like to use my time for that to introduce one of the 
witnesses, who is a very good personal friend of mine and a 
great leader in Idaho, Mayor Brent Coles from Boise.
    Mayor Coles is the immediate past president of the U.S. 
Conference of Mayors, and I understand he now sits on the 
executive committee. He has been instrumental in Idaho in 
working on transportation issues, as well as many others.
    I certainly look forward to his testimony. I suspect that 
he is going to talk to us about some of the issues of urban 
sprawl and the kinds of pressures we are facing, even in a 
broad big State like Idaho, and the fact that the 
transportation issues that this committee deals with are so 
critical.
    I know that he has been working very aggressively on 
focusing the resources that he can in the area of Boise and the 
surrounding counties with which he works with as the Mayor of 
Boise, to address things like rail systems or bus systems or 
other types of approaches to help us reduce congestion and 
increase the quality of life.
    So I, again, want to welcome Mayor Coles here, and we look 
forward to your testimony, Mayor.
    Thank you, Mr. Chairman.
    Senator Jeffords. Thank you very much.
    I, of course, would like to welcome my Mayor from 
Burlington, Vermont, Mayor Clavelle. It is nice to have you 
with us and we look forward to your statement.
    I understand we have Ray Scheppach as the Executive 
Director of the National Governor's Association. We are pleased 
to have you here; and Commissioner Hart, it is a pleasure to 
have you with us, also.
    Mr. Hart. Good morning.
    Senator Jeffords. I will exercise my home State prerogative 
and introduce Mayor Clavelle. Mayor, it is wonderful to see 
you. You have done a fantastic job in the city of Burlington. I 
have enjoyed working with you in the past, and look forward to 
future collaborations in service to the citizens of Vermont. 
Please proceed.

 STATEMENT OF HON. PETER CLAVELLE, MAYOR, BURLINGTON, VERMONT, 
           ON BEHALF OF THE NATIONAL LEAGUE OF CITIES

    Mr. Clavelle. Thank you, Chairman Jeffords. I very much 
welcome the opportunity to be with you today, and I thank the 
members of the committee for this opportunity to discuss such 
an important issue to the Nation's cities.
    As was indicated, I am Peter Clavelle, Mayor of Burlington, 
Vermont. Today, I am pleased to be here, not only as a 
Vermonter, but also as a representative of the National League 
of Cities.
    Mr. Chairman, I would like to make a short statement, and 
then would ask that my full testimony be included in the 
record.
    Senator Jeffords. It will be.
    Mr. Clavelle. The National League of Cities represents 
18,000 cities and towns, and over 140,000 local elected 
officials. The NLC represents all cities, regardless of size. 
Our largest member is the great city of New York City, with a 
population of eight million people. Our smallest member is 
DeGraff, Minnesota, with a population of 149. As representative 
of the Nation's local leaders, NLC has a vital interest in the 
reauthorization of TEA-21.
    NLC's Transportation Infrastructure and Services Committee 
appointed a special TEA-21 Reauthorization Task Force, which 
recently completed a year-long re-write of our transportation 
policy. Our new policy was adopted by NLC's full membership at 
our annual meeting in December of 2001.
    Mr. Chairman, I also would like to submit NLC's 2002 
transportation policy for the record.
    In addition to representing NLC today, I am here on behalf 
of my city, Burlington, Vermont. With a population of 40,000, 
Burlington is Vermont's largest city. I am currently serving my 
sixth term of mayor; and just this Fall, I concluded a 2-year 
term as President of the Vermont League of Cities and Towns. I 
also serve on the Advisory Board of the United States 
Conference of Mayors.
    Mr. Chairman, as we embark upon the reauthorization 
process, we must take into account the current climate in 
Washington, DC. and the Nation. As you know, these are tough 
economic times in the aftermath of September 11th, and local 
officials are shifting priorities.
    Cities nationwide are moving valuable resources to public 
safety expenditures, which makes a continued Federal commitment 
to infrastructure even more important.
    In several NLC surveys of municipal officials conducted 
after September 11, over half of the cities reported that they 
are increasing spending and public safety and security.
    The majority of cities surveyed reported that they would 
reduce spending in other areas to meet the new public safety 
funding gap. This means that cities may have to postpone or 
cancel some needed transportation projects to shift funding to 
security.
    The shifting of local revenue to a public safety and 
security-related budget is unavoidable. The question becomes, 
what will be the role of the next Federal Surface 
Transportation Program in Homeland Security? Will the Federal 
Government be able to offer greater assistance to cities to 
meet their needs?
    As the committee considers these fundamental core concerns 
for the program, the Nation's local elected officials would 
also like to highlight some key priorities for the next Surface 
Transportation Bill.
    NLC members identified congestion as a major concern when 
they created the TEA-21 task force to review NLC's policies. 
The themes of funding, flexibility and intermodalism permeated 
these discussions.
    On funding, NLC supports the current budget mechanism 
developed in TEA-21, which directly linked transportation user 
fees to transportation spending. We call for all transportation 
taxes, including those levied on gasohol and alternative fuels, 
to be deposited into the Highway Trust Fund.
    In addition, we support innovative financing programs and 
techniques such as tolls, State infrastructure banks, and the 
Transportation Infrastructure Financing and Innovation Act. 
These programs support the development of public/private 
partnerships, and provide creative ideas for meeting the 
infrastructure needs in our cities.
    On flexibility, NLC supports local flexibility to design, 
manage, and operate transportation systems. ISTEA and TEA-21 
embodied these themes, empowering local governments through the 
creation of the metropolitan planning process. We look to the 
committee to continue this Federal, State, local partnership 
through reauthorization.
    To continue to provide the most options to local 
governments, NLC supports the continuation of the Congestion 
Mitigation Air Quality Program, as well as Transportation 
Enhancement Programs, and the Transportation and Community 
System Preservation Pilot Program, TCSP, and the Intelligent 
Transportation System Program.
    These programs have made a huge impact on localities, and 
have had a positive effect on quality of life. In Burlington, 
as you know, Mr. Chairman, we have utilized the enhancements 
programs to launch the revitalization of a historic commercial 
center along North Street.
    We have implemented street lighting upgrades and 
streetscape improvements. We have benefited from TCSP funds for 
improvements to the Church Street Marketplace. CMAQ funding has 
enabled us to try new approaches to solve downtown parking and 
transportation problems.
    In addition, NLC urges the committee to consider the 
development of a new congestion program that recognizes that 
congestion is a local issue, and provides direct funding to 
cities and regions of all sizes to address related problems in 
their communities.
    On intermodalism, NLC strongly supports Federal programs, 
which fund different transportation modes, such as the Federal 
Transit and Rail Programs. Commuter rail, inter-city rail, high 
speed rail, and MAGLEV provide communities with other options 
to consider as part of a transportation and smart growth plan.
    In my small city, commuter rail service has been 
instituted. We support funding to both preserve existing 
transit systems and for new starts. In addition, we support a 
change in the law to allow States and localities to use TEA-21 
dollars for inter-city passenger rail. We support the 
development of a national high speed rail network.
    Last year, NLC joined our local and State partners in 
supporting the High Speed Rail Investment Act. In addition, NLC 
supports the development of intermodal facilities. In 
Burlington, we will break ground this Fall on an intermodal 
transit facility that will provide seamless connections for 
regional transit, passenger rail, bicycle, and lake ferry 
services.
    This facility, and all of its inter-connected modes will 
make our waterfront accessible to a great number of visitors, 
without overwhelming it with automobiles.
    In conclusion, the Nation's local elected officials stand 
ready to work with you throughout the reauthorization of TEA-
21. We understand the delicate balance among the priority 
objectives, of all of the partners from the Federal, State, and 
local levels testifying before the committee today.
    We value our seat at the table in this process, and accept 
the responsibility of planning and implementing innovative 
transportation strategies to meet the needs of our citizens.
    It is clear to us that congestion remains one of the 
nation's top complaints, and is affecting the quality of life. 
In addition, safety and security have become top priorities in 
this new post-September 11th climate.
    We believe the Federal Government can strike a balance 
between protecting our citizens and enhancing their quality of 
life. We will continue to strive for an innovative intermodal 
and multi-modal transportation system.
    Mr. Chairman, this concludes my testimony. I would like to 
thank you and the members of the committee for this hearing 
today, and for the opportunity to appear before you. I will be 
happy to answer any questions. Thank you.
    Senator Jeffords. Thank you. I am going to withhold 
questions until everyone has had a chance to give their speech 
here.
    Mayor Coles?

STATEMENT OF HON. H. BRENT COLES, MAYOR, BOISE IDAHO, ON BEHALF 
                OF THE U.S. CONFERENCE OF MAYORS

    Mr. Coles. Thank you, Mr. Chairman. I appreciate the 
opportunity to be here today and represent the U.S. Conference 
of Mayors, and the 1,000 cities that are over 30,000 in 
population that are represented at the Conference of Mayors. 
Senator Crapo, thank you very much. Senator Chafee, I 
appreciate the opportunity to be here to testify.
    There is no question that ISTEA and TEA-21 have 
revolutionized the opportunities at the local level to provide 
for the transportation needs in our communities.
    We have looked very carefully and worked very closely with 
Standard and Poor's DRI, and we have found that the metro 
economies of this Nation are what support this Nation's 
economy. As go the cities and neighborhoods and metro 
economies, so goes this Nation's economy. If we are to protect 
those metro economies, we must protect and enhance the quality 
of life that people and businesses have in their communities.
    One way to do that, of course, is to provide for their 
transportation needs. For industries to grow in Boise, Idaho 
and the other metro economies across this Nation, our 
businesses and industries must have the transportation network 
for our employees to get to work, to enjoy their neighborhoods, 
to enjoy their educational opportunities and cultural 
opportunities, that enhance our communities.
    To do that, TEA-21 and ISTEA have given us those 
opportunities to look at congestion mitigation, so that we can 
reduce air quality concerns in our community, so that our 
industries can grow, as opposed to having the numbers of cars 
grow in our communities.
    The 10 years of this legislation has made a great impact on 
our cities and our metropolitan areas, and we must protect this 
legislation. We must move forward in reauthorization, enhance 
TEA-21 and ISTEA congestion mitigation opportunities, the 
flexibility for cities and metro economies to determine whether 
or not it is a rail system that they need; whether it is an 
enhanced bus system that they need; commuter van systems; 
bicycle pathways; the whole complex opportunities of a 
comprehensive transportation system.
    Without ISTEA and TEA-21, we would not be where we are 
today. We believe that we can enhance what we do at the local 
level, given the flexibility that the Federal Government has 
offered us, through ISTEA and TEA-21.
    It has, in fact, created, and I will use the word 
``forced,'' State governments to give us that flexibility, and 
to work more closely with local governments.
    We work more closely with the Idaho Department of 
Transportation now than we ever have in the past. We are 
finding great leadership there, and desire to reduce the number 
of lanes and highways, or lanes to the highways, adding lanes 
to highways that they look at when there are projections, if 
there is an opportunity to enhance congestion mitigation; if 
there is an opportunity at the local level to get engaged with 
the overall regional transportation planning. With the 
partnerships at local government levels, through ISTEA and TEA-
21, we were able to create what we call the Treasure Valley 
Partnership. It is where the Mayors meet together each month, 
and at a volunteer level, work to communicate, and land use 
planning is the No. 1 issue; and around land use planning is 
transportation.
    Around transportation then comes your educational system 
and comes around your economic system. So to enhance our 
economy in this great Nation, to secure our economy, the 
quality of life is a very significant issue.
    We received what we call the Treasure Valley Futures Grant 
through, again, TEA-21. That gave us the opportunity, ladies 
and gentlemen, to take our comprehensive plans, throughout the 
seven or eight cities and the two counties, and begin to 
compare those comprehensive plans, so that we know what the 
build-out will be in our region.
    Instead of one city having their build-out and another city 
somewhere else, and a county over here planning their build-
out, we took those together as a region. It happened because of 
TEA-21 legislation. Once we know a build-out, then we know our 
transportation needs, and then we, at a local level, can begin 
to make decisions about what kind of transportation do we want.
    Is it going to be that in this Nation, and particularly in 
the West, that a teenager at age 16 must feel that they must 
own a car to have the independence that they so desire at that 
young age? Instead of emphasizing and focusing on their 
education and their gifts and their talents, they are out 
working some part-time job so that they can have a car, so that 
they can move around the West.
    The West must be able to develop with train systems, with 
commuter rail systems, with light rail systems. Let us allow 
that opportunity as we grow in the West, as opposed to waiting 
until it is too late, and the land uses are gone, and we do not 
have the corridors in place.
    So we support and appreciate the opportunity to work with 
Secretary Mineta. We find him to be a great leader, a great 
communicator, and a partner, as we plan the regions in the West 
and throughout the United States, to protect our metro 
economies and the economy of this great Nation.
    Thank you, Mr. Chairman.
    Senator Jeffords. Well, thank you, that was an excellent 
statement.
    Commissioner Hart?

 STATEMENT OF HON. CHRIS HART, COMMISSIONER, HILLSBORO COUNTY, 
   FLORIDA, ON BEHALF OF THE NATIONAL ASSOCIATION OF COUNTIES

    Mr. Hart. Good morning, Mr. Chairman and members of the 
committee. I am Chris Hart, Commissioner of Hillsboro County, 
Florida. Today, I am here to represent the National Association 
of Counties, where I serve as chair of its Transportation 
Steering Committee.
    On behalf of NACo, I want to thank you and the committee 
for inviting me to appear on the panel today. I am very 
delighted to join the National Governor's Association here in 
testimony, as well as Mayor Clavelle from Burlington, Vermont, 
and Mayor Coles of Boise, Idaho. In fact, we have worked 
together for many years on so many of these issues.
    My personal county seat is in Tampa, Florida, where I 
directly represent over one million people on the Central West 
Coast of Florida. It is an urban community of seven counties, 
with over 3.5 million people.
    It is also the economic engine of the Tampa Bay Region, in 
great measure because of our focus on improving the 
transportation network, plus because of our major international 
air and sea ports that connect us to our global economy.
    Senators on a lighter note, I cannot leave here today 
without getting something in return for Florida's Steve 
Spurier.
    [Laughter.]
    Mr. Hart. Also, if you have not had a call for the head 
coach position of the Tampa Bay Buccaneers, rest assured you 
will. Everyone else has. We do have a sense of humor in 
Florida.
    Senator Jeffords. You have to have one.
    Mr. Hart. You have to, right.
    [Laughter.]
    Mr. Hart. Mr. Chairman and committee members, NACo has a 
broad interest in obviously the transportation policy, and has 
been very active over its 50 years in assisting Congress and 
the Administration in developing legislation to benefit our 
member counties, as well as our partners in the cities and the 
States.
    Much of our focus has been on the highway program for the 
simple reason that counties own 44 percent of the Nation's 
highway mileage, and 45 percent of the Nation's bridges. With 
3,066 counties in our vast Nation, certainly our membership is 
diverse.
    It is in 1,000 urban counties, where both economic and 
population is occurring. Metropolitan counties or in urban 
centers, like mine on Tampa Bay, account for 84 percent of the 
gross domestic product, and have over 125 million people living 
in just 100 of the most populated counties. Strong economic 
growth will occur only with a sound transportation system.
    Of course, the downside of that growth has been increasing 
traffic congestion, which at times threatens our quality of 
life, and deprives citizens of their ability to move around in 
a safe and efficient manner.
    Conversely, there are 2,000 rural counties with a dwindling 
tax base, that must maintain and improve their highway bridge 
system, if they are just to maintain competitive in today's 
economy, and retain their current population.
    TEA-21 and its predecessor, ISTEA, have been very helpful 
to our members and to our Nation, as a whole. There is little 
doubt in my mind that these programs have contributed to the 
overall economic growth that our Nation has experienced over 
this last decade.
    ISTEA, in 1991, began a trend of increasing the Federal 
investment in the highway program, and TEA-21 provided a 40 
percent boost.
    The increase was needed, and we have seen the benefits. For 
example, last year, the State of Florida was able to 
appropriate over $1 billion for a combination of improvements 
to the local, State, and Federal transportation system in the 
Tampa Bay Region. This was a direct result of increased 
funding, because of TEA-21.
    The leadership of NACo supported the funding increase for 
transportation in TEA-21, and fought hard to support the 
financing changes in TEA-21 that made this level of spending 
possible.
    It would be an economic disaster if Congress were to 
eliminate the firewall established in TEA-21, or began to use 
the Highway Trust Fund, or either finance other programs, or 
mask the deficit. Mr. Chairman and members of the committee, 
the financing decisions made in 1998 were the right ones.
    Let me also add that I believe our highway infrastructure 
performed well on September 11th and in its aftermath. We 
should all remember that the highway program was first begun to 
ensure our Nation's defense. While the tragic events of last 
September were never anticipated, the security function of our 
highway and bridge systems worked.
    When NACo's Homeland Security Task Force met first in early 
October, in addition to the President, it was most specifically 
the Secretary of Transportation, Norman Mineta, along with 
Governor Tom Ridge, that the counties and people of our Nation 
wanted to hear from.
    Aside from funding, the key change in highway legislation 
over the past 10 years has been the creation of a flexible 
program, that has relied on greater input from local elected 
officials. The result of this has been better planning, better 
decisionmaking on project selection, and better projects.
    It is likely that the Federal Government will continue to 
spend substantial Federal resources each year on highways and 
bridges. That makes it essential that both local and State 
government leaders sit down together at the table when 
decisions are made. The reauthorization of TEA-21 should 
continue and accelerate this partnership.
    ISTEA required the cooperative decisionmaking through the 
metropolitan planning organization, or MPO process, on how 
surface transportation funds are spent. This is the most 
flexible category and where they are spent the best.
    TEA-21 has continued that requirement, and legislation also 
called for cooperation and consultation between States and 
local decisionmakers in other Federal highway programs.
    TEA-21 expanded this to the rural areas and statutorily 
called for a consultation process in States for obtaining rural 
local officials' input in the statewide transportation plan.
    I must add that while some States have a process, and the 
Federal Highway Administration did issue guidance on this 
change to the field offices, the U.S. Department of 
Transportation has yet to issue the final regulations on rural 
planning requirements.
    Last Fall, I established NACo's TEA-21 Reauthorization Task 
Force under the able leadership of my colleague, Commissioner 
Glen Whitley from Tarrant County, Texas. I can State without 
reservation that environmental streamlining will be a top issue 
on that for our membership.
    Also, I want to be very clear that we are not calling for 
any repeal of our Nation's important and strong environmental 
protection laws. Rather, we will be recommending that the 
reauthorization include provisions to ensure that projects are 
completed in a timely and efficient manner, and the delays in 
the current system that are unnecessary and create those 
slowdowns that are unjustified are eliminated.
    Simply put, Mr. Chairman and committee members, I and the 
National Association of Counties, are asking for a concurrent 
process, rather than an uncoordinated sequential one. In the 
broadest sense, this means that we need to get all the players 
and projects involved at the outset. This means that local 
officials, State DOTs and other regulatory officials, and 
Federal agencies have a role to play, as well as our 
environmental community, and most especially, our affected 
citizens. No one should be ignored. No Federal agency should be 
allowed to operate independently without being there as a 
participant.
    In my State of Florida, for example, this effort has been a 
work in progress, even since the legislation was passed. But it 
will not be successful without the collaboration from the 
Federal Government.
    Congestion will be another key policy issue that you and 
Congress must address with this reauthorization. Urban 
counties, their citizens, tourists, and commerce, are all 
strangling in congestion. Time, money, and productivity are all 
sitting on the backs of commerce, and we can ill afford this 
for our businesses, for the American commuter, or our tourists, 
to be stuck in traffic. There is no one solution, except that 
we must apply common sense approaches to this challenge. 
Solutions must be found where close local, State, and Federal 
cooperation exists. Congestion occurs on county highways, not 
just on the State or Federal networks.
    We must remember that we have a system of highways, and 
when one part, albiet local, State, or Federal, breaks down, 
the others are directly affected.
    Any new legislation should provide those highways and 
bridges that we now have, and ensure that they are properly 
maintained by funding them, so that traffic moves safely.
    We must invest money in highways to guarantee that our 
current system is maximized. We know that as much as 50 percent 
of congestion occurs due to breakdowns and accidents on our 
roadways. Therefore, we must be smart enough to establish 
simple, efficient methods of getting incidents resolved 
quickly.
    Here again, Federal agencies and their resources can be 
partners with local and State governments, to save time, money, 
and most especially, lives.
    We need to have the system of procedures in place that 
includes all the various agencies involved in incident 
management, from the highway departments, police, sheriffs, 
fire rescue and EMS, to wrecker services, all communicating 
with one another. We can do better, and I will quickly 
illustrate, Mr. Chairman.
    How many times have we seen a break down or accident in one 
lane of traffic, and I do not even have to mention the Beltway, 
with emergency vehicles taking up the other lane or lanes; and 
if we are lucky, perhaps we are able to pass after an hour of 
waiting in traffic? This is very common, not just here, but in 
every community in America.
    Systems and procedures in incident management could go a 
long way to relieving congestion, and it is much cheaper than 
building road systems, rail, and other things associated with 
this.
    Another key to relieving congestion is moving traffic to 
signalization. We have all been on highways where signals are 
coordinated and traffic flows. We have also been on roads where 
we are stopping at every red light. Many local governments need 
additional resources to modernize traffic signals.
    The good news is that electronic signals and now the 
Intelligence Transportation System, or ITS as it is commonly 
called, give us a return of about eight to one, compared to 
other investments.
    By the way, what we do not need are automatic signs saying, 
``congestion ahead,'' when we are already caught in traffic, 
and where there are no alternative routes that we can take.
    Mr. Chairman, now in finishing my remarks, I would like to 
address one last major concern that we all share: rural roads. 
Rural roads are in need of substantial Federal investment. 
Safety is the primary reason.
    According to the U.S. General Accounting Office Report from 
July, 2001, rural local roads have the highest accident and 
fatality rate per vehicle mile traveled on all types of 
roadways; over six times that of urban interstates.
    In 1999, over 25,000 fatalities occurred on rural roads 
across the United States. That figure is two and-a-half times 
greater than the fatality rate from accidents on our urban 
highways in areas like Las Vegas, Miami, St. Louis, Cleveland; 
you pick it/name it, our communities.
    If Congress wants to reduce auto fatalities, there is no 
better investment than in our roads in rural communities. 
Because rural roads are so dangerous, we, in NACo, will be 
proposing a new program to address this. Rest assured, Mr. 
Chairman, that we would work closely with your committee in 
developing this.
    Mr. Chairman and committee members, this concludes my 
testimony. I thank you and the committee members for the 
opportunity to be here today. I would be pleased to answer your 
questions.
    Senator Jeffords. Thank you, Commissioner.
    Our final witness is the Executive Director of the National 
Governors' Association, Ray Scheppach. Please proceed.

   STATEMENT OF RAY SCHEPPACH, EXECUTIVE DIRECTOR, NATIONAL 
    GOVERNORS' ASSOCIATION, ON BEHALF OF HON. ROBERT WISE, 
                GOVERNOR, STATE OF WEST VIRGINIA

    Mr. Scheppach. Thank you, Mr. Chairman. I appreciate being 
here today on behalf of the National Governors' Association. 
Let me first say that Governor Wise was supposed to be here, 
and he apologizes. Essentially, his aircraft was grounded for 
safety reasons, and so he was unable to be here.
    I would appreciate it, however, if his full statement were 
submitted for the record.
    Mr. Scheppach. Mr. Chairman, I would like to start by 
mentioning a couple of comments about the fiscal situation of 
States, because I think it is relevant to this particular 
program.
    The current shortfall in States is about $40 billion. You 
are going to have to add to that about another $6 billion for 
the State costs for homeland security. That currently is about 
7.5 percent of State-only revenues, which is quite large, by 
historical standards.
    However, because both unemployment and State revenues lag 
the economy, it is highly likely that this situation will 
continue to deteriorate for another year to 18 months, probably 
peaking in excess of $50 billion.
    If you compare this current recession to that recession in 
the early part of this decade of 1990/1992, this one is far 
worse, even at this particular point in time. The total 
shortfall previously was about $20 billion, which was 6.5 
percent of revenues, and as I said, we are going up easily to 
$50 billion, or 10 percent of revenues, over the next year to 
18 months.
    You might ask, why is it worse? The economic dip so far has 
been relatively small. The basic reason is that the phenomenal 
growth in the economy over the last half of the decade of the 
1990's was so strong that it camouflaged a number of underlying 
problems.
    Essentially, we have a deteriorating tax base, largely 
driven by the fact that we do not tax services; and Internet 
sales now are cutting dramatically into State sales tax 
revenues.
    So on one hand, we have a deteriorating tax base, because 
it is essentially for a manufacturing economy of the 1950's, 
and not for a high tech service-oriented economy of the 21st 
Century.
    On the other hand, health care costs are exploding. 
Medicaid, which represents about 20 percent of State budgets, 
is now growing 11 to 12 percent per year, with pharmaceuticals 
growing 18 percent.
    If you add other health care, it represents another 7 
percent of State budgets. We have 27 percent of our budgets 
growing at double digits, clearly at 11 to 12 percent. So it is 
a combination of these two major structural problems that is 
creating the State fiscal situation.
    Unfortunately, this is not something that is going to be 
turned around in the next year or so. This is a two or three, 
or perhaps even 10 year problem, because of the structure.
    Let us turn now and mention a couple comments about the 
highway program. First off, Governors were very satisfied and 
really supported the reauthorization last time, and we do 
believe that this program has worked quite successfully over 
this period.
    We now, however, do see that in some of the preliminary 
estimates of the revenues coming into the trust fund, that it 
is possible the revenues are down quite dramatically; some 
people argue as much as 30 percent going forward.
    And it is probably not just a one-time downward adjustment. 
But we are probably on a different baseline, because of a 
slower growth in the economy, even when we come out of this 
recession.
    This is a problem in a program which is essentially a 
capital investment program. When you have levels of funding 
going up or down of that order of magnitude, it creates a lot 
of inefficiencies in capital programs, that have to run over a 
7 or 8 year period.
    I do not know what the answer is, in all honesty, but we 
hope to work with the committee in terms of, is there any way 
in which we can smooth the revenues and expenditures on this 
particular program?
    I will just mention a couple of other issues. This problem 
in the funding level may play out, because a lot of States do 
float bonds to cover this. Of course, the interest rate that is 
on those bonds is somewhat sensitive to the Federal funding 
level. So that is an issue that we are somewhat concerned 
about.
    Finally, the other issues that we would like to work with 
the committee on are essentially insuring that we continue to 
move toward incentives, as opposed to mandates.
    I agree with Commissioner Hart, in terms of the 
environmental streamlining concurrent processes. That is an 
issue for us, and also maintaining the flexibility of the 
program, so that there is a lot of State and local control on 
what those particular priorities are.
    So with that, Mr. Chairman, we look forward to working with 
you over the next year, as you reauthorize this program. Thank 
you.
    Senator Jeffords. Well, thank you, and thank all of you for 
very excellent statements. It is a pleasure to have you with 
us. As you know, we are going to be very busy over the next 
couple of years, trying to make sure that we do the best job 
possible here.
    Senator Warner wanted to express his apologies. He had to 
leave. I asked for unanimous consent that his statement be made 
a part of the record. I do not hear anybody objection. I know 
that no one dare to object.
    [Laughter.]
    [The prepared statement of Senator Warner follows.]
    Senator Jeffords. But thank you; Senator Warner has been a 
great member of this committee over many years, as you all 
know, I am sure.
    I would like to turn to my good mayor, first. I am 
intrigued by the idea that local communities might manage 
certain aspects of the Federal Aid Transportation Program. Can 
you tell us a bit more about your experiences in that regard? 
Does the current program encourage the local role, or should we 
explore measures to extend local government's role in project 
management?
    Mr. Clavelle. Well, I think anybody who has been a local 
government official understands that citizens will hold us 
accountable and responsible for transportation, as well as 
quality of life within our communities.
    So from my perspective, it makes great sense to involve 
local government officials very intimately in the planning, the 
design, and the construction and management of transportation 
projects.
    Now in the State of Vermont, we have had an excellent 
relationship with our State Transportation Agency. They have, 
in fact, delegated substantial responsibilities where local 
governments are willing and interested in managing those 
projects.
    In my small city, we have taken on the responsibility of 
managing projects that range from bike paths, to multi-million 
dollar transportation centers, to major highway projects.
    So I think it is a great idea. Our experience has been very 
positive for both the State agency, as well as the community. I 
would urge you, as you consider reauthorizing the legislation, 
to promote and encourage this practice.
    Thank you.
    Senator Jeffords. I share your view that presently, the 
intermodal investments are somewhat orphaned in the Federal 
program. The League has endorsed the idea of a specific 
intermodal program. Can you enlarge on the idea for us?
    Mr. Clavelle. I believe that it is a good idea to have a 
separate intermodal program. I think that would help clarify 
Federal responsibilities, in terms of the management of such a 
program.
    But I also think, from a local official's perspective, it 
would simplify the planning, the design, and the financing of 
intermodal facilities. Currently, with intermodal facilities, 
you need to bring together a hodgepodge of funding sources to 
make a project a dream, a reality.
    I think a separate program would truly give some meaning to 
this word that we frequently use of ``seamless.'' I think if we 
had a seamless Federal program, it would enhance our capability 
and capacity of creating within our communities intermodal 
projects that were truly seamless.
    Senator Jeffords. Thank you, and I agree with you on these 
matters. I look forward to working with you.
    Mayor Coles, I want to commend you on the fine work you 
have done in your part of the country to promote a balanced 
transportation system, and encourage smart growth, as well.
    I, too, believe that we need all modes of transportation 
working together, to get the best out of our system. Do 
barriers exist now in the current Federal programs, to 
achieving your goals? If so, as I expect you will say, we would 
look forward to working with you, as we go along; but please, 
comment.
    Mr. Coles. Thank you, Senator Jeffords.
    Mr. Chairman, a major barrier out in the West and around 
Boise is that Amtrak does not come through Boise. It does not 
come through Idaho. We do not have that link, that national 
rail link, that we would like to have to make the intermodal 
system a vision, and one that people can believe in.
    When a Mayor says, 1 day we will have a rail system here, 
and we will be able to link nationwide to a rail system, they 
say, well, Amtrak stopped service here 3 or 4 years ago. Our 
community, therefore, went out and purchased 18 miles of right-
of-way, using property tax dollars.
    That is 18 miles of Union Pacific Railroad, which links our 
city to at least the National Rail Network. Without that 18 
miles, Amtrak could never have come back to us.
    So the barriers certainly are funding. We are beginning 
now, because of TEA-21 and your vision, sir, and the vision of 
this committee and this Senate, to work more closely with State 
government.
    But our State government has not given us a funding source 
for multi-modal transportation. They still only fund streets 
and roads and highways, and they will match any Federal grant 
that comes along.
    But if we had a Federal grant system that would match and 
provide an incentive, I think for State governments to match a 
Federal grant system to put into place a multi-modal system, 
and maybe it is available, our State may not be using it. But 
it is that kind of leverage from the Federal Government to the 
State government that we believe would help the local 
government, also.
    Senator Jeffords. Thank you. You have got a sympathetic 
voice here.
    Mr. Coles. Sir, I have been in your office and appreciate 
your leadership.
    Senator Jeffords. Mr. Hart, I believe that Tampa is the 
largest Metro area represented on the panel today. I know that 
urban congestion will be an important issue as we provide with 
the reauthorization.
    You shared a few ideas with us for tackling the problem in 
your testimony. Are their shortcomings in the current Federal 
program that have limited your ability to address the problems 
in the Tampa area? In particular, you seem to suggest that 
major local and county roads were not receiving adequate 
attention? Is that so, and if it is, what do we do?
    Mr. Hart. Thank you, Mr. Chairman. I would have to preface 
it by saying, until TEA-21, it was not getting that type of 
attention. It has been a long struggle for all of us to try to 
raise the understanding of what it really meant to bring 
together all these programs, and that they are related.
    As far as processes themselves, yes, we all have what we 
have, depending on our States or local communities, or whether 
you are part of an MPO network.
    But in some communities that are 50,000 to say, 200,000, 
they do not currently have, as I understand it, the authority, 
and have the money allocation, as far as their funding process 
in those areas. Yet, if you hit a community of 50,000 to 
200,000, you are probably going to find one of the largest 
groups of communities in America.
    If that type of authority went to those communities in the 
MBO process, they could better put together those networks and 
make those allocations.
    Some of the things, even though we are, in some part, 
talking about roads and bridges, I think in great measure, both 
the mayors addressed issues of the growth management or 
bringing land use and transportation together, and how it 
affects their quality of life; or the fact that I would have to 
agree that we need a national high speed rail system.
    But these things have got a link. I think the question you 
are asking opens that dialog. Because ultimately, we, sitting 
in my community as a metropolitan planning organization, are 
making those decisions that put together local, State, and 
Federal programs; but this does not happen throughout our 
Nation.
    In 100 urban counties it does, because we are of that size, 
but it is still a challenge. For example, I addressed just on 
the issue of what happens on the incident management, we do not 
have to build another road for that. We have to build in 
systems and procedures from the Federal to State to local 
level, that we can agree on, where we are all partners. 
Congestion is a great big part of that. Yet, some of that is 
the allocation of funding that goes in the areas like 
intelligence transportation or improved signalization; or the 
fact that where you have got a Federal interstate system, and 
now you have got a State road system, and a county or a city 
road network all there together. One cannot happen in isolation 
of the other. Too often, this has been in the case.
    I think it has been a matter, in one part, of awareness. I 
think by asking the question, you raise that awareness. But 
until we also take a look, and I am not a heavy-handed guy that 
wants more regulations or legislation, but we have got to have 
more people at the table, so they all understand what we are 
dealing with together, and it is a Federal, State and local 
system.
    That is why I was suggesting that we take a look at how we 
can build in systems and procedures, just like the streamlining 
planning process that we were addressing earlier. You have got 
to have all the partners at the table. You cannot have some 
people that are independent. I am not picking on the Corps. of 
Engineers or EPA or some other agencies. It is just that they 
are very easy targets for us.
    But you cannot have somebody that is just operating on 
their own, and everyone else thinks they have got it together, 
and then they say, oh, we have got five questions here. You 
have got to stop everything. That is part of the dilemma.
    So with your leadership and the committee's leadership 
here, we can broach the streamlining process like that, and we 
can look at questions of congestion.
    We can look at things like incident management, because 
those will open the doors of how we establish those systems and 
procedures; some part in Federal legislation, and some things 
do no cost anything. Some things just give us guidance of how 
to do it smarter.
    Senator Jeffords. Mr. Scheppach, do have anything you would 
like to share with us, in addition to your statement, now 
having heard the testimony across from you?
    Mr. Scheppach. No, I mean, I think we have got all the 
issues on the table. I think they are funding flexibility and 
environmental streamlining.
    I think that the current law has been working quite 
effectively. The unfortunate part is that this was an economic 
boom period. There were substantial revenues available to do 
this. Now we have got a higher level of spending. We have got 
some jobs at stake, and we have got some efficiency issues, if 
we have to cut this program. So there are some tough issues 
that I think the committee needs to work on.
    Senator Jeffords. Senator Crapo?
    Senator Crapo. Thank you, Mr. Chairman. I just have a 
question or two of Mayor Coles. Mayor, I kind of want to 
piggyback on the question that you were asked by the chairman.
    I was interested in your written testimony, where you 
talked about a survey that was taken of the mayors. In the 
answers to that survey, it indicated that in response to their 
being asked what the single most important surface 
transportation priority was in their city or region, about 35 
percent indicated system preservation; 20 percent, congestion 
relief; and new rail projects at 15 percent. I suspect that new 
rail projects was related to congestion relief. Then there were 
other areas that were listed, many of which also related back 
to congestion relief.
    My question is, as we move forward to look at 
reauthorization of TEA-21, it appears to me from that and from 
the testimony that I have heard here today, that congestion 
relief is going to be one of the major focuses that we will 
need to be addressing.
    In that context, first of all, could you tell me if I am 
correct in that context, and whether you see that the current 
system could be improved, in terms of allowing us the added 
flexibility or streamlining efforts, or whatever may need to be 
worked into the law to help us more effectively focus on 
congestion relief?
    Mr. Coles. Mr. Chairman, Senator Crapo, thank you very 
much. There is no question that our ability and our reliance 
upon working with the States, and every State Department of 
Transportation has their own philosophy about how they work 
with local government.
    Now the MPO system, which requires States and local 
metropolitan areas to align their transportation plans, their 
intermodal systems, and their plans, requires that dialog.
    But I think it also in the testimony indicates that only 
about 40 percent of the Mayors have been asked to participate 
with their States in making those decisions about where those 
dollars are spent.
    So we have come a long way in 10 years. This legislation 
has created the dialog and the opportunity and the structure 
for that dialog, but we still have a ways to go. That is the 
requirement and responsibility for State government and local 
government to make decisions about where those dollars are 
spent.
    Now the more flexibility, if you speak from the U.S. 
Conference of Mayors and the National League of Cities, we 
appreciate the opportunity to have funding sources that are 
similar to the Community Development Block Program, where 
metropolitan areas receive those dollars directly.
    There is not a State agency that is making those decisions 
about how we are going to spend our money; but it comes 
straight from Federal Government to local government. It gives 
us timely resources and the flexibility to use them, and it 
shows them that we are trusted by the Federal Government to 
make decisions where necessary, in our local communities to 
allocate those resources and their funds.
    It also then gives us the opportunity to manage, in some 
cases, even the construction of the process and project, which 
can also reduce costs. Often local government will have some 
flexibility built in. They can manage the project. They 
construct it. They can build it, and build it in a timely way 
and often save money. So there are those kinds of opportunities 
that we look forward to.
    Senator Crapo. Thank you. I have just one other question as 
a followup on this in a more specific sense. I appreciated your 
bringing up the Amtrak issue, as it relates to Idaho. I think 
that most people in the country, when they think of Amtrak, 
think of it in some of the more urban corridors. But its impact 
in Idaho is also critical.
    As you know, Mayor, here in the Senate, Senator Wyden and I 
have been trying to get that line between Spokane and Boise 
open. In working with you out in Idaho and others, we have seen 
some serious road blocks put the way of getting that 
accomplished.
    Do you believe that if we were to reorient or broaden the 
available use of TEA-21 funds, or if we were able to give the 
approach the Block Grant Program, like you were talking about, 
that resources at the State level, at the city and county 
level, could be more effectively utilized to encourage and 
incentivize those types of rail programs?
    Mr. Coles. Mr. Chairman and Senator Crapo, yes; now let me 
give a little addition to that answer.
    Senator Crapo. That would be helpful, thank you.
    [Laughter.]
    Mr. Coles. Certainly, again, the flexibility to use those 
dollars where we see the resources are appropriate in our local 
communities. So we could link to Amtrak.
    But truly, we also need to support the revenues for Amtrak. 
Amtrak needs to be supported just as our freeway interstate 
system is supported; just as currently the airline industry is 
being supported.
    We need the vision in our country of a multi-modal national 
system, a national rail system, a national air system through 
our airports and the support of our airline industry and, of 
course, the interstate system. Why not have a vision that 
encompasses all of those, and at the Federal level they are 
supported, at the State level they would be supported, and at 
the local level there would be support for a national rail 
policy?
    So doing that and having flexibility with TEA-21, then 
people would believe, particularly in our rural areas, that you 
could have a rail system that would link America together, so 
that commerce and industry and people can move throughout this 
country with alternatives; as opposed to right now, there are 
pretty much two alternatives. You are either going to fly or 
drive your car.
    Senator Crapo. Thank you, Mayor Coles. I, myself, found out 
when I got into the issue of Amtrak, how important the rail 
system is. It was just interesting to me that there is some 
feeling in this country that rail systems are sort of outdated 
and they are a thing of the past, and we have moved on to cars 
and planes and things like that.
    It is very interested to me to see the importance of rail 
systems, not only in Idaho, but it was like the third highest 
response of the mayors of this Nation, when they responded to 
your survey, which I understand was an open-ended survey; just 
pick what you think is the most important thing. The third 
highest response was rail systems. This indicates how that form 
of transportation may need to be something better implemented 
in our approach to transportation in the Nation.
    Anyway, thank you very much.
    Senator Jeffords. Let me followup on that, since it gives 
me a good opportunity. This is something that I feel very 
strongly about.
    Do you have concerns with respect to congestion in your 
cities, and also about the trucks, the 400 foot trucks or 
whatever we have now, when they wind through your places, as to 
whether that traffic could not be put on the rails, to some 
extent, Mr. Coles?
    Mr. Coles. Mr. Chairman, absolutely, there is no question 
about it; the length of a truck, the weight of the vehicles. We 
know that they pay a lot of tax to support the highways. But 
there is no question that our ability to rely more on rail 
would reduce congestion in our communities, large and small.
    Senator Jeffords. Are there any other comments, Mayor 
Clavelle?
    Mr. Clavelle. I think whether you are a mayor of a city in 
Idaho or a city in Vermont, I think that we would welcome an 
investment in rail that would allow us to get the heavy freight 
traffic off our roads and onto the rail. I echo everything that 
Mayor Coles has said. We need more flexibility and we need 
additional resources in our rail infrastructure.
    I hope that I will live to see the day that Amtrak will 
serve the city of Burlington. But in upgrading that rail 
infrastructure to provide that opportunity for Amtrak, we also 
will be enhancing an infrastructure that can better carry 
freight.
    Senator Jeffords. Mr. Hart?
    Mr. Hart. Mr. Chairman, I have perhaps a little twist on 
that. As I previously stated, I think we ought to have a 
national system of high speed rail.
    But throughout America, it is a building block. 
Transportation systems that are needed in a local community 
particularly are buses; a bus system where if we had the 
flexibility to put more into that, you will serve more people 
every day.
    But one area that we have not even talked about, that I 
have worked very hard on, both at the national and county 
level, but in my State in community, is a the transportation to 
the disadvantaged community; people that cannot drive, should 
not drive, will never drive. It is a serious and growing 
problem in America. You have got to have local systems that 
solve that, because there are too many differences.
    In our community, for example, and this is not an 
advertisement, we just call it Heartline. It is not my bus 
system, but it is the Hillsboro Area Regional Transit 
Authority. I sit on that.
    But we also put together the Transportation Disadvantaged 
Program, for people who are need wheelchairs or kneeling or 
whatever. So you have got to tie sidewalks to buses or 
specialized transportation for people that have the dialysis or 
have critical needs. But then you have got young or older that 
cannot or should not drive, or you want to discourage; or as 
you get into larger urban communities, you want a robust 
transportation system like on buses, that would connect to a 
rail system.
    So I think part of that base has got to be a sound transit 
system that also not only serves a great part of the 
population, but specifically also has the ability to serve the 
transportation disadvantages in America.
    Mr. Scheppach. We are a little bit split on policy with 
respect to that, so I will pass.
    [Laughter.]
    Senator Jeffords. I understand that.
    Well, I want to thank you all. It has been very, very 
helpful testimony. You are the ones that we look to, to make 
sure that we do the things we should do when we are finished 
here. It was excellent testimony, and we were pleased to have 
you here.
    With that, the hearing is adjourned.
    [Whereupon, at 11:38 a.m., the committee was adjourned, to 
reconvene at the call of the chair.]
    [Additional statements submitted for the record follow:]
  Statement of Hon. Bob Graham, U.S. Senator from the State of Florida
    Thank you for bringing us together today on the subject of the 
reauthorization of TEA-21. The policies that are decided during this 
debate will deeply affect each of our States. You are to be commended 
as well for calling us together on January 24--our first week back in 
session this year.
    This learning process and discussion is too important to rush 
through right before legislative drafting begins. You're wise to begin 
now, and explore this thoroughly.
    I have looked at your proposal for 11 hearings this year, and agree 
with the topics chosen, and the pace of discussion.
    This is the first of those proposed hearings, and as such, a great 
opportunity to look back on lessons learned, and lay out, in general, 
some priorities and challenges for the next authorization cycle.
    You've assembled a great group of witnesses (and I am very pleased 
to see a Floridian, Commissioner Chris Hart from Hillsborough County, 
on the panel). Each of them brings perspective from different universe 
of government: Federal, State, county, and city.
    This hearing emphasizes the level of coordination and cooperation 
that has developed in transportation policy since we emphasized this 
time of structure and planning in ISTEA.
    I'll be interested to learn of our successes, and where we must 
improve in this cooperative planning process.
    I would like a quick moment to reflect on my A ``lessons learned'' 
from the last reauthorization process, and outline a few priorities.
Lessons Learned
     Follow the legislative process through to the final 
regulations. Members of this committee, and witnesses in this room, 
celebrated the environmental streamlining language that was 
incorporated into TEA-21. We are now frustrated by the slow progress in 
the development of regulations that reflect our intent. This next time, 
I want to work more closely with those who will interpret what we draft 
in this committee. Better lines of communication can only mean clearer, 
better public policy.
     Other committees can affect what we draft here. I have 
been frustrated by the fact that some of the programs that we developed 
in TEA-21 where grants should be awarded on a competitive basis, are 
not working that way in reality. As an example, the ITS money provided 
by TEA-21 is all earmarked and not awarded in the way we intended.
    I'd like to work as a committee with our colleagues and find a 
solution that brings us closer to the intent of what we drafted and 
passed in TEA-21.
    There are more lessons learned, but time is short.
    I also hope the committee will seek ``lessons learned'' from those 
who have actually been on the front lines of our nation's 
transportation policy, much like the witnesses who have joined us here 
today.
    Looking ahead, the world has changed in several ways since we 
finished enacted TEA-21.
    There is a focus on homeland security.
    We are heading into some tight budget years.
    Traffic congestion is affecting quality of life.
    We learned quickly after September 11 how difficult life can be if 
one mode of transportation, such as air travel, suddenly becomes 
difficult or impossible.
    I look forward to working with our chairman, my colleagues here, 
and all interested parties in taking the next few months to expand our 
knowledge of transportation issues and challenges, and together 
drafting the next authorization bill to meet those challenges.
                               __________
 Statement of Hon. Tom Carper, U.S. Senator from the State of Delaware
    I'm happy to be here today as this committee begins its work on the 
re-authorization of the Transportation Equity Act for the 21st Century 
(TEA-21). In the 10 years since that bill, and its predecessor, the 
Intermodal Surface Transportation Act (ISTEA) have been in place, I 
believe we have made strides in the way we fund and plan for our 
transportation needs.
    ISTEA for the first time allowed State and local transportation 
officials to work together with their regional partners and with States 
to develop truly regional transportation systems. It also allowed these 
new regional transportation entities and to use Federal transportation 
dollars for the most pressing transportation projects in their region, 
regardless of whether those Federal dollars were originally designated 
for highway or transit. When ISTEA was up for re-authorization 5 years 
ago, I was Governor of Delaware and headed up a group called ISTEA 
Works along with John Rowland, my colleague from Connecticut. Our goal 
at the time was to urge Congress to preserve and build on what we were 
able to accomplish in ISTEA. Our efforts, along with the work of a 
number of my new colleagues here in Congress, lead to TEA-21, which 
maintained the flexibility granted to State and local officials and 
greatly expanded the funding available for transportation improvements 
each year. Whereas, before TEA-21, congressional appropriators could 
set caps on the amount of the Highway Trust Fund that could be spent in 
a given year, States can now spend the full amount that users pay into 
the Fund every year.
    As we sit down now to re-evaluate our national transportation 
policy, I again call on my colleagues to build on what has worked so 
well in the past. First, we should expand the flexibility built into 
ISTEA to allow States to spend their Trust Fund money on inter-city 
rail projects. Back in Delaware, commuters set out every day on 
Interstate 95 in Wilmington to head for jobs in Philadelphia, Baltimore 
and Washington. Commuters up and down the northeast corridor make 
similar commutes every day, tying up our highways in frustrating, 
wasteful gridlock. Delaware can spend as much as it wants to improve 
its piece of 95. It can't do much with its Trust Fund money to improve 
rail links to major northeast cities, however. I hope we can work this 
year to allow States to use their Federal Trust Fund dollars to create 
regional high-speed rail systems if they choose to do so.
    Second, we should continue to improve the way we fund our 
transportation priorities and examine whether our current funding 
levels are adequate. TEA-21's budgetary firewalls, along with Revenue 
Aligned Budget Authority (RABA), have led to dramatic increases in 
transportation spending in recent years, but we could see reductions in 
2003 for the first time. I hope we can work this year to fix RABA and 
also to look for other revenue sources so that we can effectively fund 
our transportation needs.
    As we begin to take a closer look at what has and hasn't worked in 
ISTEA and TEA-21 over the years, I think we'll see that most of what we 
were able to accomplish has had a positive impact on our nation's 
transportation system. I hope we can build on that success in our re-
authorization of TEA-21.
                               __________
 Statement of Hon. John Warner, U.S. Senator from the Commonwealth of 
                                Virginia
    Mr. Chairman, I join in welcoming Secretary Mineta to the committee 
and look forward to a valuable exchange of ideas over the next 2 years 
as we prepare to reauthorize our nation's highway and transit programs.
    It was my privilege to be actively involved in the formulation of 
TEA-21 in 1997 and 1998 in my capacity as the subcommittee chairman. At 
that time, we saw a great need in this Nation to respond to many unmet 
transportation demands to improve mobility in our rural communities, to 
relieve congestion in our urban areas and to promote the efficient 
movement of American goods. We responded with an unprecedented increase 
of 40 percent in highway funding by enacting landmark budget provisions 
to free up the revenues in the Highway Trust Fund.
    TEA-21's revolutionary financing and formula reforms built upon the 
program reforms of ISTEA. 1991. As we look to the next bill, how will 
we again provide the vision and tools to ensure that our surface 
transportation network--highways, transit and rail--will stimulate 
economic growth?
    Our multi-year reauthorization bills have provided a unique 
opportunity to transform our national transportation system.
    Most notably, President Eisenhower responded to the mobility needs 
with the vision of the Interstate Highway System. In 1991, at the end 
of the construction of the 40,000-mile Interstate System, President 
Bush responded with the National Highway System to ensure that an 
efficient road network reached 95 percent of all Americans.
     Also in ISTEA 1991, Senator Moynihan had a keen vision of a 
seamless national transportation system that connected roads to transit 
and railroad stations to airports.
    In 1997, President Clinton supported the efforts of this committee 
under the leadership of Chairman Chafee and our Ranking Member, Senator 
Baucus, to release funds from the Highway Trust Fund.
    The budget reforms of TEA-21 were unprecedented. For the first time 
we fulfilled President Eisenhower's commitment that taxes American 
motorists pay at the gas pump will be used to build and upgrade our 
highways.
    As we begin today, in partnership with the Administration, to 
reauthorize TEA-21, our overriding challenge is transportation 
gridlock.
    Bold, new initiatives are needed and I hope that we all will strive 
for the standard of excellence set forth by President Eisenhower, 
President Bush, and Senators Moynihan and Chafee.
                               __________
 Statement of Norman Y. Mineta, Secretary, Department of Transportation
    Mr. Chairman, members of the committee, thank you for the 
opportunity to speak about the lessons we have learned from the 
Transportation Equity Act for the 21st Century (TEA-21).
    Through this committee's leadership, and with the active 
participation of our State, local and private sector partners, the 
Department of Transportation has worked to realize the purposes and 
objectives of TEA-21. I would like to commend the committee for 
continuing its leadership by scheduling this series of hearings on the 
reauthorization of TEA-21.
    We are looking forward to working with the members of this 
committee and with Congress in shaping proposals for the 
reauthorization of this legislation. Working together, we need to 
establish the base of resources available for this important 
legislation in order to meet the transportation challenges facing the 
Nation.
    Three decades ago, when I was Mayor of San Jose, California, I 
learned that the tool that made the most difference in my community was 
transportation. Nothing else had as great an impact on our economic 
development, growth patterns, and quality of life. What I have found in 
the years since is that this is true not just locally, but also 
nationally. A safe and efficient transportation system is essential to 
keeping people and goods moving and cities and communities prosperous.
    As is true for many of you on this committee, I take great pride in 
the enactment of the predecessor of TEA-21, the Intermodal Surface 
Transportation Efficiency Act of 1991 (ISTEA), during my years in the 
House of Representatives. With that legislation we established new 
principles in the implementation of the nation's surface transportation 
programs--building partnerships with local and State officials to 
advance the strategic goals for transportation capital investment. They 
are flexibility in the use of funds; a commitment to strengthening the 
intermodal connections of the nation's transportation system; expanded 
investment in, and deployment of, new information technologies for 
transportation services; and a heightened sensitivity to the impacts 
which transportation has on our quality of life and on the shape and 
character of America's communities.
    TEA-21 built upon the programmatic initiatives contained in the 
earlier legislation and through its financial provisions, provided 
State and local governments and other transportation providers with 
greater certainty and predictability in transportation funding. It 
achieved this by reforming the treatment of the Highway Trust Fund to 
ensure that, for the first time, spending from the Highway Trust Fund 
for infrastructure improvements would be linked to tax revenue. The 
financial mechanisms of TEA-21--firewalls, Revenue Aligned Budget 
Authority (RABA), and minimum guarantees--provided greater equity among 
States in Federal funding and record levels of transportation 
investment.
    The programmatic and financial initiatives of these two historic 
surface transportation acts have provided us with a solid and balanced 
structure around which we can shape this reauthorization legislation.
    While the legislation, which the Administration and Congress will 
work together to see enacted, should continue and build upon ISTEA and 
TEA-21, we have an opportunity and an obligation to do more than that. 
This is a time in the transportation sector of extraordinary challenge 
and opportunity. On September 11 a determined and remorseless enemy 
challenged one of America's most cherished freedoms, the freedom of 
movement. The events of that day demonstrated how critical the nation's 
transportation system is to the security of every American and to the 
nation's economic well-being.
    In shaping this surface transportation reauthorization bill, we 
must maximize the safety and security of all Americans, even as we 
enhance their mobility, reduce congestion, and grow the economy. These 
are not incompatible goals; indeed, the lessons of TEA-21 demonstrate 
that all of these values are appropriate goals of national 
transportation policy and that they reinforce each other: it is 
possible to have a transportation system which is safe and secure, 
efficient and productive.
                            tea-21's record
    In five principal areas TEA-21 has strengthened the nation's 
transportation system: the predictability, equity and flexibility of 
funding; safety; mobility and system upgrading; the application of 
innovative technologies; and quality of life.
                   funding levels and program equity
    TEA-21 revolutionized transportation funding and provided record 
amounts of spending for transportation, a 40 percent increase over the 
period of ISTEA. The minimum guarantees and the Highway Trust Fund 
firewalls created confidence among grantees regarding program funding. 
Predictability is one of the most important aspects of program delivery 
for State and local programs. States and local communities have 
increased their funding levels to match the commitments made in TEA-21. 
Importantly, TEA-21's minimum guarantees provided unprecedented equity 
between the States, ensuring that highway funds are distributed in the 
fairest manner to date.
    Equally important is the funding flexibility, first allowed in 
ISTEA and continued in TEA-21. Flexible funding allows States and 
communities to tailor their transportation choices to meet their unique 
needs and enables State and local decisionmakers to consider all 
transportation options and their impacts on traffic congestion, air 
pollution, urban sprawl, economic development, and quality of life.
    TEA-21's innovative loan and grant programs further augmented the 
highway and transit programs. The Transportation Infrastructure Finance 
and Innovation Act (TIFIA) has provided almost $3.6 billion in Federal 
credit assistance to 11 projects of national significance representing 
$15 billion in infrastructure investment. These loans, loan guarantees, 
and lines of credit for highway, transit and rail projects have 
encouraged private investment in strengthening transportation 
infrastructure.
                                 safety
    The Department's paramount concern is to assure the American public 
that the Nation has the safest, most secure system possible as our 
transportation system works to meet the needs of the American economy. 
The United States has an enviable transportation safety record. 
However, the challenge of safety on the transportation system remains 
significant. While the number of highway fatalities in recent years has 
been relatively flat, despite significantly more vehicles on the 
nation's roads, more than a quarter million people have been killed on 
America's highways and roads in the past 6 years, 41,000 deaths each 
year. In addition, there are over three million injuries annually.
    TEA-21 introduced new programs, greater flexibility and increased 
funding to meet this challenge. Increased TEA-21 funding enabled States 
to make needed safety improvements to the transportation 
infrastructure, and States may--and do--use their Surface 
Transportation Program (STP), Interstate Maintenance, and National 
Highway System (NHS) funds for safety improvements. Within the STP, 
funds are reserved under TEA-21 for highway and rail crossing 
improvements and hazard elimination. The FHWA works closely with States 
and others to improve our ability to analyze roadway safety challenges 
and to direct investments to specific projects and programs, which will 
deliver the most value in terms of lives saved and injuries minimized.
    Since enactment of TEA-21, the Department of Transportation has 
awarded a total of $729 million in highway safety grants. TEA-21 also 
authorized $72 million annually for behavioral research to determine 
the causes of motor vehicle crashes, to identify target populations, to 
develop countermeasures, and to evaluate the effectiveness of programs 
in reducing traffic deaths and injuries. The Act also established 
several important, new, safety incentive grants. For example, between 
fiscal year 1999 and fiscal year 2002, the National Highway Traffic 
Safety Administration (NHTSA) awarded $210 million in seat belt 
incentive grants and over $113 million for innovative seat belt 
programs. Between June 1998 and June 2001, seat belt use had increased 
from 65 percent to 73 percent. Seat belt use, in total, saves an 
estimated 12,000 lives annually.
    In motor carrier safety, TEA-21, along with the Motor Carrier 
Safety Improvement Act of 1999, created new programs and tools for the 
Department and States to improve safety. TEA-21 increased flexibility 
for grantees, strengthened Federal and State enforcement capacity, and 
provided flexibility to promote innovative approaches to improving 
motor carrier safety. TEA-21 placed greater emphasis on targeting 
unsafe carriers and improving information systems, and increased 
funding for commercial driver license programs.
                     mobility and system upgrading
    ISTEA and TEA-21 placed an unprecedented emphasis on developing a 
seamless, intermodal transportation system that links highways, rail, 
transit, ports and airports. The dramatically increased funding under 
TEA-21 also enhanced mobility by upgrading the condition of highways, 
particularly the National Highway System, and transit systems. As a 
direct result of the increased spending provided in TEA-21, overall 
highway system conditions--as measured by pavement condition, ride 
quality, alignment adequacy, bridge ratings, and the condition of rail 
transit assets--have improved.
    As you know, Federal highway funds are used for a variety of system 
improvement and congestion relief purposes, depending on the priority 
needs and goals of each State. In recent years, for example, 
approximately 50 percent of Federal funds were obligated for system 
upgrading purposes, including reconstruction, widening, restoration and 
rehabilitation, and resurfacing. These investments have led to a steady 
improvement in pavement condition: in 2000, 90.9 percent of travel on 
the NHS occurred on pavements rated acceptable or better.
    Moreover, under TEA-21, States continued to reduce the number of 
bridges rated structurally deficient. In 2001 the percentage of 
deficient NHS bridges had been reduced to 21.2 percent. In fiscal year 
2001, the Federal Highway Administration (FHWA) provided $3.5 billion 
in TEA-21 funding for approximately 3,000 bridge projects through the 
Highway Bridge Replacement and Rehabilitation program. Included in this 
program were 17 major replacement or rehabilitation projects and three 
seismic retrofit bridge projects that received almost $88 million in 
funding.
    TEA-21 established new programs that enabled improved connectivity 
across modes, particularly in the area of freight movements. The 
National Corridor Planning and Development/Coordinated Border 
Infrastructure Program (NCPD/CBI, also known as the Corridors and 
Borders Program) has funded numerous freight improvement projects as 
well as many economic development projects, pedestrian improvement 
projects, and multi-modal studies, while strengthening the focus on 
international corridors and gateways with America's NAFTA trading 
partners. The Alameda Corridor Project used a mix of private funds and 
public programs to improve rail and highway access and to reduce 
traffic delays in the critically important area of the Ports of Los 
Angeles and Long Beach.
    As of 2001, the nation's urban rail transit assets comprised 10,427 
miles of track, 2,776 rail stations, and 1,310 maintenance facilities. 
Under TEA-21, the substantial investment in the nation's transit 
systems has contributed to an improvement in the condition of transit 
assets and a resulting increase in transit ridership. Preliminary 
estimates indicate that public transit trips increased by 4.4 percent 
from 2000 to 2001 to 9.4 billion trips.
    TEA-21 also authorized the Job Access and Reverse Commute (JARC) 
Program to address transportation gaps in the public transit system and 
to reduce barriers for those moving from welfare to work. This program 
has made transit services available to many who previously did not have 
access to adequate transportation and, thus, to jobs. As of fiscal year 
2000, the JARC program had made new transit service available at more 
than 16,000 job sites.
                            new technologies
    Under TEA-21, the Department of Transportation has made strides in 
research. Research programs include development and deployment of 
Intelligent Transportation Systems (ITS), pavement improvement, 
congestion reduction, seismic hardening of highway infrastructure 
elements, strengthening of bridges, and new tunnel technology. The 
Highway Safety Research and Development program is the scientific 
underpinning for the Department's national leadership in highway safety 
programs, and includes behavioral research to reduce traffic deaths and 
injuries, crash avoidance research, roadway design and operational 
improvements, and vehicle safety performance standards. Rail related 
research and development has focused on the next generation of high 
speed rail equipment and train control, maglev systems, and innovative 
technologies to mitigate grade crossing hazards.
    TEA-21 authorized a total of $603 million for ITS research for 
fiscal year 1998 to 2003, and significant progress has been made in 
applying this technology to our surface transportation system. From 
1997 to 2000, we have experienced a 37 percent increase in the number 
of freeway miles with real-time traffic data collection technologies, a 
55 percent increase in the coverage of freeways by closed circuit 
television, a 35 percent increase in the number of buses equipped with 
automatic vehicle locations system, and an 83 percent increase in 
traveler information dissemination on our freeways. Through the 
Department's Intelligent Vehicle Initiative, research on driver 
performance, crash avoidance and warning system performance, and motor 
vehicle safety performance standards offer the promise of future 
reductions in highway deaths and injuries.
                            quality of life
    TEA-21 has given States and communities across America additional 
tools and opportunities to enhance the environment and quality of life 
for their residents. It continued and increased funding for several 
programs originally authorized in ISTEA, broadened eligibility for 
others and established the new Transportation and Community and System 
Preservation Pilot program (TCSP).
    The TCSP program was authorized for $120 million in funding under 
TEA-21 as a discretionary grant program to strengthen the linkages 
between transportation and land use. The grants have provided funding 
for planning and implementation as well as technical assistance and 
research to investigate and address the relationship between 
transportation, community and system preservation, and private sector-
based initiatives.
    The Congestion Mitigation and Air Quality Improvement Program has 
focused on improving air quality. Under TEA-21, it provided more than 
$8 billion in funding for use by State and local partners to support 
traffic flow projects, cleaner fuels, improved transit services and 
bicycle and pedestrian programs that reduce congestion and emissions 
and improve the quality of life.
    The National Scenic Byways program and the Transportation 
Enhancements program have helped States and communities improve the 
environment. Since the enactment of TEA-21, more than $1.4 billion in 
Transportation Enhancement funds have been obligated to local 
communities to implement community focused, non-motorized activities 
that enhance transportation. Many more activities have been programmed 
and are awaiting implementation.
    TEA-21 directed us to streamline environmental reviews. This is a 
major priority for the Department in assisting States and communities 
build infrastructure more efficiently, while retaining important 
environmental protections that maintain our quality of life. Since the 
enactment of TEA-21 in 1998, streamlining of the planning and approval 
process for projects has taken root throughout the country: interagency 
personnel funding agreements that result in faster, concurrent reviews; 
a merged process for wetland permits with the Army Corps of Engineers; 
and delegated authority for historic resources. As a result of these 
actions, the mean time to process environmental documents for major 
highway projects has been cut by almost 8 months, the median time has 
been cut by 1 year, and the Department is well positioned for 
significant future progress. While we have begun the job, more can be 
done.
                           building on tea-21
    The Department of Transportation looks forward to working with both 
Houses of Congress, State and local officials, tribal governments, and 
stakeholders in shaping the surface transportation reauthorization 
legislation. The Department has established an intermodal process to 
develop surface transportation legislative proposals for 
reauthorization. A number of intermodal working groups have already 
identified key issues and programmatic options for consideration. In 
the next few months, the Department will work with stakeholders and 
congressional committees in shaping the reauthorization legislation.
    In that effort, the Department will be motivated by certain core 
principles and values:
     Assuring adequate and predictable funding for investment 
in the nation's transportation system. This funding can contribute to 
the long term health of the economy and, by enhancing the mobility of 
people and goods, promote greater productivity and efficiency.
     Preserving funding flexibility to allow the broadest 
application of funds to transportation solutions, as identified by 
State and local governments.
     Building on the intermodal approaches of ISTEA and TEA-21.
     Expanding and improving innovative financing programs, in 
order to encourage greater private sector investment in the 
transportation system, and examining other means to augment existing 
trust funds and revenue streams.
     Emphasizing the security of the nation's surface 
transportation system by providing the means and the mechanisms to 
perform risk assessment and analysis, incident identification, 
response, and, when necessary, evacuation.
      Strengthening the efficiency and integration of the 
nation's system of goods movement by improving international gateways 
and points of intermodal connection.
     Making substantial improvements in the safety of the 
nation's surface transportation system. It is not acceptable that the 
Nation suffers 41,000 deaths and over 3 million injuries annually on 
the highway system.
     Simplifying Federal transportation programs and continuing 
efforts to streamline project approval and implementation.
     Developing the data and analyses critical to sound 
transportation decisionmaking.
      Fostering ``intelligent everything'' in the development 
and deployment of technology, such as pavement monitoring, message 
systems, remote sensing, and toll collection.
     Focusing more on the management and performance of the 
system as a whole rather than on ``inputs'' or the functional 
components such as planning, development, construction, operation and 
maintenance themselves.
    This is a moment of great opportunity. As was true when Congress 
considered the landmark ISTEA and TEA-21 legislation, we have an 
opportunity to create our own legacy and to serve the needs of the 
American people. I am confident that, working together, the Department 
and Congress can preserve, enhance and establish surface transportation 
programs which will provide not only for a safer and more secure 
system, but one which is more efficient and productive and enhances the 
quality of life. One answer to the events of September 11 is to 
strengthen, not diminish, the right of all Americans to mobility and to 
grow the economy. These goals should characterize our work on 
reauthorizing TEA-21.
    Again, Mr. Chairman, thank you for the opportunity to testify 
before you today. I look forward to responding to any questions you may 
have.
                                 ______
                                 
Responses of Hon. Norman Y. Mineta to Additional Questions from Senator 
                                Jeffords
    Question 1a. Does the Administration support transfer of rail tax 
revenues into a trust fund dedicated to rail-related investment?
    Response. The Administration has not yet developed a position on 
this issue. As I indicated in my oral testimony to the committee, 
Highway Trust Fund should only be available for modes currently 
financed by it. If new programs in rail infrastructure are to be 
addressed in TEA-21 reauthorization, non-Highway Trust fund sources of 
revenue will have to be identified. The rail fuel tax was originally 
enacted in 1990 as a deficit reduction tax. Similar taxes were also 
levied on fuel used by other modes of transportation. Deficit reduction 
taxes remain on rail diesel, fuel used by commercial vessels on inland 
waterways, motorboat gasoline and highway gasohol. I look forward to 
further discussion with the committee on financial mechanisms to 
support rail-related infrastructure investments.

    Question 1b. If so, should those revenues go to the Highway Trust 
Fund, with broadened flexibility for rail investment, or should a new 
Rail Trust Fund be established?
    Response. The Administration has not yet developed a position on 
this issue. I look forward to further discussion with the committee on 
financial mechanisms to support rail-related infrastructure 
investments.

    Question 2. In general, how does the Administration propose to 
ensure adequate funding so that our nation can enjoy the benefits of 
world-class rail service for both passengers and freight?
    Response. The Administration is committed to presenting proposals 
relating to inter-city passenger rail in connection with Amtrak 
reauthorization early this year. We expect to consider and work with 
Congress on issues relating to freight rail in the context of TEA-21 
reauthorization. The Administration and the Congress need to work 
together to identify the structural reforms and develop solutions that 
will result in a financially stable rail system that can help this 
country meet our personal and economic mobility and national defense 
needs.
                                 ______
                                 
Responses of Hon. Norman Y. Mineta to Additional Questions from Senator 
                          Nighthorse Campbell
    Question 1. With the enormous responsibilities and requirements 
which have been placed upon the Department since 9/11, does the U.S. 
DOT have the time and resources to concentrate on this important TEA-21 
Reauthorization or should a 1- or 2-year short extension be considered?
    Response. It is our intention to send the Administration's 
reauthorization bill to Congress right after it convenes early in 2003. 
The Department has established an intermodal process to develop 
proposals for surface transportation reauthorization. Over the next few 
months, the Department will work with stakeholders and congressional 
committees to shape its reauthorization proposals. To that end, we are 
currently proceeding under the assumption that the authorization period 
of this bill will be 6 years, comparable to those of ISTEA and TEA-21.

    Question 2. Has there been any consideration of a special category 
for highway security funding in the next reauthorization?
    Response. The Department has established an intermodal process for 
the surface transportation reauthorization but has not developed 
specific proposals. The events of 9/11 have demonstrated our need to 
address security issues and to ensure that America's transportation 
system emerges from this transformation even stronger and more 
efficient than before. One of the core principles of the Department's 
reauthorization effort is emphasizing the security of the nation's 
surface transportation system by providing the means and the mechanisms 
to perform risk assessment and analysis, incident identification, and 
response.
                                 ______
                                 
Responses of Hon. Norman Y. Mineta to Additional Questions from Senator 
                                 Graham
    Question 1a. How do you see the reauthorization of the surface 
transportation bill in relation to our new focus on homeland security?
    Response. The events of September 11 have underscored the pivotal 
role transportation plays in the Nation's prosperity and quality of 
life. Our challenge is to create a seamless transportation system that 
will maximize not only the safety and efficiency, but also enhance the 
security of the movement of people and goods.

    Question 1b. What are the homeland security issues we should have 
in mind when drafting this legislation?
    Response. Following the September attacks, the Department took 
immediate steps to work with State and local officials to enhance 
security. Adding security personnel, emphasizing security awareness and 
response training, and hardening our transportation infrastructure 
against the threat of terrorism are critical security components. In 
this effort, we will work with the various modes of transportation to 
assess risks and to develop incident reporting and response systems. We 
look forward to working with Congress on these critical requirements as 
the reauthorization process continues.

    Question 1c. Will U.S. DOT and the Office of Homeland Security be 
following the reauthorization process together?
    Response. In developing its reauthorization proposals, the 
Department will be consulting with other Federal agencies including the 
Office of Homeland Security as appropriate.

    Question 2. Under TEA-21 we created the ``tapered match'' program 
and other alternatives for State matching requirements so that projects 
did not have to be delayed. Has the ``tapered match'' or other 
alternatives been used by States during the past year? Do you know of 
any transportation projects that have stalled because a State could not 
meet its match requirement?
    Response. ``Tapered match'' provides relief for any State 
experiencing a temporary shortage of State matching funds. The 
Department is aware of nine States that have used the tapered match 
provision. Also, 20 States are currently eligible to use non-cash toll 
credits to match Federal funds, which will also help ease a cash-flow 
shortage. While we have heard that some States are reprogramming funds 
to obtain sufficient matching funds, we are not aware of any Federal-
aid projects being delayed because of insufficient matching funds.
                               __________
         Statement of Hon. Bob Wise, Governor of West Virginia
    Chairman Jeffords, Senator Smith, and members of the Senate 
Environment and Public Works Committee . . . it is my great pleasure to 
be with you today to offer my testimony as you begin to debate the 
reauthorization of the Transportation Equity Act for the 21st Century 
(TEA-21). I am especially pleased to be one of the lead Governors on 
transportation for the National Governors Association (NGA). I also 
appreciate the chance to follow United States Secretary of 
Transportation Norm Mineta. As you are aware, I was a member of the 
U.S. House of Representatives Transportation and Infrastructure 
Committee when Secretary Mineta was chair. I can assure you that there 
is no better person to guide our nation's transportation policy. I also 
wish to commend West Virginia's United States Senators and your 
colleagues, Senators Byrd and Rockefeller. Having two senators of their 
caliber makes my job as Governor much easier.
    When I was a member of the U.S. House of Representatives, I was 
always a supporter of TEA-21 . . . because I firmly believed that 
investing in our nation's transportation infrastructure was a key 
ingredient to economic prosperity. After a year in office as the 
Governor of West Virginia, I am even more convinced that TEA-21 is 
essential to the future of my State and this Nation. West Virginia is a 
wonderful State, but we have unique transportation challenges because 
of our beautiful, yet rugged terrain. One of my most important jobs is 
to continue to improve our road system so that we can take full 
advantage of the opportunities presented by having a modern 
transportation system. West Virginia has committed itself to doing that 
by maximizing our State gas tax to leverage as much local investment as 
possible.
    The State-Federal partnership fostered under TEA-21 has been one 
that has greatly benefited the surface transportation system throughout 
the Nation as a whole. The Governors are committed to maintaining a 
safe and efficient transportation infrastructure, and we urge the 
reauthorization of TEA-21. To meet that goal, a number of important 
issues must be addressed and considered.
    As this body debates the reauthorization of TEA-21, care should be 
taken to fortify and protect the Highway Trust Fund. This fund is the 
major financial mechanism that redistributes dedicated highway related 
revenue . . . such as fuel taxes and user fees to the States for 
maintaining and improving the nation's transportation infrastructure. 
It is critically important that Congress and the Administration take 
measures to ensure that the annual revenues to the Highway Trust Fund 
are used for their intended purpose. This has been achieved during TEA-
21 through the workings of the Revenue and Aligned Budget Authority 
(RABA) Program. While this concept is commendable, we now see that it 
is not working as efficiently as it could. This program will provide a 
total of $4.1 billion more for infrastructure investment than was 
anticipated when TEA-21 was first enacted; however, that figure 
represents the net effect of the very substantial increases the States 
enjoyed in fiscal years 2000, 2001, and 2002. Between 2002 and 2003, 
the States may see their apportionments of obligation authority from 
the Trust Fund drop by about 30 percent. This translates into a $9.1 
billion drop in Federal highway funding from the fiscal year 2002 
level. These figures are projected by the U.S. Department of 
Transportation based upon new projections of the Revenue Aligned Budget 
Authority (RABA). The potential magnitude of a $9.1 billion funding 
decrease has the result of nearly 144,000 jobs being lost over the next 
2 years.
    The longer term impact on the highway program could extend for a 
number of years for two reasons. First, the sharp reduction will affect 
the ability of States to use bond financing for construction. Second, 
the fiscal year 2003 funding numbers would serve as a baseline for the 
calculations of the next reauthorization legislation. These extreme 
peaks and valleys make it impossible to conduct a consistent, well-
planned investment program. Going into 2003, commitments to several 
road projects around the country will have to be revisited, and 
contractors will be without work. Since the redistribution of RABA 
funds have been based largely on revenue estimates from year to year, I 
encourage the committee to pursue changes that ensure that all Trust 
Fund revenues continue to be distributed to the States but in a fashion 
that smoothes out the extreme peaks and valleys we will experience 
during the TEA-21 period. States are in the process of researching 
solutions to achieve a more stable and reliable distribution mechanism 
in light of new negative RABA projections. We would like to work with 
you and your committee to ensure a rapid and bipartisan action.
    Our States are responsible for the vast majority of the maintenance 
of our nation's roads and finance more than one-half of all public 
investments in surface transportation. My fellow Governors are 
committed to maintaining a first-class transportation system and 
continuing the partnership with the Federal Government developed 
through TEA-21 . . . but in order to do that, it is important that each 
State be granted the flexibility and authority to make the key 
decisions that affect transportation.
    The public transportation system is largely the responsibility of 
States and local governments. It is important that the next 
authorization should not weaken or preempt State authority. The 
Governors oppose unfunded mandates and urge Congress not to impose new 
standards without a Federal financial commitment to the States to 
offset any financial impact. Furthermore, the Governors urge the use of 
incentives rather than sanctions to encourage the achievement of 
national goals.
    The nation's Governors strongly support sound environmental 
protection efforts. It is important that TEA-21 has a strong 
environmental component; however, it is important that States have the 
necessary flexibility to meet those environmental guidelines. 
Reasonable and sound environmental policy can be achieved without 
sacrificing improved transportation and economic development. One area 
of frustration for West Virginia that resulted in numerous major delays 
in important projects has been Section 4(f) of the Department of 
Transportation Act of 1966. This section was originally intended to 
protect certain highly valued recreational and natural resources from 
significant impacts, which is certainly something I agree with. 
However, over time the Section 4(f) requirements have been extended to 
cover historic properties which are also protected under Section 106 of 
the National Historic Preservation Act. A complicated and rigid ``avoid 
at all costs'' mentality has developed regardless of how insignificant 
the historical resource or impact. Eligibility has broadened to include 
many properties that are in fact unremarkable. This ``broadening'' at 
times includes very large districts surrounding the property. As you 
debate reauthorization of TEA-21, I think this is an area that also 
needs some consideration. This provision has led to many delays to 
vitally important projects and has hindered the process of making 
transportation more accessible and safe.
    The safety of our citizens on the nation's roads is a major concern 
for the Governors. While modern transportation systems have greatly 
helped reduce injuries and deaths on our nation's highways, safety 
programs should be strengthened. States should be allowed to focus 
safety resources on their most pressing individual safety needs. 
Implementing any new national safety standards without State 
involvement will only complicate the process.
    TEA-21 can be further strengthened through streamlining and 
eliminating administrative processes that are duplicative. The recent 
Notices of Proposed Rulemaking (NPRM) released by the Federal Highway 
Administration (FHWA) and the Federal Transit Administration (FTA) 
concerning streamlining regulations will complicate TEA-21 rather than 
simplify it. I urge you to carefully consider any new administrative 
guidelines that will only hinder the process. It is a waste of time and 
resources to delay projects for unnecessary and burdensome 
administrative processes.
    In conclusion, I hope my statements today offer some insight into 
the policy positions of the nation's Governors. It is very important 
for all the States that TEA-21 is reauthorized and the advice of the 
nation's Governors is heeded in the process.
    On behalf of the citizens of West Virginia, I urge you to take all 
that I have said into consideration as this process continues. I 
believe for West Virginia to prosper, we must have a modern 
transportation system. Many sound policies were put into place in TEA-
21. One of them was the commitment of direct contract authority from 
the Trust Fund toward the completion of the long-promised Appalachian 
Highway System. The completion of this system was promised 37 years ago 
to the people of Appalachia. While the interstate system is now 100 
percent complete, only 82 percent of the Appalachian System is 
complete. These incomplete portions represent some of the most 
dangerous segments of roads in the Trust Fund can the Appalachian 
States be able to make meaningful progress on transportation.
    Once again, thank you for the opportunity to be with you today on 
behalf of the National Governors Association and the people of West 
Virginia. I would be happy to answer any questions.
                                 ______
                                 
 Response of Hon. Bob Wise to Additional Question from Senator Jeffords
    Question. Governor, in your testimony, you said, ``States should be 
allowed to focus safety resources on their most pressing individual 
needs. Implementing any new national safety standards without State 
involvement will only complicate the process.'' During enactment of the 
National Highway System legislation a few years back, I worked to 
ensure that States had design flexibility so that roadways would remain 
compatible with their surroundings. Can I infer from your statements 
today that the Governors continue to favor such an approach?
    Response. Senator Jeffords, the Governors appreciate the effort 
that you and others have made to allow for proper State flexibility. We 
continue to strongly support flexibility in roadway design. Every 
transportation situation is different and it is very important that 
design flexibility be retained. I would strongly urge that you continue 
to keep State flexibility in TEA-21. It is an important part of the 
process.
                                 ______
                                 
Responses of Hon. Bob Wise to Additional Question from Senator Campbell
    Question 1. Are there transportation related security projects in 
which your State could use Federal funding as a result of September 11?
    Response. September 11th has forever changed the way this nation 
protects itself. After the attacks, I heightened security across the 
State including monitoring and patrolling of key transportation assets 
such as bridges, tunnels, and major interchanges. State Police and the 
West Virginia Department of Transportation, along with other State 
agencies, used considerable financial resources to meet that challenge. 
While it is unlikely that all transportation infrastructure can be 
protected at all times due to the length of roads, railroad, and 
pipelines, certain key assets and segments should be protected and 
watched. Without Federal financial assistance, it is nearly impossible 
for the States to maintain that kind of security for any length of 
time. I believe that assisting the States financially on all aspects of 
homeland security is vitally important to the nation's national 
security.

    Question 2. Would you support the creation of a specific highway 
security funding category in the next reauthorization?
    Response. Governors would certainly welcome Federal funding to 
assist with homeland security costs related to transportation and other 
issues. However, it is important that the revenue for this purpose not 
be diverted from the Highway Trust Fund but come as a new revenue 
source. Simply creating a new security funding category may only get in 
the way of building our nation's roads if it does not include funds 
above what is being dedicated for the purpose of building and designing 
transportation projects. Frankly, there needs to be more focus on 
assisting the States financially with homeland security in all areas 
and not just transportation. Better security should not come at the 
expense of continuing to improve our transportation infrastructure. We 
need to find the financial resources to both continue transportation 
enhancements and improve homeland security.
                               __________
  Response of Hon. Bob Wise to Additional Question from Senator Graham
    Question. You served in the House of Representatives during the 
development of ISTEA and TEA-21, and come before us today as a 
Governor. After being on both sides of the equation, what would be your 
top suggestion(s) on enhancing the coordination and cooperation between 
the Federal Government and State government?
    Response. Efforts need to be continued to streamline the Federal 
review and approval process. Environmental concerns, air and water 
quality, historic issues, and other important areas of concern should 
be handled by the lead agencies in those areas. Without streamlining 
the process, duplication by multiple agencies will continue to 
unnecessarily delay important transportation projects. I alluded to an 
example of the need for streamlining in my testimony. West Virginia has 
suffered through numerous delays on very important highway projects 
because of the duel consideration of historical sites. Eliminating 
administrative duplication and streamlining the process would be a 
major step forward in improving the nation's transportation system.
                                 ______
                                 
    Responses of Ray Scheppach to Additional Questions from Senator 
                                Jeffords
    Question 1. Your comments on the current fiscal condition of the 
States are very informative and somewhat disconcerting. Please place 
those comments in context of the history and future of the Federal 
surface transportation program. Specifically, please address the 
following:
    a) What share of the nation's highway and transit investment has 
been born by the States over the last 10 years?
    Response. Transportation represents 8.8 percent of total State 
expenditures. In 2000, States spent $83.1 billion on transportation, a 
4.1 percent increase from the 1999 level of $79.8 billion. Figures for 
capital spending on transportation by States show actual 2000 
expenditures of $37 billion. State transportation expenditures are 
primarily funded from earmarked revenues (major source is gasoline tax) 
placed in special transportation (highway) trust funds.

    Question 1b. Has State spending on transportation as a percent of 
all State spending increased under ISTEA and/or TEA-21?
    Response. State budgetary data indicates that States have increased 
transportation expenditures from fiscal year 1999 to fiscal year 2001. 
In fiscal year 1999, State transportation spending totaled $79.85 
billion; in fiscal year 2000, $83.14 billion; and in fiscal year 2001, 
$91.10 billion.
    More specifically, in fiscal year 2002, State expenditures for 
transportation were funded as follows: 1) 62.2 percent from other State 
funds; 2) 27.4 percent from Federal funds; 3) 5.6 percent from bonds; 
and 4) 4.8 percent from general funds.
    The landmark Intermodal Surface Transportation Efficiency Act 
(ISTEA) legislation passed nearly a decade ago was the beginning of a 
true State-Federal partnership in approaching the national 
transportation system. It acknowledged the growing need for integration 
across all levels of government and permitted States and localities to 
have more flexibility in the use of Federal funds and allowed 
decisionmaking authority at the State level. State flexibility was 
granted in determining project eligibility requirements, allocating the 
required 20 percent State funding match, and in leveraging Federal 
funding.
    Since the enactment of the Transportation Equity Act for the 21st 
Century (TEA-21) in 1998, which increased Federal investment in highway 
and transit systems by 40 percent, States and localities have leveraged 
the guaranteed Federal funding to maximize State specific 
transportation priorities. The increased level of Federal investment 
has allowed States to: 1) increase highway preservation and 
performance; 2) obtain record-levels of transit rider-ship; 3) decrease 
highway fatalities; 4) provide transportation programs for Welfare-To-
Work recipients; and 5) achieve a greater level of fairness in the 
distribution of funds.

    Question 1c. Have States raised additional revenues for 
transportation to complement the increased Federal funding levels?
    Response. Yes. Since fiscal year 1998, States have raised 
additional revenues by increasing the State motor fuel tax rate. In 
fiscal year 2000, an additional $212.50 million was collected; in 
fiscal year 1999, $22 million; and in fiscal year 1998, $462 million.
    Currently, 11 States have variable rate motor fuel taxes which are 
adjusted at specific intervals to sustain funding levels. Also, four 
States have provisions or ``triggers'' in statute that would enable 
them to increase their State motor fuel tax rate if the Federal tax 
rate should decrease. Other States would require State legislative 
action to adjust fuel taxes.
    Because TEA-21 made it possible for States to aggressively plan out 
and secure State funding through innovative finance for new 
transportation projects, Governors continue to take measures to fully 
put into action newly available Federal funds and accelerate critical, 
but often-delayed projects. Such examples include:
      In Illinois, Governor George Ryan's ``Illinois First'' 
initiative makes $10.5 billion available for highways and $4.1 billion 
for transit over 5 years.
      In California, Governor Gray Davis and the State 
legislature authorized $8 billion for a congestion mitigation program, 
which when matched with Federal and local funds will commit $23 billion 
to 141 projects.''

    Question 1d. In light of their present fiscal difficulties, will 
the States be able to match the increased level of the Federal 
transportation program in FFY 2002?
    Response. States are expected to match funding requirements for 
approved projects in fiscal year 2002. However, in 2002, States that 
pre-finance with Federal highway funding may need to reprogram, delay, 
and reconsider funding critical transportation projects in light of the 
Administration's fiscal year 2003 budget proposal. For example, a cut 
in FY2003 spending from the current level would deleteriously impact 
many States' construction planning. Most States begin to plan this time 
of year, enter into contracts near the beginning of the construction 
season, and implement their 2003 budgets on July 1, 2000. Numerous 
States that pre-finance with Federal funds expect a reimbursement very 
early in the Federal fiscal year to continue for the next year's 
planning. This means that a 27 percent fiscal year 2003 cut will have 
the effect of reducing expenditures well before July of this year.

    Question 1e. Based on current forecasts, will the States be able to 
match a Federal program funded at or above the TEA-21 level ($218 B) 
during the next reauthorization period?
    Response. Yes. States will continue to be a sound partner in 
maintaining and developing an integrated national transportation 
system.''

    Question 2. Among the core principles of ISTEA and then extended in 
TEA-21 was a broad commitment to flexibility in meeting State and local 
surface transportation needs, ranging from highway and bridge 
improvements to pedestrian/bicycle and public transportation needs. At 
the same time, we note that two-thirds of the States have 
constitutional prohibitions on the use of State funds for intermodal 
investments, while TEA-21 emphasizes such flexibility in meeting 
transportation needs.
    Is there something that Federal law could do to incentivize States 
to revamp their restrictions on the use of State funds to further 
promote flexibility in development of a more balanced mix of surface 
transportation investments?
    Response. ISTEA made it national policy to ``encourage and promote 
development of a national intermodal transportation system in the 
United States to move goods and people in an energy efficient manner . 
. .'' TEA-21 continued this precept and directed that a study be 
conducted to review the condition of and improvements made since the 
designation of the National Highway System (NHS) connectors that serve 
seaports, airports, and other intermodal freight transportation 
facilities.
    The evidence shows that despite the increased funding for 
intermodal connectors, interconnectivity between all the modes of 
transportation in the areas of passenger and freight mobility is still 
lagging.
    Any future reauthorization legislation should recognize that States 
continue to overcome challenges in implementing intermodal passenger 
and freight connector projects. Scarcity of funds, project eligibility 
and differing responsibilities and philosophies between States, 
Metropolitan Planning Organizations (MPOs), and localities creates a 
complex web in the decisionmaking process. An added dilemma is the lack 
of quantitative tools that would allow States and local governments to 
properly analyze and evaluate economic benefits of freight investment 
to the region and the country. States believe that optimal management 
of the intermodal connectors can be achieved when public, private and 
multi-jurisdiction elements are working collaboratively for a desired 
result.
    I agree with the study's finding that ``as an incentive to freight 
project development, additional funding for planning and coordination 
could be used to financially support States and MPOs who are 
identifying, conceptualizing and planning for freight projects . . .'' 
and, such funding be made available via incentive grants to agencies 
and areas that have demonstrated a commitment to intermodalism and have 
meaningful private sector involvement.
    The next surface reauthorization legislation should continue 
specific intermodal-related programs such as the Transportation 
Infrastructure Finance and Innovation Act of 1998 (TIFIA) credit 
assistance program for major transportation investments of critical 
national importance, Intermodal Connectors Program, and the Surface 
Transportation Program (STP).
                               __________
        Statement of Hon. Peter Clavelle, Mayor, Burlington, VT
    Thank you Chairman Jeffords, Ranking Member Smith, and members of 
the committee for the opportunity to appear before you today to discuss 
such an important issue to the nation's cities. I am Peter Clavelle, 
Mayor of Burlington, VT. Today I am pleased to be here not only as a 
Vermonter, but also as a representative of the National League of 
Cities.
    The National League of Cities represents 18,000 cities and towns 
and over 140,000 local elected officials. NLC represents all cities, 
regardless of size--our largest member is New York City with a 
population of 8 million, our smallest member is De Graff, Minnesota 
with a population of 149. As the representative of the nation's local 
leaders, NLC has a vital interest in the reauthorization of the 
Transportation Equity Act for the 21st Century (TEA-21).
    NLC's Transportation Infrastructure and Services committee, one of 
seven standing policy committees, appointed a special TEA-21 
Reauthorization Task Force which recently completed a year-long rewrite 
of our surface transportation policy in preparation for 
reauthorization. Our new policy was adopted by NLC's full membership at 
our annual meeting in December 2001.
    In addition, NLC has joined other groups representing local 
officials to comprise the Local Officials Transportation Working Group. 
The working group includes representatives of city and county elected 
officials, public works professionals, development organizations, and 
city/county managers. The working group was created to provide a 
unified voice of local government for the reauthorization of TEA-21. We 
look forward to working with the committee and our other Federal and 
State partners throughout the reauthorization process.
    In addition to representing NLC today, I am here of behalf on my 
city of Burlington, Vermont. With a population of 40,000, Burlington is 
Vermont's largest city. I am currently serving my sixth term as Mayor, 
and just this fall I concluded a 2-year term as President of the 
Vermont League of Cities and Towns. I also serve on the Advisory Board 
of the United States Conference of Mayors.
                              partnerships
    The title of today's hearing is ``Partners for America's 
Transportation Future.'' The passage of the Intermodal Surface 
Transportation Efficiency Act (ISTEA) in 1991, and its successor, TEA-
21, in 1998, shepherded a new era of transportation partnership in this 
country.
    First, it forged a new partnership among Federal, State and local 
governments by empowering Metropolitan Planning Organizations (MPOs) in 
the transportation decisionmaking process. This elevation of the role 
of MPOs insured a more equal partnership between local and State 
governments in both the planning and funding decisions for 
transportation projects. This is a partnership that must be preserved 
and strengthened in the process of TEA-21 reauthorization.
    The second category of partnerships created by these two landmark 
laws is among the modes of transportation to which the legislation 
allocates funding. The various modes--automobile, trucking, transit, 
rail, ferry, bicycle, and walking--were challenged to become truly 
intermodal. We began to pursue the vision of creating a seamless, 
uninterrupted system to accommodate the need to efficiently and 
equitably serve our communities by transporting both people and goods.
    In Burlington and Vermont, transportation partnerships facilitated 
by ISTEA and TEA-21 have allowed us to build on a strong tradition of 
local planning. Working through the Chittenden County MPO we have 
accessed funds to manage our planning activities on a local level, 
bringing transportation planning efforts to the front porch and the 
neighborhood school gymnasium. We have also worked closely with our 
Agency of Transportation in assuming management of many of our 
transportation projects. The city of Burlington today is managing the 
revitalization of a neglected commercial street (North Street), 
improvements to our pedestrian mall (the Church Street Marketplace), 
the design and construction of a major roadway (the Champlain Parkway), 
the development of an intermodal transit facility, and the design and 
construction of a bike path.
    These partnerships, local, State, and Federal are vital to the 
success of the nation's surface transportation program. As we begin to 
work on the reauthorization of TEA-21, we must continue to work 
together to protect the program and ensure that all levels of 
government, no matter how small, play a part in the process.
                             budget issues
    As we embark on the reauthorization process, we must take into 
account the current climate in Washington, DC and the Nation. These are 
tough economic times and in the aftermath of September 11th, local 
officials are shifting priorities.
    One of the greatest successes of TEA-21 was the establishment of a 
direct link between gasoline taxes collected at the pump and Federal 
transportation spending. Because of that landmark change in law, 
funding for the program was increased to its highest levels in history. 
The Revenue Aligned Budget Authority (RABA) mechanism guaranteed that 
even additional, unanticipated gas tax revenue must be spent on the 
program. TEA-21 was a strong signal from Congress and the 
Administration to the traveling public that the nation's transportation 
system is an important priority.
    Therefore, we find it very disturbing to hear reports that this 
year's RABA levels may be much less than anticipated in TEA-21. We look 
forward to the President's budget submission to Congress in the coming 
weeks and hope that a continued commitment to infrastructure investment 
is demonstrated.
    NLC supports the current budgetary mechanism in TEA-21 and we 
pledge to work with you to protect the funding guarantees. We are, 
however, concerned about the trend in recent years to redirect 
transportation spending to specific projects through the appropriations 
process. NLC supports discretionary programs under TEA-21 and would 
advocate that the process remain open for all to apply and compete for 
those dollars.
                        transportation security
    Following the tragic events of September 11th, the nation's local 
officials have been urgently reassessing priorities in their 
communities. In several NLC surveys of municipal officials conducted 
after September 11th, 52 percent were reevaluating their emergency 
preparedness plans. Respondents reported immediate shifts in city 
priorities to security issues, moving personnel to protecting 
transportation facilities, water supply facilities, nuclear power 
plants, schools, and government buildings. At the Burlington 
International Airport, we have more than doubled the number of police 
officers providing security.
    In addition, the survey results show that fiscal conditions are 
worsening for many municipalities, with a 4 percent decline in revenue 
after September 11th and an over $11 billion decline nationwide. 43 
percent of cities say they are ``less able'' to meet their financial 
responsibilities after September 11th.
    In my own city, revenues are projected to increase by a very modest 
1 percent for the next fiscal year. Simply to maintain our current 
level of municipal services will require a 4-percent increase in 
expenditures.
    Cities nationwide are shifting valuable resources to public safety 
expenditures; with over half (51 percent) of the cities reporting they 
are increasing spending on public safety and security. The majority of 
cities surveyed reported they would reduce spending in other areas to 
meet the new public safety funding gap. This means cities may have to 
postpone or cancel some needed transportation projects to shift funding 
to security. This March, Burlington voters are being asked to approve a 
6-cent increase in their property taxes to maintain and improve fire 
and police services.
    We want to highlight this trend to underscore the need for 
protecting the valuable gains of TEA-21, while considering how 
transportation security issues could be part of the next 
reauthorization bill. The shifting of local revenue to a public safety 
related budget is unavoidable. The question becomes, what will be the 
role of the next Federal surface transportation program in homeland 
security? Will the Federal Government be able to offer greater 
assistance to cities to meet their needs?
              local priorities for tea-21 reauthorization
    A recent survey of local officials conducted by Public Technology, 
Incorporated, a non-profit technology organization supporting local 
governments, found that:
     62 percent of respondents (local officials) indicated that 
congestion is a major political issue in their community; and
     64 percent of respondents claim that transportation has a 
significant impact in their community and their citizens' quality of 
life.
    NLC members identified congestion as a major concern when they 
created the TEA-21 Task Force to review NLC's surface transportation 
policy. The Task Force spent last year developing new policy priorities 
for the reauthorization of TEA-21. The themes of funding, flexibility, 
and intermodalism, permeated the discussions about congestion and the 
future of the surface transportation system.
                                funding
    As previously mentioned, NLC supports the current budget mechanism 
developed in TEA-21, which directly links transportation user fees to 
transportation spending. We call for all transportation taxes, 
including those levied on gasohol and alternative fuels, to be 
deposited into the highway trust fund. To that end, we are supportive 
of the Highway Trust Fund Recovery Act, (S. 1306), sponsored by Senate 
Finance Committee Chairman Baucus.
    NLC supports the Federal--State financial matching relationships 
that currently exist and opposes any reduction of the Federal financial 
commitments. States and localities that want to provide greater 
financial resources than the minimum requirement, such as a transit new 
start project, should receive higher priority for Federal funding.
    In addition, we support innovative financing programs and 
techniques such as tolls, State Infrastructure Banks (SIBs), and the 
Transportation Infrastructure Finance and Innovation Act (TIFIA). These 
programs support the development of public--private partnerships and 
provide creative ideas for meeting the infrastructure needs in our 
cities.
                              flexibility
    NLC supports local flexibility to design, manage, and operate 
cities' transportation systems. No ``one size fits all'' surface 
transportation program will be able to meet the needs of the traveling 
public in the diverse regions of the country. Local officials are on 
the front lines and therefore better able to develop strategies to deal 
with transportation challenges in their communities. ISTEA and TEA-21 
embodied these themes and we look to the committee to continue this 
commitment through the reauthorization process.
    Many programs in TEA-21 have supported localities' innovative 
solutions to congestion and gridlock. Whether a positive change in the 
system comes from an added lane on the highway, a new bus route, a bike 
path, a pedestrian walkway, a telecommuting program, or something as 
simple as better traffic signal timing, communities are thinking of new 
ways to increase quality of life by reducing daily commute times.
    To continue to provide the most options to local governments, NLC 
supports the continuation of the Congestion Mitigation Air Quality 
program (CMAQ), Transportation Enhancements program, the Transportation 
and Community and System Preservation Pilot Program (TCSP), and the 
Intelligent Transportation System program. These programs have made a 
huge impact on localities and had a positive effect on quality of life.
    In Vermont, the Transportation Enhancements program is so popular 
that we have programmed 133 percent of available funds. In Burlington, 
we have benefited from several of the programmatic innovations 
contained in ISTEA and TEA-21. We have utilized the Enhancements 
program to launch the revitalization of an historic commercial center 
along North Street. We've implemented street lighting upgrades and 
streetscape improvements. We've benefited from TCSP funds for 
improvements to the Church Street Marketplace. Congestion Mitigation 
Air Quality (CMAQ) funding has enabled us to try new approaches to 
solve downtown parking and transportation problems. We have also made 
key additions to our local and regional bicycle-pedestrian system, 
providing bike shelters and placing bike racks on buses.
    In addition, NLC believes that to maintain economic viability, 
congestion mitigation programs must be available to cities and towns. A 
comprehensive, Federal funding program to address congestion would 
foster project innovation, enhance intermodal planning, promote savings 
in infrastructure investment, and increase the livability and economic 
viability of communities across the country. NLC urges the committee to 
consider the development of a congestion mitigation program that 
recognizes that congestion is a local issue and provides direct funding 
to cities and regions of all sizes to address related problems in their 
communities.
    NLC believes that a congestion mitigation program may help 
alleviate future air quality issues in many areas. We recognize that 
many metropolitan areas are currently not in attainment under the Clean 
Air Act. In addition to a metropolitan congestion program, we remain 
strongly committed to a Federal funding program, like CMAQ, for non-
attainment areas to address emissions from mobile sources.
    Additionally, NLC supports streamlining the Federal transportation 
project delivery process to help reduce unnecessary delays in 
implementation, which will allow for more effective and efficient use 
of Federal funds. We look forward to working with the committee and the 
Administration to achieve a positive change without harming the 
environment or sacrificing citizen participation in the process.
                      intermodalism/multi-modalism
    It is essential that the nation's transportation system be 
seamless, with complimentary and supportive relationships amongst all 
modes. Both freight and passenger transportation should be facilitated 
by the right mix of multi-modal connectors, minimizing the disruption 
associated with movement through high density areas, especially at peak 
times such as ``rush hour''.
    NLC strongly supports Federal programs, which fund different 
transportation modes such as the Federal transit and rail programs. 
Passenger rail--commuter rail, inter-city rail, high-speed rail and 
MagLev--provides communities with other options to consider as part of 
a transportation and smart growth plan. In my small city, commuter rail 
service has been instituted.
    We support funding to both preserve existing transit systems and 
for New Starts. In addition, we support a change in the law to allow 
States and localities to use TEA-21 dollars for inter-city passenger 
rail. We support the development of a national high-speed rail network. 
NLC joined our local and State partners in supporting the High Speed 
Rail Investment Act, (S. 250), which is pending before the Senate 
Finance committee.
    Federal policies should encourage ``closing the gap'' of 
independent modal elements of the transportation system, with the goal 
of ensuring that efficient connections are available for the movement 
of people and goods. Accordingly, NLC supports the development of 
intermodal facilities and would recommend that projects shown to 
improve the efficiency of the connecting modes of intermodal facilities 
should be recognized as a matter of national significance. 
Specifically, we would ask the committee to examine the intermodal 
system and determine if a specific funding program may be needed to 
help alleviate congestion.
    In Burlington we will break ground this fall on an intermodal 
transit facility that will provide seamless connections for regional 
transit, passenger rail, bicycle, and lake ferry services. This 
facility and all of its interconnected modes will make our waterfront 
accessible to greater a number of visitors-without overwhelming it with 
automobiles.
                               conclusion
    In conclusion, the nation's local elected officials stand ready to 
work with you throughout the reauthorization of TEA-21. We understand 
the delicate balance among the priority objectives all of the partners 
from the Federal, State, and local levels testifying before the 
committee today. The National League of Cities is committed to working 
with our partners to help develop the next surface transportation 
program. We value our seat at the table in this process and accept the 
responsibility of planning and implementing innovative transportation 
strategies to meet the needs of our citizens.
    It is clear to us that congestion remains one of the nation's top 
complaints and is affecting quality of life. In addition, safety and 
security have become top priorities in this new post-September 11th 
climate. We believe the Federal Government can strike a balance between 
protecting our citizens and enhancing their quality of life. We 
continue to strive for an innovative, intermodal, and multi-modal 
transportation system.
                                 ______
                                 
   Responses of Peter Clavelle to Additional Questions from Senator 
                          Nighthorse Campbell
    Question 1. Are there transportation related security projects 
which your State or community could use Federal funding for as a result 
of 9/11?
    Response. First, the most significant transportation related 
security challenge facing the city of Burlington as a result of 9/11 
relates to airport security. The city of Burlington owns and operates 
the Burlington International Airport. The Burlington Police Department 
is responsible for policing this facility. A total of 1.1 million 
passengers utilized the airport in 2001.
    After September 11, security at the Airport has been significantly 
increased. The number of police officers assigned to the airport has 
been increased from four to fourteen. Vermont National Guard personnel 
have been deployed to inspect vehicles at the entrance to the airport 
parking garage and to generally supplement existing security forces. 
Federal funding of the National Guard's presence at the Burlington 
International Airport is being terminated effective April 1, 2002. The 
additional security related expenses to be incurred by the City at this 
small airport are estimated to be $650,000 per year. These costs will 
be passed on to the airlines and/or consumers. Additional Federal 
funding to offset these expenses would be most welcome.
    Second, 9/11 has demonstrated the importance of offering a national 
transportation system that is multi-modal and diverse. Among the 
highest priorities of the city of Burlington is the improvement of both 
rail infrastructure and rail service to our community. We are committed 
to expanding commuter rail service, extending Amtrak service, and 
reducing freight-carrying truck traffic on our streets and highways. We 
also look forward to the creation of high-speed rail corridors 
servicing our city and connecting communities across our Nation.
    Mayors across America, from cities large and small, believe a 
national rail policy is essential for our economy and our security. We 
cannot depend too heavily on any single mode of transportation. I urge 
Congress and the Senate EPW Committee to support the re-authorization 
of Amtrak and increased investment in our nation's rail system.

    Question 2. Would you support the creation of a specific highway 
security-funding category in the next reauthorization?
    Response. The National League of Cities established a Working Group 
on Homeland Security in January to be a front line resource on homeland 
security to help define the new role of local governments in national 
defense and what those new responsibilities require in terms of Federal 
support, intergovernmental partnerships and local budgets. Former 
Dallas, Texas Acting Mayor Mary Poss and Dearborn, Michigan Mayor 
Michael Guido are leading the Working Group.
    NLC's Transportation Infrastructure and Services Committee will be 
deliberating throughout the summer with the Working Group to identify 
the needs of local governments for transportation security. Through 
multiple surveys, NLC has determined that cities are drastically 
increasing funding to public safety operations to protect vital city 
services including transportation. The most recent NLC survey revealed 
that cities expect an increase of 62 percent in first responder 
overtime costs and a 26 percent increase in new public safety equipment 
purchases and security upgrades.
    Local emergency response and evacuation plans include a 
transportation system component. Surface transportation systems can be 
considered a potential target, like a transit system or bridge 
infrastructure and provide the tools for a successful evacuation of a 
downtown, such the Washington DC metro system did on 9/11. This 
underscores the importance of protecting these facilities. NLC believes 
that TEA-21 programs like the Intelligent Transportation System (ITS) 
program will be integral to increased transportation security in the 
nation's cities.
    The ability of local government to use technology, through a 
program like ITS, to coordinate communications among local 
transportation agencies, public safety officials, and the public is 
vital to saving lives in an emergency.
    We look forward to working with the EPW Committee throughout the 
year to determine whether a specific security-funding category will be 
needed in the next surface transportation law.
                               __________
           Statement of Hon. Brent Coles, Mayor of Boise, ID
    Mr. Chairman and members of the Senate Committee on Environmental 
and Public Works, I am Brent Coles, Mayor of Boise, Idaho.
    I appear today on behalf of The U.S. Conference of Mayors where I 
serve as the Conference's immediate past president and member of the 
executive committee. The Conference of Mayors represents more than 
1,000 cities with a population of more than 30,000.
    Mr. Chairman, I want to thank you and other members of this panel 
for holding these hearings today, as we approach the next phase of 
``Transportation Equity Act for the 21st Century'' or TEA-21.
    On September 11 the world witnessed an attack on America that was 
unimaginable. The attacks instantly revealed the importance to our 
national security of a balanced, multi-modal, resilient, and secure 
transportation system. While our transportation agencies and businesses 
struggled heroically to deal with the tragedy, many travelers did not 
make it home for a week. Securing our transportation system is viewed 
as a prerequisite to eliminating the anxiety that has accelerated the 
nation's economic downturn and to achieving economic security for the 
Nation.
    Fortunately, we have tools to deal with this crisis, provided by 
visionary Federal transportation laws known as ISTEA and TEA-21. TEA-21 
provided the resources necessary to make investments in our 
transportation network that enabled immediate and quick emergency 
response.
    In the weeks since that attack, mayors across the Nation have 
mobilized the local resources provided through TEA-21 to protect their 
citizens in the event of further terrorist activity. The national 
security benefits of ISTEA were hardly anticipated when the bill was 
passed 10 years ago, but the events of 2001 demonstrated the critical 
importance of this law. As they always have done in times of crisis, 
mayors assumed visible leadership roles, both in their cities and 
throughout their metropolitan regions. They have engaged in critical 
examinations of the local, State and Federal resources, as well as the 
security infrastructure that exist to do this.
    Now, as the Nation recovers from the tragedy of September 11, 
America's mayors stand ready on the domestic front lines at assist in 
every way possible. We are the ``domestic troops'' in the war on 
terrorism, as Conference President Marc Morial of New Orleans has 
stated. The wealth of resources provided by TEA-21 has most certainly 
strengthened our ability to do this.
                                overview
    When Fort Worth Mayor Ken Barr, the Conference's Transportation and 
Communications chair, testified before the subcommittee last April, his 
statement highlighted a number of issues pertaining to TEA-21. I will 
speak to these issues and others in more detail in my testimony.
    As a starting point, I want to emphasize a statement by Mayor Barr, 
which captures the Conference's broader view on TEA-21. He said, ``TEA-
21 certainly provides the tools and the laboratory, but it doesn't 
guarantee success. This is up to local elected officials working with 
the Governors and State transportation officials to use the tools you 
have provided.''
    We commend this committee and others in Congress and the 
Administration, for providing us with the opportunity under TEA-21 to 
meet our surface transportation challenges. Mr. Chairman, I know that 
in your capacity as Senator of Vermont, you are one of the pioneers of 
the concept of transportation-oriented development. Transportation 
touches every aspect of our modern lives. We thank you for your 
leadership in this area.
    I am here to provide context for our views on where we are today 
with the implementation of TEA-21. Many of the issues highlight the 
importance of cities to the success of the TEA-21 partnership.
                               __________
                 New Ideas Influencing TEA-21 Decisions
                   (By Mayor Ken Barr, Ft. Worth, TX)
    First, I would like to call your attention to several emerging 
issues that have considerable bearing on the committee's review of TEA-
21 implementation.
    First, let me talk about the Conference's work on developing new 
information on the role of city/county metro economies in fueling U.S. 
economic growth. Since 1999, we have released annual data, prepared by 
Standard & Poor's DRI, which measures the Gross Metropolitan Product 
(GMP) figures for the nation's city/county metro areas.
    As the focal points of economic activity, metropolitan areas are 
vital to the nation's continued economic development. The contribution 
of metro areas to the national economy has increased over the last 
decade, a trend that is expected to continue over the next 25 years.
    If they were counted as a single country, the gross product of the 
five largest U.S. metropolitan areas ($1.59 trillion) would rank fourth 
among the world's economies, trailing only the U.S. ($9.96 trillion), 
Japan ($4.6 trillion) and Germany ($1.87 trillion). The importance of 
metro area economies can also be illustrated by their size relative to 
the output of U.S. States. The gross product of the 10 largest metro 
areas exceeds the combined output of the 31 smallest States. In the 
study, we found that 47 of the top 100 economies in the world are U.S. 
city/county metro areas.
    The size of metro area economies illustrates their importance to 
the Nation. Mr. Chairman, the implications of this information for 
Federal and State policymakers are far-reaching. There is no doubt in 
my mind that the resources provided by ISTEA and TEA-21 have played a 
significant role in the economic vitality of cities and metro regions. 
The Conference stands ready to work with you and this committee as you 
craft future surface transportation policy.
                 mayors' views of tea-21 implementation
    In anticipation of this discussion, we recently surveyed a group of 
mayors, principally those serving on the Conference's transportation 
committee, to solicit their general views on how the TEA-21 is working. 
Let me provide a quick review of the responses from 40 mayors who 
completed the survey.
    Nearly one-half of the mayors indicated that under TEA-21, their 
State had committed additional funding or planned to commit additional 
funds to local projects of particular priority to the city or region. 
When we asked if their metropolitan planning organizations (MPOs) had 
set any targets for fair share funding under TEA-21, one-half of the 
respondents said yes.
    Based on the survey, it appears that States are reaching out to 
local governments under TEA-21. Seventy percent (70 percent) of the 
respondents indicated that their Governors or State transportation 
officials had contacted them about new funding available under TEA-21. 
However, only 40 percent of mayors have been asked to participate in a 
State process to decide funding priorities for TEA-21 dollars.
    When asked to indicate the single most important surface 
transportation priority in their city or region, the mayors' top three 
responses were System Preservation at 35 percent, Congestion Relief at 
20 percent and New Rail Projects at 15 percent. The remaining 30 
percent of the responses included alternative transportation, new 
freeways, freeway expansion, transportation access to brownfield sites, 
safety, bridge repair and major road widening. Mayors were asked to 
write the response, rather than choosing from a list.
    I do not think mayors can overstate the importance of 
infrastructure to the economic health of our cities and regions and 
transportation infrastructure is clearly one of our highest priorities.
                           tea-21 is working
Treasure Valley Partnership
    Though suburban sprawl may conjure up visions of LA or Phoenix, the 
rugged, southwest corner of Idaho also faces significant traffic and 
air quality problems stemming from rapid growth. During the past 
decade, Boise, Idaho had the second highest growth rate in the country.
    For the first time, our residents began to think seriously about 
transportation issues. Our legendary ``rush-minutes'' lengthened and 
people began to experience longer, less tolerable commutes. Policy 
makers began to look at ways to protect our quality of life from the 
impacts of sprawl. Our highly conservative region began to discuss 
ideas like transit oriented development, protection of open space, and 
commuter rail.
    Four years ago, we formed a working group called the Treasure 
Valley Partnership. The Partnership consists of mayors and 
commissioners from general purpose governments in two counties. This 
group embodies the collaborative principles set out in TEA-21. As a 
Partnership, we have brought together business, community groups, and 
local government to make new connections between transportation and 
land use. I believe that our entire process of governance in the region 
has been improved and policy decisions are made in more informed and 
strategic manner, so that all citizens are better served.
    The Partnership began to look seriously at what our region will 
look like at full build-out. For the first time, we put our 
comprehensive plans side by side to see if they are consistent with 
each other. Our planning staffs have begun to talk more and cooperate 
more. Our transportation plans have more regional buy-in.
    The Partnership has directly benefited from TEA-21. Working in 
collaboration with Idaho Smart Growth and our MPO, we obtained a 
$500,000 grant for a visioning process that has engaged the entire 
region in a discussion of sprawl and traffic, and their link to land 
use. The money has been leveraged with other grant funds to conduct 
pilot projects which model the conclusions of the broader study.
    Based on the principles of TEA-21, the city of Boise purchased more 
than 18 miles of railroad track and right-of-way that was about to be 
abandoned by Union Pacific Railroad. We used general fund property tax 
dollars for this purchase, even though the track is located entirely 
outside our corporate city limits. We raised private funds to purchase 
Boise's historic train depot. We did this to preserve the 
infrastructure that will be needed someday for commuter and passenger 
rail service in our region.
    The residents of our two-county area went to the Idaho Legislature 
for the authority to establish regional transit programs. Then, voters 
overwhelmingly approved creation of a regional transit authority. We 
have yet to be given a dedicated funding source by the Legislature, but 
Boise City has provided funding to hire an executive director and we 
are allowing the regional transit authority to assume operation of our 
bus system.
    This is progress that would not have occurred without the guidance 
and encouragement provided by ISTEA and TEA-21. There is more to be 
done, but we believe we are on the right track.
                            closing comments
    Now, Mr. Chairman, last Friday I was informed of the potential $9 
billion shortfall in TEA-21 allocations to the States for fiscal year 
2003. If the shortfall is passed onto States, the funds allocated under 
TEA-21 in fiscal year 03 would be less than the base amounts promised 
to States for highways and transit. As you might imagine, this would 
have serious repercussions. The State of Idaho, for example, would lose 
more than 25 percent of our Federal transportation funding. California 
would lose $741 million dollars and Texas would lose $626 million. It's 
estimated that nationwide we would lose an estimated 144,000 jobs by 
fiscal year 04.
    I know that this is new information and that the impacts of the 
shortfall have yet to be fully explored. I pledge to you the assistance 
of the Conference of Mayors as you work toward resolution of this 
issue.
    Mr. Chairman, the issues I have discussed today affect all of our 
cities. Our cities as neighborhoods--protecting quality of life--and 
our cities as regions--competing in a global economy--must have 
transportation funds as tools to carry out our responsibilities within 
the regional context. In our region, adequate funding and air quality 
constraints continue to hamper our potential success. You have the 
opportunity to permit us to respond better to both our responsibilities 
to enhance quality of life and increase competitiveness in a world 
economy.
    The nation's mayors believe in the ISTEA partnership, and look 
forward to the opportunity to build upon this success under TEA-21.
    Mr. Chairman, as you move forward on TEA-21 Reauthorization, you 
can count on the mayors' active participation and support. Thank you 
for this opportunity to present our views.
                               __________
 Statement of Chris Hart, County Commissioner, Hillsborough County, FL
    Good morning Mr. Chairman and members of the committee, I am 
Commissioner Chris Hart, County Commissioner of Hillsborough County, 
Florida. Today I am representing the National Association of Counties 
(NACo)\1\ where I serve as chairman of its transportation steering 
committee. On behalf of NACo, I want to thank the committee for 
inviting me to appear before you on the topic of TEA-21 
reauthorization. I am delighted to share this panel with West 
Virginia's Governor Wise, Mayor Clavelle of Burlington, Vermont, and 
Mayor Coles of Boise, Idaho. My county seat is in Tampa, where I 
directly represent over 1 million citizens on the central West Coast of 
Florida. It is an urban center of seven counties with over 3.5 million 
people. It is also the economic engine of the Tampa Bay region, in 
great measure because of our focus on improving the transportation 
network, and our major international air and seaports that connect us 
to the global economy. On a lighter note Senators, if you haven't had a 
call for the head coach position of the Tampa Bay Buccaneers, rest 
assured you will--everyone else has!
---------------------------------------------------------------------------
    \1\ NACo is the only national organization representing county 
government in the United States. Through its membership, urban, 
suburban and rural counties join together to build effective, 
responsive county government. The goals of the organization are to 
improve county government; serve as the national spokesman for county 
government; serve as a liaison between the nation's counties and other 
levels of government; achieve public understanding of the role of 
counties in the Federal system.
---------------------------------------------------------------------------
    NACo has a broad interest in transportation policy. NACo has been 
very active over the past 50 years in assisting Congress in developing 
legislation that benefits our member counties, as well as our partners 
in the cities and States. Much of our focus has been on the highway 
program for the simple reason that counties own 44 percent of the 
nation's highway mileage and 45 percent of the nation's bridges. With 
3,066 counties in our vast nation, NACo's membership is diverse. It's 
in America's thousand urban counties where both economic and population 
growth is occurring. Metropolitan counties, or in urban centers like my 
home on Tampa Bay, account for 84 percent of the gross domestic 
product, and have over 125 million people living in just 100 of the 
most populated counties. Strong economic growth will occur only with a 
sound transportation system. Of course, the downside of that growth has 
been increasing traffic congestion, which at times threatens our 
quality of life and deprives citizens of their ability to move around 
in a safe and efficient manner. Conversely, there are two thousand 
rural counties with a dwindling tax base that must maintain and improve 
their highway and bridge systems if they are just to remain competitive 
in today's economy and retain their current population.
    TEA-21 and its predecessor, ISTEA, have been very helpful to our 
members and to our Nation as a whole. There is little doubt in my mind 
that these programs have contributed to the overall economic growth 
that our Nation experienced in the last decade. ISTEA, in 1991, began a 
trend to increase the Federal investment in the highway program, and 
TEA-21 provided a 40 percent boost. The increase was needed and we have 
seen the benefits. For example, last year the State of Florida 
appropriated over $1 billion for a combination of improvements to the 
local, State, and Federal transportation system in the Tampa Bay 
region. This was a direct result of increased funding because of TEA-
21. The leadership of NACo supported the funding increase for 
transportation in TEA-21, and fought hard to support the financing 
changes in TEA-21 that made this level of spending possible. It would 
be an economic disaster if Congress were to eliminate the firewall 
established in TEA-21 or began to use the Highway Trust Fund to either 
finance other programs or mask the deficit. Mr. Chairman and members of 
the committee, the financing decisions made in 1998 were the right 
ones!
    Let me also add that I also believe that our highway infrastructure 
performed well on September 11 and in its aftermath. We should all 
remember that the Federal highway program was begun to ensure our 
nation's defense. While the tragic events of last September were never 
anticipated, the security function of our highway and bridge system 
worked. When NACo's Homeland Security Task Force met for the first time 
in October, it was Secretary of Transportation Noman Mineta, along with 
Governor Tom Ridge, that the task force wanted to hear from.
    Aside from funding, the key change in highway legislation over the 
last 10 years has been the creation of a flexible program that has 
relied on greater input from local elected-government officials. The 
result has been better planning, better decisionmaking on project 
selection, and better projects. It is likely that the Federal 
Government will continue to spend substantial Federal resources each 
year on highways and bridges, and that makes it essential that both 
local and State government leaders sit together at the table when 
decisions are made. The reauthorization of TEA-21 should continue and 
accelerate that partnership. ISTEA required cooperative decisionmaking 
through the metropolitan planning organization (MPO) process on how 
surface transportation program funds, the most flexible category, were 
to be spent. TEA-21 continued that requirement; and that legislation 
also called for cooperation and consultation between State and local 
decisionmakers in other Federal highway programs. TEA-21 expanded this 
to rural areas and statutorily called for a consultation process in 
each State for obtaining rural local officials input in the statewide 
transportation plan. I must add that while some States have a process 
and the Federal Highway Administration did issue guidance on this 
change to its field offices, the U.S. Department of Transportation has 
yet to issue final regulations on rural planning requirements.
    Last fall, I established NACo's TEA-21 Reauthorization Task Force 
under the able leadership of my colleague Commissioner Glen Whitley 
from Tarrant County, Texas. Mr. Chairman, he and our staff have been 
diligent in their efforts, have met several times with members 
throughout our country, and are now in the process of finalizing NACo's 
recommendations for TEA-21 reauthorization. However, I am confident 
that I can state without reservation that environmental streamlining 
will be a top issue for our members. Also, I want to be very clear that 
we will not be calling for the repeal of any of our nation's 
environmental protection laws. Rather, we will be recommending that the 
reauthorization include provisions that ensure projects are completed 
in a timely and efficient manner, and the delays in the current system 
that unnecessarily slow down projects are eliminated! Simply put, Mr. 
Chairman and committee members, we are asking for a concurrent process, 
rather than an uncoordinated, sequential one. In the broadest sense, 
this means that we need to get all the players in a project involved at 
the outset. This means the local elected officials, State DOTs and its 
other regulatory officials, all Federal agencies having a role to play, 
as well as the environmental community, and most especially, the 
affected citizens. No one should be ignored, and no Federal agency 
should be allowed to operate independently of the other participants. 
In my State of Florida, for instance, this effort is a work-in-
progress, but it will not be successful without collaboration from the 
Federal Government.
    Congestion will be another key policy issue that Congress must 
address in the reauthorization. Urban counties, their citizens, 
tourists, and our commerce are strangling on congestion. Time, money, 
and productivity are all lost when commerce, the American commuter and 
tourist are stuck in traffic. There is no one solution, except that we 
must apply common sense to the challenge of congestion. Solutions must 
be found through very close State-local cooperation. Congestion occurs 
on county highways, not just on the State networks. We must remember 
that we have a system of highways, and when one part of the system 
breaks down, the others are affected too. Any new legislation should 
provide for those highways and streets we have now, to ensure they are 
properly maintained, so that they can move traffic safely. We must 
invest more money in highways to guarantee that our current system is 
maximized. We know that as much as 50 per cent of congestion occurs due 
to breakdowns and accidents on the roadways. Therefore, we must be 
smart enough to establish simple, efficient methods for getting these 
incidents resolved quickly. Here again, Federal agencies and their 
resources can partner with local and State government to save time, 
money, and lives. We need to have systems and procedures in place that 
include all the various agencies involved in incident management; from 
the highway departments, police, fire/rescue, to EMS and wrecker 
services, all communicating with one another. We can do better. Let me 
illustrate. How many times have you seen a breakdown or accident in one 
lane of traffic, with emergency vehicles taking up the other lane or 
lanes, and if we're really lucky, perhaps we are able to pass after an 
hour or so in morning and evening rush hour traffic. Systems and 
procedures for incident management could go a long way toward relieving 
congestion. Another key to relieving congestion and moving traffic is 
signalization. We have all been on highways where the signals are 
coordinated and traffic flows. We have also been on roads where we are 
stopping at every red light. Many local governments need additional 
resources to modernize traffic signals. The good news is that 
electronic signals, and now Intelligent Transportation Systems, or ITS 
as it's commonly called, are giving us an 8 to 1 return on our 
investment as compared to other alternatives. By the way, what we don't 
need are automatic signs that say ``congestion ahead'' when we are 
already caught in traffic, or where there are no alternative routes.
    Now, Mr. Chairman, I would finish my remarks by addressing a major 
concern we all share, rural roads. Rural roads are in need of 
substantial Federal investment. Safety is the primary reason. According 
to a U.S. General Accounting Office report in July 2001, rural local 
roads had the highest rate of fatalities per vehicle mile traveled of 
all types of roadways-over six times that of urban interstates. In 
1999, over 25,000 fatalities occurred on rural roads across the United 
States; and that figure was 2.5 times greater than the fatality rate 
from accidents on urban highways in areas like Las Vegas, Miami, St. 
Louis, and Cleveland. If Congress wants to reduce auto fatalities, 
there is no better investment than on roads in rural counties. Because 
rural roads are the most dangerous roads in America, and are the most 
costly in human lives, NACo will be proposing a new program to address 
rural road safety in the coming months. Rest assured, Mr. Chairman, 
that we would work closely with your committee in developing it.
    Mr. Chairman, this concludes my testimony. I thank you and the 
committee for the opportunity to be here today, and would be pleased to 
answer your questions.
                                 ______
                                 
 Responses from Chris Hart to Additional Questions from Senator Graham
    Question 1. I wholeheartedly agree with your assessment that 
Incident Management Agreements could help ease congestion. Could you 
offer examples of where they have been implemented and worked, or where 
congestion has worsened because of a lack of coordinated response to 
traffic accidents?
    Response. The State of Florida has 10 freeway incident management 
teams and 52 community traffic safety teams. Florida also created a 
statewide Traffic Incident Management Steering Committee to improve the 
management of incidents on our highway system.
    Incident management also relates to the issue of highway security. 
Our awareness of ensuring the security of our highways and ability to 
prepare for and respond to unexpected catastrophic events has been 
heightened since 9/11. The same organizational arrangements, training, 
communication systems, and procedures that one would need to manage 
traffic incidents would be similar to those needed to address highway 
security. Intelligent Transportation System technology must be a key 
element in addressing this need.

    Question 2. I share your concern that the environmental 
streamlining regulations are still not finalized, and I plan to 
encourage DOT to come forward, at the appropriate time, with 
regulations that reflect what we hoped to do in TEA-21. I hope, 
however, that we are moving toward an era of increased cooperation even 
without the regulations. What have been your recent experiences, either 
in Florida, or through your leadership with NACo, of infrastructure 
projects being stymied by lack of coordination between different 
agencies? Is the coordination effort improving, staying the same, or 
getting worse?
    Response. Florida is a leading State for the area of environmental 
streamlining. Section 13098 of the TEA-21 reflected Congress' concerns 
about delays, unnecessary duplication of effort and added costs often 
associated with the current process for reviewing and approving 
transportation projects called ``environmental streamlining''. This 
legislation challenged the Florida Highway Administration and Federal 
Transit Administration to implement a more efficient transportation 
planning and review process. Florida was selected as a pilot State for 
developing and implementing a streamlined planning and project 
development process.
    To date, Florida has developed a more efficient process, the 
Efficient Transportation Decision Making process, which uses available 
information starting at the long-range planning stage. It is also 
designed to encourage earlier and ongoing coordination among agencies 
to ensure the understanding and development of satisfactory approaches 
to addressing environmental issues with the goal to ensure timely 
permitting as early in the process as possible. Florida is attempting 
to make the National Environmental Protection Act (NEPA) and the 
environmental process a single process, and not create a situation 
where agencies review the environmental work during the NEPA process 
and then revisit the project again during the permit process.
    With this process, Florida hopes to avoid the problems it has 
encountered in several major projects. One example that is very 
familiar to Senator Graham is the proposed expansion of US1, from 
Florida City into the Florida Keys. This project was challenged by the 
Army Corps of Engineers and still awaits resolution of the 
environmental issues. Another example is the extension of SR 7 in Palm 
Beach County. Planning for this four-mile extension of SR 7 that passes 
through sensitive environmental lands moved forward with the planning 
and project development with no resolution of the issues. In both of 
these cases, millions of dollars were spent only to have the projects 
stopped or withdrawn when environmental concerns could not be resolved. 
The Efficient Transportation Decision Making process would hopefully 
identify these issues much earlier in planning and the project 
development phases before expensive project development and design 
phases proceed.
                                 ______
                                 
 Responses of Chris Hart to Additional Questions from Senator Campbell
    Question 1. Are there transportation related security projects 
which your State or community could use Federal funding for as a result 
of 9/11?
    Response. Florida's geographic location and extensive coastline 
presents security challenges to Florida's ports and communities. In 
addition, our State's reputation as a major tourist destination and 
commercial center generates significant air traffic. Florida's ports 
and airports are committed to providing the citizens of surrounding 
communities the utmost safety and security.
    Specifically, the Florida statewide Ports Council submitted a 
statewide Port Security Issue projects list to the Florida 
Transportation Outreach Program Advisory Council. This project could be 
in turn submitted for Federal funding. All major airports have been 
actively working to meet and integrate new federally mandated security 
procedures. Part of these funds will come from the Federal Aviation 
Administration and U.S. Department of Transportation. Specific airports 
are seeking additional funding such as Tampa International Airport's 
new Passenger Facility Charge Application which will provide roughly $9 
million to accommodate modifications to existing facilities to 
implement 100 percent screening of checked baggage.

    Question 2. Would you support the creation of specific highway 
security funding category in the next reauthorization?
    Response. We need to prioritize and identify specific items within 
funding categories that either serve a direct security function, or 
have a dual purpose such as ITS signalization with cameras at 
intersections. Cooperative arrangements among different highway and 
public safety agencies, common ``first-responder'' communication 
frequencies, interlocal agreements, and standardized response 
procedures could all be used to deal with both transportation incidents 
and potential security threats. Such protocols could be required 
performance standards in the reauthorization legislation, and produce 
more effective response capabilities nationwide at a low-cost.









                       REAUTHORIZATION OF TEA-21

                              ----------                              


                       MONDAY, FEBRUARY 11, 2002

                               U.S. Senate,
         Committee on Environment and Public Works,
Subcommittee on Transportation, Infrastructure and 
                                    Nuclear Safety,
                                            Washington, DC.

         DEPARTMENT OF TRANSPORTATION'S FISCAL YEAR 2003 BUDGET

    The committee met, pursuant to notice, at 1 p.m. in room 
406, Senate Dirksen Building, the Hon. Harry Reid [chairman of 
the subcommittee] presiding.
    Present: Senators Reid, Wyden, Baucus, Inhofe, Chafee, 
Jeffords, and Graham.

  OPENING STATEMENT OF HON. HARRY REID, U.S. SENATOR FROM THE 
                        STATE OF NEVADA

     Senator Reid. The Subcommittee on Transportation, 
Infrastructure, and Nuclear Safety will come to order.
    We welcome everyone to today's hearing on the Federal 
Highway Administration's fiscal year 2003 budget proposal and 
budget issues related to the reauthorization of TEA-21, the 
Transportation Equity Act for the 21st Century.
    The President's budget raises some important short- and 
long-term concerns, but I do very much welcome the opportunity 
to discuss these issues today with you, Administrator Peters, 
and other distinguished witnesses.
    The present budget cannot be sustained. A 27 percent cut in 
highway funding is a move in the wrong direction, given our 
Nation's transportation needs. It would mean the elimination of 
hundreds of thousands of good jobs, and it would be a drag on 
our economic recovery.
    I am pleased that Tom Stephens, our very fine Director of 
the Nevada Department of Transportation, is here to testify on 
behalf of State Departments of Transportation across the 
Nation. I am sure that Mr. Stephens will speak to the negative 
impact these cuts will have on Nevada.
    Nevada is the fastest growing State in the Nation. We have 
huge needs for new road capacity, not to mention new transit 
and rail initiatives. A $50 million-plus spending cut in Nevada 
next year would force the State to cut back on critical 
transportation projects. The results would be more congestion, 
reduced productivity, worsened air quality, and loss of jobs.
    This is not an acceptable outcome. Nevada has significant 
unmet transportation needs, and these cuts cannot be allowed. 
Nevada is really the poster child for the rest of the country. 
Every State has these same problems.
    The Revenue Aligned Budget Authority, or RABA, mechanism 
was created to ensure that spending from the Highway Trust Fund 
was tied to revenues in the Trust Fund. This is a goal that I 
support. However, the RABA mechanism clearly needs to be fixed 
so that we can avoid the dramatic swings in spending that we 
have seen over the past few years.
    One of the first reasons that we authorized TEA-21 for 6 
years and created the budget firewalls for highway and transit, 
was to provide States with some certainty as to the level of 
funding they would receive each year. A stable and dependable 
funding stream is essential for States to develop long-term 
transportation plans, and efficiently manage projects.
    I agree with the philosophy behind RABA, that spending from 
Highway Trust Funds should be connected to revenues, but I do 
not think it is necessary for us to follow a broken mechanism 
off a spending cliff.
    Regardless of the spending adjustment mandated during RABA, 
we cannot allow a 27 percent drop in highway funding next year. 
Adequate funding of our Nation's highways is important, not 
only for obvious, short-term economic stimulus and highway 
improvement needs, but for long-term reasons, as well.
    This subcommittee will be working with the chairman and the 
ranking member of the full committee to put together a TEA-21 
reauthorization proposal early next year. One of my priorities 
is to ensure that adequate funding is available to meet our 
Nation's significant transportation needs.
    It is important to understand that the funding level that 
Congress enacts for 2003 will serve as the baseline from which 
our committee's reauthorization proposal will be scored.
    Therefore, if we base reauthorization on the President's 
fiscal year 2003 budget proposal, we will have $28 billion less 
available to us than fiscal year 2003 spending equals the 
amounts authorized in TEA-21. That is a tremendous burden for 
us to bear.
    A spending baseline that is $28 billion below TEA-21 
baseline would spell disaster for the whole transportation 
system. In fact, my focus is on doing just the opposite, in 
finding a way to increase funding for all the components of our 
surface transportation systems: highway, transit, and rail.
    This is why the leaders of the Senate Environment and 
Public Works Committee have worked on a bipartisan, bicameral 
basis with the House Transportation and Infrastructure 
Committee, to introduce the Highway Funding Restoration Act.
    This legislation, which every member of this committee co-
sponsored, will ensure that funding in fiscal year 2003 is at 
least at the level authorized in TEA-21. Rest assured that I 
will be advocating for the highest funding possible, but I 
cannot accept a penney less than the amount authorized in TEA-
21.
    I know that Administrator Peters shares some of my concerns 
about the impact of these proposed highway funding cuts. 
Administrator Peters, I welcome you to this hearing. Let me 
tell you how pleased I am that someone so familiar with the 
transportation challenges faced by fast growing Western States 
is at the helm of the Federal Highway Administration. I look 
forward to working with you to develop a top-notch 
reauthorization bill.
    [The prepared statement of Senator Reid follows:]
  Statement of Hon. Harry Reid, U.S. Senator from the State of Nevada
    Welcome to today's hearing on the Federal Highway Administration's 
fiscal year 2003 budget proposal and budget issues related to the 
reauthorization of TEA-21, the Transportation Equity Act for the 21st 
Century. The President's budget raises some important short and long-
term concerns and I welcome the opportunity to discuss these issues 
today with Federal Highway Administrator Mary Peters and our other 
distinguished witnesses.
    I will get right to the point--the President's budget cannot be 
sustained. A 27 percent cut in highway funding is a move in the wrong 
direction given our nation's transportation needs. It will also mean 
the elimination of hundreds of thousands of good jobs and be a drag on 
our economic recovery.
    I am pleased that Tom Stephens, our fine Director of the Nevada 
Department of Transportation, is here to testify on behalf of State 
Departments of Transportation across the Nation. I am sure that Mr. 
Stephens will speak to the negative impact these cuts will have on 
Nevada. Nevada is the fastest growing State in the Nation and we have 
huge needs for new road capacity, not to mention new transit and rail 
initiatives. A $50 million spending cut in Nevada next year will force 
my State to cut back on critical transportation projects. The result 
will be more congestion, reduced productivity, worsened air quality, 
and lost jobs. This is not an acceptable outcome. My State has 
significant unmet transportation needs and these cuts cannot be 
allowed.
    The Revenue Aligned Budget Authority--or RABA--mechanism was 
created to ensure that spending from the Highway Trust Fund was tied to 
revenues into the trust fund. This is a goal that I fully support. 
However, the RABA mechanism clearly needs to be fixed so that we can 
avoid the dramatic swings in spending that we have seen over the past 
few years.
    One of the reasons that we authorized TEA-21 for 6 years and 
created the budget firewalls for highways and transit was to provide 
States with some certainty as to the level of funding they would 
receive each year. A stable and dependable funding stream is essential 
for States to develop long-term transportation plans and efficiently 
manage projects. I agree with the philosophy behind RABA--that spending 
from the Highway Trust Fund should be connected to revenues, but I do 
not think it necessary for us to follow a broken mechanism off a 
spending cliff.
    Regardless of the spending adjustment mandated by RABA, we cannot 
allow a 27 percent drop in highway funding next year. Adequate funding 
of our nation's highways is important not only for obvious short-term 
economic stimulus and highway improvement needs, but for long-term 
reasons as well. This subcommittee will be working with the chairman 
and ranking member of the full Environment and Public Works Committee 
to put together a TEA-21 reauthorization proposal early next year. One 
of my priorities is to ensure that adequate funding is available to 
meet our nation's significant transportation needs.
    With this in mind, it is important to understand that the funding 
level Congress enacts for fiscal year 2003 will serve as the baseline 
from which our committee's reauthorization proposal will be scored. 
Therefore, if we base reauthorization on the President's fiscal year 
2003 budget proposal, we will have $28 billion less available to us 
than if fiscal year 2003 spending equals the amount authorized in TEA-
21.
    A spending baseline that is $28 billion below the TEA-21 baseline 
would spell disaster for our transportation system. In fact, my focus 
is on doing just the opposite and finding a way to increase funding for 
all of the components of our surface transportation system--highways, 
transit, and rail. This is why the leaders of the Senate Environment 
and Public Works Committee have worked on a bipartisan and bicameral 
basis with the House Transportation and Infrastructure Committee to 
introduce the ``Highway Funding Restoration Act.''
    This legislation, which every member of this committee cosponsored, 
will ensure that funding in fiscal year 2003 is at least at the level 
authorized in TEA-21. Rest assured that I will be advocating for the 
highest funding level possible, but I will not accept a penny less than 
the amount authorized in TEA-21.
    I know that Administrator Peters shares some of my concerns about 
the impact of these proposed highway-funding cuts. Administrator 
Peters, welcome, and let me tell you how pleased I am that someone so 
familiar with the transportation challenges faced by fast growing 
western States is at the helm of the Federal Highway Administration. I 
look forward to working with you to develop a top-notch reauthorization 
bill.
    I also welcome Assistant Secretary for Budget Donna McLean and look 
forward to further discussion on these important budget issues.
    Senator Wyden.

  OPENING STATEMENT OF HON. RON WYDEN, U.S. SENATOR FROM THE 
                        STATE OF OREGON

    Senator Wyden. Thank you, Mr. Chairman, and thank you very 
much for holding this important hearing. I think this is a 
critical issue, and I very much appreciate your leadership.
    My view is that the Administration's budget for 
transportation is the equivalent of putting an automobile in 
reverse, when the country wants to move that car forward. It 
just seems to me that if you are serious about economic 
stimulus, you cannot propose such serious cuts in 
transportation projects.
    The fact of the matter is, the projects that are being 
slashed are projects that are ready to go. These are projects 
that will put people to work immediately.
    Oregon transportation officials calculate that the 
Administration's proposal to cut TEA-21 funding will mean the 
loss of $80 million for Oregon's economy, and more than 1,600 
family wage construction jobs. Now we have got the highest 
unemployment rate in the country. So these transportation cuts 
are draining the life blood out of Oregon's economy.
    Now I support the committee's bipartisan's legislation to 
restore funding at least to the levels called for in TEA-21. 
But I also want to note that I think we need to look beyond the 
immediate budget crunch at what could be an even bigger problem 
that is ahead down the road.
    Our country's transportation energy policies are on a 
collision course. Transportation projects are primarily funded 
by taxes on gas; the more gas we use, the more money to build 
roads. At the same time, there is a bipartisan agreement in 
Congress that we need to develop energy policies, and decrease 
our dependence on foreign oil.
    Increased production can help, but the only way to truly 
reduce dependence on foreign oil is to reduce dependence on 
oil, period. Now in the coming years, these conflicting 
policies are going to bump up each other. Hybrid gas and 
electric powered cars that get 60 miles per gallon are already 
on the market and on the road.
    Cafe standards will require more miles to the gallon for 
cards and light trucks. It is predicted that fuel cell 
technology and other alternatives will be prevalent by the end 
of this decade. As all of these things evolve, gas tax revenues 
will continue to decline, and transportation funding will feel 
the pinch, unless changes are made.
    I am hopeful that we can continue, under Senator Reid's 
leadership, to explore new ways to fund transportation projects 
that do not depend solely on the gas tax.
    My home State is already starting to look at this concept, 
with our Road User Fee Task Force. The Federal Government ought 
to be doing more to encourage this type of creative thinking.
    As part of TEA-21 reauthorization, I am interested in 
working with the bipartisan leadership of this committee to 
create a pilot program, where States can develop and test their 
own home-grown approaches that best meet their needs.
    The time to act is now. That is why it is so important that 
Senator Reid has convened this effort to deal with what I think 
are overly harsh cuts that will hurt communities across this 
country now. Then we need to work together on a bipartisan 
basis to find responsible alternatives for the future.
    I thank you, Mr. Chairman.
    Senator Reid. Senator Wyden, thank you very much for your 
statement.
    We are joining by the Ranking Member of this subcommittee, 
Senator Inhofe of Oklahoma, who has always been very diligent. 
I have come to a lot of these hearings. I do not stay as long 
as you do, normally, but you are very diligent in all the 
hearings, and I appreciate your being here today.
    Senator Inhofe.

 OPENING STATEMENT OF HON. JAMES M. INHOFE, U.S. SENATOR FROM 
                     THE STATE OF OKLAHOMA

    Senator Inhofe. Thank you, Mr. Chairman. I am pleased to be 
with you here today in welcoming our witnesses. It is always a 
pleasure to hear from the Federal Highway Administrator, Mary 
Peters. We are very fortunate to have an Administrator at the 
Federal Highways that understands some of the problems that the 
States have.
    Mary's background in the State of Arizona, which is not 
very unlike Oklahoma in some of the local problems that we 
have, puts you in a position, I think, to really understand 
these things very well.
    And it is nice to have Ms. McLean here. We served together 
over on the House Public Works and Transportation Committee in 
a few different capacities, and I am sure it is going to work 
out really well.
    I am anxious to hear from Thomas Stephens, Director of the 
Department of Transportation in the chairman's home of the 
State of Nevada. Again, I believe we can never hear too much 
from the State officials to show how some of the things we are 
doing might or might not be working at the State level.
    It is always good to hear from Bill Fay. His group, the 
Highway User's Alliance, will play an important role in 
reauthorization.
    Finally, I had hoped to be welcoming my friend and fellow 
Oklahoman, Jim Duit, to testify on behalf of the American Road 
and Transportation Builders Association. Unfortunately, Jim 
Duit--his company had a fire which virtually burned down 
everything that he had there. This was on Saturday evening. I 
did call him up and talk to him. So obviously, he could not 
join us today.
    However, I do have the oral statement that he had planned 
on making. I would ask unanimous consent to submit it for the 
record, and at the same time, unanimous consent to have the 
written statement of Ken Wert, who is President of Haskill/
Lemon Construction in Oklahoma City, made a part of the record, 
Mr. Chairman.
    Senator Reid. Both requests are granted.
    Senator Inhofe. Thank you, Mr. Chairman.
    We are fortunate that Mr. Tom Hill, Chief Executive for 
Oldcastle Materials, Inc., could join us today to present the 
industry's perspective on the proposed 2003 budget. I 
appreciate your rearranging the schedule on such short notice, 
and look forward to hearing your testimony, today.
    Thank you, Mr. Chairman.
    Senator Reid. We are joined today by the chairman of the 
Senate Finance Committee, Senator Max Baucus, who as most 
everyone knows, has been the ranking member and the chairman of 
this committee in the past.
    We are expecting great things out of the Finance Committee 
to help us through the problems that we have with this bill, 
Mr. Chairman. Welcome to our committee, today.

  OPENING STATEMENT OF HON. MAX BAUCUS, U.S. SENATOR FROM THE 
                        STATE OF MONTANA

    Senator Baucus. Thank you very much, Mr. Chairman. I was 
afraid you were going to mention something about helping with 
the whole budget that we are facing.
    Administrator Peters, we are very happy to have you here. 
We had scheduled a meeting some time ago, but unfortunately, 
this country's greatest tragedy on our soil happened that day, 
and our meeting was canceled.
    I want to just emphasize to you something which you already 
know; but I think it is important to reiterate: how important 
this program, the Highway Program, TEA-21, is to us all. It is 
the life blood of our country.
    Certainly, in my State of Montana, you know, we are not a 
seaport State, we are not a barge State. We do not have large 
international airports. We just have a lot of space, but not a 
lot of people. We depend almost totally on our roads and 
highways.
    We have more Federal highways, per capita, than any other 
State in the Nation. That includes Alaska. That includes 
Wyoming, and every other State. We have more Federal miles of 
roads, per capita, than any other State. It is everything to 
us.
    In many respects, too, it is our economic development 
program. As I walked in, I heard my good friend from Oregon 
talking about unemployment rates in the State of Oregon. We, in 
Montana, have the Nation's lowest, or second to lowest, per 
capita income rates. We are 50th or 49th.
    So in many respects, the Highway Program is our jobs 
program. It is our economic development program. These are 
obviously great paying jobs, compared with some other jobs that 
we have in our country.
    So I just cannot emphasize too much the importance of a 
very strong highway program. That includes the various 
components; you know, the bikeways and the various provisions 
which allow States, and correctly, to make their own 
determinations in towns and municipalities and so forth. But it 
is just critical that the program be strong.
    Second, I understand that RABA, which is a bit of a 
question before us, is not a question at all to members of this 
committee. We need to have at least the four and-a-half, or 
whatever the figure comes out to, restored.
    Now I know Administrations will say, ``In our budget 
request to the Congress, we just followed the law.'' Well, all 
Administrations submit budget requests that are sometimes 
inconsistent with the law, and that is their prerogative. 
Presidents make budget requests and sometimes conditions 
change. So they make requests which are, if not inconsistent 
with the law, at least Administrations have lots of 
flexibility.
    So that is not an excuse in this case. Every member of this 
committee is a co-sponsor of that bill, which I frankly think 
it should be a full nine. That is, the RABA went up for a year, 
and then it came down. There was a net difference of about $9 
billion. Because if we restore the RABA loss for the most 
recent year, then the problem is, that is going to still mean 
lots of jobs lost; that is, jobs that are dependent upon the 
higher level that was provided for under RABA in the previous 
year. It is going to be job loss. Even with the restoration of 
roughly $4.5 billion, it is still going to be job loss.
    I think it should be $9 billion. But most members of this 
committee, I think, have a contrary view. But the contrary view 
is still definitely an increase. I think we should just agree 
that we are going to do the increase, and just get on with it; 
because Congress will pass that increase. There is no doubt 
about that, in my judgment.
    Also, while we are here, I want to just reemphasize the 
need for meaningful environmental streamlining. We have been 
wrapped around the axil on this issue for a long time, years, 
with no sufficient progress. The last Federal Highway 
Administrator, or maybe not quite the last, and I am not sure 
exactly when, submitted major streamlining to this Congress. 
They were steps backward; not forwards, but backward.
    It was so frustrating to us, that I am thinking of the 
Highway Administration telling the Administration what the 
environmental streamlining is, in legislation. It was such an 
insult, the last steps backward. I just urge you very strongly, 
to appropriately and solidly figure out ways to get this done 
more quickly.
    I might say, in one small respect, it is getting more fish 
and wildlife personnel in the States, so we can get ahead of 
the curve with these projects. If you can get ahead of the 
curve, you can design around environmental problems in advance.
    But mostly, I am just urging you to streamline and just do 
it, so we are not wrestling with this issue anymore. It might 
take you a year. I do not know how long it is going to take 
you, but I urge you very strongly just to get on with it. I 
know you have a good background. I also want you to know that 
we, on the committee, will work very closely with you.
    One final point, in the Finance Committee, we are going to 
be looking for ways to increase dollars into the Trust Fund. 
One is to take those few cents that go to the General Fund, 
ethanol provisions, and put those 2.5 cents into the Trust 
Fund. That is one idea I have, and I have got a couple of other 
ideas, to make sure that the Trust Fund is larger, to enforce 
the firewalls, to make sure the dollars are spent on highway 
projects; because it is one program that Americans depend very 
much on.
    You will work well with this committee, because you will 
find a lot of support on this committee for an even stronger 
TEA-21.
    Thank you, Mr. Chairman.
    [The prepared statement of Senator Baucus follows:]
  Statement of Hon. Max Baucus, U.S. Senator from the State of Montana
    I am pleased that for the first time before the Transportation 
Subcommittee, since her nomination hearing, we will be hearing from our 
newest Federal Highway Administrator Mary Peters. Welcome Mrs. Peters, 
I look forward to your testimony and the testimony of the others.
    I'd like to start off this morning by mentioning how much TEA-21 
has helped our Nation address our infrastructure needs and our 
employment needs. This is especially true in my State of Montana. TEA-
21 has been a crucial tool for us. The bill is not perfect, but it's a 
very good bill that an overwhelming majority agreed upon, at the end of 
the day. Along with Senators John Chafee and John Warner and others, I 
was directly involved in drafting TEA-21 in the Senate. I am proud of 
that work and I look forward to working closely with the leadership of 
this committee on the next bill.
    My concern here today is held I'm sure, by all the committee 
members--the shortfall in highway funding for fiscal year 03. This is 
unacceptable. This country cannot afford a 27 percent decrease in 
highway funding.
    For the past 6 months Congress has been discussing the best ways to 
stimulate the economy. Even though we are no longer working on an 
economic stimulus bill, we face a real crisis that will negatively 
affect our economy. We face unprecedented losses to our highway 
program. Every State will lose money.
    If we want to create true stimulus and maintain jobs for our 
citizens then there is an easy solution. Highways. For every $1 billion 
that goes into the highway program, 42,000 jobs are created. In an 
attempt to address unemployment concerns and immediate stimulus to the 
country's economy, I, along with others on the Environment and Public 
Works Committee, have introduced S. 1917. This bill would restore the 
authorized levels for fiscal year 2003. It doesn't get us all the way 
there, but it's a start.
    This is about jobs. Skilled and unskilled jobs in highway 
construction are well-paid. These jobs provide employment opportunities 
for workers who have lost manufacturing jobs, with minimal training 
requirements. In addition, we need to ensure that current jobs will not 
be lost in many of the supplier and heavy equipment manufacturing 
industries. Without at least restoring TEA-21 levels, over 360,000 jobs 
will be lost.
    For my State of Montana that means a $71 million loss to our 
highway program. And in Montana, Highways are our lifeblood. We need 
the highways and we need the jobs created from new highway funding. 
Also, we can't afford to lose any highway-related jobs because of this 
under funding.
    There is $20.5 billion in the Highway Trust Fund. We can afford at 
least the $4.369 billion from that balance to be distributed over the 
next year. We could afford more. In fact, we can't afford not to.
    This extra $4.369 billion only begins to take care of this huge 
problem that we face. I would like to see even more of an increase to 
the fiscal year 03 level.
    Considering the President's focus on jobs in his 'State of the 
Union' address, I am dismayed that the President's budget did not take 
these concerns into consideration and propose these changes.
    I am hopeful, however that given the State of the economy and our 
need for highway investment and jobs, he will support at least the 
fiscal year 03 authorized level if not more.
    Given our limited highway resources, it is my intention as chairman 
of the Senate Finance Committee to take measures to increase the money 
in the Highway Trust Fund. I will be looking at the effect that the 
ethanol subsidy has on the Highway Trust Fund and also at Highway Fuel 
Tax Evasion. I am committed to the use of ethanol-blended fuels, but I 
am insistent that the Highway Trust Fund be held harmless to any costs. 
Resources are too scarce to tolerate losses.
    Additionally, I will be working with the leadership of this 
committee to explore innovative ways to fund highway projects to 
supplement the Highway Trust Fund dollars.
    The next issue I'd like to speak about is environmental 
streamlining. To your credit, Administrator Peters, you have made 
repeated statements regarding the need to streamline the process by 
which environmental approvals are obtained to construct new 
transportation projects. Before you were nominated for this position, 
you were a strong advocate for streamlining the planning and 
environmental processes. It is my hope that your zealousness continues 
and you remain active on this front.
    At present, the process for allowing highway projects to move 
forward is painfully long. The rule that was issued 2 years ago clearly 
missed the mark. It is my hope that you will go back to the drawing 
board, as they say, and issue a regulation that will help States 
expedite the project approval process without and I emphasize without 
weakening environmental protections.
    Thank you for the time Mr. Chairman. I look forward to today's 
testimony.
    Senator Reid. I would say this, Senator Baucus. Having 
traveled the State of Montana mostly by air, I can imagine the 
vastness of that State, and how there would never be an end to 
the need of roads through that massive State.
    Senator Baucus. Well, that is right, Mr. Chairman. That is 
one reason that for a long time, we did not have a highway 
speed limit, because we value our roads very much.
    [Laughter.]
    Senator Reid. Well, we, in Nevada, had the same situation.
    Senator Baucus. I know that. I remember going to school, I 
would drive through Nevada.
    Senator Reid. I bet it felt like home.
    Senator Baucus. It felt just like home. I had a VW bug, and 
a friend had a VW bug, you know, and we would just put the 
pedal to the metal. We would go flat out, and we would see who 
could pass whom, streaming through Nevada.
    Senator Reid. Well, do not be admitting that, though.
    [Laughter.]
    Senator Reid. And we go from Montana, and do they still 
need highways in Rhode Island, Senator Chafee?
    [Laughter.]
    Senator Reid. We will be happy to hear your statement.
    Senator Chafee. Route 95 comes right through Rhode Island.
    And when you have the pedal to the metal in a Volkswagen, 
Senator Baucus, what are you at, 55/60?
    [Laughter.]
    Senator Baucus. Well, it depends on whether you are going 
uphill or downhill. Downhill is a lot faster than uphill.
    [Laughter.]

OPENING STATEMENT OF HON. LINCOLN CHAFEE, U.S. SENATOR FROM THE 
                     STATE OF RHODE ISLAND

    Senator Chafee. I just look forward to the statements of 
those giving the testimony today. It is a difficult budget 
year, and we want to make sure that we make good, responsible 
decisions, and at the same time, keep our highways and our 
employees, as Senator Baucus said, working; which is, of 
course, always the best stimulus that you can have for the 
economy.
    I look forward to your testimony.
    Senator Reid. Thank you very much, Senator Chafee.
    The witnesses today have been advised that we would like to 
hear from you for 5 minutes. What you cannot cover in that 5 
minutes, we will make part of the record. Our staffs will pour 
over that, and bring to our attention what we did not bring out 
in the hearing. Following your testimony, members of the 
committee will ask you questions.
    Administrator Peters.

       STATEMENT OF HON. MARY E. PETERS, FEDERAL HIGHWAY 
 ADMINISTRATOR, U.S. DEPARTMENT OF TRANSPORTATION; ACCOMPANIED 
  BY: HON. DONNA MC LEAN, ASSISTANT SECRETARY FOR BUDGET AND 
          PROGRAMS, U.S. DEPARTMENT OF TRANSPORTATION

    Ms. Peters. Thank you, Mr. Chairman.
    Mr. Chairman, I do appreciate your holding this hearing 
today on this very important topic. I also appreciate your 
consideration during my confirmation, and my pleased to testify 
before you today for the first time as Administrator of the 
Federal Highway Administration.
    It is an honor, also, to be here today with the Assistant 
Secretary for Budget and Programs and the Chief Financial 
Officer of U.S. DOT, Donna McLean. With your permission, we 
will submit a joint written statement for the hearing record, 
as you indicated.
    Our highways, as each of you have spoken to, are critical 
links in our Nation's multi-modal surface transportation 
system. The challenge is to maintain our high quality network, 
while increasing safety, improving mobility, and promoting 
environmentally responsible project decisions and, of course, 
efficient program delivery, as well.
    Of course, our ability to accomplish these objectives is 
related to the adequacy and availability of transportation 
funding. TEA-21 provided a mechanism for ensuring the revenues 
into the Highway Trust Fund are spent, and that the funding 
level for the Highway Program is aligned with Trust Fund 
receipts.
    Over the past 3 years, revenue-aligned budget authority has 
provided more than $9 billion in additional highway spending, 
funding that is now working in our economy.
    Due to the recent economic slow-down and current 
projections of future Highway Trust Fund receipts, a downward 
adjustment of the Highway Program occurred when the highway 
spending was aligned with revenues in the Highway Trust Fund 
for 2003. The calculation, as was mentioned, is not a policy 
call. It is a calculation based in law and reflected in the 
budget.
    The $24.1 billion funding level for highways proposed in 
the President's 2003 budget reflects the funding level enacted 
in TEA-21, as adjusted for the latest Highway Trust Fund 
revenue figures.
    As we approach reauthorization, we need to look for ways to 
smooth out the current positive and negative swings that result 
from this adjustment. However, we should not abandon the 
adjustment concept.
    Linking highway spending to receipts is a fundamental 
principle of TEA-21. Even with the negative calculation in 
2003, over the life of TEA-21, RABA adjustments will provide a 
net gain of $4.7 billion in highway spending.
    The 2003 reduction can serve as a wake-up call for all of 
us. Current trends in fuel use, as well as technological 
advances, including the new fuel cell technology, will require 
us to consider new sources of revenue and leveraged funding, if 
we are going to have sufficient funds for our highway system in 
the future. Reauthorization will give us the opportunity to 
consider these important factors.
    The FHWA budget emphasizes four priority areas: safety, 
mobility, environmental stewardship and streamlining, and 
oversight. Safety remains our first priority and our greatest 
challenge, and we will work aggressively to improve the safety 
record on our Nation's highways.
    We also can improve the operation of the system. We have 
made significant progress in the deployment of intelligent 
transportation systems (ITS), but need to complete that 
deployment in both urban and rural areas.
    The 2003 budget provides almost $360 million for research 
and technology funding that will support innovations in safety, 
system preservation, and congestion mitigation, including 
expanded deployment of ITS. Continued progress in streamlining 
the delivery of transportation improvements will also improve 
safety and congestion.
    We must, at the same time, remain respectful stewards of 
the environment. However, meeting our Nation's mobility needs 
and environmental stewardship are not mutually exclusive goals.
    I am happy to report that the median time it takes to 
complete an environmental impact statement and get to a record 
of decision has been cut by an entire year. While it is an 
excellent start, we are committed to accomplishing much, much 
more. The budget proposes $6 million in additional funding for 
streamlining efforts.
    We will continue to improve Federal oversight and 
accountability to ensure, as Secretary Mineta has said, that 
the public gets what it pays for.
    We owe a good return on investment to the public for 
transportation funds that they entrust us with, and I like to 
call this the public value, in place of dividends.
    We must keep our infrastructure secure, and we must 
strengthen our commitment to reducing highway injuries and 
fatalities, even as we obtain additional capacity from the 
system. Working together, we can provide the American people 
with a safe, efficient, affordable, and accessible 
transportation system.
    Mr. Chairman and members of the committee, I thank you for 
the opportunity to make a brief opening statement. On behalf of 
Assistant Secretary McLean and myself, we will be pleased to 
answer any questions that you may have.
    Senator Reid. Madam Secretary, we will follow the same rule 
that we ask our witnesses to follow. Each member will get 5 
minutes. Thereafter, if there is still a need for more 
questions, we will do a second round.
    I was happy to hear in your statement, that it appears that 
you are willing to work with us to try to come up with some 
additional funding, recognizing that there are some new things 
happening out there to cut back on highway funds, in addition 
to the September 11th incident. Is that right?
    Ms. Peters. Mr. Chairman, that is correct. While the 
President's budget did follow the law, we certainly are willing 
to work with you. We are aware of the bill that has been 
proposed, and will be pleased to analyze that and provide any 
technical assistance we can.
    Senator Reid. You can imagine in Arizona, what would happen 
if they had a 27 percent cut in their Highway Construction 
Fund. It would cause a lot of problems, would it not?
    Ms. Peters. Mr. Chairman, it certainly would.
    One of the things that I think is important for us to 
remember, Mr. Chairman, while as you said, a 27 percent 
reduction is important, this funding will not stop immediately. 
We believe that capital outlay will be down around 3 percent 
per year, based on the relatively slow spend-out. So we do have 
some time to look at this important topic, and take care to do 
it right.
    Senator Reid. Well, the problem is, it establishes a 
baseline that will make it almost impossible to work with. We 
have to have, for next year, a different baseline than the one 
that you have given us. Otherwise, programs are drastically 
affected in the so-called out years.
    What initiatives has the Federal Highway Administration 
taken in regard to the security of our highway and bridge 
infrastructure since September 11th?
    Ms. Peters. Mr. Chairman, we have been actively working on 
security on our bridges and our infrastructure, across the 
entire system, and not just in aviation.
    Senator Reid. By doing what, though?
    Ms. Peters. In the days immediately following September 11, 
Secretary Mineta established within the Department of 
Transportation, a National Infrastructure Security Committee 
(NISC). We have undertaken a number of efforts related to 
security. I will pull a few notes here.
    This is what we have done to date, in terms of surface 
transportation. We have assessed and addressed potential 
threats to the highway system. It is a challenge, given the 
openness of the system. We are looking at the redundant 
capacity, making sure that we have identified alternative 
routes and alternative modes of transportation.
    We have worked with the States and local governments to 
identify high consequence, high value, high vulnerability 
facilities; and assisted in conducting vulnerability 
assessments, sharing best practices across the country. We are 
scheduling regional emergency management workshops to ensure 
that areas are prepared for evacuations, quarantines, and 
restoration of operations, should that become necessary.
    We are performing cases studies on the transportation 
response to the September 11th incidents in both the 
Washington, D.C. area and New York, as well as the Howard 
Street tunnel fire in Baltimore and the Northridge earthquake 
in California. We have prepared an emergency preparedness 
checklist for State and local governments, and are assisting 
them in emergency planning and operations.
    Further, we have just recently announced an ITS 
solicitation for projects that will be focused on improving 
security, using technology. A freight technology exposition is 
scheduled for April 27th, and we have under way ITS operations 
tests for security. Three are in progress and two more will be 
conducted. A national conference on incident and emergency 
management will be conducted in Irvine, California, March 11th 
through 13th.
    We have assisted State and local governments in conducting 
tabletop exercises, such as what was done in the Ft. Worth 
area. We are working closely with the American Association for 
State Highway Officials (AASHTO) task force on transportation 
security. Secretary Mineta has asked us, and we are all working 
closely together with NISC, to focus on intermodal security 
issues, and to coordinate U.S. DOT's security focus across all 
modes. NISC is also working very closely with the Office of 
Homeland Security.
    Senator Reid. There are concerns being raised about both 
the accuracy of Treasury's fiscal year Highway Trust Fund 
revenue figure, that is 2001, and the reasonableness of 
Treasury's future revenue projections. It appears to some of us 
that Treasury has based future revenue projections on fiscal 
year 2001 revenues, which may represent a low point, due to the 
recession.
    Has your office taken a look at Treasury's numbers, and are 
you comfortable with the 2001 figures being accurate, and that 
future year projections are not under-estimated?
    Ms. McLean. If I could take that one, sir, yes, we have 
looked at them. Treasury, actually, when they estimate future 
receipts, uses the same assumptions that are in the rest of the 
President's budget. So there are no unique estimates made just 
for the Highway Trust Fund beyond the obvious, the taxes. But 
those are based on assumptions on the economy's growth, which 
is the same for the rest of the President's budget.
    So we believe that they are accurate, and we have walked 
through them with Treasury. I am sure that Treasury can go into 
more detail on that, if you would like to.
    Senator Reid. The 27 percent funding cut in your budget for 
2003 will have a substantial impact on State programs. Has the 
Federal Highway Administration made any effort to assist the 
impact on State programs for the year 2003?
    Ms. Peters. Mr. Chairman, we have calculated the numbers 
and provided to each State what we believe will be the 
projected reductions in their program, as a result of the 
calculations.
    Senator Reid. I understand the dollar amounts, but the 
impact of what it will do to the highway and transportation 
systems in those States, have you taken a look at that?
    Ms. Peters. We have done some initial assessments, sir, and 
we are working with AASHTO to try determine whether there would 
be more significant impacts.
    As a former State transportation official, as you and 
several other members of the committee have mentioned, I do 
understand what those impacts can be. I understand where I 
would be, had I been in the job that I was in just a year ago, 
and looking at those impacts. It is not good news. I will not 
attempt to whitewash that in any way. It is not good news at 
all.
    There are some tools that the States can use, and we will 
help them in looking at those tools, to determine whether or 
not they can smooth out of the effects of this reduction in 
funding.
    One of the tools is that this year, we have a positive 
RABA, a positive $4.5 billion RABA. Next year, of course, RABA 
will be negative, based on the current projections. We will be 
able to smooth that out, using tools such as advanced 
construction and other methods of financing.
    It is accurate that this does not bring more money to the 
table, but those are some of the methods that we have looked at 
in terms of being able to smooth this out over the period.
    Senator Reid. Senator Inhofe?
    Senator Inhofe. Thank you, Mr. Chairman.
    Madam Administrator, I know you are in an awkward situation 
with this budget and coming before us. You are facing a 
committee that is pretty much unanimous on a bipartisan basis, 
in feeling that this budget is not adequate.
    For that reason, I believe every member of this committee, 
Democrat and Republican, have co-sponsored S. 1917, as well as 
almost all of them over on the House side.
    I agree with Senator Baucus. I have served for 15 years on 
this committee, with eight of those years in the House. I can 
remember many Administrations coming forth with a budget that 
really was not adequate, and changes can be made.
    Now in your statement, and I am quoting now, you say that 
the budget ``honors the highway category guarantees in TEA-
21.'' I think there is some disagreement on this point.
    I would just like to ask you the question, does the 
Administration have a position on S. 1917, and do you believe 
that the Highway Trust Fund could accommodate the provisions of 
S. 1917? Maybe that would be Ms. McLean on the latter question.
    Ms. Peters. Mr. Chairman, in terms of taking a position on 
the proposed legislation, we have not yet taken a position on 
the legislation. But as I indicated earlier, we would be happy 
to look at that, and to work with you, in terms of doing a 
technical review. I will defer to the Assistant Secretary for 
the second question.
    Ms. McLean. I believe the bill would allow funding up to 
$27.5 billion at the TEA-21 estimated level. Is that correct?
    Senator Inhofe. And I might add that a lot of the people 
out there do not feel that S. 1917 is adequate. They would like 
to have a freeze of the 2002, which would be about $4 billion 
more, I believe, than S. 1917 would provide for.
    Ms. McLean. I can answer both of those pieces.
    Senator Inhofe. Yes.
    Ms. McLean. We believe that looking at the Trust Fund 
balance right now, that it can accommodate the $27.5 billion, 
basically the original TEA-21 funding level.
    But once you get above an obligation limitation level in 
2003, above the $30 billion and the $31 billion range, the 
Trust Fund would not be able to support that level of 
obligation limitation in the out years. In the first couple of 
years, it would be able to, but in the out years, it would 
begin running a deficit.
    Senator Inhofe. Do you feel that that is pretty conclusive 
in your thinking, when we have already experienced that we 
really cannot predict into the future what that is going to be? 
I can remember 3 years ago, when RABA first appeared, I 
thought, one of these days, this is going to happen; and, of 
course, it has happened. Anyway, that is something that you can 
take a look at. Real quickly, I have heard the statement that 
for every $1 billion in transportation construction funding, it 
creates about 42,000 jobs. Does that sound unreasonable to 
either one of you?
    Ms. Peters. Mr. Chairman, it does not sound unreasonable. I 
do not have the basis for the number, but it does not sound 
unreasonable.
    Senator Inhofe. Yes, well, I would think, as a former State 
administrator, you probably have seen the effect it could have. 
I would only ask that you keep that in mind,
    Right now, we are doing everything we can for a stimulus 
package. I honestly cannot think of anything that would do more 
to stimulate the economy than to provide the jobs that will 
come with increased funding and construction.
    I would ask you if that was one of the considerations that 
you made during your negotiations with the White House in 
coming up with this budget, and if it something that you should 
be looking at.
    Ms. McLean. The decision was made to follow the TEA-21 
legislation, because we just did not believe that abandoning 
the concept of linking highway spending to receipts the 
fundamental concept and principle of TEA-21 was the position to 
take at this time.
    We did consider, however, the fact that additional spending 
in highways is linked to jobs. But at the same time as Ms. 
Peters pointed out previously, the reduction in outlays for the 
first year is a reduction of less than 3 percent.
    We believed that that was something that could be managed, 
balancing the fact that there was increase in funding in 2002 
above anticipated levels.
    Senator Inhofe. I have always felt very strongly about a 
very robust highway program. You know, back when Republicans 
were important, I chaired this committee. I have not changed my 
thinking since that time.
    I have one last question, and my time has expired. Let me 
just ask one question, and they can answer it for the record, 
if they do not have a position on it.
    Does the Administration have a position on a proposed 
change in the tax treatment of gasohol, with some of the things 
that are being discussed right now?
    Ms. Peters. Mr. Chairman, the Administration has not yet 
taken a position on that. We are reviewing several proposals, 
including that of Senator Baucus, with regard to the 2.5 cents, 
but have not yet taken a position.
    Senator Inhofe. Thank you very much.
    Thank you, Mr. Chairman.
    Senator Baucus. Do you have any idea when you might take a 
position?
    Ms. Peters. I will defer to the Assistant Secretary for 
that one.
    [Laughter.]
    Ms. McLean. I do not have a timetable for you, sir, but I 
can get back to you.
    Senator Baucus. I mean, the earlier the better, so we know 
where we all are.
    Ms. McLean. Sure, I understand.
    Senator Baucus. Second, on the Treasury's estimates, could 
you just tell me how deeply you or your staff examined the 
assumptions and the data with Treasury.
    Ms. McLean. Well, we have looked at their estimates. They 
are all based on, as I have mentioned, the President's economic 
assumptions. But there is a level of detail that Treasury deals 
with on their own. They do not provide all of the details of 
their estimates, and that has been a policy that Treasury has 
had for years.
    We can, again, provide you some additional information from 
Treasury on that. But, again, the estimates are based on the 
same assumptions that the President uses in the rest of the 
budget.
    Senator Baucus. Have you asked Treasury for more details, 
and have they refused to give them, because of long-standing 
policy? I am just trying to determine this here.
    Ms. McLean. No, they have been very cooperative in sharing 
their estimates with us. We understand that the reduction in 
actuals for 2001 are based on primarily three phenomena: a 
reduction in the overall economy, a reduction in receipts from 
the retail tax on trucks, and increased substitution of gasohol 
for gasoline. So we are very aware of the differences in the 
look-back calculation.
    Senator Baucus. Do you know whether Treasury uses only the 
estimates at the beginning of the year, or whether they are 
updated, as the economy changes?
    I ask that question because, regrettably, there is a quiet 
disparity between OMB and CBO, with respect to tax matters, to 
the Joint Tax Committee. That is, whenever we, in the Congress, 
particularly near the end of the year, when generally tax 
legislation comes to the Floor, are asking the Joint Tax 
Committee for estimates. Of course, they look at the economy 
and look at lots of other facts.
    But by tradition, they use the economic estimates made at 
the beginning of the year, in January. They do not update them; 
why, because OMB does not. So all this data is really dated. I 
am curious whether you know, in doing your RABA estimates, like 
I said, the January Administration estimates, or whether they 
are ever updated to more accurately reflect the state of the 
economy.
    Ms. McLean. The TEA-21 legislation requires that the 
adjustment for the revenue aligned budget authority and the 
other adjustments to the obligation limitations are done at the 
time of the President's budget release. So the law dictates 
that it is done at that time.
    Senator Baucus. That is a legal requirement?
    Ms. McLean. Well, it specifically says in law that in the 
President's budget, the President shall submit these 
adjustments.
    Senator Baucus. Well, there is another adjustment. I hope 
it does not reflect the Trust Fund balance. That is very 
interesting. There must be some meaning in that. I do not know 
what it is.
    [Laughter.]
    Senator Baucus. I urge all of us to go back and see if we 
are using the right criteria. I urge FHA, DOT, and all of us 
who are interested in this subject to do so. Perhaps we are not 
using the right criteria in making these estimates. For 
example, there may be some specific highway criteria that we 
are just not using, and should.
    I have no further questions, Mr. Chairman, except to state 
that I urge the Administration to work very strongly for, as 
Senator Inhofe stated, a robust highway program.
    Senator Reid. Mr. Chairman, if they go back and find that 
is the correct, what were the words you used, ``program 
numbers''?
    Senator Baucus. Oh, the numbers.
    Senator Reid. Well, my point is, if they find that those 
are the right numbers, they should find some different ones, 
because we need to do something.
    I would ask unanimous consent, if the committee has no 
objection, that statements by the Department of Treasury and 
the General Accounting Office be made a part of the record.
    Without objection, so ordered.
    Senator Reid. Senator Wyden?
    Senator Wyden. Thank you, Mr. Chairman.
    I want to go over the question of the implication of the 
cuts, Ms. Peters, because I am still not clear, in terms of 
your view on this.
    What I am hearing from State transportation officials in my 
State, and I think this is true across the country, is that 
these cuts are going to mean significant delays for many 
urgently needed transportation projects. Do you disagree with 
that assessment?
    Ms. Peters. Mr. Chairman, Senator Wyden, no, I do not 
disagree that there will be delays. What I was saying, and 
perhaps I could and should clarify for the record, is that 
transportation construction projects that are underway today 
likely will not be delayed, because States will be able to use 
the higher level of RABA during the current year, and smooth 
that out over time.
    Perhaps it would be best if I would frame it, if I were 
still a State administrator, would I cut existing 
transportation projects, those that are being built today? The 
answer to that would be no; that we would be able to work out 
funding for those projects.
    In terms of the future program, the Highway Program does 
spend out at a slower pace than do many other programs. For 
example, capital outlay, on average, 27 percent of a project 
will spend out in the first year; approximately 41 percent the 
second year; 16 percent the third year; and 10 percent the 
following year.
    Because States, and especially a State like Oregon, have a 
number of transportation projects ongoing at any given time, 
then you average that outlay over a period of time. So what I 
am saying is, I do not see any immediate transportation 
projects being stopped, or layoffs as a result of that.
    However, you are correct, sir, in terms of the long-term 
program. People would generally take a 5-year program and 
perhaps spread that out over a longer period of time, given the 
projected downturn in revenue. So it will have an effect, but 
what I am saying is, it will be more of a delayed effect than 
an immediate effect.
    Senator Wyden. Could you provide me and other members of 
the committee your independent assessment of how you reached 
that judgment, because that is not in line with that I am 
hearing in Oregon, and I do not think it is in line with what 
the Congress is hearing.
    If you think that somehow there can be some budgetary 
slight of hand, I would like to see your assessment, as to how 
you are going to limit the damage here, because it is not a 
view that I share. Could you provide that to us?
    Ms. Peters. Mr. Chairman, Senator Wyden, we would be happy 
to do that.
    Senator Wyden. Let me ask a question of your colleague, as 
well. Were you asked by the Administration about the 
consequences of these budget cuts? It seems to me that it runs 
completely contrary to what the President said at the State of 
the Union Address. I am just wondering if you or anybody else 
in the Administration was asked about the consequences of cuts 
of these magnitude.
    Ms. McLean. We did discuss the details surrounding a 
funding level for highways at the amount proposed in the 
President's budget. It was a concern of the Administration.
    The decision was made, again, not to abandon the concept of 
TEA-21, which is to have highway tax receipts reflected in the 
level of highway spending. Again, we believe that RABA has 
provided a total benefit of $4.7 billion to highway spending, 
and that was something that we did support.
    Senator Wyden. But you made the judgment that this could 
cost jobs and that this would have regrettable economic 
consequences, and you went ahead anyway for the reasons that 
you described.
    Ms. McLean. Well, as you probably are aware, in TEA-21, any 
additional funding beyond what was proposed in the President's 
budget, because the President's budget complies with the 
current law, would be spending above and beyond what is allowed 
in the firewalls. Such spending would essentially either 
increase either the deficit, or would have to be balanced by 
reductions in spending in other domestic discretionary 
programs.
    As the President also stated in his State of the Union 
Address, we have several priorities in the President's budget, 
including fighting the current war, and balancing those 
priorities are difficult choices.
    Senator Wyden. Let me ask one last question for you, Ms. 
Peters. In the last TEA-21, Senator Graham and I, under the 
leadership of then Chairman Baucus, worked on this streamlining 
issue. The history of how it has been implemented is certainly 
very different than the three of us envisioned.
    We saw that the whole idea was to ensure that environmental 
requirements would move forward concurrently with the project 
development requirements; that you put the two of them on the 
same track. We are now 3 years plus into this, and it just 
seems like we are still moving backward.
    Why is it so difficult to take a concept that Senator 
Graham and Senator Baucus and I thought was pretty straight 
forward--environmental track, project track, work together--why 
is it so difficult to get this implemented?
    Ms. Peters. Mr. Chairman, Senator Wyden, I share your 
frustration. In fact, I spent some time before Congress in my 
prior role, talking about environmental streamlining and how 
important it is. I do share your concerns.
    In trying to process things concurrently, what I have found 
in the short time that I have been with the Federal Highway 
Administration is that there are as many reasons as there are 
projects out there.
    But to summarize some of those reasons, the U.S. Department 
of Transportation, while it was tasked with environmental 
streamlining, does not have authority over a number of other 
environmental regulatory areas.
    I believe, however, there are ways we can work through 
that. Certainly, the Secretary feels that we can work through 
that by working more closely with the other environmental 
resource agencies and finding a way, as you indicated, to more 
concurrently process requests for project approval, rather than 
having them be sequentially processed and then have to loop 
back.
    Further, we believe there are ways to allocate resources, 
as was mentioned earlier, to the U.S. Fish & Wildlife Service 
and other resource agencies, so that they can more timely move 
those process approvals forward.
    We believe that states can process a number of 
environmental approvals. We believe that we ought to be able to 
delegate authority to the states to do a number of them, most 
specifically, categorical exclusions; so again, we can move the 
process much more quickly.
    I believe, and the Secretary believes, that there are ways 
that we can, within the existing law, substantially decrease 
the time that it takes to get environmental approvals without 
compromising the environment, and we are very committed to 
doing so.
    Senator Wyden. Thank you, Mr. Chairman.
    Senator Reid. The chairman of the full committee, Senator 
Jeffords, has arrived. He has indicated he will not give a full 
statement.
    I will call on Senator Chafee now for his questions.
    Senator Chafee. Thank you very much, Senator Reid.
    I believe, Ms. McLean, you mentioned several contributors 
to the fall-off in revenue to the Highway Trust Fund. From a 
chart I have here, it looks like the retail tax on trucks is 
the biggest culprit. Could you just describe what that tax is, 
and why it fell off so much? It is $2 billion, from this write-
up.
    Ms. McLean. Yes, it is a 12 percent tax on purchases of new 
heavy trucks, trailers, and similar pieces of equipment. 
Obviously, when the economy is good, companies are making large 
investments in capital in their businesses.
    That is basically what was happening in 2000. In 2001, 
however, those sales declined, and as a result, our tax 
revenues into the Highway Trust Fund declined. If these pieces 
of equipment are resold, there is no tax that is deposited in 
the Trust Fund.
    Senator Chafee. And is this up-to-date? If it is 2001, is 
it right through December, all those zero percent deals? At 
least in Rhode Island, my dealers are telling me, they had some 
of their best years ever, with some of the incentives that were 
offered.
    So it is just such a surprisingly low number, from the 
previous year. I was just wondering as to the accuracy of it. 
Is it up-to-date, all through December?
    Ms. McLean. The figures are for the Federal fiscal year, 
ending in September.
    Ms. Peters. Mr. Chairman and Senator Chafee, our 
understanding in talking with Treasury is that it is. 
Apparently, there was quite a peak in the sale of new trucks in 
the 1998/1999 timeframe. Then, because the economy has cooled 
in more recent years, dealers, instead of buying new trucks, 
are keeping the trucks they have.
    One of the things that the trucking industry, in my 
experience as a State administrator, was able to do, in lean 
times, is put the trucks idle for awhile, and not have to 
purchase new trucks or not run those trucks. The variable cost 
component of their industry is rather large, so they have the 
ability to do that.
    Initially, at least reading through with the Treasury, as 
we were aware of it, it appears that that indicator is now 
moving up. I believe that the last factor that I would mention 
is that, of course, the last quarter, the fourth quarter 
revenue figures, I believe, are not based on actuals, but on 
projected from the third quarter.
    Ms. McLean. Simply because those estimates are made right 
before the President's budget is released, which is right at 
the beginning of the year, those estimates just have not come 
up.
    Senator Chafee. So theoretically, that number could change.
    Ms. McLean. It could. But once again, if you go back to the 
TEA-21 language, the adjustment that is made for both the 
obligation limitation and the revenue aligned budget authority, 
those are required to be made at the time the President's 
budget is released. So those new figures could come in, but 
TEA-21 requires that adjustment to be made at the time of the 
release of the President's budget.
    Senator Chafee. OK, and last, what is the answer? You 
mentioned RABA is going to look better in the future in the 
next year, and hopefully you would work with us to maybe just 
smooth out some of the rough spots here, and the differences 
between the years. Maybe you could just expand on that, and how 
you can work with us to do that.
    Ms. Peters. Mr. Chairman, Senator Chafee, I would be glad 
to talk with you a little bit about that. We are looking at two 
concepts. One is the calculation of RABA, per se, and is there 
a way to perhaps smooth out the peaks and valleys?
    The unfortunate circumstance that resulted in the number 
that we are looking at today is a double negative, if you will. 
In the look-back, as it was calculated, there were overly 
optimistic projections for 2001, based a few years back. Then 
when we calibrated those to what the actual receipts in 2001 
were, that was a negative. The look forward was negative as 
well.
    The look-forward, however, is not as negative, if that is 
not a redundant term, to say it is not as negative going 
forward. But nonetheless, it was not a positive number either. 
So the combination of the look-back, which was a negative $3.5 
billion, and the look-forward, which was a negative $0.9 
billion, resulted in what we have today.
    I believe, and we have discussed this somewhat within the 
Department, and certainly the Secretary mentioned it in his 
testimony before this committee earlier, that there may be ways 
to smooth out the peaks and valleys, by looking at the method 
with which we calculate RABA.
    But, as the Assistant Secretary said, and we do feel very 
strongly, that tying spending to receipts is an important 
concept to continue with in the future. So perhaps we can work 
with the way the formula is calculated, to smooth out those 
peak-and-valley effects in the future.
    Senator Reid. Chairman Jeffords is here. Chairman Jeffords 
is, I am sure, feeling good today. The first gold medal in the 
Winter Olympics was won by a person from Vermont. Her name was 
Clark, as I recall.
    Senator Baucus. Kelly.
    Senator Reid. Was the last name Kelly?
    Senator Baucus. The first name.
    Senator Reid. Yes, I thought Clark was right. But anyway, 
she is a real daredevil on that snowboard. She better be 
careful.
    [Laughter.]
    Senator Jeffords. It was not unexpected.
    [Laughter.]
    Senator Reid. Which is true.
    [Laughter.]
    Senator Jeffords. Ms. Peters, I want to commend you on the 
leadership you are providing in the area of environmental 
stewardship in the so-called streamlining. You site New 
Hampshire as the leader in this regard, and of course, they 
probably stole everything they did from Vermont.
    [Laughter.]
    Senator Jeffords. But putting that aside, I encourage you 
to continue to highlight best practices around the country, and 
to work with your colleagues in the resource agencies.
    I would like to see you make as much administrative 
progress as possible before we legislate further on this topic. 
Please comment on your plans in this regard.
    Ms. Peters. Mr. Chairman, Senator Jeffords, thank you.
    We have a number of efforts underway, where we believe that 
we can make some inroads, using the administrative means that 
we have available to us today.
    As I mentioned earlier, one of the things that we believe 
has prevented us from moving forward as aggressively as we 
would like is the working relationship between Federal resource 
agencies and U.S. DOT. Accordingly, our Deputy Secretary has 
met with his counterparts in other resource agencies, and we 
want to work very closely with the Council on Environmental 
Quality, as well, to move forward streamlining efforts.
    We believe that we can do this by raising to a high level 
the issues where projects do get hung up and are in dispute, 
and by developing a dispute resolution process to move them 
through much more quickly, so that we are not delayed in moving 
projects forward when disputes do come about.
    As I mentioned earlier, we need more concurrent processing, 
rather than sequential processing. I have to say, one of the 
really frustrating things for me, as a former State 
Administrator, was to finally get agreement, for example, with 
the U.S. Fish & Wildlife Service, and then have to go to the 
Corps of Engineers, and get a 404 permit from them.
    They would make a change, and then I would have to go back 
to U.S. Fish & Wildlife Service, and take the change that I had 
to make to get the 404 permit back to them. I felt a little 
like a rat in a maze sometimes.
    We think that we can change some of those processes so that 
we still are mindful stewards of the environment, but we are 
not playing this constant loopback game.
    Further, there are a number of projects that require 
categorical exclusions. These are generally projects that are 
not taking new right-of-way, and are not major expansions, 
meaning that they would not add capacity. Improvement projects 
such as safety and maintenance need to be able to move forward 
much more expeditiously than they are today.
    These, again, are areas where we believe states can be 
given authority, when they have a good environmental record, to 
move forward with projects, without having to then come to 
Federal officials for another layer of approval. So those are 
some of the methods, sir, that we think we can use to expedite 
the process.
    One more that I would mention is working with the AASHTO 
Center for Environmental Excellence. We are allocating some of 
the money that you made available to us for environmental 
streamlining to get that Center started. It will collect and 
share best practices, and send teams out to help people work 
through environmental issues when they do hit a roadblock in 
project processing.
    Senator Jeffords. In your written testimony, you mention 
that FHWA has modified its bridge performance measures. In my 
State of Vermont, we have many historic bridges, both covered 
bridges and steel truss bridges. How will the new measures 
impact our ability to preserve those bridges?
    Ms. Peters. Mr. Chairman, we certainly want to be sure that 
we are preserving historic bridges.
    If I am not speaking accurately, based on what my written 
testimony was, I will certainly get back to you. But this is 
one of the factors that we came up against, and this has to do 
with the bridge rehabilitation fund (BRF).
    If a bridge had had a rehabilitation project in the past 10 
years, they were not then able to use BRF funds for future 
repairs or maintenance on that bridge that would extend the 
life of the bridge. We felt it was important not to restrict 
that funding, because clearly we want to extend the life of 
bridges.
    So we wanted to make available that funding category to use 
on bridges, so that we could do restorative work and continue 
to extend the life of the bridge.
    Senator Jeffords. Thank you, that is helpful.
    Thank you, Mr. Chairman, and thank you for calling the 
hearing.
    Senator Reid. Thank you for being here.
    There is one last question that I have. You may have stated 
this in your opening statement, or it could have been in 
response to Senator Baucus, who asked you a number of questions 
about environmental streamlining.
    You said that it had been improved by 1 year. Well, if 1 
year is 1 year from seven, tell us what that means. Instead of 
1 year, it is what?
    Ms. Peters. Mr. Chairman, I do not have the base data with 
me. But the median time that it takes to complete an 
environmental impact statement has been reduced by 1 year.
    Senator Reid. But you do not know what that means?
    Ms. Peters. I believe it was from 7 years, sir, but let me 
get the exact data, so that I do not misspeak to you today. I 
believe it was from 7 years. But, as I said, it is still too 
long.
    Senator Reid. Yes, people who are waiting to have something 
done, to tell them that it is multiple years, and we have 
increased it by 1 year, that is a big help. We appreciate that, 
but we are going to have to do much better than that.
    Based on your experience in the State of Arizona, as you 
explained to us, you felt like a rat in a maze. That is how 
people explain this to us; that they are shuffled back and 
forth, from the Corps of Engineers, to the EPA, plus Fish & 
Wildlife, and all this. It just becomes a burden that makes us 
all look a little bit foolish.
    So I think we should really follow the admonition of 
Senator Baucus, and do whatever we can to streamline this. If 
you need legislative help, we would be happy to take a look at 
that.
    Ms. Peters. Mr. Chairman, I appreciate that. I certainly 
will work with you on that. You have my commitment.
    In fact, I will say, when I spoke to the Secretary about 
taking the job as Federal Highway Administrator, I mentioned to 
him how important this was, and I will continue to focus on it.
    Senator Reid. Senator Inhofe, or any other Senators?
    Senator Baucus. Yes, I have just a couple of questions, 
very briefly.
    Ms. McLean, I just want to make sure that I heard your 
statement correctly; that is, when Senator Wyden asked you 
about whether there will be job layoffs or not.
    I want you to please clarify this, because there are many, 
particularly in the contracting industry, who say just the 
contrary. That is, there will definitely be jobs laid off, if 
the Administration's recommended budget is adopted by the 
Congress. In fact, I think a panelist on the next panel, my 
guess is, is going to testify very much to that point. So I 
just want to make sure we heard straight what you said.
    Ms. McLean. What I said, or at least what I meant to say, 
was that we were looking at all the factors and all of the 
details surrounding proposing a funding level at the level that 
is in the President's budget.
    We are well aware of those suggestions that the reduction 
in funding, or an increase in funding, results in either a loss 
or a gain of jobs. So that was part of the discussion.
    Senator Baucus. So is it your analysis that the swing of 
roughly $8 or $9 billion will result in lost jobs or not? I am 
just curious what your analysis shows and what your testimony 
is.
    Ms. McLean. I do not have today what a number would be. 
What the reduction in Federal-aid highway program outlays of 
1.3 percent in 2003, that would be the reduction in funding 
level.
    Senator Baucus. I am just asking the simple question, are 
there going to be jobs lost or not, based upon the 
Administration's budget submission?
    Ms. McLean. I would say that there would be a reduction in 
funding for highways, which would result in the level of 
construction in highways. But I could not tell you the number 
of jobs.
    Senator Baucus. So the answer is yes, there would be loss, 
but you do not know the number.
    Ms. McLean. I do not know the number.
    Senator Baucus. Thank you.
    I have one other question, if I might. I have just some 
ideas on how to get at environmental streamlining. It is my 
thought that because of all the boxes and the rabbits running 
around the maze and so forth, and it somewhat legitimate, but I 
do not think entirely, that DOT be made the lead agency, with 
respect to purposes and need and scope and alternatives.
    You know, all agencies can be consulted, and should be, the 
appropriate agencies. But you need some lead agency; somebody 
that can organize all this.
    It is my understanding that there really is not a well 
defined lead agency, at this point. So one thought might be 
and, in fact, in the bill that I will be introducing at the 
appropriate time, it will include such language.
    I am also wondering if it might make sense to have sort of 
a deadline by which an agency has got to respond, at some date. 
It would be something that is reasonable and make sense, but at 
least some date.
    I mean, the world is usually run by deadlines. For a lot of 
people in Government, it is not. I am not being critical, but I 
am just making an observation.
    For example, all of us run by deadlines. You know, lots of 
you can think of all kinds of people in their daily lives who 
operate by deadlines, and the businesses have deadlines. You 
have quarterly reports in the business sector, and you can name 
it. But a lot of agencies do not seem to have deadlines within 
which to make their recommendations, their suggestions.
    It just seems to me that the agencies should have 
deadlines. You know, it would force them to think a little bit. 
Frankly, they might find something pretty creative, if they 
have got a deadline, so long as it is reasonable. That, too, 
will be in the bill. Deadlines will be included in the bill 
that I intend to introduce.
    But if you could just think about that, when you make your 
recommendations to us, as we further discuss the legislation, 
we would deeply appreciate it. Thank you.
    Ms. Peters. Mr. Chairman and Senator Baucus, I think those 
are good suggestions, and we will consider those.
    Senator Reid. Max, I think that is a great idea, because a 
lot of times, these agencies are waiting around for one of the 
other agencies to do something.
    I think that that, combined with your idea to have a time, 
and as you have indicated, a reasonable time, we have got to do 
that, because there is no pressure for them to do anything. 
They can wait forever on this. So I think that is a great idea.
    We have been joined by Senator Graham of Florida. Do you 
have a statement you want to give?
    Senator Graham. Mr. Chairman, I do not have a statement, 
but I do have a few questions, if this would be appropriate.
    Senator Reid. We would be happy to have you ask those. This 
is totally appropriate.

  OPENING STATEMENT OF HON. BOB GRAHAM, U.S. SENATOR FROM THE 
                        STATE OF FLORIDA

    Senator Graham. Now I am going to violate what I just said, 
to make a brief statement.
    Senator Reid. It does not matter. It is counting against 
your 5 minutes, anyway.
    [Laughter.]
    Senator Graham. I heard the discussion about the number of 
jobs affected by this. I know, as a former Governor, during a 
period of economic downturn in the early 1980's, we analyzed 
all the things that the State Government could do to try to 
play a positive counter-cyclical role.
    We concluded that one of the most significant things to do 
was to accelerate our highway maintenance programs; that they 
were quick starting, they were heavy employment-oriented, and 
they left behind a better community and a stronger economic 
infrastructure.
    So I do not know how the States and other territories that 
are beneficiaries of these funds are allocating it, as between 
new construction and maintenance. But if a significant amount 
of that is in maintenance, as I know it is in my State, you are 
talking about very large number of job losses, if you cutoff 
those funds. So this is a real economic, as well as a 
transportation, issue.
    Having said that, when did the DOT first begin to suspect 
that the RABA calculation would result in such a large negative 
number?
    Ms. McLean. Sir, during the mid-session review, which the 
White House puts out around August----
    Senator Graham. This was August of 2001?
    Ms. McLean. Correct, there was a release that showed a 
negative, and I believe it was around, I want to say, $1.2 
billion/$1.3 billion at that time.
    Senator Graham. What steps were taken in August of 2001 to 
alert the States that they might be facing significantly 
reduced funds in the next year?
    Ms. McLean. We did notify them, and I think Administrator 
Peters can respond to that, as well. But I know that AASHTO was 
aware, and some of the other user groups were aware at that 
time, that a negative RABA or a negative adjustment was 
something that was very possible, due to the tax revenues.
    Senator Graham. What steps did the States take to take that 
into account?
    Ms. Peters. Mr. Chairman and Senator Graham, I could not 
tell you specifically what steps the States took. But we did 
know as early as mid-summer, that RABA would likely be 
negative.
    In fact, in early July, we were hosting a Western States 
Symposium of State Transportation Officials in Phoenix, 
Arizona, shortly before I was able to come to Washington. We 
were talking about the probability that RABA would be negative 
at that point in time. By the fall, as we began to get more 
data together, it was more evident and we were having 
discussions with various interest groups.
    I do know very specifically in early December of 2001, when 
I had an opportunity to speak to the AASHTO organization, which 
is the State Highway Transportation Officials, we talked very 
openly about negative RABA at that point in time.
    I was not party to discussions among the members about what 
specifically they might do. Again, I can only look back and 
tell you what I would have done, had I still been a State 
administrator. I would have been looking at trying to even out 
the flow between 2 years, so that I could try to keep my 
programs intact, and then look at the out years of the program, 
at perhaps extending the date of projects out into the future.
    One thing that is important, that we certainly have talked 
about, and I have talked about with some members of AASHTO is 
that this is news that is not good in the short term. But, as I 
mentioned earlier, because of the rather slow pay-out of 
highway spending, we are not going to fall off the ``plateau,'' 
if you will, immediately.
    But we do have reauthorization coming up and, as I think 
the chairman mentioned earlier, we are starting reauthorization 
at a lower level. In looking at the overall life of 
reauthorization of the transportation funding act, it is very 
important for us to look at this and try to provide more 
stability in funding over the long run.
    Senator Graham. My time is short, and I am going to make 
what may be more of a statement than a question. But I 
understand that you talked earlier about the Intelligent 
Transportation System Program.
    I have been very concerned that the high level of 
earmarking of that program had undercut its basic objective, 
which was to learn something about how ITS programs worked in 
real world applications, so we would do a better job in the 
future of reducing highway congestion.
    Toward that end, last year, I offered an amendment, which 
was adopted in the Senate, and stayed essentially in fact in 
the final bill, which said that the following sums shall be 
made available for ITS system projects, that are designed to 
achieve the goals and purposes set forth in Section 5203 of the 
ITS Act of 1998.
    I encourage the Department of Transportation to look at 
these three pages of earmarked ITS projects, and evaluate them 
against that standard of, are they consistent with the purposes 
that led to this ITS Act in the first place; and if you find 
them not to be consistent, that you not disburse the funds. I 
will be interested in seeing which of these many, many projects 
you find not to be consistent with the statutory purpose.
    Senator Reid. Senator Graham, for those that are watching 
this, and members of the committee know, has done hundreds of 
jobs and put in full shifts over the years that he was Governor 
and the years he has been in the Senate.
    My question is, Senator Graham, have you done anything 
dealing with highway construction?
    Senator Graham. Many, probably 10 or 15 highway 
construction jobs, from bridge building to asphalt pouring.
    Senator Baucus. I might say to my good friend and chairman, 
I have followed Senator Graham's lead. I know that he has done 
that. I thought it was a great idea, so I have done the same 
thing, and I might say the same.
    I have operated heavy equipment and raked gravel on highway 
jobs. I commend it to all of us on the committee, because it 
gives you a really good sense of, you know, what is going on 
here, as you talk to the guys and gals.
    I do not know if this happened to you, Senator Graham. I 
was also a sign person 1 day, and I was trying to get the 
traffic to stop. I jumped out in front of this traffic to get 
them to stop, because equipment was on the road, and instead of 
flashing the stop sign, I flashed the slow sign.
    [Laughter.]
    Senator Baucus. A guy went through, but he knew more about 
what was going on than I did. He stopped, and he just read me 
the riot act, because I had flashed the wrong sign.
    [Laughter.]
    Senator Baucus. But he knew exactly what was going on.
    So we all have had our great experiences on these jobs. I 
highly commend it.
    Senator Reid. Well, I could rake the gravel, and I think I 
could do the sign; but heavy equipment should be left for 
someone else.
    Senator Baucus. Well, 1 day they put me out in any empty 
field for 3 hours by myself, to make sure I did not cause too 
much damage.
    [Laughter.]
    Senator Reid. Thank you very much. We appreciate both of 
you being here.
    Ms. Peters. Thank you.
    Ms. McLean. Thank you.
    Senator Reid. The next panel of witnesses that we have 
today is the Honorable Tom Stephens, Director of the Nevada 
State Department of Transportation. He will testify on behalf 
of the American Association of State Highway and Transportation 
Officials.
    We will also hear from Mr. William Fay, President and CEO, 
American Highway Users Alliance, Washington, D.C.; and Mr. Tom 
Hill, Chief Executive, Oldcastle Materials, Incorporated, on 
behalf of the American Road and Transportation Builders 
Association.
    As has been indicated by Senator Inhofe, we were expecting 
Mr. Duit here today, but sadly, his business burned down 
Saturday night, and he is therefore unable to be here.
    I have said this, Senator Baucus, to Senator Graham, but I 
hope the two of you do something in the form of putting 
together your experiences. I think that would be really 
entertaining and really rewarding.
    Senator Baucus. We can do that.
    Senator Reid. But I think it is great that the two of you 
have done that. It is certainly a way to find out what is going 
on out there, and there is no other way.
    I have done it on a very limited basis, and have to 
acknowledge that I have not spent full shifts out there. I will 
come and do a few things and then leave. But I know that you 
and Senator Graham have put in full shifts, which is very hard 
to do.
    We are first going to hear today from Tom Stephens. Tom, 
please proceed. As each of you know, here is the little lamp. 
It will say ``talk,'' and when you have 1 minute left, it says, 
``sum up,'' and then ``quit.'' Please proceed.

    STATEMENT OF HON. THOMAS E. STEPHENS, DIRECTOR, NEVADA 
    DEPARTMENT OF TRANSPORTATION, ON BEHALF OF THE AMERICAN 
   ASSOCIATION OF STATE HIGHWAY AND TRANSPORTATION OFFICIALS

    Mr. Stephens. Mr. Chairman and members of the committee, I 
am Tom Stephens, Director of the Nevada Department of 
Transportation. I greatly appreciate the opportunity to speak 
with you today on a topic of extreme concern to every member of 
the American Association of State Highway and Transportation 
Officials.
    Mr. Chairman, we, in the States are stunned by the fiscal 
year 2003 budget proposal to slash $8.6 billion from the 
current highway funding levels. In the midst of a recession, 
this would cut the Federal Highway Program by 27 percent, 
because of an apparent slow-down in Highway Trust Fund 
Revenues, which triggered a complex revenue aligned budget 
authority reduction.
    Losses of this magnitude can wipe out much of what we have 
accomplished in the past 4 years to reduce the backlog of 
needed highway improvements. It would set the clock back to 
ISTEA.
    We strongly support the bill you all introduced last week 
to restore highway funding to not less than the $27.8 billion 
level authorized in TEA-21 for fiscal year 2003. We commend you 
for your appreciation of how important sustained highway 
investment is to the country, and thank you for your leadership 
in putting forth this legislation.
    It is our emphatic view that the ``not less than'' for 
fiscal year 2003 should be no less than the $31.8 billion level 
provided in fiscal year 2002.
    With 36 State Governors and legislators already contending 
with severe budget shortfalls, it is vital to maintain current 
Federal funding. Otherwise, State and local officials will have 
to begin the task of cutting billions of dollars in highway 
projects from their fiscal year 2003 Transportation Improvement 
Programs.
    Final decision on these cuts will be made public in 
September, affecting nearly every community in the Nation. 
Construction contractors throughout the country will cut back 
on equipment purchases, and lay off tens of thousands of well 
paid construction workers.
    Stock prices of several heavy equipment companies and 
construction companies have already dropped. Engineering 
consulting firms, already hard hit by the recession, will 
almost immediately have to start laying off engineers and 
technicians, as design work for next year's projects is delayed 
or canceled.
    Let me give you just a few State-specific examples, based 
upon a survey that AASHTO now has underway. In Nevada, a $50 
million cut in Federal funding will translate into a $50 
million reduction in construction contracts. Future year 
programs will be downsized, as well. This funding cut would 
jeopardize our progress on numerous projects to meet the 
demands of the Nation's fastest growing State.
    In Oklahoma, a total of $120 million in construction and 
right-of-way projects would be delayed or canceled, and the 
State's proposed $1 billion GARVEE Bond Program would be 
jeopardized.
    In Montana, a $67 million reduction would result in the 
loss of 2,800 jobs, roughly equivalent to a quarter of the new 
jobs created in Montana in 2001.
    In the longer term, we are concerned that the fiscal year 
2003 cut, from $32 billion down to $23 billion, will be used as 
the baseline for the reauthorization of TEA-21. Over the next 7 
years, the Highway Program would lose $60 billion, the 
equivalent of 2 years funding under TEA-21, with the Highway 
Trust Fund locking up tens of billions of dollars by the end of 
the period.
    Not only do we need to ensure that the fiscal year 2003 
funding levels are restored, but also that the firewalls for 
the distribution of the Highway Trust Fund receipts are 
perpetuated.
    This damage to our highway system and the Nation's economy 
need not occur. As the chart next to me shows, there is over 
$19 billion in the Highway Trust Fund. By using only $2.4 
billion for outlays in fiscal year 2003, we can keep highway 
investments at the fiscal year 2002 level.
    Now no matter what you think about the calculations, when 
you look at the numbers here, the fact is that the Highway 
Trust Fund has grown from $8 billion in the last 4 years, up to 
$19 billion. No matter how you calculate it, there is a lot 
more money in the Highway Trust Fund today than there was 4 
years ago.
    Clearly, the RABA mechanism needs to be refined, and 
calculations by the Treasury Department need scrutiny. But 
there are two principles adopted in TEA-21, which must be 
maintained.
    The first is to provide funding guarantees to provide the 
reliability essential to multi-year investments. The second is 
to preserve the firewalls in the Budget Enforcement Act, to 
assure that all of the revenues which flow into the Highway 
Trust Fund are spent for transportation.
    Let me conclude by saying that transportation has enabled 
the economic prosperity that America has enjoyed since the 
1950's. It is a simple equation: better transportation equals 
productivity gains and economic growth.
    As we struggle to regain our economic vitality, we dare not 
pull the plug on our transportation investments. America's fuel 
taxes collected for highways should be spent on highways.
    Thank you, Mr. Chairman. I would be pleased to answer any 
questions.
    Senator Reid. Mr. Fay?

 STATEMENT OF WILLIAM FAY, PRESIDENT AND CEO, AMERICAN HIGHWAY 
                        USER'S ALLIANCE

    Mr. Fay. Mr. Chairman, thank you for inviting the Highway 
User's to testify at this important, very timely hearing on 
highway funding.
    We are one of the most broad-based and diverse advocacy 
groups in the U.S. We are a consumer's group for America's 
motorists and truckers, buses and RVs. We represent vehicle 
manufacturers; the oil industry; the service stations that fuel 
them; 3-M, insurance and other safety interests; farmers; 
industries that produce concrete, stone, asphalt; and 
contractors and equipment manufacturers that turn those 
substances into highways.
    It seems like yesterday that we were asking for $5 billion 
to stimulate jobs in the economy. Now we are here on a far 
graver task, to avert the job and economic disruption that will 
result from the loss of $9 billion in highway funding next 
year.
    Simply stated, slashing 27 percent from our Nation's 
largest infrastructure program is too much. It will have 
serious economic repercussions for a Nation struggling to climb 
out of recession. Cuts ranging from $28 million in Delaware, to 
$618 million in California, will be nothing short of 
calamitous.
    The mere announcement of these cuts has already cost 
Americans jobs. Appended to my statement is a Joint Economic 
Committee study, estimating the cost of losing one's job: the 
financial hardship, the loss of health care and health 
insurance, rising mortality, divorce, and suicide. Quoting from 
that study, the longer jobless endures, the more likely it 
becomes that frustrations will be vented on the family or on 
the rest of society.
    Road investments not made also delay positive societal 
benefits: the safety benefits of reducing crashes, the air 
quality, time saving and fuel saving benefits of relieving 
gridlock, the productivity benefits of speedier deliveries. 
They are the reason that the highway tax is the tax Americans 
pay most willingly. But they are only realized if highway taxes 
are used as intended.
    No where are these gains clearer than in our study 
evaluating the 20 year benefits of improving America's 167 
worst bottlenecks, 287,000 fewer crashes, 1,150 fewer deaths, 
141,000 fewer injuries, 45 percent less carbon monoxide, 44 
less VOCs, 71 percent less CO2, 20 billion less gallons of fuel 
consumed, and 19 minutes knocked off the time it takes to drive 
through the bottleneck.
    For commuters, that is 38 minutes a day that they can spend 
with their families, at work, at errand, or recreation. That is 
why this funding shortfall is so crucial to our 45 million 
members.
    In the short term, we strongly support prompt enactment of 
S. 1917. We are mounting a nationwide media and grassroots 
campaign to enlist co-sponsors, and urge appropriators to do 
their part, once it is enacted.
    We wish the funding levels were more, but we commend this 
committee for its unanimous support and leadership, and for its 
bill, that actually sets obligation levels at a little under 
the amount that the Administration's budget says is going to be 
collected in taxes in 2003.
    America's highway users have an ironclad case that sets us 
apart from other interests asking for funding. We have already 
paid the $19 billion in taxes, and they are just sitting here 
in Washington.
    To make matters worse, even using the Administration's 
conservative revenue estimations, this surplus is going to 
double by the year 2008. The taxes we want released have 
already been paid. If they are not released, even more funds 
will languish in Washington, as our roads crumble.
    Let me be clear. We knew that RABA could go both ways. We 
have enjoyed record funding, because receipts have exceeded 
expectations. If there was not a Trust Fund surplus, we would 
be just another interest group with its hand out. But we have 
already paid the taxes that S. 1917 will invest.
    Turning to reauthorization, TEA-21 restored the concept of 
highway taxes paid equal highway investments made. While that 
concept must be preserved, we might make some minor adjustments 
that are going to eliminate future funding swings.
    To us, the fact that Treasury has failed to predict the 
adverse impact of the recession on revenues from diesel fuel 
and truck and tire sales, their models fail to understate 
future revenues, particularly if the economy picks up.
    To us, that suggests several clear priorities, and they are 
included in my statement. We need to enact S. 1306, which will 
shift over $400 million in ethanol tax receipts into the 
Highway Trust Fund. We need to further stop tax evasion. We 
need to invest the $19 billion Trust Fund surplus.
    Mr. Chairman, thank you for inviting me here to testify. We 
look forward to working with this committee to continue to 
support the vital role that our highway system plays in our 
economy and our every day lives.
    Senator Reid. We will now hear from Mr. Tom Hill from the 
private sector.

 STATEMENT OF TOM HILL, CHIEF EXECUTIVE, OLDCASTLE MATERIALS, 
    INC., ON BEHALF OF THE AMERICAN ROAD AND TRANSPORTATION 
                      BUILDERS ASSOCIATION

    Mr. Hill. Mr. Chairman and members of the committee, my 
name is Tom Hill. I am the Chief Executive Officer of Oldcastle 
Materials. We are the largest material supplier and paving 
contractor in the United States, headquartered here in 
Washington, D.C.
    I am here today on behalf of the American Road and 
Transportation Builders Association, where I am privileged to 
serve as Senior Vice Chairman. ARTBA has been representing the 
transportation construction industry here in Washington for 
over 100 years this week.
    Oldcastle has operations in 25 states and employs over 
15,000 people in the transportation construction industry. We 
are a federation of companies, and to help illustrate our 
reach, we have significant operations in several of your 
States.
    In Montana, we have Jensen Construction in Missoula, and 
Maronic Construction in Helena, Montana. In Connecticut, we 
have Tilcon, a very major employer in the State. Tilcon also 
has a large presence in Rhode Island.
    In Ohio, our Shelley Company is the largest paving 
contractor in the State, with well over 1,000 employees. Mr. 
Chairman, we also have a fairly small operation in Elko, 
Nevada.
    I greatly appreciate the opportunity to appear before you 
today, because the proposals currently before Congress relating 
to Federal highway investment in 2003 will have a direct impact 
on our business and the hard working people we employ.
    Our deep involvement in transportation improvement projects 
across the Nation provide me with a unique perspective on what 
the real world impacts of this will have today and in 2003.
    Mr. Chairman, I can tell you that people like myself, 
contractors, material suppliers, equipment manufacturers, and 
State transportation officials across the Nation, are having a 
hard time understanding why we are suddenly looking at nearly a 
30 percent cut in Federal Highway Program funding next year.
    This is nothing but a crisis for our industry. Share prices 
dropped on the release of the President's budget. More 
importantly, our employees are deeply concerned about their 
jobs and their families.
    This is not a 2003 problem, and let me reemphasize that. It 
is not just a 2003 problem. States are already delaying 
projects. Companies like mine are curtailing capital 
investment, and the impact is being felt right now.
    Then we learn that the cut is being triggered because the 
program funding level is dictated by a truly convoluted 
mathematical formula, that hinges on the accuracy of economic 
forecasts that try to guess the future. It is confusing.
    When we learn that since TEA-21 was enacted in 1998, that 
the Highway Trust Fund's account balance has grown to close to 
$20 billion that includes billions in surplus revenue, we do 
not even know why there is a problem.
    My understanding of TEA-21 was that it was based on the 
principle that, for the first time, all incoming highway user 
revenues to the Trust Fund would be spent in a timely manner on 
needed transportation improvements. If there is a $20 billion 
balance in the Trust Fund, that clearly has not happened.
    The RABA adjustment cut of $8.6 billion is not just some 
academic exercise that takes place in a vacuum. I was out 
amongst our companies last week, meeting with employees on this 
issue. I can tell you, they are scared and energized to reverse 
this cut in any way they can.
    The $8.6 billion is already sustaining 360,000 American 
jobs in companies like mine. If you waive a magic wand and take 
it away, just because someone in Washington made a mistake in 
predicting the future of the economy, then those jobs will be 
lost. Real American workers and companies will be hurt.
    Let us use that $20 billion Trust Fund balance to maintain 
the program next year at this year's level, so that we are not 
creating unemployment, disrupting State highway programs, and 
delaying critical safety improvements.
    I am not an economist, and I am not going to pretend to be 
able to explain all the nuances of Federal transportation 
funding that are contained in ARTBA's testimony. That is why I 
brought Dr. Buechner, who is the economist at ARTBA, along with 
me.
    The ARTBA written statement outlines a number of ideas for 
improving the RABA mechanism and for meeting the Nation's 
transportation needs in the TEA-21 reauthorization bill. I ask 
that our statement and all attachments to it be included in the 
record of this hearing, so they can be studied and considered 
by Congress.
    Senator Reid. Hearing no objection, that will be ordered, 
and that is the American Road and Transportation Builders 
Association to which you refer.
    Mr. Hill. Mr. Chairman and Senator Inhofe, we deeply 
appreciate your leadership, and that of your entire committee, 
in introducing S. 1917 last week, which would set a floor on 
fiscal year 2003 highway funding at the authorized guaranteed 
firewall level. That has got the ball rolling in Congress, and 
ARTBA supports your bill.
    We also hope that over the next weeks, we can work with you 
and Congress to maintain funding next year at the current $31.8 
billion level. Cutting the program by $4.1 billion makes no 
more sense than cutting it by $8.6 billion.
    Please use the Highway Trust Fund for its intended purpose, 
to fix this legislative glitch. The user fee revenues are 
coming in to do it.
    I thank you for giving me the opportunity to share my 
views, the concerns of our employees, and the positions of my 
industry's associations with you and the committee.
    Senator Reid. Thank you for your testimony, Mr. Hill, and 
thank you for appearing here on such short notice.
    The statement about which I am going to make has no 
partisan ramifications. But it does have ramifications to what 
I think is a bureaucracy that really prevents us from doing 
certain things here in Washington. I mean, this is just not 
right to have this in the budget. Some people should have 
advised the President of its ramifications.
    Using the figures that Tom Stephens gave us, I did this on 
a calculator. I thought maybe I was wrong, so I did it by hand: 
$60 billion is 2,520,000 jobs--2,520,000 jobs. These are high 
paying jobs. Each person that has one of those jobs is paying 
taxes, buying refrigerators and cars. I mean, we just cannot 
let this happen.
    Now we have been talking about an economic stimulus package 
here for months. One of the things I talked about was having 
what I refer to as an American Marshall Plan, infrastructure.
    In Nevada, we have problems that are different than in New 
York. They have things that are old. We have things that are 
new that need to be done. So we have different problems all 
over the country. But our infrastructure is in drastic need of 
help.
    We did not have it, in the Democratic proposal, even though 
I tried, and it certainly did not have any support in the 
Republican proposal. I cannot imagine why we did not go with 
that.
    I spoke at the National Mayor's Association. They went 
crazy. They know it is the right thing to do. I have gotten 
support from all over America, with State legislators. But here 
in Washington, the bureaucrats have stymied me. A simple 
program like building roads, I cannot get it through the 
bureaucracy.
    So I just think that not only do the cutbacks hurt programs 
about which I just spoke, but the other thing that happens, and 
I say this to all the panelists, if you cut back on a project, 
it makes it more expensive before you finish it.
    If on the road, we are going to build between search light 
and railroad passes, little local stuff, I mean, if we are 
going to do that over 3 years instead of 2 years, the project 
is more expensive.
    So I am so glad that we have the support of the Republicans 
in the House and Republicans in the Senate. This is something 
that we are all joining together on. I mean, they are happy and 
the Democrats are supporting it. We have got to join together 
and get this done. This is more than just fluff.
    So I have some questions that I will submit to all of you. 
Your testimony has been tremendous. Mr. Hill, we appreciate 
very much your coming on such short notice.
    When anyone ever says that Government cannot create jobs, 
they are wrong. Government does create jobs with programs like 
this. As far as I am concerned, there are two major programs 
that really get people to work: building houses and doing 
things with roads and bridges and dams and things of that 
nature. That creates lots of jobs.
    Senator Inhofe?
    Senator Inhofe. Thank you, Mr. Chairman.
    You know, I think most of you were here when the previous 
panel was here, and Senator Baucus said something that I recall 
also. That is that quite often, under different 
Administrations, Democratic or Republican Administrations, they 
start with a number that is lower than we end up. I think that 
has just become a reality.
    Your economic analysis, all three of you, it is pretty 
stark, when you talk about some of the things that could 
happen. Now what would be helpful to me, for example, the $1 
billion and the 42,000, to see just how you came up with these 
figures.
    You might remember, I asked the Administrator and Ms. 
McLean that question. They did not question it, but I think it 
would be helpful for us to actually, Mr. Stephens, come up with 
something where we can say, this is how this works.
    I would make the same request for the fact that they have 
said that we could take the additional figure that is found in 
S. 1917. But the Trust Fund could not support the higher figure 
that you folks are talking about, and you say that they can.
    So this would be helpful to us to have your analysis, so 
that we could look over and make our own determination, and we 
could be more persuasive in presenting our case. Are there any 
thoughts about that?
    Mr. Stephens. To address your first point, that is 
published data. The Federal Highway Administration put it out 
in a pamphlet, in preparation for TEA-21, where they showed the 
number of jobs, direct, indirect, et cetera. I will be happy to 
send you a copy of that pamphlet.
    At that time, I happened to be the chairman of the AASHTO 
Economic Committee, so the economic impact of highway 
expenditures was a big deal to us, and the Federal Highway 
Administration published that. So maybe it is only 40,000 per 
one billion now, because of inflation.
    Senator Reid. Or maybe it is 45,000.
    Mr. Stephens. Or maybe it is 45,000; but that was published 
data by the Federal Highway Administration.
    Senator Inhofe. Well, that is very helpful, Mr. Stephens, 
because I was not aware of that. When we can show that, that 
helps in establishing the case. Do not always assume, when you 
come up with a figure, that we have the background on that 
figure.
    And do not put me in an adversarial relationship. I agree 
with you. I just want to be able to see it, so that we can 
present it with conviction; yes, sir?
    Mr. Hill. If I could just comment on that. You know, the 
real world effects are, we invest in asphalt plants and 
quarries, crushing plants, for 20 and 30 years. When all of a 
sudden, there is a blip in what has been a fairly steady stream 
of Federal moneys for the last 30 years, it really puts doubt 
on whether you should invest for 20 and 30 years.
    In fact, you know, we are reassessing our capital program 
for next year with this in mind. That just is where the real 
life effects of it are. Our equipment manufacturers are 
worried, and they should be.
    You know, it is not just the jobs on the road. It is not 
just the guy on the back of the paver. It is the guy in the 
plant in Iowa that manufacturers the crushing equipment and so 
on. It is very real.
    Senator Inhofe. Go ahead, Mr. Fay.
    Mr. Fay. Mr. Chairman, Senator Inhofe, what Mr. Hill said 
is exactly right. He just mentioned the words ``capital 
budget.'' This is our Nation's capital budget, the 
infrastructure of this Nation. Yet, it is treated in much the 
same way as the pencil you are holding, you know, Mr. Chairman, 
in the way that it is accounted for.
    Thankfully, TEA-21 actually brought some sanity to that 
process by setting it apart and having a connection between 
revenues received and the amount that is appropriated and 
budgeted. But this is a capital program. It is just not treated 
that way. A lot of States may treat it that way.
    Senator Inhofe. No, I understand that, and believe me, I 
have had a lot of conversations with our people at Oklahoma. As 
you know, Mr. Duit was going to be here; and Mr. Hill, I 
appreciate your being here on such short notice.
    Well, the other thing, and you can just give me this for 
the record, and that is that the numbers support S. 1917, but 
according to the Highway Administration, may not support the 
others; but you say they are supported. So we would just need 
to have your data to help us out.
    Mr. Chairman, I have no more questions.
    Senator Reid. Senator Inhofe, I just advised my staff, just 
so you and Senator Chafee understand, as to the way I like to 
conduct the subcommittee hearings. Those people that get here 
first, they give their statements in the order that they show 
up. But after that, what I do is, I try to go on the basis of 
seniority.
    So Senator Graham, questions?
    Senator Graham. Thank you very much, Mr. Chairman.
    Mr. Stephens, when did your State Department first learn 
that there was going to be significant reduction in 2003 
funding?
    Mr. Stephens. I hate to quibble with words, but we were 
first officially notified of this in a letter of January 24th, 
2002, signed by the Administrator, Mary Peters.
    I will acknowledge that people had talked about RABA in 
various forums before then. But this is the letter which drove 
the point home, saying that we were only going to get $146 
million for the State of Nevada, instead of the $203 million 
that we had gotten the previous year, and it talks about the 
adjustment.
    I, frankly, had never looked at the adjustment in great 
detail, and I am not somebody who is shy about crunching 
numbers. I understand numbers. But when I got into the RABA 
adjustment, I was just amazed at how they did the look-back, 
the look-forward, estimates, authorizations, obligation 
authorities, and receipts.
    The receipt estimates, those are actual receipts from 1998 
through 2001, $24 billion to $33 billion, and then down to $30 
billion. The last year, they are saying, is $27 billion.
    We are not experiencing that kind of fluctuation on the 
State level in our revenues for diesel and fuel tax. We are not 
seeing where they are coming up with the figures from the truck 
tax. For example, they say the truck sales tax went down 55 
percent. Well, the sales only went down 24 percent. So what is 
going on there?
    I do not know that the GAO report had shed any light on 
that. Maybe people in the recession decided not to pay their 
taxes last year and are paying penalties. I have no idea. But 
we are not seeing the same data.
    Now it has flattened out. Revenues have flattened out. They 
are not increasing, but they are not dropping the way that they 
have indicated on the State level. What they are doing on the 
Federal level, we do not run the Treasury.
    Senator Graham. It was indicated that the first signal that 
the Department had was in August of last year. They thought 
they had communicated it through AASHTO or other 
intermediaries; but apparently, the full impact had not reached 
the States affected until January.
    Would it have been helpful if there had been a more formal 
method of early identification to you and other State highway 
administrators, as to what your budget was likely to be for 
2003?
    Mr. Stephens. It certainly would have been helpful, and I 
think probably in a going-forward basis, and I do not mean to 
be critical of the Federal Highway Administration. This has 
never happened before in this manner. So I do not want to be 
critical of Mary Peters and her tenure there. She is excellent.
    But it would be helpful if, when they do this mid-year 
review, I guess, which comes out in August, if they would sent 
that out in a letter to every Director, Secretary of State, 
DOT, indicating to them what was going on, so that we have 
really got it on our radar screen.
    Somebody saying something in a meeting, in a national 
meeting, where there might be 25 percent of the Directors in 
the meeting, and maybe only two-thirds of the States 
represented, that does not hammer it home. What hammers it home 
is a letter like this, that I got from the Federal Highway 
Administration, dated January 24th.
    Senator Graham. As you know, this committee will soon be 
turning to the task of reauthorization of the Surface 
Transportation Act. I would appreciate, from all three of you 
and the members that you represent, your ideas as to how can we 
create a more predictable and stable funding level.
    I recognize that there is the business cycle. It has not 
been repealed and, therefore, there are going to be ups and 
downs, over an extended period of time. I think it is important 
for people who have the responsibility of planning projects 
that take multiple years to complete, to have some degree of 
predictability within that up and down, as to what their 
resources are going to be.
    Maybe some things like multi-year averaging or other steps 
that would help to knock down the peaks and valleys of funding 
would be helpful. But you could be very helpful to this 
committee, if you would give us the benefit of your suggestions 
as to how to try to build as much stability into this program 
as possible.
    I mentioned in my opening statement that, at least from the 
Florida perspective, we found that expenditures on highway 
maintenance were some of the highest job creation activities.
    These numbers are almost 20 years old in my mind now, but I 
think at the time, we were projecting that for every million 
dollars of expenditure, that you could create somewhere in the 
range of 40 to 50 annualized jobs. This was in early 1980 
expenditure levels. It is probably a little bit less today.
    But what is your estimate? What percentage of your funding 
is going into maintenance, and how many jobs does every million 
dollars of that maintenance expenditure generate?
    Mr. Stephens. Well, on the National level, the $1 million 
to 42,000 works out to about one job for $25,000. So it works 
out into your range of figures: the 40,000 to 50,000 for $1 
million.
    I do not have a study that shows this. But my feeling is 
that you are exactly correct, that maintenance work creates 
more jobs than construction work.
    There are several reasons behind that. One, the lead time 
on design of a maintenance project is shorter, because you do 
not have all the complications of designing new bridges and 
whatever. You do not have to buy right-of-way. You do not have 
to get interrupted by long environmental delays.
    So you can get the money out a lot quicker on the 
maintenance project. To some extent, maintenance projects are 
more labor intensive, like doing an asphalt overlay, than 
buying the steel for a bridge for example, and building a new 
bridge.
    So you are exactly correct. To what extent maintenance 
versus new capacity projects and how that relates, I cannot 
tell you. But it is certainly my very strong feeling, after 7 
years of experience as the Director, that that is exactly 
correct.
    Mr. Hill. Senator, as the largest paving contractor, we 
think all the money should go to maintenance.
    [Laughter.]
    Senator Inhofe. Senator Chafee?
    Senator Inhofe. Well, I want to say, Mr. Chairman, on your 
interest in my work days, one of my early work days was laying 
asphalt on a maintenance project. It happened to be on Graham 
Street in South Daytona Beach.
    So if you want to come down to the big race in Daytona 
Beach this weekend, I will arrange for you to go to Graham 
Street and see what a good job maintenance I did.
    [Laughter.]
    Senator Reid. Well, you do a good job of maintenance here. 
I am sure you did a good job on Graham Street.
    Senator Chafee?
    Senator Chafee. Thank you, Mr. Chairman.
    Some of the comments here, I have to agree with, are 
calamitous cuts. I think Mr. Fay said that. I think just in 
hearing Mr. Stephens talk about what, a $50 million cut in your 
budget, is that accurate?
    Mr. Stephens. Yes.
    Senator Chafee. Those would be just calamitous for all our 
States.
    I also have to agree about the accuracy and, I think Mr. 
Stephens, in your testimony or at least your written testimony, 
you did question the accuracy. It just seems to me also that we 
have to get to the bottom of that.
    So at least we are being responsible, using real dollars 
and making sure they are going toward the projects that they 
are designated toward. But if they are there, we want to use 
them, certainly. Other than that, I have no other questions, 
except for Mr. Hill. I was just wondering what does Oldcastle 
Materials make?
    Mr. Hill. We are the fourth largest producer of 
construction aggregates, and we are the largest producer of 
asphalt in the United States.
    Senator Reid. You mentioned this, Mr. Fay, very briefly, 
and I want to elaborate on it, because of personal experience. 
I have talked to Tom Stephens many times about the road to my 
hometown of Searchlight, where I have a home.
    After September 11th, and I have no complaint about that, 
and I am glad they did this, they took a lot of the truck 
traffic off of Hoover Dam. But that has created a road from 
what we call Railroad Pass to Searchlight, 36 miles, that is a 
death trap.
    I do not want my children to come and visit me when I am in 
Searchlight, because I am afraid they are going to get killed 
on that road, and I am not exaggerating. Thousands and 
thousands of trucks, big trucks, come over that road every day 
that did not come before.
    The one thing that you talked about, that I want to stress, 
this road construction saves lives. I mean, we have had scores 
of people killed on that Searchlight road. It is 36 miles. 
People do not know how to drive on a two lane road anymore, and 
they become anxious and they pull around. There is something 
facing them, and it is death for one or more.
    People say, well, when I get money for home, they criticize 
and say, Reid brings pork home, you know. But I have never 
apologized for a single penny that I brought home for road 
building and other things. Because I believe I am bringing home 
things that make people more comfortable, it makes businesses 
more efficient, and saves injury and death.
    Now would anybody disagree with that, that is on the panel 
today?
    [Laughter.]
    Mr. Fay. Mr. Chairman and members of the subcommittee, 117 
Americans will die today on our roads, and 788 will die this 
week.
    I am a Trustee on the Roadway Safety Foundation, which is a 
non-profit educational group that just puts out materials like 
the fact that adding one foot to the width of a lane reduces 
fatal crashes by 12 percent; adding two feet reduces them by 23 
percent. Every time Mr. Hill improves a road, he does save 
lives.
    When you take a look at safety experts, they have a lot of 
great data on this. They have calculated that 30 percent of all 
fatal crashes in the United States are due to outmoded road 
design.
    These are roads that are carrying way too much traffic than 
they were designed to carry, or roads that area not in good 
condition or not well maintained. Those are roads that are 
killing people. It is a real travesty.
    I just point people sometimes to our interstate highway 
system, because it is the safest road system in the world, in 
terms of fatality rates. What is that? It is because it is 
designed for that. The lanes are wider. The shoulders are 
wider. There is a gentle slope off the side of the road. The 
lanes are divided to prevent head-on collisions.
    If you remember, we had two head-on collisions within a 
couple of weeks on George Washington Parkway out here. They 
just simply put up guardrails, and we have not had one since 
then. These investments really do save lives.
    I had gotten into a tremendous argument with an NBC 
reporter that was talking about highways as the fleecing of 
America. I took great umbrage because I said, as a person that 
represents the taxpayers, we do not feel fleeced. What we feel 
is that not enough investments are being made to save our lives 
and to make our commutes easier.
    The greatest personal problem that is facing Americans 
today, when you look at polls, that personal problem is time 
management. We do not have enough time in the day to do all the 
things that we need to do.
    The investments that this committee puts through, and the 
investments that your bill is going to put through, are going 
to save people's lives. They are going to give us more time 
with our families, and we commend you for them.
    Senator Reid. Mr. Hill, I have one question. You have 
brought an economist with you, and I would like to have his 
information be made a part of this record. I am anxious to hear 
how he feels about this analysis of the Treasury's revenue 
estimates.
    I am intrigued by what you said, that this organization 
that you are representing here today is 100 years old. Is that 
right?
    Mr. Hill. That is correct. It is in 2 weeks, or is it this 
week?
    Senator Reid. Anyway, it is recently, and we want you to 
give us the benefit of your organization's information about 
what has happened with the Treasury Department.
    Mr. Stephens, I would like you to do the same.
    Mr. Fay, if you have anything, we will take that, too.
    We will make this part of the record.
    Senator Reid. Senator Inhofe?
    Senator Inhofe. I have nothing further.
    Senator Reid. This has been a very good hearing. I 
especially appreciate the members of the committee for being 
here and being so attentive.
    This is an issue that is, and I repeat, of a bipartisan 
nature. We are going to work very hard to get more money. We 
recognize that we are in a fiscal downturn. But if you want to 
really get in a downturn, cut back road building the way that 
has been talked about.
    The subcommittee stands in adjournment.
    [Whereupon, at 2:53 p.m., the subcommittee was adjourned, 
to reconvene at the call of the chair.]
    [Additional statements submitted for the record follow:]
  Statement of Hon. James M. Jeffords, U.S. Senator from the State of 
                                Vermont
    Thank you, Senator Reid. First, let me say that I look forward to 
working closely with you as we proceed toward reauthorization of the 
Surface Transportation Program. This subcommittee will be our think 
tank in the months ahead.
    Let me also thank all of our fellow EPW Committee members for 
joining me in sponsoring S. 1917, the Highway Funding Restoration Act. 
ThroughS. 1917, we have taken an important step toward ensuring that 
the nation's transportation program will be properly funded in fiscal 
year 2003.
    We have borne many burdens as a Nation over the last few months. 
Now is not the time to backslide on our commitments to the traveling 
public. The construction season is just around the corner in my State 
of Vermont. Literally thousands of jobs are supported by our investment 
in transportation. We can't shortchange this sector if we expect to 
pull out of recession.
    S. 1917 is fiscally responsible. It funds the highway program at 
the authorized levels. At those levels, the balance in the Highway 
Trust Fund can support the spending.
    I look forward to hearing from our witnesses today about both the 
immediate budget outlook and the longer-term picture.
    Good afternoon to Assistant Secretary McLean and to Administrator 
Peters. Your partnership and cooperation in our process is greatly 
appreciated.
    I'm delighted also to see the outstanding panel of industry 
representatives and State officials. These folks understand the 
outcomes of our budget decisions. I am most concerned with outcomes.
    I know that resources will be the heart of the matter as we craft 
the committee's reauthorization proposals. It is vital that we get 
spending right for the coming year. Fiscal year 2003 will set the base 
for the 6-year program we are about to authorize.
    I want to achieve a balanced transportation system in this country. 
I want a system that provides choices to our citizens, that is secure 
and reliable.
    As we proceed with the committee's hearing agenda, we will receive 
a detailed accounting of the transportation system's needs and 
opportunities for the future. I expect that the needs will be great and 
the opportunities breathtaking! We must ensure that the resources are 
there to be called on.
    So again, I thank you Senator Reid.
                               __________
 Statement of Hon. Tom Carper, U.S. Senator from the State of Delaware
    I'd like to thank the chairman for holding this important hearing 
today and for giving me the opportunity to make a statement before his 
subcommittee on an issue that is important to all of our States.
    When President Bush released his Fiscal Year 2003 budget 1 week ago 
today, the budget for the Federal Highway Administration, particularly 
for the Federal-Aid Highway program, was one of the more attention-
grabbing pieces. After 3 years in which States received more than $9 
billion in aid above the numbers projected in TEA-21, the program was 
cut by nearly $9 billion. As we all know, this cut came as a result of 
Revenue Aligned Budget Authority (RABA), which, for the first time, was 
negative due to lower-than-expected revenue into the Highway Trust 
Fund. This means that, under the president's budget, Delaware, for 
example, will experience a nearly $30 million cut in Federal highway 
aid in 2003, about 24 percent less than its 2002 allocation. Other 
States will see even more dramatic cuts. At a time when the economy is 
just beginning to recover from recession, when combined State budget 
shortfalls are at $15 billion and many States are being forced to trim 
their budgets or raise taxes, Congress should act to restore some of 
these cuts. That's why I joined all of my colleagues on the full 
committee in co-sponsoring S. 1917, the Highway Funding Restoration 
Act, a bill that would raise Federal highway aid next year to the 2003 
level called for in TEA-21.
    In the coming year, I look forward to working with my colleagues to 
fix RABA to ensure that, in the future, States are provided with a 
steadier stream of highway funding. The Federal-Aid Highway program 
should not be as subject as it is now to the ups and downs of the 
economy and the Highway Trust Fund should not suffer from the nation's 
increased reliance on alternative fuels. At the same time we are 
addressing these issues, however, we must enhance the flexibility TEA-
21 gave States in spending their Federal transportation dollars by 
allowing them the discretion to spend at least a portion of their 
highway and transit funding on inter-city rail projects. Just last 
month, in the first hearing the full committee held on TEA-21 re-
authorization, we heard from representatives of the National Governors' 
Association, the National Association of Counties, the U.S. Conference 
of Mayors and the National League of Cities, all of whom expressed 
strong support for expanding the flexibility built into TEA-21 to cover 
inter-city rail. The mayors, in particular, released the results of a 
transportation survey showing that increased funding for new inter-city 
rail projects was one of their members' top priorities. I was pleased 
to hear several of my colleagues echoing the witnesses' testimony that 
day when they spoke about the desire among their constituents for 
passenger rail service that can connect them to our growing national 
system. Allowing States to spend at least a portion of their Federal 
highway and transit dollars on inter-city rail projects will 
significantly improve Amtrak's ability to build on its existing long 
distance routes and begin serving cities and towns that currently have 
no passenger rail service at all.
    In the last Congress, the full committee passed S. 1144, a 
bipartisan bill that would have allowed the funds TEA-21 granted States 
for the National Highway System, Surface Transportation and Congestion 
Mitigation and Air Quality Improvement Programs to be spent on inter-
city rail projects. I hope to introduce similar legislation shortly.
    As I'm sure you all know, Amtrak President George Warrington 
announced earlier this month that he would trim nearly 1,000 jobs and 
$300 million from Amtrak's budget this year. He also announced that 
Amtrak will have to propose major route reductions if it does not 
receive the necessary funding from Congress to pay its operating and 
capital expenses. The most likely candidates for route reductions are 
those routes outside the Northeast Corridor that are not partially 
supported by States. In the coming year, I plan to work with my 
colleagues to see that Amtrak is re-authorized, that its budget 
requests are met and that a dedicated source of capital funding is 
created.
    My bill will not solve Amtrak's capital funding dilemma. What my 
bill will do is help States retain critical service by increasing the 
tools they have available to them to spend their highway and transit 
dollars more flexibly to retain critical service. Increased flexibility 
will not cost the Federal Government anything and will not require any 
State to fund inter-city rail projects if it does not want to do so. It 
will, however, give States the ability to give our constituents the 
transportation services they need. It is my hope, then, that, when the 
committee considers S. 1917, we can also act to give States the kind of 
flexibility our constituents and their Governors, mayors and county 
administrators are asking for.
                               __________
   Statement of Hon. James M. Inhofe, U.S. Senator from the State of 
                                Oklahoma
    Thank you Mr. Chairman: I am pleased to join you today in welcoming 
our witnesses. It is always a pleasure hear from Federal Highway 
Administrator Mary Peters. We are very fortunate to have an 
Administrator at Federal Highway that understands the tough choices our 
States have to make. Mary's background as the director of the Arizona 
Department of Transportation will be very beneficial to us as we 
balance the needs of our individual States with need the for a national 
transportation system because she will be able to tells us what works 
and what does not work. So I am looking forward to working with you as 
we begin deliberations on reauthorization.
    I have had the pleasure of working with Donna McLean first as a 
fellow on the Water Resources Subcommittee on the then Public Works and 
Transportation Committee in the House. We were fortunate that she 
decided to stay as a permanent staffer on the Aviation Subcommittee. I 
have always found Donna to be very thorough and accurate in her 
analysis and I have no doubt that as we work through the varying 
interpretations of RABA, we will find that she will be most helpful in 
explaining the position of the Administration.
    I am most anxious to hear from Thomas E. Stephens, Director of the 
Department of Transportation in the chairman's home State of Nevada. 
Again, I believe we can never hear too often from our State officials 
on how decisions we make in Washington effect how they to their jobs at 
home.
    It is always good to hear from Bill Fay. His group, the Highway 
User's Alliance will play an important role in reauthorization.
    Finally, I had hoped to be welcoming my friend and fellow Oklahoman 
Jim Duit to testify on behalf of the American Road and Transportation 
Builders Association. Unfortunately, Jim's suffered a devastating fire 
to his business Saturday evening. In talking with him it appears that 
the cause of the fire may have been arson. Needless to say, he is 
unable to join us today. However, I have the oral statement that he had 
planned on making and I would ask that it be submitted for the record. 
Also, I have a written statement of Kenneth K. Wert who is President 
has Haskell Lemon Construction Co. in Oklahoma that I would like to 
submit for the record.
    We are fortunate that Mr. Tom Hill, Chief Executive of Oldcastle 
Materials, Inc. could join us today to present the industry's 
perspective on the proposed FY03 budget. I appreciate your rearranging 
your schedule on such short notice and look forward to hearing your 
testimony.
    Thank you Mr. Chairman and welcome to our witnesses.
                               __________
    Statement of Hon. Bob Smith, U.S. Senator from the State of New 
                               Hampshire
    Mr. Chairman, I too would like to offer a warm welcome to our 
witnesses this afternoon. As I promised at our full committee hearing 
on TEA-21 reauthorization just a couple weeks ago, I have looked 
closely at the RABA mechanism and the highway funding level for fiscal 
year 2003, and I believe we have come up with a responsible solution. 
In reauthorization of TEA-21 we will need to re-examine the RABA 
calculation method so that it does not result in these amplified ups 
and downs in funding. I look forward to working with Administrator 
Peters and Assistant Secretary McLean on that issue.
    More immediately, however, we need to address the drop of almost 30 
percent in highway funding for fiscal year 2003. I do not believe that 
this is what Congress intended when we passed the RABA provision in 
TEA-21. What was intended was that Highway Trust Fund revenues would 
equal highway spending. There is no dispute that the country's economic 
growth produced revenues well above the levels predicted in TEA-21, and 
so RABA resulted in funding increases. However, now that revenues have 
dropped off, the RABA calculation would result in a spending level well 
below actual revenues. In fact, the President's budget proposes a 
highway spending level of $23 billion when the latest Treasury 
Department projections put highway trust fund revenues at over $28 
billion for 2003. Congress did not intend for this discrepancy, 
regardless of the results of a complicated and obviously flawed 
calculation formula.
    Our solution was to introduce S. 1917, the ``Highway Funding 
Restoration Act,'' for which all 19 members of this committee are 
original cosponsors. I believe this bill clarifies congressional intent 
by clearly stating that highway funding for fiscal year 2003 will be no 
less than $27.7 billion, the amount authorized in TEA-21. I will 
continue to work throughout the budget and appropriations process to 
make sure this funding is restored and distributed to the State 
programs, and not diverted to project earmarks.
    Finally, I want to commend Administrator Peters for her leadership 
and commitment to the issue of environmental streamlining. As one of 
the authors of this provision in TEA-21, I have continued to focus 
attention on it at every opportunity. I also created a pilot project in 
New Hampshire to illustrate how State and Federal agencies are supposed 
to apply streamlining to an environmental impact statement process. 
These agencies committed to complete an EIS for the I-93 widening 
project in little more than 2 years, and they remain on schedule. I 
invite you, Administrator Peters, to come up to New Hampshire to attend 
this project's celebration of success later this year.
    Thank you, Mr. Chairman, for holding this hearing.
                               __________
Statement by Hon. Ben Nighthorse Campbell, U.S. Senator from the State 
                              of Colorado
    Mr. Chairman, I would like to thank you for scheduling this 
important hearing. This is an issue that I know is very important as it 
is to the rest of the West, including Colorado. I would also like to 
thank the distinguished panel for taking the time to meet with us 
today.
    Transportation is the grease that makes our economic engine go. 
Traffic congestion only slows the engine and cost businesses and 
individuals billions of dollars a year due to extra fuel costs, late 
deliveries, and lost production. Traffic congestion is also taking a 
toll on our nation's families. Parents are now getting home to their 
children later and later.
    The passage of the Transportation Equity Act for the 2151 Century 
(TEA-21) has helped States start to solve many of these problems. The 
Colorado Department of Transportation (COOT) has been able to increase 
its budget from $200 million to $300 million a year. This has allowed 
COOT to undertake projects that help ease the stress on Colorado roads.
    However, there are also problems with TEA-21. Current projects show 
a $4.4 billion shortfall in the fiscal year 2003 budget, a more than $8 
billion drop from the total TEA-21 funding from fiscal year 2002 
levels. This means that the State would Colorado would lose $59 million 
a 19 percent decrease from the year before. It is estimated that a 
budget decrease of this level would result in the loss of over 3,600 
jobs in Colorado over the next 7 years and 287,000 nationally during 
that same length of time.
    Now is not the time to decrease funding for our nations highways. 
This higher level of funding has allowed COOT to move forward with 
transportation projects that would not have been able to be completed 
without TEA-21 and now is not the time to slow the this progress.
    In addition, Colorado, along with many other States, is 
experiencing State budget reductions. This ``double whammy'' will 
result in additional project reductions.
    Now is not the time to decrease funding for our nation's highways. 
The higher level of funding has allowed COOT to move forward with 
transportation projects that would not been able to be completed 
without TEA-21 and now is not the time to slow this progress.
    Last week I signed on as an original cosponsor to the Highway 
Funding Restoration Act of 2002, which was introduced by leadership in 
this committee and fully supported in a bipartisan manner. This 
legislation would bring the FY2003 highway funding up to the level set 
in TEA-21.
    In closing, transportation remains a top priority in Colorado. 
Having a transportation system that moves people and goods is important 
to our economic health and quality of life. I remain committed to 
working with this committee throughout the year and I look forward to 
these discussions today on this important issue.
    Thank you Mr. Chairman.
                               __________
      Statement of Mary E. Peters, Administrator, Federal Highway 
    Administration Donna McLean, Assistant Secretary for Budget and 
                  Programs and Chief Financial Officer
    Mr. Chairman and members of the subcommittee, thank you for the 
opportunity to testify today in support of the President's Fiscal Year 
(FY) 2003 Budget proposal for the Department of Transportation and to 
discuss the status of the Highway Trust Fund. We would also like to 
thank you for your leadership in scheduling a series of hearings in 
preparation for the reauthorization of the surface transportation 
program. We are looking forward to working with this subcommittee and 
with Congress to achieve the goals outlined in the fiscal year 2003 
budget request and to shape reauthorization proposals. Working 
together, we can meet the transportation challenges facing our Nation 
and provide the American people with a transportation system that is 
safe, efficient, and accessible, while remaining respectful stewards of 
the environment.
                                overview
    As a whole, the strong but flexible multi-modal system developed 
under the Intermodal Surface Transportation Efficiency Act of 1991 
(ISTEA) and the Transportation Equity Act for the 21st Century (TEA-21) 
is working well in supporting our Nation's economic growth and 
improving the quality of life for all our citizens. Our Nation's 
highways and intermodal connectors are the critical link in the 
national intermodal transportation system. The challenge is to maintain 
our high-quality network while achieving our goals to increase safety, 
ensure national security, improve mobility, and promote environmentally 
responsible and efficient project delivery. The $24.1 billion funding 
level, proposed by the President for the Federal Highway Administration 
(FHWA) for fiscal year 2003, provides funding essential to meet this 
challenge. This includes a Federal-aid Highway obligation limitation of 
$23.2 billion. The fiscal year 2003 request reflects the funding levels 
enacted in TEA-21, as adjusted to reflect the latest Highway Trust Fund 
revenue figures, and honors the highway category guarantees in that 
Act.
    The key to ensuring that highway-related receipts are spent is that 
the highway funding level is adjusted each year to reflect the latest 
information on Highway Trust Fund (HTF) receipts. At the time of the 
enactment of TEA-21, highway program funding levels were set based on 
estimates of HTF receipts. Each year, the level is adjusted using a 
formula specified in TEA-21. This adjustment ensures that highway 
spending remains aligned with HTF receipts.
    In fiscal years 2000, 2001 and 2002, our Nation reaped the benefits 
of record-level funding for surface transportation as authorized in 
TEA-21. The guaranteed funding level, tied to HTF receipts, has 
provided the States with much needed resources to support the Nation's 
highway infrastructure, as Congress intended. In fiscal year 2003, 
however, declining HTF receipts will, for the first time, trigger a 
downward adjustment, in the amount of $4.369 billion, in the highway 
program level, in order to keep highway spending aligned with the 
status of the Highway Trust Fund. Even with this negative calculation, 
over the life of TEA-21, these adjustments will provide a net gain of 
almost $4.7 billion in highway spending.
    The calculation of the adjustment is not a policy call--it is a 
calculation based in law and reflected in the budget. As we discuss the 
reauthorization of the surface transportation program, we need to look 
for ways to smooth out current positive and negative swings that result 
from this adjustment. What we should not do is abandon this adjustment 
concept. Linking highway spending to receipts is a fundamental 
principle of TEA-21.
    The budget proposes to fund most Federal-aid highway programs from 
within the obligation limitation, including our major programs: the 
Surface Transportation Program, the National Highway System, Interstate 
Maintenance, the Highway Bridge Replacement and Rehabilitation Program, 
and the Congestion Mitigation and Air Quality Improvement Program. 
Other TEA-21 programs include the National Corridor Planning and Border 
Infrastructure Improvement programs and the Transportation and 
Community and System Preservation Pilot Program. The Emergency Relief 
program and a portion of the Minimum Guarantee program will continue to 
be exempt from the limitation. The estimated obligation level for 
exempt programs in fiscal year 2003 is $893 million.
    In the face of declining revenues into the Highway Trust Fund, we 
continue to strongly support creative financing solutions. 
Consequently, the 2003 budget includes $99 million to leverage our 
Federal investment in transportation infrastructure under the 
Transportation Infrastructure Finance and Innovation Act Program 
(TIFIA). This investment will translate into over $6 billion in 
nationally significant surface transportation projects.
    As the events of September 11 so graphically demonstrated, a safe 
and secure surface transportation system is vital to all Americans. We 
must keep our infrastructure secure and we must strengthen our 
commitment to reducing highway injuries and fatalities, even as we 
squeeze additional capacity from the system. To meet this challenge, 
the fiscal year 2003 Budget for FHWA emphasizes four priority areas: 
safety, mobility, environmental stewardship and streamlining, and 
oversight.
                                 safety
    Safety continues to be the Department of Transportation's most 
important priority. While the number of highway fatalities in recent 
years has been held relatively flat, despite significantly rising 
numbers of vehicles on our roads, more than a quarter of a million 
people have been killed on America's roadways in the past 6 years, 
41,000 deaths each year. There are also more than 3 million police-
reported injuries annually. Highway safety improvements are critical to 
improving these numbers. Success will depend on a balanced approach 
that addresses the behavioral, vehicular, and roadway infrastructure 
and operations safety problems. We can, we must, and we will strive to 
do better.
    FHWA works closely with States and other partners to improve our 
ability to analyze roadway safety challenges and to direct investments 
to specific projects and programs, which will deliver the most value in 
terms of lives saved and injuries minimized. For example, construction 
programs continue to contribute to safety by correcting unsafe roadway 
design and removing roadway hazards. States mayCand doCuse their 
Surface Transportation (STP), Interstate Maintenance, and National 
Highway System (NHS) funds for safety improvements. Safety can be built 
into every interchange upgrade, intersection redesign and new facility 
through safety conscious planning and design. Signing and pavement 
improvements can enhance the safety of existing and new facilities for 
all users of the highway system.
    Within the STP, 10 percent of funds are reserved under TEA-21 for 
highway-rail crossing improvements and hazard elimination. The Hazard 
Elimination program supports efforts to resolve safety problems at 
hazardous highway locations. Since the enactment of TEA-21, States have 
obligated $489.3 million in Hazard Elimination funds, and another 
$707.4 million in optional safety funds have been obligated primarily 
for Hazard Elimination purposes. These Hazard Elimination expenditures 
are estimated to have saved 7,200 lives since 1998. The Highway-Rail 
Grade Crossing Safety program is designed to reduce crashes at public 
grade crossings, and $499 million in Highway-Rail Grade Crossing funds 
have been obligated. The grade crossing safety program is estimated to 
have saved 2,000 lives since 1998.
    To meet its highway safety goal, FHWA will focus its safety 
programs on reducing the most frequent types of fatal crashes through 
technical assistance, research, training, data analysis, and public 
information.
    From the $359.8 million requested for research and technology 
programs for fiscal year 2003 budget, significant resources will be 
invested in improving safety. Part of the research funding will support 
innovations, such as brighter traffic signal lights which are more 
visible to drivers, to improve safety at or near intersections. 
Research funding also supports speed management techniques, which are 
designed to reduce the 30 percent of fatal crashes in which speed is a 
factor. Rumble strips help prevent run-off-the-road crashes, which 
account for 38 percent of all fatal crashes. FHWA provides technical 
assistance to States like Maryland, whose 1999 data show a $182 safety 
benefit for every dollar spent on rumble strip installation.
    National deployment of wireless enhanced 9-1-1 (E-9-1-1) will be 
accelerated this year. E-9-1-1 is an emergency cellular telephone 
service that automatically routes calls to the closest public safety 
answering point and informs the dispatcher of the caller's location. It 
will save lives. About 25 percent of 9-1-1 calls come from wireless 
phones.
    Without automatic location, when callers are unable to describe 
their location, response times dramatically increase. Response time is 
a critical factor in determining the survivability of a crash. Also, 
more timely and accurate information will aid police, fire, and other 
emergency responders in protecting victims and property and in reducing 
traffic congestion surrounding the scene.
    Recent events have focused attention on the need to ensure the 
security of our Nation's transportation system and ITS technologies 
offer many opportunities to significantly improve transportation 
security. The ITS program is developing and deploying technologies to 
help States and localities improve traffic flow and safety on streets 
and highways and address the need for emergency notification and 
response. This budget proposes to focus the fiscal year 2003 ITS 
Deployment Program resources of $93 million on ITS technologies that 
enhance the security of our surface transportation systems.
    A major emphasis in ITS will continue to be in the area of 
intermodal freight. The Department is conducting several ITS 
operational tests that are designed to improve the efficiency and 
security of the intermodal movement of freight. The Chicago O'Hare 
cargo project, which is an operational test, uses a ``smart card'' and 
biometric identifiers to identify the shipment, vehicle, and driver 
during transportation from the shipper to and through the air cargo 
terminal. Another project, Cargo-Mate, has particular applicability to 
port and container security, in addition to enhancing efficiency of 
freight movement. The system is designed to perform real-time 
processing of asset and cargo transactions, provide for the 
surveillance of cargo movement to and from ports, and provide an 
integrated incident and emergency response capability.
    To improve safety of motor carriers operating on our highways, as 
well as national security, a total of $47 million is requested for 
construction of motor carrier safety inspection facilities on the 
Southern Border within the Coordinated Border Infrastructure Program. 
This builds on funding provided in fiscal year 2002 and supports 
infrastructure improvements necessary to accommodate permanent 
facilities.
                                mobility
    Congestion is one of the most obvious results of the mismatch 
between the growing demands for transportation and the capacity of our 
systems, particularly in metropolitan areas. Congestion is a complex 
problem involving many factors. This budget works to address the causes 
of frustrating delays that face travelers and shippers and impact the 
Nation's economic efficiency. Funding will support the identification 
and implementation of a mix of locally preferred investments, including 
selective additions of new capacity, to improve traffic flow and system 
reliability. Our progress toward our goal of supporting mobility is 
tracked by measures such as improvement in pavement and bridge 
condition and by reduction in the growth of traffic congestion.
    States may direct 2003 Federal-aid highway funds, according to 
their priority needs and goals, to a variety of system improvement and 
congestion relief purposes. In recent years, approximately 50 percent 
of Federal funds were obligated for system upgrading purposes, 
including reconstruction, widening, restoration and rehabilitation, and 
resurfacing. Consequently, overall highway system conditions, as 
measured by pavement condition, ride quality, alignment adequacy, and 
bridge ratings, have steadily improved. In 2001, 91 percent of travel 
on the NHS occurred on pavements rated acceptable or better. In fiscal 
year 2003, the Department's goal is to increase this to 92 percent.
    For fiscal year 2002 and beyond, the FHWA has modified its bridge 
performance measures in order to take into account the actual area and 
average daily traffic on the bridge. This measure more accurately 
reflects progress toward meeting our mobility goal. The previous 
measure of reducing the number of deficient bridges considered all 
bridges as equal, therefore large bridges with higher average daily 
traffic were considered the same as smaller bridges with lower average 
daily traffic. Since the enactment of TEA-21, the condition of NHS and 
non-NHS bridges has improved significantly. In 1998, the percentage of 
the Nation's total bridge deck area that was on deficient NHS bridges 
was 32.6 percent and 32.5 percent on non-NHS bridges. In 2001, the 
percentage of deck area on deficient NHS bridges was 30.6 percent and 
32.3 percent on non-NHS bridges. Our goal for fiscal year 2003 is to 
improve the condition of bridges so that the percentage of deck area on 
deficient bridges is reduced to 27.5 percent for the NHS and 29.8 
percent for the non-NHS.
    The development and deployment of longer lasting materials will 
mean that facilities will need repair or improvement less often, 
thereby reducing congestion and safety problems associated with work 
zones. Research and Technology program funds support multi-year 
initiatives in pavements, structures, and asset management.
    Along with improved condition and strategic expansion of 
infrastructure, we must address congestion through improved operation 
of the highway system. In the last year we developed and tested a 
system reliability index in 10 cities that we call the ``buffer 
index,'' the amount of time you have to add to your trip because of 
system unreliability. It will help cities gauge how well they are doing 
in responding to incidents, managing their work zones, and responding 
to weather. The measure will be applied in 22 cities this year.
    In the area of congestion mitigation, we have a number of other 
initiatives underway that will continue in 2003, including three that 
have great potential for long term impact:
    We will be piloting a national campaign to rethink the way we look 
at work zones. The focus will be on managing the work zone from the 
perspective of the highway user, emphasizing the concept of getting in, 
getting out, and staying out.
    We are sponsoring a national conference on incident and emergency 
management that brings together transportation and public safety 
communities to focus on ways to improve traffic incident response time 
and traffic incident management methods.
    We are working with our State partners to help each make use of the 
roadway operations self assessment diagnostic tool at least once during 
the year. The purpose of this tool is to help the operating agencies to 
identify ways that they can improve the operation and management of 
their roadway networks.
    Other strategies to improve operations include the deployment of 
ITS to provide more information to drivers faster, enabling them to 
take the most efficient route of travel. Significant progress has been 
made in ITS deployment since the enactment of TEA-21. We have seen a 37 
percent increase in the number of freeway miles with real-time traffic 
data collection technologies, a 55 percent increase in the coverage of 
freeways by closed circuit television, a 35 percent increase in the 
number of buses equipped with automatic vehicle location systems, and 
an 83 percent increase in traveler information dissemination on our 
freeways. However, only 22 percent of the freeways in major 
metropolitan areas are instrumented for real time monitoring. 
Therefore, ITS deployment must continue to be a high priority for the 
Department. The search for new technological and innovative solutions 
to our mobility challenges will be supported by the 2003 budget request 
for $359.8 million for research and technology.
    We are committed, along with our partners at the State and local 
levels, to maintain, operate, and improve transportation systems to 
reduce congestion and improve mobility, thus allowing our Nation to 
compete globally and Americans to enjoy a higher standard of living.
               environmental stewardship and streamlining
    Implementation of environmentally responsible transportation 
improvements, delivered on time and within budget, is an important 
component of the Department's vision for all its programs. TEA-21 gave 
States and communities additional tools and opportunities to enhance 
the environment and quality of life for their residents, while 
directing us to streamline the environmental review process. Within the 
Federal-aid highway program, NHS and STP funds support programs that 
also protect the environment. There is also a mandatory 10 percent set-
aside from each State's STP apportionment for Transportation 
Enhancement projects that support historic preservation, bicycle/
pedestrian travel, scenic easements, and other enhancements. The CMAQ 
program supports projects to reduce emissions, that often reduce 
traffic congestion. To minimize the impact of transportation on air 
quality, FHWA will continue to work with the Environmental Protection 
Agency and other partners to continue to reduce on-road mobile source 
emissions.
    Continued progress in streamlining the delivery of transportation 
improvements will also improve safety and ease congestion, but must be 
balanced against the need to protect communities and the environment. 
Successful environmental streamlining requires fostering good working 
relationships across a number of organizational lines. These 
relationships allow for the development and establishment of reasonable 
and realistic schedules for advancing major projects. It is important 
for the Department to facilitate agreement by Federal agencies on 
timeframes for conducting reviews and granting approvals. Working 
together in partnerships, combining a full range of Federal, State, and 
local officials and interest groups, will lead to reasonable ways to 
meet the Nation's transportation needs, while being good stewards of 
the environment.
    The Department's streamlining approach has resulted in:
    Reinvention of the environmental review process, through 
interagency training, development of national programmatic agreements, 
and guidance that encourages flexible mitigation practices.
    Development of a system for dispute resolution that includes draft 
national procedures, guidance for managing conflict during the project 
development process, and assistance by qualified dispute resolution 
specialists to States and project sponsors.
    Research conducted to evaluate project timeframes, identify reasons 
for project delays, and assess the effectiveness of implementation 
efforts.
    Assistance, support, and encouragement to develop numerous best 
practices and pilot projects to catalyze change and lead to even better 
streamlining outcomes.
    Since the enactment of TEA-21 in 1998, progress has been made in 
streamlining the planning and approval process for projects throughout 
the country: 33 States have interagency agreements for funding 
additional personnel necessary for faster, concurrent reviews; 23 
States have adopted a merged process for wetland permits with the Army 
Corps of Engineers; 15 States have adopted context sensitive design 
approaches; and 31 States have some level of delegated authority for 
historic resources. As a result of these actions, the mean time to 
process environmental documents for major highway projects has been cut 
by almost 8 months, the median time has been cut by 1 year, and the 
Department is well positioned for significant future progress.
    We have begun the job, but more can be done. Only a couple of 
States, most notably New Hampshire, have attempted to define timeframes 
for concurrent reviews. New Hampshire's model for setting project 
timeframes for I-93, using a partnering approach, has been publicized 
as an effective streamlining tool on the FHWA website and at a national 
streamlining workshop.
    FHWA continues to work with other agencies to advance the 
Environmental Streamlining National Memorandum of Understanding (MOU). 
Efforts to cooperatively establish realistic project development 
timeframes among the full range of transportation and environmental 
agencies will be advanced by this budget. For example, in 2003 we 
propose to fund $6 million from the FHWA administrative takedown for 
FHWA support of Federal and State initiatives to identify new, more 
efficient business processes that will result in more timely project 
delivery. Working cooperatively to adhere to those timeframes is 
resource intensive, but it is critical to our success. With the 
additional proposed funding, we will be able to intensify efforts 
currently underway within DOT that focus on solidifying the interagency 
partnerships, such as pilot efforts and process reinvention.
                               oversight
    We must continue to improve Federal oversight and accountability 
for the expenditure of public funds. Increased emphasis on FHWA's 
oversight responsibilities must accompany the significant increases 
that have occurred in the Federal-aid Highway program in recent years 
if our Nation is to make the ``best buys'' in safety and congestion 
relief.
    FHWA oversight policies were updated and clarified in fiscal year 
2001 and their implementation will continue into the requested budget 
year. Even as legislation has directed FHWA to delegate many project-
level authorities to the States, the responsibility for program 
oversight to ensure the effective delivery of all programs remains with 
FHWA. Additional resources deployed in this area will enable FHWA to 
work with the States to improve its management of the Federal-aid 
highway program, including cost containment, while allowing States 
maximum delegated authority and flexibility, as appropriate. FHWA will 
continue to advance asset management and system preservation 
initiatives to foster more systematic and strategic thinking and 
investment choices by the State and local governments. Timely 
investments in the size and makeup of the Federal work force itself are 
also crucial with the aging of both the Interstate Highway System and 
the work forces of our partner agencies in States and localities. We 
are focusing new attention on work force development issues and will 
keep the subcommittee advised of our efforts. As larger and more 
complex projects are contemplated, a balance must be achieved between 
addressing the needs of major projects and the vast majority of the 
program vested in smaller projects.
    In 1998-1999, FHWA undertook a major restructuring in order to move 
program decision authorities closer to our primary customers, the 
States, and to focus high-level technical expertise in our Resource 
Centers. Through this redeployment of existing resources we have also 
been able to fulfill FHWA's commitment to add an additional position in 
respective Division Offices for the oversight of each major project.
    The fiscal year 2003 budget requests a funding level of $318 
million for the necessary salaries and benefits for our employees and 
for ongoing administrative expenses in support of our Federal-aid 
program. The budget request reflects modest adjustments for mandatory 
salary and benefit increases and other adjustments for current service 
levels.
                    status of the highway trust fund
    The cash balance in the Highway Trust Fund (HTF) at the end of 
fiscal year 2001 was $27.740 billion, of which $20.372 billion was 
located in the Highway Account and $7.369 billion in the Mass Transit 
Account. Based on the latest projections of income to the HTF reported 
by the Department of the Treasury, the Department of Transportation 
estimates that the Highway Account of the HTF has sufficient revenues 
to support the levels of authorizations throughout the life of TEA-21.
    Balances in the Highway Account of the HTF should not be considered 
as surplus funds. Current commitments of HTF revenues for prior year 
obligations, as well as unobligated balances of prior year 
apportionments, exceed $67 billion. However, as reimbursing cash is 
made available from the HTF, revenues from excise taxes are coming into 
the HTF. Any consideration of HTF balances must take into account not 
only current levels of revenue, but also commitments made against that 
revenue, and projected levels of future income.
                               conclusion
    The funding requested in 2003 will help improve transportation 
safety; enhance national security; maintain and expand our 
transportation infrastructure, and increase its capacity; reduce 
environmental degradation; and improve the quality of life for all our 
citizens. We look forward to working with Congress to enact the 
President's fiscal year 2003 budget in order to provide a viable 
transportation system to support a strong America.
    Once again, thank you for this opportunity to testify today. We 
will be pleased to address any questions you may have.
                                 ______
                                 
 Responses of Hon. Mary E. Peters to Additional Questions from Senator 
                                  Reid
    Question 1. One of the most important accomplishments of TEA-21 was 
the creation of the highway and transit budgetary firewalls. These 
firewalls provide the States with some degree of certainty as to the 
expected level of highway and transit funding and allow transportation 
leaders to better plan projects and manage budgets. In addition, 
without these budgetary protections, we would have never been able to 
enact the funding increases envisioned in TEA-21.
    Unfortunately, the Administration's budget request does not appear 
to establish any continuing connection between Highway Trust Fund 
revenues and highway spending. Can we expect the Administration's 
reauthorization proposal to maintain the existing transportation 
firewalls?
    Response. Yes. The Federal Highway Administration (FHWA) agrees 
that the budgetary firewalls contained in the TEA-21 legislation not 
only protect highway and transit budgetary spending amounts from 
incursions by other discretionary programs, but also provide a direct 
relationship between revenues accruing to the Highway Account of the 
Highway Trust Fund and spending allowed in the Federal-aid Highway 
Program. The budget amounts for fiscal years 2004-2012, the years for 
which no authorization act is in place, do not reflect the 
Administration's reauthorization proposal. Rather they assume the 
continuation of the program level from the last year of TEA-21 with 
modest growth each year. The fiscal year 2004 President's Budget will 
reflect the Administration's reauthorization proposal.
    The Administration's fiscal year 2003 budget was based on the 
legislated mechanism known as Revenue Aligned Budget Authority (RABA). 
Even though the RABA calculation for fiscal year 2003 produced a 
negative result, over the prior three fiscal years, it provided over $9 
billion in additional spending authority. RABA was established with the 
possibility of being either positive or negative. The negative RABA 
result of fiscal year 2003 is as much a part of the promise of tying 
spending to available revenues, as were the positive RABA results of 
prior fiscal years. However, the FHWA would like to work with Congress 
during reauthorization of the Federal-aid Highway Program to consider 
adjustments to the RABA mechanism that may somewhat reduce the 
magnitude of swings in its calculations from one fiscal year to 
another.

    Question 2. I have heard concerns raised about both the accuracy of 
Treasury's fiscal year 2001 Highway Trust Fund revenue figure and the 
reasonableness of Treasury's future revenue projections. It appears 
that Treasury has based future year revenue projections on the fiscal 
year 2001 revenues, which may represent a low point due to the 
recession. Has the Federal Highway Administration taken a close look at 
Treasury's numbers and are you comfortable that the 2001 figures are 
accurate and that future year projections are not underestimated?
    Response. Over the years, the Federal Highway Administration (FHWA) 
has met frequently with Treasury and understands the process used by 
Treasury to administer the Highway Trust Fund (HTF). We are satisfied 
that the process is complete, fair, and objective, and results in the 
HTF being credited with the appropriate taxes. However, FHWA does not 
have the information to independently assess the absolute accuracy of 
fiscal year 2001 HTF revenues. Based on the information available to 
FHWA and on discussions with Treasury, the fiscal year 2001 revenues 
reported appear to be reasonable.
    Future HTF projections are based largely on Administration 
estimates of the pace at which the economy will recover from the 
recession. It will take some time before economic conditions return to 
the levels forecast prior to the recession. The same is true for HTF 
revenues. Again, based on the information available to FHWA and on our 
understanding of Treasury procedures, we do not believe that future HTF 
revenues are underestimated.

    Question 3. The 27 percent cut in your budget for fiscal year 2003 
will have a substantial effect on State programs. Has the Federal 
Highway Administration made any effort to assess the impact on State 
programs in fiscal year 2003?
    Response. FHWA has released tables that estimate the State-by-State 
impact of the fiscal 2003 RABA calculation (See Attachment). States 
then will have to make programmatic adjustments to reflect the revised 
funding totals. States need time to analyze and evaluate options before 
the impact of these adjustments on State programs can be evaluated.
    To mitigate the impact of these reductions from anticipated 
funding, one option available to all States is advance construction. 
The primary purpose of advance construction is to allow projects to go 
forward when Federal funds are not available while having those 
projects retain eligibility for future Federal funds. This strategy 
requires the availability of non-Federal funds until additional Federal 
funds are provided.
    If State/local funds are not available, a second option is to issue 
transportation bonds. The bonds could be backed by State and/ or 
Federal funds.
    States may also consider utilizing some of their unobligated 
minimum guarantee special limitation from prior years, along with the 
minimum guarantee funds that are exempt from the obligation limitation. 
In the aggregate, there is currently almost $3 billion in obligation 
authority available to the States.

    Question 4. We have heard several references to the Aperformance@ 
of our transportation system. While I agree that performance is the 
critical standard by which we judge our system, I am concerned that we 
have not developed adequate ways to measure and track performance. The 
U.S. Department of Transportation puts out a biennial Conditions and 
Performance report, but focuses almost exclusively on conditions. Do 
you have any suggestions as to how we might better measure performance?
    Response. Yes. The Federal Highway Administration (FHWA) is 
examining approaches to measuring performance that go beyond the 
traditional measures of congestion used in the biennial Conditions and 
Performance report. Since the 1999 Status of the Nation=s Highways, 
Bridges, and Transit; Conditions and Performance report to Congress was 
published, the annual FHWA Performance Plans have adopted new 
procedures developed by the Texas Transportation Institute (TTI) for 
measuring the operational performance of the Nation's highway system. 
These measures include the percentage of travel under congested 
conditions, the percentage of additional travel time caused by 
congestion, and the annual hours of delay experienced by drivers. These 
measures are calculated annually, using data collected from 400 urban 
areas in the United States, according to a fixed set of formulas that 
facilitate measuring historical congestion trends. The discussion of 
current highway operational performance in the 2002 C&P report will 
focus on these measures.
    In research on customer needs and better ways to measure highway 
performance, the FHWA has determined that reliability is the most 
important aspect of performance for highway users. Unexpected delay 
costs significantly more in late arrivals at work or childcare for 
commuters, late appointments for businesses, and missed deliveries, 
than predictable delay for which the traveler or trucker can adjust. 
The FHWA has recently adopted a new measure of reliability, the buffer 
index, calculated as the percentage increase in the amount of travel 
time allowed for a trip to ensure on-time arrival on all but one 
working day per month. The FHWA has calculated the buffer index with 
data from intelligent transportation systems for 10 cities last year, 
and will calculate the measure for 22 cities this year. Collection of 
the measure will expand to other cities as the deployment of 
intelligent transportation systems allows.
    The biennial C&P report has been steadily increasing its focus on 
the operational performance of the highway system, and on measuring the 
impacts that the condition and performance of the system has on highway 
users. The analytical tools used by FHWA to estimate future highway 
investment requirements have been modified to recognize the costs of 
incident delay, and the benefits that can be derived from improving 
system reliability. The 2002 C&P report will incorporate these 
analytical enhancements, and will include new information on the 
impacts that alternative investments could be expected to have on the 
operational performance of the highway system. This change in emphasis 
has been discussed with a variety of groups with an interest in the C&P 
report, including majority and minority staff from the Senate 
Environment and Public Works Committee.
    Adequately assessing the overall performance of the Nation's 
transportation system will require additional measures beyond those 
outlined above. Aspects such as transit, bicycling, and pedestrian 
access should also be considered. This is an ongoing research process.

    Question 5. I am intrigued by the American Road and Transportation 
Builders Association's suggestion that we enact a maintenance of effort 
requirement for the States. Certainly our goal in providing additional 
transportation funding at the Federal level is to increase the total 
level of infrastructure investment rather than to have States simply 
substitute Federal funds for State funds. Have you studied how States 
have reacted to the Federal funding increases since TEA-21?
    Response. Combined State and local governments' highway capital 
investment actually grew more quickly from 1997 to 2000 than Federal 
highway capital investment. The Federal share of highway capital 
funding fell from 41.6 percent in 1997 to 39.9 percent in 2000. The 
latest available data strongly suggest that States have not been 
substituting Federal funds for State funds.
                                 ______
                                 
 Responses of Hon. Mary E. Peters to Additional Questions from Senator 
                                 Smith
    Question 1. In your written testimony, you state that ``The 
calculation of the [``negative RABA''] adjustment is not a policy call-
it is a calculation based in law . . . .'' In addition, Ms. McLean 
stated in her oral testimony, in response to a question from Senator 
Inhofe, that in reducing the baseline obligation limitation for 2003 by 
over $4 billion, the Administration was ``just following the 
legislation''. Accordingly, please state, with as much particularity as 
possible, the analysis of the law that leads the Department of 
Transportation to that conclusion.
    Response. The Transportation Equity Act for the 21st Century (TEA-
21) included several provisions intended to tie highway spending to 
available revenues. Sections 8101 and 8103 of TEA-21 establish funding 
levels for the highway budget category in terms of outlays and 
obligations, respectively. Section 1105 of TEA-21 amended title 23, 
United States Code (U.S.C.), by providing a new section 110 to 
establish the basic framework for Revenue Aligned Budget Authority 
(RABA), the related adjustment to contract authority.
    As part of the annual budget submission, section 8101(d) of TEA-21, 
which amends section 251(b)(1) of the Balanced Budget and emergency 
Deficit Control Act of 1985 (BBEDCA), requires the agency to look at 
actual receipts from 2 years prior to the budget year, plus revised 
receipt projections for the budget year. The adjustment is calculated 
in two parts, one looking ahead to the coming budget year and the other 
looking back at the prior year.
    For the look-ahead adjustment, pursuant to Section 
251(b)(1)(B)(ii)(I)(bb) of the BBEDCA, the latest estimate for the 
budget year is compared with the estimated level (provided in BBEDCA, 
as amended by section 8101(d) of TEA-21), and the difference is added 
to the amount of obligations set forth in Section 8103 of TEA-21. For 
the look-back adjustment, pursuant to Section 251(b)(1)(B)(ii)(I)(aa) 
of the BBEDCA the estimate for the prior year, adjusted for the look 
ahead calculation for that year, is compared to the actual receipts to 
the Highway Account for the prior year. This difference is also added 
to the level of obligation limitation for the budget year set forth in 
section 8103 of TEA-21. The sum of these differences is also converted 
to the outlay effect and the highway category discretionary outlay caps 
are adjusted for the budget year and the out years.
    Section 110 of title 23, U.S.C., specifies actions that the 
Secretary shall undertake in the event of positive (subsection (a)(1)) 
or negative (subsection (a)(2)) RABA adjustments. Specifically, section 
110 provides for the distribution of RABA (contract authority) equal to 
the amount calculated pursuant to Section 251(b)(1)(B)(ii)(I)(cc) of 
the BBEDCA, as amended by section 8101(d) of TEA-21.
    If RABA for a fiscal year is greater than zero, section 110(a)(1) 
of title 23, U.S.C., requires that the additional contract authority be 
distributed on October 15 of that fiscal year.
    If RABA for a fiscal year is less than zero, 23 U.S.C.' 110(a)(2) 
requires that, on October 1 of the succeeding year, amounts authorized 
to be appropriated from the Highway Trust Fund (HTF) to carry out each 
of the Federal-aid highway programs (other than emergency relief) and 
the motor carrier safety grant program shall be reduced by an aggregate 
amount equal to the amount calculated pursuant to Section 
251(b)(1)(B)(ii)(I)(cc) of the BBEDCA. Therefore, negative RABA 
calculated for fiscal year 2003 requires a reduction in contract 
authority to be made available in fiscal year 2004, i.e., the fiscal 
year succeeding the year for which negative RABA is determined. Also, 
when such sum is calculated and the obligation limitation in section 
8103 of TEA-21 is adjusted under section 8101 (see section 
251(b)(1)(B)(ii)(I)(cc), as amended by section 8101(d) of TEA-21), an 
equal adjustment is made to the level of obligation limitations under 
section 1102 of TEA-21 for the fiscal year affected by the adjustment.
    Thus, adjustments in the obligation limit will occur in fiscal year 
2003 for the negative RABA amount calculated this budget year, and the 
reduction in contract authority will occur in fiscal year 2004.

    Question 2. There was testimony at the hearing that the receipts 
into the highway trust fund for fiscal year 2003 will, even with the 
diminished expectations under which you are now operating, exceed the 
statutory distribution of obligation limit for fiscal year 2003. Do you 
agree?
    Response. Yes, we agree. Revenue aligned budget authority (RABA) is 
a major reason why fiscal year 2003 obligation limits will be less than 
estimated fiscal year 2003 revenues to the Highway Account of the 
Highway Trust Fund. In particular, the ``look back'' portion of RABA 
will require significant downward adjustments to obligation authority 
based on prior year differences between forecast and actual revenues. 
These adjustments will result in obligation limits being lower than 
revenues. Having revenues exceed obligation limits is not unusual. From 
1998 to 2000 revenues exceeded obligation limits.

    Question 3. In your written testimony, you state that ``Linking 
highway spending to receipts is a fundamental principle of TEA-21.'' 
Given that, and also given that receipts for 2003 are expected to 
exceed the TEA-21 baseline, do you agree that S. 1917's restoration of 
obligation limit for fiscal year 2003 to $27.746 billion is consistent 
with ``linking highway spending to receipt''?
    Response. No. Receipts to the Highway Account of the Highway Trust 
Fund (HTF) often exceed expenditures from the Highway Account in a 
fiscal year. The opposite is also true. These facts alone, however, do 
not determine if the legislatively mandated mechanism to tie Federal-
aid Highway Program spending to receipts to the Highway Account of the 
HTF known as Revenue Aligned Budget Authority (RABA) is positive or 
negative in a given fiscal year.
    Instead, the RABA calculation relies upon a look ahead to the 
coming fiscal year and a look back at the fiscal year just ended. For 
fiscal year 2003, the look-back calculation compares the actual taxes 
deposited in the Highway Account of the Highway Trust Fund in fiscal 
year 2001 to the estimate of fiscal year 2001 tax receipts used to 
calculate the fiscal year 2001 RABA. The fiscal year 2001 estimate, 
made in December 1999, was too optimistic. Thus, a downward adjustment 
to the fiscal year 2003 highway program of $3.468 billion is needed to 
offset the overly optimistic estimate made earlier.
    The look-ahead calculation compares the latest estimate for fiscal 
year 2003 to the estimate made at the time TEA-21 was enacted. The 
current economy is less robust than expected in the TEA-21 estimate 
and, therefore, the latest estimate for fiscal year 2003 Highway 
Account receipts is lower than the TEA-21 estimate. As a result, a 
downward adjustment to the fiscal year 2003 highway program of $901 
million is required in addition to the look-back adjustment.

    Question 4. If you do not support passage of S. 1917, please state 
your reasons, with as much particularity as possible?
    Response. We are working on ways to mitigate the effects of RABA 
that are consistent with the principles of TEA-21 while still 
maintaining fiscally responsible solutions. We hope to come to Congress 
with a proposal in the near future.
    We believe that the forthcoming reauthorization of the Federal-aid 
highway program presents an excellent forum and a unique opportunity to 
consider possible modification to RABA, and we look forward to working 
with the Congress during TEA-21 reauthorization to address this issue.

    Question 5. As to the issue of reauthorization, what would be the 
implications, both negative and positive, of restoring the collection 
of interest on the funds on hand in the Highway Trust Fund?
    Response. Resuming the prior practice of crediting interest earned 
on HTF balances to the HTF could increase HTF revenues substantially, 
depending on HTF balances and prevailing interest rates. Before being 
discontinued in TEA-21, total interest payments to the highway and 
transit accounts of the HTF had been as high as $2 billion. Since 
interest would be paid from the General Fund, resumption of interest 
payments to the HTF would mean that like amounts would not be available 
for expenditure on programs financed from the General Fund.

    Question 6. Administrator Peters stated in her oral testimony 
regarding the environmental streamlining provision of TEA-21 that one 
of the difficulties with implementation is that the U.S. Department of 
Transportation, while it was tasked with environmental streamlining, 
does not have the authority over a number of other environmental 
regulatory areas. Please describe with specificity the additional 
authority that is needed for US DOT to more effectively implement these 
provisions, including any statutory or regulatory changes that would be 
needed to establish the necessary authority.
    Response:
Statutory Authority
    FHWA is not advocating any statutory or regulatory changes to 
environmental laws to achieve more authority. However, there are 
statutory constraints under Section 1309 of TEA-21 and other laws that 
restrict the degree of flexibility that FHWA and/or the other agencies 
can exercise in achieving streamlining. To protect the environment, 
Congress has enacted over 60 laws, including the Clean Air Act (CAA), 
Clean Water Act (CWA), Endangered Species Act (ESA), National Historic 
Preservation Act, Section 4(f) of the DOT Act of 1966 (Section 4(f)), 
Wild and Scenic Rivers Act, National Environmental Policy Act (NEPA), 
and the Coastal Zone Management Act. Many of these laws, notably the 
ESA, Section 4(f), and the CAA, establish stringent environmental 
protections, including both substantive and procedural requirements. 
Over 12 different agencies implement these laws through regulations, 
guidance, and standards developed based on their specific environmental 
missions. The courts have rigorously upheld the laws and agency 
regulations, creating an extensive and complex body of case law. 
Congress did not grant the U.S. Department of Transportation (USDOT) 
authority to collectively interpret laws administered by other 
agencies, to override other Federal agencies, or to compel their 
cooperation in environmental streamlining.
    USDOT's statutory authority to administer the Federal-Aid Program 
stems from title 23 U.S.C. Section 4(f) is the only environmental law 
under USDOT domain. USDOT ensures that transportation projects, which 
use Federal funds or require Federal approval, have implemented the 
Federal requirements associated with the expenditure of those funds. 
For transportation projects, NEPA is the umbrella under which all 
environmental laws are coordinated. NEPA requires agencies to prepare a 
statement on the impact of each proposed ``major Federal action 
significantly affecting the quality of the human environment.'' NEPA 
also defines the procedures regarding how USDOT meets its Federal 
action approval. Some observers believe that if a project does not 
require an EIS, then the project is exempt from all Federal 
environmental laws and requirements. This is not correct. Even 
categorically excluded projects may require coordination or Federal 
approvals under laws other than NEPA.
Agency Requirements Under NEPA
    As Lead Agency under NEPA, the Federal Highway Administration 
(FHWA) affirms that all of the related environmental requirements have 
been addressed before granting approval for the expenditure of funds or 
when a Federal approval is required. FHWA does this by approving one of 
the following environmental documents: a ``Record of Decision'' for an 
Environmental Impact Statement; a ``Finding of No Significant Impact'' 
for an Environmental Assessment; or a ``Categorical Exclusion.'' Any 
number of Federal agencies will be involved. Each Federal agency has a 
distinct mission and specific role in the NEPA process. The 
Environmental Protection Agency (EPA), Army Corps of Engineers (USACE), 
Fish and Wildlife Service (FWS), National Marine Fisheries Service 
(NMFS), and Advisory Council on Historic Preservation (ACHP) are the 
Federal resource agencies most frequently engaged in reviews of 
transportation projects.
    Resource agencies meet their statutory obligations by reviewing 
project proposals, identifying the potential concerns, and evaluating 
the impacts proposed projects would have on specific resources. For 
example, USACE must issue a Section 404 permit for the dredge and fill 
of waters of the United States, primarily wetlands. USACE bases its 
decision to grant a permit for a transportation project, in accordance 
with Section 404(b)(1) of the CWA, on whether the issuance of the 
permit, not the project itself, is in the best interest of the public. 
USACE must base its permit decision on the ``Least Environmentally 
Damaging Practicable Alterative.'' Certain conditions or modifications 
may have to be made to a project to satisfy the USACE or another 
permitting agency. In addition to Section 404, Section 7 of the ESA and 
Section 106 of the NHPA are the most common laws impacting 
transportation projects. These statutes and others define and impose 
conditions that drive the environmental review analysis or approval by 
resource and permitting agencies.
    Under the leadership of the Bush Administration and with the full 
commitment of the Secretary, we will be working with the other agencies 
at the highest level to make the collaborative process more efficient 
and effective.
                                 ______
                                 
  Response by Hon. Mary E. Peters to Additional Question from Senator 
                                 Inhofe
    Question. What effect will the proposed excise tax credit for ETBE-
blended gasohol have on revenue into the Highway Trust Fund?
    Response. The proposed excise tax credit for ETBE-blended gasohol 
will have a negligible effect on revenues into the Highway Trust Fund. 
At this time, because of market economics, very little ethanol is being 
used to manufacture ETBE.
                               __________
 Statement of Thomas E. Stephens, P.E., Director, Nevada Department of 
 Transportation on behalf of the American Association of State Highway 
                    and Transportation Officials\1\
---------------------------------------------------------------------------
     \1\Founded in 1914, AASHTO represents the departments concerned 
with highway and transportation in the 50 States, the District of 
Columbia and Puerto Rico. Its mission is a transportation system for 
the Nation that balances mobility, economic prosperity, safety and the 
environment
---------------------------------------------------------------------------
    Mr. Chairman and members of the committee, my name is Tom Stephens. 
For the past 7 years I have been the Director of the Nevada Department 
of Transportation, and I am here today to testify on behalf of the 
American Association of State Highway and Transportation Officials 
(AASHTO). I also am President of the 18-State Western Association of 
State Highway and Transportation Officials.
    I want to thank you for your leadership in scheduling a series of 
hearings over the coming year to address key policy, program and 
funding issues in preparation for the reauthorization of the 
Transportation Equity Act for the 21st Century (TEA-21). I am also 
honored that you invited me to testify before your subcommittee. I 
believe that I can offer some real world experience from the field, 
especially on the subject of today's hearing--funding the Federal-aid 
highway program.
    Mr. Chairman, I would like to start by giving your colleagues a 
brief picture of the great Silver State. Nevada is the fastest growing 
State in the Nation. Since 1970, the State's population has quadrupled 
from 500,000 to more than 2 million residents. A majority of this 
growth has taken place in just five urbanized areas--Las Vegas, Reno, 
Sparks, Carson City and Elko. In Clark County alone, where Las Vegas is 
located, we estimate that by 2010 we will have 400,000 additional 
residents. Along with this population growth, we have seen a steady 
increase in the number of miles of congested highways.
    We are also a large State--with roughly the same land area as all 
the New England States combined. Our State-maintained highways and 
bridges spread out across many rural miles as well as in the metro 
areas. Twenty-six percent of all Nevada's improved roads are on the 
State-maintained system. However, this 26 percent carries 61 percent of 
the total vehicle miles of travel. The remaining 39 percent is on 
systems maintained by county, city or other governmental agencies. 
Vehicle miles of travel on all Nevada roads more than quadrupled from 
3.5 billion in 1970 to 17.4 billion in 2000. The State-maintained 
system also carries 84 percent of all truck traffic. With more cars, 
additional heavy trucks, and more vehicle miles of travel, our biggest 
challenge is preservation of our highways.
    However, as the fastest growing State in the Nation, and with much 
of that growth concentrated in just two counties--Washoe and Clark, we 
have an added capacity challenge. In our metropolitan areas, we are 
working with our local
    officials to try to keep pace with our population growth and new 
demands on the system. In Nevada, we are investing in new multi-modal 
strategies. These include a privately funded $600 million monorail 
people mover system and a bus rapid transit system in Las Vegas which 
will feature low-floor, electric powered buses with an optical guidance 
system. We will invest in innovative ITS technologies such as dynamic 
message signs, ramp meters, closed circuit television and traffic 
detection systems. Other efforts include ``low-tech'' car-pooling, 
telecommuting and new bike and pedestrian facilities.
    We will still need substantial additional highway capacity.
    With the growth in the Federal-aid highway program provided by TEA-
21, we have been able to make progress in our preservation and highway 
capacity needs. At the beginning of fiscal year 2001, there was a $483 
million backlog of highway and bridge preservation work. This is 
significantly lower than the $670 million backlog we had at the 
beginning of fiscal year 1999. We were able to reduce the backlog by 
investing significantly greater amounts in pavement preservation. 
During fiscal years 1999 and 2000, our department spent $329 million on 
overlay and reconstruction work--our biggest pavement preservation 
program ever.
    TEA-21's highway program increases have also enabled us to 
undertake an aggressive effort to keep pace with our growing population 
and make a real difference in addressing congestion. For example, the 
$99 million ``Spaghetti Bowl'' I-15/U.S. 95 interchange in Las Vegas 
opened in March, 2000, 6 months ahead of schedule. The revamped 
interchange will reduce the congestion caused by the 330,000 vehicles 
using it each day. It is now capable of accommodating 500,000 vehicles 
per day.
    Mr. Chairman and members of the committee, let me now address how 
the funding of the Federal aid highway program for fiscal year 2003, 
and beyond, can be sustained at levels required to meet this nation's 
needs.
    Mr. Chairman, we in the States are stunned by the fiscal year 2003 
budget proposal which, in the midst of a recession, would cut the 
Federal aid highway program by $8.6 billion because apparent reductions 
in revenues to the Highway Trust Fund have triggered a Revenue Aligned 
Budgetary Authority (RABA) reduction. To avoid a disastrous cutback in 
highway improvements, reducing our ability to meet basic highway needs, 
and to avoid the loss of thousands of jobs, we strongly support the 
bill you introduced last week to restore highway assistance to no less 
than the $27.8 billion level for fiscal year 2003 authorized in TEA-21. 
We commend you for your appreciation of how important sustained highway 
investment is to the country and thank you for your leadership in 
putting this legislation forward.
    We also want to share with you our emphatic view that it is vital 
to sustain Federal highway investment in fiscal year 2003, at no less 
than the $31.8 billion level provided in fiscal year 2002. With 36 
State Governors and legislatures already contending with severe budget 
shortfalls, and the Nation in an economic downturn, cutting the program 
by $4.3 billion makes no more sense than cutting it by $8.6 billion. 
This is especially so when there are more than sufficient reserves in 
the Highway Trust Fund to provide funding for fiscal year 2003. Let me 
outline what we believe the consequences would be unless current levels 
of funding are sustained.
    As early as next month, State and local officials will begin the 
task of cutting billions of dollars in highway projects from their 
fiscal year 2003 Transportation Improvement Programs. Final decisions 
will be made public in September affecting nearly every community in 
the Nation.
    Construction contractors throughout the country will start making 
business plans on how to cut back their equipment purchases and lay off 
tens of thousands of well-paid construction workers. The stock prices 
of several heavy equipment manufacturers and construction companies 
have already dropped. Engineering consulting firms, already hard hit by 
the recession, will almost immediately have to start laying off 
engineers and technicians as design work for next year's projects is 
delayed or canceled.
    Yet since the tragic events of September 11, traffic is up all over 
the country. The most recent data shows a dramatic increase in annual 
traffic growth of nearly 3 percent. For example on I-15 at the 
California-Nevada border, our vehicle count for the last 3 months is up 
nearly 10 percent. This highway is really bottlenecked, especially in 
California where Interstate 15 and 40 converge into a single four-lane 
Interstate carrying the traffic from Arizona and Nevada to Los Angeles. 
While this bottleneck is scheduled to be widened, the cut in TEA-21 
funding could cause project delays resulting in hundreds of millions of 
dollars in congestion-related costs.
    Numerous other projects will be delayed in every State. This cut is 
proposed at a time of increasing need for highway preservation projects 
in every part of the country and capacity projects in rapidly growing 
States like Nevada.
                             state impacts
    AASHTO last week initiated a survey of State departments of 
transportation to assess the direct and indirect dollar and project 
impacts across all 50 States. While that survey is still in progress, 
here is an example of what we found:
     In Ohio, approximately $187 million worth of construction 
projects would be delayed or canceled. $47 million in preconstruction, 
right-of-way and/or environmental activities would be impacted.
     In Oklahoma, a total of $120 million in construction and 
right-of-way projects would be delayed or canceled. This could also 
impact the State's proposed $1 billion GARVEE Bond Program, with the 
construction let dates for the proposed projects being delayed.
     In Montana,$66.8 million reduction would result in a loss 
of 2,805 jobs--roughly equal to 25 percent of the new jobs created in 
Montana in 2001. This drastic reduction will have significant impact on 
the many small construction and design firms in Montana.
     In Alaska, even if the program recovers in 2004, the 
reduction in design efforts in fiscal year 2003 will translate into 
future delays in construction contracting of nearly $50 million.
     In Florida, a reduction of $324 million is equivalent to 
approximately 24 percent of the fiscal year 2003 capacity construction 
program. Implementation of these reductions would negate gains in jobs 
and transportation improvements achieved from recent transportation 
initiatives of the Governor and legislature.
    One serious concern that must be addressed is the accuracy of the 
process used by the Department of the Treasury to determine the revenue 
estimates used in calculating RABA. The correction of a $600 million 
error by the Department of Treasury has already reduced the proposed 
highway cutback to $8.6 billion. Recent information on fiscal year 2001 
truck sales and fuel tax revenues at the State level call into question 
the Treasury forecasts, and leads us to believe that other adjustments 
in RABA could occur.
    The public policy questions Congress needs to address are these. 
First, to assist in the nation's economic recovery does it not make 
sense to sustain highway funding at $31.8 billion? Second, are there 
reserves and cash-flow in the Highway Trust Fund to make this possible 
in fiscal year 2003? The answers are ``Yes'' and ``Yes!''
         funds are available to sustain fiscal year 2002 levels
    Four years ago we agreed to the fundamental principle that all the 
receipts going into the Highway Account would be fully used for 
transportation purpose, and not be used to offset other government 
expenditures. But today there is a $20.3 billion cash balance in the 
Highway Trust Fund. We seek to provide $8.6 billion in obligations 
which will restore the highway funding to the fiscal year 2002 level. 
The budget impact of this increase will only require $2.3 billion in 
outlays for fiscal year 2003. Because highway funds are spent over a 
period of about 7 years, $2.3 billion in additional outlays in fiscal 
year 2003 will allow us to continue the momentum we have achieved in 
fiscal year 2002.
    The table displayed below shows receipts and expenditures for the 
Highway Account of the Highway Trust Fund for Fiscal Year 1998 thorough 
Fiscal Year 2003. Even accounting for unpaid obligations, it is clear 
that there is a substantial balance in the Highway Account with 
receipts exceeding outlays over the 6-year period. Mr. Chairman, we 
respectfully urge the Congress and the Administration to honor their 
commitment to spend all the receipts going into the Trust Fund, unlock 
the balances that have built up and make a positive contribution to the 
current economic recession.

                 Highway Account Receipts and Outlays\1\
------------------------------------------------------------------------
           Fiscal year               Receipts     Outlays     Difference
------------------------------------------------------------------------
1998.............................         24.3         20.3          4.0
1999.............................         33.8         23.1         10.7
2000.............................         30.3         27.0          3.3
2001.............................         26.9         29.1         -2.2
*2002............................         27.7         30.2         -2.5
*2003............................         28.6         30.6         -2.0
                                  --------------------------------------
    Subtotal.....................        171.6        160.3         11.3
 
Balance from ISTEA D8.0..........
 
                                  --------------------------------------
    Total........................        179.6        160.3         19.3
------------------------------------------------------------------------
*Estimated
Note: The Highway account balance was $8 billion at the beginning of TEA-
  21. Therefore, the cash balance at the close of fiscal year 2001 is
  $20.3 billion.
Source: Federal Highway Administration Long-term Impacts

    In addition to the immediate impacts of reducing highway spending 
by more than a quarter, the RABA downward adjustment has longer-term 
consequences for the Federal-aid highway program. If the obligation 
level for Fiscal Year
    2003 is adjusted downward from $31.7 to $23.2 billion, then the $23 
billion level will become the baseline for reauthorization of TEA-21. 
That would leave us at a starting point $8.6 billion below where we are 
today, and considerably lower that the $27.8 billion obligation level 
for fiscal year 2003 contained in TEA-21. Starting in such a deep hole, 
would make it much more difficult to maintain the Federal-aid highway 
program at current levels, and perhaps impossible to expand it.
                         tea-21 reauthorization
    As we look to reauthorization of TEA-21 and the future of the 
Federal-aid highway program, we believe that, first, it is essential to 
preserve and reaffirm the principle of a user-based transportation 
financing system in which all receipts are guaranteed to be used for 
the purposes for which they were intended.
    To accomplish this, TEA-21 set highway obligations at levels based 
on then-current estimates of gasoline and related tax receipts, and 
established a new mechanism, Revenue Aligned Budget Authority (RABA), 
to annually adjust them based on updated revenue estimates.
    To ensure that domestic discretionary caps would not prevent the 
use of all available revenues, a ``firewall'' provision was included in 
the Budget Enforcement Act to increase or decrease highway spending 
each year so that it would align itself with Highway Trust Fund 
receipts. This provision provides for a ``spending guarantee.'' 
Congress also guaranteed an annual funding level for transit programs, 
which are funded with a combination of highway tax receipts accruing to 
the Mass Transit Account of the Trust Fund and a general fund 
contribution. I should add that we are pleased that in the just 
released Fiscal Year 2003 budget, the Administration honors the transit 
funding guarantee.
    Mr. Chairman, this year the spending caps expire. If and when 
Congress considers new caps, we urge you and the members of the 
subcommittee to lead the way in ensuring that the ``firewall'' 
provision is maintained.
    These tools--RABA and the ``firewall'' provisions--were designed to 
provide the long-term fiscal stability needed for State and local 
highway and transit agencies to finance, design and execute multi-year 
construction programs.
    Recent experience has demonstrated, however, that there are 
unintended flaws in the RABA mechanism. Changes in economic conditions 
that result in minor adjustments to estimated receipts cause wide 
swings in highway funding levels. In reauthorizing TEA-21, we must 
carefully examine and refine the RABA mechanism, including its 
calculation methods and revenue estimating procedures. We recommend 
that you consider replacing the current calculation method with one 
that simply compares actual previous year receipts to the assumptions 
made at the time the bill passed, with the difference becoming the RABA 
adjustment.
    We also recommend that you consider instituting reforms to the 
Department of Treasury's process for estimating tax receipts to the 
Highway Account. This is not the first time that the Department of 
Treasury has made costly errors. In 1994, a $1.3 billion error 
eventually cost $3.6 billion to correct. This most recent $600 million 
error leaves us with absolutely no confidence in their accounting 
methods. We are not alone in our concerns. In June 2000, the U.S. 
General Accounting Office released a report\2\ in which they indicated 
that ``Treasury's process for allocating tax receipts to the Highway 
Account of the Highway Trust Fund is complex and error prone.'' At the 
request of House Transportation and Infrastructure Chairman Don Young 
and Ranking Member James Oberstar, GAO is now engaged in a new review 
of Treasury's methods for estimating receipts to the Highway Account. 
We urge you carefully consider the results of GAO's review, and 
consider appropriate reforms during reauthorization.
---------------------------------------------------------------------------
     \2\Highway Funding: Problems with Highway Trust Fund Information 
Can Affect State Highway Funds(GAO/RCED/AIMD-00-148, June, 2000)
---------------------------------------------------------------------------
                                revenues
    Near term: Changes regarding gasohol revenues need to be addressed 
during TEA-21 reauthorization. A significant portion of the 
unanticipated downturn in fiscal year 2001 revenues was due to 
increased gasohol sales, which grew by nearly 30 percent. This 
accounted for a significant portion of the revenue reduction. Now that 
the use of MTBE is to be discontinued in several States, the only fuel 
additive approved to address the oxygenate requirements in the Clean 
Air Act is gasohol. Prior to the change regarding MTBE, the most 
heavily affected State due to the lower tax rate charged for gasohol 
was Ohio, which lost over $175 million in fiscal year 2001. A recent 
study by the State of Wisconsin indicates that the impact may grow 
significantly worse in the near future, with the impact on California 
for example increasing to $450 million next year. Areas such as New 
York and New England are expected to be hard hit as well. This will 
become a priority issue to be addressed during reauthorization. The 
Baucus Bill, for example, which would shift revenue from the 2.5 cents 
on gasohol now going to the General Fund to the Highway Trust Fund 
beginning in fiscal year 2004, is a step in the right direction. Still 
more may be required.
    Long Term: The second revenue issue is longer term in nature. It is 
a concern for the future ability of gas tax revenues to sustain highway 
funding as increases in fuel efficiency reduce revenues relative to 
travel, and other technological changes occur such as a move to greater 
reliance on alternative fueled vehicles including fuel cells, 
compressed natural gas, and electricity. We believe the time has come 
for Congress to mandate a study of this issue by GAO or the National 
Academy of Science and the development of alternatives for 
consideration during reauthorization deliberations in 2009.
                              conclusions
    In conclusion, I would like to state that the Federal-aid highway 
program has been one of the most successful Federal-State partnerships 
ever created. It has contributed to the nation's mobility and to the 
unprecedented economic growth that the Nation has experienced since the 
1950's.
    TEA-21 is a major step forward in providing much-needed funding to 
the nation's highway and transit program. It is essential that the RABA 
principle of fully spending Highway Trust Fund receipts and 
guaranteeing that spending be maintained. However, it is also essential 
that in a time of recession, the consequences of the RABA mechanism not 
be permitted to eliminate hundreds of thousands of jobs while setting 
back much-needed transportation projects nationwide.
    We clearly have sufficient receipts in the Highway Trust Fund to 
sustain a higher program level. Authorizing a higher level is 
consistent with TEA-21, which provided more contract authority to the 
States to assure the Congresses could increase the program above the 
guarantee. We urge the Congress to make this investment in America.
                                 ______
                                 
 Responses by Thomas Stephens to Additional Questions from Senator Reid
    Question 1. Please walk us through the impact that an In February 
AASHTO conducted a survey of the State departments of transportation on 
the impacts to their programs from an $8.6 billion funding cut. The 
results of the survey are included in the report Shortchanging America: 
Impacts on States from an $8.6 billion Reduction in Federal Highway 
Funding. A copy of the report is attached, and we request that it be 
included as part of the record for the hearing.
    Response. In February AASHTO conducted a survey of the State 
departments of transportation on the impacts to their programs from an 
$8.6 billion funding cut. The results of the survey are included in the 
report Shortchanging America: Impacts on States from an $8.6 billion 
Reduction in Federal Highway Funding. A copy of the report is attached, 
and we request that it be included as part of the record for the 
hearing.

    Question 2. In your written testimony you express concern about the 
accuracy of the Treasury revenue estimates. Can you tell the committee 
what specifically gives rise to your concern?
    Response. First, we were disturbed to learn that just before the 
President's Budget was issued the Treasury advised that they had 
determined that almost $600 million in revenue had been credited to the 
Transit Account of the Trust Fund when in fact it was Highway Account 
revenue. This represents a serious accounting error.
    In addition The Treasury in explaining the sharp drop in revenue 
attributed a substantial amount of the change to truck sales tax 
declines citing a 55 percent drop in truck sales tax collections. This 
is in contrast to sales figures from the trucking industry, which 
reported only a 24.2 percent drop in sales. Even allowing for 
adjustments the industry sales data doesn't correlate with the Treasury 
figures.
    Also Treasury's data assumes that gasoline tax revenues drop 6 
percent from 1 year to the next. However, FHWA's Traffic Volume Trends 
Report issued monthly shows VMT increasing 2.07 percent for the first 9 
months of 2000. In comparing the data to that for fiscal year 2001 the 
data seem to be flat.

    Question 3. We have heard several references to the ``performance'' 
of our transportation system. While I agree that performance is the 
critical standard by which we should judge our system, I am concerned 
that we have not developed adequate ways to measure and track 
performance. The U.S. Department of Transportation puts out a biannual 
Conditions and Performance report, but focuses almost exclusively on 
conditions. Do you have any suggestions as to how we might better 
measure performance?
    Response. This question recognizes the serious weaknesses we have 
today in measuring performance. Much of the concern for better 
measurement is a product of increasing congestion. We have not really 
developed effective ways of transmitting the scope and character of 
congestion to the public in terms of its breadth depth and duration in 
an understandable way. Another reason for our need to better measure 
performance is the growing value of time to both travelers and of 
freight. Both will demand more exacting levels of service in the 
future.
    System performance is about:

      Speed
      Cost
      Convenience
      Safety and Security
      Reliability

    All of these factors are things that we presently measure badly, or 
not at all. Most particularly measures of cost and reliability are very 
weak. We are working with FHWA to construct better ways to introduce 
the measurement of reliability into the description of the system's 
functioning and to produce a more comprehensive condition and 
performance report that truly reports condition and performance.
    AASHTO is currently undertaking a major research effort to quantify 
highway and transit needs, including incorporating a measurement of 
reliability for the highway component. The results will be presented in 
the AASHTO Bottom Line Report, which is scheduled to be released in 
September 2002.

    Question 4. I am intrigued by the American Road and Transportation 
Builders Association's suggestion that we enact a maintenance of effort 
requirement for the States. Certainly our goal in providing additional 
transportation funding at the Federal level is to increase the total 
level of infrastructure investment rather than to have States simply 
substitute Federal funds for State funds. Have you studied how States 
have reacted to the Federal funding increases since TEA-21?
    Response. While AASHTO has not surveyed the States to get a 
quantitative assessment of the total Federal, State and local 
percentages of total highway expenditures, anecdotal information 
suggests that the States have effectively leveraged TEA-21's Federal 
contribution to increase the overall State contribution.
    For example:

      In Illinois, Governor George Ryan's 5-year ``Illinois 
First'' initiative makes available $10.5 billion for highways and $4.1 
billion for transit;
      Kansas has enacted a 10-year Comprehensive Transportation 
Program funded from increases in the State gas and sales taxes and 
additional bonding authority;
      In California, Governor Gray Davis and the State 
legislature enacted a $15 billion congestion relief program that 
combines Federal, State and local funds; and
      Rhode Island voters passed a $62.5 million transportation 
bond issue for new transit equipment and work on I-95; and,

    Another indicator is the number of bids let:

      Colorado let $491 million in bids in 1999, up from $229 
million in 1995;
      Tennessee let $694 million in bids in 1999, up from $597 
million in 1995;
      Texas let more than $3 billion in bids in 1999, up from 
$1.7 billion in 1996; and,Wisconsin let $597 million in bids in 1999, 
up from $414 million in 1995.
    In addition, when you examine FHWA's most recent statistics for 
Federal, State and local percentages of total highway expenditures over 
the past 5 years, the Federal, State and local percentage shares of 
expenditures have remained relatively constant. Attached a table based 
on information from FHWA
                                 ______
                                 
Responses by Thomas Stephens to Additional Questions from Senator Smith
    Question 1. Mr. Stephens testified that States have not experienced 
a drop in State revenues due to motor fuel taxes that may have served 
as an indicator for the Federal Highway Trust Fund revenue 
fluctuations. What has been the trend over the last several years in 
State motor fuel tax collections?
    Response. AASHTO asked States to provide actual State 
transportation revenues for 1999-2001 from State gasoline, gasohol and 
diesel taxes. We also asked States to provide forecasted State 
transportation revenues from 2002 and 2003 from State gasoline, gasohol 
and diesel taxes. The results from 36 States is included in a table 
showing actual and projected revenues, along with percentage difference 
from the prior year. A copy of the table is attached.
    State fuel tax revenues increased by 2.7 percent between 1999 and 
2000, and increased 1.5 percent between 2000 and 2001.
                               __________
  Statement William D. Fay, President and CEO, American Highway Users 
                                Alliance
    Mr. Chairman and members of the subcommittee, I am Bill Fay, 
president and CEO of the American Highway Users Alliance. Thank you for 
inviting us to testify at this very important and timely hearing on 
highway funding for 2003 and future years.
    The Highway Users is one of the most broad-based and diverse 
advocacy groups in the Nation. We are like a consumers' group for 
motorists and businesses who pay the taxes that support the Federal 
highway program. Our vast membership includes the most visible user 
groups--AAA and the nation's truckers, buses, and recreational 
vehicles--but also those who ensure their safety--3M, insurance 
companies and the traffic service industry. It includes businesses that 
rely on efficient roads to ease the flow of raw materials, supplies, 
and finished products--such as farmers, auto and auto parts makers and 
dealers. And our members include those who build roads and mine, drill, 
and refine the products essential to highway travel--petroleum, 
asphalt, cement, and aggregates producers, and many others. Our 45 
million members have a strong interest in how much the government 
collects from motorists and how that money is invested after it gets to 
Washington.
    The subject of today's hearing includes both short-and longer-term 
issues: the Administration's fiscal year 2003 budget proposal and the 
major funding issues pertaining to next year's reauthorization 
legislation. Putting first things first, I will begin with the 2003 
budget and then discuss funding for reauthorization.
Fiscal Year 2003 Highway Funding
    Transportation Secretary Mineta foretold the drop in guaranteed 
highway funding when he testified before this committee nearly 3 weeks 
ago. Last week, the President's fiscal year 2003 budget confirmed that 
the guaranteed obligation limitation for next year will be 
approximately $8.6 billion less than the $31.799 billion provided in 
2002. That's more than a quarter of the program (a 27 percent cut) in 1 
year.
    According to the Administration, the cut is a straight-forward 
calculation based on a substantial reduction in fiscal year 2001 tax 
receipts relative to previous estimates combined with revised, lower 
estimates of fiscal year 2003 tax receipts. Questions, of course, 
remain regarding the accuracy of the Treasury Department's accounting 
of those receipts, and I understand the General Accounting Office (GAO) 
is reviewing Treasury's calculations for a report due in May. 
Apparently, one error was found after the principal budget documents 
were sent to the printer but in time for the more accurate figures to 
be reflected in the Department of Transportation's own budget 
documents. Correcting that error resulted in a $600 million increase in 
trust fund tax receipts and a corresponding increase in the fiscal year 
2003 guaranteed highway funding.
    The possibility of further errors in the calculation of trust fund 
receipts is important, and we look forward to reading GAO's final 
report. Assuming, however, that the current figures are generally 
correct, we have a simple point to make about the fiscal year 2003 
budget: a 27 percent cut in 1 year in the nation's largest 
infrastructure program is too much.
    It would have serious economic repercussions just at a time when 
the country is struggling to get out of a recession, and it would be a 
devastating blow to our national transportation system.
    Mr. Chairman, a week ago, when initial expectations were for a $9.1 
billion cut in guaranteed funding for highways (rather than $8.6 
billion), we obtained a Federal Highway Administration chart showing 
the potential impact on each State's obligation limitation. The losses 
spread across the States are nothing short of calamitous. Nevada, for 
example, would lose over $53 million of the $200 million it received 
this year. Similarly, Oklahoma would I lose $118 million out of its 
$428 million in 2002 receipts. While the $600 million downward revision 
in lost funding will mitigate those reductions slightly, the cuts, as a 
percentage of the States' total Federal funds, are still dramatic.
The Cost of Losing One's Job to Families and Society
    As you have heard from others, funding cuts of this magnitude will 
result in lost jobs, perhaps hundreds of thousands of jobs over time. 
Far too many of those jobs will be lost before the fiscal year even 
begins as contractors begin laying off workers in anticipation of the 
project delays that will inevitably follow. These are high-paying jobs 
that induce many other jobs. Such dramatic changes in employment would 
increase the call of Federal unemployment compensation funds and other 
social programs, as well as cut the flow of tax dollars from those 
affected families and individuals. Attached to my testimony is a 1984 
study released by the Joint Economic Committee on the social effects of 
losing one's job. It paints a dire picture of personal financial 
hardships, loss of health insurance, and rising mortality, divorce, 
criminal activity, and suicide. Quoting from that study, ``The longer 
[joblessness] endures, the more likely it becomes that frustrations 
will be vented on the family--or on the rest of society.'' While I wish 
the study were more recent, it is unlikely the torment of losing one's 
job today is any less consequential than it was in 1984.
The Life-Saving, Time-Saving, Fuel-Saving, Economic and Environmental 
        Benefits of Road Investments
    Equally important from the perspective of motorists, a 27 percent 
reduction in funds will delay the important benefits of roadway 
improvements--the safety benefits of reducing crashes, injuries, and 
fatalities; the air quality, time-saving, and fuel-saving benefits of 
relieving traffic congestion; the economic and productivity benefits of 
speedier deliveries. These are the primary reasons that fuel taxes are 
the taxes that Americans pay most willingly. They realize the benefits 
of a safe, uncongested, and accessible highway system to themselves, 
their families, and their businesses. But those benefits are only 
realized if their tax dollars are used as intended.
    In 1999, The Highway Users published a study identifying the worst 
traffic bottlenecks in the country and the benefits that could be 
realized by improving traffic flow at those sites. Unclogging America's 
Arteries: Prescriptions for Healthier Highways showed that very modest 
traffic flow improvements at each of our 167 worst bottlenecks would 
result in 287,000 fewer crashes over 20 years, including 1,150 fewer 
fatalities and 141,000 fewer injuries; they would reduce carbon 
monoxide emissions by 45 percent and volatile organic compound 
emissions by 44 percent, while carbon dioxide emissions would fall by 
71 percent at those sites; they would slash fuel consumption by nearly 
20 billion gallons; and of course, they would reduce travel time by an 
average of 19 minutes per trip. With polls showing that time management 
is one of the greatest challenges facing American families today--38 
minutes less for a commuter driving to and from work represents more 
time for family, work, errands, and recreation.
    That's an example of the ``big bang for the buck'' that this 
program has the potential to deliver, but too little funding will delay 
these large, critically important projects for years. That's why this 
debate over 2003 funding is so important to us.
We Must Preserve The Fundamental Premise of RABA and TEA-21's 
        Firewalls: Highway Taxes Received Equals Highway Investments 
        Made
    Let me be clear about our view of the funding predicament we face 
in 2003. We do not believe there is anything fundamentally wrong with 
either the RABA provisions or the budgetary firewall provisions of TEA-
21. It is clear that Treasury's models did not foresee the recession 
(resulting in a large ``look back'' adjustment) and that those same 
models will likely understate the economic recovery that most 
economists predict to begin in upcoming months. As such, some minor 
adjustments to the method of calculating tax receipts and guaranteed 
funding levels may help eliminate dramatic changes in funding from 1 
year to another, but the link established in TEA-21 between tax 
receipts and guaranteed funding for the program has been critical. It 
is, in fact, the reason that TEA-21 was so warmly embraced by America's 
highway users--it restored the ``trust'' in the Highway Trust Fund. The 
chart appended to my testimony illustrates the impact that RABA and the 
firewalls have had on funding for highways during the TEA-21 years 
compared to the previous 6 years.
    The fact that revenues have fallen short of previous estimates 
simply puts all of us back in the annual budget and appropriations game 
that we used to play every year before TEA-21 tied highway funding to 
trust fund receipts.
    The Highway Users looks forward to being back in the game this year 
and working with all of you, your House counterparts, and members of 
the Appropriations committees to see that this vital infrastructure 
program is not cut by 27 percent in 1 year.
    We commend the members of this committee for your recent 
introduction of ``The Highway Funding Restoration Act,'' legislation to 
raise the fiscal year 2003 obligation limitation to $27.7 billion, the 
amount anticipated when TEA-21 was enacted. By adding $4.4 billion to 
the amount guaranteed for 2003, your legislation will soften the blow 
of negative RABA in these difficult economic times. The Highway Users 
strongly supports this legislation, and we are already working hard, 
through our grassroots contacts, to build political support and enlist 
additional cosponsors for the bill. We have a similar campaign underway 
to support the identical legislation introduced by your counterparts on 
the House Transportation and Infrastructure Committee.
$18 Billion in Motorist Taxes Just Sitting in Washington
    Although funding will be tight because of the war on terrorism and 
renewed deficit spending, I believe America's highway users have a 
strong case to make for additional highway funding above the guaranteed 
amount. In addition to describing the very serious impact of this cut 
on State highway funding, jobs, safety, congestion, and the 
environment, we can also cite a key distinction between our cause and 
the argument Members of Congress will hear from other interest groups: 
the money for highways has been collected in advance.
    Before TEA-21, interest was accrued on surpluses in the Highway 
Trust Fund. This interest was ridiculed by some Members of Congress as 
``funny money'' that wasn't really owed to highway users. As a 
condition for establishing a link between revenues and investments, 
TEA-21's framers agreed to eliminate all but $8 billion of the 
previously existing cash balance in the Highway Account and to stop any 
further interest payments to the account. As a result, since TEA-21's 
enactment, not one penny of that $8 billion or subsequent additions to 
the trust fund surplus is attributable to interest payment transfers 
from the General Fund.
    According to the Administration's budget, the Highway Account of 
the Highway Trust Fund will have a cash balance of more than $18 
billion at the end of this fiscal year. All of today's cash balance--
every dime--is money previously paid by motorists and intended for 
improvements to our nation's roads and bridges.
    If Congress were to increase the 2003 obligation limitation by a 
full $8.6 billion to bring us up to this year's level, the cash balance 
in the Highway Account would only be reduced by approximately $2.3 
billion in fiscal year 2003. That would leave more than $15 billion in 
the account as you consider funding levels and other issues in the 
reauthorization legislation.
Funding Issues in Highway Reauthorization
    That leads me to the longer-term highway funding issues that you 
asked us to address in connection with next year's reauthorization 
legislation. Let me begin again with the basic facts.
    Tax receipts to the Highway Account of the Highway Trust Fund will 
be just over $28 billion next year, according to the President's budget 
documents. The Administration projects conservatively that those 
receipts will grow by almost $1 billion a year through 2007. The truth 
is, we collected more than $30 billion in both 1999 and 2000, so if the 
economy picks up, we can expect trust fund receipts to rise 
significantly above the Administration's projections. Still, the need 
for additional highway investment is substantially greater than those 
Highway Account tax receipts can support, according to the FHWA 
biennial report on road and bridge conditions and performance To us, 
that suggests several clear funding priorities. The first priority, and 
by far the most important, is to continue the direct link between 
annual highway funding and the taxes paid by motorists. Whether that 
link is accomplished through RABA and the budgetary firewalls, a 
modified version of them, or some other mechanism entirely, the point 
is to provide as much assurance as possible that highway funding will 
not be less than the taxes paid by motorists and deposited in the 
Highway Account.
    Second, the reauthorization legislation should ensure that all 
taxes paid by highway users are used for their intended purpose. Here, 
there are several opportunities to improve upon current law.
Support S. 1306, Which Will Shift Ethanol Tax Receipts into the Highway 
        Trust Fund
    Last year, Senator Baucus introduced S. 1306, a bill to transfer 
into the Highway Trust Fund that portion of the tax on ethanol-blended 
fuels that currently is diverted to the General Fund. We strongly 
support the Baucus legislation, and we appreciate the fact that four 
other members of this subcommittee, including you, Mr. Chairman, are 
cosponsors of it. If enacted, the bill would increase annual trust fund 
deposits by more than $400 million, and it would ensure that the trust 
fund receives virtually all taxes currently imposed on motor fuels.
End Fuel Tax Evasion
    Another step toward ensuring the integrity of highway use taxes 
would be to close the remaining loopholes in the tax collection system 
that allow unscrupulous individuals to evade the Federal taxes they 
should be paying. Former Federal Highway Administrator Ray Barnhart 
originally brought this issue to Congress' attention years ago. His 
efforts resulted in a change in the tax collection system for motor 
fuels, closing the books on tax evasion schemes that robbed the Highway 
Trust Fund of hundreds of millions of dollars in revenue. Administrator 
Barnhart believes, however, that other substantial tax evasion schemes 
still exist, and I urge the subcommittee to review the report on this 
subject, prepared by kpmg Consulting Inc., which is appended to my 
testimony.
    We understand that efforts are underway to draft legislation 
closing these loopholes. We expect to support this legislation, and we 
will report back to the committee once a bill is introduced.
Reduce the Highway Trust Fund Surplus Over Time
    Our final recommendation for ensuring the integrity of highway use 
taxes is to spend down the Highway Account balance over time. As I 
indicated previously, the cash balance in the account will be $18 
billion at the end of fiscal year 2002, slightly less than that by the 
end of 2003, depending on how much funding is ultimately appropriated 
for next year.
    All of that money has been paid by motorists. All of it was 
intended to be used for road and bridge improvements. It ought to be 
used for its intended purpose.
    After protecting the integrity of highway use taxes, we ought to 
guard against proposals that will reduce the revenue available for the 
highway program.
Don't Triple Ethanol Mandate
    For instance, the renewable fuels mandate proposed in S. 1766, the 
``Energy Policy Act of 2002,'' would require that large amounts of 
renewable fuels, primarily ethanol, be sold in the U.S. If enacted, 
that provision would nearly triple the current demand for ethanol, 
which, because of the tax subsidy for ethanol-blended fuels, would have 
a severe impact on revenues to the Highway Trust Fund. The trust fund 
currently loses more than $1 billion per year because of the tax 
treatment of gasohol. When fully implemented, the ethanol mandate of S. 
1766 would result in an annual revenue loss greater than the obligation 
limitation distributed this year to the States of Nevada, Oklahoma, 
Montana, Virginia, Connecticut, Oregon, and Rhode Island combined.
    We strongly urge you to oppose the expansion of the ethanol mandate 
in S. 1766 or, if you support mandated ethanol use, to bring equity to 
ethanol taxation . . . in other words, levy the same tax on ethanol 
that you do on gasoline.
Stem Diversions of Highway Funding
    We also urge the committee to oppose any new diversions of highway 
funding away from road and bridge improvements. In particular, I know 
that you, Mr. Chairman, and other members of the full committee have 
previously indicated your strong interest in finding additional funds 
to support passenger rail development in the U.S. While Congress 
considers whether and to what extent public financial support for 
passenger rail service makes sense, we urge the subcommittee to resist 
attempts to divert Highway Trust Fund dollars to rail. The needs are 
simply too great on our primary transportation system--highways--to 
justify the expenditure of limited financial resources to build or 
operate a passenger rail system.
    Finally, Mr. Chairman, some have also suggested a fuel tax increase 
as a means to increase highway funding. Given the current state of the 
economy and the President's general opposition to tax increases, I 
suspect there is little possibility that Congress will approve a tax 
increase as part of the reauthorization bill. In any case, I expect 
taxpaying motorists are unlikely to support a rate increase unless it 
is clear that the funding guarantees of TEA-21 will be continued, that 
the enormous existing balance in the Highway Account will be spent 
down, and that highway users are not subsidizing other Federal programs 
that have little or no direct benefit to motorists.
    I also have one final observation about the President's budget. 
Rather than spending down the balance in the Highway Trust Fund, the 
Administration projects a dramatically growing balance beginning in 
fiscal year 2004, the first year of a reauthorized highway program. 
Over 4 years, the balance is projected to grow by a whopping $17.4 
billion despite using very conservative estimates of annual tax 
receipts.
Urge President Bush to Support Continuation of TEA-21's Funding 
        Guarantees
    We are told by Administration sources that those projections are 
simply based on the extraordinarily low 2003 spending as a baseline 
adjusted for inflation in future years. Unfortunately, however, it also 
indicates at the very least that the Administration has not yet made 
the policy decision to support continued budgetary firewalls and a 
RABA-like mechanism tying highway funding to tax receipts. There is 
still time for the President to make that policy decision before 
submitting his reauthorization proposal to the Congress, but I believe 
the recent budget documents are an ominous warning that members of this 
subcommittee, State and local public officials, and we in the private 
sector need to work very hard to convince top Administration officials 
that the TEA-21 funding guarantees must be continued in the next bill.
    Former Transportation Secretary Rodney Slater used to say that 
highways are about more than concrete, asphalt, and steel; they're 
about new opportunities and quality of life. We at The Highway Users 
understand the value of a good transportation system, centered on our 
road network. It isn't an end in itself; it's a tool to move us, our 
families, our customers and employees, and our products where they need 
to go as safely and with as little delay as possible.
    As Federal Highway Administrator Mary Peters is quick to point out, 
however, it takes a lot of concrete, asphalt, and steel to realize 
those benefits. That's the central point of this hearing and much of 
the coming debate on 2003 funding and the reauthorization bill: we need 
a well-funded Federal highway program to improve safety, reduce 
congestion, enhance air quality, and keep our manufacturers and 
producers competitive in the marketplace.
    We look forward to working with all of you to see that your 
colleagues, journalists, and the general public understand the unique 
and vital role that our highway system plays in our overall economy and 
our quality of life.





                               __________
   Statement of Mr. James Duit, President, Duit Construction Company
    Mr. Chairman and members of the subcommittee, on behalf of the 
American Road and Transportation Builders Association I would like to 
thank you for inviting us to be here this afternoon to discuss highway 
funding issues, particularly the impact of the unprecedented $8.6 
billion cut in Federal highway investment that is on the table for 
fiscal year 2003 and what can be done to prevent a recurrence in the 
future.
    I am James Duit, President of Duit Construction Company, a highway 
construction firm based in Edmond, Oklahoma. I am here representing 
ARTBA, which on Wednesday will mark its 100th anniversary representing 
the transportation construction industry here in Washington. ARTBA's 
more than5,000members come from all sectors of our industry both public 
and private. Our industry generated $200 billionannually in U.S. 
economic activity and sustains the employment of more than 2.2 million 
Americans.
    My company was founded in 1969 and now provides good jobs for 300 
permanent employees. Duit Construction specializes in paving, 
aggregates and quarries. I am a member of the Transportation Research 
Board's pavement research committee.
    It was also my privilege to serve last year as chairman of the 
American Concrete Pavement Association.
    I am accompanied by Dr. William Buechner, ARTBA's Vice President 
for Economics and Research, who will be available to respond to any 
technical questions you may have. Dr. Buechner is a Harvard-trained 
economist who spent more than two decades as an economist for the Joint 
Economic Committee of the U.S. Congress.
             reason for negative raba for fiscal year 2003
    The reason for the proposed $8.6 billion cut in the Federal highway 
program in fiscal year 2003 is well known. Since fiscal year 2000, the 
``revenue-aligned budget authority'' or RABA provision of TEA-21 
(Transportation Equity Act for the 21st Century) adjusts the annual 
firewall guarantee for highways if revenues into the Highway Account of 
the Highway Trust Fund are above or below the initial TEA-21 baseline 
revenue estimate. For fiscal year 2003, the RABA adjustment was 
determined to be negative $4.369 billion-the first negative RABA 
adjustment ever.
    Subtracting the negative $4.4 billion from the original TEA-21 
highway guarantee of $27.7 billion gives the $23.2 billion Federal 
highway investment proposed in the President's budget for fiscal year 
2003.
    This is $8.6 billion less than the $31.8 billion enacted for 
Federal highway investment during the current fiscal year.
    Senator, we greatly appreciate your leadership in addressing this 
issue by introducing legislation to provide fiscal year 2003 funding of 
at least $27.7 billion, the original TEA-21 guarantee. We believe this 
is an excellent start and look forward to working with you to restore 
the highway funding this year.
    Before I discuss the consequences of an $8.6 billion cut in Federal 
highway investment, I want to point out that the negative RABA was not 
the result of a reduction in gas tax revenues into the Highway Trust 
Fund. It is easy to misunderstand what happened, and the assertion that 
the proposed cut in highway funding was due to declining gas tax 
revenues has appeared in a number of newspaper articles. But it is not 
an accurate statement.
    According to data provided to ARTBA by the U.S. Department of the 
Treasury, motor fuel excise taxes collected by the Treasury during 
fiscal year 2001-the ``look-back'' year for the fiscal year 2003 RABA 
computation-were just about even with the amount collected during 
fiscal year 2000. There was a small decline in total revenues but 
virtually all of it was due to a reduction in excise taxes paid by 
heavy trucks.
    The overriding reason for negative RABA is that Treasury made a 
forecasting error in computing the fiscal year 2001 RABA adjustment and 
another forecasting error in crediting revenues to the Highway Account 
in fiscal year 2000. Treasury corrected both of those errors when 
computing the fiscal year 2003 RABA adjustment. These were technical 
corrections to past forecasting errors, caused to some extent by the 
recession, but they account for almost $3 billion of the negative RABA 
adjustment that concerns us today.
    In addition, we believe Treasury has underestimated projected 
incoming Highway Account revenues for fiscal year 2003. This 
underestimate, we believe, added another $900 million to the negative 
RABA. The fiscal year 2003 revenue projection does not appear 
consistent with the administration's overall economic assumptions and 
does not appear to take into account historical data showing that 
highway travel and truck excise tax receipts recover sharply after a 
recession ends.
    The Treasury gas tax data and an explanation of how the fiscal year 
2003 RABA adjustment was computed are attached to my prepared statement 
and I ask that they be included in the record.
      consequences of proposed $8.6 billion cut in highway funding
    Now I want to discuss the consequences of a $8.6 billion cut in 
Federal highway investment.
    Job Loss. An $8.6 billion cut in Federal highway investment in 
fiscal year 2003 would reduce employment in America by more than 
360,000 jobs over the next 7 years, with roughly 70 percent of the job 
loss occurring in 2003 and the election year 2004. This works out to 
more than 825 jobs per congressional district. A State-by-State 
breakdown of the job loss is included as an attachment to my testimony. 
If highway investment in fiscal year 2003 is provided at the TEA-21 
baseline level of $27.7 billion (a $5 billion increase from the 
proposed RABA-adjusted level), the job loss would still be almost 
170,000. Neither figure is acceptable at a time when the economy is 
struggling to emerge from recession. Much of the job loss will affect 
minorities, especially Hispanic workers who make up almost a third of 
the transportation construction work force. A legislative solution that 
would restore only $5 billion would concede that jobs will be lost.
    TEA-21 Reauthorization Baseline. The fiscal year 2003 obligation 
limitation will be the major determinant of the baseline funding levels 
for the fiscal years covered by TEA-21 reauthorization legislation. As 
the attached chart shows, the $8.6 billion cut would lower future 
baseline highway funding by more than $10 billion each year from the 
levels included in the fiscal year 2002 budget submitted just a year 
ago.
    Starting from this baseline will make it much more difficult for 
Congress to increase Federal highway investment after TEA-21 expires. 
Providing $27.7 billion for fiscal year 2003 would eliminate about half 
the shortfall, but restoring the full $8.6 billion is the only way to 
provide a realistic baseline for reauthorization.
    Cancellation of Highway Improvements. Based on reports from State 
DOTs, a number of States have already started to terminate or postpone 
projects on the basis of the expected cut in fiscal year 2003 Federal 
highway funding. The chaos caused by the proposed cut in Federal 
highway funding will continue until Federal funding for fiscal year 
2003 has been resolved. This needs to be addressed quickly to allow 
State construction programs to proceed unimpeded for the 2002 
construction season.
    Cannibalization of State Highway Budgets. The States rely on 
Federal highway funds to finance, on average, almost half of their 
highway capital improvement programs. A cut in Federal highway funds in 
fiscal year 2003 would exacerbate their budget problems and likely 
force many to cannibalize their own highway improvement programs to 
complete construction on Federal-aid projects.
                 how the $8.6 billion could be financed
    Highway funding for fiscal year 2003 could be maintained at the 
fiscal year 2002 level of $31.8 billion-and we believe should be-by 
utilizing the existing balance in the Highway Trust Fund's Highway 
Account. According to the Treasury Department that balance stands today 
at about $20.5 billion.
    This balance is not needed to reimburse States for already 
committed projects and programs. Approximately $7 billion of the 
balance is a cash surplus that occurred because TEA-21 did not require 
the RABA adjustment until fiscal year 2000. More highway user fee 
revenues came into the trust fund in fiscal year 1998 and fiscal year 
1999 than were spent.
    An additional $14 billion or so in the balance is to cover the 
unobligated contract authority that TEA-21 has provided to the States 
to date above the guaranteed firewall (You'll recall that TEA-21 
authorized $177 billion for highway investment, but only guaranteed 
$162 billion under the budget firewall).
    That contract authority is worthless to the States unless this 
money is appropriated from the trust fund. Otherwise, they cannot 
commit it to projects.
    It is time to free these surplus funds to save American jobs.
                     purpose of the raba mechanism
    I would now like to turn to the second issue being addressed today-
how to improve the RABA mechanism.
    Let me begin by pointing out that our overriding concern with 
Federal highway funding is not only that it be adequate to meeting our 
nation's transportation needs but also that it be predictable and 
reliable.
    Highway and bridge investments often take a long time to plan and 
construct. To schedule projects efficiently, State Departments of 
Transportation need stable funding sources and predictable revenues. 
That is why the Federal highway program has a 6-year, rather than 
annual, authorization cycle.
    The RABA adjustment process was not expected by the Congress, the 
States or the industry to inject the kind of instability in Federal 
highway funding that we are currently facing.
    The purpose of RABA was to help implement the TEA-21 goal of using 
all revenues into the Highway Trust Fund for their intended purpose-
investment in transportation improvements-in a timely manner.
    To accomplish this, TEA-21 set up a two-part process to determine 
the annual funding for the Federal highway program.
    First are the firewall amounts guaranteed in TEA-21, which from 
fiscal year 2000 on were directly linked to Highway Account revenues 
collected during the previous fiscal year. These guaranteed amounts 
were based on revenue projections made at the time TEA-21 was enacted 
in June 1998.
    The second is the RABA adjustment, which automatically increases or 
decreases the firewall guarantee whenever actual revenues into the 
Highway Account exceed or fall short of the TEA-21 baseline estimates.
    Attached to my testimony is a detailed explanation of how the 
fiscal year 2003 RABA adjustment was computed.
    The major problem with the computation process appears to be in the 
``look forward'' forecasting provision. Although annual highway funding 
under TEA-21 is supposed to be tied to previous-year revenues, part of 
the RABA calculation requires making a forecast of Highway Account 
revenues during the budget year itself and comparing that forecast to 
the initial TEA-21 baseline.
    This ``look forward'' forecast has proven to be a major source of 
instability in the RABA computation because the projections have been 
off each year, as forecasts always are. For example, Treasury 
overestimated fiscal year 2001 Highway Account revenues by $1.8 billion 
when computing the fiscal year 2001 RABA adjustment and corrected its 
mistake in the fiscal year 2003 RABA adjustment.
    This problem must be corrected when TEA-21 is reauthorized.
                       possible raba improvements
    There are a number of ways this could be done. One is to eliminate 
the ``look forward'' forecast part of the RABA formula. Basing RABA 
solely on the ``look back'' part of the formula might yield smaller 
RABA adjustments, but provide more predictability and stability to 
Federal highway investment.
    Another option might be to establish a reserve that would 
automatically be drawn down whenever RABA is negative. In fact, such a 
reserve exists today in the Highway Trust Fund as I have previously 
explained.
    I would like to suggest a third, more fundamental, reform that 
would change the nature of the RABA mechanism in the TEA-21 
reauthorization legislation.
    Under ISTEA and previous authorizations, the annual level of 
highway funding was budget-driven. Highway funding was determined by 
the overall budget cap and the level of the deficit, regardless of the 
amount of user fees paid into the Highway Trust Fund. As a result, the 
balance in the Highway Trust Fund kept growing, breaking trust with 
highway users who thought all their gas taxes were being invested in 
highway improvements.
    TEA-21 addressed this problem by making highway funding revenue-
driven, by linking each year's funding to the previous year's revenues. 
RABA helped accomplish this but, as we have seen, introduced the 
potential for unanticipated instability into Federal highway 
investment.
    For reauthorization, ARTBA urges that Congress go the next step and 
make annual highway funding performance-driven. While TEA-21 has 
succeeded in increasing highway investment, the level at present is 
barely sufficient to maintain the physical condition of the nation's 
highways and bridges.
    Under current funding, however, system performance-particularly 
congestion--is getting worse. In our TEA-21 reauthorization report, 
which has been supplied for the hearing record, ARTBA recommends that 
Federal highway investment from fiscal year 2004 through fiscal year 
2009 be set at a level that maintains not only the physical condition 
of highways and bridges, but mobility conditions as well.
    Based on data from the latest Conditions and Performance report 
submitted to Congress just over a year ago by the U.S. Department of 
Transportation, this goal would require an average annual Federal 
highway investment of $50 billion during the next 6 years, rising from 
$48 billion in fiscal year 2004 to $54 billion in fiscal year 2009.
    Funding this investment could be achieved by modifying the RABA 
provision. The modification would require setting guaranteed annual 
funding levels, as recommended in the ARTBA reauthorization report, 
computing the resulting outlays from the Highway Trust Fund, which OMB 
and CBO already do, and automatically setting highway user fees at the 
beginning for each fiscal year to raise the required revenues.
    This is exactly what the U.S. Postal Service does. It determines 
the cost of delivering the mail and sets postal rates at the level 
necessary to cover its costs. If the postal service followed the 
highway model, it would instead set postal rates at some arbitrary 
level and then deliver whatever mail its budget would cpermit.
                 budget related reauthorization issues
    Before ending, I want to briefly mention some additional budget-
related issues for TEA-21 reauthorization.
    First, and most important, preserve the budget firewalls that apply 
to the highway and mass transit categories and the guaranteed 
obligation limitation for highways.
    These two TEA-21 innovations have been instrumental in moving 
toward the goal of using all Highway Trust Fund revenues for surface 
transportation investment in a timely manner. The budget firewalls have 
removed the incentive to cut funding for the highway and transit 
programs, because the ``savings'' of doing so cannot be diverted to 
other uses. The guaranteed funding has, at least until fiscal year 
2003, provided predictability to Federal funding for State DOT 
planning.
    Second, we suggest enactment of a maintenance-of-effort requirement 
for the States. An increase in Federal highway funding creates a 
temptation for State legislatures to divert State-derived highway funds 
to other uses. A maintenance-of-effort requirement to receive Federal 
highway funds would eliminate that temptation.
    Third, we recommend a significant increase in funding for the mass 
transit program and, in conjunction with that, elimination or a cap on 
the ability of State DOTs to transfer highway program funds to transit. 
Each year, more than $1 billion of Federal highway funds are diverted 
by the States to transit operating and capital expenses, as permitted 
under the Surface Transportation Program (STP) and Congestion 
Mitigation and Air Quality (CMAQ) programs. This is in addition to the 
funding made available through the Federal mass transit program. 
Adequate funding for the mass transit program should go hand in hand 
with dedicating highway program funds solely to highway improvements.
    Mr. Chairman, again I want to thank you very much for inviting me 
to testify on behalf of the American Road and Transportation Builders 
Association.



                                 ______
                                 
Responses by Tom Hill, from ARTBA, to Additional Questions from Senator 
                                  Reid
    Question 1. Your organization has done quite a bit of analysis of 
Treasury's revenue estimates and I would ask you to expand upon your 
testimony that Treasury has underestimated future Highway Trust Fund 
revenues.
    Response. As part of the annual preparation of the president's 
proposed Budget of the U.S. Government, the Office of Tax Analysis of 
the U.S. Treasury prepares a forecast of revenues for the Highway 
Account of the Highway Trust Fund. A copy of the forecast used for 
preparation of the fiscal year 2003 budget is provided as Attachment 1.
    ARTBA's analysis of these Treasury revenue estimates indicates that 
Treasury may have underestimated future Highway Account revenues.
    Treasury uses a complex model to forecast Highway Account revenues. 
Each of the six main revenue sources-the Federal gasoline, diesel and 
gasohol excises plus the taxes on truck sales, tire sales and truck 
use-is projected separately and the results are added together to 
provide an overall revenue forecast.
    The Treasury revenue forecast raises three concerns:

      The forecast projects that revenues from the retail tax 
on trucks will not recover to the fiscal year 2000 pre-recession level 
until fiscal year 2008, 7 years after the trough of the current 
recession (see the 4th line of Attachment 1). This is completely at 
odds with every past recession, where truck tax revenues equaled or 
surpassed the pre-recession peak within 2 years of the recession 
trough. This includes the 1981-82 recession, which was the worst in the 
post-war period and far more severe than the current recession. 
Assuming that it will take 7 years to reach a level attained within 2 
years after previous recessions means the Treasury forecast may be 
significantly understating future Highway Account revenues. For 
example, if truck excise taxes return to the pre-recession peak in 
three rather than 7 years, annual Highway Account revenues would be 
$1.1 billion higher than the Treasury baseline. If it takes 4 years, 
annual revenues would still be more than $800 million higher than the 
baseline.
      On February 28, the Bureau of Economic Analysis of the 
U.S. Department of Commerce reported that real Gross Domestic Product 
(GDP) rose 1.4 percent during the 4th quarter of 2001 rather than the 
previous estimate of 0.2 percent. The economy appears to be stronger 
than originally thought and the GDP estimates used by Treasury to 
prepare the Highway Account revenue forecast thus may have been too 
low. Adopting a higher GDP forecast should also raise projections of 
Highway Account revenues.
      The Treasury Department credited the Highway Account with 
$26.9 billion of revenues in fiscal year 2001, even though just under 
$28 billion of revenues were actually collected. The difference was a 
bookkeeping correction to make up for the fact that $1.089 billion too 
much was credited to the Highway Account in fiscal year 2000. This is 
explained in more detail in Attachment 2. For fiscal year 2002, 
Treasury estimates that Highway Account revenues will be $27.7 billion, 
which is a reasonable increase over the $26.9 billion credited to the 
account for fiscal year 2001 given the forecast for economic recovery 
this year. But it is $300 million less than was actually collected in 
fiscal year 2001. Treasury says its revenue forecast models are 
independent of the amount of revenues collected in fiscal year 2001. 
But if the full $28 billion had been credited to the Highway Account in 
fiscal year 2001, would Treasury have projected a revenue decline in 
fiscal year 2002 in contrast to a forecast of economic recovery and 
growth? It seems more likely that a higher starting point would have 
resulted in higher revenue forecasts for fiscal year 2002 and all 
subsequent years.

    These concerns suggest Treasury's January revenue estimates may be 
too pessimistic and will be revised upward when the estimates are 
recomputed with more recent data for the August budget review and the 
fiscal year 2004 budget.
    Given the strong upward 4th quarter GDP revision and the other 
issues raised in this response, the committee may wish to ask Treasury 
for new revenue estimates prior to the August budget review.
    A corollary issue has been raised: what level of cash balance 
should be maintained in the Highway Account? The Federal Highway 
Administration has said informally that a prudent balance would be $8 
billion.
    There is no statutory reason for this. The only benefit of a cash 
balance is that it serves as a back-up source of funds in the event 
that outlays from the Highway Account exceed revenues into the account. 
ARTBA has found that, under reasonable assumptions about annual Highway 
Account revenues and obligation limitations, a positive cash balance 
will be maintained throughout the forecast period even if Congress 
provides $31.8 billion for the Federal highway program in fiscal year 
2003.
    More fundamentally, however, the cash balance is not the 
appropriate measure of the level of spending supportable by the Highway 
Account.
    A better measure is the statutorily required Byrd test, which asks 
whether all anticipated revenues into the Highway Account over a 3-year 
period are sufficient to cover all anticipated bills that must be paid 
from the account during that time. This recognizes that the highway 
funds distributed to the States each fiscal year actually spend out 
from the Highway Account over a seven to 9 year period, with most of 
the bills coming due during the first 3 years.
    The Byrd test begins by adding together all outstanding obligations 
that have not yet been paid plus all outstanding balances that have not 
yet been obligated. This gives the maximum amount that might have to be 
paid from the Highway Account. The current cash balance is subtracted 
to determine how much additional cash would be needed to pay all 
potential bills. This figure is then subtracted from projected Highway 
Account revenues for the next 2 years. The result is the headroom in 
the Highway Account. If it is positive-projected revenues exceed 
anticipated bills-there is room for additional funding. If it is 
negative, the Byrd amendment requires an across-the-board cut in 
highway funding sufficient to restore the difference.
    Under the CBO baseline, the Byrd test is consistently positive 
throughout the forecast period and, in fact, grows throughout the 
period. This holds true whether the highway program is funded at $31.8 
billion in fiscal year 2003 or $23.2 billion or anywhere in between.
    In summary, whether looking at the cash balance in the Highway 
Account or the Byrd test, ARTBA believes the Highway Account could 
support a $31.8 billion highway program in fiscal year 2003.

    Question 2. I am intrigued by the American Road and Transportation 
Builders Association's suggestion that we enact a maintenance-of-effort 
requirement for the States. Certainly our goal in providing additional 
transportation funding at the Federal level is to increase the total 
level of infrastructure investment rather than to have the States 
simply substitute Federal funds for State funds. Have you studied how 
States have reacted to the Federal funding increases since TEA-21?
    Response. ARTBA's analysis of Federal Highway Administration (FHWA) 
data for 1998 through 2000 show that 26 States invested less of their 
own State funds in highway capital improvements during at least one of 
those years than during 1997, the last year of funding under the 
Intermodal Surface Transportation Efficiency Act (ISTEA). Four States 
invested less all 3 years than during 1997. Had a maintenance-of-effort 
provision been in effect during those years, it would have added 
approximately $2 billion to highway capital improvements.
    ARTBA based its analysis on data from the annual Highway Statistics 
volumes published by FHWA. We began with total capital outlays for 
highways by State Departments of Transportation (from Table SF-2) and 
subtracted the payment of funds by FHWA to each State (from Table SF-3) 
to arrive at the annual amount of own-State funds invested in highways 
by each State. We did this for 1997, 1998, 1999 and 2000. The results 
are shown in the first four columns of Attachment 3.
    We then compared the amount of own-State funds invested in highway 
capital improvements during 1998, 1999 and 2000 to the 1997 baseline. 
These results are shown in the next three columns. A negative figure 
means the State invested less in highway capital improvements during 
that year than in 1997.
    The final two columns summarize the results. The first summary 
column shows the number of years each State's capital investment fell 
short of the 1997 baseline. The second shows the total shortfall during 
all negative years.
    The table yields two important results.
    First, own-State expenditures for highway capital investment fell 
below the 1997 baseline in 47 instances during the first 3 years of 
TEA-21, an average of just under one instance per State. Since this was 
spread over 3 years, it means that one-third of the States spent less 
on highways during each of the first 3 years under TEA-21 than they did 
in 1997.
    Second, if TEA-21 had included a maintenance-of-effort provision, 
the result would have been an additional $2 billion of capital 
investment in highways during those 3 years.
    If Congress were to include a maintenance-of-effort provision in 
TEA-21 reauthorization legislation, two issues need to be addressed:
    While ARTBA's analysis used 1997 as the baseline, the baseline for 
a maintenance-of-effort provision should be multi-year. This would 
prevent States from manipulating the baseline.
    The maintenance-of-effort provision should apply to obligations. 
ARTBA's analysis was based on actual expenditures from the U.S. and 
State treasuries, since these were the only consistent data available. 
But expenditures are the result of obligations in previous years and 
are thus only a second-best measure of State maintenance of effort.
                                 ______
                                 
     Response by Tom Hill to Additional Question from Senator Smith
    Question. As to the issue of reauthorization, what would be the 
implications, both negative and positive, of restoring the collection 
of interest on the funds on hand in the Highway Trust Fund?
    Response. Prior to October 1, 1998, the cash balance in the Highway 
Trust Fund earned interest from the U.S. Treasury. While interest added 
resources to the Highway Trust Fund, it did not necessarily increase 
Federal investment in highways and mass transit because there was no 
mechanism to assure that all Highway Trust Fund receipts were actually 
spent on the nation's transportation needs.
    TEA-21 took one step forward and one step back. It provided 
guaranteed funding for highways and mass transit and established the 
revenue-aligned budget authority (RABA) mechanism to assure that all 
Highway Account revenues were spent solely on the Federal highway 
program.
    But under TEA-21, the cash balance in the Highway Trust Fund no 
longer earns interest.
    According to the latest data from the U.S. Department of the 
Treasury, the cash balance in the Highway Trust Fund is just over $22 
billion. At current interest rates, the foregone interest on this is 
slightly less than $1 billion. During the 6-year life of TEA-21, the 
total foregone interest will total well over $6 billion, since both 
interest rates and the size of the balance were higher at times earlier 
in the period.
    Restoring the collection of interest on funds in the Highway Trust 
Fund would increase the resources available for Federal highway and 
mass transit investment. ARTBA supports this proposal.
    It will increase Federal highway investment, however, only if 
Congress continues to guarantee that all Highway Trust Fund revenues be 
spent only for highways and mass transit. This means preserving the 
budgetary firewalls and the annual RABA adjustment mechanism for the 
highway program. Without these guarantees, restoring interest to the 
Highway Trust Fund could have no effect on annual investment levels.
    The sole ``cost'' of this proposal is that it would increase 
Federal outlays for computing the annual budget surplus or deficit. But 
it would not reduce spending for other domestic discretionary 
categories. This is because the additional Highway Trust Fund revenues 
would raise the highway budget category directly and thus would not 
require any offsets in other domestic discretionary programs.
    ARTBA has proposed additional ways of increasing Highway Trust Fund 
revenues, including indexing the Federal motor fuels excise taxes for 
inflation, depositing all receipts from the excise on gasohol into the 
Highway Trust Fund including the 2.5 cents per gallon currently 
deposited into the general fund, financing the ethanol subsidy from the 
general fund rather than the Highway Trust Fund, and spending down the 
cash balance in the Highway Trust Fund.
    Ultimately, however, we believe the Federal user fee excise taxes 
on motor fuels and trucks will have to be increased or a new dedicated 
revenue source developed in order to provide adequate funding for the 
Federal highway and mass transit programs.
                               __________
 Statement of the JayEtta Z. Hecker, Director, Physical Infrastructure 
                 Issues U.S. General Accounting Office
    Mr. Chairman and members of the subcommittee: We appreciate the 
opportunity to provide testimony on the Highway Trust Fund. Our 
statement today is based on our June 2000 report on problems with 
Highway Trust Fund information,\1\ work we performed as the principal 
auditor of the annual financial statements of the Department of 
Treasury's Internal Revenue Service (IRS), and other work we do to 
assist the Department of Transportation Office of Inspector General in 
its annual audits of the Highway Trust Fund and Department of 
Transportation financial statements. The Highway Trust Fund is the 
principle mechanism for funding Federal highway programs authorized by 
the Transportation Equity Act for the 21st Century (TEA-21). Under TEA-
21, the funding levels for Federal highway programs are adjusted 
annually upward or downward based on actual and projected receipts of 
the Highway Trust Fund. These adjustments are referred to as the 
Revenue Aligned Budget Authority (RABA). We are currently reviewing the 
fiscal year 2003 RABA adjustment. We can provide you the results of 
that work at a later time.
---------------------------------------------------------------------------
     \1\U.S. General Accounting Office, Highway Funding: Problems with 
Highway Trust Fund Information Can Affect State Highway Funds, GAO/
RCED/AIMD-00-148 (Washington, DC.: June 2002).
---------------------------------------------------------------------------
    This statement will provide a description of (1) how the 
Transportation Equity Act for the 21st Century (TEA-21) changed the 
budgetary treatment of programs financed by the Highway Trust Fund, (2) 
the Revenue Aligned Budget Authority (RABA) calculation process, and 
(3) the results of our review of the Department of the Treasury's 
excise tax distributions to the Highway Trust Fund for fiscal year 
2001.
    In summary: TEA-21 made significant changes to the budgetary 
treatment of Federal highway and transit programs financed by the 
Highway Trust Fund. In particular, TEA-21 guaranteed annual funding 
levels for most highway and transit programs and more closely linked 
highway user tax receipts, such as those from motor fuel and truck tire 
taxes, to the annual guaranteed funding levels for highway programs.
    RABA adjustments ensure that highway program funding levels will 
change as Highway Account receipt levels change. For the first time, 
the RABA adjustment for fiscal year 2003 is negative-decreasing highway 
funding by $4.37 billion.
    Our work shows that the amounts distributed to the Highway Trust 
Fund for the first 9 months of fiscal year 2001, as adjusted based on 
IRS' certifications, were reasonable and adequately supported based on 
available information.
                   tea-21 and the highway trust fund
    TEA-21 authorized $217.9 billion for highway, mass transit, and 
other surface transportation programs for fiscal years 1998 through 
2003. TEA-21 n '' the use of the Highway Trust Fund-which is divided 
into a Highway Account and a Mass Transit Account-as the mechanism to 
account for Federal highway user tax receipts that fund various surface 
transportation programs. Prior to TEA-21, these programs competed for 
budgetary resources through the annual appropriations process with 
other domestic discretionary programs. In a major change to Federal 
budget rules, TEA-21 guaranteed a minimum level of spending for these 
programs. New budget categories were established for highway and 
transit spending, effectively establishing a budgetary ``firewall'' 
between those programs and other domestic discretionary spending 
programs. Of the $217.9 billion authorized for surface transportation 
programs over the 6-year life of TEA-21, about $198 billion is 
protected by the budgetary firewall-about $162 billion for highway 
programs and $36 billion for transit programs. TEA-21 also enhanced the 
linkage between highway user tax receipts in the Fund's Highway Account 
and Federal highway program funding levels in several ways, including 
(1) guaranteeing specific annual funding levels for most highway 
programs over a 6-year period on the basis of the projected receipts in 
the Highway Account, and (2) adjusting the guaranteed spending level 
for each fiscal year upward or downward if the receipt levels in the 
Highway Account increased or decreased from those projected in TEA-21.
    Federal highway user taxes directed to the Highway Trust Fund 
include excise taxes on motor fuels (gasoline, gasohol, diesel, and 
special fuels); and truck-related taxes on truck tires, sales of trucks 
and trailers, and the use of heavy vehicles (see fig. 1). Someone other 
than the consumer generally pays the motor fuel taxes into the Highway 
Trust Fund. Oil companies typically pay a per-gallon tax on the motor 
fuels at the point where their fuel is loaded into tanker trucks or 
rail cars at a terminal. Tire manufacturers pay taxes on truck tires, 
by weight; and retailers pay taxes on the sales price of new trucks and 
trailers. Owners of heavy highway vehicles pay taxes on the use of 
these vehicles, making this the only highway tax directly paid by the 
highway user.

                                 Table 1: Highway User Taxes (Cents per gallon)
----------------------------------------------------------------------------------------------------------------
                                                                        Distribution of tax
                                                 ---------------------------------------------------------------
                                                        Highway Trust Fund            Leaking
           Type of tax               Tax rate    --------------------------------   underground
                                                      Highway         Transit      storage tank    General fund
                                                      Account         Account       trust fund
----------------------------------------------------------------------------------------------------------------
        Motor fuels taxes
Gasoline........................           18.40           15.44            2.86            0.10
Diesel..........................           24.40           21.44            2.86            0.10
 
     Alternative fuels taxes
Gasohol (10% ethanol)...........           13.10            7.64            2.86            0.10            2.5
Liquefied petroleum gas.........           13.60           11.47            2.13
Liquefied natural gas...........           11.90           10.04            1.86
M85 (from natural gas)..........            9.25            7.72            1.43            0.10
Compressed natural gas (cents              48.54           38.83            9.70
 per thousand cu. ft.)..........
----------------------------------------------------------------------------------------------------------------
 
Truck related taxes
Tires                                                                0-40 lbs., no tax
                                  Over 40 lbs - 70 lbs, 15 cents per pound in excess of 40
                                                     Over 70 lbs - 90 lbs, $4.50 plus 30 per pound in excess of
                                                             Over 90 lbs, $10.50 plus 50 cents per pound in excess of 90
Truck and trailer sales tax       12 percent of retailer's sales proce for tractors and trucks over 33,000 lbs
                                  gross vehicle weight (GVW) and trailers over 26,000 GVW
Heavy vehicle use tax             Annual tax: Trucks 55,000 lbs and over GVW, $100 plus &22 for each 1,000 lbs
                                  (or fraction thereof) in excess of 55,000 lbs (maximum of $550)
----------------------------------------------------------------------------------------------------------------
Note: Tax rates as of July 1, 2001.
Source: Federal Highway Administration (FHWA) and the Office of Tax Analysis, Department of the Treasury.

    Twice a month, business taxpayers make deposits of excise taxes-
including highway user taxes-generally through Treasury's Electronic 
Federal Tax Payment System. Excise taxes are deposited into Treasury's 
General Fund as received.
    Treasury uses a complex and lengthy process-involving four 
organizations within the department-for distributing excise tax 
receipts to the various trust funds, including the Highway Trust Fund. 
The department uses this process, in part, because it does not obtain 
data from business taxpayers (when they make semimonthly deposits) on 
the types of excise taxes that these deposits are intended to cover.
    Because businesses, rather than consumers generally pay highway 
user taxes, most of the Federal motor fuel and truck taxes come from 
only the handful of States where those businesses have their corporate 
headquarters and pay their taxes.
    As a result, the Treasury Department does not provide the Federal 
Highway Administration (FHWA) with State-level data on highway tax 
receipts, and FHWA must therefore estimate these data in order to 
distribute Highway Account funds to the States under various highway 
programs. FHWA estimates State-level contributions through what it 
refers to as its ``attribution process.'' Through this process, it 
determines each State's share of highway motor fuel usage on the basis 
of data provided by the States, and it uses that information to 
estimate the amount of contributions to the Highway Account 
attributable to each State's highway users. The information developed 
by Treasury and FHWA is used to determine the amounts of funds 
distributed to each State under several major highway programs.
    The Revenue Aligned Budget Authority Calculation
    TEA-21 used projections of Highway Account receipts to develop 
guaranteed highway funding levels for fiscal years 1999 through 2003. 
Beginning in fiscal year 2000, these guaranteed levels were to be 
adjusted upward or downward each year on the basis of actual Highway 
Account receipts and new projections of these receipts. If this RABA 
adjustment lowers the guaranteed funding level for a given fiscal year, 
TEA-21 requires that the Department of Transportation reduce the amount 
of funding authorized on October 1 of the next fiscal year. RABA 
adjustments ensure, for the first time, that highway program funding 
levels will change as Highway Account receipt levels change.
    The RABA adjustment to the funding levels authorized in TEA-21 is 
based on actual receipts from 2 years prior to the fiscal year, as 
reported by Treasury, plus revised Treasury receipt projections for the 
fiscal year in question. For example, for fiscal year 2000, TEA-21 
requires that this adjustment be calculated by comparing (1) actual 
Highway Account receipts for fiscal year 1998 with the TEA-21 
projection of these receipts (the ``look back `` portion of the 
calculation) and (2) revised projections of Highway Account receipts 
for fiscal year 2000 with the TEA-21 projection of these receipts (the 
``look forward'' portion of the calculation). The sum of these 
differences becomes the RABA adjustment. To determine the amount of the 
RABA adjustment, the Office of Management and Budget relies on 
information on Highway Account receipts supplied by Treasury. 
Specifically, the Bureau of Public Debt provides the actual Highway 
Account receipts for the prior fiscal year, and the Office of Tax 
Analysis (OTA) provides a projection of Highway Account receipts for 
the next fiscal year.
    Figure 2 shows the RABA calculations and resulting adjustments for 
fiscal years 2000 through 2003. As shown, the RABA adjustments for 
fiscal years 2000 through fiscal year 2002 were positive-increasing 
highway funding levels by a total of over $9 billion.\2\ However, in 
fiscal year 2003, actual Highway Account receipts for fiscal year 2001 
were less than the TEA-21 estimate for fiscal year 2001, and Treasury's 
projection of Highway Account receipts for fiscal year 2003 was less 
than the TEA-21 estimate for that year. As a result, the RABA 
adjustment for fiscal year 2003 is negative $4.37 billion.
---------------------------------------------------------------------------
     \2\FHWA apportions any additional RABA funds to the States on 
October 15 of each fiscal year-about 2 weeks after apportioning the 
amount of highway program funds for the fiscal year that was authorized 
in TEA-21.

                          Table 2: RABA Calculation for Fiscal Years 2000 through 2003
                                            (In millions of dollars)
----------------------------------------------------------------------------------------------------------------
                                              Look Back                          Look Ahead
          Fiscal Year           -----------------------------------------------------------------------   RABA
 
----------------------------------------------------------------------------------------------------------------
FY 2000........................  1998 Actual Hwy/Accnt      23,135   2000 Est. Hwy/Accnt       28,551
                                  receipts.                           Receipts.
                                   less 1998 TEA-21         22,164     less 2000 TEA-21        28,066
                                  ext. Hwy/Accnt                      est. Hwy/Acct
                                  receipts.                           receipts.
                                   less look ahead               0
                                  result for 1998.
                                                       -------------                      --------------
                                   subtotal...........         971     subtotal..........         495      1,456
----------------------------------------------------------------------------------------------------------------
FY 2001........................  1999 actual Hwy/Accnt      38,815   2001 est. Hwy/Accnt       30,368
                                  receipts.                           receipts.
                                   less 1999 TEA-21         32,619     less 2001 TEA-21        28,506
                                  est. Hwy/Accnt                      est Hwy/Accnt
                                  receipts.                           receipts.
                                   less look-ahead               0
                                  result for 1999.
                                                       -------------                      --------------
                                   subtotal...........       1,196     subtotal..........       1,862      3,058
----------------------------------------------------------------------------------------------------------------
FY 2002........................  2000 actual Hwy/Accnt      30,334   2002 est. Hwy/Accnt       31,732
                                  receipts.                           receipts.
                                   less 2000 TEA-21         28,066     less 2002 TEA-21        28,972
                                  est. Hwy/Accnt                      est Hwy/Accnt
                                  receipts.                           receipts.
                                   less look-ahead             485
                                  result for 2000.
                                                       -------------                      --------------
                                   subtotal...........       1,738     subtotal..........       2,760      4,543
----------------------------------------------------------------------------------------------------------------
FY 2003........................  2001 actual Hwy/Accnt      26,900   2003 est. Hwy/Accnt       28,570
                                  receipts.                           receipts.
                                   less 2001 TEA-21         28,506     less 2003 TEA-21        29,471
                                  est. Hwy/Accnt                      est Hwy/Accnt
                                  receipts.                           receipts.
                                   less look-ahead           1,862
                                  result for 2001.
                                                       -------------                      --------------
                                   subtotal...........     (3,468)     subtotal..........       (901)    (4,369)
----------------------------------------------------------------------------------------------------------------
Note: Actual receipts are net tax receipts (excluding fines and penalties) after deduction of transfers and
  refunds. OTA prepares forecasts of tax receipts to the Highway Account of the Highway Trust Fund for the
  President's Budget and other analyses. References to TEA-21 estimates are to the estimates of Highway Account
  receipts in TEA-21. The Congressional Budget Office prepared these estimates.
Source: Department of Transportation

    We are currently reviewing the fiscal year 2003 RABA calculation 
and will report our results at a later date. We have, however, 
completed our annual review of the Treasury's distribution of excise 
taxes to the Highway Trust Fund for fiscal year 2001--which accounts 
for about 80 percent of the total negative RABA of $4.37 billion.
    Treasury's Excise Tax Distributions to the Highway Trust Fund for 
the First Nine Months of Fiscal Year 2001 Are Reasonable
    The Federal Government levies excise taxes on entities and 
individuals to finance general Federal activities and specific 
government programs. Several different bureaus and offices within 
Treasury collected about $69 billion of net excise taxes in fiscal year 
2000. However, IRS accounted for the majority of excise taxes in fiscal 
year 2000, with about $54 billion in net excise tax collections on the 
purchase, use, or inventory of various types of goods or services, such 
as gasoline and tobacco. The various excise tax receipts accounted for 
by IRS are initially deposited into the General Fund of the Treasury as 
they are paid by the business taxpayer; subsequently, a portion of 
these deposits are distributed to nine excise tax-related trust funds, 
which are administered by six Federal agencies. More than 63 percent of 
these funds are ultimately distributed to the Highway Trust Fund.
    Under section 9601 of the Internal Revenue Code, the Secretary of 
Treasury is required to transfer applicable excise tax receipts from 
the General Fund to trust funds on a monthly basis. These transfers are 
based on estimates because data is not available to attribute excise 
taxes to the appropriate trust funds when the deposits are initially 
made. Treasury's OTA prepares these semi-monthly estimates based on 
historical IRS certification data and actual current excise tax revenue 
collections. The estimates are used to prepare accounting entries for 
the initial distributions to the trust funds.
    Subsequently, IRS certifies the actual excise tax revenue 
collections that should have been distributed to the trust funds based 
on the payments and tax returns IRS receives from taxpayers.\3\ Using 
the IRS certifications, Treasury then adjusts the initial trust fund 
distributions. For example, in March 2001, Treasury made an adjustment 
to decrease the Highway Trust Fund's fiscal year 2001 excise tax 
distributions by about $1.2 billion. This adjustment was to correct for 
actual collections for the fourth quarter of fiscal year 2000 being 
less than what was initially distributed based on OTA's estimates for 
the quarter ended September 30, 2000. According to an official from 
OTA, the original estimated transfer amounts for the quarter had been 
calculated using an economic model that assumed a higher rate of 
economic growth through calendar year 2000 than was actually the 
case.\4\ As a result, the downward adjustment was made, effectively 
reducing fiscal year 2001 distributions to the Highway Trust Fund by 
the $1.2 billion.
---------------------------------------------------------------------------
     \3\Typically IRS certifies quarterly excise tax distributions 6 
months after the end of the quarter. This is to allow sufficient time 
for receipt and processing of the tax returns, including returns filed 
late. Even though IRS certifies collections 6 months after the end of a 
quarter, certifications for any given quarter routinely contain some 
amounts related to prior quarters.
     \4\Prior to December of 2000, this process used economic models 
and was linked to OTA's receipt estimates for inclusion in the 
President's Budget.
---------------------------------------------------------------------------
    We are issuing today results of a report on the procedures we 
performed related to the distributions of excise taxes to the Highway 
Trust Fund in fiscal year 2001.\5\ Based on this work, we believe the 
amounts distributed to the Highway Trust Fund for the first 9 months of 
fiscal year 2001, which were subject to the IRS' quarterly excise tax 
certification process and which were adjusted based on this process, 
were reasonable and were adequately supported based on available 
information. Additionally, we believe the March 2001 adjustment made by 
Treasury to reduce fiscal year 2001 Highway Trust Fund excise tax 
distributions by $1.26 billion was reasonable and appropriately 
supported. The certifications for distributions of excise tax revenue 
collected during the period July 1, 2001, through September 30, 2001, 
will not be completed by IRS until March 2002. Consequently, the 
distributions of fourth quarter fiscal year 2001 excise tax revenue 
were based solely on estimates prepared by OTA. While we reviewed 
certain procedures associated with OTA's estimates, we did not audit 
the estimation process nor did we audit the estimates themselves. 
Therefore, we cannot conclude on the reasonableness of the 
distributions made to the Highway Trust Fund for the fourth quarter of 
fiscal year 2001.
---------------------------------------------------------------------------
     \5\Report on Appling Agreed-Upon Procedures: Highway Trust Fund 
Excise Taxes (GAO-02-379R).
---------------------------------------------------------------------------
Contact and Acknowledgement
    For further contacts regarding this testimony please contact 
JayEtta Z. Hecker at (202) 512-2834 or on [email protected]. Individuals 
making key contributions to this testimony included Nikki Clowers, Ted 
Hu, Steven Sebastian, Ronald Stouffer.
                               __________
Statement of Andrew Lyon, Deputy Assistant Secretary for Tax Analysis, 
                    U.S. Department of the Treasury
    Mr. Chairman and members of the subcommittee, I appreciate the 
opportunity to describe recent trends in actual highway-related excise 
taxes and discuss the Administration's fiscal year 2003 Budget forecast 
of excise taxes dedicated to the Highway Account of the Highway Trust 
Fund.
    The Office of Tax Analysis in the Department of the Treasury 
forecasts most future tax receipts for the President's Budget. These 
forecasts are made using economic models that are constantly updated to 
incorporate the most current information on tax collections and 
reported tax liabilities. The forecast for Fiscal Years 2002 through 
2012 incorporates the Administration's economic assumptions formulated 
for the Budget by the Troika, which consists of the Council of Economic 
Advisors, the Office of Management and Budget, and the Department of 
the Treasury.\1\ Each of the six dedicated Highway Account excise tax 
sources are separately forecast: (i) Gasoline, (ii) Gasohol fuels, 
(iii) Diesel and other fuels, (iv) Retail tax on trucks, (v) Highway-
type tires, and (vi) Heavy vehicle use tax. In Table 1, fiscal year 
receipts for 2000 through 2012 are reported for these six excise tax 
sources. The 2000 and 2001 figures are actual receipts drawn from the 
Highway Account Income Statement, while the 2002 through 2012 figures 
are projections from the President's fiscal year 2003 Budget.\2\
---------------------------------------------------------------------------
     \1\The economic assumptions are described in Chapter 2 of the 
Analytical Perspectives volume of the fiscal year 2003 Budget.
     \2\The Income Statement for 2001 includes three quarters of actual 
tax receipts certified by the IRS. Receipts for the last quarter of the 
year are based on an estimated allocation of total excise tax receipts. 
Any differences between estimated and actual receipts for the last 
quarter is adjusted in March and reflected in the Income Statement of 
the subsequent year.
---------------------------------------------------------------------------
                       recent excise tax receipts
    There has been a rapid downturn in highway-related excise taxes as 
the economy weakened over the past year and a half. Actual tax receipts 
dedicated to the Highway Account fell $3.4 billion from Fiscal Year 
2000 to Fiscal Year
    2001, dropping from $30.3 billion to $26.9 billion, an 11.3 percent 
decline. As shown in Table 1, five of the six receipt sources were 
lower in 2001 than in 2000. Only taxes on gasohol fuels show an 
increase.
    Although the growth in the tax on gasohol fuels might initially 
appear to be a bright spot in an otherwise disappointing year, the 
growth is actually a significant factor in the overall reduction in 
dedicated Highway Account tax receipts. The increase in taxes on 
gasohol fuels is evidence of an ongoing substitution of gasohol fuels 
for gasoline, which may be used interchangeably in cars and light 
trucks. We anticipate that there will be an increasing use of gasohol 
fuels, and corresponding reductions in gasoline consumption as States 
ban the use of MTBE (methyl tertiary-butyl ether) as a fuel additive. 
Since the Highway Account receives 15.44 cents per gallon of gasoline 
but only about 8 cents per gallon of gasohol, increases in gasohol use 
at the expense of gasoline consumption will result in a net reduction 
in Highway Account receipts. On net, for every billion gallons of 
gasohol sold in place of gasoline, Highway Account receipts are 
approximately $78 million lower. Approximately two-thirds of this 
negative effect on Highway Account receipts from the substitution of 
gasohol for gasoline is due to the ethanol tax incentive (currently 53 
cents per gallon of ethanol, which at a 10 percent blend is 5.3 cents 
per gallon of gasohol). The remainder is attributable to the fact that 
the law dedicates a portion of gasohol tax receipts (typically 2.5 
cents per gallon) to the General Fund.
    The most dramatic declines between fiscal year 2000 and fiscal year 
2001, both in percentage terms and in dollars, occurred in excise taxes 
related to the sales and operations of trucks. The retail tax on 
trucks, a 12 percent tax on the first retail sale of heavy trucks, 
buses, truck tractors, and trailers, was down 55.2 percent, a decline 
of more than $1.8 billion. Tax receipts from the tax on truck tires 
fell 22.5 percent, and truck use tax receipts fell 33.8 percent. The 
reductions in retail truck taxes were particularly large because this 
tax is levied as an ad valorem tax on the first retail sale. During the 
investment boom of 1998 and 1999, a large volume of new trucks was 
purchased at premium prices. As the economy weakened, large numbers of 
these slightly used trucks were placed on the market. This greatly 
depressed prices and sales in the new heavy truck market, and tax 
revenues from retail truck taxes declined accordingly.
    The first quarterly report to show weakness in total collections 
was for July through September of 2000. This Highway Trust Fund 
certification of excise tax receipts was issued in March of 2001.\3\ 
This certification shows a 4.8 percent drop compared with the same 
quarter in the prior year. The subsequent quarterly certification for 
October through December 2000, issued in late June, showed a 5.6 
percent reduction in receipts compared to the prior year. Based on this 
weakness, the Mid-Session Review of the fiscal year 2002 Budget 
reported that Highway Trust Fund revenues would be lower than 
previously forecast.
---------------------------------------------------------------------------
     \3\The Highway Account Certification is issued by the IRS as the 
final statement of excise tax collections dedicated to the account. The
    Certification for a given quarter is issued approximately five and 
half months after the end of the quarter due to the time required to 
process the excise tax returns. This report, based on filed excise tax 
returns, provides the first detail of tax receipts by specific tax 
item.
---------------------------------------------------------------------------
    New data for the first two quarters of calendar year 2001 have 
shown further weakness in tax receipts. The certification for January 
through March of 2001 showed receipts declining 3.5 percent compared 
with the prior year, and the certification for April through June of 
2001 was 5.5 percent lower than the prior year. These two quarterly 
certifications also reflected accelerating increases in gasohol use as 
gasohol taxes grew by 25.8 percent and 23.7 percent compared with the 
same quarters in 2000. This series of weak Highway Account receipt 
certifications explains why fiscal year 2001 total tax revenues fell to 
$26.9 billion.\4\
---------------------------------------------------------------------------
     \4\ Total Highway Account receipts including fines and penalties 
were $29.917 billion in fiscal year 2001.
---------------------------------------------------------------------------
                 forecast of future excise tax receipts
    Looking forward, the Administration projects steady growth in 
highway-related excise tax receipts. Net receipts in fiscal year 2003 
are projected to be 6.2 percent higher than fiscal year 2001 and 2.9 
percent higher than fiscal year 2002. Average annual growth is forecast 
to be more than 3 percent per year over the remainder of the budget 
period. The fiscal year 2003 Budget forecasts a faster long-run growth 
in receipts than last year's Budget; however, this faster rate of 
growth is relative to a smaller base, so the fiscal year 2003 levels 
are lower than previously projected. In the current budget, the 
Administration forecasts net Highway Account excise tax receipts to be 
$28.57 billion in fiscal year 2003.
    During the first 5 years of the forecast period, gallons of 
gasoline and gasohol fuels are projected to grow at an average of 2.3 
percent per year. Gasohol fuels grow faster than gasoline due to the 
increasing reliance on ethanol as an oxygenate to meet clean air 
requirements. Because of the difference in the amount per gallon 
dedicated to the Highway Account, total gasoline and gasohol receipts 
grow at about 2 percent per year during the first 5 years of the 
forecast.
    The truck related excise tax receipts are projected to grow quickly 
as the economy recovers. For fiscal year 2003 compared to fiscal year 
2001, retail tax on trucks receipts are projected to grow 22.1 percent 
and tire tax receipts are projected to grow by 10.6 percent. Between 
fiscal year 2003 and fiscal year 2002 retail tax on truck receipts are 
projected to grow 15.6 percent and tire tax receipts are projected to 
grow 6.5 percent. This growth reflects the recovery of the heavy truck 
market and more generally increased investment in equipment. Diesel 
fuel receipts are forecast to decline slightly between fiscal year 2001 
and fiscal year 2002 before resuming growth averaging more than 3.5 
percent per year.
    In summary, the Administration's forecast of highway-related excise 
taxes reflects the most recent tax collection and liability data 
available, and the Administration's economic forecast. The data reflect 
the weakness in the economy during 2000 and 2001. The forecast for 
future years is based on the expectation that the recession will end in 
early 2002 and a strong recovery will be underway later in the year.
                               conclusion
    I appreciate this opportunity to describe recent trends and present 
our current forecast to you.
                               __________
Statement of Kenenth K. Wert, Associated General Contractors of America
    On behalf of the Associated General Contractors of America (AGC), I 
am pleased to submit testimony on the critical issue of how the 
recommended dramatic reduction in Federal-aid highway funding for 
fiscal year 2003 will hurt the nation's economy, the construction 
industry and my company. My name is Kenneth Wert, President of Haskell 
Lemon Construction Co. in Oklahoma City, Oklahoma.
    AGC is extremely concerned with the recommended cut in highway 
funding in the President's fiscal year 2003 budget proposal. Toward 
that end, AGC strongly supports S. 1917, the Highway Restoration Act 
and the companion legislation, H.R. 3694. These bills call for 
increasing obligations for the Federal-aid highway program by $4.4 
billion over the President's budget request. If included in this year's 
Transportation Appropriation's (FY 2003), it would fund the highway 
program at $27.75 billion in obligation authority, which is the minimum 
funding level included in the Transportation Equity Act for the 21st 
Century (TEA-21). While supportive of this legislation, AGC supports 
increasing funding to the level in this year's fiscal year 2002 
appropriation's bill, an obligation limitation of at least $31.8 
billion.
    AGC is urging Congress to raise the funding for highways from the 
surplus that has accumulated in the Highway Trust Fund since the 
adoption of TEA-21. The money was collected with the express intent 
that it be spent on transportation improvements. Our proposal will 
accomplish this objective, spur the economy and save jobs.
    The recommended cut in funding would be devastating to State 
Departments of Transportation across the Nation. In Oklahoma, our State 
Department of Transportation (ODOT) would experience a reduction of 
approximately $110 million
    for fiscal year 2003, if the Federal program is cut by the proposed 
$8.5 billion. Construction of new vital highway projects will be the 
first to be cut. The Road Information Program's (TRIP) analysis states 
that Oklahoma would lose 4,600 jobs just from the Federal cut. 
Additional jobs will be lost if Oklahoma cuts its State highway funding 
as well. TRIP's report states that the cut in funding could result in 
the loss of $627 million in economic benefits in Oklahoma. These lost 
economic benefits are based on the USDOT's estimate that each $1 
invested in transportation funding results in $5.70 in economic 
benefits that improve safety, reduce traffic congestion and reduce 
vehicle-operating costs paid by motorists.
    Make no mistake about it, Oklahoma cannot afford any cut in 
funding, certainly not one of this magnitude. In Oklahoma, vehicle 
miles traveled increased by 31 percent between 1990 and 2000. Traffic 
fatalities average 737 annually. Many of these fatalities could be 
avoided with a variety of safety improvements to our State's 
transportation system. Furthermore, 83 percent of the $58 billion worth 
of commodities delivered annually from sites in Oklahoma are 
transported on the State's highways.
    Reducing Oklahoma's highway program by $110 million would be 
devastating for family owned businesses such as mine, Haskell Lemon 
Construction Co. For our company, the cut in highway funding will 
reduce bidding opportunities for new construction, which would result 
in a reduction in personnel, a reduction in plant and equipment, and 
the need to develop a revised business plan.
    Let me be more specific as to the impact on Haskell Lemon 
Construction Co. We currently have a combined employment of 
approximately 225 employees. Our company has the present capability to 
progress multiple large-scale ($10-20 million) projects simultaneously. 
Typical project duration is 9 to 18 months. Multiple crews within each 
construction discipline (i.e. grading, drainage, paving, etc.) allows 
for multiple construction operations to be in process in both urban and 
rural settings.
    The proposed reduction in ODOT's funding will result in the 
elimination of several construction crews within the company. It is 
conceivable that an entire construction segment within the company 
could be laid off--one grading crew (7 employees), one drainage crew (8 
employees), one concrete paving/structures crew (10 employees) one 
asphalt paving crew (6 employees), one plant crew (4 employees), and 
shop support personnel (3 mechanics). In addition to the construction 
division employment effected by a reduction in ODOT's program, several 
peripheral operations would also lose employees. The reduction in 
construction projects would eliminate demand for hauling construction 
materials (7 drivers), truck mechanics (2), and demand for aggregate 
production (3 plant employees). The initial loss in personnel would 
total over 50 employees--a reduction of 22 percent of total employment 
representing over $1 million in annual payroll.
    It is important to consider that along with the lost jobs 
documented above, is the loss of benefits for the employees--health and 
dental insurance. While the insurance is portable for a limited 
duration at the individual's cost, it is becoming more expensive in an 
increasingly difficult insurance market. Many laid-off employees are 
forced to tap their profit sharing benefits at a substantial penalty to 
survive in today's lean job market. These benefits are intended for 
retirement after years of service.
    Finally, Haskel Lemon Construction Co. would be forced to evaluate 
its current plant and equipment operations. Our company operates four 
asphalt plants, one concrete plant, and two sand and gravel operations. 
Rolling stock and construction equipment are in the hundreds with a 
replacement cost in excess of $20 million. A reduction in Oklahoma's 
construction program would require the company to evaluate its plant 
and equipment and liquidate those assets that would not have the 
opportunity to produce as a result of a reduced construction market.
    This is the dramatic impact a highway funding cut of this magnitude 
would have on our company. There are hundreds of other family owned 
construction companies that would react the same way and be forced to 
lay off tens or hundreds of valued employees.
    Mr. Chairman, on behalf of AGC, I thank you and every member of 
this committee for introducing and cosponsoring S. 1917 and attempting 
to mitigate some of the impact of this proposed highway funding cut. 
AGC and I stand ready to assist you. Thank you for the opportunity to 
submit testimony.












                         TEA-21 REAUTHORIZATION

                              ----------                              


                        TUESDAY, MARCH 19, 2002

                                       U.S. Senate,
                 Committee on Environment and Public Works,
                                                    Washington, DC.

         TRANSPORTATION MOBILITY, CONGESTION AND INTERMODALISM

    The committee met, pursuant to recess, at 2:30 p.m. in room 
406, Senate Dirksen Building, Hon. James M. Jeffords [chairman 
of the committee] presiding.
    Present: Senators Jeffords, Graham, and Chafee.
    Also present: Senator Murray.

OPENING STATEMENT OF HON. JAMES M. JEFFORDS, U.S. SENATOR FROM 
                      THE STATE OF VERMONT

    Senator Jeffords. Good afternoon, everyone. Thank you all 
for joining us for third in our series of hearings on 
reauthorization of the Nation's Surface Transportation Program.
    I also want to extend a warm welcome to our witnesses who 
have traveled from near and far to be with us today. I look 
forward to hearing your testimony.
    The subject of today's hearing is congestion, a nuisance 
that every person in this room has experienced at one time or 
another. Congestion is one of the Nation's most vexing 
problems, particularly in our metropolitan areas and on the 
highway system in those areas. Beyond the general frustration 
that congestion imposes on commerce every day, it has 
significant negative impacts on our economy, delaying freight 
delivery and creating inefficiencies. Congestion also harms the 
environment and as such presents a threat to human health as 
well.
    In today's hearing, we hope to uncover some of the fresh 
ideas on transportation demand, access, mobility and program 
flexibility. These new ideas may become part of our 
contribution to the 10-year legacy of the Intermodal Surface 
Transportation Efficiency Act, ISTEA, and the Transportation 
Equity Act for the Twenty-First Century, TEA-21. With the 
passage of ISTEA and TEA-21, our transportation program shifted 
its emphasis from building the interstate highway system to a 
new focus, the movement of people and goods. In metropolitan 
areas where congestion is of the greatest concern, this new, 
post-interstate program empowered citizens and local officials 
to develop transportation improvement strategy tailored to the 
unique needs of the metro region.
    The law also provides spending flexibility so that funds 
could be targeted in ways that will carry out local strategies. 
Gone for the most part are the rigid funding categories. Funds 
can now be moved among programs to meet local needs.
    In today's hearing, we will explore lessons learned about 
our transportation program over the last 10 years. We will look 
at trends in travel and congestion. Our witnesses will forecast 
future conditions to give us the context for reauthorization 
and based on those lessons learned and changing conditions, our 
experts will share their ideas for improving our transportation 
program.
    Now to our witnesses. Tim Lomax is a Research Engineer for 
the Texas Transportation Institute at Texas A&M University. Dr. 
Lomax's most recent study, the ``2001 Urban Mobility Study,'' 
uses a variety of measures to illustrate the Nation's growing 
traffic problems. Our second panel will present ideas to 
address access and mobility. The Honorable Ron Sims was elected 
King County Executive in 1997, home to the city of Seattle, 
King County, Washington State's largest county. Mr. Sims is 
founder and organizer of the Metropolitan Congestion Coalition, 
bringing together metropolitan elected officials and business 
leaders nationally. Anthony Downs is a Senior Fellow at the 
Brookings Institute in Washington, DC. His 1992 book, ``Stuck 
in Traffic,'' is among the most widely read on the subject of 
metro congestion. C. Kenneth Orski is the Director of MIT's 
International Mobility Observatory and Editor and Publisher of 
``Innovation Briefs,'' a newsletter on transportation. He also 
heads the Urban Mobility Corporation, a Washington, DC.-based 
consulting firm. We will have Frederick P. Salvucci also from 
MIT, a civil engineer and senior lecturer specializing in 
transportation. Mr. Salvucci is the former Secretary of 
Transportation of the Commonwealth of Massachusetts and 
presently serves as senior advisor to a number of urban 
transportation programs. Alan Pisarski is chairman of the 
Transportation Research Board Committee on National 
Transportation Data requirements and the Committee on 
Transportation History. He has worked in transportation policy 
for over 30 years.
    Now we are ready to proceed. Mr. Pisarski, I will ask you 
to start.

 STATEMENT OF ALAN PISARSKI, CHAIRMAN, TRANSPORTATION RESEARCH 
        BOARD COMMITTEE ON NATIONAL TRANSPORTATION DATA

    Mr. Pisarski. Thank you, Mr. Chairman.
    My name is Alan Pisarski and I am honored to be invited to 
speak before you once again to address the outlook for American 
travel. I recall with pleasure that I participated in these 
hearings in 1997 in the advent of TEA-21 and also in the first 
hearing for ISTEA. It is a responsibility that I take very 
seriously.
    We need to look at the next reauthorization period through 
the lens of the changes likely to occur between now and the end 
of the coming cycle. We will have seen dramatic changes since 
the first decade of this new century. We will have crossed 300 
million in population at some point during this reauthorization 
period. Our rural population will have reached 60 million 
people, as large as many countries. We will have added more 
than 25 million people during this period, perhaps as many cars 
as people, another ten million households, perhaps 10 million 
immigrants.
    As the reauthorization comes to a close, the first of the 
babyboomers will be reaching 65. We will have added probably $4 
trillion to our economy. The point is I think we will be a very 
different country at the close of the next reauthorization than 
we are today and we must consider both the passenger and the 
freight travel activities in both our metropolitan and non-
metropolitan forms. Many of our issues of the future will be 
centered in freight passenger conflicts and the intercity and 
local interactions.
    My focus today will be on taking the long view on the 
Nation's travel behavior and its demographic future. I am going 
to be talking quite a bit about our demography and where it is 
taking us in the future. There is a document called, ``Notes to 
the Testimony,'' that has some notes that you might choose to 
refer to.
    One of the key points I wanted to make is the current data 
coming out of the Census Bureau now shows the nature of the 
trends that are happening with American commuting. I will skip 
over the major points other than to say that when I testified 
last, I thought the single occupancy vehicle had about stopped 
its growth. I was wrong, it continues to grow from 73 to 76 
percent. Car pooling continues to decline. The good news is 
transit is holding its share at 5 percent of total commuting.
    With respect to travel times and congestion in the country, 
I think there is something very positive we can say about our 
system. Over 20 years we have added over 35 million new riders 
in our road system and we have only grown 2 minutes in average 
travel time. That is a period that is getting worse but still I 
think it is very positive.
    One of the phenomena that is happening which needs to be 
addressed is the fact that many more rural States, States 
without large metro areas where you would expect congestion, 
are now seeing the largest increases in commuting problems. 
West Virginia was the largest increase, and Vermont and New 
Hampshire for example.
    The major forces that were acting in the past, I think, for 
the most part, are behind us. I won't pursue those. I do want 
to identify new forces of change that I think will be acting 
over the next years during the reauthorization period. The 
first is the evident one, the aging population. I think it is 
going to be a key factor. A stagnating labor force is going to 
be a key question, just the numbers of people available. If we 
worried about too many commuters in the past, we may be 
worrying about too few in the future.
    Continuing immigration waves will change the nature of our 
commuting patterns. An important influence will be what I call 
the democratization of mobility. Many of our minority 
populations, which are very close to being back in the 1960's 
and the 1970's in regard to current mobility levels, as they 
achieve the mainstream, mobility will be an important influence 
on travel growth.
    Finally, the increasing affluent nature of our society I 
think will have an immense influence on most of our forces. 
High income people will typically make twice as many trips as 
low income people in a metro area. In long distance, they will 
make four times as many auto trips, seven times as many air 
trips. So as the society is more affluent and as people's value 
of time increases, both the activity and the pressures for the 
quality of the system will increase.
    I would ask you to look for the following prospects. For 
commuting, who and where the immigrants are will be central. 
Expect appeals to older workers and women to join the labor 
force even more actively than they have simply to meet the 
dearth of skilled workers. For local travel, a generally more 
affluent society, new minorities being able to travel more, 
expect very active daytime and weekend travel. For long 
distance, expect a new era of tourism in America, both foreign 
visitors and domestic tourism, minorities being able to travel 
extensively. In geography, the conflicting between intercity 
and local travel forces will be significant. The pressures of 
time for both goods and for people and the high value that each 
has in terms of time are going to put tremendous pressures on 
the system. Transportation is always about overcoming the 
tyranny of distance and today I think although we have achieved 
great successes in that, the pressures of time are going to be 
the dominant force in the future and that we will have to 
respond to in this legislation.
    I think I should stop. I would be happy to answer 
questions.
    Thank you, Mr. Chairman.
    Senator Jeffords. Dr. Lomax?

STATEMENT OF TIM LOMAX, RESEARCH ENGINEER, TEXAS TRANSPORTATION 
                INSTITUTE, TEXAS A&M UNIVERSITY

    Dr. Lomax. I really want to thank you for the opportunity 
to testify today. I have not had an opportunity to testify, so 
maybe you can't blame all of this on me like you can on Alan. 
The current situation is Alan's fault. I am going to help you 
understand some of the future.
    I have been asked to summarize a few trends that we have 
identified in a report we prepare each year on urban traffic 
and congestion. I will also offer a few observations about 
congestion in U.S. cities over the next few years. I would like 
to build on the excellent information that Mr. Pisarski has 
prepared. Please keep in mind that summary of how travel has 
grown and how it is going to grow in the future.
    Over the last 20 years, our cities have not been able to 
keep pace with demand increases brought on by population and 
job growth. Congestion has increased as a result of that 
imbalance. Our data shows that during the peak travel periods 
in the 76 urban areas that we studied, the travel time penalty, 
the amount of extra time it takes to travel during rush hour, 
has increased 185 percent since 1982. The penalty in areas of 
population between 500,000 and 3 million has increased over 300 
percent over this time. This indicates that while most of the 
problem is in the large metropolitan areas, the congestion 
problem is growing in areas of all sizes. The total hours that 
travelers in these 76 areas were delayed increased from 750 
million in 1982 to 3.6 billion in 2000. I have a couple of 
charts on a handout that I will be referring to over the next 
couple of minutes.
    The congestion growth was the result of the trends Alan 
referenced. In our 76 areas the travel demand increased 86 
percent but the road capacity, the amount of road added was 
only 37 percent. Real capacity increases were probably less 
than that because that includes areas that were previously 
rural areas that were put into urban boundaries as they grew.
    I think the imbalance is a result of several truths and 
maybe a few myths about what can be accomplished. First, a 
truth. Road construction can help reduce the growth of traffic 
congestion. Figure 1 in my handout shows the dramatic 
difference in travel time, penalty growth between areas that 
added roads at a rate close to that travel growth, the green 
line on top, and those areas that added few roads in relation 
to travel growth, the dark blue line toward the bottom. The 
cities in that group where traffic volume and road growth grew 
at about the same rate, the time penalty only increased 57 
percent. In areas that lagged behind sort of lesser aggressive 
road building areas, the time penalties increased 245 percent.
    A myth that is related to that is we should invest all our 
money and effort to adding roadways. My characterization of 
this as a myth is not based on ideology but on the fact that 
since 1982 urban areas have only added about half the roads 
need to stop the growth of traffic delay. Figure 2 shows this 
percentage is about the same for all areas, about 50 percent no 
matter what size urban area you are in. This is due to a 
combination of factors ranging from lack of funding, lack of 
land, public support, environmentally supportable alternatives. 
I would suggest that roads can definitely help but 
realistically they aren't the wonder drug prescription that 
will solve all the problems because the city has not been able 
or willing to build them quickly enough.
    A similar truth can be stated about transit improvements. 
They can help but they cannot solve the problem themselves. 
Figure 3 illustrates the amount of transit system that would 
have to be added essentially every year to keep pace with 
travel demands. We would be looking at adding the equivalent of 
a transit system worth a ridership between every year and every 
4 years depending on what population category you are in. I 
would suggest that is very unlikely.
    Let me point out also a somewhat discouraging note that the 
sort of regular traffic congestion we see is only part of the 
problem. The variations in travel time caused by crashes, 
vehicle breakdowns, special events, construction, maintenance, 
weather and a variety of other factors are a source of 
frustration and economic loss that you spoke about in your 
opening remarks. Part of the problem is that we don't have long 
term, systemwide, very detailed data that we need to fully 
describe these reliability issues but the emphasis on 
operational improvements over the last several years does allow 
us to analyze this data for a few cities.
    Figure 4 shows the kind of information we can develop and 
how we can use it to identify some problem areas and the 
success of improvements. It shows a graph of how congestion 
varies across the year and how reliability varies across the 
year in Minneapolis-St. Paul in the year 2000. Congestion is 
measured by the travel time index, the dark blue line near the 
middle of the graph; the buffer index is the line toward the 
bottom. This is the amount of extra time travelers need to 
allow because of the unpredictability and system conditions.
    We can see the effect of the big snowstorms in January and 
December, more congestion and very unreliable travel times. We 
can also see the effect of the summer tourist season, more 
variation but about the same amount of congestion. We can also 
see the effect of turning off the traffic signals that control 
access to the freeway system. This experiment began in October 
and the freeway effects were dramatic.
    The unfortunate part of this story is the monitoring and 
data collection system does not extend to the entire roadway 
system, so we don't know what happened on the rest of the 
system. The limited data we have suggests that operational 
improvements can play a significant role in providing a more 
reliable transportation system for people and freight. It 
appears unless something changes, we will continue to see a 
growth in congested travel and congested transportation systems 
in the future. Projected population increases mean more travel. 
Our cities have not been able to stop congestion growth over 
the last two decades and travel and population growth will 
continue to stress our systems.
    If we are fortunate enough to have enough funds, select 
projects wisely and implement them using techniques that do not 
result in significant delay from construction and maintenance 
activities, we might be able to slow down the growth of 
congestion and make the system more reliable than it is now but 
reliably congested is not a very high standard of achievement 
in my view.
    If cities are going to have a different future than this, 
we will have to pursue all types of improvements and implement 
more projects rather than fewer and manage both the demand 
patterns and the system more efficiently.
    Senator Jeffords. I would like to turn to my good friend, 
Senator Murray. Please proceed.

STATEMENT OF HON. PATTY MURRAY, U.S. SENATOR FROM THE STATE OF 
                           WASHINGTON

    Senator Murray. I appreciate your giving me the opportunity 
to make a quick introduction of someone who is here for the 
second panel. I appreciate your having this hearing on this 
critical issue.
    Unfortunately, I have to leave to attend a joint hearing 
but I wanted to come by and let you know that Ron Sims who is 
here for your second panel really understands the critical 
transportation problems we are facing in my home State of 
Washington. Ron Sims serves as the Executive of King County 
which is the 11th largest county in the Nation. When he talks 
to you today about traffic congestion, he speaks with 
authority.
    The Seattle-Tacoma corridor has the second worse traffic in 
the country and he has been working to address that in his role 
as a board member and now as chairman of Sound Transit which is 
the major transit authority in central Puget Sound. For the 
past couple of months he has been working very hard to bring 
business leaders, local elected officials, and the community 
together to reduce traffic congestion so that King County can 
continue to grow economically.
    Ron has led the way on smart strategies for moving people 
and products in our State that is the most trade dependent 
State in the entire country. He is a real national leader on 
metropolitan issues. He is a member of the Advisory Board of 
the Brookings Center on Urban and Metropolitan Policy.
    Ron was born in Spokane, Washington and spent 11 years on 
the King County Council and for the past 5 years, served as 
County Executive. He has dealt with every issue from recovering 
endangered salmon to using technology to bring government 
closer to his constituents.
    He is a proud father of three sons but he is a passionate 
advocate and a gifted leader. I think we are very fortunate to 
have him come all the away across the country to give us his 
expertise on this very important issue.
    Thank you for having him and thank you for allowing me to 
make a quick opening remark.
    Senator Jeffords. Thank you and we will look forward to his 
testimony.
    This will be addressed to both of you. How will the rate of 
growth in vehicle miles traveled change over the next 10 years?
    Mr. Pisarski. I should probably leave this to Tim but let 
me suggest to you that I think the rates of growth we have seen 
in the past, I don't think we are going to see in the future. 
We have seen a tapering in the last few years from the ranges 
of 3-3.5 percent a year down more to 2 percent. I would expect 
given the kinds of dramatic bubbles that we have lived through 
in the last 15 years that are now behind us, I would expect 
those growth rates to be more moderate in the future. I think 
it will be a more operable future, something we can address 
rather than the rather dramatic things we have been through in 
the last 20 years.
    Dr. Lomax. I think I would agree with that. I think the 
down side of that slower growth is that congestion will 
continue to grow, VMT will continue to grow, population and 
putting that on top of many systems that are already very 
stressed leads to an exponential growth in congestion. 
Congestion growth is not necessarily linear when you add 1 
percent of vehicles. You don't necessarily get just a 1-percent 
increase in congestion depending on where that 1 percent gets 
added. That is part of the trend we have seen, that the 
population has grown at x, vehicle travel has grown at 2x or 
3x, we may get that traffic volume growth down but it's still 
going to continue to grow. We have had a very difficult time 
adding system, transit, highway, any kind of system at any kind 
of rate that we need to.
    Senator Jeffords. Dr. Lomax, in your testimony, you state 
we don't fully understand many congestion issues because we 
lack the data to draw correct conclusions. What type of data is 
needed to better understand the congestion situation and to 
begin to address the problem in appropriate ways?
    Dr. Lomax. We are beginning to get some of that data. The 
operations centers that are set up to monitor the activities of 
the freeway systems, principally, that dispatch vehicles during 
crashes or severe weather events or create alerts for 
motorists, those are the kinds of systems that are collecting 
the sort of minute to minute condition information about the 
transportation system. Some transit systems have had a very 
good monitoring system as well.
    The issue is if we don't know what's happening out on the 
roadway system sort of every 5 minutes of the day; it is very 
difficult to predict what we should be doing in terms of 
operational improvements. In the past, our technology solutions 
were do we build a freeway, do we not build a freeway, do we 
add a lane, do we not add a lane. Those sorts of very large 
increments of capacity don't need to be informed by very good 
data, but if we're trying to figure out if we should meter the 
freeway system with five cars per minute or four cars per 
minute and need to put out a tow truck to relieve a crash, or 
if that crash is going to be able to relieve itself, those are 
the kinds of systems that need a lot more information.
    We need better information about what has happened over 
time, better information about what's happened over space. We 
don't need to just monitor the freeway system; we need to try 
to extend that to the arterial streets. That is a trend we have 
seen over the last five to 10 years. I expect we will continue 
to see that growth in monitoring, but whether or not we can 
amass that data into usable formats that people such as 
yourself or Executive Sims can use is one of the challenges of 
my profession.
    Mr. Pisarski. Some of the data I was showing you was from 
the decennial census. We were living with 1990 data until just 
recently when some of the new data became available. We still 
don't have the final tabulations and the final work on the year 
2000 data. In effect, in many instances we are still operating 
with 10 year old information. That is from the travel demand 
side. From the consumer side, we need far superior information.
    Senator Jeffords. Mr. Pisarski, in your written statement, 
you indicate ``The future demographics of non-immigrant 
Americans will help to cap the growth in urban congestion.'' 
You then state, ``The new immigrants to this country are at the 
1960's level of transportation use and this group will increase 
the demand on the system much as non-immigrant Americans did 
over the past 30 years.''
    My question is, where will this increased immigrant demand 
on transportation occur, both in terms of areas of the country 
and whether it will be urban or rural demand?
    Mr. Pisarski. This is an area where really I think I'm 
speculating but let me speculate and put some caveats on that. 
The first point is that when you add one person by child birth, 
you have a commuter 20 years later. If you add to a population 
by an immigrant, you have a commuter in 6 weeks. So the whole 
shift to immigration where we have 40 to 50 percent of our 
population growth coming from immigrants, these people come at 
the labor stages, many immediately enter the labor force, so 
they have an immediate impact on the system. That is point one.
    Second is the fact that they very frequently start off as 
heavy transit users. You can see the impact of immigration on 
some of our metro areas and how it affects the travel 
ownership, the auto ownership, et cetera but over time, they 
transition to a more typical pattern of the mainstream if you 
will. I think one of the things transit does for us in these 
areas, it acts as a socialization tool, gets people into the 
system, gets them into the job markets, gets them participating 
in the system and maybe over time, transitioning to an 
automobile in the more typical patterns, but I think it 
provides a very valuable function.
    There is still an area where the immigrant population and 
the minority population largely because of income are still 
lagging behind the rest of the population. Many of the 
characteristics of the immigrant populations and our ethnic 
minorities, racial minorities, look exactly like the mainstream 
population of 1970, 1965, the number of women without driver's 
licenses, the number of households without vehicles is the same 
as the population was in 1960. Many of those things I think 
will change with growing affluence. The minorities in America 
will be an important part of our growth in travel in the 
future.
    Senator Jeffords. Senator Graham is here. Would you have 
some questions?

  OPENING STATEMENT OF HON. BOB GRAHAM, U.S. SENATOR FROM THE 
                        STATE OF FLORIDA

    Senator Graham. I would, Mr. Chairman, and if I could, also 
make a short statement.
    One of the issues I am very interested in because I think 
it has significant potential for dealing with congestion is the 
expanded application of intelligent transportation systems. I 
define intelligent transportation system as being a system of 
integrated technologies, communications and procedures which is 
directed toward enhancing the efficiency of our existing 
investment in highways.
    The Federal Government has attempted to play a role in 
accelerating the process of intelligent transportation systems. 
As an example, in our last Surface Transportation Act, TEA-21, 
between the fiscal years 1998-2003, there was $1.28 billion 
authorized for intelligent transportation systems. The 
principal objective of that $1.28 billion was to accelerate the 
pace of development of new technologies, communications and 
procedures and then to field test them in situations where we 
would go through an accelerated learning curve of which of 
these systems individually and in conjunction had the greatest 
impact on remediating congestion. That is the theory.
    The reality is what has happened is this money has largely 
been earmarked and it has been earmarked in some very, in my 
opinion, detrimental ways. According to the University of Texas 
study annually of where the greatest congestion exists in the 
United States, it's almost an inverse allocation of ITS money. 
If you are on the list as having a lot of congestion, you could 
pretty much count on the fact that you wouldn't get any ITS 
money.
    Two, the projects tended to be, although the numbers are 
not small by most peoples' standards, they are small in terms 
of what it takes to fund a reasonable ITS. That is, they were 
in the numbers of $500,000, $1 million, $2 million.
    My concern is that we have now been three-and-a-half fiscal 
years into this program and I am going to ask you the question, 
and I have asked other knowledgeable people, what did we learn 
for the first part of the $1.28 billion we have invested? Not 
much because we haven't used it in a serious, scientific 
learning process.
    I am sorry that Senator Murray had to leave because she is 
chairman of the Appropriations Committee for Transportation in 
the Senate and I know she shares my feelings. She has indicated 
to me that she hopes to see some reversal of this. I think it 
is incumbent on our authorizing committee to try to see what 
steps we might take, and I have some ideas, to assure if we are 
going to continue to spend $1.2 billion that we get something 
for it. I think we ought to either recommend to our colleagues 
that we cancel the ITS Program or make it what it is supposed 
to be because today it is just another source of transportation 
funding directed primarily at those congressional districts 
which have members of the right appropriations subcommittees on 
them and we're not accomplishing the purpose of advancing the 
knowledge of intelligent transportation and its application to 
critically congested areas of the country. That is the end of 
my editorial.
    Let me ask you to give me your assessment of how well the 
congressional authorization TEA-21 has been used? Have we 
significantly increased our knowledge of and demonstrated 
capabilities of ITS as a result of this expenditure?
    Dr. Lomax. Let me take a shot at that. I am from Texas A&M 
University and while I like my esteemed colleagues at the 
University of Texas, I do want to make clear that it goes on 
the record that the study is from Texas A&M University.
    Senator Graham. I have been giving Texas A&M the credit. 
You just assume anything that is as common sense as that comes 
out of Texas A&M.
    Dr. Lomax. Thank you, Senator. I very much appreciate that 
being on the record.
    I think we have learned an awful lot. I think there have 
undoubtedly been programs that have spent money and not gotten 
the kind of impact, the kind of effect that we like. I share 
your concern about investments in transportation in areas that 
are important to the economy. As much as I like transportation, 
I really think transportation is supposed to serve the 
interests of the people, the freight and things that move on 
the system. So investing in the big drivers of our economy I 
think is supporting the improvement of transportation. To help 
that is something I think our programs ought to be oriented 
toward.
    I think investing in a lot of different ideas, a lot of 
different places has allowed us to find places that either 
don't work or a particular technology or procedure didn't work 
in one place and it did in another. I think it is important 
that we have failures, otherwise we are not going to learn what 
doesn't work. Hopefully we cannot do the things that fail again 
but learn from them. Typically, it is not a fault of technology 
that doesn't work, it is a fault of planners that don't talk to 
operations people, or designers that don't talk to operations 
people, or operations folks that aren't able to communicate 
their message to the folks who are the appointed and elected 
officials making the funding decisions to invest in particular 
elements. Maintenance is always held up as the element that 
doesn't get any funding because you can't cut a ribbon on a 
pothole project.
    The same kind of approach works with an ITS program. They 
are depending on data collection technologies that need to be 
maintained but there is not as much money in maintaining the 
data collection effort and the information gathering pieces as 
there is in deploying them initially. I think part of that is 
just sort of a natural cycle that you put the equipment out and 
see what works and what doesn't work and try to fix it as it 
goes forward.
    Mr. Pisarski. I guess I would only add that there are so 
many disparate parts to this process, I think what we need to 
do now is take some of the experience we have gained and do 
some syntheses and bring these things together in looking at 
the successes and the failure and tell people more about what 
has happened and the results. I think the potentials are there. 
We just haven't examined it enough and described enough what it 
is we have learned.
    Senator Graham. Last year the Congress earmarked something 
on the order of a couple of hundred projects as ITS. Does 
anybody do follow-up studies to determine what we learned from 
those 200 plus or minus projects and the applicability of that 
learning in future efforts to reduce congestion?
    Dr. Lomax. I would say that record is uneven. I think there 
are some places doing a better job of monitoring what happens 
and at least as important, are putting that message out there, 
getting the information into the hands of people who make 
decisions. There are some definitely not doing a good job of 
that.
    Senator Graham. I wanted to add one final question.
    If you were to direct this committee to what you consider 
to be the state-of-the-art in the application of intelligent 
transportation systems in the United States or elsewhere, where 
would you send us?
    Mr. Pisarski. Which metropolitan area?
    Senator Graham. In the United States or elsewhere, the 
state-of-the-art of intelligent transportation?
    Mr. Pisarski. I guess one of the things I would suggest is 
you address that question to Ken Orski who is going to be on 
the second panel. I know he has been looking at that around the 
world as well as in the U.S.
    Dr. Lomax. I have the opportunity to make one person happy 
and a whole bunch of people angry. I think that the Japanese 
and the Germans are doing a very good job on some of the 
technology stuff. Whether or not their administrative or 
institutional relationships are anything like ours is something 
someone else has to figure out. I don't know that.
    Within the U.S., I think there are places doing very good 
jobs of particular elements with which I am familiar. Seattle 
and Minneapolis-St. Paul with ramp metering, LA with ramp 
metering, Minneapolis-St. Paul and Chicago with incident 
management. Chicago actually has tow trucks out on the freeway 
system and if there is an accident, they go pick up the wrecked 
vehicle and get it off the road. Houston has a motorist 
assistance program operated by the State and off-duty sheriffs 
man the patrol vans. They go out and fix flat tires, get 
stranded motorists off the road.
    The objective of a lot of the ITS Program and the main 
benefit is to make the system operate reliably bad. So if you 
can take out the really bad days, we have a chance to make the 
system more predictable. I think there are different elements 
depending on which piece of the ITS world you want to talk 
about. Some places are doing well. I know I have left out a 
bunch.
    Mr. Pisarski. I can't think of one place that has 
integrated all those pieces which would be a wonderful thing to 
see.
    Senator Jeffords. Senator Chafee.
    Senator Chafee. Thank you, Mr. Chairman, for having this 
hearing as we prepare for the second reauthorization of ISTEA.
    Mr. Pisarski, some of the statistics in your testimony are 
very interesting, particularly car pooling being down and drive 
alone being up, walking alone being down over the 1990's. I am 
sure a lot of that has to do with low gas prices. I saw it was 
down south of here about 91 cents a gallon. I think it is 
starting to creep up now.
    As we prepare for this 5 year reauthorization, how much 
should we, as best we can, factor in the cost of gas? Obvious 
that has an enormous impact on transportation behavior, 
particularly with cars?
    Mr. Pisarski. In the short term, the price fluctuations in 
gasoline don't have much of an effect. In the longer term, they 
very well may, but the biggest effect they have is on the kinds 
of vehicles people own. The tendency is to go down size to a 
smaller vehicle to a more fuel efficient vehicle. The American 
public today in almost the majority of households have more 
vehicles than workers. So people can mix and match. What 
happens is if you double the price of gasoline tomorrow, 
everybody parks the SUV and takes the Saturn to work. The fuel 
efficiency of the country would jump 40 percent overnight. That 
is what happened in 1974, exactly the same thing.
    One of the immense factors that needs to be recognized in 
all this is probably the biggest change in our Nation's 
transportation system in the last 20 years is the continued 
reliability and longevity of the automobile. The average age of 
our fleet is now 8 years old and rising. That has made an 
immense number of vehicles available, very serviceable vehicles 
available to low income people to gain access to the automobile 
fleet. Out into the future, I think that is going to permeate 
everybody's approach to the opportunities. With high prices, 
people will simply shift to more efficient vehicles. The 
hybrids are coming.
    Senator Chafee. My wife drives one. I don't know in 
particular if I agree with you that the price of gas, by 
itself, would change just the type of vehicle people drive. I 
would tend to think they might double up in cars, perhaps take 
mass transit. It's just a budget issue at home. You stick by 
what you said earlier though?
    Mr. Pisarski. I think there is also a tradeoff. Clearly 
what has been going on between both car pooling and transit, 
transit and car pool riders look a lot alike demographically 
but there is also sliding back and forth between the single 
occupant vehicle and the carpoolers. Car pooling today has 
almost evaporated. It is basically family pooling as if a 
husband and wife work and go in the same direction. But the 
traditional let's save money and car pool together just doesn't 
happen. People do it because of saving time in an HOV lane. 
They will do it because they are traveling very long distances 
but for the most part, car pools are a much narrower concept 
than they were 10 or 15 years ago.
    Senator Chafee. Dr. Lomax, any comment?
    Dr. Lomax. No.
    Senator Chafee. Thank you.
    Senator Jeffords. Thank you for your helpful testimony. We 
appreciate your participation.
    Senator Jeffords. Our next panel is Ron Sims, Anthony 
Downs, C. Kenneth Orski, and Frederick P. Salvucci. We 
appreciate you all being with us. We will start with you, Mr. 
Sims and work on down the line. Please proceed.

  STATEMENT OF HON. RON SIMS, KING COUNTY EXECUTIVE, SEATTLE, 
                           WASHINGTON

    Mr. Sims. Good afternoon. I am glad to be here today.
    I submitted remarks and go on to the general things in the 
remarks I submitted to the committee.
    I am the elected head of King County Government which is 
the 11th largest county in the United States. We operate every 
mode of transportation, buses, van pools, car pools, airport. 
What I have seen and want to discuss a little is what my peers 
talk about when we are in a room together, normally the large 
cities, large metropolitan areas, we talk about our 
frustrations at the smokestacks, the pipes, the categories or 
the straight jackets that were inserted in dealing with 
transportation issues within our regions.
    We cannot unfortunately develop a coherent transportation 
system in major metropolitan areas because we chase the 
categories of funding that is available to us. Because we 
chase, it is the funding available that moves us so if we have 
roads money available, we chase roads money; if it is rail 
money, we chase rail money. We chase the funds. I have a number 
of staff whose job it is to chase the funds in order to build 
our transit system. I chair another transit agency called Sound 
Transit and we chase the funds.
    The frustration is if we were allowed to design a system to 
have it integrated, we wouldn't spend as much money chasing the 
funds. We would have a ration approach to building a 
transportation system. We would integrate all of the modes, 
rail, commuter rail or light rail, highway expansion, bus, use 
of new technologies, but because of the method by which we 
receive it at the local level, because it is in so many defined 
statutory categories, we simply are unable to build the systems 
we would like. There isn't a policy that requires the major 
metropolitan areas to build a system of transportation. We can 
plan for it, but it is one thing to plan and another thing to 
implement, so we don't see that.
    I would hope that in this round of authorization, we can 
begin to move to two things. One, we can require major 
metropolitan areas to come back with definitive plans that are 
transportation systems and there can be a category of funding 
to fund those systems. If you look at the top 21 areas in the 
United States, you find several things in common. One, they are 
all congested, every one of them. The top 21 areas of the 
United States that are congested account for 37 percent of this 
Nation's payroll, 50 percent of this Nation's GNP, 50 percent 
of this Nation's population and they are all congested.
    I don't know how we compete in the 21st Century with other 
countries and other cities if we have goods and people tied up 
in congestion, where it adds an additional expense. We have 
Boeing in our community and we found Boeing is moving the same 
tonnage north to south in my county as they were moving 5 years 
ago. The difference is it costs them 22,000 more payroll hours 
to move it. It is a hidden tax.
    If you use Dr. Lomax's data, we have a hidden tax of about 
$78 million in this country and in my community it is $2 
billion of hidden tax. We are hoping we can get away from the 
categories that in dealing with our areas we can create a 
transit system that is integrated, that responds to the 
interests of business, and to our citizens, and that we can get 
a grant to fund them, that we don't always have to have 90 
people writing 90 different grants trying to find out the rules 
for all 90 different grants.
    When I spoke to the Washington State Legislature, I told 
them we were concerned about arterials. They said, we give 
money for arterials. I said, yes, you give money to each city 
but we have found people have left the interstate systems and 
were using arterials as an alternative to the interstate and 
that they needed to look at those arterials as corridors. After 
a great deal of discussion they decided to create corridor 
projects, minor systems that we would have synchronized traffic 
signals in that entire corridor, similar designs where we would 
focus on how we built that out, whether we can meet bus needs 
and trucks needs, whether we could get over and under rail 
tracks. We looked at a corridor. It has worked effectively for 
us in my county.
    The important thing now is to expand that to a regional 
level, to have all of the funds the Federal Government makes 
available in transportation given to us as a grant so we can 
develop a coherent and rational transportation system so that 
we can integrate these pieces into a single system of movement. 
We don't do that now. It doesn't happen now. We simply chase 
the money, chase the funds that are available.
    I love my job. Dr. Lomax makes my job difficult every year. 
He announces congestion in our region and we always rank second 
or third and the newspapers say, Mr. Sims, what are you going 
to do about it and I say, we can hire more staff, we can write 
more grants but what we really miss is the ability sit down 
with cities, counties, businesses, environmentalists, and labor 
unions to prioritize what we are going to fund as a system. So 
it isn't just roads and a roads discussion, not just transit 
and a transit discussion, not just ferries and a ferry 
discussion, not just new technology and a new technology 
discussion but we are able to weave these into a single, 
coherent, rational system in order to move forward.
    Thank you, Mr. Chairman.
    Senator Jeffords. Thank you.
    Mr. Downs?

     STATEMENT OF ANTHONY DOWNS, SENIOR FELLOW, BROOKINGS 
                          INSTITUTION

    Mr. Downs. My name is Anthony Downs, and I am a Senior 
Fellow at the Brookings Institution. I am the author of the 
1992 book ``Stuck in Traffic'' which deals with the causes and 
possible remedies for peak hour congestion for which I am now 
preparing a second edition. I am required to say by the 
Brookings Institution that the views I state here solely are my 
own and not those of the Brookings Institution, its trustees or 
other staff members.

    I will confine my oral testimony to making seven main 
points and I will use proof by assertion, a well known 
Washington technique. It means my points are conclusions 
presented without benefit of any evidence or data whatsoever.
    Senator Jeffords. It just confuses you when you put stuff 
in like that. So go right ahead.
    Mr. Downs. I assure you that these conclusions are 
absolutely correct.
    My first point is that peak hour traffic congestion is 
erroneously considered to be a wholly negative and undesirable 
condition when in fact it produces huge benefits for the 
country and even for the people stuck in it. Congestion is the 
primary balancing mechanism we use to ration scarce highway 
space during peak hours so we can pursue certain other major 
goals we desire. Those goals include having a wide variety of 
choices about where to live and where to work, working during 
similar hours so we can interact with each other efficiently, 
living in low density settlements and enjoying highly flexible 
means of movement, that is private vehicles.
    There are only two other possible means of rationing the 
highway space when too many people want to use it. One is 
charging high tolls to keep many people off the road, but we 
reject that method politically because it would unduly favor 
the wealthy. Second, we could spend enormously more money to 
build enough roads to handle peak hour traffic without any 
delays at all, but no society can afford to do that.
    Since we wisely reject these means of rationing road space, 
we must use delays from overcrowding in order to pursue those 
other goals we want to achieve. In other words, congestion is 
bad but it is better than the alternatives.
    The first conclusion implies the second one. Peak hour 
traffic congestion is an inescapable result of living in any 
large modern or modernizing metropolitan area anywhere in the 
world. Moreover, it is bound to become worse in the future in 
all of those metropolitan areas as long as their populations 
keep rising. There is no such thing as a remedy to peak hour 
congestion in a large and growing metropolitan area once such 
congestion has appeared on its major roads. There are many 
tactics that might slow down the worsening of future 
congestion, but none will eliminate it or even stop it from 
intensifying.
    The biggest challenge to future ground transportation in 
America will be dealing with the many added vehicles generated 
by future population growth. Since 1980, the United States has 
added 1.2 cars, trucks or buses to our vehicle population for 
every one person added to our human population. Since our human 
population rose by 32 million in the 1990's, if it rises by 
similar totals in each of the next two decades, we will have to 
cope with as many as 64 million more vehicles capable of being 
on our roads by the year 2020.
    As the Texas Transportation Institute has already said, 
``We cannot build our way out of peak-hour congestion.'' It 
appears on our major roads by adding more lanes to those roads. 
After a road's capacity rises, traffic initially speeds up, and 
more vehicles will converge on that road during peak hours from 
other routes, other times and even other modes until it is just 
as crowded during the peak hour as before the road was 
expanded, although the peak hour might be shorter.
    That does not mean, however, that there is no point in 
building more roads. In fact, we will need enormous future 
spending on roads and bridges for two reasons. The most 
important is to repair and maintain the road network we already 
have, much of which is in bad shape. Also important will be 
creating new roads to serve population growth areas. They will 
continue to be mainly low density settlements at the edge of 
existing metropolitan areas.
    We also need to spend a lot of money on public transit in 
the future, even though there is no chance whatsoever that we 
can shift any very large share of future ground movement from 
private vehicles to mass transit. In 1995, public transit 
accounted for about 3.7 percent of all daily commuting but only 
2.2 percent outside of New York City.
    The vast majority of Americans prefer moving in private 
vehicles because doing so is faster, more comfortable, more 
convenient in timing, more flexible in choice of routes and use 
of multiple destinations, more private and often cheaper than 
public transit. If we spend more on public transit, it should 
be mainly on more flexible, smaller scale, and less regulated 
forms that can provide convenient service to people living in 
low density settlements, which will remain the predominant form 
of our future growth. Also, a higher fraction of our elderly 
population will be unable to drive and that population is 
growing rapidly.
    My written testimony presents a more complete version of 
these points, plus a number of other aspects of these subjects, 
including suggestions for possible improvements in slowing down 
the rate of congestion.
    I thank you for inviting me and I will be happy to answer 
any questions.
    Senator Jeffords. Thank you for an excellent statement.
    Mr. Orski?

   STATEMENT OF C. KENNETH ORSKI, URBAN MOBILITY CORPORATION

    Mr. Orski. Thank you, Mr. Chairman.
    I am Editor and Publisher of Innovation Briefs, a bi-
monthly publication which has been reporting and interpreting 
developments in the transportation sector for the past 13 
years. My testimony today is based on observations acquired in 
the course of gathering and analyzing information for our 
publication. These observations draw on recent briefings and 
conference presentations and on interviews and personal 
communications with members of the transportation community in 
Washington, in State governments and local officials across the 
country.
    I shall confine my remarks to a very brief summary of my 
prepared testimony, copies of which I believe have been made 
available to committee members
    My overall conclusion is that we enter this reauthorization 
cycle with fewer issues than might divide the transportation 
community and with a larger measure of a consensus among major 
stakeholders than at any other time in recent history. Unlike 
the last reauthorization cycle when interest groups jockeyed 
for position and floated a number of competing proposals, this 
time around I find near universal agreement that we ought to 
buildupon the combined legacy of ISTEA and TEA-21 rather than 
engage in a bruising fight to reinvent the Federal Surface 
Transportation Program. To be sure, there will be some 
proposals for changes, but these I think are likely to be 
refinements to program delivery rather than radical changes in 
the structure of the program itself.
    Turning to specifics, I discern a large degree of consensus 
within the transportation industry and among major stakeholders 
on several policy directions and new initiatives.
    They are, first, the need to protect the Highway Trust Fund 
by preserving the budgetary firewall protections and the 
principle of guaranteed minimum levels of annual spending. 
Second, the need for increased program flexibility, something 
Mr. Sims spoke very eloquently about. Third is the need to 
mitigate traffic congestion. This is regarded by all I think as 
a serious national problem requiring a national response.
    There appears to be a large measure of consensus within the 
transportation community that this response should include both 
capacity expansion and improvements in the operation of 
existing facilities, although I might add opinions do differ 
among stakeholders as to the proper balance to be accorded to 
these two major traffic mitigation strategies. A comprehensive 
Federal attack on the problem of traffic congestion might take 
the form of a specific bottleneck elimination program, 
something along the line suggested by the American Highway 
Users Alliance. This would be supplemented by a program of 
operational improvements designed to squeeze more capacity out 
of existing facilities.
    The fourth point is the need for environmental 
streamlining. This is considered a critical priority by large 
segments of the transportation community. Indeed, there is 
almost a unanimous agreement that something has to be done 
about streamlining of our decision process. While the current 
efforts of the Federal Highway Administration to streamline 
procedures through administrative action are commendable, the 
transportation community, I believe, is looking to Congress to 
provide more explicit legislative direction to reduce the 
delays that have plagued the project implementation process.
    Fifth is the need to advance the intelligent transportation 
system program, something Senator Graham was talking about. The 
continued Federal support of this program remains a high 
priority for large segments of the transportation community. A 
frequently mentioned idea is the creation of a national 
``infostructure'' which I put in quotation marks because it is 
not yet an accepted term but one that I think you are going to 
hear more about in the future.
    This network would be capable of collecting and sharing 
transportation system conditions and performance information 
covering the entire national highway system. Such a national 
communication network, I believe, could become an integral part 
of a homeland security infrastructure, available in times of 
national emergency for evacuation and mobilization purposes.
    My sixth point is the need for increased transit funding, 
especially for new starts. Funding is likely to dominate the 
transit industry's reauthorization agenda. According to the 
latest annual report on new starts, there are some 50 rail 
projects in preliminary engineering or final design which 
represent a potential demand of $30 to $35 billion. Carving out 
a bigger role for ``bus rapid transit,'' which is now 
undergoing a series of demonstrations, could significantly 
reduce the need for transit capital funding. Indeed, many 
transit experts, including myself, believe that bus rapid 
transit could lead to a new generation of more flexible, less 
expensive new starts.
    This leads me to the next subject, a related initiative, 
which is to convert and expand the existing stretches of HOV 
lanes, high occupancy vehicle lanes, into seamless networks of 
high occupancy/toll lanes in major metropolitan areas. These 
networks would be dedicated to express bus service and car 
pools but would also be open to individual drivers for a fee. 
By varying the fee according to demand, the number of single 
occupant cars seeking entry to those hot lanes could be 
restrained to maintain free-flowing traffic conditions at all 
times.
    In my judgment, a congressionally authorized program of HOT 
lane networks, built as enabling infrastructure for bus rapid 
transit, but also available as a paying option to individual 
users, would be an eloquent expression of the increasingly 
intermodal nature of our Federal Surface Transportation 
Program.
    Finally, I sense a growing concern within the 
transportation community, as well as among stakeholders, about 
the long-term capacity of the Highway Trust Fund to finance the 
Nation's future transportation needs. The majority view, I 
believe, is that the growth in gasoline tax revenue will not 
keep pace with the rising demand and cost of highway 
reconstruction and rehabilitation. Looking beyond the next 
reauthorization cycle, we may need to consider entirely new 
approaches to financing the Federal Transportation Program. 
Hence, I join other transportation leaders in urging a 
congressionally mandated study to explore alternative financing 
mechanisms that would offer a stable and adequate source of 
transportation financing beyond the next reauthorization cycle.
    This concludes my testimony. Thank you very much for the 
opportunity to present my views.
    Senator Jeffords. Thank you.
    Mr. Salvucci?

  STATEMENT OF FREDERICK SALVUCCI, MASSACHUSETTS INSTITUTE OF 
                           TECHNOLOGY

    Mr. Salvucci. Thank you very much. It is really an honor to 
be able to share some views with this committee.
    I am at MIT and have been in an academic environment on and 
off for 15 years but my primary experience in this area is as a 
State transportation official when I was Secretary of 
Transportation for Massachusetts, so my views reflect that 
background as well as the more recent academic experience. I 
would like to speak to the three points you gave as a title for 
this conference and add a fourth which is money. You have my 
written comments, so I will try to make this brief.
    On mobility for the poor, the automobile and access to the 
automobile I think is increasingly solving the problem of 
access to jobs for poor people. If you have a job, you can 
afford at least a cheap car. For urban jobs, bus fares I 
believe are too high and continue to be an obstacle for poor 
people, is taking too big a piece of their private household, 
in particular, the lack of free transfers in many systems is a 
serious problem for the urban poor seeking urban jobs. I think 
as a mobility issue, mobility for poor people is getting better 
and I expect will continue to do so, I think we all hope.
    I don't think the same is true for disabled and elderly. 
The disabled and elderly access has improved because of the 
paratransit systems which have been required of public transit 
systems and I think it was an important strategic step to move 
in that direction but that really limits improvements in 
mobility for the disabled and elderly people to those areas 
that have transit systems. It is sort of an unfunded mandate on 
the transit systems to provide the paratransit service. As the 
systems become fully accessible, which is the hook that got 
public transit into this, there is some argument they can 
lessen the quality of the paratransit service that is out 
there. I think that would substantially disadvantage the 
elderly and disabled populations who are not well served, 
better the paratransit that is out there than nothing which is 
what was there before but I think there is a lot of need for 
improvement.
    I think we need to change our view of disabled and elderly 
access as a responsibility of the transit system to a 
responsibility of the transportation system which includes 
everyone, including people outside those areas served by fixed 
route transit systems. I think the Federal Government needs to 
step up to the plate and partially fund it, possibly at low 
funding ratios, one-third Federal I think would leverage a lot 
of State participation. You could require a maintenance of 
effort so you didn't get hit with a big jump. I think this is a 
big problem about to erupt. The aging population is growing, as 
mentioned, and I think that is a big one.
    There is also a teen mobility problem, particularly in the 
suburbs. Soccer moms are basically chauffeurs and if we were 
creative about the way we dealt with paratransit, we might find 
better ways of dealing with both elderly, disabled and teen 
populations rather than having mom drive. I also think there is 
a cultural advantage in shifting in this manner. I am not 
denigrating public employees or civil engineers, I am a civil 
engineer. Civil engineers love to build things. I am a civil 
engineer and I love to build things. If we want to see mobility 
being the focus of these institutions, we need to focus on 
that. So I think Federal funding specifically for mobility for 
important constituencies, disabled and elderly, would be a big 
step in the right direction.
    Second, congestion, it is politically attractive to say we 
are going to fix it but I would agree that it is not going to 
go away, in many cases it is not even desirable to go away, and 
that to do something effective about congestion requires some 
peculiar situations. I had a lot to do with the Central Artery 
Tunnel Project in Boston and I think it will improve congestion 
at enormous cost. I think it is worth it but it is important to 
remember there is a huge investment in public transportation 
and a limit on the number of parking spaces in downtown Boston 
which complement that very large endeavor.
    I think if you are serious about getting at congestion, you 
can only manage it in critical points, you can move it around 
some and that is useful. Better to not have the traffic jam at 
the entrance to the hospital, better to manage things so that 
the critical points work. So I think it makes sense to focus on 
congestion but I think we shouldn't mislead ourselves and lose 
our credibility by pretending we are going to make it go away 
because I don't think that is the case. The methods used in 
Singapore are very interesting but they don't seem to be 
applicable anywhere else in the world so far. We have to study 
them but I think we shouldn't promise any early end to 
congestion.
    I would urge that in this area, we recognize that the 
metropolitan area process I believe tends to make it difficult 
to do large projects. It is easier in the metropolitan process 
to do a whole bunch of little things that are too small to 
matter. If you are trying to something major, the problem in my 
view is not the environmental process. The environmental 
process helps to structure a very complicated conversation 
about how you are going to restructure old urban 
infrastructure. I don't think our cities should become 
petrified wood, doomed to continually repeat their old 
patterns. I think we ought to rethink urban infrastructure as 
we face the need to rebuild it but if we are going to expect 
people to get at that job, I think there should be dedicated 
funds so I will disagree with this flexibility argument to some 
degree.
    As a State official, in my experience the problem was not 
the environmental process, the problem was not enough money. 
There is only a certain amount of money. At the end of the day 
you are going to spend it all. The real problem is that the 
more complex projects take longer to process, so in order to 
satisfy the contractor constituency, you spread more asphalt 
around the State. If you want to see attention focused where it 
is most needed, I believe it would be highly desirable to 
target at relatively high matching ratios, I am usually an 
advocate for low matching ratios, here I think they should be 
high, on critical corridors, particularly airport access.
    We all talk about trucks but we never give them priority. I 
think we ought to be looking at airports in particular as a 
location where the congestion is particularly difficult and 
worthy of attention but I think we need some categorization in 
order to enable officials to focus on the most critical issues. 
You can't expect I believe a local official under the same 
political pressure to spread things around to be able to focus 
on the more complicated ones if there is not some higher level 
of dedication in that area.
    Finally, on money, I am suggesting a bunch of places that I 
think the program should be expanded. We all know the pot is 
smaller and you have an extremely difficult job just getting 
reauthorization with the smaller pot. I believe the key to 
being able to get a bigger tent is not to take on the 
environmentalists but to embrace them. Two, I believe we should 
be revisiting the pay as you go philosophy inherent in the 1956 
decision to proceed with the interstate and at least for some 
of these projects, begin to go to a capital budget approach as 
every State and every city in the country and as Americans use 
to buy their own homes.
    If we use the existing revenue streams but dedicate a 
portion to debt service, we could get at some of these problems 
earlier and quicker than otherwise we will be able to do. I 
think that would be worth doing. Eventually, we will face the 
issue of if we like it, we have to raise the tax to continue. I 
don't think that would be so bad either. Even if we never 
increase the tax, I would much rather see serious investment 
done over the next 8 years than spread out over the next 30 so 
we can get the economic benefit of those critical investments.
    I appreciate your attention. I have gone over my time. I 
would be happy to answer any questions you might have.
    Senator Jeffords. Thank you.
    I will read my question and then I will start at the other 
end of the table.
    One key issue in the debate over congestion is whether we 
can build our way out of the problem. I wonder whether we can 
afford to build our way our. In 2000, while new capacity 
projects represented only 17 percent of the mileage involved in 
all Federal aid projects, it required 48 percent of the money 
spent that year. Isn't a build strategy prohibitively 
expensive? Mr. Sims?
    Mr. Sims. You can manage congestion. We will never build 
our way out of it. You can manage it. The key is not to let it 
continue to get worse. That is why I want to go back to the 
issue of we do not have a coherent, rational policy in 
metropolitan areas on transportation. We tend to like big 
projects because we believe they will deliver the capacity we 
want.
    I always smile at what we see in our area, we will build 
big projects and arterials get crowded. We will not explore van 
pools because we like more what we call sexy, ribbon-cutting 
things like BRTs. BRTs work in some corridors, clearly. The key 
is to have a system in place and to have a discussion of a 
transportation system in metropolitan areas so you can manage 
the congestion, so you can find out what tools you can put in 
place.
    I agree with every speaker here, if anybody thinks we are 
going to end congestion and build our way out of it, that is an 
absolute impossibility today. It wont happen. In our State, we 
have discussed saying that highway speed during peak hour are 
up to 35 miles per hour. People say wow, 35 miles per hour but 
the posted speed is 60. We say, yeah, but if you are moving at 
35 miles per hour you are moving faster than you are moving 
right now.
    What we would like to do is have tools to manage them but 
you are going to have to have a transportation system that 
everyone has agreed to fund, big projects, small projects, a 
variety of different modes of transportation and we can do it. 
Right now, we don't have it.
    My biggest fear is Seattle Times will report that Ron Sims 
says we do not have a coherent transportation system in the 
central Puget Sound but people know that already because they 
are sitting in congestion, so they know it is not coherent. The 
Federal Government can stimulate that by insisting on it and 
then providing funds to give us, and fund a system. I keep 
saying that. I am a person that connects dots. When I was a 
kid, everyone else got puzzles; I got the thing that said 
connect the dots. As the County Executive, I can't connect the 
dots because all the funds coming out of the Federal Government 
are in these categories. The categories don't talk to each 
other, so we chase the money and whatever we can get we are 
satisfied with but it doesn't create a rational, sensible, 
thoughtful, traffic system in the metropolitan areas and the 
increased congestion in every one of those areas is an evidence 
that it is not rational and thoughtful at this time.
    Senator Jeffords. Mr. Downs?
    Mr. Downs. I am sorry, but I don't agree with you, Mr. 
Sims. There is no system on earth that is going to prevent 
congestion from getting worse. I am not opposed to having a 
better system; I think that is probably a good idea, but if you 
think it is going to prevent increasing congestion, you are 
living in a fantasy world. As everybody here says, if you look 
at the population increase, rising congestion is likely to 
occur in the Seattle metropolitan area even if we don't add 1.2 
vehicles for every human being. In the 1990's, that ratio 
dropped to one vehicle added for every additional human being. 
We are still going to add a lot of vehicles on our roads. Not 
only that, but because of the other goals we want to pursue 
that I described--for example, everyone working about the same 
hours so we can interact with each other--those vehicles always 
converge on the roads at certain peak hours. No matter what 
system you have, the roads are going to be overloaded at peak 
hours unless you turn the whole metropolitan area into one 
concrete slab, and you are not going to do that. That would be 
an environmental disaster and we couldn't afford it. So rising 
congestion is inescapable. It is a part of living in any modern 
metropolitan area, and it is going to get worse as long as the 
population of that area keeps going up. Sorry about that.
    There are things you can do to slow down congestion's rate 
of increase. But don't think if you get a great system, the 
most perfect system you could imagine, that is going to solve 
the congestion problem because it isn't.
    Mr. Orski. We may not be able to build our way out of 
traffic congestion but I don't think that should be used as an 
argument for not increasing highway capacity because increased 
highway capacity is needed to accommodate growth in population 
and economic activity.
    Mr. Downs. I agree.
    Mr. Orski. I would like to draw the analogy with schools 
and hospitals. Schools and hospitals in fast growing areas also 
eventually fill up with students and patients and yet this has 
never stopped us from building more schools and more hospitals.
    Mr. Salvucci. I would agree that congestion is not going to 
go away. I think we do have some choices in how we spend money 
that could stretch out capacity a bit, particularly in rural 
and suburban areas. My experience is that capacity goes 
backwards as people add curb cuts and new land development 
sprawled along the side of the road, we lose safety, we lose 
capacity and when we try to maintain high speeds the whole mix 
gets fairly lethal.
    The same amount of money spent on a small road widening 
stretched out to acquire development rights and access rights 
and some environmental betterment easements would maintain the 
capacity for a longer time on these roadways and then 
eventually when you do get the money to widen, you have already 
acquired the property rights.
    We do something very foolish, we focus on a very short 
piece of road, spend a lot of money and create a lot of 
disruption in widening that piece of road while the Burger 
Kings open 24 more joints in the next mile and we say, we'll 
have to do that one too and then have to pay to relocate the 
Burger Kings. We would be better off looking at it sequentially 
and saying if this is a corridor that looks like it is going to 
change over time, not suggesting the change is always bad, I 
would get control of the curbs so that we retain the capacity 
we have and if new economic development happens, and we may 
want that development to happen, let it happen in an orderly 
fashion off the roadway. We could achieve a pro-environmental 
outcome, improve safety and preserve capacity somewhat longer 
than we would otherwise.
    I agree though that as cars go up, congestion will increase 
but I think there is a more effective way to deal with suburban 
congestion than trying to build our way out of it. I would make 
an exception in the case of the critical piece next to the 
hospital, so to speak. There are critical links where I think 
we should be managing congestion by letting it take place away 
from the sensitive location, but I would agree with Mr. Downs 
that eventually congestion is going to be there. He wrote a 
great book; I am using it for my students. I look forward to 
the new version.
    Senator Jeffords. Mr. Sims, Seattle is a natural bottleneck 
with the additional problem of crossing Lake Washington, so it 
would seem the construction of additional roadways is not a 
practical solution to your congestion problems. If additional 
funding were provided to the metropolitan areas for congestion 
relief, how would you utilize that funding?
    Mr. Sims. In my heart of hearts, obviously we are very 
concerned and want to continue to buildup our light rail system 
and our commuter rail systems. There is need for road expansion 
and we can see that on the Interstate 405 corridor which needs 
to be expanded. We have an incredible bottleneck that ties up 
everything, including every arterial. So there are road 
capacity needs that remain in the area.
    Our area is a prime example that there is never a silver 
bullet that fixes anything. We look at a variety of tools that 
could be made available to us because we believe it is going to 
require a multi-modal approach. Whether it is van pools, car 
pools, buses, BRT, light rail, commuter rail, road expansion, 
the synchronization of traffic signals, all can play at moving 
people but we are limited.
    We are not unique. When I travel to other communities, I 
see the same kinds of patterns. I don't see any single 
metropolitan area in the United States that can sit here and 
tell me that there is one solution that should be available to 
them to move people and commerce. It is going to have to be 
multimodal, no matter where we are.
    Senator Jeffords. For you, Mr. Sims, let me wish you well 
in your efforts to organize the Metropolitan Congestion 
Coalition. I hope you will keep us appraised of your progress 
and pass along the group's thinking on reauthorization. It is a 
pleasure having you with us.
    Mr. Sims. Thank you very much.
    Senator Jeffords. Mr. Downs, in your written testimony, you 
make a brief reference to the cost of parking as a factor in 
the comparative commute cost of transit to driving. You seem to 
suggest that free parking can make the difference in a 
commuter's decision to drive rather than to ride share or take 
transit. If so, how should parking factor into our policies? 
Should we look to parking pricing to reduce congestion; should 
we tax employers differently if they provide parking rather 
than transit allowances?
    Mr. Downs. It depends on how strongly you want to attack 
the problem. If you are trying to raise the cost of driving, 
the best way to do it is to raise the gasoline tax. Congress 
has consistently avoided that. The single most effective thing 
you could do to reduce driving is to put a $3 a gallon tax on 
gasoline. Of course none of you would be in office after the 
next election, so you are not going to do that. That is the 
most effective way to raise costs.
    What you are talking about concerning parking is: could you 
raise the cost of parking in theory? We could put a tax on 
parking or else force employers to charge their employees for 
parking. But I don't think that has anymore popularity 
politically speaking than a gasoline tax. I think parking is a 
relatively minor factor in people's decisions on whether to use 
transit or to drive. As I pointed out, the fraction of people 
who use transit is so small, even if it doubles or triples, it 
will not take enough people off the roads to cause much 
congestion to change at a peak hours. That is one of the 
weaknesses of the argument that improving transit is going to 
reduce congestion.
    There may be reasons to adopt light rail systems, but one 
of them is not to reduce congestion. That won't happen.
    Senator Jeffords. Mr. Orski, your statement that only 
additional lane miles of roadway can decrease or eliminate 
bottlenecks and congestion is an interesting one. That may very 
well be true in the western portions of the country where 
building additional roads will also improve the redundancy of 
the highway system. What can be done in densely built up urban 
areas like New York, Philadelphia, and the District of 
Columbia? How can we build additional roadways in a socially 
and fiscally responsible way?
    Mr. Orski. First, I would probably modify my sweeping 
statement that only roadway widenings or new road construction 
can decrease congestion. The kind of congestion caused by 
accidents and incidents can be effectively mitigated by 
intelligent transportation systems technology by providing more 
effective emergency response and clearance of accidents.
    Having said this, there are many situations that 
intelligent transportation systems technology cannot solve 
because it is simply a matter of too many cars trying to 
squeeze into too few lanes. What can be done about that? We can 
use simple engineering improvements, such as eliminating three 
lanes of traffic squeezing into two lanes of traffic, as is the 
case with the Wilson Bridge. In other words, we could do a lot 
to smooth out traffic without spending billions of dollars on 
brand new highways, through incremental design and engineering 
improvements to existing roadways.
    This is where the bottleneck elimination program comes in, 
something that I have already referred to in my testimony. It 
is a recommendation of the Highway Users Federation to identify 
a finite number of highly congested arteries in densely 
urbanized areas and try to attack those specific bottlenecks. 
This does not require building new highways. It simply calls 
for engineering and design improvements to existing highways.
    Senator Jeffords. Mr. Salvucci, you emphasized the 
importance of maintenance, repairing, rebuilding and 
redeveloping deteriorating transportation infrastructure. Do 
you feel that proper maintenance and repair can reduce or 
alleviate the congestion problem?
    Mr. Salvucci. Yes, but I think given where we are, it has 
to be approached with a two pronged effort. One, I advocate 
that the Federal Government should get into the maintenance 
business with some funding. The management systems of ISTEA, 
which I was very excited to see in 1991, have not affected 
behavior at the State or bureaucratic level. I think if the 
Government wants to see greater emphasis on maintenance, a 
stitch in time saves nine, it is the prudent thing to do, 
putting perhaps one-third Federal match on the table with a 
maintenance of effort so you don't get hit in the head with a 
big jump, but prospectively getting into the maintenance 
business and requiring the States to become more professional 
about the way things are maintained is necessary so we stop 
sliding backwards.
    That being said, there is a huge backlog of infrastructure 
that is in terrible shape that has to be dealt with at this 
point. I would fund those reconstructions at very high matching 
ratios because they are very tough projects to take on. In the 
local politics, the easiest thing to do is nurse it along to 
the next administration because rebuilding old infrastructure 
that is already heavily used is very tough politically because 
you create traffic disruption while you are doing it. So you 
have a built in tendency to avoid dealing with some of our 
worst structural problems at the local level. I have a great 
respect for the people at the local level. I was one for a long 
time but I think we should recognize the pressures on them and 
provide some high matching ratio, categorical funds that must 
be spent dealing with old infrastructure to give local 
officials the incentive to take on a very, very difficult 
political problem which is absolutely necessary. We see over 
and over again those issues pushed off and dealt with by the 
next administration maybe and then once in a while, we get a 
bridge that collapses.
    Senator Jeffords. Senator Chafee?
    Senator Chafee. Thank you.
    It seems as though Mr. Downs summed it up in his last 
paragraph when he said ``No matter what public policies are 
adopted in response to future traffic congestion, it is likely 
to get worse in nearly all parts of the world. My final advice 
is get accustomed to it. Commute in an air conditioned car with 
a stereo, tape deck and a CD player and a hands-free telephone 
and a microwave oven and realize that congestion is providing 
benefits to you by rationing the roads you use and letting you 
pursue other goals. So just get used to it.''
    Mr. Sims said here is no silver bullet. I guess the options 
are high priced tolls or $3 a gallon gas tax per his testimony, 
so the solutions to congestion are going to be very difficult 
is what we hear in the testimony this afternoon. I guess I do 
agree with that.
    Mr. Downs. There are no solutions, but there could be 
improvements. Examples are the hot lanes that Ken Orski 
suggested; or the systems for picking up accidents and getting 
them off the road faster; the metering access to expressways as 
you do in Seattle; or building some additional capacity at 
bottlenecks. These are things that can be done to slow the rate 
of increase in congestion.
    Although you might consider me to be a pessimist, I am not 
a 100 percent pessimist.
    Mr. Sims. If you will indulge me a second, when I was a kid 
my father was directing a mass choir, I was a member. He 
stopped the choir and rehearsal and said to me, Bud, lip sync, 
which is what I did through the concert. The reason I want to 
use that analogy is that at the regional level or talking about 
metropolitan areas, there are several things wrong. One is a 
cacophony, not a symphony because people are not on the same 
page. Everybody has a different song sheet and until the 
Federal Government provides the incentives to give us all the 
same song sheets so that we have an agreed to level of 
congestion, then we will not have a rational and thoughtful 
process.
    My middle son told me I was irrelevant the other day. He is 
in college, so I guess there is a time to be irrelevant. I told 
him when I was in college, I had a 'fro, I had a hair growth 
period, my beard, my sunglasses, my dashiki and I told my dad 
that he was irrelevant too. I did it after the tuition check 
but not before as my son did.
    The issues that he cited were very interesting which was 
all the national and local problems. I was very impressed. We 
can look at what we have done over the last several decades and 
say that is acceptable or we can embark on something that is 
bold, next century and of a new generation. That requires us to 
get out of our comfort zones. I am telling you, unless you 
require metropolitan areas to have an agreed to level of 
congestion and system in place, we will be doing what we have 
been doing for the last decade, and it simply won't work. It 
will diminish our quality of life significantly.
    Senator Chafee. Thank you for coming all this way.
    Mr. Orski. Tony Downs gave me an opening to say a good word 
for HOT lanes, the so-called high occupancy toll lanes. While 
admittedly we will not be able to get rid of traffic congestion 
for everyone, we can create conditions where people who have 
reason to be somewhere on time, whose time is valued in terms 
of money, have an option of faster travel. Those are the so-
called high occupancy toll lanes that have been created in 
several jurisdictions, including in California that allow buses 
and single occupant vehicles to travel in unobstructed traffic, 
in free flowing traffic at a fee.
    Some people call these lanes ``Lexus lanes'' implying they 
used only by highly paid professionals but I can assure you a 
utility van and a pick-up truck are a far more common sight on 
those HOT lanes in California than Lexuses or BMWs. There are 
many people who, from time to time, find the need for a quicker 
trip and are willing to pay for this. A classic example is the 
parent who is racing to the day care center to beat the $1 per 
minute fine that is assessed for parents that are late. For 
that parent, paying a toll of 55 cents or even $1 may be money 
well spent in order to avoid the fine. So there should be ways 
of improving travel conditions for people who are willing to 
pay for it.
    Senator Chafee. Thank you.
    Senator Jeffords. Senator Graham?
    Senator Graham. Thank you. I apologize for having to leave 
for another committee meeting. As I was leaving, Mr. Orski was 
making his opening statement. He was listing a number of 
numerical points we needed to pursue. Several of them, 
including the streamlining of the permitting process, ITS and 
innovative financing were all provisions included in TEA-21. 
Some of them were new, such as the streamlining of permitting, 
some were continuations such as the innovative financing.
    This is a question to any panel member. Has there been an 
analysis of these types of programs which are intended to make 
our resources and our highway facilities more effective and 
efficient by managing them in non-traditional ways? Has there 
been any analysis of the success of these efforts, and from 
that analysis, recommendations that we might utilize as we 
reauthorize TEA-21?
    Mr. Orski. Senator Graham, there have been a number of 
evaluations of intelligent transportation system projects. I 
have in mind specifically the model deployments that have been 
carried out in several urban areas. These provide quite a bit 
of evidence of effectiveness of ITS.
    As far as innovative financing is concerned, I cannot 
really think of any good examples but State and Federal 
environmental streamlining and intelligent transportation 
initiatives provide a number of evaluations that would be very 
valuable to the committee as you proceed with the 
reauthorization.
    Mr. Downs. I am not aware of any systematic evaluation of 
ITS, but there is one particular project in ITS that I can 
evaluate on my own as ridiculous: That is the high speed 
highway on which cars controlled by computer travel at 120 
miles per hour 6 feet apart. We are spending a lot of money on 
this project. I believe there is an test road built outside of 
San Diego. If we developed this, since the cars are only 6 or 
so feet apart, there will be 10 times as many cars arriving 
each hour in the downtown area, what are you going to do with 
them? The real bottleneck is the downtown street system with 
its limited capacity.
    Even if this project were to work, which I don't think it 
would, it is extremely expensive. Also the liability cost if 
there is an accident would be colossal and no one knows who 
would pay the cost. The whole idea is ludicrous and yet we are 
spending around $100 million on this idea, so there is an 
evaluation for you.
    Senator Graham. One of the things I hear you saying is 
maybe in our next reauthorization of the Surface Transportation 
Act, we need to put in some stronger evaluation components so 
that we will achieve what we had hoped which is to learn 
something through this process and be able to have incremental 
improvements from year to year.
    It was mentioned that the attempt to streamline permitting 
has pretty much failed, that there was a set of regulations 
developed by the U.S. Department of Transportation which many 
States felt actually made the system more cumbersome than it 
had been before. Are there any models within the States where 
there has been some effective effort at streamlining the 
permitting process for transportation projects, examples that 
we might look to for some ideas as to what the Federal 
Government should be doing?
    Mr. Orski. Senator, I wish that Brad Mallory, chairman of 
the AASHTO was here because I think he could speak to this 
subject with a great deal of authority. I believe there are 
examples. I cannot cite to you chapter and verse but I believe 
that Mr. Mallory and the staff of AASHTO would be the best 
source of information on that question.
    Senator Jeffords. We have a whole hearing planned on that 
issue.
    Mr. Salvucci. Let me give a slightly different point of 
view on the environmental streamlining. I say this as a former 
State official who dealt in excruciating detail with some of 
the environmental requirements.
    Basically, at the end of the day at the State level, you 
are going to spend all the money you have coming. The real 
damage in delay in environmental process is that it may slow 
down, and in my judgment it sometimes does slow down, the most 
important initiatives and some that are too small to matter 
move quickly because there is no opposition.
    I don't believe that is a problem that we will get at by 
streamlining the environmental process. The tough projects are 
tough to do because they are complex and other constituencies 
may not agree. In my view, the environmental process actually 
gives us a structure with a beginning and an end to sort out 
the issues that must be sorted out.
    I think what would help the process is, one, if there were 
more money on the table because with an existing amount of 
money, you are going to do a certain amount and you are just 
rearranging the order. Two, I know this contrary to the 
direction people are going but have a category for high 
priority, large projects which tend to attract more attention, 
much more opposition and are more difficult to do, so provide 
an incentive to State officials to take those on because right 
now the incentive is hope the bridge doesn't fall down on your 
watch and let the next guy take care of it. I think you put 
some money on the line, provide the incentive to deal with it, 
but I would leave the environmental regulation in place.
    I have made several recommendations that would add money 
and you have less money on the table. I think the central issue 
to make timely reauthorization work is to find some way to get 
more money on the table, and if I understand the political 
constraint, without increasing the gasoline tax. I believe the 
only significant way to do that is to shift a portion of the 
program to a capital funding approach as every State uses so 
you use some of the revenue stream for debt service and you can 
expand the pie. You need something to get through the next 
authorization in a timely fashion if you want to deal with 
these issues which every idea presented is going to cost more 
money someplace or other and you have less to deal with. We are 
not being very helpful unless we can suggest ways to expand the 
pie. I think a look at the capital budget is the one idea I can 
think of that can give you that flexibility.
    Senator Graham. I think he had a very intriguing idea. Many 
States, including my own, have a concept called DRIs, 
development of regional impact where large scale projects are 
treated differently in the land use review process than more 
traditional scale projects. Maybe that is an idea that has some 
seeds to explore for large transportation projects where you 
would recognize their complexity and the need for some special 
provisions. I would like to discuss that with you further.
    I was very interested in this environmental permitting 
issue primarily as a matter of sequencing. What I found in my 
experience as Governor was that too often a big project didn't 
have red flags raised about it until you were many millions of 
dollars and years into land acquisition, planning, et cetera 
and then you find there is going to be a problem. One of the 
goals was to try to move those decisions to the beginning of 
the process so if you were going to get a no go decision, at 
least you got it in the year 2002, not 2012. We haven't 
achieved that yet. I hope we might be able to make some 
progress the next time we look at environmental streamlining.
    Mr. Sims. In our State, we are the agency that enforces a 
lot of the regulations. We are fascinated that there has been a 
lot of discussion over regulatory reform. In our road building, 
I only ask that we build according to the existing law and not 
all the layers of discussion we have had. What happens is 
permit processes and environmental processes are pushed a lot 
by the prospect of litigation. Doug McDonald, our Secretary of 
Transportation, and I agreed that how we would pursue our 
projects is to interpret the law that was written and not all 
of the processes on top of it that combine community hearings 
with the permit process, that are designed to lower your risk 
and go ahead and defend ourselves as necessary as meeting the 
intent.
    As a result, we are building faster now than we have ever 
before. I don't know what they are doing in other States but we 
have what we call large project processes as well but in those 
projects, we say we will abide by the existing law.
    On the technology side, I know you like evaluations of 
whether technologies work. We try to avoid actually going to 
someone to finance them because it is so difficult to figure 
out whether or not the source of funding justifies the 
technology you are buying. In order to have, as we have, a 
smart card technology that allows you to use a single pass on 
any public mode of transportation in our county, we basically 
avoided trying to go to the Federal Government to finance it, 
whether it is having signal synchronization that can be 
overriden by the buses to move more quickly. We went to the 
voters and asked them to tax themselves for it.
    Evaluation can be productive but the implementation of it 
is incredibly cumbersome and there is an avoidance by major 
jurisdictions like ours at going down that path until it is 
made more simple.
    Senator Jeffords. Thank you all for your very helpful 
testimony. We appreciate your time and effort in preparing for 
it and preparing for us. Thank you.
    [Whereupon, at 3:13 p.m., committee was adjourned, to 
reconvene at the call of the chair.]
    [Additional statements submitted for the record follow:]
         Statement of Alan E. Pisarski, Independent Consultant
    Mr. Chairman, Distinguished members of the committee, ladies and 
gentlemen, my name is Alan E. Pisarski, and I am honored to be invited 
to speak before you once again to address the outlook for American 
travel. I recall with pleasure that I participated in your hearings in 
1997 in the advent to TEA-21, and also in the first hearing for ISTEA. 
It is a responsibility that I take very seriously.
    I recall in that first hearing that Senator Moynihan spoke of 
seeing the New York World's Fair in 1937 as a youngster and how it 
affected his sense of the future of transportation. I related then that 
I had been there also, my parents had wheeled me thru that fair as a 
newborn, and I must have acquired some of the same flavor he did.
    We need to look at the next reauthorization period through the lens 
of the changes likely to occur between now and the end of the cycle. As 
the next reauthorized period concludes, delivering us to the doorstep 
of the year 2010, we will have seen dramatic changes in the first 
decade of the new century:
      We will have crossed 300 million in population at some 
point midway in the period
      Our rural population alone will be over 60 million, more 
than many nations
      We will have added more than 25 million people
      And perhaps as many cars as people
      Another 10 million households
      More than 10 million more immigrants
      The first of the baby boomers will be at retirement age.
      13 percent of the population will be over 65 years of age
      We will have added four trillion dollars or so to our 
economy
    In many respects our world and the transportation system that 
serves it will be a different place.
    In reviewing travel trends and their social and economic 
determinants I like to use the following list of eight elements of 
transportation. Now more than ever it is critical to keep them in mind.
      Commuting
      Other local travel
      Tourism
      Service vehicles
      Public vehicles
      Urban goods movement
      Thru passenger travel
      Thru freight travel
    Too often we say we are going to talk about transportation and then 
we forget freight and talk only about passenger travel; then we say we 
will talk about passenger travel and end up talking about metropolitan 
commuting. Then we get into an argument about highways versus transit 
and get lost in the thickets of advocacy.
    We must consider both freight and passenger travel, in both their 
metropolitan and non-metropolitan forms as the list indicates. Many of 
our issues of the future will be centered in freight-passenger 
conflicts; and intercity-local interactions.
The Metaphor of the Wilson Bridge
    One of the difficult problems addressed by the Congress in the 
recent past has been the Wilson Bridge. It is the perfect symbol of our 
challenges:
      It is a critical commuter corridor in the morning and 
evening
      A major all day regional connector for passengers and 
freight
      A major route for buses and private vehicles from Maine 
to Florida
      A critical freight link in the I-95 corridor--main street 
of the Northeast
    It is an aging, heavily used facility suffering from both 
functional and physical deficiencies operating in a complex inter-
governmental environment. There are many Wilson bridges in our future.
    My focus today will be on taking the long view on the nation's 
travel activity trends and demographic future and its implications for 
future travel.
A Report on Recent Trends
    First a report on where we are with respect to commuting and other 
travel trends. I made the mistake of going back and reviewing my 
testimony 5 years ago and some of the thoughts I expressed then have 
been borne out, others need some modifying in the light of the new 
census data.
    The changes between 1990 and preliminary 2000 data from the 
statistics of the Census Bureau are shown in the accompanying table.

                   Journey to Work Mode Choice Trends
------------------------------------------------------------------------
                                           1990               2000
------------------------------------------------------------------------
Drive alone.......................         73 percent         76 percent
Carpool...........................         13 percent         11 percent
Transit...........................          5 percent          5 percent
Taxi..............................          0 percent          0 percent
Motorcycle........................          0 percent          0 percent
Bicycle...........................          0 percent          0 percent
Other.............................          1 percent          1 percent
Walked only.......................          4 percent          3 percent
Worked at home....................          3 percent          3 percent
------------------------------------------------------------------------

    In my testimony 5 years ago I felt that the decline in transit and 
carpooling had about reached their limits--right on transit--it has 
just about held share; but carpooling has continued to decline--it is 
fundamentally now an intra-household activity today--a fampool. 
Detailed data from the decennial census coming later this year will 
help establish the why and how of the decline.
    I also stated then I expected the single occupant vehicle to have 
reached a share of commuting about as high as it was going to go--
Wrong!--as you can see, by 3 percentage points, rising from 73 percent 
to 76 percent--most of it coming out of walking and carpooling.
    And surprisingly working at home did not grow enough to increase 
its share. These rates of growth are shown below compared to total 
workers. Effectively, those modes of travel that grew faster than total 
workers gained share and those that grew less lost share. In the 1980 
to 1990 period the only modes that showed growth greater than worker 
growth were driving alone and working at home. In these data it appears 
that in addition bicycling actually grew the fastest, although from a 
very small base.
    The growth in activity for all modes in the nineties appear in the 
table below:

                               Net Change
------------------------------------------------------------------------
             1990-2000                   (000's)          percent chg
------------------------------------------------------------------------
Total workers.....................              12367       10.7 percent
Drive alone.......................              13032       15.5 percent
Carpool...........................              -1071       -7.0 percent
Transit...........................                492        8.4 percent
Taxi..............................                 15        8.3 percent
Motorcycle........................                -79      -33.3 percent
Bicycle...........................                 96       20.7 percent
Other.............................                290       35.9 percent
Walked onlY.......................              -1076      -24.0 percent
Work at home......................                669       19.6 percent
------------------------------------------------------------------------

    The extraordinary fact continues to be that in the nineties, as in 
the eighties, the increase in the number of single occupant vehicle 
users was greater than the increase in total workers. In effect all new 
commuters went to the SOV and additional commuters switched from 
carpooling, walking etc. The significant difference is that transit did 
actually gain in numbers of commuters in the nineties, though at a rate 
less than the growth rate for workers overall thus reducing its overall 
share, but a positive trend nonetheless.
    Some may see cause for disappointment in that transit shares have 
not increased. There are reasons to be somewhat more sanguine. Transit 
served about 4 percent of the new commuters, less than its traditional 
overall share of 5 percent, but its gain of about a half million users 
certainly is a far superior performance than its actual decline of 
several hundred thousand in the 1980-1990 period. If we can say that 
the decline of transit has been arrested we will have accomplished a 
great deal. When the final census data are available it could show 
gains for transit sufficient to hold share at 5 percent. Transit 
reports show gains since the census was conducted. The more important 
share questions for transit are in metropolitan areas rather than 
national figures.
Congestion and Travel Times
    The new census data are preliminary and indicate that average 
travel times to work increased to about 24.3 minutes, up from 22.4 
minutes in 1990 and 21.7 minutes in 1980. When adjusted to correct for 
definitional changes and given the extraordinary increases in travel 
activity adding approximately 30 million new commuters and 35 million 
new vehicles out there a travel time increase of around 2 minutes in 20 
years is a really positive point, however the increase of about 1 and a 
half minutes from 90 to 2000 was more than double the increase in the 
previous decade. Often in these hearings you only hear problems--in 
this case there can be some real pride in a system that has absorbed 
tremendous travel loads and by and large functioned very well.
    Travel time is not about averages however. Some States have seen 
dramatic increases in travel times--especially those with already high 
densities or absorbing great growth such as Georgia 4 minutes, New 
York, New Jersey and Massachusetts all around 3+ minutes. But a new 
phenomenon arose with more rural States showing very high increases as 
workers commute to large metro areas beyond the State borders. West 
Virginia led all States with a 4.5 minute increase, Vermont grew 3.1 
minutes and New Hampshire also saw large gains at 2.5 minutes. About 9 
million commuters nation-wide are now commuting more than 60 minutes.
    More detailed data will be arriving from the census and the US DOT 
later this year that will expand our knowledge appreciably. One of the 
trends that is clear from other data sources is that commuting is now a 
relatively small and declining share of total passenger travel--roughly 
20-25 percent of local travel. We must remember not to focus on 
commuting to the exclusion of other important trips.
      While commuting has grown rapidly in the last 20 years, 
trips for personal business, shopping, etc. have grown even faster.
      Total trip-making per household has grown 66 percent 
since 1970 despite a 17 percent decline in household size.
      Today the average person makes more than 4 one-way trips 
per day as the figure below indicates.
      Moreover the average person makes about 4 trips greater 
than 100 miles from home each year with a round trip distance per trip 
of over 800 miles.




Challenges and Great Opportunities Lie Ahead
    In the past I have called transportation ``the collision of 
demography and geography.'' The following examines each in turn.
The Challenge of Geography
    Few nations have been challenged by what Australians have labeled 
``the tyranny of distance'' as greatly as America, and fewer still have 
reduced its influence on their economic future as we have. We have 
succeeded through a combination of timely investments in infrastructure 
and benign public policies that served to permit market forces to work 
in very positive ways. We have been blessed with great potential 
endowments and have responded well to those endowments. In the 
eighteenth century transportation knitted together a nation; in the 
nineteenth century it welded together great internal mass markets; and 
the twentieth has seen us integrate our nation into the world economy 
helping to define and support that world economy.
    Transportation is all about reducing the time and cost penalties of 
distance on economic and social interactions. To the extent that 
nations succeed in that function they enable tremendous forces of 
economic opportunity, social cohesion and national unity.
    What do geographic trends have in store for us in the coming 
period.
      We now have 50 metropolitan areas over a million in 
population accounting for about 60 percent of the US population. This 
is where most of the congestion and air quality issues will occur.
      The remainder of the population is roughly 20 percent in 
metropolitan areas below a million and 20 percent in non-metropolitan 
areas.
      The net flow today is from metro areas to rural areas. We 
will have close to 60 million people in rural areas interacting more 
and more with metropolitan areas every day.
      Suburbanization continues to extend the scale and extent 
of suburbs
      Metropolitan areas are growing together--the fastest 
growing travel pattern geographically will be inter-metropolitan 
flows--from the suburbs of one area to the suburbs of another.
      A key question will be the balance within suburbs of jobs 
and workers so that average trip lengths to job opportunities do not 
grow inordinately.





                      commuting trips in millions
The Challenges of the New Demography
    All of our professional life times have been dominated by the baby 
boom. That and the dramatic increases in involvement of women in the 
labor force have defined our age. As we approach 2010 many of the 
strong forces of the past will be less potent as the list below 
delineates:
      Lower population growth
      Lower household growth
      Lower labor force growth
      Saturation of driver's licenses
      Saturation of car ownership
      Lower domestic migration rates
    Again, we have absorbed the massive impacts of prodigious growth in 
these areas over the last 40 years and done it rather well. These 
elements, which have been the drivers of travel demand since World War 
II, will not be pursued here other than to say that they will not be as 
dominant an influence on travel growth and character as they have in 
the past, although their influence will still be substantial in 
specific areas of the Nation, especially those still receiving dramatic 
levels of domestic and foreign migration growth.
    We will have new forces of change to address. One sign of the more 
balanced growth is that the 2000 census recorded growth in every State 
in the Union.
    There are just a few demographic factors that will be the key 
forces of change in the coming period of reauthorization and beyond. 
These are:
      An aging population
      A stagnating labor force
      Changing household composition
      A continuing immigrant wave
      Mainstreaming minorities--the Democratization of Mobility
      An increasingly affluent society
    Of these one might say that the first three are inexorable--they 
will happen; and the last three are strong likelihoods but more open to 
question.





An Aging Population
    There are many facets to the challenges raised by our aging 
society. A sharp image is portrayed in the graphic below showing the 
crucial role played by the aging of the baby boom. The combinations of 
that boom with greater health among the older population and declining 
birth rates will sharply shift the relationships between our population 
groups.
    Present estimates place the population over 65 at about 35 million, 
only slightly increased from 1990. The small increase was a product of 
limited increase among the depression babies generation, those now 
between 65 and 75, but we also saw extraordinary growth in those 
between 75 and 85, rising 23 percent. There are roughly 70 men for each 
100 women in the group. Persons over 65 composed 12.4 percent of the 
population with 29 States with equal or higher percentages.
    By the end of the coming cycle of reauthorization those over 65 
will rise to 13.2 percent by 2010 and reach 20 percent by 2030 as the 
last of the baby boomer surge reaches 65. At that point we will have 
reached a stage where there will be more than 31 older citizens per 100 
working age adults contrasted to about 20 today. During this period the 
working age population is actually projected to decline by 5 percent. 
At the same time the dependent young will remain about the same level. 
As a result the number and kinds of trips made by and for the elder 
population will increase sharply. By 2025 there will be 27 States with 
20 percent of their population over 65 or more, higher than Florida 
today.
    A number of factors will have bearing on how that population will 
meet its travel needs:
    1. The coming older population grew to maturity in an auto oriented 
world--95 percent of those, men and women, who will be reaching 65 
after 2010 now have licenses.
    2. Disability rates among older persons have been declining in the 
US, and the developed world, suggesting an active older population in 
the future.
    3. At present older citizens are retiring sooner and are more 
likely to have the means for an active retirement.
    4. Retired citizens make almost as many trips of non-work purposes 
as the general population.
    5. Given that the trips most oriented to transit (work and school) 
are the trips not taken by elder populations it should not be a 
surprise that their travel is heavily auto oriented.





Stagnating Labor Force
    The chart above that showed the growth in the older population also 
showed the diminishing growth in worker-age groups. The graphic 
provides both the history and the future of American age and labor 
force relationships. From the 70's on we see the sharp rise of the 
working age population as baby boomers joined the labor force age 
group, compounded further by women joining the labor force in 
extraordinary numbers, doubling the labor force by 2010. But as 2010 
approaches, the size of the labor force age group stops growing and 
remains effectively constant out into the future. Some projections have 
indicated that the group actually slightly declines in numbers. The 
implications of this for retirement programs have been discussed 
extensively in the public press around the world. In fact the US is 
less extreme than many western nations in this regard.
    The working age population responding to those job developments 
will be sharply changed from the past. While the entire working age 
population is projected to grow by about 12 percent the number of 
members of the labor force over 55 years of age will grow by almost 47 
percent. Workers over 55 will be responsible for half of the growth in 
labor force from 2000 to 2010. Although these changes need to be of 
concern we should note that the average age of the labor force in 2010 
will be about the same as in the sixties just as the baby-boomers began 
to join the labor force.
    From a transportation view, however, an additional and perhaps more 
significant factor will be shortages of workers, particularly in 
skilled jobs, which may lead to important potential changes in travel 
behavior, such as:
      attempts to keep older workers in the work force longer;
      attempts to recruit even more women into the work force;
      greater use of part-time-like work arrangements;
      greater competition among employers for workers;
      the increased role of immigrant workers.
    If the last decade was one of too many commuters the next may be 
the decade of too few. There will be a severe lack of skilled workers 
in the future--apparent already. We will have to employ everyone who is 
employable. Transportation will be central to making that happen. 
Connecting rural populations and inner city residents to suburban job 
centers will be one need. The great demand for workers means that 
workers will be more free to choose where they wish to live and 
employers will follow. This may mean greater dispersion of jobs and 
home sites, but it need not; workers may opt for center city living as 
well as rural life styles. It will mean an amenity-driven development 
process where areas that can attract and retain workers will be highly 
advantaged.
    Much of this suggests greater freedom for workers to define the 
when and where of their work. It will mean more flexible work hours for 
older workers and parents. Jobs in the future will be flexible in a 
more humanized work place--women in the work force have seen to that. 
The jobs of the future will look to us from this vantage point like 
part-time jobs. The implications for travel are a more dispersed and 
balanced travel pattern throughout the day.
Changing Household Composition
    The number of households increased by almost 14 millions between 
1990 and 2000, growing faster than population, yielding smaller average 
household sizes. Households are key generators of travel--more so often 
than individuals. Had households remained at their 1960 levels we would 
have 20 million fewer households today. Households have declined to 
less than 2.6 persons in size, and family based households are down to 
3.14.
    Households without children have grown more rapidly than those with 
children. In 1970 40 percent of all households were those of married 
couples with children, today they account for less than 25 percent of 
households. They are now outnumbered by married couples without 
children.
    A notable facet of our future is that we have more than 33 million 
non-family households, about a third of all households, more than 27 
million of which consist of persons living alone. We now have 10 
million persons over 65 living alone, most of them women. Their 
transportation needs are likely to be significantly different than the 
general population.





The Continuing Immigrant Wave
    America is once again a nation of immigrants as it was at the start 
of the last century, as shown graphically below--however the extent to 
which that is true is unclear. Census estimates have ranged from 8 to 
11 million immigrants arriving in the 1990's with some estimates 
reaching as high as 14 millions. This would place immigration somewhere 
around 40 percent of the sources of population growth in the nineties 
and an even greater share of the labor force age group. Of the roughly 
28 million foreign born in the US today 40 percent arrived between 1990 
and 2000.
    From a transportation view it must be noted that additions to the 
population by natural increase generate a new worker in 18 or so years; 
whereas immigrants, heavily distributed in the working age years, are 
often instantaneous additions to the work force and the traveling 
population. Of those immigrants arriving between 1990 and 2000 the 
census estimates that two-thirds are in the age group from 16 to 45, 
and more than 80 percent of men and 50 percent of women are presently 
in the labor force.
    The flow of immigrants nationally is toward the South and West; 
tending to locate where other Americans are, in the largest metro 
areas, where the jobs are. Although they have been a significant factor 
in replacing residents who have been leaving center cities, the current 
immigrant wave is far more likely to arrive directly at suburban 
locations contrasted to center cities as in past migrations.
Mainstreaming Minorities--the Democratization of Mobility
    Many of the aspects of the questions regarding immigrant travel 
behavior are interrelated with a discussion of the travel behavior of 
racial and ethnic minorities. For example, their arrivals in the many 
large metro areas of the south and west actually had the effect of 
reversing declining trends in the number of households without 
vehicles. Not surprisingly there are indications that new immigrants 
use transit more than current residents, but that over time their 
travel choices echo the general population. Immigrants constitute a 
significant element of transit ridership today in many metropolitan 
areas. A distinct role for the transit systems of the Nation may well 
be in the socialization process of immigrant populations.
    It is often the case that immigrants and resident minorities 
constitute that group in our society with limited mobility. Their 
growing access to vehicles will be one of the major factors in travel 
growth in the future. The figure below shows the long term trend in 
vehicle ownership among households. The key observations here are that 
one vehicle households having been stable for almost 40 years at about 
30 million households have jumped by 5 million in the last decade, and 
a related move of households without vehicles to below 10 million for 
the first time. Both of these moves are strongly related to immigrant 
and minority trends. We have moved from more than 25 percent of 
households without vehicles in 1960 to less than 10 percent today even 
with the surge in immigrants in the last decade.





    The relative saturation in drivers' licenses and vehicles has been 
noted earlier. These apparent national patterns mask the reality that 
such saturation has a long way to go before it is a fact among 
minorities and immigrants. While the White Non-Hispanic population 
tends to be saturated in ownership of drivers licenses, with both men 
and women having above 92 percent with licenses, these values are more 
like 80 percent among Hispanic and African American men and in the 
range of 70 percent among women of those groups.
    Auto ownership has similar patterns with households without 
vehicles at about 7 percent among White Non-Hispanics and closer to 30 
percent for African-American households and half that for Hispanic 
households. Even rural African-American households have 17 percent of 
households without vehicles.
    An important facet of national mobility regarding minorities is the 
longevity of the vehicle fleet and the resultant affordability of 
serviceable vehicles for lower income households. The average age of 
the vehicle fleet today exceeds 8 years.
    In many respects our minority populations are somewhere back in the 
sixties or seventies in terms of transportation and mobility
      They are at 25 percent of households without vehicles, as 
the general population was in 1960
      Minority women are at 70 percent with drivers licenses; 
white women probably were at that level in the 60's.
      Long distance travel rates by minorities are less than 
the general population rates of the seventies.
Rising Affluence and Aspirations
    Many of the aspirations we have for our society are closed 
connected with rising affluence, either in establishing the means for 
families to act on their own economic and social goals or to create the 
resources to assist those that do not have those resources.
    Among these goals are:
      Home ownership and adequate housing--2/3 of households 
today own homes
      Greater access to opportunity and social services
      Greater participation in the mainstream of society by 
minorities
      Increased freedom for all to act on their social and 
economic goals
    All of these very desirable goals are tied to mobility and the 
interaction between mobility and rising incomes is strong. Some key 
attributes:
      Minority households are reaching the income levels where 
vehicle ownership is an increasing probability and near certainty.
      There will continue to be a close linkage between workers 
and vehicle ownership. Most households without vehicles will also be 
without workers
      Trip making and trip lengths will increase with 
increasing incomes
      Long distance travel for business and recreation is 
strongly correlated with income.
    Households spending going to transportation is about $7,400 per 
year, about 19 percent of all household spending, second only to 
housing--not surprisingly most of it oriented to the acquisition and 
use of personal vehicles. Transportation, like other household 
expenditures, clothing, housing and food for example, is both a 
necessity and a discretionary good. The amount of spending rises 
substantially, even in percentage of income terms, with rising 
household incomes as documented in the figure below.




    Note: Those with low incomes may have other assets
    Increased spending is closely associated with greater auto 
ownership, more trip making and with trips of greater length. In part 
this is attributable to the fact that higher income households often 
have more household members and more workers, but it is also 
attributable to the fact that higher income households have more 
discretionary income for travel including recreation, visiting friends 
and relatives, eating out, etc. Auto trips over one hundred miles 
increase 4 fold between low income and high income households and air 
trips more than 7 fold. In local travel trip-making by high-income 
households roughly doubles that of low income households. Much of the 
growth in travel we have seen in recent years is a product of this 
affluence.
    Long distance travel also means important international 
interactions, as not just we, but also our neighbors, rise in 
affluence. Despite 9/11 it is expected that foreign visitors to the US 
will rise to 60 million per year by sometime after 2005, a delayed 
growth but with no long term effects--a tremendous force for economic 
health and social understanding--but a challenge for our transportation 
systems. Foreign visitors, especially our North American neighbors, are 
heavy users of all aspects of our transportation systems.
    Perhaps the most illuminating variation in transportation spending 
is that between rural populations and their urban counterparts. Rural 
households have the highest share of income going to transportation 
expenditures (23.5 percent) contrasted to only 19 percent for urban 
residents. In fact they spend more in total dollars, about $7460 than 
their urban counterparts despite earnings about 80 percent of urban 
households. It is tremendously significant, however, that rural 
residents have the lowest housing costs share and have the lowest total 
costs share for the housing-transportation combination. Housing and 
transportation are tightly linked in cost and character with 
transportation representing the tradeoff in terms of home cost and 
size. The fact that two-thirds of American households own their own 
homes is a crucial factor in our understanding of transportation 
budgets.
    At 2000 with about 1.72 vehicles per household, on average, the 
majority of American households have two or more private vehicles; 
vehicles available equal or exceed workers in the majority of 
households regardless of the number of workers in the household. 
Perhaps the most significant event in auto ownership, as noted earlier 
has been that households without vehicles have dropped below 10 percent 
of all households for the first time.
    One of the things that this says is that congestion is one of the 
prices we pay for a high degree of affluence and vehicle affordability.
    In my view congestion is: People with the economic means to act on 
their social and economic interests--getting in the way of other people 
with the means to act on theirs!
    Another thing the reality of rising national affluence produces is 
that the value of time will be increasing for most people. As incomes 
rise the value of time rises accordingly. Particularly, the pressures 
of time will be acute for working women, seeking to balance multiple 
goals and tasks.
    We must also recognize that rising in parallel with that value of 
personal time is the rising value of the goods and products we move. 
These too are a product of our increasingly affluent society. It 
suggests that many products will be intensely time sensitive with a 
tolerance for high cost transportation if it provides high speed, 
reliable transport; this will often mean the air freight-truck 
combination.
Implications
    In summary, America will be:
      A stable ``older'' population
      Operating in a global economy
      Where ``high cost'' transport is OK
      Where skilled workers are at a premium
      Where many workers can live and work anywhere
      Who, where are the immigrants will be a key question
      Where mainstreaming minorities will be a key factor of 
growth
    We will be a challenge affluent society where transportation will 
have immense importance in helping us remain competitive and to realize 
our economic and social aspirations.
    To me transportation is about society building--not just economy 
building--society building ! It ties people together across distances--
especially today when families are dispersed over the entire nation.
    The greatest strength of our economy is the nationwide mobility of 
workers in a highly specialized division of labor. Transportation knits 
families back together.
    Many planners still think in terms of ``community'' as the people 
physically next door--our communities today are a product of multiple 
voluntary links across vast distances supported by two pillars--
communications and transportation--virtual communities.
    Transportation's goals are all about speed, cost and reliability 
and those are the three things we are just terrible at measuring in 
transportation! We must do better.
Summary
    In summary the factors that will matter most in the future are 
these:
    For commuting--the lack of workers, skilled workers especially, 
creating a sellers market in jobs--greater freedom of location through 
technology and greater flexibility about work schedules (more part-
time-like jobs) in the work place. Who and where the immigrants are 
will be central. Expect appeals to older workers and even more women to 
join the work force.
    For Local travel--an aging population with more freedom and 
discretionary resources for recreation and other travel. A more mobile 
minority and immigrant population. A generally more affluent society 
able to act on its social and economic interests. Expect very active 
day-time, evening and week-end travel patterns.
    For Long Distance Travel--many people in the peak long distance 
travel age groups; more people able to participate in long distance 
travel; more foreign visitors. Expect a peak period in American 
tourism.
    For Geography--the flows between local elements of the Nation will 
expand faster than the internal travel within those elements. Expect 
interaction conflicts between long distance and local travel.
    A higher value of time for people and goods means greater emphasis 
on time-saving technologies and modes of transportation for both. 
Expect interaction conflicts between freight and passenger travel.
    Transportation will always be about distance and time. I have said 
in the past that transportation's goal must be to reduce the impact of 
distance on the ability of society to act on its social and economic 
interests. Today in many respects America through its transportation 
system has largely overcome the challenges of distance and reduced its 
costs to our society. This is a large part of our success as a Nation. 
We are now at the stage where it is the pressures of time that should 
be the great driver of transportation goals and issues for the future.
                                 ______
                                 
 Responses of Alan Pisarski to Additional Questions from Senator Smith
    Question 1. Would you please discuss, in greater detail, your 
thoughts on hot lanes? What I am most interested in are your thoughts 
as to how such a concept can be employed on a nation-wide scale in our 
bill next year re-authorizing the Highway Trust Fund and surface 
transportation program?
    Response. I prefer to think of hot lanes as ``premium service 
lanes''--that captures the essence of the service they provide. My 
thoughts regarding their development nationally follow:
    a. They must be additional lanes not conversions of existing 
lanes--the public has demonstrated again and again their antagonism for 
taking existing lanes for any purpose.
    b. The public, at all levels of income, will accept the idea of 
paying for better service, as long as the non-tolled option continues 
to exist.
    c. They should be tied in with bus rapid transit and carpooling 
preferably in a network of routes. We desperately need to find ways to 
resuscitate car-pooling and to provide lower cost transit services.
    d. The private sector can be a major source of development and 
funding thru revenue bonding of these facilities.

    Question 2. As you know, ISTEA created various programs and 
policies to increase transportation options, and reduce people's 
dependence on single occupancy vehicle trips, yet as your testimony 
showed, driving alone has increased over the last 10 years, and vehicle 
miles traveled also experienced substantial growth. What are the 
mobility benefits and constraints associated with such policies, and 
what segments of the population bear the burden of such policies?
    Response. We have seen a tremendous focus on the value of time in 
our society, particularly among women who are maintaining careers, 
households, etc. As our population becomes more affluent their value of 
time increases and the standards by which they judge the transportation 
system become higher than before. It is my belief that as long as fuel 
costs remain anywhere near reasonable and vehicles are relatively 
affordable that the public will react to their time pressures through 
the use of the single occupant vehicle. The only suitable way to make 
headway against that trend is to improve the competitiveness in speed 
and quality of transit and carpooling services. Efforts to push workers 
out of their cars by making things worse for them--consciously abetting 
congestion or increasing the costs of travel are antagonistic to 
society's best interests and to our faith in our citizens' ability to 
make sound judgments about how to lead their lives. Perhaps more 
significantly, I would argue that there are critical needs for 
transportation services regarding getting low income populations to 
jobs and services, assisting our rural populations and serving the 
aging population everywhere that should be the focus of our resources, 
taking precedence over spending money trying to attract high income 
commuters out of their cars.

    Question 3. You define congestion in terms of economic and social 
interests. How would you define mobility? Is there a way to measure or 
assign value to increased mobility (due to greater transportation 
choices and capacity) or decreased mobility (due to increased 
congestion)?
    Response. This is a wonderful question that unfortunately goes to 
the heart of our ignorance about transportation and its benefits. At 
least part of it is that we have always taken our mobility for granted 
and have not needed to rigorously defend or justify its value to 
ourselves personally or to society in general. Mobility of course is 
closely linked to my sense of economic and social interests. I think of 
mobility in terms of choice--expanded opportunity for choices which 
means selection, service and perhaps most important--price. Recent data 
show that the ranges of choices of products and services available to 
the public has exploded. Among the most important of these 
opportunities are job opportunities whether seen from the workers point 
of view--jobs within a half hour of home--or from the employer's--
potential employees within a half hour of my office.
    Perhaps the most telling way to appreciate its value is to consider 
its absence. Center city populations lacking mobility are often 
subjected to low quality services and monopoly prices because they do 
not have the mobility to take advantage of alternatives. Rural 
isolation has similar attributes.
    It is interesting that we measure fuel efficiencies in miles per 
gallon to two decimal places and air quality in parts per million in 
legislation but have no metric for the benefits of travel activity--
mobility. This has clearly distorted our tradeoffs and the policy 
decisions that support them. Perhaps we should think of it in terms of 
``opportunities provided per minute''. A major research effort to 
quantify, understand and relate the value of mobility to us as a 
society would be very valuable to public policy. The question is 
important and needs to be pursued. The more we know about mobility and 
its interactions in a healthy society the better will be our public 
policies.
                                 ______
                                 
  Response of Alan Pisarski to Additional Question from Senator Graham
    Question 1. You mention the growing tension between movement of 
people and movement of goods. Both are becoming gridlocked. Will this 
tension escalate in the face of new security measures screening cargo, 
perhaps several times, along its route? Can you offer advice on ways to 
ensure movement of goods with minimal impact to passenger travel, and 
timely screening for national security?
    Response. We have used ``time-separation'' as a way to reduce 
conflicts between cars and trucks in the past. The Interstate belonged 
to cars by day and trucks by night--that is now failing us. Trucks used 
to get off the road in our metro areas during peak hours until traffic 
subsided--that is now failing us. All of these failures are due to 
increasing congestion and the need of truckers to get through in 
something like a timely manner.
    Ultimately I believe it will lead us to some form of separation of 
the vehicle streams--separate truck lanes for large, through vehicles--
as both a safety and a driving ease matter. Sections of the New Jersey 
Turnpike are the example I am thinking of. Such separation would 
facilitate truck screening and monitoring as well, as in weigh 
stations. The need for security inspections will only add to our 
conflicts. The air-truck combination will grow in significance in the 
future with the increases in value of goods. Inspections at the airport 
inbound and out may become a critical factor in travel conflicts.
    Perhaps we need to consider a wholly separate set of national 
parkways designed for personal vehicles, accepting the fact that trucks 
will dominate permanently on certain Interstate routes.
                                 ______
                                 
    Responses of Alan Pisarski to Additional Questions from Senator 
                                Jeffords
    Question 1. Mr. Pisarski, you mention in your testimony that 
transit ridership increased slightly in the last 10 years (500,000 net 
increase) while remaining at 5 percent of the work commute trips. 
However, I understand from FTA data that transit ridership declined in 
the first 5 years of that period (1991-1996), and then rose 
dramatically, by 21 percent, in the last 5 years (1997-2001). If you 
focus on the most recent 5 years, you get a different picture of where 
transit is going, don't you?
    Response. Yes, I would like to think so. There were some 
indications from other census surveys that transit may have dropped 
below its current 5 percent share during the 90's and got back to that 
figure by decades end at least in part due to new services, new fare 
policies, and new worker populations, etc. It is important to recognize 
that these data sets portray very different snapshots of the activity. 
The census data I base my work on counts workers and the way they 
travel to work. The FTA data on the other hand are effectively 
turnstile counts. If a worker passes through a turnstile (or 
equivalent) four times in a day that would be a big jump in FTA data 
but still just one worker as counted by census. This would not really 
change the 5 percent figure share I mentioned in my testimony. There 
are just a few metro areas at 10 percent shares for transit across the 
country today New York, Chicago, and Washington for sure; maybe Boston, 
Philadelphia, and San Francisco--a very worthy goal to examine would be 
to see how many more areas we could bring up to that level. Shifts in 
transit use for non-work activities could add to the differences but I 
do not expect that they have grown enough to change transit's 2 percent 
share in overall travel. It is important to keep a sense of scale in 
interpreting these measures.

    Question 2. Mr. Pisarski, your testimony touches on the aging 
population and their transportation needs in terms of the need to 
continue driving. However, many Americans lose their ability to drive 
as they age. For example, in 2000, only 68 percent of women over the 
age of 65 had licenses. How will we meet the needs of older Americans 
unable or unwilling to drive?
    Response. I wish there were easy answers here. In the early stages 
of the aging scenario we face, roughly the next 15 years, the numbers 
of elderly drives will increase strongly--for instance with women's 
licensing rising to over 90 percent for those over 65--as the first 
real age group that grew up with the car ages. Most of their travel 
demand will be met by their own driving and then secondarily by family 
and friends, which is a major factor in the mobility of aging 
populations typically. For those unable or unwilling to drive and for 
most of those who reach the higher age groups where infirmity begins to 
be a critical factor something new in the forms of present community 
transportation services needs to be developed. While, there are many 
willing people and organizations trying to serve the aging community 
well, from what I have seen in my work the present systems of services 
need careful review and rationalization. They are often times confusing 
and expensive. In many cases these older citizens cannot use 
traditional transit or even curb side delivery but need door to door 
assistance. We will need a national summit-like discussion of how to 
respond to these dramatic social challenges. Costs and pricing are 
critical. A role for the private sector and for community institutions 
is crucial. It must be an important focus for reauthorization planning.

    Question 3. Mr Pisarski, you discuss the mobility needs of 
immigrants and resident minorities. Do the data sources mentioned have 
a good rate of return from these communities. What is your confidence 
level in these data?
    Response. In the census I am convinced that they have done a 
successful job of accessing minorities and obtaining the necessary 
information. There are certainly response problems with undercount that 
we all are concerned about but by and large they have been very 
effective. I am much more concerned about travel surveys by local 
governments, MPO's etc., and even our national sources, the NPTS now 
NHTS. While those survey's managers are doing a great job trying to 
address these challenges, the weaknesses in phone interviewing 
techniques are critical in causing concern about the representativeness 
of the returns. I had similar problems 30 years ago in surveying in 
face to face interviewing, so this is nothing new but the changes in 
people's life styles and means of communications have not been balanced 
by new approaches in surveying methods. We might consider matching 
census data with survey data to evaluate gaps and weaknesses. We need a 
national commitment to better data to support transportation 
decisions--this means more money, of course, but also research on 
innovative methods, employing new technologies to respond to these 
growing challenges.

    Question 4. Mr. Pisarski, you emphasize demographic factors behind 
travel patterns. However, the data shows that the growth in driving 
itself is far outstripping the growth in population. In fact, an FHWA 
analysis found that population growth is responsible for only 13 
percent of the increase in driving, and TTI data show that the distance 
driven rises every year. Can you speak more about how travel demand 
management can be an effective congestion-fighting strategy.
    Response. Senator Moynihan was fond of saying that ``demography is 
destiny''--and so it is--certainly in transportation. But these 
demographic factors go far beyond population growth. I was responsible 
for the FHWA study mentioned in your question and concur that 
population growth itself is typically a relatively minor factor in 
growth--except in metro areas and States seeing dramatic shifts in 
population--Nevada, Georgia to name just two. More to the point areas 
losing population are still seeing growth in travel. Clearly it is the 
per-capita growth rates that are significant. Growing affluence, 
changes in family composition and life styles, the availability of 
relatively low cost transportation automobile services are the really 
significant drivers of change. A central factor in the changes we have 
seen has been the same aging factor referred to in an earlier question. 
We have many more people of working age; many more at the peak travel 
age group.
    Given these factors it is not clear what the role of demand 
management should be. I would certainly argue that suppressing trips is 
both undesirable and unwarranted. Trips have economic and social 
transactions at their end of value to each citizen. This suggests that 
reducing the time and cost penalties of trip-making is a highly 
desirable public goal--I see such ``induced'' travel as a major social 
benefit--to be applauded not condemned. We may think of others' trips 
as unnecessary, but which of us examining his or her own travel would 
judge them to have been meaningless. Almost 30 years a congressional 
committee asked me what percent of trips were frivolous--a question I 
could not answer.
    There may be opportunities in getting people to combine trips in 
what we call ``trip chains,'' linking purposes together in a time and 
energy efficient pattern. People tend to do that under the pressures of 
time.
    Land use solutions, where people might find opportunities at 
shorter distances travel might have limited potential, but I would not 
overstate it. Many of the changes we are seeing are the product of 
shifts in trip purposes and their lengths. Going out to eat for 
instance instead of preparing meals at home; taking laundry out rather 
than doing it at home. This is often accompanied by increases in trip 
length as distant opportunities become accessible. One of the not-so 
obvious factors is just the growing size of our metro areas. About 60 
percent of our population lives in the 50 areas of more than a 
million--substantially up from the past ( there were 39 such areas in 
1990). Such areas make possible the prospect of work trips of 20 miles 
or even trips to a restaurant or to visit friends and relatives of that 
distance that do not exist in a smaller metro area. The most 
significant factor there will be travel times and the effects of 
congestion.
                               __________
    Statement of Tim Lomax, Research Engineer, Texas Transportation 
                              Institute\1\
---------------------------------------------------------------------------
     \1\The views in this testimony are those of Tim Lomax and do not 
necessarily represent those of the Texas Transportation Institute, or 
The Texas A&M University System
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    Mr. Chairman, distinguished members of the committee, thank you for 
the opportunity to testify before you today. I have been asked to 
summarize a few trends that we have identified in a report we prepare 
each year on urban traffic congestion. I will also offer a few 
observations about congestion in U.S. cities in the next few years. I 
would like to build on the excellent information that Mr. Pisarski has 
prepared. Please keep in mind his summary of how travel demand has 
grown and how it will continue to grow in the future.
    Over the last 20 years our cities have not been able to keep pace 
with the demand increases brought on by population and job growth. 
Congestion has increased as a result of that imbalance. Our data shows 
that during peak travel periods in 76 urban areas we studied, the 
travel time penalty--the extra time it takes to travel during the 
``rush hours''--has increased 185 percent since 1982. The penalty in 
areas with populations between 500,000 and 3 million increased by 300 
percent over this same time. This indicates that while most of the 
problem is in the large metropolitan areas, the congestion problem is 
growing in areas of all sizes. Total hours that travelers in these 76 
areas were delayed increased from 750 million in 1982 to 3.6 billion in 
2000.
    This congestion growth was the result of the trends that Alan 
referenced. In just our 76 areas, travel demand increased 86 percent, 
but road capacity only increased 37 percent. The real capacity 
increases were much less; the 37 percent value includes many roads that 
were incorporated as a result of growing urban area boundaries, rather 
than newly constructed roads. The imbalance is the result of several 
truths and myths about what can be accomplished. I would like to 
emphasize just a few important elements.
    First, a truth. Road construction can help reduce the growth of 
traffic congestion. Figure 1 shows the dramatic difference in travel 
time penalty growth between areas that added roads at a rate close to 
the rate of travel growth-the green line at the top-and those areas 
that added few roads in relation to their travel growth-the dark blue 
line at the bottom. The cities in the bottom group added roads at a 
rate close to travel growth-for example, a 4 percent annual growth in 
the traffic might be accompanied by a 3.5 percent growth in major 
roads. The time penalty only increased 57 percent in the areas that 
were able to add roads. Time penalties increased 245 percent for the 
``least aggressive'' roadway adding areas.
    Second, a myth. We should invest all our money and effort in adding 
roadways. My characterization of this as a myth is not based on 
ideology. It is based on the fact that since 1982, urban areas have 
added only about half of the roads needed to stop the growth in travel 
delay. Figure 2 shows that this percentage is about the same for all 
four urban population ranges we track in our annual report. This is due 
to a combination of factors ranging from lack of funding, land, public 
support, and environmentally supportable alternatives. Roads can 
definitely help, but realistically they aren't the ``wonder drug'' 
prescription because cities have not been able or willing to add them 
quickly enough.
    A similar truth can be stated about transit improvements-they can 
help, but cannot solve the problem themselves. Figure 3 illustrates the 
amount of new transit riders and carpoolers that would have to be added 
each year to keep pace with travel demand growth. We are looking at 
adding the equivalent ridership of a current transit system between 
every year and every 4 years. This is very unlikely.
    Let me point out a somewhat discouraging note that ``regular'' 
traffic congestion is only part of the problem. The variations in 
travel time caused by crashes, vehicle breakdowns, special events, 
construction, maintenance, weather and a variety of other factors are a 
source of frustration and economic loss to person travel and freight 
movements. Part of our problem is that we don't have the long-term, 
system-wide, detailed data we need to fully describe the issues. The 
emphasis on operational improvements over the last several years allows 
us to analyze a few years in a few cities, but these improvements need 
to cover more of the nation's transportation system.
    Figure 4 shows the kind of information that can be developed and 
how we can use it to identify problem areas and the success of 
improvements. This graph is for some of the Minneapolis-St. Paul 
freeway system in 2000. Congestion is measured by the Travel Time 
Index-the peak period travel time penalty shown in the dark blue line. 
Unreliable travel conditions are measured by the Buffer Index-a measure 
of the amount of extra time travelers need to allow because of the 
unpredictability in system conditions. We can see the effect of the big 
snowstorms in January and December-more congestion and very unreliable 
travel times. The summer tourist season is also the cause for greater 
variation in travel time, although not a substantial increase in 
average travel time penalty. We can also see the effect of turning off 
the traffic signals that controlled access to the freeway system. This 
experiment began in October, and the freeway effects were immediate and 
dramatic. The unfortunate part of this story is that the monitoring and 
data collection system does not extend to the entire system of freeways 
and streets so we cannot completely analyze the experiment from this 
data. But the limited data we have suggests that operational 
improvements can play a significant role in providing a more reliable 
transportation system for people and freight.
    It appears that unless something changes we will continue to see a 
growth in congested travel and congested transportation systems. 
Projected population increases mean more travel; our cities have not 
been able to stop congestion growth over the last two decades and 
travel and population growth will continue to stress our transportation 
systems. If we are fortunate to have enough funds, select projects 
wisely, and implement them using techniques that do not result in 
significant delay from construction and maintenance activities, we may 
be able to slow down the growth of congestion, and make the system more 
reliable than it is now. But ``reliably congested'' is not really a 
high standard of achievement in my view. If our cities are going to 
have a different future than this, we will have to pursue all types of 
improvements and implement more projects, rather than fewer and manage 
both the demand patterns and the system more efficiently.
    More information on Texas Transportation Institute's urban mobility 
studies can be found at: http://mobility.tamu.edu




                                 ______
                                 
 Responses by Dr. Tim Lomax to Additional Questions from Senator Smith
    Question 1. In your testimony, you point out that the ``congestion 
penalty'' in areas with over 300,000 population has increased over 300 
percent since 1982. Your also mention these travelers were delayed a 
combined 3.6 billion man-hours by congestion. I have two questions 
about this part of your testimony:
    i. Could you please explain, in as much detail as possible the 
calculations and assumptions you made that brought you to those two 
conclusions?
    ii. Most of the figures I have seen putting a value on the cost of 
the ``congestion penalty'' are a bit outdated. For example, in my 
opening statement at the hearing, I referred to figures dating from 
1998. In your opinion, in 2002 dollars, what is the average cost of 
this penalty to rush-hour commuters in those same metropolitan areas 
you referred to?
    Response. i) I have attached a copy of the analysis methodology 
used in our study. Some additional notes on our results:
      I think my testimony refers to areas with population 
between 500,000 and 3 million, rather than 300,000.
      Our study only covers 75 of the approximately 400 urban 
areas in the United States. The study includes all of the largest 40 
urban areas and most of the U.S. urban travel delay.
      The 3.6 billion person-hours are only for the year 2000, 
not 1982 to 2000.
    Response. ii) To estimate congestion in future years, I would use 
the following trends.
      The Consumer Price Index has increased 6.8 percent since 
1999.
      Travel delay, the main component of the congestion cost, 
has increased 6.2 percent per year over the last 5 years.
      Using these values, I estimate the average congestion 
cost has risen from $505 per person in 2000 dollars to $590 per person 
in 2002 dollars.

    Question 2. With regard to your answer to the previous question, do 
you have an opinion as to whether that figure would likely materially 
vary from one part of the country to another, and if so, can you offer 
an explanation for such a phenomenon?
    Response. The congestion cost generally varies by population of an 
area-larger cities are more congested, have more people and, thus, have 
higher congestion costs.
    The value of time (measured in dollars per hour) is a constant in 
our study. That value probably varies from one part of the country to 
another, but I do not have an estimate of that. I do believe the 
research on value of time also shows that it varies by trip purpose, 
activities on each end of the trip, whether the traveler believes they 
will be on time, as well as the personal value of time.

    Question 3. Do you agree with Alan Pisarski and Ken Orski who 
testified in favor of what they term ``hot lanes'' as one way to reduce 
traffic congestion?
    Response. I think high-occupancy/toll (HOT) lanes can provide an 
option that does not currently exist for most trips. The ``option'' 
aspect of HOT lanes seems to be the most important element in my 
opinion, rather than congestion reduction. There may be some congestion 
reduction benefit if enough trips use the lanes, and if the ``before'' 
congestion level is not too high. Most corridors that I know of where 
the HOT lane concept is being studied, however, are very congested. The 
likely effect will be to shorten the period of slow traffic speeds and 
to provide a high-speed option for some trips, rather than to 
significantly improve overall average speeds.
                                 ______
                                 
  Response of Dr. Tim Lomax to Additional Question from Senator Graham
    Question. Your testimony discusses the difference between 
``regular'' traffic congestion that occurs in bottlenecks, and 
congestion caused by accidents, breakdowns, and other non-recurring 
events. Have you or TTI researched the best approach to dealing with 
the day to day breakdowns, accidents and other incidents that lengthen 
commutes?
    Response. Incident management programs are the general term for the 
problem you identify. The elements might be separated into the 
following categories:

      Detection (finding the problem)-The wire loops in the 
pavement, radar speed sensors, toll tag reading devices and other 
automated devices can identify problems using comparisons between 
nearby sensors and comparisons to historic averages. Motorists using 
cell phones to report accidents are becoming the quickest way to 
identify accidents. Cameras can be used to confirm the incident 
location and proper response vehicles and personnel.
      Clearance (removing the problem)-"Highway helper'' 
programs have been developed in many areas and consist of many 
different elements. The basics include a roving set of vehicles that 
assist motorists with disabled vehicles or with minor crashes. More 
advanced programs might include tow trucks that are assigned to clear 
crashes and disabled vehicles from important sections of road. 
Communicating the incident location and expected duration of road 
blockages--such as the National 511 traveler information telephone 
number program--is also an important element.
      Prevention (reducing the problem)-Some of the incident 
delay problems might be addressed most appropriately by driver 
education or design changes. The delay that occurs when motorists in 
the opposite direction of an incident slow down (so called 
``rubbernecking''), for example, does not have an easy solution other 
than to educate drivers as to the delay and safety problems this 
causes. Some sort of visual screen mounted on top of the median barrier 
might also reduce the problem. Teaching motorists to maintain their 
vehicles and monitor fuel level, tire condition, etc., would also pay 
significant benefits in reduced vehicle breakdown rates.
                                 ______
                                 
 Response of Dr. Tim Lomax to Additional Question from Senator Jeffords
    Question. Mr. Lomax, over the last few years, the Texas 
Transportation Institute Mobility Study has moved away from calculating 
the number of lane miles of roadway needed to 'solve' congestion to 
bring free-flow conditions to highways. In recent years, the report has 
begun to discuss increasing transit capacity and managing travel 
demand. Can you talk about your shift in thinking on the approach to 
solutions?
    Response. We have attempted to broaden the set of improvements we 
refer to, rather than to move away from any solution. We have also 
chosen to look at achievable or realistic options. The number of lane-
miles needed to keep pace with annual traffic growth are still 
presented along with the transit riders or carpoolers needed.
    Building hundreds of lane-miles to solve congestion problems, 
however, is not a realistic option in almost all urban areas. Slowing 
the growth of congestion, however, is probably achievable and relevant 
in many urban areas. Our studies show that this will take a full range 
of construction, operational improvements, transit and carpool 
enhancements, and demand management alternatives in larger cities.
    Smaller cities, however, have not been any more successful at 
adding roads in sufficient amounts to keep pace with traffic growth. 
This suggests that a broader view of the solution set might be 
appropriate for more than the largest and most congested cities.
                               __________
    Statement of Hon. Ron Sims, Executive of King County, Washington
    Mr. Chairman, Ranking Member Smith, and members of the committee, I 
appreciate the opportunity to testify before you today regarding new 
ideas for the reauthorization of the Transportation Equity Act for the 
21st Century (TEA-21.) Your reauthorization of these vital 
transportation funds can better help communities address the public's 
need for greater mobility in the face of growing congestion that 
threatens the quality of life in our metropolitan areas.
    I applaud the dramatic changes Congress has instituted in the last 
two surface transportation reauthorization bills, particularly those 
that have helped address congestion problems in America's major urban 
areas. The Intermodal Surface Transportation Efficiency Act of 1991 
(ISTEA) strengthened the role of metropolitan planning organizations 
(MPOs) and encouraged the use of Federal-aid highway moneys for high-
occupancy vehicle lanes, transit systems and other projects designed to 
meet congestion problems. TEA-21 established ``firewalls'' that ensured 
that the funds collected from the public for transportation purposes 
will be spent on transportation, restoring trust to the Highway Trust 
Fund, and freeing up billions of dollars for congestion relief 
programs.
    I believe that next year's reauthorization bill should take what I 
view to be an essential next step. By targeting transportation 
investments into metropolitan areas that are competing in the global 
economy, we can help these areas and our country retain our competitive 
edge. If we don't, companies will leave our area, and, in some cases, 
our country. Infrastructure investment in our metropolitan areas will 
not only bring much needed congestion relief, it will help secure the 
stability and health of these metropolitan areas that are the economic 
engines of this country.
    Despite the efforts of programs like TEA-21, we must do more to 
ensure congestion relief infrastructure investments are targeted to key 
major metropolitan areas. Clogged roadways delay people, goods and 
services from moving freely to their destinations. Metropolitan 
congestion relief will have a tremendous impact on the quality of life 
for business, industry and the residents. More and more people are 
living in urban areas. Through very successful Smart Growth strategies 
aimed at managing growth in urban areas, many cities are seeing a 
revitalization of their cores as people move back into cities. In King 
County, we know that over 50 percent of all daily trips are still by 
single-occupancy vehicles despite great strides being made in 
increasing transit trips and carpool rides. Our long-term goal is to 
get people to live, work and shop in the same community--to use public 
transportation and to cut down on driving alone. But it is imperative 
we create and invest in the infrastructure to help make this goal a 
reality.
    The viability of urban areas is increasingly dependent on reliable 
transportation networks of all kinds--from major freeways to regional 
arterial networks and public transportation, inter-city rail, and all 
other efforts aimed at congestion relief. And we're moving in the right 
direction. In 2002, transit ridership in King County grew by almost 4 
percent, boarding 100 million riders given on buses, trolleys, and 
streetcar. We have dozens of programs aimed at getting more people out 
of their cars, like our Transit Oriented Development projects that 
combine housing and local retail with a transit station or a park-and-
ride lot to locate people and services near transit to discourage auto 
use. We are creating better pedestrian linkages to bus service. 
Further, ongoing national health studies show that some urban 
development, especially sprawl, limits physical activity causing 
obesity and related illnesses. We have an obligation to give our 
citizens the transportation choices they need to make their lives 
easier and more healthful.
    Therefore, included in whatever is done with the reauthorization of 
TEA-21, metropolitan congestion relief is a must. A successful 
comprehensive plan will include transportation infrastructure that 
helps our metropolitan areas to thrive as both economic engines and as 
wonderful places to live.
Economic Importance of the Major Metropolitan Areas
    As the United States economy grew and prospered in recent years, we 
have witnessed significant growth in major metropolitan areas and 
business centers across our Nation. The major metropolitan areas are 
significant major contributors to the economic viability of our nation 
as a whole. The 20 most congested metropolitan areas in the United 
States together have more than one-third of the entire economy of the 
Nation. Using 1999 payroll data as an indicator for economic activity 
(payroll is the largest share of GDP), these top 20 metropolitan areas 
had a combined payroll total of more than $1.7 trillion--37 percent of 
the total national payroll of $4.6 trillion. Further, these 20 
metropolitan areas contain nearly 50 percent of the population and 
economic activity of the total metropolitan areas combined.
    Let me talk about our economy and its importance to the region, 
State and Pacific Northwest. Based on 2000 economic data, this 
metropolitan area ranked as the nation's 13th largest metropolitan 
economy, generating about $115 billion in economic output. Compared to 
nations of the world during the same period, the area out-produced 
Greece or Venezuela and nearly out-produced Finland. Further, King 
County represents 43 percent of Washington State jobs and 55 percent of 
the State's dollar payroll.
    This region is also a port community, largely dependent on the 
increasing pace of global trade. International trade supports one of 
every three jobs in Washington State, and we serve as an important 
export and import gateway for the northern tier of States. I want to 
thank this committee for including the National Borders and Trade 
Corridors program in the last authorization bill. We are using funds 
from that program in our region to help construct a series of railroad 
grade separation projects that are increasingly important as mile long 
container trains move slowly off the docks at the Ports of Seattle and 
Tacoma.
Costs of Congestion
    The total cost of traffic congestion in the metropolitan areas 
studied by the Texas Transportation Institute amounts to almost $74 
billion. TTI has calculated that significant amounts of fuel are wasted 
as a result of congestion, noting that drivers stuck in traffic used 
more than six billion gallons of fuel in 1996.
    Now, congestion remains the primary threat to the long-term health 
of the economies of many different regions. Traffic congestion deeply 
affects our nation's ability to move goods and services. Corporations 
and businesses in these congested areas have experienced significant 
financial losses as a result of increased traffic. The Boeing 
Corporation, the nation's No. 1 exporter, estimates that while they 
move the same amount of freight up and down the Puget Sound region as 
they did 5 years ago, it takes them 22,000 more payroll hours to do it. 
Boeing shocked our region last year when they announced they were 
moving their corporate headquarters, partly because of our State's 
failure to keep up on transportation spending. The added costs 
associated with traffic congestion are causing many businesses to 
search for other, less congested areas, just to meet their freight 
mobility needs.
Infrastructure Investment Has Not Kept Pace with Growth
    Decaying and outdated roads are having a severe impact on all 
aspects of residents' daily lives, from how they get to work to when 
they return home to spend time with family and friends. Road rage and 
other congestion-related ills are affecting the quality of life for 
many Americans.
    As this committee knows, the overall level of public investment in 
transportation has declined from a peak in the 1960's to levels that 
now threaten the economic vitality and the livability of our 
communities. Recent polls taken in the Seattle-Tacoma metropolitan 
area, for example, consistently indicate that solving congestion is the 
highest policy priority of residents. They consistently rank 
transportation congestion as their No. 1 problem, far ahead of concerns 
over crime, education, taxes, or the environment.
    The Washington Legislature has struggled, as many other State 
legislatures have, to craft statewide and regional packages to fund 
much-needed transportation projects. The Washington State Legislature 
voted late last week to increase statewide spending for transportation. 
This will be financed through a combination of gas tax, truck weight 
fee, and vehicle sales tax increases. A regional transportation finance 
mechanism was also authorized. Our transportation problems can only be 
addressed through bold cooperative actions, not just at the State 
level, but at all levels of government.
Development Patterns Have Contributed to Congestion
    Urban sprawl has been a major contributor to our growing traffic 
congestion problems. From 1970-1990, population in the Seattle 
Metropolitan Area grew by 38 percent while the development of land 
increased by 87 percent. This represents a doubling of land needed for 
each person over the previous period. Related to this statistic, there 
has been a 30 percent drop in residential densities since 1970 while we 
have seen new jobs locate in sprawling low-density employment centers.
    Communities comprised of housing exclusively combined with low-
density development randomly scattered around a region, have created 
land use patterns that are difficult for transportation to serve. 
People have no choice but to drive everywhere. Alternate forms of 
transportation such as public transit, walking, bicycling, carpooling 
don't work as well in a pattern of sprawl development because travel 
trips are too long and too scattered. It is more difficult for 
government to respond to the growing needs created by these inefficient 
development patterns. Housing, jobs and shopping become more distant 
from each other, resulting in greater vehicle miles traveled.
    I challenge us to look for ways to meet our current transportation 
needs, while at the same time, we support efforts to steer new 
development into smart growth land use patterns. New funding plays an 
important role in fixing transportation problems in our major 
metropolitan areas. We need to leverage these new resources by making 
changes to the development patterns the transportation system serves to 
get the most efficient use of our money.
    Smart Growth Is Part of the Solution
    Smart growth is a major factor in reversing the trends resulting 
from typical development patterns and traffic congestion. Smart growth 
provides for ``common sense'' development by encouraging growth where 
facilities and services already exist, bringing jobs and housing 
closer, and limiting development into farm lands and low density rural 
areas. I support the testimony of Don Chen, Executive Director of Smart 
Growth America, who spoke to your committee 2 weeks ago about the role 
the Federal Government can play in supporting smart growth policies and 
actions by local governments. The reauthorization of TEA-21 can become 
a mechanism to support smart growth initiatives. This committee can 
help local governments solve transportation problems by encouraging 
smart growth policies leading to fewer cars on the road.
    In King County, we've been working diligently to make Smart Growth 
work. In 2000, only 4 percent of all of our new housing units went into 
our designated Rural Area. We're revitalizing our older urban areas as 
evidenced by the nearly 10 percent growth in the city of Seattle from 
1990-2000. Growth in the centers of the close-in suburbs is also 
rising. Over the last 10 years, the population in King County grew by 
15 percent and the city of Seattle grew by 9 percent. This data 
demonstrates a reverse in the declining growth trend in the city of 
Seattle during previous decades. This is not just happening in Seattle, 
but in other metropolitan areas as well. Future transportation 
investments need to support these recent trends.
    The viability of our urban areas is increasingly dependent on 
reliable transportation networks. If we are successful in creating more 
Smart Growth communities, where people use their cars less, then we are 
actually preserving road capacity for those that really need it--like 
for the movement of freight. A clear example of how land use and 
transportation are being used together is in a Transit Oriented 
Development Project, which typically combines housing and local retail 
with a transit station or a park-and-ride lot.
    We need to create better pedestrian linkages to bus service, 
encourage greater densities and mixed-use developments around transit 
centers, and simply provide connections within our communities. Ongoing 
studies are demonstrating that many forms of urban development, 
especially sprawl, can work against physical activity such as walking 
and other forms of exercising. We have an obligation to give our 
citizens the transportation choices they need to make their lives 
easier and more healthful.
    Increases in Vehicle Miles Traveled
    People drive more and they own more cars. In King County, there are 
more registered vehicles than there are registered drivers for those 
vehicles. Vehicle miles traveled (VMT) has also increased, so traffic 
congestion continues to worsen.
    In the Seattle region, from 1980 to 1990, VMT increased nearly 
three times faster than population and employment growth. However, from 
1990 to 2000, VMT grew at approximately the same pace as population and 
employment. Although the trend is in the right direction, the 
transportation system needs to catch-up from the rapid growth in vmt 
from the past 20 years. Also, through strategic investments, we can 
ensure that this trend continues and does not revert back to the rapid 
rise of the 80's.
    While traffic congestion is the most evident sign of increasing 
VMT, other important impacts are significant to our quality of life. 
Increasing VMTS correlate to worsening air quality and higher energy 
consumption rates.
Increase in Transit Ridership
    As we look to solutions to address our traffic congestion problems, 
we need to keep in mind that there is no quick fix to eliminate 
congestion. Instead, we will need broad solutions to address different 
facets of congestion and to give metropolitan areas the flexibility and 
choices they need.
    Often, we turn first to adding highway lanes. While this is an 
important part of the solution, alone it will not alleviate the traffic 
congestion problems we currently face. Additional congestion-fighting 
tools include improved transit service and other actions.
    In King County, we have one of the best transit operations in the 
Nation. Last year we exceeded 100 million annual riders for the first 
time. Transit's share of daily travel is also going up. In the Seattle 
Metropolitan Area, commute trips on public transportation, as a 
percentage of all work trips, has increased from 6.3 percent in 1990 to 
7.1 percent in 2000. I believe strategic investments will help us 
maintain this trend in transit ridership. However, we know that 
increasing traffic congestion is having a negative effect on our 
ability to operate transit efficiently. More congestion makes if harder 
for buses to maintain schedules, leading to more buses providing the 
same level of service. Clearly, this is not a very efficient way to 
operate.
    Transit can and should be one of the key tools to address traffic 
congestion, especially in metropolitan areas and centers where there 
are concentrations of people and jobs. To do this, we need to make sure 
transit becomes a viable alternative. Transit can compete with the car 
for commute trips if appropriate funding and operating incentives are 
provided. Many inter-city rail routes, for example, have proven this 
and incredible progress in ridership has been realized.
Revenue Sharing Formulas May Not Be the Answer
    Almost all highway assistance is provided to States based on a 
formula. Exceptions include the recently enacted trade corridor/border 
crossing, intelligent transportation system deployment, and 
transportation community and system preservation programs that are 
allocated on a national discretionary basis each year. Other exceptions 
are the regional Surface Transportation Program and Congestion 
Mitigation/Air Quality programs where project selection is the 
responsibility of metropolitan planning organizations. About two-thirds 
of transit assistance is provided to transit operators on a formula 
basis through their metropolitan planning organizations. About one-
third is allocated on a national discretionary basis annually to start 
new and bus capital projects. Federal assistance must be directed 
toward solving problems in proportion to their severity.
                            recommendations
Encourage and Promote Flexible Funding Approaches
    Most Federal transportation programs pay for specific solutions; 
e.g., new highway lanes or transit new starts, rather than the best 
overall transportation solution for a given corridor. While ISTEA and 
TEA-21 included flexible funding programs like the surface 
transportation program and Congestion Mitigation/Air Quality programs 
with broad program eligibility, most Federal assistance is still 
provided on a mode-specific basis to existing road and transit 
providers. Furthermore in the first 4 years of the CMAQ program, it has 
managed a mere 57 percent obligation rate. This rate is troubling and 
is the worst of any of the core programs in TEA-21 suggesting that even 
when Congress provides tools to the States for metropolitan needs it 
has not merited enough attention to address the problem.
    It is my belief that addressing congestion in the most strategic 
and effective way demands a comprehensive approach encompassing 
everything from improving operations to managing growth. Federal, State 
and local governments can no longer afford to view investments in 
metropolitan infrastructure in separate, distinct elements particularly 
when transportation infrastructure at the metropolitan level is far 
more complex and inter-modal then at the State or Federal levels. The 
very nature of a global economy and the need for our nation's 
metropolitan economies to stand up against their competitors around the 
world by definition necessitates comprehensive, strategic planning and 
ultimately targeted investments. Funding must be predicated on the 
notion that metropolitan governments in partnership with their 
constituents are most familiar with residential growth patterns, 
commercial development needs, freight mobility and the many other 
demands on local metropolitan areas. These demands must be dealt with 
in a cohesive fashion that allows for optimum flow and efficiency.
Creation of a Metropolitan Transportation System
    Mr. Lomax's research has consistently shown that roadway congestion 
can be quantified through various research indexes to identify our 
nation's significant problem areas. According to his research, rush-
hour travel in five regions--Los Angeles, San Francisco-Oakland, 
Seattle-Everett, the Washington DC Metro Area and Las Vegas--takes 50 
percent more time than non-rush hour travel. Additionally, he indicates 
that drivers in the largest metropolitan areas spend about half of 
their driving time stuck in traffic, far more than drivers in medium 
and smaller sized metropolitan areas. This work of identifying our 
nation's significant problem areas must be advanced further.
    I believe Congress should take the next step of calling for in the 
upcoming reauthorization the creation of a metropolitan transportation 
system that geographically defines the boundaries of metropolitan areas 
within which Federal transportation funds will be targeted. Similar in 
concept to the Federal Highway System or Interstate systems, planning 
and investments for major highways, regional arterials, bus and subway 
routes, local and inter-city rail, freight corridors, ferries, and 
other transportation modes such as air travel must be carried out as 
part of a comprehensive metropolitan transportation system. Congestion 
relief is of such an urgent and immediate nature, that a step of this 
magnitude is necessary and warranted. Some of this work has already 
been accomplished through the work of Metropolitan Planning 
Organizations. We must find ways of furthering this work and 
aggressively infusing such metropolitan systems with the kind of 
strategic resource allocation that is needed.
Creation of a Metropolitan Congestion Program
    Finally, I it is time for Congress to create a Metropolitan 
Congestion Program that would funnel Federal dollars directly to the 
metropolitan transportation system. This Metropolitan Congestion 
Program should be sized at a minimum equal to the National Highway 
System Program which this year received nearly $5 billion under TEA-21. 
I acknowledge the need for the next reauthorization bill to be crafted 
in a way that does not perpetuate a multiplicity of programs and 
perhaps this metropolitan program would encompass other programs in the 
current reauthorization bill originally intended to address congestion. 
However, at the local level, metropolitan organizations and governments 
in major urbanized areas are suffering from the lack of tools at their 
discretion. In fact metropolitan sub-allocations under TEA-21 are 
smaller as a percentage of total funding as compared to levels under 
ISTEA.
    While land use, permitting and many other functions that involve 
growth planning, residential and commercial development are primarily 
the responsibility of these governments we are handcuffed by the lack 
of balance in matching infrastructure investments to support 
development planning. Transportation dollars that are funneled 
ultimately to local areas lack the clarity, transparency and precision 
in investment decisions that metropolitan governments are most 
appropriately situated to provide. I strongly advocate that the right 
and ideal place is in the metropolitan areas.
    Over the past several months, I have begun to partner with 
colleagues around the country to form a metropolitan congestion 
coalition. The magnitude of these changes require the kind of bold, 
decisive leadership that our citizens deserve. The purpose of this 
coalition is to bring together metropolitan elected officials and 
business leaders in metropolitan areas to address these ideas for the 
reauthorization of TEA-21. We have to date been successful in our 
initial discussions around the country because the need is so evident. 
I have no doubt that you also recognize this need and I am hoping to 
partner with you during this reauthorization cycle.
    I respectfully urge this committee to consider where transportation 
problems are most severe and the associated socio-economic consequences 
then to direct available Federal assistance to those areas proactively. 
In metropolitan areas and at all levels of government public resources 
are scarce. This only emphasizes the importance of greater discretion 
in funding decisions. We have strong decisionmakers in every 
metropolitan area who are first responders and are on the frontline 
helping to lead the economic engines of this Nation. The depth of this 
leadership capacity must be further utilized to propose and implement 
solutions that enhance vitality and energy in these regions. Congestion 
cannot be allowed to stand in the way.
    Thank you, Mr. Chairman and members of the committee, for giving me 
this opportunity to share with you my views on the reauthorization of 
the Federal Surface Transportation Program.
                               __________
  Statement of Anthony Downs, Senior Fellow, The Brookings Institution
    My name is Anthony Downs, and I am a Senior Fellow at the Brookings 
Institution. I am the author of the 1992 book STUCK IN TRAFFIC, which 
deals with the causes of and possible remedies for peak-hour traffic 
congestion, and which I am now revising for a second edition. The views 
I state here are solely my own, and not those of the Brookings 
Institution, its Trustees, or its other staff members.
    My comments will consist of a series of major points, with some 
supporting discussion of each. These points are focused on a realistic 
view of the nature of traffic congestion, both present and future, and 
what actions might be taken to relieve it.
The Positive Social Function of Traffic Congestion
    Most people regard peak-hour traffic congestion as an unmitigated 
evil, but that viewpoint is incorrect. Congestion is a vital de facto 
device we use to ration the scarce space on our roads during periods 
when too many people want to use that space at once. In effect, 
congestion is a balancing mechanism that enables us to pursue many 
other goals besides rapid movement--goals American society values 
highly. Those goals include having a wide variety of choices about 
where to live and where to work, working during similar hours so we can 
interact with each other efficiently, living in low-density settlement 
patterns, and enjoying highly flexible means of movement--that is, 
private vehicles. The only other possible means of rationing highway 
space when too many people want to use it would be (1) charging high 
tolls to keep many people off the roads then, which most Americans 
decisively reject because it would unduly favor the wealthy, or (2) 
spending enormously more money to build enough roads to handle all 
peak-hour traffic without delays. But that would require turning 
metropolitan areas into virtual cement slabs--which would be 
environmentally undesirable and prohibitively costly. Since we wisely 
reject those means of allocating road space, we must use delays from 
overcrowding in order to pursue the other goals we want to achieve. So 
congestion makes possible large-scale social benefits as well as the 
costs of delay on which most people focus when they think about it.
Peak-Hour Congestion Is Inevitably Going to Get Worse All Over the 
        World
    Because it performs a critical rationing function, traffic 
congestion is inescapable in large modern and modernizing metropolitan 
areas all over the world. In fact, it is certain to get worse in almost 
all of those areas, because populations are growing, and higher 
fractions of those increased populations will be using private vehicles 
for movement. So the biggest future ground transportation problem 
everywhere in the world will be coping with immense increases in the 
number of vehicles in use. In the United States, since 1980, we have 
added 1.2 cars, trucks, or buses to our registered vehicle population 
for every one person added to our human population. (This ratio was 
1.49 to 1 in the 1980's, but declined to 1 to 1 in the 1990's.) In 
addition, we have increased the average number of miles each vehicle is 
driven each year. Hence total vehicle miles traveled increased by 72 
percent from 1980 to 1998; whereas our total population increased by 
less than 20 percent.
    In the 1990's, we added 32 million persons to our human population, 
and we may do so again in each of the next two decades. Unless American 
behavior changes radically, that means we will add as many as 64 
million more vehicles to our registered vehicle population by 2020. 
Coping with the added traffic generated by this increase will be the 
main challenge to our ground transportation policy in the next two 
decades. Without doubt, traffic congestion will get worse because of 
these population dynamics.
Peak-Hour Congestion Is Almost Impossible to Eliminate Once It has 
        Appeared
    Once peak-hour congestion appears on a major roadway, it cannot be 
entirely eliminated by expanding the capacity of that road, though its 
duration can be reduced. That is because of the operation of the 
Principle of Triple Convergence. If the road's capacity is expanded, 
traffic at first moves faster on that road. But soon people realize 
this, and start altering their behavior. Drivers converge on the 
expanded road from other routes they have been using to escape 
congestion, from other times they have been using to avoid it, and even 
from other modes like buses or trains. Soon the increase in vehicles 
overloads the expanded road once again until traffic at the peak hour 
is moving no faster than before. True, the peak period may be shorter 
and the number of vehicles carried by the road each hour may be larger, 
since the road's capacity has been expanded. But traffic during the 
peak period will move no faster than before the road's capacity was 
increased. This means we cannot ``build our way out of congestion'' by 
expanding road capacity on crowded expressways or other key routes, 
once peak-hour congestion has appeared on them.
    Another obstacle to ``building our way out of congestion'' is that 
expanded roads may attract more new development along their routes, 
generating more traffic than before the roads were expanded. This is 
particularly likely in fast-growing metropolitan areas.
Yet American Society Will Need to Spend Heavily on Road Construction in 
        the Future
    Though we cannot build our way out of existing congestion, large 
future spending on road capacity will certainly be needed for two 
reasons. The first is to maintain existing roads and bridges, many of 
which are in serious need of repairs. Existing roadways are almost 
certain to carry much more traffic in the future than any new roads 
built, since the former serve large already-existing population 
centers; whereas new roads will mainly serve lower-density growth 
areas. That makes improving existing roads a very high priority goal.
    The second reason is to provide mobility for new-growth areas, most 
of which will be located on the peripheries of existing metropolitan 
regions. As settlements expand outward, new roads will be necessary to 
create mobility for their residents. Some advocates of ``smart growth'' 
argue that most future population increases should be accommodated by 
raising densities in already-built-up areas, rather than by expanding 
outward in more ``sprawl.'' Some increases in density will probably 
occur. But residents of most American neighborhoods do not want higher 
densities and will resist them vehemently, as experience clearly shows. 
Therefore, the chance that even a majority of future growth will occur 
through higher densities rather than though more outward development is 
very small. A lot more roads will be needed to provide mobility for 
residents of those new outlying areas.
Emphasis on Measuring the Aggregate Costs of Congestion Tend to 
        Exaggerate Its Pain
    The Texas Transportation Institute (TTI) has developed useful 
measures of traffic congestion, and changes in it over time, for a 
large number of major metropolitan areas. But the way these measures 
are expressed tends to exaggerate the amount of pain inflicted upon the 
American driving public. TTI estimates that the greatest annual delay 
from congestion in 1999 per person occurred in the Los Angeles region 
and equaled 56 hours; the average annual delay per person for 68 
regions was 36 hours. 56 hours is a whole week of 8-hour days, and that 
certainly seems like a lot of wasted time. But when divided by 240 
working days, and then by 2 for two trips per day, the average delay 
per person was 7.0 minutes per one-way commuting trip in the worst case 
(Los Angeles) and only 4.5 minutes for all 68 regions. When viewed this 
way, the ``excess'' time spent commuting does not seem so immense, 
though we all tend to remember the worst delays as being close to the 
average. This is the price we pay for rationing the scarce space on our 
roadways during peak hours so we can pursue all those other goals I 
mentioned at the outset of this testimony.
Americans Strongly Prefer Moving in Private Vehicles to Using Public 
        Transit
    Most Americans prefer using private vehicles for mobility instead 
of public transit because private vehicles have many superior traits. 
These include greater comfort, more flexibility as to timing, ability 
to perform several tasks on one trip, greater speed, more privacy, 
and--if parking is free--possibly lower costs. The average automobile 
commuting trip in 1990 was about 22 minutes; whereas the average bus 
commuting trip was 36 minutes and the average rail commuting trip was 
45 minutes. Thus, any major shift from private vehicles to transit 
would increase the average amount of time spent commuting.
    The strong preference among Americans for moving in private 
vehicles is shown by data from the 1995 nationwide Personal 
Transportation Survey. Over 90 percent of all work trips were in 
private vehicles, vs. 3.7 percent on public transit. (Since a large 
fraction of all public transit work trips are in New York City, if that 
city's trips are removed, only about 2.2 percent of commuters outside 
New York City use public transit.) Counting all types of trips, 86.1 
percent were in private vehicles, and only 1.8 percent on public 
transit.
    Transit advocates have pointed out that transit usage has recently 
grown faster in percentage terms than miles driven in private vehicles. 
Therefore, in December 2000, the Surface Transportation Policy Project 
(STPP) claimed that ``Growth in public transit exceeds growth in 
driving.'' But transit usage is so tiny compared to driving that even 
very small percentage gains in highway travel involve vastly larger 
absolute increases miles traveled than much larger percentage gains in 
transit travel. In 1999, the year about which STPP said that ``Growth 
in public transit exceeds growth in driving,'' total transit travel 
grew by about 1.7 billion passenger miles. But car passenger travel 
grew at least 51 billion miles, and travel in all small private 
vehicles (excluding motorcycles and buses) increased at least 80 
billion miles. Thus, the annual increases in highway passenger miles 
traveled in 1999 exceeded those in transit passenger miles by ratios of 
either 31 or 48 to 1. That hardly indicates that growth in transit was 
exceeding growth in driving!
More Spending Is Needed for Public Transit Too--But Much of It Should 
        Be for a Different Kind of Transit
    The nation's public transit systems also need major future 
investments, but they should aim at making significant changes in the 
way public transit is provided. Future public transit expansion should 
focus on smaller-scale, more flexible, and less heavily regulated means 
of movement that are feasible for serving relatively low-density 
settlement patterns, which will remain dominant. Improving such forms 
of public transit will be vital in serving portions of the population 
unable to drive, especially the rapidly rising very elderly population. 
Major spending on fixed-rail systems, including light rail, is not 
likely to be very efficient at meeting our most pressing public transit 
needs. Moreover, expanding public transit is also not likely to reduce 
future traffic congestion much, if any. Some of the regions with very 
extensive public transit systems also have among the most intensive 
traffic congestion, including Washington, Boston, St. Louis, and San 
Francisco.
How Could Future Traffic Congestion Be Reduced?
    What devices exist for improving future congestion levels--even 
though some worsening of congestion probably cannot be prevented? There 
are no total remedies, and not even many approaches that might slow 
down increases in future congestion. However, the following tactics 
seem the most promising:
      Coping with Accidents and Incidents as Causes of 
Congestion Delays. Many experts--including the TTI--believe accidents 
and incidents are the single most important cause of traffic 
congestion. Accident rates per 100 million miles driven have been 
steadily declining, partly because a higher fraction of traffic is 
occurring on better designed roads, especially interstate highways. But 
the absolute number of accidents has stabilized because of increased 
driving. Probably the most effective way of reducing accident-caused 
congestion on major roadways consists of faster removal of accidents 
from traffic lanes using roving teams of specialists controlled by 
traffic management centers. Many States already have created such 
centers, but their effectiveness could be improved with more sensors 
and more roving teams of obstacle removing specialists. This requires 
intensive coordination of police, fire, health-care, towing, and 
communications agencies in each jurisdiction.
      Shifting Some Future Growth to Smaller Regions. Multiple 
regressions based on TTI congestion measures show that congestion is 
most serious in the largest metropolitan areas, and those experiencing 
absolutely large amounts of population growth. Smaller areas are not as 
seriously affected by congestion even if they have high percentage 
growth rates. Hence one long-range offset to congestion would be 
shifting more population growth to smaller metropolitan areas. True, 
that is difficult to do through public policies. Most larger areas want 
to keep on growing, and they have important advantages of scale to 
attract future development. Yet any individual or organization 
extremely frustrated by congestion can greatly improve his, her, or its 
mobility by moving to a much smaller metropolitan area.
      Using HOT Lanes to Provide Drivers on Congested Roads 
with a Fast Choice. On already-heavily congested expressways, HOT lanes 
(High-Occupancy-Toll lanes) can offer a high-speed peak-hour mobility 
alternative to those drivers willing to pay tolls, without forcing all 
those not willing to pay tolls to drive at other times. HOT lanes 
accept both High Occupancy Vehicles (HOVs) and Single Occupancy 
Vehicles (SOVs) if the latter pay a toll during peak hours. The toll is 
variable, and it is set high enough to keep traffic on such lanes low 
enough to permit rapid traffic flow. This arrangement does not 
eliminate all congestion on such roads, but offers drivers a choice of 
rapid movement through paying high tolls or congested movement without 
tolls. Hence HOT lanes are politically superior to putting tolls on all 
the lanes in the roadway, which eliminates the choice of traveling 
without tolls on that roadway during peak hours. However, HOT lanes 
should be created only by adding new lanes to the roadway or converting 
HOV lanes, not by converting existing non-toll lanes to HOT lane use.
      Metering Access to Expressways. Metering entry-points 
onto expressways so as to slow entering flows appears to have some 
potential for increasing the average speed during peak hours, according 
to experience in Seattle. However, it may shift some previous 
congestion to lines of people waiting to get onto the expressways 
through the meters.
      Adding Capacity at Specific Bottlenecks. Where traffic 
flows suffer from definite bottlenecks, expanding the capacity of those 
bottlenecks might speed flows over the whole network of which they are 
a part. However, doing this is often difficult technically, and may be 
controversial as well. An example of both problems is the major traffic 
bottleneck created by the San Francisco Bay Bridge.
      Moving Home and Job Closer Together. One tactic an 
individual can use to cut commuting time is moving either home or job 
so they are closer together. This can be quite effective for one 
person, but may be difficult for a household in which more than one 
person works outside the home. It is also difficult in regions with 
very high housing costs, such as the San Jose and San Francisco areas.
Get Used to Traffic Congestion
    No matter what public policies are adopted in response to future 
traffic congestion, it is likely to get worse in nearly all parts of 
the world. So my final advice is: Get accustomed to it. Commute in an 
air-conditioned car with a stereo radio, a tape deck and CD player, a 
hands-free telephone, a micro-wave oven, and a fellow passenger whose 
company you enjoy. Realize that congestion is providing benefits to you 
by rationing the roads you use and letting you pursue other goals 
besides rapid movement. In short, learn to treat being stuck in traffic 
as part of your normal leisure life, because it's here to stay.
                               references
    1. David Schrank and Tim Lomax, The 2001 Urban Mobility Report 
(Texas Transportation Institute, May 2001).
    2. Federal Highway Administration, Our Nation's Travel: 1995 
nationwide Personal Transportation Survey, Early Results Report 
(Washington D.C.: Federal Highway Administration, September 1997).
    3. Anthony Downs, Stuck in Traffic (Washington D.C.: The Brookings 
Institution and the Lincoln Institute of Land Policy, 1992).
    4. Bureau of the Census, Statistical Abstract of the United States: 
2000 (Washington D.C: Government Printing Office, 2001). Data on 
population and vehicle registrations.
    5. Applied Research and Development Facilities and Activities, part 
of Cal Poly Foundation, Evaluating the Operation Impacts of a Variable-
Toll Express Lane Facility in the SR91 Corridor , http://
airship.ardfa.calpoly.edu/sr91/sr91main.htm. An in-depth study of the 
longest-established HOT lanes project in America.
    6. Alan E. Pisarski, Commuting In America II (Lansdowne, Virginia: 
Eno Transportation Foundation, Inc., 1996).
                                 ______
                                 
 Responses of Anthony Downs to Additional Questions from Senator Smith
    Question 1. In your testimony, you restate in different terms the 
TTI estimate of delay from congestion, based on 1999 figures. At the 
hearing, Dr. Lomax of TTI gave updated numbers. Specifically, he 
testified that ``The penalty [from congestion] in areas with 
populations between 500,000 and 3 million increased by 300 percent 
[since 1982] . . . Total hours in travelers in the[se] 76 [largest 
metropolitan] areas were delayed increased from 750 million in 1982 to 
3.6 billion in 2000. Do you have any dispute with that testimony?
    Response. I have not analyzed the Texas Transportation Institute's 
(TTI's) method of computing hourly and dollar costs of congestion in 
detail, and I have great respect for Tim Lomax. So I have no reason to 
dispute his assertions about these costs.

    Question 2. You testified that ``the 'excess' time spent commuting 
does not seem so immense''. In light of Dr. Lomax' testimony, what is 
your opinion of the real dollar cost in lost time and productivity, 
increased insurance premiums, auto maintenance, and collision repair 
for the average rush hour commuter in these 76 areas?
    Response. The reason I said that ``the time spent commuting does 
not seem so immense'' involves dividing TTI's estimates down to their 
daily impact upon individual commuters. For example, he says that 
``total hours of delay in the 76 largest metropolitan areas amounted to 
3.6 billion in 2000.'' In 2000, the 76 largest metropolitan areas (MSAs 
only) contained 160,288,549 residents. In 2000, 46.8 percent of the 
population was employed. If that ratio were true in these 76 areas, 
that would be 75.015 million workers living there. If 90 percent drove 
to work, which is the national average, that would be 67.514 million 
auto commuters (not counting those on buses who would also experience 
congestion). Thus, 3.6 billion hours divided by 67.514 million 
commuters is 51.8 hours per commuter per year in 2000. But there are 
240 working days each year, and 2 commuting trips per day. That is 480 
trips for each commuter. 51.8 hours equals 3,108 minutes. That number 
divided by 480 equals an average of 6.48 minutes of delay per commuting 
trip. That does not seem nearly as immense a figure as 3.6 billion 
hours for the whole year, but it is the same number.
    Furthermore, because people experience commuting delays a little 
bit at a time, it is not clear to me that they could make as productive 
use of this lost time as the totals might imply. 51.8 hours per 
commuter per year is more than an entire work week. But if you saved 
6.48 minutes per trip each day, you would not have one block of more 
time equal to 51.8 hours to use--you would have 480 blocks of 6.48 
minutes each. That is why I believe aggregating these numbers into 
totals exaggerates the real loss that people experience, and the 
alternate uses to which they could in theory put that time.
    I cannot compute the ``real dollar cost in lost time and 
productivity, increased insurance premiums, auto maintenance, and 
collision repair for the average rush hour commuter.'' However, I can 
tell you that the absolute number of automobile accidents in the United 
States has not risen much in recent years, in spite of large increases 
in vehicle miles driven. Thus, from 1990 to 2000, when vehicle miles 
driven in the entire United States rose by 28.6 percent, the absolute 
number of vehicles of all types involved in accidents increased by only 
0.5 percent, and the number involved in fatal accidents declined by 3.7 
percent. So I see no reason that commuting has caused more collisions 
(since there aren't many more collisions) or higher insurance premiums 
or repair costs in the period from 1990 to 2000.

    Question 3. Please quantify, with as much particularity as you are 
able, the detrimental impact on our environment (in terms of air 
quality in the nation's 76 largest metropolitan areas) of traffic 
congestion.
    Response. It is impossible to quantify the detrimental impact of 
traffic congestion in air quality in the 76 largest metropolitan areas 
because that impact varies immensely from one region to another, and 
from one place to another within each region. Air quality is greatly 
influence by local topography, local wind currents, and other factors 
that make any large generalizations about its overall reaction to 
commuting suspect. No doubt congestion does add to the pollutants in 
the air by keeping people in their cars with their motors running 
longer than they would be if there were no congestion.
    But no large metropolitan area in the world can function 
efficiently without traffic congestion during peak periods. Traffic 
congestion is a necessary balancing mechanism in the efficient 
operation of modern life, which requires most people to work during the 
same hours so they can interact easily. Therefore, we need some way to 
ration the limited space on our roads among the many people who want to 
use them at the same time--far more people than they can hold 
simultaneously. There are only two other ways to ration that space: by 
charging money to enter it, and by building so many roads that everyone 
who wants to travel in peak periods can do so without delay. The latter 
is impossible as long as we all work the same hours, because it would 
be immensely costly and turn each region into one giant concrete slab. 
The former is not politically acceptable to Americans. Therefore, we 
have to have congestion to function efficiently, since that requires 
most people in each region to work about the same hours each day.

    Question 4. Please describe, with as much particularity as you are 
able, what you believe to be an acceptable level of environmental 
impact, in terms of air quality, resulting from traffic congestion in 
the nation's 76 largest metropolitan areas.
    Response. I am not an air quality specialist, so I cannot describe 
what is ``an acceptable level of air quality'' resulting from traffic 
congestion. However, I believe the current method of measuring air 
quality in individual regions is not reliable. As I understand it, a 
region's air is considered polluted if it violates pollution standards 
for a tiny percentage of all the observations made in that region 
during an entire year. But I leave this esoteric subject to specialists 
in the relevant regulatory agencies--especially the Environmental 
Protection Agency--who understand it better than I do.

    Question 5. For those of us not so sanguine about traffic 
congestion as the view expressed in your testimony that ``in effect, 
congestion is a balancing mechanism that enables us to pursue many 
other goals beside rapid movement'', would you please describe, with as 
much particularity as you are able, all of the detrimental/deleterious 
effects to our society from traffic congestion?
    Response. Congestion does cost people time lost sitting in traffic, 
but that is the price they are willing to pay for being able to pursue 
other goals they prefer over getting to work sooner. Those goals 
include having a wide choice of places to live and work, being able to 
perform more than one purpose on a single trip, working at the same 
time as other people for the efficient operation of the economy, buying 
lower-cost homes that are located far out, living in low-density 
settlements, and working in scattered low-density workplaces. If many 
people really placed a huge value on minimizing the time they spent 
commuting, they would move closer to their jobs, or take jobs closer to 
where they work, or move to smaller regions where congestion is low. 
Some do, but most do not because they still prefer pursuing other goals 
over minimizing their commuting time.
    Congestion also increases air pollution and consumes more fuel than 
would be the case if there were no congestion. But we cannot live in 
large-scale settlements without peak-hour congestion, for reasons set 
forth above. If Congress were really interested in conserving fuel and 
reducing air pollution, it would substantially raise gasoline taxes, as 
most other developed nations have done. But Congress is clearly not 
very interested in reducing fuel consumption or air pollution if doing 
so would incur political costs, which it would because the members know 
that many Americans would object. Most Americans are not interested in 
reducing national fuel consumption or air pollution either--if doing so 
would cost them more, which it would.
    Long congestion also makes people irritable and increases tension. 
This is more likely on days when congestion is unexpectedly long 
because of some unusual incident than on typical days, because people 
get used to their ``normal'' delays.

    Question 6. In your testimony, you assert that we cannot ``build 
our way out of congestion'' because drivers will divert to newly 
expanded roads with better travel times, or expanded roads may attract 
new development, thus generating more traffic. This phenomenon is often 
referred to as ``induced traffic.'' How would you describe the positive 
social benefit of ``induced traffic'' in terms of increased mobility or 
congestion?
    Response. ``Induced traffic'' usually means that, if more roads are 
built, more development will take place along those roads, increasing 
the traffic flows on them. That is different from the ``Principle of 
Triple Convergence,'' which states that expanding the capacity of a 
freeway that is already experiencing peak-hour overloading will cause 
people who are already traveling in some other manner to shift onto the 
expanded freeway during peak hours from (1) other routes, (2) other 
times, and (3) other modes, such as transit. Such shifting will 
continue until the freeway is just as overloaded as it was before the 
capacity gain, although the peak period may be shorter and more cars 
will be able to move on the freeway during that period. Thus, ``induced 
traffic'' refers to the creation of additional traffic from people who 
are not present today; whereas the ``Principle of Triple Convergence'' 
refers to people who are already commuting but would rearrange their 
behavior in response to more freeway capacity.
    ``Induced traffic'' is one way of looking at the result of building 
roads out into vacant land around a metropolitan area. The existence of 
the roads makes living in those now-vacant areas more convenient, 
thereby encouraging developers to build housing and other improvements 
along those roads. This provides a social benefit to the people who 
occupy that housing or use those other improvements. In fact, it is 
impossible to avoid creating ``induced traffic'' in areas experiencing 
rapid population growth, which usually occurs at the edge of each 
region. As more people occupy homes there, a need arises for more roads 
to serve them--as will surely be the case in the next 20 years in the 
U.S. But when those roads are built, that encourages still more people 
to move there. But, after all, those more people will have to live 
somewhere. ``Induced traffic'' is thus an almost inescapable 
accompaniment to population growth. Stopping ``induced traffic'' would 
require stopping most future growth, or at least growth in outlying 
areas. But that is not consistent with the likely future growth of the 
United States at over 1 percent per year.
    Senator Smith's questions display some frustration about the idea 
that congestion is a necessary and inescapable part of modern life in 
large metropolitan areas. But it performs a vital social function--that 
of rationing road space during peak hours. I sympathize with that 
frustration, which is only natural in light of increasing congestion. 
But alternatives to rising traffic congestion--such as road pricing or 
raising gasoline taxes sky high--are understandably unpalatable to 
Congress.
    As our society gets more populous, our traffic congestion is going 
to get worse because we are not willing to adopt those measures that 
would prevent it from doing so. Most Americans accept rising congestion 
as better than those alternative measures, although they like to 
complain about the resulting congestion. But it is futile to rage 
against rising congestion if we are not willing to pay the price of 
adopting those policies that would prevent congestion from rising. The 
only other alternative is to halt the nation's population growth. But 
we cannot stop babies from being born or people from crossing our 
border into the United States without also adopting policies that we do 
not regard as acceptable. So rising congestion is inescapable under 
present political and economic conditions. That is why I urge people to 
get used to it, and learn to enjoy it as best they can!
                               __________
   Statement of C. Kenneth Orski, Editor/Publisher, Innovation Briefs
    Mr. Chairman, members of the committee: My name is C. Kenneth 
Orski. I am editor and publisher of Innovation Briefs, a bi-monthly 
publication which has been reporting and interpreting developments in 
the transportation sector for the past 13 years. Innovation Briefs, I 
am pleased to say, has a wide and influential audience that includes 
congressional staffs, Federal, State and local transportation 
officials, newspaper editors, business leaders, association executives, 
and transportation professionals. My testimony today is based on 
observations acquired in the course of gathering and analyzing 
information for our publication. These observations draw on recent 
briefings and conference presentations, and on interviews and personal 
communications with members of the transportation community in 
Washington, and with State and local transportation officials across 
the country.
    My overall conclusion is that we enter this reauthorization cycle 
with fewer issues that might divide the transportation community, and 
with a larger measure of a consensus among major stakeholders than at 
any other time in recent history. Unlike the last reauthorization 
cycle, when interest groups jockeyed for position and floated a number 
of competing proposals, this time around I find near-universal 
sentiment that we ought to buildupon the combined legacy of ISTEA and 
TEA-21rather than engage in a bruising fight to reinvent the Federal 
surface transportation program. To be sure, there will be some 
proposals for changes, but these are likely to be refinements to 
program delivery rather than radical changes in the program structure 
itself.
    Turning to specifics, I discern a large degree of consensus within 
the transportation industry and among major stakeholder groups on 
several policy directions:
Protecting the Highway Trust Fund
    There is unanimous agreement, I believe, that the budgetary 
``firewall'' protections and the principle of guaranteed minimum levels 
of annual spending should be preserved. At the same time, everyone 
recognizes that some refinements in the RABA formula will be necessary 
in order to prevent dramatic year-to-year swings in highway funding, 
such as occurred this year.
Increasing Program Flexibility
    Similarly, there appears to be much support for greater program 
flexibility, i.e. giving Federal-aid recipients greater freedom to 
transfer funds between major programs and between sub-categories within 
programs. While a good deal of flexibility already exists, there is 
support for clarifying and enhancing this flexibility, perhaps by 
reducing the number of existing set-asides and sub-allocations.
Congestion Mitigation
    Traffic congestion is viewed by all as a serious national problem 
that requires a national response. There appears to be a large measure 
of consensus within the transportation community that the response 
should include both capacity expansion and improvements in the 
operation of existing facilities--although opinions among stakeholders 
differ as to the proper balance to be accorded to these two major 
traffic mitigation strategies. My own belief is that, while operational 
strategies can help to some extent to reduce congestion due to 
accidents and vehicle breakdowns (the so-called ``non-recurrent'' 
congestion), only additional highway capacity, in the form of new lanes 
and design changes, can decrease or eliminate recurrent bottlenecks 
caused by too many vehicles trying to squeeze into too few highway 
lanes. Proponents of the ``you-can't-build-your-way-out-of-traffic-
congestion'' school of thought seem to ignore the fact that additional 
highway lanes, even if eventually they do fill up with traffic, help to 
accommodate increased population growth and economic development. After 
all, schools and hospitals in areas of rapid growth also eventually 
fill up with students and patients, yet this never has stopped us from 
building more schools and more hospitals to fill growing demand.
    A comprehensive Federal attack on the problem of traffic congestion 
might take the form of a specific ``bottleneck reduction'' program 
(along the lines suggested by the American Highway Users Alliance), 
supplemented by a program of operational improvements designed to 
squeeze more capacity out of existing facilities. Bottleneck reduction 
can often be achieved without major new construction by eliminating the 
sources of traffic flow instability, such as inadequate acceleration 
and deccelertion lanes, and lane constriction (e.g., three lanes of 
traffic funneling into two lanes.) Operational improvements would rely 
heavily on the application of advanced intelligent transportation 
system (ITS) technologies, to strengthen emergency response, improve 
detection and clearance of accidents (incident management), promote 
wider dissemination of real-time weather and traffic information to the 
traveling public, improve work zone management and establish more 
regional Traffic Management Centers.
Environmental Streamlining
    Simplifying and accelerating the process of highway project review 
and approval is viewed as a critical priority by large segments of the 
transportation community . While current efforts of the Federal Highway 
Administration to streamline procedures through administrative action 
are commendable, the transportation community, I believe, is looking to 
Congress to provide more explicit legislative directions to reduce the 
delays that have plagued the project implementation process. Issues 
that call for congressional resolution include establishing uniform 
ground rules and timelines for dispute resolution; further reducing or 
eliminating the Federal review process for minor projects; setting 
maximum time limits for federally required reviews for major projects; 
clarifying responsibilities and requirements under NEPA in Section 
4(f); and giving States and localities greater authority to sign off on 
environmental reviews through self-certification.
    The environmental community's position on environmental 
streamlining reforms is not clear at this time. To my knowledge, no 
overt opposition to expediting the project approval process has been 
expressed by environmental groups so far, perhaps because 
transportation officials have been careful to stress that advocacy of 
environmental streamlining should not be construed as an attack on 
environmental values, and that project delivery can be streamlined 
without hurting the environment.
Intelligent Transportation Systems (ITS) Program
    Continued Federal support of the ITS program remains a high 
priority for large segments of the transportation community. Specific 
objectives advocated by the ITS community include initiatives to 
encourage regional partnerships for coordinated ITS operations; 
deployment of ITS technology to enhance highway operations and to 
increase the efficiency and security of intermodal freight movement; 
and programs to expand freeway and arterial monitoring instrumentation 
in metropolitan areas (currently, only 22 percent of the urban freeway 
network and virtually no arterials are instrumented). Another 
frequently mentioned idea is the creation of a national 
``infostructure'' network, capable of collecting and sharing 
transportation system condition and performance information covering 
the entire national highway system. Such a national communication 
network could become an integral and vital part of a homeland security 
infrastructure, available in times of national emergency for evacuation 
and mobilization purposes.
Transit Issues: Bus Rapid Transit (BRT)
    Increased funding, especially for New Starts, is likely to dominate 
the transit industry's reauthorization agenda. According to the latest 
Annual Report on New Starts published by the Federal Transit 
Administration, there are some 50 rail projects in preliminary 
engineering or final design. These projects represent a potential 
demand of $30-35 billion. Another several dozen projects, worth $70-75 
billion, are in the alternatives analysis stage. While the transit 
industry is not expected to seek funding for all these projects, this 
begins to define the level of future demand for new starts projects in 
the eyes of the transit community.
    Carving out a bigger role for Bus Rapid Transit (BRT), which is now 
undergoing a series of demonstrations, could significantly reduce the 
need for transit capital funding. According to the General Accounting 
Office, Bus Rapid Transit shows promise of offering a level of service 
comparable to that of light rail transit (LRT) at a fraction of their 
cost (an average of $9 million/mile for BRT vs $34.8 million/mile for 
LRT--Report GAO-01-984). Many transit experts believe that Bus Rapid 
Transit could lead to a new generation of more flexible, less expensive 
New Starts.
High Occupancy/Toll (HOT) Lane Networks
    However, for Bus Rapid Transit to offer service quality comparable 
to that of rail (and to make it eligible for New Starts funding) the 
buses must be able to run in reserved lanes that are congestion-free 
even in peak periods. This has led to proposals to convert and expand 
existing stretches of HOV lanes into seamless networks of high 
occupancy/toll (HOT) lanes in major metropolitan areas. The HOT lanes 
would be open to buses and carpools without charge and to single-
occupant cars for a fee. By varying the fee according to demand with 
the help of electronic transponders (as is already being done on the I-
15 HOT lanes in San Diego), the number of single-occupant cars seeking 
entry to the HOT lanes could be restrained to maintain free-flowing 
traffic conditions at all times, thus ensuring the integrity of the Bus 
Rapid Transit concept. Funds to develop and operate the HOT lane 
networks could come from a combination of existing Federal-aid highway 
funds, a New Starts BRT set-aside, and tolls collected from single-
occupant vehicles using the reserved lanes.
    Surveys of motorists on the SR 91 Express Lanes in Orange County 
show that people of all income levels choose to use the toll lanes when 
saving time is really important to them. Indeed, a utility van or a 
pickup truck is a far common sight on California's HOT lanes than a 
Lexus. A recent study of the High Occupancy/Toll lanes on I-15 north of 
San Diego indicates that public opinion strongly favors priced lanes 
that offer the option of a faster and more reliable trip. As existing 
urban freeways become more and more congested and as travel on them 
becomes increasingly slower and less reliable, I believe there will be 
plenty of people and businesses willing to pay for the privilege of 
traveling in congestion-free lanes. Such HOT networks would benefit not 
only individual travelers, freight movers and goods deliverers who need 
a fast and reliable way to reach their destination, but also users of 
general purpose lanes, which would become less congested as some 
traffic switched to the toll lanes. In my judgment, a congressionally 
authorized program of HOT Lane networks-built as enabling 
infrastructure for Bus Rapid Transit but also available as a paying 
option to individual drivers who seek a faster and more reliable trip-
would be an eloquent expression of the increasingly intermodal nature 
of our Federal surface transportation program.
``Essential Intercity Bus Services''
    While the subject of Amtrak and intercity transportation falls 
outside the scope of this hearing, there is one aspect of it that may 
be of potential concern to this committee. The restructuring of Amtrak 
and the potential abandonment of some of its unprofitable intercity 
rail corridors, may create serious mobility deficiencies in many 
communities across America. One solution would be to establish a 
network of intercity buses to take the place of the discontinued train 
services. The bus network would connect small towns and rural 
communities to regional airports and to transportation hubs in larger 
cities. The bus services could be run by private carriers and, where 
necessary, supported by Federal subsidy payments modeled after the 
congressionally authorized ``essential air services'' program (49 
U.S.C. 41731). Essential air services have been maintained with Federal 
subsidy support at approximately 100 communities affected by airline 
deregulation. I believe a similar approach could restore mobility to 
hundreds of communities threatened by possible cutbacks in intercity 
rail service.
Long Term Viability of the Trust Fund
    Finally, I detect a growing concern within the transportation 
community about the long term capacity of the Highway Trust Fund to 
finance the nation's future transportation needs. The preponderance of 
opinion is that the growth in gasoline tax revenue will not keep pace 
with the rising demand and cost of highway preservation, reconstruction 
and rehabilitation. A growing use of ethanol-based fuels (its use 
jumped 28 percent in 2001) and the long range impact of hybrid and fuel 
cell vehicles is expected to further diminish the prospects for gas tax 
revenue sufficiency. In the short run, shifting ethanol tax receipts 
from the general fund to the Highway Trust Fund might ease the 
situation somewhat. But looking beyond the next reauthorization cycle, 
we may have to consider entirely new approaches to Federal 
transportation program financing. Hence, I join other transportation 
leaders in urging a congressionally mandated study to explore 
alternative financing mechanisms that would offer a stable and adequate 
long-term source of transportation financing.
    This concludes my testimony. Thank you for the opportunity to 
present my views.
                                 ______
                                 
 Response of C. Kenneth Orski to Additional Question from Senator Smith
    Question. Would you please discuss in greater detail your thoughts 
on HOT lanes. What I am most interested in are your thoughts as to how 
such a concept can be employed on a nation-wide scale in our bill next 
year reauthorizing the Highway Trust Fund and surface transportation 
programs.
    Response. HOT Lanes and Bus Rapid Transit are two key ideas on 
which we should build a new urban transport policy for the 21st 
century. The first offers urban motorists an option of faster, 
congestion-free travel, while the second promises effective mass 
transit service at a fraction of the cost of new rail starts. Combined, 
they offer a powerful new approach to improving urban mobility.
HOT Lanes
    High-Occupancy/Toll (HOT) lanes are limited-access lane which high-
occupancy vehicles (carpools and buses) are allowed to use for free 
while other vehicles gain access to them by paying a variable toll. The 
lanes are ``managed'' through pricing so as to maintain free-flow 
conditions even during the height of rush hours. HOT lanes have been in 
operation for several years in Orange County (the SR91 Express Lanes) 
and San Diego County (converted HOV lanes on I-15). More than a dozen 
other HOT lane projects are in the planning process in places like 
Dallas, Denver, Houston, Miami and Silicon Valley .HOT lanes have been 
endorsed by the Environmental Defense Fund and other environmental 
groups as an innovative transportation concept that offers benefits to 
all users of a congested corridor-carpoolers and transit riders as well 
as automobile users.
Bus Rapid Transit
    Bus Rapid Transit (BRT) refers to high-capacity bus transit along 
major corridors, aiming to match the capacity and level of service of 
rail transit while adding the inherent flexibility of buses. For Bus 
Rapid Transit to offer service quality comparable to that of rail, 
buses must be able to operate in limited access, congestion-free lanes. 
The best examples of high capacity BRT systems are Curitiba, Brazil and 
Ottawa's Transpo where buses travel on separate dedicated busways. In 
the U.S., bus rapid transit, as currently promoted by the Federal 
Transit Administration, includes express-bus service on major streets 
with traffic-signal preemption, on exclusive bus lanes on arterials, 
and on freeway HOV lanes. The metro area that has done the best job 
marrying express buses with HOV lanes is Houston.
    Carving out a bigger role for Bus Rapid Transit (BRT), which is now 
undergoing a series of demonstrations, could significantly reduce the 
need for transit capital funding. According to the General Accounting 
Office, Bus Rapid Transit shows promise of offering a level of service 
comparable to that of light rail transit (LRT) at a fraction of their 
cost (an average of $9 million/mile for BRT vs $34.8 million/mile for 
LRT--Report GAO-01-984).
    BRT is rapidly picking up support within the transit community, 
which realizes that only a small number of communities have the fiscal 
capacity to support costly rail projects and that the Federal New 
Starts program can only fund a small fraction of the rail candidate 
projects. Bus Rapid Transit is seen as ushering in a new generation of 
less costly New Starts and extending the benefits of rapid transit to a 
much larger number of communities. In the San Francisco Bay Area, both 
the Metropolitan Transportation Commission and the grass-roots Bay Area 
Transportation and Land Use Coalition have been advocating much greater 
use of express buses as an alternative to multi-billion dollar rail-
transit expansion.
HOT Networks
    Instead of building isolated HOV or HOT lanes on a handful of 
freeway segments, the new strategy would involve creating seamless, 
region-wide networks of HOT lanes, including connectors at major 
freeway interchanges. A metro-area-wide HOT Network could remain 
congestion-free at all times thanks to variable pricing. The HOT 
network would become, in effect, a system of fixed guideways for high-
speed BRT, giving express buses a speed advantage over buses using 
congested freeway lanes. At the same time, the HOT network would 
provide a faster travel option for motorists for whom time savings are 
really important. Tolls would be debited electronically from the users' 
smart cards, thus doing away with toll booths and cash transactions. 
Funds to develop and operate the HOT lane networks could come from a 
combination of existing Federal-aid highway funds, a New Starts BRT 
set-aside, and local funds in the form of tolls collected from single-
occupant vehicles using the reserved lanes.
Equity Issues
    Some people have questioned whether solo motorists should be 
allowed, as a matter of public policy, to ``buy their way out'' of 
congestion. Surely, the answer must be ``yes''. There is nothing 
intrinsically unfair about paying for access to a higher level of 
service in our market-based economy. After all, money buys better 
service in every other aspect of our lives, including transportation. 
We pay higher prices for first class travel in planes. Door-to-door 
taxi service costs more than slower and less convenient public 
transportation. Even Amtrak, a publicly supported carrier, offers 
different classes of service. Why, then, should we insist on having a 
one-size-fits-all level of highway service?
    Nor is it just the highly paid professionals that would benefit 
from priced lanes, but anyone for whom time is a precious commodity. 
That includes many ordinary people, such as workers whose job depends 
on always being on time, parents racing to get to a daycare center 
before the late fee kicks in, and repairmen anxious to fit in one last 
appointment in a busy day. Surveys of motorists on the SR 91 Express 
Lanes in Orange County, CA show that people of all income levels choose 
to use priced lanes when saving time is really important to them. 
Indeed, a utility van and a pickup truck are a far more common sight on 
California's HOT lanes than a Lexus or a BMW.
    A new study of the High Occupancy/Toll lanes on I-15 north of San 
Diego indicates that public opinion strongly favors priced lanes that 
offer an option of a faster and more reliable trip. A survey conducted 
by Wilbur Smith Associates in the fall of 2001 found that, by a 91 
percent to 7 percent margin, I-15 users think it's a good idea to have 
a timesaving travel option. Surveys in Washington State have reached 
similar conclusions.
    This suggests that paying for the use of lanes (or roads) that 
offer a premium level of service may become an accepted practice in the 
years ahead. As existing urban roads become ever more congested and as 
highway travel becomes increasingly slower and less reliable, there 
will be more and more people and businesses willing to pay for a chance 
to travel on congestion-free lanes.
    In sum, the HOT Networks approach presents a situation where 
everyone wins. Transit riders would win because many cities that could 
not justify or would not qualify for new rail starts, would be able to 
implement effective region-wide express bus service. Individual 
motorists would benefit by having the option of faster and more 
reliable travel on a network of congestion-free lanes when saving time 
is really of importance to them. Users of regular lanes would gain 
because regular lanes would become less congested as some motorists 
switched to the toll lanes. And, importantly, HOT lanes would provide a 
revenue stream that could be used to finance the local share of the 
cost of new lanes.
    A congressionally authorized program of High Occupancy/Toll (HOT) 
networks-built to benefit motorists and transit users alike-would 
constitute an eloquent expression of the increasingly intermodal nature 
of our Federal surface transportation program.
    Note: an in-depth study of HOT Network feasibility is currently 
underway at the Reason Policy Institute under the direction of Robert 
Poole, the Institute's Transportation Director. The study is expected 
to be completed in early autumn.
                                 ______
                                 
  Responses of C. Kenneth Orski to Additional Questions from Senator 
                                 Graham
    Question 1. Constituents are frustrated with ITS Message Boards 
that merely flash the news ``Congestion Ahead.'' What have been the 
best examples you've seen of information sharing to commuters that was 
time--sensitive and meaningful?
    Response. I share your constituents' frustration with meaningless 
(``Have a Nice Day'') or obvious (``Congestion Ahead'') messages on 
electronic variable message boards. In partial defense, let it be noted 
that, because of their relatively small size, there is not enough room 
for detailed, informative messages. However, a far better job of 
informing the traveling public is done on the Internet, where web sites 
run by State and local transportation agencies display color-coded maps 
indicating up-to-the-minute levels of congestion on the highway 
network. Many such web sites also provide camera images of congestion 
``hot spots,'' alert motorists about work zones and lane closures, and 
give estimated trip time between origin-destination pairs on the 
highway network. Good examples of effective traveler information web 
sites are those of the city of Houston (traffic.tamu.edu), the 
Washington State DOT (www.wsdot.wa.gov/traveler) and the Arizona State 
DOT (www.azfms.org).
    The obvious weakness of the Internet as a medium of time-sensitive 
traveler information is that the information can only be accessed 
before getting into the car. Since traffic conditions can change 
rapidly, such ``pre-trip'' information is often out of date by the time 
the motorist reaches a reported scene of an accident or congestion 
bottleneck. This explains the continued popularity of ``drive-time'' 
traffic reports on the radio. Despite their alleged shortcomings 
(spotty, not frequent enough, covering only key corridors) commercial 
broadcasters still do the best job of keeping drivers currently 
informed of traffic conditions and incidents. This may change in the 
years ahead, as cars become equipped with wireless telematic terminals 
that can display Internet-based messages and congestion maps. A 
widespread use of in-vehicle telematics, however, is still 5-10 years 
away, according to industry estimates.

    Question 2. I have been concerned that the ITS deployment money in 
Transportation Appropriations has recently been focused on areas that 
are not identified in TTI's list of most congested cities. Your 
testimony mentions that only 22 percent of the urban freeway network is 
instrumented--do you share the concern that we have a lot more research 
to do in urban use of ITS?
    Response. The fact that only 22 percent of the urban freeway 
network (and hardly any urban arterials) has been instrumented can be 
attributed to several factors: the high cost of installing electronic 
detection equipment (loop detectors, optical sensors, ``radio 
cameras'', closed circuit video cameras, etc); the tendency to spend 
available Federal money on elaborate Transportation Management Centers 
rather than on roadway instrumentation; the desire to promote rural as 
well as urban applications of ITS; and a reluctance by local and State 
governments to give priority to ITS implementation given the many other 
demands on their highway resources. I agree that highly congested urban 
areas deserve priority attention in the allocation of scarce Federal 
ITS deployment funds-because that's where the potential payoff for ITS 
clearly is the greatest.
                                 ______
                                 
  Responses of C. Kenneth Orski to Additional Questions from Senator 
                                Jeffords
    Question. In your oral testimony, in summarizing the ``policy 
directions and new initiatives'' for reauthorization that enjoy 
widespread consensus among stakeholders, you include ``the need for 
increased flexibility.'' Would you elaborate on this. In what respects 
is the current program insufficiently flexible? How would increased 
flexibility influence outcomes?
    Response. While there already is considerable freedom to move funds 
within the Federal-aid highway program and between highways and 
transit, we do continue to hear calls for more flexibility. The calls 
come primarily from those who would like to see an end to most 
categorical set-asides and congressional earmarks, on the theory that 
set asides and earmarks deprive State and local decisionmakers of the 
flexibility and discretion to allocate resources according to their own 
notions as to where the resources can do the most good. While one can 
take issue with this position, the fact remains that calls for 
``greater program flexibility'' can be found in a number of 
reauthorization-related position statements, among them, those of APTA 
(``preserve and enhance the flexibility for highway and transit 
programs . . .''); AASHTO (``encourage greater flexibility in 
transferring Federal funds''); ARTBA (increase flexibility within the 
Surface Transportation Program); and STPP.

    Question 2. Your analogy between hospitals and roads assumes that 
the objective is both health care and transportation is to meet an 
ever-increasing demand that is based solely on population growth. The 
trouble with this analogy is that the need for hospital beds, or roads, 
is not primarily based on population growth, but depends on many other 
factors. In health care, the level of general public health determine 
how many people need hospitalization.
    Response. In transportation, the general accessibility level of the 
community helps determine whether people need to drive to reach every 
destination. In fact, what we are seeing is a growth in driving that is 
far outpacing population growth. For example, Texas Transportation 
Institute figures show that in Atlanta, the population grew 36 percent 
between 1990 and 1999, while the amount of driving grew by 64 percent. 
The distance driven by the average American in that time period 
increased by 24 percent. If more roads are not inducing more travel, 
what is the cause of this impressive increase in driving?
    In my testimony I stated that ``proponents of the 'you-can't-build-
your-way--out-of-traffic-congestion' school of thought seem to ignore 
the fact that additional highway lanes, even if eventually they do fill 
up with traffic, help to accommodate increased population growth and 
economic development.'' There are, of course, other factors, besides 
population growth, that have contributed to the rapid increase in 
vehicle-miles-of-travel (VMT) in recent times. For example, according 
to the 2000 Census, metropolitan densities have dropped by more than 20 
percent nationwide between 1982 and 1997 and this has led to a greater 
dispersal of homes and jobs, and longer commutes. Of the 281 
metropolitan areas in the Nation only 17 have become more dense during 
the decade of the 1990's; all the other 264 metro areas have 
decentralized, according to the 2000 Census. Another factor responsible 
for a rapid increase in VMTs is the growth of two-worker households. 
Today, chances are that both the husband and the wife drive to work, 
thus doubling the work-related VMTs of ``traditional'' households of an 
earlier era..
    However, work trips are not solely responsible for the dramatic 
increase in VMTs. After all, they only constitute about 25 percent of 
total daily travel. Personal business trips, shopping and social/
recreational trips have actually experienced a more rapid growth. Both 
types of trips are a reflection of a higher rate of economic activity, 
a rising standard of living and their high contribution to VMTs is a 
function of the dispersed housing location which cannot be easily 
served by public transit.
    Like hospital beds and school classrooms, roads fill up because of 
many other factors besides population growth. But, while we are not 
reluctant to meet growing demand for hospital beds and classrooms, we 
seem to apply a different standard to meeting highway demand.
                               __________
    Statement of Frederick Salvucci, Civil Engineer specializing in 
   Transportation, with particular interest in infrastructure, urban 
transportation, public transportation, and institutional development in 
                            decisionmaking.
Biographical Sketch
    Most of his career has been in the public sector, having served as 
transportation advisor to Boston Mayor Kevin White between 1970 and 
1974, and then as Secretary of Transportation of the Commonwealth of 
Massachusetts under Governor Michael Dukakis between 1975 and 1978 and 
again from 1983 to 1990. In those roles he has participated in much of 
the transportation planning and policy formulation in the Boston 
urbanized area and the Commonwealth of Massachusetts over the past 20 
years, with particular emphasis on the expansion of the transit system, 
the development of the financial and political support for the Central 
Artery/Tunnel Project, and the design of implementation strategies to 
comply with the Clean Air Act consistent with economic growth. Other 
efforts include the extension of the Red Line in South Quincy and 
Alewife, the relocation of the Orange Line in Boston's Southwest 
Corridor, the acquisition and modernization of the Commuter Rail 
Network, the restructuring of the MBTA, the formulation of noise rules 
to halt the increase in aircraft noise at Logan Airport, the 
development of strategies to achieve high speed rail service between 
Boston and New York, and the planning for the redevelopment of the Park 
Square section of Boston through the location and construction of the 
State Transportation Building there.
    More recent activities have included participation in a 
restructuring of commuter and rapid transit services in Buenos Aires, 
Argentina, using concession contracts with private-sector companies 
(the new system has improved both efficiency and effectiveness); 
participation with the Volpe Center in a review of the transportation 
planning process in US metropolitan areas of over 1 million people, and 
participation in an innovative research and educational collaboration 
with the University of Puerto Rico and the Puerto Rico Highway and 
Transportation Authority, focused on the development of a new transit 
system for San Juan, Puerto Rico. The project, called Tren Urbano, is 
the first design-build-operate system in the United States. Mr. 
Salvucci is also a key participant in a new major MIT research project 
with the Chicago Transit Authority, patterned on the Tren Urbano 
program.
    Mr. Salvucci teaches courses in Urban Transportation Planning, 
Institutional and Policy Analysis, and Public Transportation. He 
attended MIT as both an undergraduate and graduate student of Civil 
Engineering, earning his Bachelor of Science in 1961 and his Master of 
Science in 1962. International education includes a year at the 
University of Naples as a Fulbright Scholar from 1964 to 1965, studying 
the use of transportation investment to stimulate economic development 
in high poverty regions of Southern Italy.
Introduction
    First, let me thank the committee for the extraordinary opportunity 
to participate in your consideration of the needs to be addressed in 
the process of reauthorization of Federal Surface Transportation 
Funding. Let me share with you my views on some key emerging issues, 
based on my experience as a City and State transportation official in 
Boston, Massachusetts, and more recently as an academic researcher at 
the Massachusetts Institute of Technology.
A. Emerging issues
    As we anticipate the reauthorization process for the surface 
transportation bill, I believe this is a useful time to step back and 
re-examine the evolution of the Federal program since 1956, and the 
changing needs of the Nation.
    The initial impetus of the program, to create a national highway 
infrastructure, has substantially been accomplished. The mechanism of 
high Federal matching ratios for capital investment, stable and 
reliable funding, clear Federal policy guidelines, and implementation 
decentralized to the State government level, has been very successful 
at creating an ubiquitous high-quality highway network. As this primary 
objective has been substantially achieved, the program has evolved to 
include funding for complementary modes such as transit and the urban 
system, and to issues of management of operations and maintenance 
(ITS). These shifts have required more complicated planning and 
environmental procedures and institutional requirements, with transit 
authorities, metropolitan areas and cities, and sister agencies with 
environmental and public health responsibilities, playing important 
roles, in addition to State highway departments. Persistent issues of 
congestion, especially in suburban areas, continue to generate 
intractable problems at the interface of transportation performance, 
economic growth, land use, and environmental quality. Moreover, as the 
system ages, deteriorating physical condition of old infrastructure 
gives rise to the need for reconstruction, or redevelopment of old 
urban infrastructure in complex urban environments. The Big Dig in 
Boston is perhaps an extreme example of the cost and complexity of this 
challenge, and is indicative of challenges ahead in a very large number 
of urban areas. The need to renew and expand the bridges and tunnels 
that serve Manhattan, compounded by the tragedy of September 11, is 
perhaps the most vivid example, but dealing with the earthquake damaged 
infrastructure in West Coast cities such as Seattle is likely to be 
similarly challenging. The vulnerability of the air traffic system 
exposed by the September 11 tragedy was already becoming obvious 
because of the growing airport congestion, and poses the question of 
the need for complementary intercity rail services and improved 
``ground access'' to airports.
    Finally, the unglamorous question of proper maintenance of the 
existing highway network is perhaps becoming more important to the 
national interest than the further expansion of the network.
    I believe that our democratic political system will and should 
translate these emerging problems into a demand to be as innovative and 
creative with new national initiatives as were the founders of the 
Interstate system.
    My suggestions to anticipate and deal with these emerging issues 
are these:
    (1) Establish a new program to federally fund the cost of operating 
and maintaining the existing national highway system, with clear 
Federal guidelines and policies for planning, but a decentralized 
structure to allow local flexibility for implementation. A pay-as-you-
go incentive of 1/3 Federal, 2/3 State funding would, in my judgment, 
be adequate to create substantially more attention and sophistication 
to this unglamorous but vital activity.
    (2) Develop a new category of funding for the rebuilding and 
redevelopment of old infrastructure and mega-projects. This will be a 
very expensive undertaking, but one that is essential to the economic 
health of the Nation. It will require high Federal matching ratios to 
be affordable at the State and local levels, and will require planning 
and financial mechanisms similar to those of the Interstate program. 
Early costs are likely to be modest because of the long lead times 
often involved, and some national planning will be required to even 
develop realistic national cost estimates.
    (3) Develop a new initiative to prioritize access to airports, 
particularly for truck movements which are increasingly trapped in 
congestion, with severe economic consequences. Again, the early costs 
are likely to be modest because of lead time, but eventual costs will 
be high, and require high Federal matching ratios.
    (4) Develop a new program to provide Federal funding for improved 
paratransit services. The dramatic growth in the aging population is 
creating a mobility demand far in excess of the ``interim'' services 
for the elderly and disabled provided by transit authorities for 
systems which are not fully accessible. The growing need extends well 
beyond the extent of many transit providers, and as transit systems 
become physically accessible they could theoretically withdraw the 
current limited services. To deal with this emerging issue at an 
adequate level requires that it be viewed as a responsibility of the 
entire transportation system (not just inaccessible public 
transportation systems) and that it receive reliable Federal funding, 
not be imposed as an unfunded Federal mandate. A 50-50 Federal share of 
costs is probably adequate to motivate the level of effort required, 
but the unserved need is great and growing, so the (Federal and State) 
funding needs will grow substantially as organizational capacity to 
serve the need improves.
    (5) Understand and anticipate increased funding requirements for 
complementary systems such as transit, intercity rail, elderly and 
disabled access, and recognize that aviation funding authorizations 
will be considered in the same timeframe as surface transportation 
reauthorization.
(B) Implementation Considerations
    For all of these emerging needs, an expanded and restructured 
financial base will be required, and it is important to consider the 
political and financial context of reauthorization.
    The Federal role in transportation has been evolving based on a 
combination of three factors:
    (1) the changing needs of the Nation as a whole,
    (2) The narrower needs of the transportation public agencies at the 
State, metropolitan, and local level, and
    (3) the needs of the transportation construction industry whose 
economic viability is strongly affected by Federal transportation 
authorizations and appropriations.
    In many ways the evolution of the Federal program has been shaped 
by these three forces, particularly in the recent history of the 
program (1990 to the present), and the challenge facing the re-
authorization process of 2003. In order to balance these three 
considerations, the Congress has periodically increased Federal funding 
through increases in the gasoline tax so that ``new'' issues can be 
addressed without weakening existing programs, but the President 
appears unlikely to support this approach in 2003.
    I believe that the successful balancing of these three 
considerations in 2003 could best be achieved by reconsidering three 
major features of the Federal program:
    (1) If the pay-as-you-go philosophy, established by Eisenhower, 
were partially replaced by a capital budget bonding approach, similar 
to that used by every State government, the existing tax revenue 
streams could support a major expansion of program to meet changing 
national needs and allow expansion for all transportation agencies and 
the transportation construction industry, while deferring the need to 
increase gasoline taxes. If one-third of the existing revenue streams 
were to be used for debt service, the program size could expand, so 
that over the next 6 years, instead of approximately $145 billion it 
would be possible to invest approximately $175 billion, approximately a 
20 percent increase. While OMB would oppose this possible change (as it 
has in the past) it would have major economic benefits to the Nation by 
allowing increased investment now, producing both short-term economic 
stimulus, and long-term economic growth, within the existing tax 
constraints.
    (2) If the State and local matching ratios were increased beyond 
the 20 percent ratio now favored, national program size would increase, 
and State and local accountability would grow, easing the burden on 
Federal oversight somewhat. Traditional thinking has favored very low 
State and local matching ratios based on the precedent of the 90/10 
ratios of the Interstate highway program and the strength and 
popularity of that program, and the very simple political task of 
building State and local political will to raise 10" to attract 90". 
But it is still a bargain to raise 33" at the local and State level and 
get 67" from the Feds, and you ``leverage'' a somewhat larger program, 
with more fiscal discipline at the State and local level.
    (3) If the focus of the Federal role were shifted from capital 
investment to include a larger component for operation and maintenance, 
the effectiveness and efficiency of the overall program would increase. 
An extremely large and extensive highway network has now been created, 
but the operation and maintenance of that system is often inadequate 
and inefficient. The ``new'' capital needs are increasingly to rebuild 
older parts of the system which have deteriorated from decades of 
inadequate attention to operation and maintenance.
    Modification of any one of these three features alone is very 
difficult, but a combination of the three could make it possible to 
deal with both pressing ``new'' initiatives such as elderly and 
disabled needs, environmental concerns, very expensive reinvestment and 
renewal needs, and increased levels of funding for operation and 
maintenance as well as continuing existing programs, allowing all major 
players to ``win'' without a tax increase during the near-term future.
    The current situation, with gasoline tax revenue estimates low, has 
created multiple political problems. Highway appropriations have been 
cut, and the beginning point for the reauthorization is lower. In a 
policy area with increasing claims, a ``growing pie'' is essential to 
accommodate new interests without damage to long-standing 
constituencies. A ``shrinking pie'' is a disaster. This political 
problem could produce the political will to partially shift to a 
capital budget approach, which could produce growth rather than 
shrinkage, and allow the Congress to better deal with emerging issues.
    ISTEA began a process of introducing operation and maintenance 
themes into the program through its management reporting systems and 
``flexibility'', but these have not been fully embraced by the States 
because the management reporting requirements were often treated as 
perfunctory paperwork, and flexibility requires shifting money away 
from some traditional activities. This proposed new combination would 
allow introduction of funded operation and maintenance activities 
(perhaps at ``low'' 30 percent match) that would produce the carrot for 
real operation and maintenance reform, without sacrifice of capital 
investment, and could really continue, deepen and consolidate the new 
initiatives of ISTEA while respecting the continuing need for new 
investment (and the economic and political importance of the 
construction industry). It could also prepare the capacity to deal with 
major national infrastructure rebuild issues such as Manhattan Post-9/
11 and (to extrapolate to the aviation re-authorization process) large 
reinvestment projects like the proposed restructuring of O'Hare 
Airport.
(c) Some additional clarification of conceptual proposals
    Let me provide a little more explanation of the new program 
initiatives I proposed earlier.
    (1) Operations and/or Maintenance Funding
    Such an extensive highway and transit system has now been built 
that the use of what we have, and its proper maintenance, is more 
important to performance of the overall system than the addition of a 
new link. Yet in spite of the importance of maintenance and operations, 
and the system management requirements of ISTEA, maintenance and 
operations continue to be treated as afterthoughts, with sporadic 
attention and funding. Most State transportation systems continue to 
focus on facilities, not the operation of the system, and new 
construction continues to be the most visible activity. This is partly 
institutional; these agencies tend to be dominated and led by civil 
engineers (like myself) who like to build things, especially new 
things. New construction is exciting, highly visible, expensive, and 
federally funded, so there is a lot of attention to doing the job right 
(and less attention to asking if we are doing the right job). In these 
organizations there is often high capacity to design and manage the 
construction of new facilities coexisting with under-funded and poorly 
managed maintenance, so that facilities require reconstruction because 
of deferred maintenance. Traffic operations is often viewed as less 
exciting, or important, and is reactive. Very little attention is given 
to protecting existing capacity and safety through acquisition of 
development rights, so we see sprawl development eroding highway 
capacity, as well as environmental quality. In order to transform this 
institutional landscape into one where improved mobility and 
accessibility are the primary objectives, and sophisticated management 
of facility maintenance is available to serve the accessibility mission 
(while retaining capacity for excellence in the design and construction 
of new facilities or the redevelopment of obsolete facilities), it is 
necessary for Federal leadership to adequately fund maintenance and 
operations activities and provide support for research and management 
improvement. Steady reliable Federal funding, even at modest ratios 
such as 30 percent, will serve to protect O&M budgets from the vagaries 
of local budget fluctuation, and allow this transformation to occur.
    (2) Rebuilding, redevelopment of old infrastructure and mega-
projects.
    I believe that there is a large backlog of aging infrastructure in 
most metropolitan areas which badly need to be renewed, replaced, 
redeveloped, or augmented, but which are systematically under 
prioritized in the planning and procurement systems in metropolitan 
areas. Often these facilities are seen as lower priority because they 
already exist. In addition, they are often intensively utilized, 
creating dramatic problems of maintenance of traffic during 
construction, so agencies may tend to postpone projects that will be 
very difficult to manage and politically unpopular. The environmental 
processing of redeveloping and/or replacing old, heavily used 
facilities can be complex and time-consuming, and the high cost and 
``lumpiness'' of these can be very difficult to deal with in an MPO 
process, because they often require a large share of available funds on 
one project in a small geographic areas over multiple years. The 
combination of competition for resources from other projects, the 
difficulty and potential political unpopularity, and large funding 
requirements make these difficult to achieve, yet they are crucial to 
the future viability of many of our major metropolitan areas.
    I believe that some protection from competition, through dedication 
of Federal funds at high Federal ratios, is essential to mitigate a 
tendency to avoid these challenges, with long-term destructive impact 
on accessibility and economic performance.
    There are often suggestions that simplification of environmental 
procedures would expedite these and other ``mega-projects.'' I believe 
this is a dramatically mistaken view. First of all, the complexity of 
the environmental process is a reflection of the real impacts that 
redeveloping our infrastructure will have, on both traffic and the 
environment. Moreover, old infrastructure problems are often seen as 
the occasion to reconceptualize the facility and its relationship to 
the environment, not simply ``rebuild'' it. Indeed, if we do not want 
our regions to become a form of ``petrified wood,'' locked into 
hundred-year-old patterns, reconceptualization is an appropriate and 
essential activity. Developing public understanding and participation 
in this process is desirable and necessary, and I believe the 
environmental process is a useful way to organize this essential 
participation. Given the political importance of the environmentalists 
rather than picking a fight, I propose that we should strengthen the 
enforceability of environmental commitments. More fundamentally, the 
real delays in implementation do not come from legitimate environmental 
process so much as from lack of available funding, ``predatory'' 
competition for funds, and agency reluctance to implement these 
difficult projects. Attempting to reduce environmental process is 
likely to simply increase the political unpopularity of these projects 
and exacerbate the real problem, which is competition for limited 
funds. Creating an adequately funded, high Federal matching ratio, 
dedicated funds for these ``mega-projects'' would deal directly with 
the real problem which inhibits dealing with this category of issues. 
In addition, increased Federal capacity for technical support and 
oversight of these projects is needed. I believe that the FTA Project 
Management Oversight program which uses expert consultants responsible 
to FTA to help oversee these unique projects is a good model. New 
York's West Side Highway collapsing without real replacement, and the 
redevelopment of Boston's Central Artery as a depressed highway, at 
very high cost, are good examples of the range of possibilities, and 
the importance of this issue.
    (3) Airport Access
    This represents another category of accessibility likely to be very 
important to the economy, but underprioritized in the metropolitan area 
process. Airports and the aviation industry zealously oppose any idea 
of responsibility to deal with landside access. Additionally, port 
authorities tend to make money from parking and rent-a-car revenues, 
leading to a lack of advocacy or even support for improved public 
transportation access to airports. Truck access to airports, presumably 
very important for high-value goods, generally receives no particular 
attention. In the competition for scarce funds at the metropolitan area 
level, airport and other intermodal access is often a bit of an orphan 
(similar to rebuild and mega-projects). Again, a separate high Federal 
matching ratio dedicated fund for airport and intermodal facilities 
could help ensure adequate attention to this important area. Since the 
reauthorization of aviation funding is under consideration by Congress 
at the same time as the surface transportation authorization, it should 
be possible to introduce symmetrical provisions in the aviation 
reauthorization to create some responsibility and funding to prioritize 
landside access. If some matching share from the airport proprietor 
were required to access dedicated surface transportation funds for 
airport and inter-terminal access, an incentive could be created to 
encourage a more proactive attitude by airport operators.
    (4) Elderly and disabled paratransit services.
    Currently, most paratransit services for the elderly and/or 
disabled population are provided by public transportation providers 
whose fixed-route services have not yet achieved full ADA 
accessibility. There are several problems inherent in this situation:
    a) Funding the paratransit service competes directly with funds to 
operate fixed-route bus and rail services, and weakens fare recovery 
ratios. (Paratransit fares typically cover only 5-10 percent of 
operating costs.)
    b) This leads transit providers to consider the paratransit an 
``unfunded Federal mandate,'' and provide paratransit service of lower 
than desirable quality, and (because of budget and fare-recover ratio 
constraints) reduce fixed-route service.
    c) As fixed-route service comes into compliance with ADA, the legal 
obligation to provide paratransit service is removed, but approximately 
50 percent of the clients cannot really use ``accessible'' fixed-route 
service, creating a potential crisis.
    d) Outside of fixed-route transit districts, paratransit services 
are less available.
    e) The aging population, some of whom should not drive but still 
need mobility, is growing dramatically.
    For all of these reasons I believe we should recognize that we are 
dealing with a problem of access to society, not access to fixed-route 
systems, for growing numbers of people, and that this is a 
transportation system responsibility, to be funded (at a 50-50 level) 
by Federal funds with Federal planning and service characteristics, in 
order to provide reasonable access and mobility to the full population. 
This could be a building block toward creating institutions focused on 
mobility and accessibility rather than exclusively on facilities.
    (5) Intercity rail and bus services to complement aviation in the 
aftermath of 9/11.
    Partly because of the ongoing fiscal problems of Amtrak, partly 
because of the increased aviation travel times caused by the increased 
security in the aftermath of 9/11, intercity rail and bus facilities 
are likely to be seen as increasingly legitimate claimants for a share 
of transportation funding. While this will raise complex institutional 
issues which neither States nor MPOs are perfectly suited to encompass, 
I believe there is legitimacy to the public claim and that it would be 
prudent to anticipate a need for a new funding initiative here, at 
least for capital.
    (6) Implementation of reauthorization.
    Again, given the combination of legitimate increased public claims 
for participation, the reduced level of gasoline tax receipts, and the 
likelihood of great resistance to increasing the gasoline tax before 
the next election, and that the historic reality has been that the 
surface transportation act reauthorization require ``all winners,'' I 
believe that re-opening the question of a capital budget approach to 
surface transportation is the best hope to create adequate room to go 
forward with a broad consensus.
    To be sure, using part of the current revenue streams for bonding 
allows increased investment in the short run, but requires either 
ending some capital investment or increasing the gasoline tax at some 
point in the future. But either of those outcomes is better than the 
status quo. Bonding costs are at or lower than the rate of inflation in 
the construction industry, so dealing with investment needs sooner 
through bonding does not cost more. On the contrary, it provides both 
short-term economic stimulus and long-term economic growth, both of 
which are desirable. It is the way every homeowner in America buys a 
house, most private investment is financed, and every State and City 
government invests. If, in 6 years new investments are curtailed, we're 
better off to have had the investment early. If, on the other hand a 
unified constituency successfully lobbies to increase the gasoline tax 
so investment can continue, that's even better.
    In the short term, we need a strategy to incorporate ``new'' 
claimants and environmentalists in support of an expanded surface 
transportation authorization, and I believe these suggestions can help 
us get there.
    Thank you again for the opportunity to testify.
                                 ______
                                 
 Responses of Frederick Salvucci to Additional Questions from Senator 
                                 Graham
    Question 1. You raise an important point about highway maintenance. 
It is as important, or more so, than new construction. Do you feel that 
poorly maintained roads and bridges cause congestion?
    Response. Senator Graham, I support your view that maintenance is 
as important as new construction, if not more so. I believe there is a 
complex interrelationship between poor maintenance of roads and 
bridges, and congestion, and that increased Federal attention and 
funding could produce improved management of maintenance with 
beneficial effect in reducing congestion. When poor maintenance leads 
to closure or load limits on bridges there can be dramatic impact on 
congestion as vehicles are forced to re-route to other route where they 
may cause congestion. Generally, maintenance and operations are under-
funded at the local level. Consequently, responsible officials tend to 
carry out maintenance in the ``cheapest'' manner for the agency budget, 
even if that means causing congestion and shifting costs to motorists. 
Carrying out some maintenance activities at night may lower congestion 
impacts to motorists, but will cost the agency more money from an 
already inadequate maintenance budget, so the agency is likely to use 
higher cost/lower congestion methods only when forced to do so by 
political pressure on very high-traffic routes. Moreover, 
reconceptualizing maintenance activities in coordination with 
operations of traffic systems, and maintenance of the more 
sophisticated ITS methods increasingly available requires a commitment 
of management attention and money, when agencies are usually under-
funded for maintenance, and management attention is usually focused on 
more visible, and better funded construction activities. As a result 
you are more likely to see sophisticated traffic management techniques 
applied in ad hoc application to reasonably well-funded reconstruction 
projects, to minimize congestion impact of reconstruction, than as part 
of ongoing maintenance activities. ISTEA mandated the development of 
improved maintenance and management systems, but provided no dedicated 
funding, so the results have been modest. If the Federal requirement to 
develop maintenance and operations management systems is strengthened, 
but accompanied by Federal funding to facilitate not only the 
development of management systems but also the more expensive 
techniques which can reduce congestion, then I believe we will see much 
more significant utilization of techniques to reduce congestion, as 
well as a better level of ongoing maintenance to reduce the need for 
very costly and expensive reconstruction which current policies 
encourage.

    Question 2. You also raise the issue of truck and cargo access to 
airports in your testimony--and possibly a new Federal revenue stream 
to make access improvements. Do you feel the same re: access to 
seaports?
    Response. Yes, I believe that a new Federal revenue stream, to 
prioritize access to airports, should include access to seaports and 
other intermodal terminals. Again, ISTEA encouraged more planning 
attention to cargo and intermodal issues, but provided no dedicated 
funding to facilitate implementation. Developing ways to improve 
intermodal connections, and prioritize truck access generally is very 
difficult conceptually, can be unpopular with the general motoring 
public if not done very carefully, and often receives little support 
from the terminals who fear they maybe asked to provide financial 
support to any potential solutions. If the ISTEA mandates are 
strengthened and supported with dedicated funding streams, I believe we 
will see better results.
                                 ______
                                 
 Responses of Frederick Salvucci to Additional Questions from Senator 
                                Jeffords
    Question 1. Your testimony provides many important insights on some 
of the key areas that needed to be addressed by this committee. I 
wanted to focus on your comment that ``if one-third of the existing 
revenue streams were to be used for debt service, the program could 
expand . . . by approximately 20 percent.''
    How would you structure this new approach? Would this new approach 
conform with your view that ``proper maintenance of the existing system 
is perhaps becoming more important to the national interest than 
further expansion of the network?"
    Response. I am suggesting that a portion of the existing Federal 
funding streams be used to support debt service on bonds, so that a 
somewhat larger capital program can be feasible along with a new 
program for Federal funding of a portion of operation and maintenance 
costs. Another candidate for new Federal operating funds should be 
Federal funding for the growth cost of elderly and disabled paratransit 
services. Without bonding, any appreciable expansion of the capital 
program, and any new operation and maintenance program would require an 
increase in dedicated taxes (presumably gasoline taxes). I have 
suggested partial bonding because it facilitates program expansion 
without a gas tax increase in the near term. Even if a gas tax increase 
were politically feasible, I believe partial bonding would be desirable 
to get a larger program expansion. Bonding could be done at the Federal 
level directly. Alternately, USDOT agencies could enter into long-term 
(25-year contracts) for contract assistance with State and regional 
entities, for long-term maintenance assistance and/or debt service on 
State or local bonds. These could be similar to ``T.I.F.I.A.'' loans or 
``G.A.R.V.E.E.'' bonds, except with Federal support. Either approach 
could work, as long as there is equitable access to the expanded 
funding among States and regional entities.

    Question 2. I noted your interest in providing more coordination of 
resources between TEA-21 and AIR-21. You noted some attention to 
freight needs. Do you also see some need to address intercity passenger 
travel as well, linking airports to city centers along corridors?
    Response. As part of coordinating TEA-2 and AIR-21 reauthorization 
bills, I agree that it would make sense to look at intercity passenger 
travel across air, rail, bus, and auto modes, particularly for trips 
within 300 miles, and move toward better integrated passenger systems, 
as the Europeans are achieving. On the cargo side, while we need a new 
emphasis on intermodal coordination supported by Federal funding, I 
emphasized the cargo issue because it can be developed more rapidly, as 
there are advantages to most parties whereas passenger services, 
particularly involving rail, will likely conflict with both rail cargo 
needs and air passenger suppliers, and may be less amenable to 
resolution in TEA-21 and AIR-21 reauthorization processes.
                               __________
 Statement of Elizabeth Stutts, Grant Programs Administrator, Florida 
Department of Transportation on behalf of the Association for Commuter 
                             Transportation
Introduction
    Mr. Chairman, members of the committee, thank you very much for the 
opportunity to participate in the dialog on the reauthorization of the 
Transportation Equity Act for the 21st Century, or TEA-21. My name is 
Elizabeth Stutts, Grants Program Administrator for the Florida 
Department of Transportation in Tallahassee, Florida. I am pleased to 
be here today representing the Association for Commuter 
Transportation--or ACT.
    The members of ACT represent a broad coalition of organizations--
from major private-sector businesses and institutions to transportation 
agencies--but we all have one thing in common . . . We are all working 
cooperatively to make transportation work better by making it more 
efficient and less costly.
    ACT members are working together in public-private partnerships to 
make transportation work better for business. Major employers recognize 
that transportation issues impact the bottom-line. Workers are facing 
commutes that get longer each day--under more stressful and less 
predictable travel conditions. This situation has a direct impact on 
employee recruitment, retention, and productivity--increasing labor-
related costs and affecting competitiveness.
    Our testimony today will focus on creative approaches to making our 
transportation system work better by investing in a more comprehensive 
approach--not just to the way we build our transportation systems, but 
to the way we use our transportation systems.
    In communities around the country, ACT members are working closely 
with the people who use transportation on a daily basis. We have a 
customer-driven approach. After all, transportation is really about the 
people who use it--and the individual decisions they make everyday 
about where they need to go, when they need to leave, and how they're 
going to get there. Unfortunately, all too often, everyone tries to go 
the same place, at the same time, using the same route and the same 
mode of travel. The result is congestion and inefficiency, which 
greatly impacts our business productivity and our quality of life. Our 
members include public-sector entities working in partnership with 
businesses and residents to make transportation more efficient; 
private-sector employers, working with their employees to improve the 
commute; and schools working with their students to improve connections 
to the campus and the classroom.
    The reauthorization of TEA-21 presents a clear opportunity to 
support America's businesses, workers, and citizens by supporting 
transportation programs and partnerships that can make a difference. In 
our testimony today, we are asking the committee to:
      Build upon the foundations of flexibility and partnership 
established under ISTEA and TEA-21,
      Recognize the important balance between the way we build 
transportation and the way we use transportation,
      Increase support for partnerships that engage the private 
sector, and
      Enhance travel choices and provide incentives for smart 
choices.
ISTEA and TEA-21: Building the Foundation
    The enactment of the Intermodal Surface Transportation Efficiency 
Act (ISTEA) in 1991, and its successor, TEA-21, in 1998, signaled a new 
era in the development of our nation's transportation system. By the 
early 1990's, the construction of the original interstate highway 
network was complete, and a growing number of business and community 
leaders were looking to broaden their approach to meeting the 
transportation needs of their workers and citizens. ISTEA and TEA-21 
responded. By giving communities new flexibility to use Federal funds 
to invest in a variety of travel modes--from highways, to rail lines, 
to bike paths--ISTEA and TEA-21 recognized the benefits of allowing 
communities to invest in transportation that gives people more choices 
in how they get around. These bills recognized the significant power of 
transportation investments--not simply as an end in themselves--but as 
an effective tool to achieve a wide range of community goals.
    Throughout the 1990's, transportation agencies, metropolitan 
planning organizations, and local jurisdictions responded to 
increasingly diverse travel needs by investing in multi-modal 
transportation improvements. The results of this shift were 
significant. Annual Federal investments in public transportation 
systems doubled from just over $3 billion in 1990 to nearly $6 billion 
in 1999, and Federal funding for bicycle and pedestrian projects grew 
from only $7 million in 1990 to $220 million in 1999.
    In addition to enhancing funding flexibility, ISTEA and TEA-21 
stressed the importance of partnerships between Federal, State and 
local agencies--empowering metropolitan planning organizations (MPOs) 
to facilitate intergovernmental partnerships in the transportation 
decisionmaking process. This focus on partnerships allowed Federal 
transportation investment decisions to better respond to the unique 
transportation goals of States and communities--and led to an overall 
increase in State and local funding for projects that provide citizens 
with enhanced travel choices. For example, between 1990 and 1999, local 
and State funding for public transportation grew by 34 percent.
    As we move toward the reauthorization of TEA-21, we must build on 
these foundations of flexibility and partnership. We must continue to 
strengthen our national transportation infrastructure, including road 
and bridge networks, bus and rail transportation lines, ferry services, 
and bicycle and pedestrian trails. We must continue to prioritize 
investments in preserving the quality of existing roads and bridges and 
improvements in transportation safety. And we must continue to support 
the expansion of rail and bus transit services to meet the ever-growing 
demand for these services.
TEA-21 Reauthorization: Making It All Work
    While ISTEA and TEA-21 were remarkable steps forward, many 
challenges remain. Across the country, traffic congestion is a serious 
and pervasive problem for both businesses and communities. In 1999, 
congestion cost the Unites States over $78 billion dollars in wasted 
time and wasted fuel. People are spending more and more time stuck in 
traffic and less time with families. More frustrating and less 
predictable commute times are impeding the ability of employers to 
recruit and retain valued employees, and congestion is impeding the 
efficient movement of goods. Air quality continues to endanger public 
health and degrade community livability. Finally, as the tragic events 
of September 11th revealed, the functionality of transportation systems 
affect a wide range of security and emergency preparedness issues, from 
the movement of response vehicles to the evacuation and protection of 
citizens.
    To tackle these critical challenges, the reauthorization of TEA-21 
must build on the foundations of flexibility and partnership first 
established by ISTEA. Reauthorization must take the next step forward 
by integrating programs and partnerships that can make the 
transportation system work better--by not simply focusing on the way we 
build transportation, but on the way we use transportation. This is a 
critical distinction, as it recognizes that how well the transportation 
system works depends on the balance between the availability of 
transportation infrastructure--from roads to bridges to transit lines--
and the way that people use this available infrastructure.
    Focusing on the way that people use transportation means focusing 
on where they need to go, when they need to leave, and what choices 
they have in how to get there. It means providing people more 
transportation choices and real-time travel information about these 
choices. It means recognizing that people make travel decisions based 
on a variety of factors like time, cost, convenience, safety and 
reliability--and developing incentives to encourage smart travel 
choices. And it means forging partnerships between the people that 
depend on transportation every day--partnerships between transportation 
organizations and private employers, between employers and their 
employees, between educational institutions and their students, and 
between developers and their tenants.
    To address the significant transportation challenges facing our 
businesses and communities, the reauthorization of TEA-21 must 
recognize the importance of this balance between the way we build 
transportation and the way we use transportation. The following 
sections highlight the need to integrate programs and partnerships 
designed to achieve this balance.
Partnerships with Employers
    Reauthorization represents a key opportunity to enhance the spirit 
of partnerships developed in ISTEA and TEA-21 by supporting win-win 
public-private partnerships between employers and transportation 
organizations. Through commuter benefits like monthly transit passes, 
onsite commute information, and flexible work schedules, employers play 
a significant role in the travel decisions of their employees. A 2001 
national survey called the Zylo Report found that, on average, 
employers that provide commuter benefits have 15 percent fewer 
employees driving to work alone (86 percent vs. 71 percent). Employers 
offer commute programs because they make good business sense. Employer 
commute programs allow businesses to address employee recruitment and 
retention problems, increase employee productivity, and lower facility 
construction and maintenance costs related to employee parking. For 
example, a commute assistance program saved a company in San Antonio, 
Texas, over $2.5 million by eliminating the need to build and maintain 
1,000 extra parking spaces.
    Employer partnerships are an important source of additional funding 
for transportation--as businesses invest in employee transit passes, 
invest in the development and operation of shuttle programs, and invest 
in other commute resources for their employees. As a powerful example, 
in 2000-2001, every $1 that the public sector invested in supporting 
employer commute programs in the State of Washington resulted in $12 of 
additional investment from employers.
    Employers and the organizations that support employer partnerships 
are also a critical resource in emergency preparedness planning and 
response. On September 11th, ACT members worked with employers and 
employees to get people home safely--providing critical information on 
the availability of transportation alternatives. In the weeks following 
September 11th, our members worked in partnerships to keep businesses 
productive by supporting commute alternatives like telecommuting and 
ridesharing.
    The reauthorization of TEA-21 should strengthen support for 
organizations that facilitate employer partnerships. These 
organizations integrate one of the sectors most impacted by 
transportation challenges--America's businesses--into the fold as 
partners in developing effective solutions. For example, innovative 
programs spurred by the Congestion Mitigation and Air Quality 
Improvement Program (CMAQ)--including public-private organizations 
called Transportation Management Associations, or TMAs--are responsible 
for many employer-partnership success stories. To further promote these 
programs, the next transportation bill should maintain support for the 
CMAQ program with an enhanced emphasis on partnerships and innovation. 
Reauthorization should further recognize the value of employer 
partnerships by supporting a tax credit for businesses that offer 
commuter benefits to their employees. A commute benefit tax credit 
would provide a powerful tool to leverage additional private-sector 
investments in transportation solutions that work.
Choices, Incentives and Information
    On a daily basis, people make a variety of transportation 
decisions. These decisions begin with the travel choices available to 
them--where to go, when to leave, what mode to use, what route to 
take--but they also include a variety of other influencing factors, 
like travel time, trip cost, convenience, safety, and reliability.
    The reauthorization of TEA-21 should support the continued 
enhancement of travel choices. A strong and balanced transportation 
system provides travelers with a variety of choices--rather than 
limiting choices--allowing each traveler to choose the best travel 
alternatives to meet their needs. The next transportation bill should 
continue to support a multi-modal approach to building transportation 
by continuing to encourage flexibility in the use of Federal funds and 
by maintaining the Transportation Enhancements program.
    In addition, the bill should also support smart travel choices that 
make more efficient use of existing facilities--including smart mode 
choices like transit, ridesharing, bicycling, and walking; smart time 
choices like traveling during off-peak hours, smart route choices based 
on real-time traveler information; and smart location choices like 
living near your place of employment, living near public transit 
services, or utilizing travel-free alternatives like telecommuting and 
e-commerce. Supporting smart travel choices can reduce the overall 
``demand'' for transportation--improve the efficiency, operation, and 
performance of the existing system--and produce broad-based benefits.
    We must also work to make smart travel choices truly viable. We 
must create an environment where the other key decision criteria--like 
travel time and travel cost--are equitable between travel choices. As 
an example, commuters can currently receive up to $185/month in tax-
free benefits from the their employer to park their cars at work all 
day, yet they can only receive a maximum of $100/month for the same 
trip via transit or vanpool. This inequity does not encourage smart 
travel choices and should be addressed during reauthorization. In 
addition, other travel choices like carpooling, bicycling, walking, and 
telecommuting should be made eligible for this transportation benefit, 
creating equity between all travel choices.
    Finally, people cannot make smart travel choices without increased 
awareness and real-time information on the alternatives available, how 
to use them, and even when to use them. The development of Intelligent 
Transportation Systems (ITS) should continue, especially development of 
real-time traveler information services. At the same time, the 
development of ITS infostructure must be supported by programs and 
services that can get real-time transportation information into the 
hands of the people that need it, when they need it, and where they 
need it--so that they have ample opportunity to make the smart travel 
choices that can make a difference.
Integration with Operations and Major Investment Planning
    The programs and services developed and implemented by ACT members 
to forge partnerships with major employers and enhance travel choices 
are a critical tool in the effort to make transportation more efficient 
and less costly. As a compliment to major capital improvements, these 
customer-driven programs and services (often called transportation 
demand management, or TDM) can provide near-term benefits which improve 
transportation operations and make the most of existing resources by 
improving the way we use transportation. The reauthorization of TEA-21 
should recognize the role of TDM organizations by supporting improved 
coordination between these and other organizations that manage and 
improve the daily operation of the transportation system.
    Finally, the reauthorization of TEA-21 must strengthen the 
integration of TDM programs and services in major investment and 
corridor planning efforts. Too often, TDM programs are compared to 
other major investment alternatives in a ``no-build'' versus ``build'' 
analysis, setting up an illogical either-or evaluation. Instead, 
reauthorization should require the integration of TDM programs and 
strategies as a complement to major capital investments. TDM programs 
have proved effective as construction mitigation measures, and offer 
near-term implementation advantages to address transportation 
challenges before the construction of the major investment is complete.
                               conclusion
    Again, the reauthorization of TEA-21 presents a clear opportunity 
to support America's businesses, workers, and citizens by supporting 
programs and partnerships that make transportation more efficient and 
less costly. Reauthorization should:
      Build upon the foundations of flexibility and partnership 
established under ISTEA and TEA-21,
      Recognize the important balance between the way we build 
transportation and the way we use transportation,
      Increase support for partnerships that engage the private 
sector, and
      Enhance travel choices and provide incentives for smart 
choices.
    We appreciate the opportunity to present testimony before the 
committee and offer the Association for Commuter Transportation as a 
resource on these important issues. If you have any questions, or would 
like to discuss these matters further, please contact Kevin Luten, ACT 
Assistant Director, by phone: (202) 546-5478, or by email: kevin@act-
hq.com. You may also contact ACT's Washington, DC, representative 
Thomas J. Bulger, Government Relations, Inc., by phone: (202) 775-0079, 
or by email: [email protected].
                               __________
 Statement of Elissa Margolin, Executive Director, League of American 
                               Bicyclists
    Mr. Chairman, Senator Smith and members of the committee, thank you 
for holding these hearings regarding the reauthorization of the 
Transportation and Equity Act for the 21st Century. On behalf of the 
League of American Bicyclists, I am pleased to have this opportunity to 
address the benefits associated with the use of the bicycle as it 
relates to mobility, congestion and intermodalism.
    The League of American Bicyclists was founded in 1880 as the League 
of American Wheelmen when cyclists from across the United States joined 
together to advocate for paved roads. Their efforts ultimately led to 
our national highway system.
    Today, the League promotes bicycling for fun, fitness and 
transportation and works through advocacy and education for a bicycle-
friendly America. We represent the interests of the nation's 42.5 
million cyclists. With a current membership of 300,000 affiliated 
cyclists, including 40,000 individuals and 600 affiliated 
organizations, the League works to bring better bicycling to 
communities across the country.
    We recognize that bicyclists are not going to completely solve our 
nation's congestion problems. However, they are certainly a key piece 
of the puzzle and cannot be overlooked. It is important that Congress 
recognize the important role bicycling plays in transportation during 
this reauthorization process.
    Aside from creating gridlock, traffic congestion wastes time and 
energy and creates pollution and driver frustration. Those who use 
their bike as a mode of transportation will be the first to tell you 
that their bicycling commuting experience is far more pleasant than 
sitting in a car. The typical bike commute takes less time than 
driving, particularly in urban areas such as Washington, DC; is less 
expensive; certainly uses less gasoline and emits no air pollution. 
Generally, the bicyclist arrives at work less stressed and invigorated 
for a productive day.
    According to the Federal Highway Administration, 40 percent of all 
automobile trips are less than 2 miles. Turning even a small percentage 
of those trips into bicycle trips would ease congestion tremendously. 
Many of those trips are made by parents dropping their children off at 
school, creating dangerous congestion near and around schools. If we 
help make those school routes become safer for children to travel by 
bike or by foot, think of the congestion that would be eliminated, not 
to mention improving their health by promoting physical activity. Mr. 
Chairman, the physical benefits of bicycling for all Americans is an 
important topic that deserves its own hearing, as does the 
environmental benefits.
    Not only will getting more people to take trips on their bicycle 
decrease the amount of vehicles on our roads, it will also 
substantially decrease air pollution.
    At the present, 80 percent of carbon monoxide and 50 percent of 
nitrogen oxide emissions in the United States are a result of our 
transportation system. 60 percent of automobile emissions pollution 
occurs at the very beginning of vehicle operation when the engine is 
cold and the pollution control devices have not begun to work 
effectively. Therefore, the shorter automobile trips are producing more 
pollution on a per-mile basis than shorter trips.
    With regard to intermodalism, the bicycle plays a vital role. All 
over this country, in addition to bicycling all the way to work, people 
are biking to their local bus stop or train station and then taking 
mass transit. In some cases, they keep a bicycle at the other end to 
finish their commute. The Federal Transit Administration estimates that 
at least one-in-five transit buses nationwide are equipped with bike 
racks.
    Buses in Seattle carry over 60,000 bicyclists a month, or 60,000 
single-occupancy vehicle drivers. More and more of our nation's subways 
and trains are encouraging bicycle access, making it easier for 
bicyclists to use mass transit and reducing the number of cars on our 
roads and highways, especially during rush hours.
    Mr. Chairman, it is critical that Congress continue to recognize 
the contributions that bicyclists make with regard to mobility, 
congestion and intermodalism. Even a small percentage increase in 
bicycling will go a long way in making a positive change and improve 
mobility for all.
    Thank you once again for the opportunity to testify before this 
distinguished committee. We look forward to working with you throughout 
this important reauthorization process, as we collectively strive to 
improve the transportation system in the United States for all 
Americans.
                               __________
                         Defenders of Wildlife
                                                    March 19, 2002.
U.S. Senate,
Committee on Environment and Public Works,
410 Dirksen Senate Office Building,
Washington, DC 20510-6175.

For submission to hearing record: ``Mobility, Congestion and 
Intermodalism'' Tuesday, March 19, 2002, 2:30 p.m. Hearing Room (SD-
406)

    Defenders of Wildlife is a national nonprofit conservation 
organization with over 400,000 members, committed to preserving the 
integrity and diversity of natural ecosystems, preventing the decline 
of native species and restoration of threatened habitats and wildlife 
populations. We have been involved with transportation and environment 
issues for nearly a decade, recognizing the importance of this often 
overlooked segment of our nation's continued growth. Recently, 
Defenders launched a new campaign to address the conflicts between 
transportation and wildlife. Our objective is to reduce the impact of 
surface transportation on wildlife and habitat, and to incorporate 
conservation into transportation planning to avoid or minimize the 
negative effects on wildlife and habitat.
    In your attempt to examine fresh ideas on transportation demand, 
access, mobility and program flexibility, we remind you that mobility 
is not always best served via the single occupant vehicle and that 
additional roadbuilding and lane miles are not always the most 
efficient answer to traffic congestion. We submit the following 
information for the record:
    1. *A Taxonomy for Induced Demand in Transportation. 2001. Hunt, 
J.D. United Nations Commission on Sustainable Development.
    2. Highways and Induced Travel Demand. 2000. Marshall, Norm. 
Resource Systems Group.
    3. Estimating Induced Travel, Emissions and Benefits in Highway 
Corridor Analysis. 1998. DeCorla-Souza, Patrick. Federal Highway 
Administration.
    4. *A Framework for Understanding the Demand Inducing Effects of 
Highway Capacity. 1994. Dowling, Richard G. Transportation Research 
Board.
    5. *Trunk Roads and the Generation of Traffic. 1994. Wood, D.A. 
Great Britain Department of Transport.
    6. *Effects of Increased Highway Capacity on Travel Behavior. 1993. 
Dowling Associates. California Air Resources Board.
    7. *The Air Quality Impacts of Urban Highway Capacity Expansion: 
Traffic Generation and Land-Use Impacts. 1993. Dobbins, Allison. 
California Air Resources Board.
    8. *Portland's Livable Downtown. 1992. Corbett, Judith. Surface 
Transportation Policy Project.
    9. *User Response to New Road Capacity: A Review of Published 
Evidence. 1989. Pells, S.R. Institute for Transport Studies.
    10. *The Relationship of Changes in Urban Highway Supply to Vehicle 
Miles of Travel. 1979. Cambridge Systematics, Inc. National Cooperative 
Highway Research Program, Transportation Research Board, National 
Research Council.
    *Regrettably, most of these reports are available in hardcopy only, 
copies provided.
            Sincerely,
               Patricia A. White, Transportation Associate.













                        REATHORIZATION OF TEA-21

                              ----------                              


                        WEDNESDAY, MAY 15, 2002

                                       U.S. Senate,
                 Committee on Environment and Public Works,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:05 a.m. in 
room 406, Dirksen Senate Office Building, Hon. James M. 
Jeffords [chairman of the committee] presiding.

                TRANSPORTATION PLANNING AND SMART GROWTH

    Present: Senators Jeffords, Reid, Corzine, Chafee, and 
Wyden.

OPENING STATEMENT OF HON. JAMES M. JEFFORDS, U.S. SENATOR FROM 
                      THE STATE OF VERMONT

    Senator Jeffords. The hearing will come to order.
    Welcome to today's hearing on transportation planning and 
smart growth. We are joined this morning by a number of fine 
witnesses from around the Nation. I appreciate their 
willingness to lend us a hand as we proceed with our 
examination of the Nation's surface transportation program.
    Our topic this morning, transportation planning, is one of 
the lynch pins of the new thinking introduced by the Intermodal 
Surface Transportation Efficiency Act of 1991, or ISTEA, as it 
has become known. In passing ISTEA, Congress inaugurated the 
post-interstate era. With its enactment, our transportation 
program moved from a focus on new highway construction to a 
recognition that transportation is the means to the end. We 
recognize that our investments in transportation and other 
infrastructure mold and shape our communities. Beyond community 
form, we saw transportation's influence on people's daily 
lives, on the time they spent away from their families, and on 
their health and well-being.
    Because of transportation's broad ramifications, ISTEA 
provided States and, for the first time, local officials, wide 
latitude in the use of Federal aid dollars. ISTEA had provided 
flexibility, the freedom to move Federal money from category to 
category as best fit the needs of a given State or metropolitan 
area.
    I had the honor to serve on this committee during the 
enactment of ISTEA. At the time, we recognized that with the 
freedom of flexibility came enormous responsibility. The 
highway program, alone, has provided $300 billion in taxpayers' 
dollars to State and local officials. Stewardship of these 
funds demands great care. The transportation planning 
provisions of ISTEA were intended to ensure that would be 
working.
    The idea is simple. Let's think before we act. Before 
spending Federal aid dollars, State and metro officials would 
first assess needs, communicate with citizens, coordinate with 
stakeholders, and realistically forecast financial resources. 
This basic planning process would guide and inform the 
investments to follow.
    TEA-21, the Transportation Equity Act for the 21st Century 
of 1998, refined the ISTEA planning provisions but retained its 
basic thrust. As a result, we now have 10 years of experience 
in this new way of doing the Nation's transportation business. 
Today we will explore lessons learned over the past 10 years. 
We will also examine a range of ideas for the future of the 
planning program.
    I will turn now to my good friend, Senator Reid.

  OPENING STATEMENT OF HON. HARRY REID, U.S. SENATOR FROM THE 
                        STATE OF NEVADA

    Senator Reid. Thank you very much, Mr. Chairman. I 
appreciate your holding this very important hearing. Let me 
say, to the witnesses, that while there might not be many 
Senators--Senators will come in and out during the day--that we 
have everything taken down, and this, of course, is shared with 
the other committee members. And, of course, every person that 
is a member of this committee is represented here by staff, so 
these are extremely important hearings.
    One of our goals in writing transportation policy is to 
maximize the mobility of people and freight while minimizing 
air pollution and other environmental impacts. This isn't easy, 
and success requires a thorough planning process. Planning is 
especially important in areas that are experiencing high rates 
of population growth--for example, Las Vegas metropolitan area 
in the State of Nevada.
    The Las Vegas region is the fastest-growing area in this 
country. Its population doubled over the past decade. So the 
challenges are especially acute, but almost every metropolitan 
region in the Nation is growing.
    I think people sometimes don't realize how difficult in a 
relatively small State growth is. We have as many as 10,000 
people each month moving into the Las Vegas area. Just to keep 
up, for example--and I've used this illustration before--to 
keep up with the growth in schools, we've had to build as many 
as 18 new schools every year, just in the Clark County School 
District. Think of that--18 new schools. It's very difficult.
    And from a transportation perspective we always seem to be 
trying to catch up to growth after traffic congestion begins to 
choke our roads. We'd be better off if we could stay one step 
ahead of growth and make the important connection between land 
use and transportation before growth accelerates rapidly, 
rather than as an afterthought.
    The Federal Government must give States and metropolitan 
regions the tools necessary to ensure that transportation 
planning and population growth go hand in hand, and planners 
need the maximum flexibility within the transportation program 
to address growth in the way that best suits each region's 
needs.
    Many transportation options are available: road 
construction, mass transit, high-speed rail, improved 
management of transportation system, upgraded pedestrian 
access, new bike routes, carpooling, high occupancy lanes, to 
name a few. I'm sure many of you will talk about these things 
I've spoken of in more detail. Good planning can ensure that 
the best mix of these options is chosen.
    Our challenge in Las Vegas is to address the needs of a 
booming population while maintaining the high quality of life 
that attracts so many to move west, but transportation is a key 
to this challenge.
    The Regional Transportation Commission of Southern Nevada 
is using almost every transportation option that I just 
mentioned to address traffic congestion. In addition, Las Vegas 
is trying to promote transit use through some smart growth 
initiative of its own--for example, planning transit-based 
development around the construction of a new monorail system, 
also tied to new bus rapid transit system. The monorail will 
eventually connect the airport to the strip to downtown to the 
rapid transit buses to population centers to park and ride lots 
and to an eventual high-speed train connection with southern 
California.
    I have made no secret of my belief that we need to invest 
more money in our transportation infrastructure nationally, and 
I was happy to take the House take action, Mr. Chairman, 
yesterday. That's not as much as we need, but it is a step in 
the right direction.
    As chairman of this committee's transportation 
subcommittee, I'll make increasing the level of investment in 
transportation a top priority. However, with more money comes 
more responsibility. We need to make sure this funding is put 
to its best use, and a robust and open planning process is the 
best way to ensure that transportation stays one step ahead of 
growth.
    Mr. Chairman, let me again congratulate you for having this 
meeting, and also we start activity on the floor at 10:30, so 
I'll have to be over there to referee some of the fights.
    Senator Jeffords. Thank you. It's a pleasure having you 
here, and you're doing a great job as chairman of the 
subcommittee.
    Our first panel consists of practitioners from across the 
Federal, State, and local spectrum. They include: Ms. Cynthia 
Burbank of the Federal Highway Administration; Mr. Kenneth J. 
Leonard of the Wisconsin Department of Transportation, on 
behalf of the American Association of State Highway and 
Transportation Officials; Mr. Ronald Kirby from the 
Metropolitan Washington Council of Governments, on behalf of 
the Association of Metropolitan Planning Organizations; Mr. 
Peter Gregory from the Two Rivers Ottauguechee Regional 
Commission in Woodstock, Vermont, on behalf of the National 
Association of Regional Councils.
    Let us start with Ms. Burbank.

  STATEMENT OF CYNTHIA BURBANK, PROGRAM MANAGER, PLANNING AND 
  ENVIRONMENT, FEDERAL HIGHWAY ADMINISTRATION, WASHINGTON, DC

    Ms. Burbank. Mr. Chairman and Senator Reid, thank you very 
much for the opportunity to report to you today on the status 
of transportation planning and what FHWA has been doing to 
assist States and MPOs to meet the planning goals of ISTEA and 
TEA-21. I wanted to note it is a particular pleasure, Mr. 
Chairman, for me as a long-time Vermonter, a ninth-generation 
Vermonter who goes back to a family history when it was an 
independent nation, to appear before you.
    I ask that my written statement be made part of the record 
for this hearing.
    Senator Jeffords. It will be.
    Ms. Burbank. Thank you.
    Transportation planning identifies transportation problems 
and solutions that fulfill multiple national, State, and local 
goals. Planning must do more than merely list highway and 
transit capital investments. It must advance a State's or an 
area's long-term goals, as you have noted, through strategies 
for operating, managing, maintaining, and financing the 
transportation system.
    ISTEA and TEA-21 made significant changes in planning 
requirements for highways and transit. These changes require 
greater attention to public involvement, fiscal prudence, and 
environmental impacts.
    States continue to have the primary responsibility and 
authority, but the role of MPOs and local governments in 
transportation planning and programming has been strengthened. 
The States, in consultation and cooperation with MPOs, local 
governments, and transit operators, choose which projects will 
advance.
    To assist in making the best transportation choices for 
these areas and States, FHWA and FTA have launched a major 
initiative that we call ``capacity building,'' and by this I 
mean institutional capacity building, not necessarily transit 
and highway capacity building.
    Our first effort in this institutional capacity building 
has focused on metropolitan planning needs through developing 
training courses, providing and preparing models and case 
studies. More recently, we have developed a rural capacity 
building initiative because there are unique needs in rural 
areas. Through this effort we are also providing training, 
technical assistance, and information exchange targeted to the 
needs of the rural areas.
    The rural capacity building initiative is a partnership 
with the National Association of Regional Councils, the 
National Association of Counties, and the National Association 
of Development Organizations.
    Now let me address for a moment an issue of concern to both 
metropolitan and rural areas, smart growth. Smart growth means 
different things to different people. FHWA has looked at this 
very carefully and our perspective on smart growth is that it 
is a set of State and local policies and programs designed to 
protect and preserve natural and cultural resources and make 
efficient use of existing infrastructure while accommodating 
economic development and population growth, as Senator Reid 
described in Las Vegas.
    Smart growth often means expanding transportation choices 
and providing a balanced intermodal transportation system to 
allow for efficient and economical movement of both people and 
goods. In some areas that may mean more transit, in other areas 
it may entail significant roadway improvements, and in most 
areas it probably means both, as well as bicycle and pedestrian 
improvements and meeting the needs of freight transportation.
    We want to stress that it is up to State and local 
officials to decide how best to address their unique 
circumstances and serve their smart growth interests, and it is 
U.S. DOT's role to help areas best implement their decisions 
within the funding available.
    We believe that all of the programs in TEA-21 can be 
effective tools to serve smart growth, but one that I know is 
of particular interest to the members of this committee is the 
TCSP program--Transportation and Community, and System 
Preservation Pilot Program. It is a small program authorized at 
just $25 million per year, but it is an opportunity to provide 
innovative funding to areas to involve their citizens more in 
making these important decisions and to achieving their 
economic growth and environmental interests.
    While FHWA strongly believes that land use decisions are 
State and local in nature and should remain that way, we 
believe there is much to be gained from more coordination among 
State and local planning, zoning, and housing authorities, and, 
as well, environmental and transportation officials, to reach 
good decisions.
    The changes in planning under ISTEA and TEA-21 have 
enhanced and improved the transportation decisionmaking 
process, but we are well aware that continued progress is 
needed. In reauthorization, we look forward to working with 
this committee and with our partners to find additional means 
of assisting States and local governments in strengthening the 
transportation planning process.
    Mr. Chairman, thank you again for the opportunity to 
testify. I look forward to answering your questions.
    Senator Jeffords. Thank you for your excellent statement.
    Mr. Leonard?

    STATEMENT OF KENNETH J. LEONARD, DIRECTOR, DIVISION OF 
 TRANSPORTATION INVESTMENT MANAGEMENT, WISCONSIN DEPARTMENT OF 
 TRANSPORTATION, MADISON, WISCONSIN, ON BEHALF OF THE AMERICAN 
   ASSOCIATION OF STATE HIGHWAY AND TRANSPORTATION OFFICIALS

    Mr. Leonard. Mr. Chairman, members of the committee, I'm 
Ken Leonard. I'm director of planning with the Wisconsin 
Department of Transportation. I'm also the vice chair of the 
Standing Committee on Planning for the American Association of 
State Highway and Transportation Officials.
    Transportation planning today is a complicated process, and 
an overriding recommendation we have is simplify, simplify, 
simplify. ISTEA and TEA-21 made some positive changes in the 
planning process, first by shifting decisionmaking in many 
areas from Federal to the State level and by emphasizing a 
broad planning process that includes all stakeholders, as well 
as all modes of transportation, but there's still room for 
improvement. Among these areas are: freight planning, financial 
constraint provisions, local consultation, and the role of 
States in regard to land use.
    First, in regard to freight planning, freight movement is 
growing faster than capacity. Over the next 20 years, 
international trade is expected to triple and domestic freight 
is expected to double. It is critical that we upgrade our 
freight planning efforts.
    AASHTO is recommending an increase in freight training and 
capacity building for States and for local agencies, and we're 
recommending an increase in freight transportation research, 
and also the creation of a National Freight Advisory Council.
    In Wisconsin, as well as in a number of other States, we 
already have advisory committees represented by freight 
providers and shippers that advise us on our State planning 
process, and we are recommending something like that at the 
national level.
    In regard to financially constrained plans, the intent was 
to avoid the creation of transportation wish lists where funds 
were not available. I think, as a whole, we've accomplished 
that intent. Our programs, in terms of a total level, stay 
within what we expect in terms of financial resources, but the 
actual day-to-day application is still difficult for States in 
terms of making adjustments when projects are delayed or when 
there's additional resources. AASHTO believes that 
reauthorization should increase flexibility related to 
financial constraints for both States and MPOs.
    Congress attempted in TEA-21 to eliminate major investment 
studies as a separate requirement and to integrate that within 
the planning process and the NEPA process, but that has really 
not occurred. In fact, the proposed USDOT regulations really 
expanded the applicability of MISes.
    We would urge that in reauthorization you direct USDOT to 
eliminate the MIS requirement effective immediately and not 
contingent upon new regulations.
    State DOTs and MPOs should develop options to ensure that 
decisions reached in the statewide and the metropolitan 
planning process regarding purpose and need and the range of 
alternatives would then be binding in the NEPA process, 
therefore eliminating duplication.
    In regard to State long-range plans and timelines, Congress 
should continue to provide flexibility to States in terms of 
performance measures and planning horizons as long as we keep 
the minimum 20-year planning horizon. To improve the planning 
process and public involvement within that, AASHTO also 
advocates that Congress change the update cycle for long-range 
metropolitan plans from 3 years to 5 years.
    In the area of smart growth, most States defer land use 
decisionmaking to local governments, believing that it reflects 
a number of local circumstances and that local officials should 
have the responsibility to determine land use for their 
particular area.
    Federal statutes should continue to defer to local and 
State governments in whether and how to consider land use. That 
being said, AASHTO and the State DOTs are doing a number of 
things in the area of smart growth. Wisconsin has smart growth 
legislation, and we're working cooperatively with our local 
units of government. We've developed a transportation guide to 
help local units of government, and we're encouraging them to 
plan land use and transportation together once they develop 
what the vision is for their community.
    AASHTO is also developing a guide and contact-sensitive 
design that's going to be published later this year. AASHTO is 
sponsoring a smart growth competition between States to 
highlight best practices in the States. AASHTO also has an 
environmental stewardship initiative and has launched the 
creation of a Center for Environmental Excellence. All of these 
things will deal with land use and smart growth.
    In regard to the roles and the tools of the various 
parties, the existing balance of decisionmaking authority 
between the MPO, the State, and the local officials has worked 
well for a decade and that should continue. We think that 
Congress should maintain this balance and reaffirm the 
leadership role and the authority of States as TEA-21 is 
reauthorized.
    AASHTO is working closely with others in developing tools 
to assist transportation planners and is identifying needed 
research.
    Finally, States and MPOs need flexibility to adapt their 
planning provisions to the many diverse parts of the country.
    I look forward to answering any questions you have.
    Senator Jeffords. Thank you for an excellent statement.
    Mr. Kirby, please proceed.

      STATEMENT OF RONALD KIRBY, TRANSPORTATION DIRECTOR, 
METROPOLITAN WASHINGTON COUNCIL OF GOVERNMENTS, WASHINGTON, DC, 
     ON BEHALF OF THE ASSOCIATION OF METROPOLITAN PLANNING 
                         ORGANIZATIONS

    Mr. Kirby. Thank you, Mr. Chairman, members of the 
committee. I'm Ronald Kirby, director of transportation 
planning for the National Capital Region Transportation 
Planning Board, which is the metropolitan planning organization 
for the Washington, DC, metropolitan area. I am appearing today 
at your invitation on behalf of the Association of Metropolitan 
Planning Organizations.
    TEA-21 and its predecessor, ISTEA, rightfully recognize the 
importance of planning a metropolitan transportation system and 
gave the Nation's 340 MPOs increased responsibility to develop 
effective, strategic, long-range plans and comprehensive 
multimodal transportation improvement programs. With the 2000 
census, we expect that additional MPOs will be designated, 
perhaps as many as 60, to establish newly designated urbanized 
areas, and that the geographic areas and populations served by 
existing MPOs will grow significantly.
    While we've got new responsibilities such as management and 
operations required by TEA-21, the percentage of the highway 
program funding for metropolitan planning has remained at the 1 
percent level set in ISTEA. AMPO believes that it is time to 
increase this takedown from the highway program, and also the 
amount allocated from the transit program for metropolitan 
planning to reflect the almost 20 percent increase in MPOs that 
we expect the growth in population and increased 
responsibilities, and we suggest that we look at a level of 2 
percent of the overall program for metropolitan planning.
    I'd like to mention three different categories of tools for 
metropolitan planning: those the we believe are working 
effectively and that we should retain, those that are effective 
and that we should expand, and some new tools that we need.
    First, with regard to those that are working effectively, 
we believe the that requirement for a financially realistic 
plan in a fiscally constrained program is the most effective 
tool provided by ISTEA and TEA-21. This requirement eliminated 
the possibility of wish list plans and programs which did not 
identify enough funds for implementation. The financial 
restrain requirement gave credibility to the MPO plans and 
programs and presented the public with a realistic view of what 
can be delivered in the way of transportation projects and 
services. It is imperative that this requirement be retained.
    In addition to this, two ancillary requirements need by 
retained--the requirement for cooperative revenue forecasting 
among MPOs, States, and transit authorities; and the 
requirement for an annual listing of obligated projects to be 
prepared by the MPO.
    Along with the financial tools, the overall planning 
approach established in ISTEA and TEA-21 should be retained. 
The requirement that long-range plans be strategic in nature 
with broad community goals and specific objectives places the 
transportation agenda in a broader context, encouraging the 
linkage between transportation, land use, the economy, and the 
environment in a metropolitan area, and the MPO provides a 
forum to bring together State and local groups and agencies 
that have to deal with smart growth initiatives. We feel we 
have the opportunity to do that.
    With this approach, with extensive and early involvement of 
the community, the MPO has a solid basis for developing its 
long-range plan and transportation improvement program. The 
proactive public involvement requirements in ISTEA and TEA-21 
have been particularly important in enhancing the effectiveness 
of the MPO process and should be retained.
    In the Washington metropolitan area these ISTEA and TEA-21 
tools have, in the words of one of our elected officials and 
board members, ``forced us to ask the right questions.'' 
Application of the financial constraint in the early 1990's 
resulted in a rather stressful prioritization of transportation 
improvements for inclusion in our long-range plan and the 
initiative of a visioning process aimed at developing a broad 
community consensus on regional goals and addressing the 
critical funding needs that we had identified as a result of 
applying the financial constraint requirement.
    The transportation, community, and system preservation 
pilot program has allowed us to pursue previously unaddressed 
goals and a new vision regarding a new system of regional 
greenways and circulation systems within regional activity 
centers and allowed us to focus increased attention on those 
areas in project selection.
    With regard to existing tools that work effectively that we 
should expand, we are particularly interested in, obviously, 
the planning resources to MPOs, which I mentioned earlier, and 
then, with regard to funds for building projects, ISTEA and 
TEA-21 for the first time put funds in the hands of local 
elected officials to assign to projects developed cooperatively 
through the MPO process. Each MPO with more than 200,000 in 
population receives a portion of the STP funds allocated to its 
State to expend on specific projects. These funds could be 
program based on the MPOs best judgment of the transportation 
needs of their areas. The funds are made available by the 
States through sub-allocation. The availability of these funds 
not only provides funding for vital local projects, but also 
encourages local officials to get involved in the 
transportation decisionmaking process for their region, since 
there is real money on the table.
    Sub-allocation of STP funds has been a great success for 
the one-third of the MPOs that have populations over 200,000 
and needs to be expanded to the remaining two-thirds of small 
areas that still have pressing needs.
    AMPO suggests restoring the suballocation of the STP 
minimum guarantee funds that was in ISTEA but disappeared in 
TEA-21, and extending the sub-allocation of STP funds to all 
MPOs. Second, that we should sub-allocate CMAQ funds to MPOs in 
air quality nonattainment and maintenance areas.
    With regard to new tools, in order to complement the 
financial restraint requirement and sub-allocation proposal, we 
would like to see that the States account annually for 
expenditures of NHS and other programs so that we know what we 
have done, as opposed to what we plan to do.
    Once facilities have been built, it is important that we 
manage and operate them effectively and monitor their 
performance. We would like to put more resources into 
monitoring devices to track the operations of existing 
facilities, the so-called ``infostructure,'' and to encourage 
the development of performance-based management and operation 
elements within MPO plans and programs, and we'd like to have 
NHS, STP, and CMAQ funds eligible for use on projects that 
manage and operate the system, in addition to building new 
facilities.
    In the area of planning, freight planning needs some new 
tools. We are concerned about this area, as well. We have it as 
a planning factor, but we have limited eligibility of funding 
for freight projects, particularly in our port areas, which has 
been a problem for a number of our members. We'd like to see 
port access and gateways be eligible for the corridors and 
borders program in the reauthorization.
    We're also concerned about streamlining project delivery 
and air quality conformity processes. There are opportunities 
within the MPO process, we believe, to identify environmental 
issues and incorporate them into the planning process before we 
get down to specific project alternatives in the EIS process.
    We'd like to have Federal project sponsoring and resource 
agencies engaged at the MPO level prior to the development of 
specific EIS projects.
    We'd like concurrent reviews and also incentives for 
innovative streamlining techniques.
    With regard to air quality conformity requirements, we 
would recommend that the new law add two tools. First, put the 
State air quality implementation plan and transportation 
conformity plans on the same timeframes--they are quite 
different at the present time--and to focus conformity on the 
plan, as opposed to the 6-year program or 3-year program.
    In summary, I'd like to emphasize the importance of 
planning in producing effective transportation systems. In the 
planning, designing, and building of transportation facilities, 
the most important leadership must come in the planning phase. 
If we do a good job of planning, the implementation will 
follow. If we shortchange the planning process, we often end up 
having to go back and start over when project development comes 
to grief. With that kind of planning, we can assure you, we 
hope, that we will have a transportation system that works.
    Thank you for the time and opportunity.
    Senator Jeffords. Thank you, Mr. Kirby. Excellent 
statement.
    Mr. Gregory, we are pleased to have you here. Please 
proceed.

  STATEMENT OF PETER GREGORY, EXECUTIVE DIRECTOR, TWO RIVERS 
OTTAUGUECHEE REGIONAL COMMISSION, WOODSTOCK, VERMONT, ON BEHALF 
        OF THE NATIONAL ASSOCIATION OF REGIONAL COUNCILS

    Mr. Gregory. Thank you, Mr. Jeffords and committee members, 
for inviting me to appear before the committee and speak on 
transportation planning.
    Transportation planning, the resources necessary to carry 
it out, and the role of the local elected officials is key to 
my commission, to the National Association of Regional 
Councils--NARC--and all my colleagues across the region and the 
country.
    My name is Peter Gregory. I am director of the Two Rivers 
Ottauguechee Regional Commission in Woodstock, Vermont. I'm 
also a member of the Executive Directors Committee of NARC, and 
I serve on the NARC Transportation Working Group and advise 
rural transportation interests to the association. I am here in 
multiple capacities today, as an executive director 
representing 27 rural towns, most with populations of less than 
1,000 residents, their elected officials; as spokesman for NARC 
on transportation issues; and on transportation issues for all 
councils and MPOs across the country.
    NARC is a full-service, nonprofit organization serving the 
interests of urban and rural regional councils, councils of 
government, and MPOs. Regional councils and MPOs are created by 
compact, enabling legislation as consortia of local 
governments. As such, regional councils and MPOs represent 
locally elected officials from cities, towns, counties, and 
villages. As such, RPCs and COGs are uniquely positioned to 
address issues across jurisdictional lines.
    In my jurisdiction and across the State of Vermont, for 
example, councils have a strong voice in transportation 
planning. Each regional planning commission's work is guided by 
a Transportation Advisory Committee made up of locally elected 
officials. These officials provide the Vermont Agency of 
Transportation, VTRANS, with a regional transportation plan and 
a list of prioritized projects across all modes. This 
comprehensive program to document local interest has served 
VTRANS well since 1992. Successive Governors and secretaries of 
the Vermont Agency of Transportation have all strongly 
supported the processes that regional planning commissions use 
to identify and support projects. However, Vermont's regional 
planning commissions need a consistent and predictable funding 
source to provide these services. Although they have close 
working relationships with VTRANS today, it is imperative that 
the process my council has undertaken over the last 10 years 
does not falter due to changing economic or political 
situations. Therefore, guaranteed funding for rural areas to 
carry out this planning is essential.
    As in Vermont, councils need funding to plan the best 
transportation systems possible. To help achieve this, NARC is 
proposing new funding opportunities and a net set-aside for 
rural transportation planning.
    NARC proposes changes in TEA-21 to allow States and regions 
to replicate the success in Vermont. We will ask Congress to 
smooth inconsistencies among the States by adopting clear and 
concise law incorporating local governments into the 
transportation decisionmaking and planning process.
    Urban areas are being held hostage to congestion, delay, 
and loss of productivity while workers and freight sit in 
traffic. This is a symptom manifest beyond any local 
jurisdiction. It is a national problem and needs a national 
solution, and NARC pledges to work cooperatively with this 
committee to address that.
    We need to not only guarantee States the flexibility to 
spend funds, plan and program projects based on their 
priorities, but also extend the same responsibility and 
authority to all locally elected officials. Furthermore, we 
need to reexamine the process we use to achieve clean air 
goals. The current process opens regions to poorly defined 
legal challenges, faulty science, and consigns many of them to 
a bureaucratic quagmire. While conformity is well intended and 
necessary, its application should be modified. As others have 
mentioned, conformity and plans should be timed together to 
achieve maximum results.
    NARC will also urge Congress for this in the coming year to 
consider greater emphasis in safety in rural and urban 
communities, a balanced and intermodal approach to Federal 
funding, comprehensive review and consideration of technology 
deployment, and greater consideration of freight movement as an 
essential part of the transportation planning process. Of 
particular concern to NARC members and its citizens they 
represent are the tens of thousands of lives lost on our rural 
roads each year. Coupled with increasing safety concerns in 
urban areas, this presents a sobering picture of travel in 
America. NARC is urging Congress to apply resources in new and 
innovative ways to lessen this tragedy.
    NARC is asking Congress to consider ways to streamline 
project delivery, while ensuring the health of our natural 
environment. The ability to move projects quickly, especially 
those that make our roads safer, is of key concern. Given the 
fact that many regional councils are currently involved in 
emergency management activities, NARC will ask Congress also to 
consider regional councils and MPOs as primary recipients for 
homeland security funding.
    When completed, NARC will submit to you its position and 
policies for reauthorization of TEA-21. We hope you will 
consider them as part of your ongoing process.
    Thank you, Mr. Chairman, for this opportunity. Further 
comments have been submitted to this committee and I will be 
happy to answer any questions. Thank you very much.
    Senator Jeffords. Well, thank you for an excellent 
statement.
    Peter, I am very proud of the work that you and your 
colleagues have done in Vermont. Can you summarize for us the 
value to any State in providing funding for rural 
transportation planning?
    Mr. Gregory. Well, as you know, Mr. Chairman, many of the 
areas are not served by MPOs, and engaging in a process that 
includes the rurals ensures that all citizens throughout the 
country have the same access to decisionmaking and project 
prioritization. Many of these decisions are made elsewhere and 
directly affect the lives and the quality of life of our rural 
citizens, so it is imperative that we provide the same benefits 
and opportunities to rural America as we do currently to urban 
America.
    Senator Jeffords. Ms. Burbank, how many applications do you 
receive for the TCSP program?
    Ms. Burbank. We've received 1,332 applications for 
discretionary funding under the TCSP program over the period 
since it started under TEA-21, so there has been significant 
interest.
    Senator Jeffords. And how many do you accept?
    Ms. Burbank. Pardon?
    Senator Jeffords. How many do you accept?
    Ms. Burbank. Of those, we awarded 80, given the $25 million 
in funding that was available. Several hundred additional 
projects have been earmarked.
    Senator Jeffords. What is the ratio of need to desire for 
TCSP?
    Ms. Burbank. I think the ratio is roughly 10 to 12 times 
the funds authorized. Beyond the authorized funds in TEA-21, 
additional funds were made available through the appropriations 
process.
    Senator Jeffords. What does that tell you about community 
desire to plan proactively?
    Ms. Burbank. There is a tremendous interest in more 
community-level planning. It certainly indicates the strength 
of that interest from all across the country.
    Senator Jeffords. Thank you.
    Let me go back to Mr. Gregory. This is for all of you, but 
I'll go down the line. While consideration of land use trends 
is not specifically referenced among the planning factors in 
Title 23, it seems to me to be a basic element in planning for 
transportation needs. How do each of you incorporate 
considerations of land use trends in your work? We'll start 
with Mr. Gregory.
    Mr. Gregory. Thank you, Mr. Chairman. The regional planning 
commissions, of course, deal with all kinds of issues, not just 
transportation, so, again, they are qualified to work and bring 
in all these different issues.
    In our area of the country, we integrate land use planning, 
local development decisions, access management, demand side 
management to a great extent. It is clear that we could never 
build our way out of congestion, and although ``congestion'' is 
a relative term, we do have it in Vermont. But managing the 
demand, controlling access, and things like that can preserve 
the functionality of our system.
    Senator Jeffords. Mr. Kirby?
    Mr. Kirby. Mr. Chairman, as part of the committee structure 
at the Metropolitan Washington Council of Governments, we have 
the local planning directors from the local governments who 
report up to our board of directors, and we work closely with 
them in developing forecasts of population and employment by 
small area zones for our travel forecasting process. We've also 
developed a comprehensive regional map showing the location of 
development centers and linking them to where the 
transportation facilities are, and it has given us the ability 
to look at where we have transportation and not enough 
development, where we have development and not enough 
transportation, so those linkages exist within our 
organization.
    Senator Jeffords. Mr. Leonard?
    Mr. Leonard. Mr. Chairman, in Wisconsin, when we develop 
our State-wide, long-range transportation plan, we work with 
our local regional planning commissions and our metropolitan 
planning organizations and develop that transportation plan 
based upon their land use plans.
    Also, in addressing the smart growth legislation in 
Wisconsin, we've worked with all the local communities and 
we've put together a transportation guide to help them do their 
transportation element of their comprehensive plan. In that 
guide, we recommend that they develop land use and 
transportation plans together, but that they first think about 
what the vision is for their community, what they would like 
that community to be, and then develop their land use plan and 
transportation plan based on that. So it gets a very high level 
of emphasis.
    Senator Jeffords. Ms. Burbank, would you like to make a 
comment?
    Ms. Burbank. Sure. I want to emphasize that by statute the 
transportation plans are required to look forward 20 years, and 
in doing so it is essential that the 20-year look-ahead 
considers how land use is going to evolve, how it will affect 
transportation, and how various transportation investments will 
affect land use. That needs to be part of that planning 
process. Land use is further brought in through the conformity 
requirements, where you have to examine the air quality impacts 
of those long-range plans in the interplay of land use and 
transportation. So we work closely with the State and local 
governments to make sure that their plans are doing this and to 
provide them tools.
    Senator Jeffords. Thank you.
    Next question is there appears to be some disagreement over 
the application of fiscal constraint in your planning work. I'd 
like to hear your thoughts on that issue, and I'd also like to 
ask you your perspective of organizations--how your 
organizations work together over the next few months to seek 
common ground on the issue. In general, I would prefer to 
receive solutions rather than problems, and from those 
interested in the reauthorization.
    Mr. Gregory?
    Mr. Gregory. We look forward to continuing our dialog with 
all of the organizations that have a role to play in 
transportation planning, be it urban or rural or State 
organizations, and look forward to continuing that dialog with 
the committee.
    The fiscally constrained issue is something that we work 
closely with our MPO on and the MPO works closely with the 
State of Vermont on. In fact, the State of Vermont developed a 
way to pare down its capital program, a little bit of truth in 
advertising so citizens understand that not everything that had 
been on a capital plan would ever get built, and regional 
commissions were key in working with local governments to 
ensure those programs and projects that were on the list were 
realistic, were fully supportive, and were likely to be built 
in our lifetime, so we continue to work in that direction.
    Senator Jeffords. Mr. Kirby?
    Mr. Kirby. Mr. Chairman, we believe that the law in ISTEA 
and TEA-21 and the regulations that were developed following 
ISTEA were really appropriate for metropolitan planning. We've 
found them to be very workable from the regional level. They 
have been very important to us in developing our plans. The 
development of revenue forecasts and cost forecasts and 
matching these over time over our 25-year period is probably 
the most important activity that we undertake as an MPO. We 
update these every 3 years and our board members and technical 
staff are very focused on that exercise. It has also had an 
impact back through our State DOTs and our transit agency. They 
work closely with us on this.
    I think it is a provision that is working well. I think the 
fact that we are updating our plans regularly does provide the 
flexibility to update revenues and costs as new information 
comes along, so overall I think it is a very good requirement.
    Mr. Leonard. AASHTO plans to, over the next few months, 
work with all the various organizations addressing what are our 
draft policy positions, working with AMPO and NARC and Federal 
Highway Administration, as well as the other organizations. I 
think that, as a whole, we certainly understand and support 
financial constraint, having our plans and programs live within 
expected revenues. Our problems are probably more on a day-to-
day basis. For instance, when we run into a complex project in 
contaminated soil, things like that, that extend the life of 
the project, change the cost, then we have to go back and 
change our program, go back through the review and approval 
process, so it is more on a day-to-day basis where it causes us 
problems, but we'll certainly work with the organizations on 
this issue.
    Senator Jeffords. Ms. Burbank, do you have a comment?
    Ms. Burbank. First, I want to emphasize the Department's 
very strong commitment to fiscal constraint. It is essential to 
a good planning process, and we are committed to fiscal 
constraint.
    Having said that, however, it requires flexibility, good 
judgment, and reason in judging what fiscal constraint is in 
any particular program or plan. I think the greatest need is 
for good administration of fiscal constraint . I haven't heard 
a lot of specific ideas for statutory changes to fiscal 
constraint in reauthorization, but we'll certainly be willing 
to look at that and discuss it with our partners and with the 
Congress.
    Senator Jeffords. Senator Chafee?

OPENING STATEMENT OF HON. LINCOLN CHAFEE, U.S. SENATOR FROM THE 
                     STATE OF RHODE ISLAND

    Senator Chafee. Thank you very much, Mr. Chairman, for 
having the hearing. I'm just struck that, as we have these 
various hearings on the reauthorization, you don't hear too 
many dissenting notes about the reauthorization. I think that's 
different from the last time it was reauthorized. There were a 
lot of questions about it. I don't think this panel is any 
different from the others we've heard in the last number of 
weeks.
    I don't have any other further questions.
    Senator Jeffords. Thank you, Senator.
    The traditional planning process begins with a problem 
statement, develops information, weighs alternatives, and then 
sets a course of action. To be effective, it must be a 
continuing process. In the classic planning model, the 
mechanism for regenerating the process is evaluation. Did this 
strategy work? And what were the outcomes?
    My question is: do we have an evaluation step in our 
transportation planning process? And are we measuring outcomes? 
And can we become more effective in this regard?
    Mr. Gregory, I'll pick on you first again.
    Mr. Gregory. By the nature of planning, planning is 
iterative, so we are constantly reevaluating our situations, 
taking into account new circumstances. But you are absolutely 
correct that evaluation and measurable progress toward our 
goals is key. We can always do more. We are always looking at 
ways to further integrating data that we collect, whether it be 
natural resource or economic development data, to ensure that 
the transportation goals that we have set out in our local, 
regional, and State-wide plans are met.
    Mr. Kirby. Mr. Chairman, this is a question we are often 
asked as MPOs is, ``How accurate has your planning been?'' The 
MPO process has been in place now for some 30 years, and we are 
able to look back in the Washington region to plans in the 
1960's and see how well they turned out, how the forecast 
turned out. We have not always projected population and 
employment growth on target. We under-estimated the growth of 
labor force participation by women. We didn't anticipate the 
growth in telecommuting. We didn't anticipate people buying 
SUVs as much as they have. So there are changes that occur in 
lifestyles that we have to keep up with, but the continuing 
updating nature of the process is what gives us the ability to 
check on our progress, to look backward as well as forward.
    Mr. Chairman, you mentioned the word ``continuing.'' That's 
the critical component, I think, to evaluation and keeping up 
with changes as they occur.
    Senator Jeffords. Mr. Leonard?
    Mr. Leonard. Mr. Chairman, State DOTs use performance 
measures in their State-wide plans, and one of the things 
AASHTO is doing is supporting increased research and training 
in the use of performance measures so we can always continue to 
evaluate how well we are doing, what's the condition of our 
transportation system.
    You've also probably heard the term ``asset management.'' 
That is a large emphasis area within AASHTO so that we are 
continuing to evaluate how well we are doing at preserving the 
existing system, as well as improvements in that system. So 
between performance measures and asset management, we are doing 
a good job of evaluating the outcomes and what have been the 
changes.
    Senator Jeffords. Comments, Ms. Burbank?
    Ms. Burbank. Yes. Starting at the Federal level, we do 
establish performance measures for ourselves and track them 
under The Government Performance and Results Act (GPRA), and I 
think we are getting better at doing that. However, it is 
certainly not easy to track those outcomes and to identify what 
they should be. They range from mobility measures to 
productivity measures to environmental measures and safety 
measures.
    Shifting to the State and local level, we have noticed 
increasing emphasis by both MPOs and State DOTs on establishing 
performance measures and doing performance planning.
    Senator Jeffords. Well, I want to thank you all for your 
excellent answers, and hopefully we will all work together.
    Ms. Burbank, I understand that other members who have been 
delayed in attending today's hearing were looking forward to 
discussing the issues with you. I wonder if you would mind 
staying on a little bit after the next panel?
    Ms. Burbank. I would be happy to.
    Senator Jeffords. Thank you very much.
    Well, thank you all. We're going to be back in touch and 
depending upon you to help us keep going in the right 
direction, so thank you very much.
    Our second panel will offer a range of views on the 
effectiveness of the planning program and on the scope going 
forward. The second panel will include: Mr. Andrew Cotugno of 
the Portland Oregon MTO known as METRO; Ms. Judith Espinosa 
from the University of New Mexico on behalf of the Surface 
Transportation Policy Project; Ms. Jennifer Joy Wilson on 
behalf of the National Stone, Sand and Gravel Association; 
Wendell Cox from Belleville, Illinois; and Mr. Tom Downs of the 
University of Maryland.
    Again, thanks to the panelists for coming. We look forward 
to your testimony.
    Mr. Cotugno?

    STATEMENT OF ANDREW COTUGNO, PLANNING DIRECTOR, METRO, 
                        PORTLAND, OREGON

    Mr. Cotugno. Thank you. Mr. Chairman, I want to thank you 
for holding this series of hearings on reauthorization of TEA-
21 and inviting me. I'm Andy Cotugno, planning director for 
METRO. We're the regional government of the Portland, Oregon, 
metropolitan area. METRO is the only elected regional 
government in the U.S. We also serve as the MPO and are active 
members of the Association of MPOs.
    Portland is often cited as the smart growth capital of the 
world. Whether that's true or not, we are certainly scrutinized 
for our smart growth programs and they are closely tracked from 
across the country. It is from this unique base of experience 
linking land use and transportation that I offer my comments 
this morning.
    I'd first like to speak on the principles of making the 
smart growth connection to transportation and then relate that 
to recommendations for how the next authorization bill could 
recognize these principles. The linkage between smart growth 
and transportation is about understanding how developing land 
use patterns impact the effectiveness of the transportation 
system and, in turn, how new transportation projects affect 
these development patterns.
    METRO and the Portland region have implemented a number of 
integrated land use and transportation strategies. We have an 
urban growth boundary in place for now more than 20 years, 
which has effectively stopped the sprawling development pattern 
leapfrogging onto farmland. We've used zoning to reinforce a 
higher-density development pattern in locations that can be 
well served by transit, producing six consecutive years of 
ridership increases. We have protected industrial areas and 
intermodal freight terminals from conversion to big box retail, 
preserving this land and highway capacity for more important 
economic uses.
    We've adopted parking limitations to ensure new development 
does not over-build parking. We've adopted a requirement for 
greater local street connectivity to ensure that a system of 
cul-de-sacs does not simply shift local traffic onto the 
regional system.
    We have restricted development near streams and purchased 
open space to ensure a balance between growth and access to 
nature.
    We have adopted revised street design guidelines to ensure 
highways intended for through traffic are built to emphasize 
moving cars and trucks, while streets in downtowns and 
neighborhoods support a strong pedestrian environment.
    We've used the flexibility provided by ISTEA and TEA-21 to 
fund a broad mix of highways, light rail, bike trails, 
sidewalks, and transportation development projects. We've put 
to good use funding made available through the new starts 
program to build a successful light rail system that helps to 
focus growth and has ridership 7 years ahead of forecast.
    We've leveraged the requirement for an MPO into a 
coordinated regional growth management and environmental 
protection program.
    With this framework, my focus on smart growth and the next 
authorization bill is going to emphasize three programs--the 
Federal new starts program, FTA new starts program; the Federal 
highway national trade corridor, so-called ``borders and 
corridors'' program; and the Federal Highway TCSP program.
    First, the new starts, which I believe can be a model for 
the other two programs. It has been successful in constructing 
light rail projects. As a result of high competition for these 
funds, there is a long line waiting for funding, and to manage 
that demand, Congress has set clear criteria to distinguish the 
most meritorious projects. The Federal Transit Administration 
requires local areas to go through a rigorous process, 
producing the best projects.
    The Federal Transit Administration makes a recommendation 
to Congress on projects that are recommended, highly 
recommended, or not recommended for funding, and based upon 
that the congressional authorizing and appropriating committees 
authorize execution of a multi-year funding contract.
    This program produces a limited number of good projects 
that stand up to scrutiny from a large, competitive field, and 
produce projects that actually make a difference. For the 
Portland region, the new starts program has provided the means 
to build an essential part of the region's infrastructure and 
shape growth of the region in the process. It has had a 
profound impact on our ability to reign in sprawl and hold 
tight an urban growth boundary. It has helped produced a 
terrific downtown Portland, and is now shaping the future of 
downtowns in Gresham, Beaverton, and Hillsboro, and has been 
possible to leverage State and local funds that would otherwise 
not have been spent on transportation into the projects.
    So what might be the equivalent on the highway side? You 
might think the national highway system program would be that 
because it is intended for modernization of the most 
significant part of the Nation's highway system, but that 
system is large and the use of those funds is quite varied.
    I would follow the new starts model with a national trade 
corridor program to make that smart growth connection to build 
a strong economic base with a trade and freight emphasis. Like 
new starts, I would suggest it be authorized at over $1 
billion, allowing Congress to make multi-year commitments to 
large construction projects; however, with those funds Congress 
should set a high standard on how those funds are spent to 
ensure high-quality projects are funded that produce the 
greatest impact on global economic competitiveness. Federal 
Highway Administration, like the new starts, should make sure 
that the local areas go through a rigorous process so that 
there can be a recommend, highly recommend, or not recommend 
recommendation to Congress, providing the basis for executing a 
full funding contract.
    In Portland, the case study is I-5 through the middle of 
town connecting Oregon and Washington and California. It is a 
national trade corridor. It is one of the national trade 
corridors. But the I-5 bridge across the Columbia River is the 
bottleneck. It was built in 1917, well before the interstate 
system was conceived, and represents the bottleneck right where 
the port of Portland, the intermodal railroad terminals, access 
to the Portland International Airport, and access to 80 percent 
of the region's truck terminals are all concentrated.
    We've developed a fragile consensus on how to fix this 
problem, but a consensus faces many difficulties because of the 
high impact of further widening in a low income minority area, 
because of the Endangered Species Act affecting construction 
across the Columbia River, and because that 1917 bridge is on 
the National Register of Historic Places.
    But we've come to a conclusion that that bridge needs to be 
expanded from six lanes to ten lanes, light rail needs to be 
expanded from Portland into Clark County, Washington. We need 
an aggressive program to minimize demand. And we've reached an 
agreement that land uses need to be controlled to avoid simply 
more sprawl in response to a bigger freeway resulting in simply 
a bigger traffic jam in the future.
    The third program is the Federal TCSP program. It was 
really founded to make the land use connection to 
transportation system and was based upon the principle of 
having transportation projects support good local and regional 
growth decisions. In the first year, I believe Federal Highway 
did a good job of setting guidance and selecting competitive 
projects; however, since then it has been earmarked to a 
potpourri of different projects and I believe could also 
benefit from the rigor of the new starts model, not the build 
the major elements like freeways and light rail, but to build 
good communities that support the transportation system around 
that.
    Again, Federal Highway should continue its guidance to 
development to identify what are the best types of projects to 
fund and publish these as best practices. I would consider 
increasing the authorization level to that that was earmarked 
in 2002, but tighten up the statutory language to ensure grants 
cannot be awarded unless they demonstrate a supportive land use 
connection, and base those earmarks on a Federal Highway 
recommendation of recommend, highly recommend, or not 
recommended, the same for all three programs. The areas go 
through a rigorous process, therefore justifying a substantial 
funding commitment to a project that actually makes a 
difference.
    The final comment I would like to make, in addition to 
support of Ron Kirby's comments about the MPOs' planning funds 
and STP funds, is a suggestion that there be a better 
connection between the Clean Water Act and the Endangered 
Species Act with TEA-21 reauthorization. There's already a 
strong connection with the Clean Air Act, and similar kinds of 
linkages would be appropriate for Clean Water and Endangered 
Species.
    Thank you, Mr. Chair.
    Senator Jeffords. Thank you.
    Ms. Espinosa?

     STATEMENT OF JUDITH ESPINOSA, DIRECTOR, ALLIANCE FOR 
TRANSPORTATION RESEARCH, ALBUQUERQUE, NEW MEXICO, ON BEHALF OF 
           THE SURFACE TRANSPORTATION POLICY PROJECT

    Ms. Espinosa. Thank you, Mr. Chairman, and thank you for 
allowing me to be here to testify. I am Judith Espinosa, 
director for the Alliance for Transportation Research Institute 
at the University of New Mexico. I appear here today on behalf 
of the Surface Transportation Policy Project, where I serve as 
a member of the board of directors.
    I thank you, Mr. Chairman. STPP has just celebrated 10 
years of progress since ISTEA and TEA-21 reauthorization, and I 
believe, Mr. Chairman, you and Senator Chafee were there to 
celebrate with us.
    I also bring greetings from New Mexico and to say that we 
are very pleased to see that Senator Domenici has rejoined the 
committee again, and we look forward to working with the 
committee and with him on all of these issues.
    New Mexico has had 400 years of cultural diversity, and 
with that has brought 400 years of the oldest commercial trade 
route in this country founded by the Spanish called the Camino 
Real, so we think we know a little bit about pedestrian and 
horse cart and now ultimately automobile and transit through 
our State. Like Vermont, we are a rural State, and so I was 
pleased to hear panelists earlier talk about the need for rural 
planning and for the engagement of the public not only in our 
large urban centers, but also in rural America, as well. We 
find that to be very important, and I believe that my written 
testimony, which I would ask to be put into the record, speaks 
to that.
    STPP and its coalition of national, regional, and local 
organizations--of which we now number many hundreds due to a 
new charter that we have engaged many hundreds of organizations 
and individuals around the country--believe that the 
transportation policy and planning concepts and the structure 
in the current law is fundamentally sound and should be 
preserved. However, despite the progress that we have made over 
10 years, we also want to make sure that we can fully 
capitalize on the many opportunities that TEA-21 has intended 
to make available, and we still feel that there need to be 
improvements. Like my mother almost always told me, Mr. 
Chairman, ``Improvements is what life is all about,'' and so we 
cannot stop on the progress that we've made.
    The public has an appetite now for transportation 
improvements. It has been stimulated over the last decade, and 
I think that is due to the public input provisions in ISTEA and 
TEA-21. The public wants choice and balance and transportation 
with options that add value to their lives.
    STPP views TEA-21 reauthorization as the ability for this 
committee and for Congress to continue to renew the public's 
concerns with transportation investments, but to do good 
planning, Mr. Chairman, we need good data and good research. I 
believe that Cindy Burbank and I have talked about this on some 
of the Transportation Research Board committees we have been 
on. We need to continue to develop that.
    You will see, Mr. Chairman, on this panel and other panels 
that you hear from the discrepancies in data. Some will argue 
that smart growth is very difficult to achieve and that what 
smart growth plans and what transportation planning does now 
does not achieve what we are looking for. I would say to you, 
Mr. Chairman, that that is why we need to present ourselves 
with good data, and this governing body and the Federal 
Government can help do that for the States and the local MPOs.
    We need funding transparency. You've already heard about 
investments and looking at that. The public wants to know where 
their money is going. This is a taxpayer issue. This is an 
issue for the public taxpayers. The public does not want to 
continue paying for incremental increases in capacity and in 
infrastructure without knowing exactly whether things can be 
done differently, how they can be done differently, and 
alternatives to that planning.
    We need to know what the budgets are from the States. They 
change. The MPOs do not always know. MPOs do not know from only 
year to year what kind of budget they will have to spend in 
their areas.
    Those are all very important and critical needs that we 
have in order to effect and enhance our planning process in 
this country.
    I might also mention, Mr. Chairman, just to know and to say 
last that this Congress this year and next year and this 
committee has the opportunity to look at transportation in an 
integrated fashion. You, Mr. Chairman, on this committee and 
Members of Congress will be looking in 2003 at air, rail, 
highway, and transit reauthorizations. We would urge the 
Congress and this committee to look at an integrated 
transportation system for this country that looks at not just 
surface transportation but integrating our airports with our 
cities and also our cities with our rural areas. That will 
bring a diversity of bus, light rail, high-speed rail, 
aviation, and highways to our population, and that we can start 
planning for that in this millennium so that we have a truly 
integrated opportunity to provide benefits and quality of life 
to our communities.
    Thank you.
    Senator Jeffords. I thank you for an excellent statement.
    Mr. Cox?

STATEMENT OF WENDELL COX, WENDELL COX CONSULTANCY, BELLEVILLE, 
                            ILLINOIS

    Mr. Cox. Thank you, Mr. Chairman. You surprised me. I am a 
consultant. I live in Belleville, Illinois. I was appointed to 
three terms on the Los Angeles County Transportation Commission 
by Mayor Tom Bradley and to the Amtrak Reform Council by 
Speaker Gingrich. I have just returned from 2 months as a 
visiting professor at a French national university, and I am 
visiting fellow at Heritage Foundation, though I don't speak 
for them today. I speak for myself.
    What I will suggest to you today are things probably you've 
not heard before, things that are very controversial, things 
that will probably disagree with most everything else you hear 
today. But recognize that in the 1950's urban renewal and 
ripping up our cities was what planners thought we needed to 
have, and I'm here to suggest to you today that the whole smart 
growth agenda in many ways is a step in the wrong direction.
    First of all, if you look at my slide No. 2, you see what's 
happened to Paris in the last 50 years. Urban Sprawl is not an 
American problem. Urban sprawl occurs all over. It occurs where 
there is affluence and it occurs where there is population 
growth. And, of course, we have great amounts of land in this 
country. Only about 3 percent of it is urbanized at this point, 
according to USDA data.
    Now, smart growth seeks to control sprawl, to reduce 
sprawl, and, in attempting to do so, claims that it will reduce 
traffic congestion, that it will reduce air pollution, it will 
lower overall costs, and so on.
    The key to smart growth is density. If you do not increase 
density, you can accomplish nothing of what smart growth seeks 
to accomplish. But the claims don't hold up. International and 
national evidence proves that traffic congestion is greater 
where densities are higher. That's not surprising. Federal 
research indicates that at the present densities of our urban 
areas, if you have 100 percent increase in density you will 
have about an 80 percent increase in traffic. Now, granted, 
that means the per capita driving drops, but the overall 
increase in traffic continues, and that creates another 
problem. Traffic slows down, commute times are longer. In 
addition to that, because traffic slows down and because there 
is more stop-and-go driving, you have worse air pollution. All 
the data internationally and nationally shows that density is 
associated with worst traffic congestion.
    By the way, we've made great progress, and I want to make 
sure you are aware of the progress we've made in this country. 
This chart in my presentation from the EPA indicates great 
progress in reducing the three criteria pollutants or two of 
the three criteria pollutants in this country at the same time 
that vehicle miles traveled have gone up very much.
    You've also probably been told that sprawl is costly, and I 
don't come here with a brief for sprawl, I come here with a 
brief for freedom. I believe we ought to allow people to live 
and work where they like, and we ought not to interfere with 
that unless there's a good reason. The fact is that the overall 
consumer expenditure data of the U.S. Department of Labor shows 
that, where densities are lower, costs are lower overall. Yes, 
transportation costs are higher, but housing costs are lower.
    But worst of all is the impact of the anti-sprawl efforts 
and the densification efforts on minorities and low-income 
people. Sprawl is associated with higher levels of home 
ownership. The data is very clear on that. There's all sorts of 
research on that. There's a raging debate between people like 
me--and there are other people like me in the academic 
community--and those on the other side who say, ``Well, how 
much is sprawl increasing? How much is the anti-sprawl movement 
increasing the price of housing?'' Well, the problem is this--
it's an intellectual discussion. Any increase in the price of 
housing hurts people. Smart growth rations lands and 
development. When you ration, you raise prices. As prices go 
up, you hurt the lower part of the income spectrum, and that 
means in this country that minorities and low-income people 
will pay the greatest price for the anti-sprawl measures that 
will inevitably increase the price of housing relative to 
income.
    Now, the normal answer to that is to hear people say, 
``Well, we'll increase the housing affordability program, the 
affordable housing programs.'' The problem with that is in this 
country today we only support one-third of the eligible 
recipients of housing assistance with our programs as they are, 
so before we even start with the anti-sprawl strategies we've 
got two-thirds of the people who are eligible who aren't even 
getting money.
    Finally, we should remember that this country is the 
richest country in the world. It is the most prosperous country 
per capita in the world except for countries smaller than 
Fresno, for example, and we need to recognize the role that 
land plays in wealth creation and we need to be very careful 
about limiting land and regulating land.
    Now, a couple of quick notes on transit. Transit is very 
concentrated in this country. I am not here to be anti-transit 
or pro-transit or anti-roads or pro-roads. The fact is transit 
works very well. Transit carries 75 percent of the people who 
work in New York. Transit carries 60 percent of the people who 
work in the loop in Chicago. But it carries virtually no one to 
work who has a car outside our central business districts, and, 
unfortunately, our central business districts now represent 
only 10 percent of employment. What that says is that transit 
is in no position to reduce traffic congestion except in those 
corridors going to central business districts.
    I take a bit of evidence--a recent study by the Union of 
International Public Transport. The International American 
Public Transit Association was quoted thusly: ``In the United 
States, with the exception of New York, public transit is 
unable to compete with the automobile. Its speed is half as 
fast, which means that door-to-door travel times incorporating 
terminal distance times, waiting and transfer times are three 
to four times longer than public transport.'' I think that's an 
over-statement. It isn't that bad. The fact is, however, that 
transit, unfortunately, has no potential because of our 
dispersion to reduce traffic congestion except in those 
downtown corridors.
    Now, in conclusion I would suggest to you that no problem 
has been identified of sufficient magnitude to justify the 
coercive smart growth strategies; two, that there is little 
potential for reducing traffic congestion or increasing 
transportation choice for all but a few, mainly those going 
downtown through transit. There are no material successes. You 
will not find any successes in this regard anywhere in the 
developed world. And, finally, smart growth strategies tend to 
intensify the very problems they are purported to solve. 
Therefore, I would suggest new Federal mandates with respect to 
planning on local agencies based upon a philosophy of smart 
growth are inappropriate.
    Finally, I won't read the quotation from Adlai Stevenson, 
but I think it is well to remember that we are a country that 
is very prosperous and we have led the world in economic 
progress and a whole bunch of other things through history, and 
the Stevenson quotation from the 1952 campaign basically 
concludes with, ``Who shall say the American dream has ended? I 
think we need to look forward to the future with confidence, 
recognizing the great success we have had and not go back and 
start regulating land and reduce the affluence of this country 
and, frankly, make minorities pay the price.''
    Thank you, Mr. Chairman.
    Senator Jeffords. Thank you, Mr. Cox.
    Ms. Wilson?

 STATEMENT OF JENNIFER JOY WILSON, PRESIDENT, NATIONAL STONE, 
        SAND AND GRAVEL ASSOCIATION, ARLINGTON, VIRGINIA

    Ms. Wilson. Good morning. I'm Joy Wilson, president and CEO 
of the National Stone, Sand and Gravel Association located in 
Arlington, Virginia.
    Mr. Chairman, as someone once confirmed by former 
membership of this committee and as a former Senate staffer, it 
is a pleasure to be here.
    NSSGA represents the Nation's crushed stone, sand, and 
gravel industries, and our membership represents 90 percent of 
the crushed stone and 70 percent of the sand and gravel 
produced annually in the United States. Nearly three billion 
tons of aggregate valued at approximately $14.5 billion were 
produced in this country in 2001. There are about 10,000 
construction aggregate operations nationwide in virtually every 
congressional District, and construction aggregates are used 
primarily in asphalt and concrete. Of asphalt pavement, 94 
percent is aggregate, 80 percent of concrete is aggregate.
    While I appear this morning representing the aggregates 
industry, I also appear as a member of the Partnership for 
Quality Growth, which is 13 labor and industry organizations 
that share a common interest and concern for the future of our 
country's growth management and its impact on transportation 
infrastructure. I know this is something we share with the 
members of this committee, so we particularly appreciate this, 
Mr. Chairman, and your initiative in holding this hearing.
    Our industry labor coalition adheres to the basic concept 
that Americans should be allowed the freedom of mobility and 
the freedom of choice in where we live and when and how we 
travel. We recognize that as our population continues to grow, 
all planning, whether it is Federal or local, must accommodate 
that continued growth, plus the collateral increase and 
transport of freight that will be needed to support that 
population. We hope to ensure that Federal policies respect 
local planning power to meet growth needs, especially with 
regard to infrastructure improvements.
    Use of Federal transportation law to drive local planning 
decisions should be approached with extreme caution lest local 
and State land use decisions become usurped by Federal 
determinations.
    Since 1975, the U.S. population has increased more than 30 
percent, passenger car traffic has more than doubled, and truck 
traffic has increased six-fold. At the same time, highway 
capacity rose just 6 percent. There is no wonder we are 
experiencing congestion. We haven't, as a Nation, kept up with 
our needs.
    Traffic congestion in and around our cities costs our 
economy $78 billion annually in added time, wasted fuel, and 
labor costs.
    Economic growth is not the only cost to society. Each year 
14,500 people die in traffic accidents attributable to unsafe 
road and bridge conditions. Safety improvements and maintenance 
of our current system will take $50 billion a year. We're about 
$20 billion a year short of that investment, even with TEA-21, 
and we need to understand and support what additionally it will 
take to solve the capacity issues.
    One in eight traffic fatalities results from a collision 
involving a large truck. That's about 5,000 deaths a year. This 
last figure warrants some thinking about the benefits of 
separate truck lanes, or HVLs--heavy vehicle lanes. This idea 
merits consideration because such separation of heavy vehicles 
from passenger vehicles could enhance motorist safety, relieve 
congestion, and reduce wear and tear on lanes used by lighter 
vehicles.
    Even though our country is blessed with the best 
transportation system in the world, transportation planners can 
fail society if they refuse to acknowledge the data that is 
critically important to decisions when they are made about when 
and where to add capacity. Consider this: suburbanites or rural 
residents who move to an urban area are estimated to drive 90 
percent as much as they did before, but if the urban population 
doubles, then even with the reduced per person driving pattern 
the city will see a tremendous increase in vehicle miles 
traveled.
    How then are cities going to reduce congestion and still 
offer Americans freedom of mobility? Capacity increases will 
need original thinking and some creative, tough, practical 
know-how. Everything should be on the table, from adding turn 
lanes and smart signals to considering additional land miles or 
new roads, as well as public transportation, HOV lanes, maybe 
heavy vehicle lanes, tunnels, elevated streets, and so forth.
    Americans view as fundamental their freedom of choice in 
where they live and work and how they travel. In 2000, when the 
voting public in Arizona and Colorado came to fully understand 
the ramifications of State-wide ballot initiatives on smart 
growth, the initiatives failed. They failed because the 
proponents misread how strongly the vast majority of Americans 
hold to the values of home ownership, safe neighborhoods, and 
the freedom to travel and to choose where to live.
    Consider these statistics: by 2025 the U.S. population is 
expected to reach 337 million people, an increase of 60 million 
over 2000. Annual passenger miles traveled are predicted to 
increase from 5 trillion miles in 2000 to 8.4 trillion miles in 
2025. By 2025, freight transportation will expand to just over 
5 billion ton miles, a 29 percent expansion. Rail ton miles is 
also projected to grow by 2 percent per year between 2000 and 
2025. Capacity needs are real and present for all modes of 
transportation--air, waterways, ports, rail, transit, and road. 
That's why we must increase our investment in transportation 
infrastructure.
    Mr. Chairman, I know I'm getting to the end of my time. 
I've got just about one more page of summary, if that's all 
right.
    Senator Jeffords. Keep on going.
    Ms. Wilson. Thank you.
    The reality is that goods will need to continue to be 
shipped, primarily in trucks on our Nation's highways. People 
will still want to go to work and have the freedom to be fuel 
efficient and timewise by practicing trip chaining, or going to 
multiple destinations in one trip. The decisions made in the 
reauthorization of TEA-21 and the successor legislation will 
have significant impact on this Nation 21 years from now when 
the U.S. population will have increased by 60 million people.
    I thank you for this opportunity to testify.
    Senator Jeffords. Thank you for your testimony.
    Mr. Downs?

  STATEMENT OF TOM DOWNS, DIRECTOR, NATIONAL CENTER FOR SMART 
    GROWTH EDUCATION AND RESEARCH, UNIVERSITY OF MARYLAND, 
                      BALTIMORE, MARYLAND

    Mr. Downs. Thank you, Mr. Chairman and Senator Chafee. I'm 
Tom Downs, and I'm the director of the National Center for 
Smart Growth Research and Education at the University of 
Maryland, created by a consortium of schools of engineering, 
agriculture, public affairs, and architecture and planning.
    Instead of giving you the kind of executive summary of my 
comments, I was struck by a couple of things that maybe I can 
summarize and perhaps reinforce. One is that smart growth is 
about growth. That's why the ``growth'' word is part of that. 
And you can quibble about whether or not it is smart, quality, 
efficient, effective growth. It is a framework that questions 
how we will respond to the demographics that Ms. Wilson just 
laid out--the demographics which, by the way, are about 64 
million people additional in the United States in the next 20 
years, not 25 years. Demographics are destiny. That's two 
Californias. The question is how this country will choose, with 
hundreds of billions of dollars worth of transportation 
investment, to cope with eight trillion miles of travel in the 
United States in the next two decades.
    If the frustration with the existing system at its current 
population levels and travel levels is high enough to be ranked 
at the top of almost every public attitude survey in the United 
States about local issues, then we have to be accountable in 
this reauthorization for how we begin to answer some of those 
questions about how we absorb that growth.
    The Center received a grant from the Packard Foundation to 
look at some of the issues in data and modeling to see where we 
were in this. An incredible gap between assumptions about how 
the planning process works in America, about transportation 
funding, and what we know it actually produces. There is 
relatively little research of a national level that shows the 
impact of highway investments, transit investments, or any 
other modal investment over the long haul about density, 
suburbanization, growth, land use patterns. The research that 
is there suggests that there are little economic development 
impacts of the construction of a highway corridor; that, in 
effect, that highway corridor is simply a moving of the 
economic chairs within a region. There's no net gain or loss 
from that from an economic development standpoint for the 
region. There are winners and losers within the region.
    It suggests that urban areas with beltways sprawl faster 
than areas without beltways, but it is inconclusive.
    It shows some linkages between highway capacity, expansion, 
and growth in VMT, but the correlation, the actual growth in 
VMT is less than popular literature would suggest.
    The literature also suggests strongly that not building 
highways does not change VMT growth within an urban area. So if 
you don't build it, they come. If you build it, some of them 
come. But the research doesn't help us enough to understand why 
we are making hundreds and hundreds of billions of dollars 
worth of national investment in transportation systems.
    The question that the planning process and the framing of 
TEA-21 in its purpose chapter needs to be looked at again, 
expanded, and put in the planning chapters of the next bill. It 
posited that the Nation had an interest in safe, efficient 
movement of goods, intermodalism, social justice, social 
equity, clean air, environmental mitigation, and all of those 
were expectations about the use of those Federal funds. If we 
say that they are simply block grants to be passed along to the 
rest of the inter-governmental system, we miss an important 
point about our national responsibilities.
    I'd like to hit two points, one that was raised by Mr. Cox 
about the question about whether or not the suburbanization or 
smart growth impacts minorities adversely or positively. To 
show you the lack of data, there is an additional study that 
shows that the poorest of families, the lower 25 percent of 
families in terms of income in the United States, are severely 
disadvantaged from a transportation cost standpoint about a 
move to the suburbs, and that those costs more than offset the 
gains in housing so that there are no easy answers.
    The answer is that the poor and the disadvantaged have 
always been disadvantaged by transportation investments. We 
simply don't have that as a focus in our transportation 
systems.
    One of the points that Ms. Wilson made about how many roads 
within the Washington region were drawn, only one was built, 
failing to mention that, of those, just one envisioned the 
removal of 15,000 individuals from that corridor, alone; that 
our transportation system has always made assumptions about 
what is best for communities, and the strength of this last 
bill was in mandating more direct involvement in the planning 
process by counties and local communities.
    The last is that one of the major assumptions that people 
make is that density increases traffic. We don't actually know 
that because we don't count one of the important methods of 
transportation in most urban areas, and that is pedestrians. 
Unless you are carrying around 2,000 pounds of sheet metal, you 
don't get counted in the transportation process. There's some 
data that suggests, for instance, that there are more 
pedestrian trips in New York City than there are transit and 
automobile trips combined, but we don't know that because 
pedestrians obviously don't count. They don't pay a gas tax.
    What we don't need is a lot of ideology struggling over the 
outcome of this bill. What we don't need are opinions. What we 
need is a funded set of research objectives beyond materials 
and road construction that lets us understand how we have 
affected the land, our jobs, and how we live in America, and I 
think that there is an emerging consensus among a lot of people 
about the purpose of transportation investments, at least at 
this level, and that is to help Americans choose how they want 
to live and travel--something that for a lot of Americans is 
very difficult to do. In this democratic society, we hope it is 
about choice and freedom.
    Thank you, Mr. Chairman.
    Senator Jeffords. Thank you, Mr. Downs.
    I now will ask a question for the panel, and I'll go down 
and start at the opposite end again.
    Our committee has jurisdiction over the highway title, 
while the Banking Committee handles transit. I look forward to 
working closely with Senator Sarbanes on the reauthorization. 
One element in the transit title that appears very promising to 
the transit-oriented development using TOD, transit properties 
can enter into partnerships with the private sector to generate 
new land uses that both support and benefit from the 
availability of transit facilities, and the Federal Transit 
Administrations encourage and support these partnerships. In so 
doing, TOD can return revenues to the transit property and the 
transportation system.
    I would like to explore the transferability of the TOD 
concept to highways, and I would like your thoughts on this.
    Mr. Cotugno. Mr. Chairman, we use the flexible dollars now 
to support transit-oriented development projects. We use it by 
transferring STP or CMAQ funds from Federal Highway to Federal 
Transit, which is available under TEA-21, and thereby access 
the Title 49 eligibility for TODs that's not available under 
Title 23, but the transferability of funds is available to do 
that.
    If it were more directly included in the Title 23 side, I 
think that would be useful. Certainly, the TCSP category 
explicitly incorporates that eligibility, whereas the other 
categories require this transfer to the FTA site. It works, and 
we've used it effectively.
    Senator Jeffords. Ms. Burbank, do you have any comment?
    Ms. Burbank. Were you asking whether highway programs could 
be revised to be more supportive of transit-oriented 
development? Is that the thrust your question?
    Senator Jeffords. I believe so, yes.
    Ms. Burbank. Well, as Andy noted, there is considerable 
flexibility now, and yes, I'm sure there are opportunities to 
take that further. It's something we could take a look at and 
comment on.
    Senator Jeffords. Ms. Espinosa?
    Ms. Espinosa. Yes, Mr. Chairman. I agree with what Mr. 
Cotugno said, and also I believe that looking at transit-
oriented design and where highways come into play, you're 
looking at a note and a place where people want to be and where 
they come from. To be able to increase the funding on the TCSP 
side would be, I think, one of the more opportune available 
methods for this body to use, perhaps looking at minimum 
amounts. I know that is sometimes difficult with earmarks, but 
it is quite important. It has been a very popular program and 
one that can be flexed to look at transit-oriented design, and 
also how that is designed around streets and around roadways in 
communities. I know in Albuquerque one of the mayors is doing 
that in a small community because he doesn't have available 
transit. He's looking at how pedestrians interact and 
bicyclists interact with the roadways.
    Flexing the money is certainly important, but there is also 
the ability to get that money into the local areas so that the 
flexibility comes within the MPOs and within the local 
government areas. They know best where some of that, if you 
will, transit-oriented, highway-oriented design should be 
placed and how that might be able to be worked. They're the 
ones that work within their community, I believe, and they also 
can provide the transparency and the public input to be able to 
make those plans realistic. We would like to see that more in a 
local type setting, whether it's a rural planning or whether 
it's a local MPO planning area, rather than sitting at the 
State side where those decisions would be made at that level.
    Mr. Cox. Mr. Chairman, as you know, these programs need to 
be effective. I mean, we, as we've heard from two of the 
witnesses today, are looking at a situation where we're going 
to have eight trillion vehicle miles in this country in 20 
years, and I fully agree with Mr. Downs with the view that we 
need a whole lot better research than we have at this 
particular moment.
    What we do with TOD with respect to the Federal program I 
think should, to some extent, have to do with how effective 
that program is with respect to other alternatives that we 
have, and I would really urge you, Mr. Chairman, and the 
committee and the Congress to be thinking very seriously about 
some new ways to think about transportation planning in this 
country and some new indicators.
    One that strikes me--and there may very well be much better 
indicators than this, but, I mean, think about eight trillion 
miles in the next 25 years. I mean, we are going to spend a lot 
more time sitting in traffic. There is just simply no way that 
that's not going to be the case. And so maybe we ought to be 
looking at trying to restructure the Federal program to 
encourage those kinds of strategies that reduce hours of delays 
for people the most, and maybe the indicator ought to become, 
with respect to all these programs and whether they survive in 
an overall package, whether this year or next reauthorization, 
perhaps we ought to be looking at something like cost per 
reduced hour of delay.
    Senator Jeffords. Thank you.
    Ms. Wilson. Mr. Chairman, the only thing I might add to 
that discussion is I think the flexibility is important, but I 
think it is important that it be at the ability of the local 
level to flex either way. It may be in a particular community 
that a combination of some sort of HOV bus lanes would be the 
proper thing. It may not be transit in the rail sense, and it 
may be adding turn lanes, it may be traffic signalization. 
There are all sorts of things that I think need to be looked at 
in the flexibility, and would propose that when you look at 
flexibility and adding enhancing options that the flexibility 
be able to go in and out of the road program both ways.
    Mr. Downs. Mr. Chairman, only an editorial comment that if 
we're going to talk about a future we probably ought to start 
talking about people miles of travel rather than vehicle. 
Vehicle miles of travel always proposes that vehicles count 
more than people.
    The recent research about transit-oriented development 
suggests that the key factor is not the investment, it is the 
local land use set of relationships if you link in the 
transportation plan, a set of expectations about the 
development that local jurisdictions ought to be required to 
show how their local land use and zoning is compatible with 
that set of investments. It is not a Federal predisposition to 
say that a set of local land use requirements are better than 
others, but it should be that, if there is a Federal investment 
that is based on a series of expectations at the local level 
about an outcome, that the local jurisdiction show how it is 
going to make that outcome happen.
    My guess is that transportation-oriented development will 
suffer the same lack of linkage to local land use decisions 
that transit-oriented development does now.
    Senator Jeffords. Thank you all.
    A second concept that seems promising is the safe path to 
schools initiative. I know that my colleague in the House, 
Congressman Oberstar, shares my interest. How can 
transportation planning most effectively advance the safe 
routes to school idea?
    Mr. Cotugno. Maybe just to start, the focus of 
transportation tends to emphasize moving adults a lot more than 
it does moving kids--getting to work, moving freight. Safe 
routes to schools is the younger population that is just as 
important and ought to be just as much attention as getting to 
work or getting to shopping or getting to the warehouse for 
trucks.
    Senator Jeffords. Ms. Burbank?
    Ms. Burbank. Yes. One way it can do that is greater 
attention to pedestrian and bicycle facilities in 
neighborhoods. Through our bike/ped activities and fulfilling 
some of the mandates in TEA-21, we have been working on that, 
providing curricula on bicycle design and safety which kids can 
use to get to school, as well as promoting better design of 
sidewalks to accommodate children and disabled adults. And so 
there are many ways to support safe routes to schools through 
greater attention to bicycle and pedestrian design, 
incorporating bike/ped needs into the design of highways, and 
context-sensitive design that can make a difference and are 
taking place now.
    Senator Jeffords. Thank you.
    Ms. Espinosa. Mr. Chairman, I'm proud to say that the 
Surface Transportation Policy Project was a sponsor of safe 
routes to school in California. That program has shown what 
will happen with good flexibility when a State and local 
governments come together to be able to flex money to get it 
out to local planning, particularly for schools and for 
children getting to schools.
    While in places other than California there's different 
ways of doing this, but I think the concept is very appropriate 
and the concept is very appropriate for consideration and 
reauthorization.
    Safe routes to school allows for what we're talking about, 
which is public input and public decisionmaking and a place 
where the public can see where their investment is going.
    Let me give you an example. Outside of Albuquerque, New 
Mexico, we were working on planning a contact-sensitive design 
project. Actually, the community stopped a five-lane roadway 
through there because they wanted to see smaller lanes. One of 
the chief areas of interest was that going right past this 
roadway or right by this roadway were two schools, a middle 
school and a first-grade-through-fifth-grade school. Neither 
the Highway Department in the State nor the local public works 
agencies had ever talked to the schools or the children or 
their parents to see what kind of walkways we needed, what kind 
of pedestrian walkways, what kind of bicycle routes, how people 
would cross this proposed five-lane highway.
    Safe routes should be put into planning where new models 
can be developed for planning where you can talk about the 
disadvantaged communities which in this community were 
disadvantaged children, how they are going to get to school, 
and what is the safest route to go.
    That brings the entire circle in. It also allows for new 
challenges in modeling. How do we get research? How do we get 
data? And how do we do new models that are going to include our 
younger generation--which, by the way, is very fast-growing in 
this country. So we would hope that this body would look at a 
safe routes to school provision in TEA-21 reauthorization, do 
it in a broad fashion that allows local governments that kind 
of planning with their communities.
    Senator Jeffords. Thank you.
    Mr. Cox?
    Mr. Cox. Mr. Chairman, I would only urge some caution, 
because oftentimes the beginning of Federal regulation and the 
beginning of Federal programs brings us into a situation where 
local prerogatives are interfered with in the long run. I'm not 
saying that's what is happening here, but we need to be 
concerned with that.
    I'm real pleased to have the opportunity--I know that you 
here don't spend a lot of time on school buses because school 
buses tend to be a local and a State issue, for the most part, 
but the school bus systems in our local school districts around 
the country are one of the real transportation successes of 
this country. Every school day they carry 45 million rides. 
That's almost double the number of rides that are carried by 
all of the buses and subways in this country. So it is quite a 
transportation resource, and obviously we ought to do whatever 
we can to make that ride and that walk to school the safest 
possible.
    Senator Jeffords. Thank you.
    Ms. Wilson?
    Ms. Wilson. Mr. Chairman, I'm not familiar with this 
specific legislation, and I may need to expand this answer for 
the record, if that would be all right.
    Senator Jeffords. It would be.
    Ms. Wilson. But I would simply say that I'm delighted that 
you're focusing on some of the safety aspects, whether it is 
for school children getting to school on foot or on bike or on 
bus. The safety situation with our transportation system is one 
of the saddest but also one of the most motivational things we 
can do in the reauthorization. We're trying to correct that in 
this country, and I applaud you for going in this direction. 
Thank you.
    Senator Jeffords. Thank you.
    Mr. Downs?
    Mr. Downs. Mr. Chairman, I think it goes without saying 
that the transportation system should not kill or maim 
children. We don't count them. If they don't count, they don't 
count. We don't understand any of the relationships between the 
spiraling out of control of childhood obesity, childhood 
asthma, and transportation or how children move. None of the 
local planning processes that I know do any kind of accurate 
update about how children move through their transportation 
system. It is perceived to be recreational, and it just doesn't 
count.
    If this is a comprehensive transportation planning process 
and we think that children count in this process, it should 
start with them literally counting children and how they behave 
and move within the system, but we do not, and you could 
address that in this legislation.
    Senator Jeffords. Now I'd like to welcome Senator Wyden 
here. You could have the last word.
    Senator Wyden. Thank you, Mr. Chairman. I apologize for the 
bad manners. As you know, we've got Enron hearings and that's 
of special importance to the Pacific Northwest. But I very much 
want to thank you for holding this important hearing. I look 
forward very much to working with you as we go forward on the 
next significant transportation initiative in this area. As you 
know, I was a principal author of the transportation community 
system preservation program, and we're especially proud because 
so much of what the Federal Government is now doing under that 
legislation really stems from the efforts that began at home 
with METRO, its predecessor, and we're very glad Mr. Cotugno is 
here and is in a position to talk to us about these issues. Let 
me, if I might, just begin with him for a question or two.
    Andy, what has been METRO's experience with applying for 
grants under the program? Obviously, what we want to do is we 
want to increase the funding. We want to try to get the 
Congress away from earmarks, which has been almost a biological 
imperative around here. Come up with a good program, and 
somebody says, ``Well, let's hijack the money. Let's hijack 
it.'' And what we had sought to do--and Senator Moynihan and 
Senator Chafee were especially helpful to me as a new member of 
the Senate in putting together the program. They said, ``Let's 
make this something done on merit and we'll have a competitive 
bidding process so as to encourage people all across the 
country to come forward with innovative ideas for linking smart 
growth and transportation at the local level.''
    So tell us, if you would, what your experience has been 
with the program.
    Mr. Cotugno. Thank you, Mr. Chairman. Senator Wyden, we 
applied the first year for two grants, and, as I indicated in 
my remarks earlier, the first year was run as a competitive 
process by merit by the Federal Highway Administration, and we 
succeeded in getting one of those two grants.
    The next year we applied for one grant, decided we should 
pick our own priorities and not submit two, so we submitted 
one, and we thought we had that grant award because we were 
receiving calls from the Secretary's office indicating that it 
was going to be announced, but it was withdrawn because the 
funds were earmarked.
    The third year we applied and I don't think it ever went 
through a review process because it was also earmarked again 
the third time.
    So we were successful that first year, but have not been 
able to obtain a grant since then.
    Senator Wyden. Well, I want you to know, and all of you, 
that I'm going to pull out all the stops to go back to what was 
originally produced in this legislation. We do have the good 
fortune--Chairman Jeffords, of course, has a long record and 
history of support for smart growth, and his State, as well as 
Oregon, are really considered the pioneers in terms of the 
smart growth area, so we are very fortunate in this crusade to 
get back to making these calls on the merits, to have a leader 
with a gavel in his hand who can help us and, of course, has 
the State experience that is very much in sync with Oregon.
    Let me wrap up by asking you a couple of questions about 
what model we might choose in terms of trying to get this 
program back to what it was intended.
    Andy, as I understand it, what you all are suggesting is 
that something along the lines of the new starts program for 
transit projects would be a sensible foundation for improving 
the program. Would something like this allow the Vermonts and 
the Oregons and the States that have really been leaders in 
smart growth to get this program back to what we envisaged, 
which is one where the calls are made on competition and the 
merit?
    Mr. Cotugno. Mr. Chairman, yes. Senator Wyden, I think 
that's an approach you could take. I think it would entail 
including in the authorizing language a restriction that 
requires that funding only be awarded based upon a 
recommendation that recognizes that smart growth connection.
    Like the new starts program, if the Federal Highway 
Administration comes forward with a recommendation, a high 
recommendation, or a not recommended, then it is still up to 
the appropriations and authorizing committee to award that 
project. You can choose to take and fund a not-recommended 
project, but your own peer pressure amongst each other would 
tend to pick the highly recommended projects because those are 
the ones that are shown to stand up on a merit basis.
    Senator Wyden. Ms. Burbank, I appreciate your staying, as 
well, given how hectic the schedule is. I understand that you 
all had applications many, many times over the amount of the 
available funding, and to me, as we go forward in this effort--
and Chairman Jeffords and others have been involved with the 
Smart Growth Caucus and we've had a lot of exciting 
developments since our first effort with the last ISTEA 
legislation, but all of it is going to be hard to achieve 
unless the Administration will support additional funding for 
this program.
    Is this something that you can discuss this morning and 
talk about the designs of the Administration? I mean, what I 
like about this--and, you know, Mitch Daniels has always been 
very open in terms of dealing with me, and I'm going to make 
this case to him. This is something that's locally driven and 
home grown, and the idea of having a program with competitive 
grants, with the opportunity to try different approaches at the 
local level strikes me to be very much consistent with the 
Administration's philosophy.
    I don't think I've ever told Chairman Jeffords, but Scoop 
Jackson, interestingly enough, put in the first Federal bill to 
promote smart growth. He, of course, was a legend in our part 
of the world. And when scoop put this bill in they said this is 
a monster plot, it's going to lead to Federal zoning and the 
Federal Government is going to confiscate private property. I 
think that what we were able to do in the last ISTEA bill was 
just the opposite of Federal zoning. We have basically said, 
``Let's let folks do their thing at the local level, and the 
Vermonts and Oregons play up their innovative approaches in 
growth, and we'll encourage the other States to catch up.'' So 
I would see this as very much consistent with the 
Administration's philosophy.
    Make my day, Ms. Burbank, and tell us, by god, we're going 
to find some additional dollars for this important effort.
    Ms. Burbank. I'm not sure I can make your day, but I do 
want to be as positive as possible because certainly that 
program has been one of the most popular programs. TCSP is 
exciting because it does generate local initiatives and 
innovative ideas. We do feel that the competitive process of 
reviewing and ranking them at the Department through a 
multimodal group of evaluators has yielded some really good 
projects, but the projects that have been identified through 
earmarking are quite different. They don't tend to put as much 
emphasis on efforts to involve the local citizens in planning 
and anticipating needs. The earmarked projects tend to be 
oriented more toward a specific, pre-ordained solution, and we 
think that has some limitations to it. So we certainly would 
like to see a competitive program. We think a competitive 
application process has a lot of benefits.
    In terms of funding level and reauthorization, it goes 
without saying that we are all going to face some tough choices 
with funding because there are a lot of needs in 
transportation. So I can't quite make your day in going so far 
as to say what the Administration's position will be. It is too 
early to say. But we do see a lot of benefit in TCSP.
    Senator Wyden. I've imposed on the chairman's time, but I 
hope that you will really be a passionate advocate for this, 
both for additional funding and for returning to something 
along the lines of a competitive model. I mean, you have been 
very diplomatic here this morning by saying, ``Gee, Senator, 
the earmarked projects are a little different.'' The idea is 
that, well, maybe they have something foreordained. I mean, to 
me that just defeats the whole idea. I mean, when I went to 
Senator Moynihan and Senator Chafee as a brand new Senator, 
Senator Moynihan said, ``Look, we know Oregon is a leader in 
this, but they're going to have to compete with everybody 
else.'' That's the whole point. I mean, it seems to me that we 
have got an opportunity to really catalyze all across this 
country in communities from one end of the country to another a 
wave of innovative thinking in this area if we have the 
dollars, if we make the calls on the merits.
    Mr. Chairman, I feel badly about imposing on you. Just know 
that I am very glad that you've got the gavel in your hand on 
this, because the Vermont/Oregon smart growth axis has an 
opportunity, in my view, to show the rest of the country how to 
do the job right, while at the same time giving them all the 
freedom and all the flexibility to carve out their own 
approaches that are consistent with their needs. I really look 
forward to working with you.
    Senator Jeffords. Well, I certainly look forward to working 
with you. Oregon and Vermont are almost peas in the same pod. 
We do everything the innovative----
    Senator Wyden. The enlightened way.
    Senator Jeffords. Right, the enlightened way. We could go 
on.
    [Laughter.]
    Senator Jeffords. Ms. Burbank, I want to thank you for 
spending the extra time to be with us during both panels. I 
look forward to working with you.
    This has been a very wonderful experience this morning, my 
first time in this area. I have a number of first times in 
store for me, my new responsibilities, but you have been very 
helpful and enjoyable and innovative and, wow, you're great. 
Thank you.
    [Whereupon, at 11:54 a.m., the committee was adjourned, to 
reconvene at the call of the chair.]
    [Additional statements submitted for the record follow:]
Statement of Cynthia Burbank, Program Manager, Planning and Environment 
Core Business Unit, Federal Highway Administration, U.S. Department of 
                             Transportation
    Mr. Chairman, members of the committee, thank you for this 
opportunity to provide testimony on the important subject of 
transportation planning. Today, I would like to report to you on the 
status of transportation planning, and what FHWA is doing to assist 
States and Metropolitan Planning Organizations (MPOs) in fulfilling the 
planning goals of the Intermodal Surface Transportation Efficiency Act 
of 1991 (ISTEA) and the Transportation Equity Act for the 21st Century 
(TEA-21).
                overview: the essential role of planning
    Transportation planning is the process of identifying 
transportation problems and looking for solutions that fulfill multiple 
national, State, and local goals. Statewide and metropolitan 
transportation planning processes, governed by Federal law (23 United 
States Code (USC) sections 134 and 135; 49 USC sections 5303-5305) and 
applicable State and local laws, are required if Federal highway or 
transit funds are to be used for transportation investments in the 
State or metropolitan area. The planning process must do more than 
merely list highway and transit capital investments. It must provide 
strategies for operating, managing, maintaining, and financing an 
area's transportation system in such a way as to best advance that 
area's long-term goals. The Federal Highway Administration (FHWA) and 
the Federal Transit Administration (FTA) rely on the transportation 
planning process as the primary mechanism for cooperative 
decisionmaking at the State and local level. This means that local 
officials and others who anticipate using Federal transportation funds 
must be involved in planning. Transportation planning must be attentive 
to the public's needs and include sufficient opportunities for public 
input.
    The planning process produces the information on which elected 
officials and policymakers will base their decisions regarding 
transportation improvements, and helps ensure better, more informed 
decisionmaking. Transportation planners undertake comprehensive 
analyses and evaluation of the potential impact of transportation plans 
and programs and, at the same time, address the aspirations and 
concerns of the community that these plans and programs serve. Planners 
examine past, present, and prospective trends, and issues associated 
with the demand for the movement of people and goods at local, rural, 
metropolitan, statewide, national, and international levels. Public 
officials equipped with this information can make decisions that 
address key community objectives and tradeoffs, while reducing 
unanticipated consequences.
    Transportation planning must reflect the desires of communities and 
take into account the impacts on both the natural and human 
environments. Transportation plans should help regions and communities 
set and achieve their goals. A comprehensive planning process that 
considers land use, development, safety, and security, also helps 
ensure that transportation decisions will be made in an environmentally 
sensitive way. The States, MPOs, and transit operators choose which 
projects will advance. The Federal role is to provide funds, standards, 
technical assistance, and planning models so that State and local 
decisionmakers are able to make the best transportation choices for 
their area within the funding available.
                    planning under istea and tea-21
    ISTEA made significant changes in the metropolitan and statewide 
planning requirements for highways and transit, requiring greater 
attention to public involvement, fiscal prudence, and multimodal 
transportation systems planning. In addition, ISTEA provided State and 
local governments more flexibility in determining transportation 
solutions, whether transit or highways. ISTEA instituted statewide 
planning and continued the metropolitan planning processes as the 
framework for making these decisions. As a result, much of the past 10 
years has been devoted to adjusting to these changes and applying the 
new requirements. In most cases, the MPOs, State Departments of 
Transportation (DOTs), and transit operators have worked together in a 
cooperative way to implement the changes. The ISTEA reforms have 
resulted in more attention to developing financially sound 
transportation plans and programs and to involving the public and 
stakeholder interest groups in developing the plans and programs. The 
changes have enhanced and improved the integrity and effectiveness of 
the transportation decisionmaking process, but continued progress is 
needed.
    To assist the MPOs, State DOTs, and transit operators in 
implementing the ISTEA changes, FHWA and FTA have focused on conducting 
training courses, providing technical assistance, supporting peer 
exchanges, identifying best practices, and preparing case studies.
    The changes initiated by ISTEA were carried forward by TEA-21 with 
some further refinements. The financial discipline in the development 
of plans and programs introduced in ISTEA was continued, with an added 
requirement that financial estimates be developed cooperatively between 
the State and MPO.
    By statute, metropolitan transportation plans must address a 
minimum of a twenty-year planning horizon and be updated on a schedule 
identified by the Secretary (currently 3 years in non-attainment areas 
and 5 years in attainment areas). By statute, Transportation 
Improvement Programs (TIPs) address a 3-year horizon and must be 
updated at least every 2 years at the State and metropolitan level. 
State plans are updated on a cycle identified by the State. In non-
attainment areas, under the Clean Air Act, FHWA and FTA have sought, in 
cooperation with the Environmental Protection Agency (EPA), to develop 
approaches to more effectively integrate air quality and transportation 
planning timeframes and processes. This is a continuing challenge, 
which will arise in reauthorization.
    Section 1308 of TEA-21 directed the Secretary to eliminate the 
separate requirement for a Major Investment Study (MIS) and integrate 
the remainder of the process into the environment and planning 
processes. Although regulatory changes have not been completed, FHWA 
and FTA have fostered and supported experimentation with alternative 
approaches, as mutually developed at the State and local level.
    While ISTEA and TEA-21 strengthened the role of MPOs and local 
governments in transportation planning and programming, States continue 
to have the primary role, responsibility, and authority-albeit in a 
framework of consultation and cooperation with MPOs, local governments, 
and transit operators.
    Since the passage of ISTEA and TEA-21, States have become more 
involved in comprehensive transportation planning, including the 
development of multi-modal transportation plans. As a result, many 
States are now engaged in activities, such as rural freight issues, 
which previously received little attention. Because the statewide 
planning process is continuing to evolve, many States are looking at 
ways to restructure their transportation planning and programming 
processes. They are determining which decisions should be made at the 
State level and which can be decided at the rural or metropolitan 
level.
                    institutional capacity building
    FHWA and FTA have jointly developed specialized training courses 
and new tools and procedures that address the emerging needs. Also, 
FHWA and FTA have sponsored peer exchanges that have allowed States, 
MPOs, and transit operators to share best practices.
    FHWA and FTA, in a collaborative effort with the American 
Association of State Highway and Transportation Officials (AASHTO), the 
American Public Transportation Association (APTA), the Association of 
Metropolitan Planning Organizations (AMPO), and the National 
Association of Regional Councils (NARC), have launched the Metropolitan 
Capacity Building (MCB) Program-an initiative to strengthen MPOs. The 
program is targeted not only for transportation professionals, but also 
the elected officials who make transportation decisions. Collecting, 
synthesizing, and disseminating examples of successful innovations by 
States, MPOs, and transit operators, the Capacity Building initiative 
provides multiple mechanisms for getting critical information to 
decisionmakers. Moreover, it helps spread innovation in decisionmaking 
by publicizing the new techniques and strategies developed by State and 
local officials. This initiative has supported peer exchanges focusing 
on transportation modeling and fiscal constraint. A new course on 
metropolitan planning has been developed to provide public officials 
and staff with an overview of planning process expectations and 
options. A public officials briefing book has been prepared, directed 
specifically to helping elected officials understand their role and 
responsibilities, as well as the overall planning process. Additional 
activities are in development and will be disseminated over the coming 
year.
    In addition to the involvement of the MPO, State DOT, and transit 
operators, TEA-21 made it very clear that new parties should be coming 
to the planning table at both the metropolitan and statewide levels. 
TEA-21 added a requirement that freight shippers and users of public 
transit be provided a reasonable opportunity to comment on 
transportation plans and programs. Among the most important parties to 
come to the planning table are local officials, and TEA-21 emphasized 
the importance of bringing non-metropolitan officials into the process. 
Most States have procedures for engaging local officials throughout 
their planning and programming processes. FHWA and FTA are working hard 
with States and MPOs to improve or otherwise enhance their efforts to 
bring non-metropolitan local officials, freight shippers, and users of 
public transit to the table and involve them in planning and 
programming.
    FHWA and FTA have advanced several initiatives, including safety 
conscious planning, implementation of the Intelligent Transportation 
Systems (ITS) Architecture requirements, freight planning, work zone 
safety, and operational improvements. These efforts have contributed to 
congestion mitigation and enhanced safety consideration.
                transportation planning and smart growth
    Today, we frequently hear the term ``smart growth"-a term that 
means different things to different people. FHWA views ``smart growth'' 
as a set of State and local policies and programs designed to protect 
and preserve valuable natural and cultural resources and make efficient 
use of existing infrastructure, while accommodating economic 
development and population growth. ``Smart growth'' policies link 
transportation projects with desired land use patterns in order to make 
more efficient use of infrastructure and reduce environmental impact. 
Land use and transportation have a symbiotic relationship. How 
development occurs can greatly influence regional travel patterns and, 
in turn, the degree of access provided by the transportation system can 
influence land use distribution. Transportation affects land use just 
as do affordable housing, good schools, and low crime rates.
    State and local governments have the responsibility for 
establishing growth policies. Transportation agencies respect those 
policies and work with the State and local requirements. Smart growth 
can mean State and local land use strategies to increase population and 
housing densities and make transit more viable, and it can also mean 
managing and operating existing highway, transit, and other 
transportation modes to maintain or improve performance for each mode 
without adversely affecting neighborhoods or urban centers. The goals 
for smart growth include knitting transportation improvement projects 
and public/private investments so that they merge as seamlessly as 
possible into the community; supporting the provision of mixed use 
development, where feasible, so that transit, bicycle and pedestrian 
facilities, and ferry boats are viable options to driving; and 
accommodating the flow of freight and passengers throughout the country 
so that the economy can continue to grow.
    Smart growth does not mean pitting transit or any other mode 
against highways. We recognize that it is impractical to completely 
build our way out of congestion in our most congested metropolitan 
areas. But that does not mean that we think that new roads and 
improvements to the existing road network should be eliminated. It is 
not an issue of highways versus transit. It is an issue of expanding 
transportation choices and providing a balanced intermodal 
transportation system that allows for the efficient and economical 
movement of people and goods. In some areas that may mean more transit 
and in other areas it may entail significant roadway improvements, and 
in most areas it probably means both. It is up to State and local 
officials to decide how best to address their unique set of 
circumstances, and it is the Department of Transportation's role to 
help them best implement their decision.
    While FHWA and FTA strongly believe that land use decisions are 
State and local decisions, and should remain that way, we do believe 
that there is much to be gained from more coordination among State and 
local planning, zoning, and housing authorities, and environmental and 
transportation officials, in reaching those decisions. We also believe 
that there should be more dialog between local decisionmakers and 
transportation professionals on the connections between land use and 
surface transportation-including, for example, more dialog between 
airport sponsors and metropolitan planning organizations. Such dialogs 
would allow us to learn from each other and produce better 
transportation outcomes.
    FHWA's role in promoting ``smart growth'' is to provide technical 
assistance and training to our State and local customers concerning the 
linkages between transportation and land use. Along with FTA, we will 
work cooperatively with other Federal agencies such as the Department 
of Housing and Urban Development (HUD) and the EPA, to assist us with 
transportation-related issues, such as affordable housing or 
brownfields, to provide as much assistance as possible in the form of 
research, technical expertise, and training to local and State 
governments. At the same time, we will be mindful that the people of 
this country hold freedom of mobility as a cherished individual right.
    In addition to the Metropolitan and statewide Capacity Building 
Program mentioned above, our efforts to help State and local 
governments make smart decisions about growth include support for the 
Transportation Enhancements Program, the Congestion Mitigation and Air 
Quality Improvement Program (CMAQ), the Transportation and Community 
and System Preservation Pilot Program (TCSP), and research in areas 
such as value pricing, modeling, and land use.
  transportation and community and system preservation pilot program 
                                 (tcsp)
    The TCSP program was created by section 1221 of TEA-21, as a 
competitive discretionary program to stimulate innovative strategies 
for using transportation investments to achieve economic growth, while 
simultaneously protecting the environment and ensuring a high quality 
of life. TCSP projects funded in fiscal year (FY) 1999 and fiscal year 
2000 are demonstrating results that include: developing new analytical 
tools to assess the impacts of transportation and land use alternatives 
on mobility and economic development; expanding the range of partners 
involved in transportation and land use planning; and demonstrating 
design practices that increase travel options and improve the character 
of local communities. For example, TCSP grants are being used in Mono 
County, California; Centreville, Delaware; and Cleveland, Ohio to 
investigate design changes that can improve safety and pedestrian 
access, while still maintaining traffic flow, where high-traffic roads 
run through community centers. A TCSP project in Oregon will survey the 
impact on travel patterns of telecommuting centers being developed in 
rural Oregon by the Oregon Department of Energy.
    TCSP was authorized in TEA-21 at $25 million per year. The response 
to the program has been positive--between fiscal year 1999 and fiscal 
year 2002, we received approximately 1,332 applications totaling $906 
million in response to Federal Register Notices. With the pending 
announcement of fiscal year 2002 TCSP awards, there will be a total of 
420 TCSP grant awards.
    A significant number of TCSP projects in fiscal year 2001 and 2002 
were designated in congressional committee reports. While many of these 
projects might not have been selected in a competitive process similar 
to the one used to recommend the fiscal year 1999 and 2000 TCSP 
discretionary awards, we can state that all projects that have received 
funds are statutorily eligible.
    Although FHWA believes that a truly discretionary program, 
administered through a competitive merit-based process, would allow us 
to better maximize the benefits of the TCSP program, we are working 
aggressively to ensure that the funds provided for TCSP projects are 
used to advance the program's goals as established in TEA-21.
    TCSP outreach efforts by FHWA, including a comprehensive report on 
the first 3 years of implementation based in part on interviews with 
grantees, have elicited suggestions for improving TCSP in 
reauthorization. Suggestions include: award future TCSP grants through 
a competitive process; continue to emphasize learning and knowledge 
transfer; and maintain a focus on both planning and implementation.
                               conclusion
    ISTEA and TEA-21 have provided us a solid and balanced structure 
around which to shape reauthorization legislation and we will build on 
the programmatic and financial initiatives of these two historic 
surface transportation acts. To this end, we will apply the core 
principles enunciated by Secretary Mineta in testimony before this 
committee in January, including:

      Building on the intermodal approaches of ISTEA and TEA-
21; * Preserving funding flexibility to allow the broadest application 
of funds to transportation solutions, as identified by State and local 
governments; and
      Simplifying Federal transportation programs and 
continuing efforts to streamline project approval and implementation.

    In reauthorization, we want to work with this committee and with 
our partners in the transportation community to find additional means 
of assisting States to strengthen and improve their transportation 
planning processes to better achieve not only their transportation 
goals but their other societal goals as well.
    Mr. Chairman, thank you again for the opportunity to testify. I 
look forward to responding to any questions you may have.
                                 ______
                                 
Responses of Cynthia Burbank to Additional Questions From Senator Smith
Transportation Planning and Smart Growth
    Question 1. A recent report by the Transportation Research Board on 
long-term research needs states, ``Research on transportation and the 
environment has only recently begun to explore in any significant depth 
the complex relationships among land development patterns, 
transportation investments, travel behavior and consequent 
environmental impacts.'' Please comment on the practicalities of 
implementing a ``smart growth'' program given our limited understanding 
of these relationships.
    Response. FHWA's approach to Smart Growth recognizes the limits of 
our knowledge of the complex relationships among land use, 
transportation, and environment. Our approach relies on (a) research 
into these relationships, often via case study approaches and through 
research partnering with other organizations; and (b) deference to 
State and local governments in establishing and carrying out land use 
and Smart Growth policies, based on the circumstances and community 
values on issues such as economic growth and environmental quality in 
each State or area.

    Question 2. How can we develop a more outcome-oriented 
transportation planning process that relies less on mandatory planning 
processes?
    Response. FHWA has initiated Planning ``Capacity Building'' 
programs to improve the planning process through best practices, case 
studies, training, peer-to-peer exchanges, and technical assistance 
tools. This is a cooperative effort with Federal Transit Administration 
(FTA), the American Public Transit Association (APTA), the Association 
of Metropolitan Planning Organizations (AMPO), the National Association 
of Regional Councils (NARC), and the American Association of Highway 
and Transportation Officials (AASHTO).
    As part of this Capacity Building initiative, we are focusing on 
``performance-based planning,'' which several States and metropolitan 
planning organizations (MPOs) have undertaken. We will disseminate 
information and case studies on performance-based planning and will 
encourage all States and MPOs to adopt performance-based planning, 
which focuses on establishing outcome goals, tracking progress, and 
making adjustments as needed to achieve those outcome goals.
                               __________
    Statement of Kenneth J. Leonard, Director, Bureau of Planning, 
   Wisconsin Department of Transportation, on Behalf of the American 
       Association of State Highway and Transportation Officials
    Founded in 1914, AASHTO represents the departments concerned with 
highway and transportation in the 50 States, the District of Columbia 
and Puerto Rico. Its mission is a transportation system for the Nation 
that balances mobility, economic prosperity, safety and the 
environment.
       tea-21 reauthorization--statewide transportation planning
    AASHTO Recommends that Congress Consider the following:
Freight
      Provide funding to support the development and 
implementation of a training and capacity-building program to 
strengthen the ability of State and local transportation agencies to 
effectively address freight transportation issues.
      Provide funding for the FHWA research program to support 
freight transportation research that includes the private sector, and 
allows the pooling of U.S. DOT modal agency funds.
      Establish and fund a Freight Transportation Cooperative 
Research Program.
      Strengthen the transportation data programs and link them 
to national, State and local planning for freight transportation.
      Authorize a Freight Advisory Council that will 
communicate to U.S. DOT, State DOTs, and others the industry's needs 
and issues.
Financial Constraint
      Calculate financial constraint based on total dollars in 
the program compared to total revenue available, including both Federal 
and State funds.
      Allow flexibility in the documentation requirements used 
by States to demonstrate financial constraint.
      Revise financial planning and financial constraint 
requirements for mega-projects to get away from the ``one size fits all 
approach'' that impacts all projects over a certain cost level.
      Permit the States and implementing agencies to 
cooperatively develop definitions of ``anticipated full funding'' and 
``reasonably available.''
      Permit projects for which discretionary funding is being 
sought to be included in financially constrained TIPs.
      Permit a 10-year fiscal constraint time horizon for 
purposes of the metropolitan long range transportation plan.
Major Investment Studies
      Direct U.S. DOT to eliminate the MIS requirements 
effective immediately and not make elimination of the MIS contingent on 
the issuance of new regulations.
      Authorize State DOTs and MPOs to develop optional 
procedures (with public transit operators, as appropriate) through 
which decisions reached in the statewide and metropolitan planning 
process regarding purpose-and-need and range of alternatives would be 
binding in the NEPA process.
Planning Timeline
      Continue to provide flexibility to States as to the 
content of statewide Long Range Transportation Plans, performance 
measures and planning horizons so long as a minimum 20-year horizon is 
maintained.
      Change the update cycle for Long Range Metropolitan 
Transportation Plans from 3 years to 5 years.
Land Use and Smart Growth
      Continue to defer to local and State governments on 
whether and how to consider land use in the course of transportation 
planning.
Consultation
      Continue the existing balance of decisionmaking authority 
between the MPO, the State and local officials.
Planning Roles and Responsibilities
      Maintain the current balance of responsibility for the 
development of highway transit and intermodal projects, and reaffirm 
the leadership role and authority of the States.
      Retain the current definitions of planning 
``consultation, cooperation and coordination.''
      Retain the existing program structure rather than 
authorizing new set-asides or program categories.
    Mr. Chairman, my name is Ken Leonard. I am the Director of the 
Bureau of Planning at the Wisconsin Department of Transportation. I am 
speaking today on behalf of the American Association of State Highway 
and Transportation Officials (AASHTO) in my role as vice chairman of 
the AASHTO Standing Committee on Planning.
    Mr. Chairman, thank you on behalf of the State transportation 
officials across the country for inviting AASHTO to participate in this 
hearing to examine the State of the transportation planning process. My 
testimony today will address a number of specific planning issues that 
have drawn attention, including freight planning capacity, financial 
constraint provisions, local consultation, performance-based planning 
and the role of State department of transportation (DOTs) with respect 
to land use. First, I want preface my remarks with the observation that 
the statewide transportation planning process is very complicated, in 
part because of the very complex set of transportation challenges that 
the transportation planning process must address, but also because of 
the many layers of Federal and State transportation and environmental 
statutes and directives that guide the process. From our perspective, 
the goal should be to simplify the process and not add further 
complexity.
    Federal law has long established that the Federal-aid highway 
program is a ``federally assisted State program''. The program has 
evolved through the years and, in addition to providing roles for 
Federal and State officials, provides roles for local governments and 
Metropolitan Planning Organizations (MPOs).
    The Intermodal Surface Transportation Efficiency Act (ISTEA) was 
important as the first piece of transportation legislation in the post-
Interstate era. ISTEA set in motion a positive effort toward 
implementation of a responsive transportation program designed to meet 
a diversity of national transportation needs.
    ISTEA placed a strong emphasis on the transportation planning 
process, including much more emphasis on public involvement. In 
addition, ISTEA included 23 planning factors for use in statewide 
planning, and 16 planning factors for use in Metropolitan Planning. 
While much of this type of analysis and public involvement was already 
being done by many State DOTs, ISTEA placed stronger emphasis on these 
matters.
    The successor to ISTEA, the Transportation Equity Act for the 21st 
Century (TEA-21) consolidated the planning factors into seven, 
including:
      Support the economic vitality of the Nation, the States 
and MPOs.
      Increase the safety and security of the transportation 
system for motorized and non-motorized users.
      Increase the accessibility and mobility options for 
people and freight.
      Protect and enhance the environment, promote energy 
conservation and quality of life.
      Enhance the integration and connectivity of the 
transportation system, across and between modes throughout the State 
for people and freight.
      Promote efficient system management and operation; and
      Emphasize the preservation of the existing transportation 
system.
    TEA-21 also included a provision that failure to consider any one 
of the planning factors is not actionable in a court of law. In part, 
this recognizes the need to allow diverse approaches that reflect the 
unique conditions in each State--i.e., State constitutional and 
statutory requirements, geographic size and population, institutional 
history, political environments and differing transportation 
challenges, needs and priorities. Despite its complexity, the post-
Interstate transportation planning process has evolved effectively 
because of support for innovation, understanding of the need for 
flexible approaches and emphasis on training, technical assistance and 
information sharing rather than command and control oversight.
Current Transportation Planning Practices and Innovative Approaches
    The current framework for statewide and metropolitan transportation 
planning was established in TEA-21 and its predecessor ISTEA. In the 
past decade, we have seen significant changes in the transportation 
planning process. We have strengthened the stakeholder and public 
involvement, and established multi-modal planning processes that take 
into account a broad array of factors, including community input and 
goals, economic development, improved access to transportation 
facilities and services for all, and enhanced environmental quality and 
protection.
    In addition, there has been a renewed focus on attainment of the 
Federal clean air standards, and with that we have incorporated 
transportation conformity requirements into the planning process. The 
objective of transportation conformity is to better harmonize 
transportation and air quality planning and to ensure that 
transportation investments do not thwart clean air goals.
    While the transportation planning processes within the States and 
metropolitan areas are generally sound and should be retained, some 
improvements can be made to simplify and improve the efficiency and 
effectiveness of the process. However, in doing so, we need to ensure 
that new requirements are not added that will encumber the processes 
that have evolved over the past decade. In addition, the U.S. DOT 
should continue and enhance its training, technical assistance, 
capacity building and information sharing efforts.
Greater Focus on Freight in the Transportation Planning Process
    Both ISTEA and TEA-21 emphasize the need for increased attention to 
freight movement in their planning factors. States have been including 
the freight system in their statewide multimodal transportation plans 
as required first by ISTEA. As part of this effort, Wisconsin, and a 
number of other States, include a freight advisory committee as part of 
their planning process that engages both freight transportation 
providers and shippers.
    Recognizing the increased importance of freight transportation, 
AASHTO has created a new committee to focus on freight, the Special 
Committee on Intermodal Transportation and Economic Expansion.
    AASHTO has also been putting increased emphasis on freight planning 
in its tools development and capacity building for States and MPOs. 
Currently we are funding a research project on ``Best practices in 
statewide Freight Planning'' which will examine planning in States 
where efforts have been made to better understand goods movement. The 
lessons learned in this project will then be passed on to other States 
and MPOs. We will also be conducting a workshop this year on the need 
for better intermodal freight connections. The objective of this 
workshop will be to improve the awareness within States and MPOs of 
intermodal freight needs.
    In addition, AASHTO is sponsoring an increasing amount of freight 
research through the National Cooperative Highway Research Program 
administered by the Transportation Research Board (TRB). I am 
personally chairing a research project for $500,000 to develop 
``Methods for Forecasting statewide Freight Movements and Related 
Performance Measures''. The results of this research should improve our 
ability to predict future freight movements so we can plan and 
construct facilities accordingly. Another research project is entitled 
``Freight Movement by Rail--Impacts and Opportunities''. This project 
will examine the relationships between rail and other freight modes to 
identify opportunities for rail as part of an optimum mix.
    To facilitate freight consideration in the planning process, AASHTO 
recommends the following actions:
      $10 million annually should be provided to support an 
initiative through which the U.S. DOT and the State DOTs will jointly 
develop and implement a training and capacity-building program to 
strengthen the ability of State and local transportation agencies to 
effectively address freight transportation issues.
      Congress should increase funding for the FHWA research 
program to support freight transportation research that includes the 
private sector, and allows the pooling of U.S. DOT modal agency funds. 
A Freight Transportation Cooperative Research Program should be created 
and funded in the range of $5 million to $7.5 million annually. The 
transportation data programs should be strengthened and linked 
effectively to national, State and local planning for freight 
transportation.
    AASHTO's recommendations to Congress also include support for 
authorizing a Freight Advisory Council that would communicate to U.S. 
DOT, State DOTs and others with one voice the industry's needs and 
issues.
Financially Constrained Plans
    ISTEA included a provision for a financially constrained 
Transportation Improvement Program (TIP) and State Transportation 
Improvement Program (STIP). Subsequent FHWA regulations defined this 
requirement to mean fiscal constraint by type of fund and year, with no 
over-programming.
    TEA-21 continued requirements for financial constraint for State 
Transportation Improvement Programs (STIPS) and urban Transportation 
Improvement Programs (TIPS). The intent of these requirements was to 
match program-level project commitments to overall resources at the 
planning and program development stage in order to avoid the creation 
of wish lists of projects for which funds might not be realistically 
available for the foreseeable future under any circumstances. While the 
expectation for a fiscally constrained planning and programming process 
is both reasonable and beneficial, in practice it is sometimes being 
applied to cash-flow and project management.
    From the State DOT perspective, the financial constraint 
requirement makes it difficult for States to make adjustments needed as 
to which projects can move forward to obligation and letting. States 
need flexibility in managing their programs to be able to make 
adjustments should a project become delayed. The financial constraint 
provision makes it difficult to move forward another ready project for 
funding should a project in the STIP be delayed for any reason. It is 
equally difficult to move forward with projects when unanticipated 
State initiatives make additional funds available.
    The TEA-21 reauthorization legislation needs to provide sufficient 
flexibility in financial constraint and timing to allow States to deal 
with unexpected delays in project development and in working with their 
State legislatures to obtain adequate funding. State DOTs and MPOs need 
flexibility and discretion in the development of their STIPs and TIPs 
to enable them to deal with the realities of cash-flow, uncertainties 
in project schedules, and fluctuating funding levels. Moreover, when 
air quality and other environmental laws are paired with financial 
constraint requirements, it creates a bureaucratic maze that delays 
needed projects and prevents States from concluding the NEPA process on 
large, multi-phase projects whose costs are spread over a long time 
period.
    AASHTO believes that the TEA-21 reauthorization legislation should 
increase flexibility related to financial constraint in State and 
Metropolitan Transportation Improvement Programs. AASHTO recommends 
legislative changes that:
    1. Calculate financial constraint based on total dollars in the 
program compared to total revenue available, including both Federal and 
State funds. 2. Allow flexibility in the documentation requirements 
used by States to demonstrate financial constraint. 3. Revise financial 
planning and financial constraint requirements for mega-projects to get 
away from the ``one size fits all approach'' that impacts all projects 
over a certain cost level. 4. Permit the States and implementing 
agencies to cooperatively develop definitions of ``anticipated full 
funding'' and ``reasonably available''. 5. Permit projects for which 
discretionary funding is being sought to be included in financially 
constrained TIPs. 6. Permit a 10-year fiscal constraint time horizon 
for purposes of the metropolitan long range transportation plan.
    In practice, the problem with the Financially Constrained Plan is 
that it is too strictly applied, and has become more of a cash-flow 
financial management instrument.
Major Investment Studies
    In October, 1993, FHWA issued revised regulations implementing the 
planning provisions of ISTEA. These revised regulations included a new 
concept--the major investment study or MIS, which was not specifically 
required in ISTEA itself.
    The regulations required an MIS for any ``major metropolitan 
transportation investment'' where ``Federal funds are potentially 
involved''. The regulations defined a major investment as a ``high-type 
highway or transit improvement of substantial cost that is expected to 
have a significant effect on capacity, traffic flow, level of service, 
or mode share at the transportation corridor or subarea level''.
    Two options were allowed for preparing an MIS. Under ``Option 1 ``, 
the MIS was prepared as a stand-alone study prior to the NEPA process. 
Under ``Option 2'', the MIS was combined with the EIS into a single 
document.
    The two options for the MIS raised significant concerns:
      Option 1 MIS (prepare MIS, then EIS): When Option 1 was 
used, the ``decisions'' made in the MIS process were often discarded 
when the NEPA process began. In effect, it became necessary to start 
over again in the NEPA process, which caused the MIS process to lose 
credibility among agencies and the public.
      Option 2 MIS (prepare MIS and EIS together): While the 
Option 2 MIS avoided the problems with Option 1, it also provided less 
flexibility. The Option 2 MIS was, in fact, an expanded EIS; it did not 
provide a vehicle for conducting a corridor-level planning study before 
making a commitment to prepare a full EIS for a specific project.
    In reaction to the experience with the MIS, Congress enacted 
Section 1308 of TEA-21 which directed U.S. DOT to ``eliminate the major 
investment study . . . as a separate requirement and promulgate 
regulations to integrate such requirement, as appropriate, as part of 
the analysis required under the planning and NEPA processes for highway 
and transit projects.
    Section 1308 also provided that ``the scope of the applicability of 
such regulations shall be no broader than the scope of such section''.
    In May, 2000, FHWA and FTA issued a notice of proposed rulemaking 
(NPRM) for new statewide and metropolitan planning regulations. 
Pursuant to Section 1308 of TEA-21, the proposed regulations would have 
eliminated the MIS as a stand-alone requirement. However, the proposed 
regulations also would have created a new requirement with broader 
application.
    In its comments on the NPRM, AASHTO strongly opposed the MIS 
integration provisions in the FHWA's proposed planning regulations. 
AASHTO raised several objections, including:
      The proposal created a new requirement that applied to 
all projects, not just major investments. Because the new requirement 
was broader in its applicability than the original MIS regulation, it 
directly contradicted Section 1308 of TEA-21. * The new requirement 
created a mandatory process, which had the potential to become 
extremely resource-intensive. * The new process did nothing to ensure 
that decisions made in the planning stage would be accepted in the NEPA 
process.
    AASHTO's recommendation regarding the MIS issue when it is 
considered in the reauthorization of TEA-21 is that Congress direct 
U.S. DOT to eliminate the MIS requirement effective immediately, and 
not make elimination of the MIS contingent on the issuance of new 
regulations.
    AASHTO also recommends that Congress authorize State DOTs and MPOs 
to develop optional procedures (with public transit operators, as 
appropriate) through which decisions reached in the statewide and 
metropolitan planning process regarding purpose-and-need and range of 
alternatives would be binding in the NEPA process.
Planning Timelines
    With regard to State Long Range Transportation Plans, Congress 
should continue to provide flexibility to States as to content of Long 
Range Plans, performance measures and planning horizons so long as a 
minimum 20-year horizon is maintained.
    TEA-21 required that each MPO develop a Metropolitan Long Range 
Transportation Plan with a minimum 20-year forecast period. 
Metropolitan planning provisions in TEA-21 establish general guidelines 
for State DOTs, MPOs and transit agencies to follow in updating MPO 
plans, which FHWA requires every 3 years.
    However, in a 3-year update cycle, MPOs don't have adequate time to 
improve their data collection and modeling processes. Further, the 3 
year update cycle makes it difficult to involve the public since the 
planning agency is always in a continuous update cycle. If the update 
cycle was changed to 5 years, MPOs would be able to strengthen the 
planning process by improving the data and updating their modeling 
tools.
    To overcome the problems listed above, AASHTO advocates that 
Congress change the update cycle for Long Range Metropolitan 
Transportation Plans from 3 years to 5 years.
Land Use and Smart Growth
    TEA-21 requires consideration of projects and strategies that will, 
among other things, ``increase accessibility and mobility options'' and 
``enhance the integration of the transportation system.'' These 
parallel considerations are often included in land use planning 
activities. TEA-21 correctly eliminated any specific reference to 
State-level responsibility for land use planning in recognition that 
States only rarely have authority to directly make land use decisions.
    Land use has historically been considered to be a local government 
function. Most States, as a matter of State law or practice, defer most 
or all land use decisionmaking to local units of government. Land use 
reflects a number of local circumstances, and local officials should 
have the responsibility to determine land use for their particular 
area. Trying to legislate one particular approach to land use--a ``one 
size fits all'' approach--simply would not be workable from an 
interjurisdictional perspective.
    Congress should ensure that Federal statutes continue to defer to 
local and State governments on whether and how to consider land use in 
the course of transportation planning.
    With regard to Smart Growth, Wisconsin has ``Smart Growth'' 
legislation, and has worked cooperatively with local units of 
government and developed a ``Transportation Guide'' for the local 
communities to use in developing their comprehensive plans. This 
stresses the importance of planning for land use and transportation 
together once the community has determined its vision.
    AASHTO has several Smart Growth related activities underway, 
including:
      Sponsoring meetings and working with State DOTs, U.S. DOT 
and other organizations on Context Sensitive Design. AASHTO supports 
Context Sensitive Design, and attention to the way streets and highways 
are routed or redesigned through living areas to lessen any negative 
effects they may have on the livability of an area. AASHTO is 
developing a guide on context sensitive design, which is slated for 
publication later this year. * Through a grant from FHWA and EPA, 
AASHTO is sponsoring a Smart Growth competition to highlight new and 
innovative Smart Growth initiatives being tried around the country.
      AASHTO has launched an Environmental Stewardship 
initiative to assist State DOTs in capacity building efforts to deliver 
needed transportation projects in a manner that preserves and enhances 
our environment.
    Under this Environmental Stewardship initiative, AASHTO is working 
with FHWA, other Federal agencies, and environmental organizations in 
the establishment of a Center for Environmental Excellence,
    AASHTO is also sponsoring an Environmental Stewardship pilot 
program to again disseminate information about best practices in 
working with the environment.
    Several State DOTs, such as New York, have incorporated 
environmental stewardship into all facets of their operations, whether 
planning and designing new facilities, or maintenance activities such 
as grass cutting.
Are the appropriate parties being included in the process?
    Congress should continue the existing balance of decisionmaking 
authority between the MPO, the State and local officials. This would 
continue already proven arrangements that have worked well for a decade 
and been agreed to by transportation officials and professionals 
nationwide.
    In particular, the current relationships in rural areas should 
remain unchanged. Rural transportation planning already is fully 
encompassed by the statewide planning provisions of 23 USC section 135, 
which have been institutionalized nationally since ISTEA. Indeed, in 
most States a comparable rural/statewide transportation planning 
process was in place before ISTEA.
    Much has been said about the changes that TEA-21 made to 
consultation with rural officials. In fact, a review of the language in 
both statutes reveals that the net effect of the changes is that, with 
respect to nonmetropolitan areas, States are to consult not only with 
certain ``elected officials'', but also with affected local officials 
``with responsibility for transportation.''
    There is no question that there must be consultation, and we 
believe that in most States this is taking place. Where local officials 
are being left out of planning discussions, we believe that FHWA should 
consider some type of case-by-case action to ensure consultation. 
However, failure by one State or area to consult should not become the 
basis for imposing broad regulations that dictate how the States should 
consult with their local officials.
    In Wisconsin, rural planning is a collaborative effort between the 
States, regional planning commissions and local government. This 
arrangement goes back to the 1960's. These parties coordinate their 
planning activities utilizing advisory committees, intergovernmental 
committees, guidance documents, association meetings, public 
involvement, etc. In addition, Wisconsin has a Local Roads and Streets 
Council composed of all levels of government: counties, towns, 
villages, cities and State. This council develops and evaluates local 
road data and develops policy initiatives based on that data as well as 
evaluates policy and program options on funding. Other States have 
similar arrangements for their local planning depending on their unique 
institutional and statutory authority.
Have the planning partners been given the proper roles and mandate?
    In recognizing statutorily that the Federal-aid highway program is 
a ``federally assisted State program'', TEA-21 acknowledges two 
centuries of federalism. Implicit in this recognition is an 
appreciation of the central role that the States perform in the 
development of our surface transportation system, even as other 
jurisdictions and institutions--local government, MPOs, tribal 
governments and Federal agencies--have come to play important parts. 
The nation is well-served by the current balance of responsibility for 
the development of highway, transit and intermodal projects, and AASHTO 
recommends that Congress maintain this balance and reaffirm the 
leadership role and authority of the States as TEA-21 is reauthorized.
    Congress should continue TEA-21's decisionmaking responsibilities, 
processes, and procedures for planning, programming and project 
selection. This means retaining the balance of decisionmaking between 
States and MPOs, and State and rural officials; retaining the current 
definitions of planning ``consultation, cooperation and coordination,'' 
and meeting needs through the existing program structure, rather than 
through new set-asides.
Do planning organizations have adequate capacity, tools and resources 
        to carry out their assigned role and responsibilities?
    AASHTO is working closely with the Federal Highway Administration, 
the Federal Transit Administration, the Association of Metropolitan 
Planning Organizations, and the National Association of Regional 
Councils to develop and deploy various capacity building tools to 
assist transportation planners. Several initiatives are included in 
this activity, including a web site where transportation planning 
assistance can be disseminated.
    In addition, AASHTO has been working closely with the 
Transportation Research Board (TRB) to continue to improve planning 
tools. There are on-going projects related to safety, freight planning, 
rural planning, public involvement, economic benefits, and innovative 
financing. There are additional needs for techniques to deal with 
capacity needs to support the nations' economy, accelerating the 
renewal of our highways, providing reliable travel times, and making 
improvements in highway safety. In fact, in these four areas, AASHTO is 
working cooperatively with FHWA to identify research needed to address 
these problems. These research proposals will be completed in time to 
be considered during reauthorization of TEA-21.
    However, if there are increases in requirements through the Federal 
legislative or regulatory process, it will be difficult to meet them 
through the planning process. Currently, planning and research for 
States and their localities is supported by 2 per cent of certain 
Federal aid categories. If the overall Federal program grows, planning 
funds should be sufficient. But if the program does not grow, there 
will not be enough planning funds to keep up with new challenges let 
alone any new requirements. For years, Wisconsin has shared its 
planning funds with the MPOs, regional planning commissions and local 
government. This is becoming much more difficult. In addition, research 
at the national level is critically under funded.
Summary
    As statewide and Metropolitan planning issues are considered in the 
reauthorization of TEA-21, it is important to recognize the differences 
among States and provide adequate flexibility. The reauthorization 
legislation needs to include flexibility that allows States and MPOs to 
adapt it to different parts of the country based on government 
structure, geography, population and a number of other important 
factors.
    In addition to legislative changes, AASHTO is particularly 
concerned about any Federal planning regulations that may come forward 
after the reauthorization legislation is passed. AASHTO strongly 
believes that such regulations should be consistent with congressional 
intent.
    Thank you for allowing me to present AASHTO's perspective on these 
issues. AASHTO is available to work with you and your staff on these 
important issues that will be considered in the reauthorization of TEA-
21. I would be happy to answer any questions here, or in writing.
                               __________
   Responses of Kenneth Leonard to Additional Questions from Senator 
                                Jeffords
    Question. Do you feel that computer simulations, an example of 
which would be TRANSIMS, are (or could be) valuable in the planning 
process? Are, or could they be, effective in the examination of various 
planning options?
    Response. A computer simulation approach to estimating and 
analyzing travel in a metropolitan area holds great potential for 
evaluating a number of issues currently of concern to policymakers at 
the Federal, State, metropolitan and local level. The principal 
development effort for a computer simulation approach has been through 
the TRANSIMS project under the sponsorship of the U.S. Department of 
Transportation and Environmental Protection Agency. Because TRANSIMS 
models the travel of individual travelers and vehicles as opposed to 
predicting aggregate travel for entire zones, it has the potential to 
more accurately estimate travel as well as to address a number of 
issues that current travel demand models are unable to address. These 
issues include, for example, analysis of travel by various segments of 
the population, differences in travel characteristics by time of day, 
the effects of a number of traffic operations and Intelligent 
Transportation System (ITS) measures, the effects of priority 
treatments for transit and/or high occupancy vehicles, as well as the 
effects of changes in the amount of transit or highway capacity 
provided. The potential value of TRANSIMS lies with its simulation 
which has significant advantages over the traditional 4-step traffic 
models. Transportation planners, in particular, have long sought the 
capability to simulate travel on roadway networks, but have only 
recently been given the software and hardware needed to apply 
simulation.
    TRANSIMS gives planners the ability to see how traffic actually 
moves through the network, demonstrating how traffic responds to 
network and other conditions that affect traffic. It also provides 
information on how individual vehicles and groups of vehicles function 
in their surroundings. This capability is important because it permits 
the planner to work with the traffic engineer to understand and use 
simulation results to improve traffic flow conditions and thereby help 
both to better deal with actual conditions. The simulation in TRANSIMS 
also permits a better understanding of traffic congestion by 
forecasting when vehicle travel will be initiated, thereby 
demonstrating how congestion propagates.
    Probably equally important is the information that simulation 
provides on the operating conditions of motor vehicles, thereby 
permitting better understanding of how travel patterns and traffic 
conditions affect motor vehicle engine performance and the resulting 
air quality in the vicinity of roadways. Second-by-second simulation of 
vehicle movements for every vehicle on the transportation system will 
allow for much more accurate estimates of vehicle emissions, taking 
into account vehicle acceleration, deceleration and idling 
characteristics, as well as cold start and evaporative characteristics 
after the vehicle has been turned off. This offers the potential for 
much more accurate and detailed analysis of the effects of proposed 
Transportation Control Measures for air quality.
    Because of the level of complexity of the computer simulation 
approach used by TRANSIMS, the development of the model has proven to 
be more complicated and time consuming than originally anticipated. 
Until the model is operational and used in an actual metropolitan area 
(the first application is expected to be in Portland, Oregon), the full 
potential, benefits and costs of the model will not be known. Of 
specific concern is the amount of data that may be required to make the 
model an effective analysis tool in any particular metropolitan area. 
Because TRANSIMS is a radical departure from current travel demand 
modeling approaches, there will be special challenges in educating the 
transportation planning community in how to use it and in acquiring the 
necessary computer hardware to operate such a complex, computer 
resource intensive model. AASHTO is supportive of the continued 
development of TRANSIMS due to its potential as an analysis tool, but 
cautions that it is still too early to understand all the issues that 
are associated with its use throughout the transportation planning 
community.
                                 ______
                                 
Responses of Kenneth Leonard to Additional Questions from Senator Smith
    Question 1. What would be the impact of a legislative mandate for 
greater consistency in the incorporation of local governments into the 
transportation decisionmaking process, as has been suggested by the 
National Association of Regional Councils?
    Response. The States have greatly varied needs, resources and 
environments that call for flexibility in order to give each State the 
ability to adapt its process to its unique social, political, 
geographical, legislative and constitutional circumstances. Each State 
has developed its own process for consulting with local officials that 
reflects and conforms to these unique factors.
    The AASHTO interim position on TEA-21 Reauthorization, in speaking 
to this issue, states:

    Recognizing that the Federal-aid highway program is a ``federally 
assisted State program,'' Congress should continue TEA-21's 
decisionmaking responsibilities, processes and procedures for 
transportation planning, programming and project selection. This means 
retaining the balance of decisionmaking between the States and MPOs, 
and States and rural officials; retaining the current definitions of 
planning ``consultation, cooperation and coordination,'' and meeting 
needs through the existing program structure.

    While preserving State leadership and authority in the development 
of transportation plans, programs and projects, the TEA-21 
Reauthorization should also respect the roles of other jurisdictions, 
institutions and the public and their involvement in the transportation 
planning process.

    Question 2. Is there a shortage of qualified transportation 
engineers and planners, and if so, how has it contributed to the 
challenges faced by the transportation planning process, and what can 
be done to solve this problem?
    Response. According to a May, 2001 NCHRP report titled Managing 
Change in State Departments of Transportation, issued May 2001, ``State 
departments of transportation face severe challenges in recruiting and 
maintaining their workforces''. State DOTs are looking for innovative 
ways to recruit and retain the necessary workforce.
    State DOTs are facing shortages of not only transportation 
engineers and planners, but also of personnel who are able to use new 
technology.
    The growing complexity of the transportation planning process makes 
it difficult for State DOTs to handle the growing range of issues that 
are considered. This complex transportation planning process that 
includes such challenging items as travel modeling, economic analysis, 
financial planning, public involvement and additional items make it 
difficult for State DOTs to recruit and train sufficient staff with the 
broad range of needed skill sets.
    States DOTs are addressing this workforce issue by increasing their 
efforts in recruitment and retention. As a longer term solution, they 
are strengthening professional development programs and establishing 
succession programs and processes. In the shorter term, many State DOTs 
are using private consultants to help keep projects moving.
    In Wisconsin, the department provides support to the university 
transportation center to promote the education of transportation 
professionals and regularly participates in university job fairs and 
class lectures promoting careers in transportation engineering and 
planning.
    Again, I appreciate the opportunity to testify before your 
committee on May 15, and I am available should you or your staff have 
additional questions or need additional information.
                               __________
  Statement of Dr. Ronald Kirby, Director of Transportation Planning, 
 National Capital Region, Transportation Planning Board, Metropolitan 
                   Washington Council of Governments
    Mr. Chairman and members of the committee, I am Ronald Kirby, 
Director of Transportation Planning for the National Capital Region 
Transportation Planning Board, the Metropolitan Planning Organization 
for the Washington, DC region. I am appearing today at your invitation 
on behalf of the Association of Metropolitan Planning Organizations 
(AMPO) of which I am an active member, serving as vice chairman of its 
Management Committee and a member of its Policy Committee.
    I want to thank you and the members of the committee for holding 
this series of hearings to review critical issues surrounding the 
reauthorization of the Transportation Equity Act for the 21st Century 
(TEA-21).
    This act and its predecessor, ISTEA, rightfully recognized the 
importance of planning a metropolitan transportation system and gave me 
and my colleagues at 340 other MPOs increased responsibility to develop 
effective strategic long-range plans and comprehensive, multi-modal 
transportation improvement programs. With the 2000 census we expect 
that an additional 61 MPOs will be established to serve newly 
designated urbanized areas, and that the geographic areas and 
populations served by existing MPOs will grow significantly.
    While new responsibilities such as management and operations have 
been added to MPO requirements by TEA-21, the percentage of highway 
program funding for metropolitan planning has remained at the 1 percent 
level set in ISTEA. It is time to increase the takedown from the 
highway program and the amount allocated from the transit program. This 
will reflect a) the almost 20 percent increase in MPOs resulting from 
the 2000 census, b) the increasingly urbanized U. S. population coming 
under the rubric of existing MPOs, and c) the increased MPO 
responsibilities created by enhanced planning provisions and 
requirements. AMPO suggests the takedown be increased to 2 percent of 
the overall program.
    I understand your interest is in exploring the lessons learned from 
the 10 years of experience with metropolitan planning since the 
enactment of ISTEA in 1991, the adequacy of the planning tools 
available, the adequacy of resources to perform metropolitan 
transportation planning, and whether the right groups have been at the 
table during the development of plans and programs. I would like to 
provide you with a few initial thoughts: we need to retain key 
provisions in the planning process, increase the resources for plans 
and projects, and venture into new areas to improve planning and 
implementation of our metropolitan transportation systems.
    I classify the tools for planning in three categories: 1) tools 
that are working effectively and we should retain, 2) tools that work 
effectively and we should expand, and 3) new tools we need to continue 
effective planning.
    First, we should retain tools that are working effectively. The 
requirement for a financially realistic plan and a fiscally constrained 
program is the most effective tool provided by ISTEA and TEA-21. This 
requirement eliminated ``wish list'' plans and programs which did not 
identify enough funds for implementation. This financial constraint 
requirement gave credibility to the MPO plans and programs and 
presented the public with a realistic view of what can be delivered in 
the way of transportation projects and services. It is imperative that 
this requirement be retained.
    Any dilution of the fiscal constraint requirement may find us over-
promising transportation improvements and losing our credibility with 
our customers. Citizens and users of our metropolitan transportation 
systems who rightfully complain about congestion and unreliability in 
parts of our system will not countenance papering over the problem with 
wishes for projects that cannot be delivered.
    In addition to financial constraint, two ancillary tools in TEA-21 
should also be retained: 1) the requirement for cooperative revenue 
forecasting among MPOs, States and transit authorities and 2) the 
requirement for an annual listing of obligated projects to be prepared 
by the MPO.
    Along with financial tools, the overall planning approach 
established in ISTEA and TEA-21 should be retained. The requirement 
that long range plans be strategic in nature with broad community goals 
and specific objectives places the transportation agenda in a broader 
context, encouraging the linkage between transportation, land use, the 
economy and the environment in a metropolitan area.
    When this approach is combined with early and extensive involvement 
of the community, the MPO has a solid basis for developing its long-
range plan and transportation improvement program. ISTEA and TEA-21 
transformed the long range plan from a twenty-year listing of 
transportation projects to a blueprint for community development which 
indicates the appropriate contribution transportation investment can 
make to that development.
    In the Washington metropolitan area, these ISTEA and TEA-21 tools 
have, in the words of one of our elected officials, ``forced us to ask 
the right questions.'' Application of the financial constraint in the 
early-1990's resulted in a rather stressful prioritization of 
transportation improvements for inclusion in the long-range plan, and 
the initiation of a visioning process aimed at developing a broad 
consensus on regional transportation goals and addressing the critical 
funding needs we had identified. The Transportation and Community and 
System Preservation Program (TCSP) has allowed us to pursue previously 
unaddressed goals in our new vision regarding a system of regional 
greenways and circulation systems within regional activity centers, and 
to focus increased attention on these areas in the project selection 
process.
    Second, we believe we should expand some of the existing tools that 
work effectively. Two tools have been effective and should be expanded: 
1) ensuring that adequate planning resources are available to MPOs, and 
2) making project funds available directly to MPOs.
    As you may know, MPOs receive planning funds via a small percentage 
take-down from the Federal highway authorization and a line item amount 
from the transit authorization. ISTEA set the percentage for the 
highway program at 1 percent, a reasonable figure given the increased 
responsibilities asked of MPOs and the understanding that involving the 
public in transportation decisionmaking would require appropriate 
additional resources. With the increased urbanization of America, AMPO 
believes that it is time to increase the takedown to 2 percent to serve 
an increasing number of MPOs and a growing percentage of our population 
in existing MPO areas.
    Regarding funds to build projects, ISTEA and TEA-21 for the first 
time put funds in the hands of local elected officials to assign to 
projects developed cooperatively through the MPO process. Each MPO with 
more than 200,000 in population receives a portion of the Surface 
Transportation Program (STP) funds allocated to its State to expend on 
specific projects. These funds can be programmed based on the MPOs' 
best judgment on the transportation needs of their metropolitan areas. 
The funds are made available by the States through ``suballocation.''
    The availability of these funds not only provides funding for vital 
local projects, but also encourages local officials to get involved in 
the transportation decisionmaking for their region, since, as they say, 
there is ``real money'' on the table. Suballocation of STP funds has 
been an outstanding success for the one-third of the MPOs that have 
populations over 200,000, and needs to be expanded to the remaining 
two-thirds of smaller areas that still have pressing needs for their 
regions. AMPO suggests: 1) restoring the suballocation of the STP 
minimum guarantee funds and extending the suballocation of urbanized 
STP funds to all MPOs, and 2) suballocating CMAQ funds to MPOs in air 
quality non-attainment and maintenance areas.
    Third, let us look at possible new tools to improve the 
effectiveness of metropolitan transportation planning.
    In order to complement the financial constraint requirement and 
suballocation proposal, it would be helpful to require States to 
account annually for expenditures of NHS and other programs. This would 
allow for a clear and comprehensive assessment of the effectiveness of 
plan implementation. In other words, ``did we build what we planned?"
    Once we have built facilities, and managed and operated the system, 
we should determine how effective we have been. MPOs need better data 
on the use of the metropolitan transportation system. AMPO suggests two 
tools to measure effectiveness: 1) invest resources in monitoring 
devices to track use of our transportation facilities, the so-called 
``Infostructure,'' and 2) encourage the development of a performance-
based management and operation element within MPO plans and programs. 
To give local officials the greatest flexibility in applying solutions 
to our metropolitan transportation needs, we recommend that the law 
make clear that NHS, STP and CMAQ funds may and should be used for 
projects that manage and operate the system.
    Another area of transportation planning, freight planning, needs 
some new tools. While consideration of freight is a planning factor, it 
is time to give MPOs greater capability to develop and apply solutions 
to freight needs. AMPO proposes that the reauthorization bill broaden 
the eligibility of freight project funding, provide incentives to 
attract private investment, and allow port access and gateways to be 
eligible for the ``corridors and borders'' program.
    Finally, we feel new tools are needed to streamline project 
delivery and air quality conformity processes. The MPO planning process 
offers untapped opportunities to identify environmental issues and 
incorporate them into the process of defining project alternatives. To 
take advantage of these opportunities, we propose that the 
reauthorization bill 1) require that both Federal project-sponsoring 
and resource agencies participate in the MPO corridor planning process, 
2) allow concurrent review processes, and 3) provide incentives for 
demonstrating innovative streamlining techniques.
    Regarding air quality conformity requirements, we recommend that 
the law add two tools: 1) put the State air quality implementation plan 
(SIP) and metropolitan transportation conformity plans on the same 
timeframe, and 2) focus the conformity process on the metropolitan 
transportation plan, not the transportation improvement program (TIP). 
We will have more specific proposals regarding air quality conformity 
in the near future.
    In summary, I would like to emphasize the importance of planning in 
producing effective transportation systems for our metropolitan areas. 
In the planning, designing, building and operation of transportation 
facilities the most important leadership must come in the planning 
phase. With a solid plan developed through consensus you may be assured 
that we will have a transportation system that works.
    Thank you for your time and the opportunity to speak before this 
committee.
                                 ______
                                 
  Responses of Ron Kirby to Additional Question from Senator Jeffords
    Question 1. Do you feel that computer simulations, an example of 
which would be TRANSIMS, are (or could be) valuable in the planning 
process? Are, or could they be, effective in the examination of various 
planning options?
    Response. Computer simulations have been successfully applied in a 
variety of fields and industries, including transportation. One type of 
simulation--small area micro-simulation--has been used by 
transportation engineers for years to help study traffic across 
bridges, complex interchanges, toll plazas, etc. Computer hardware and 
software has reached the performance level that allows simulation 
technology to be applied on a larger scale: a city or even a large 
metropolitan area. TRANSIMS is a developmental effort in this class of 
transportation planning tools, aimed at simulating travel of every 
individual and every vehicle in a large metropolitan area. Once fully 
developed, simulations like TRANSIMS could allow transportation 
planners to build a significantly more precise model at the regional 
level. In the shorter term, TRAMSIMS could be applied on a more limited 
geographic scale to help with certain projects like new transit 
stations. Additionally, the visual component in TRANSIMS could be 
helpful to citizens and decisionmakers, such as local elected officials 
on MPO Boards, because it allows non-experts the opportunity to see 
various simulations.
                                 ______
                                 
    Responses of Ron Kirby to Additional Question from Senator Smith
    Question 1. How would you modify the conformity process to focus on 
results, instead of process?
    Response. We believe the intent of the law dictating the conformity 
process focuses on results but that the true measure of success is 
found when a region is able to attain the clean air standard. We feel 
that conformity is an important link between mobility and clean air. 
Additionally, we believe that the process can produce useful results if 
there is good communication and cooperation between all stakeholders. 
At this time, we defer on making specific recommendations for change to 
the process itself in hopes of providing more information in the fall 
after our policy committee has fully addressed this issue.

    Question 2. What percent of an MPO's budget is typically spent on 
the conformity process?
    Response. In Chicago, the Chicago Area Transportation Study (CATS) 
spends about 7.5 percent of a total budget of $4.7 million on 
conformity. A representative from the MPO stated that they have spent 
less on conformity over the years because they have ``gotten better at 
it.'' In Dallas-Ft. Worth, the North Central Texas Council of 
Governments spends about 10 percent of a total $5 million budget, or 
$500,000, on conformity. In the Washington metropolitan region, we 
spend about 7.7 percent of a $7.8 million budget or $600,000.

    Question 2a. What percent of an MPO's budget is typically spent on 
the transportation planning process? Please provide some examples for 
specific MPOs.
    Response. MPOs are charged solely with transportation planning. The 
MPO spends 100 percent of its budget on this.

    Question 3. What percent of current MPO budgets are covered by the 
State and local governments? What percent of the MPOs responsibilities 
relate to Federal transportation investment, and what percent of their 
work relates to State and local responsibilities?
    Response. The standard for funding is 80 percent Federal with a 20 
percent local match (a portion of this may be provided by the State as 
well as by the local governments). Local match may exceed 20 percent in 
some cases. Planning responsibilities mirror this.

    Question 4. Is there a shortage of qualified transportation 
engineers and planners, and if so, how has it contributed to the 
challenges faced by the transportation planning process, and what can 
be done to solve this problem?
    Response. We can only offer anecdotal information. According to 
Institute of Transportation Engineers:
    The Federal Highway Administration has indicated that 40 percent of 
the State and local transportation workforce is between the ages of 45-
64. In the next 5-15 years, 40-50 percent of all transportation workers 
will begin to retire. Graduate school enrollment in transportation 
programs is on a decline as is undergraduate enrollment in civil 
engineering. Although not exclusive sources of professionals to the 
workforce, they are significant.
    For additional information on this, please contact Aliyah Horton, 
Senior Director of Government Affairs at (202) 289-0222.
                               __________
Statement of Peter Gregory, Executive Director, Two Rivers-Ottauquechee 
  Regional Commission, Woodstock, Vermont, on Behalf of the National 
                Association of Regional Councils (NARC)
    Thank you Chairman Jeffords and members of the committee for the 
opportunity to testify before you today. My name is Peter Gregory; I am 
the Executive Director of the Two Rivers-Ottauquechee Regional 
Commission (TRORC), in Woodstock, Vermont. I am here today representing 
the National Association of Regional Councils (NARC), our members, and 
the local elected officials and citizens we represent. I am providing 
testimony on behalf of NARC on the importance of transportation 
planning to regional councils and Metropolitan Planning Organizations 
(MPOs). I would like to discuss the success of the Transportation 
Equity Act for the 21st Century, and changes necessary in its 
reauthorization to strengthen planning, the role of local elected 
officials, and specifically, how to better integrate rural areas into 
the process. The topic of transportation planning and the processes 
MPOs and councils use to achieve it is important to my commission, 
NARC, and all of my colleagues across the country. In these processes 
transportation systems are first developed and discussed so I am glad 
to see this issue is important to the committee as well.
    The National Association of Regional Councils is a 32-year-old 
organization serving the interests of regional councils, and 
Metropolitan Planning Organizations. NARC is an umbrella organization 
comprised of planning commissions and development districts made up of 
large urban and small rural councils, and MPOs from across the country. 
NARC provides advocacy and technical assistance in and for 
environmental issues, economic and community development, emergency 
management, and transportation. NARC emphasizes regional 
intergovernmental cooperation to resolve common problems in all of 
these important areas.
    Regional councils and MPOs are created by compact and enabling 
legislation as consortia of local governments. As such, regional 
councils and MPOs represent local elected officials from cities, 
counties, townships, and villages. Their mission is regional planning 
and coordination across multiple jurisdictions. Regional Councils and 
MPOs deliver a wide-range of programs and services such as, economic 
development, first responder and 911, health care, infrastructure 
development, aging services, air and water quality, land-use planning, 
work force development, emergency management and homeland security, and 
transportation.
    Among all of these programs, transportation is key to the continued 
prosperity and health of all regions across the country. Access to 
employment and recreation, and the movement of goods and services, 
drive regional economies and serves to bridge communities otherwise 
separated. An excellent example of regional coordination and service 
delivery is the Two Rivers-Ottauquechee Regional Commission (TRORC), 
which is one of 12 regional planning commissions in the State of 
Vermont. TRORC has planning responsibilities for 27 rural towns, most 
with populations of less than 1000 residents. TRORC performs emergency 
management, natural resource, land use and transportation planning 
across its jurisdictions.
    Since 1992 when the Intermodal Surface Transportation Efficiency 
Act (ISTEA) was enacted, the State of Vermont has elected to obtain 
local input on transportation investment decisions by contracting with 
Vermont's regional planning commissions. Each regional planning 
commission's work is guided by a transportation advisory committee 
(TAC) comprised primarily of locally elected officials. These local 
officials provide the Vermont Agency of Transportation (VTrans) with a 
regional transportation plan and prioritized projects in all modes. In 
Vermont, local and regional transportation policy is developed locally 
and feeds into the statewide plan, thereby creating a seamless 
philosophy on transportation investment.
    This comprehensive program to document local interests has served 
VTrans well since 1992. Successive Governors and Secretaries of the 
Vermont Agency of Transportation have all strongly supported the 
processes that regional planning commissions use to identify and 
support projects. In addition, the Vermont Legislature has demonstrated 
strong bi-partisan support for the inclusiveness of the process. They 
have understood that regional planning commissions are closer to the 
communities and bring a comprehensive and trusted approach to their 
constituents. This innovative approach to public participation has now 
been used by most of the agencies of State government as a cost 
effective means to obtain an accurate assessment of local desires. The 
regional planning commission relationship with the State of Vermont is 
strong and is serving Vermonters well. It has evolved and matured and 
has reacted to changing circumstances whether they be freight movement 
or homeland security.
    As an example of this relationship and as enabled by ISTEA and TEA-
21, Vermont took advantage of the opportunity to revisit highway design 
standards used by VTrans engineers. In the mid-1990's, Vermont adopted 
new, context sensitive standards that replaced the previously used 
AASHTO standards. Highway, bridge and pedestrian and bicycle facilities 
now attain their purpose and need while enhancing the built environment 
and protecting more historic, social and environmental resources. 
Vermont's regional planning commissions played the decisive role in 
ensuring adoption of these new standards.
    Vermont's citizens have also benefited by the formal involvement by 
regional planning commissions in transportation planning. Through the 
10-year period, the level of understanding by the general public in 
transportation issues has grown steadily and dramatically. This, in 
turn, enables more meaningful input for VTrans on project scope, and 
allows the public greater understanding as to the constraints that are 
faced when developing transportation infrastructure.
    Vermont's regional planning commissions bring many unique talents 
to the process, not the least of which is the expertise in all the 
other disciplines that is needed when contemplating the rehabilitation 
or construction of infrastructure. Vermont's regional planning 
commissions all bring years of experience in computerized mapping which 
delineates everything from sewer infrastructure to wetlands and 
wildlife habitat. Integrating the extensive knowledge base we have with 
the locally elected officials' input enables projects to be designed 
and constructed substantially sooner than would have occurred in 
previous decades. This preserves the environment and saves tax dollars 
while meeting the mobility needs of the New England economy. Vermont is 
clearly a ``best practice'' in rural transportation planning.
    Vermont's regional planning commissions need a consistent and 
predictable funding source to provide the services that we provide. 
Although they all have close working relationships with VTrans today, 
it is imperative that the process TRORC has undertaken over the last 10 
years does not falter due to changing economic or political situations.
    Guaranteed funding for rural areas to carry out planning is 
essential. As in Vermont, councils need funding to plan the best 
transportation systems possible. NARC will ask Congress to provide 
States with meaningful incentives to move toward the Vermont example of 
seeking rural officials' involvement. NARC is proposing new funding 
streams in the next Bill, to make this a reality--including a Rural 
Set-Aside for planning and projects.
    This committee can appreciate a system that works well. Vermont is 
an example of where ISTEA and TEA-21 were implemented successfully. 
This success, however, is not replicated in all regions across the 
country. Local elected officials, councils, and MPOs, in many cases and 
in many places, have less say in the transportation planning and 
decisionmaking process, then those in Vermont.
    NARC proposes changes in TEA-21 to allow all States and regions to 
replicate the success of Vermont. The association asks Congress to 
smooth inconsistencies among States by adopting clear and concise law 
incorporating local governments into the transportation decisionmaking 
process. Local elected officials, cities, counties, and regions, should 
not be left out of the system because, at the Federal level, there are 
not clear voices sounding on their importance in the process. For 
example, in many rural areas across the country, there is no Federal 
statute that requires States to formally engage local elected officials 
in the planning process. NARC would like to see law and regulation 
requiring this process. Congress did ask the United States Department 
of Transportation to promulgate their proposed regulation on local 
official consultation. NARC asks this committee to reemphasize the 
importance of this regulation and urge the Department of 
Transportation, in the strongest sense possible, to move forward on its 
release.
    NARC is urging Congress to consider all its partners, not just 
rural councils as important to building and maintaining the best 
transportation system in the world. NARC seeks more funding for MPOs, 
better coordination within State and Federal programs, and new and 
innovative programs aimed at alleviating urban transportation problems 
such as congestion, funding flexibility, and air quality. Congress 
should guarantee States the flexibility to spend funds and program 
projects based on their priorities and extend that same responsibility 
and authority to all local elected officials.
    Air quality, planning coordination, and finance and fiscal 
constraint are of particular interest given new directions in air 
quality regulations, the need to better coordinate planning cycles, and 
fewer resources at the regional and local level. These new regulations 
will impact urban and rural areas in ways not yet understood. First and 
foremost, Congress should consider air quality conformity as a tool to 
achieve clean air quality goals.
    The conformity process as currently legislated neither readily 
achieves air quality nor facilitates an easy solution. The current 
process opens regions to poorly defined legal challenges, faulty 
science, and consigns many of them to a bureaucratic quagmire. While 
conformity is well intended, and necessary, its application should be 
reexamined. Of no less importance to regions is the assurance of well-
timed plans.
    Both conformity and transportation plans should be timed together 
to achieve maximum results. Required plan updates, plan lifetimes, and 
conformity checks should be synchronized, and required less often. By 
doing these two things MPOs and regional councils can conserve planning 
resources and make plans more meaningful to the public and their 
elected officials. To ensure MPOs and regional councils have the 
ability to plan in the first place they need concise revenue forecasts 
and tight internal control of their resources.
    Fiscal constraint on MPOs and councils is absolutely necessary, as 
long as revenue forecasts are precise and fiscal standards consistent. 
MPOs and regional councils are held to higher fiscal standards in their 
planning and programming processes then the States that fund them. 
Congress should require States to provide accurate revenue forecasts to 
MPOs and councils and engage them in calculating these forecasts as 
well.
    NARC will also urge Congress throughout this and the coming year to 
consider greater emphasis on safety in rural and urban communities, a 
balanced and intermodal approach to Federal funding, comprehensive 
review and consideration of technology deployment, and greater 
consideration of freight movement as an essential part of the 
transportation planning process.
    Of particular concern to NARC members and the citizens they 
represent are the tens of thousands of accidents and deaths on rural 
roads each year. Coupled with increasing safety concerns in urban 
areas, this presents a sobering picture of travel on America's roads. 
NARC is urging Congress to apply resources in new and innovative ways 
to lessen this tragedy.
    NARC is urging Congress to consider ways to streamline the project 
delivery process, while ensuring the health of our natural environment. 
The ability to move projects quickly, especially those that will make 
our roads safer, is of key concern. Bound intimately with safety are 
new concerns for security.
    Given the fact that many regional councils are currently involved 
in emergency management planning, NARC will also urge Congress to 
consider regional councils and MPOs as primary recipients of homeland 
and surface transportation security funding.
    NARC would like to help all councils achieve the same success as 
those in Vermont, and in other places, through a balanced, intermodal, 
comprehensive, and locally and regionally led process of planning, 
programming, and project selection.
    NARC will be happy to elaborate at any time and assist Congress in 
any way. Thank you, Mr. Chairman and committee members for allowing the 
National Association of Regional Councils time to present its views.
                               __________
  Statement of Andrew C. Cotugno, Metro Planning Director, Portland, 
                                 Oregon
    Mr. Chairman I want to thank you and the committee for holding this 
series of hearings on reauthorization of the Transportation Equity Act 
for the 21st Century (TEA-21) and inviting me to testify. I am Andy 
Cotugno, Planning Director for Metro, the regional government covering 
the 24 cities and three counties of the Portland, Oregon metropolitan 
area. Metro is the only directly elected regional government in the 
U.S. Metro has a home-rule charter approved by the voters, establishing 
a Metro ``that undertakes, as its most important service, planning and 
policymaking to preserve and enhance the quality of life and the 
environment for ourselves and future generations.'' We also serve as 
the Metropolitan Planning Organization (MPO) under the Federal 
transportation planning statutes. Metro is an active member in our 
national organization located here in Washington, the Association of 
Metropolitan Planning Organizations (AMPO). I am pleased to be joined 
today by my colleague, Ron Kirby from the MPO for the Washington, DC. 
region.
    The Portland region is often cited as the Smart Growth capital of 
the world. Whether that is true or not, Metro's programs have been 
closely scrutinized throughout their 23 year life. It is from that 
unique base of experience, transportation integrated with Smart Growth, 
that I offer these recommendations.
    This morning, I would like to speak to you first on the principles 
of making the Smart Growth connection to transportation and then relate 
that to recommendations for how the next transportation authorization 
bill could recognize these principles. The linkage between Smart Growth 
and Transportation is about understanding how developing land use 
patterns impact the effectiveness of the transportation system and, in 
turn, how a new transportation project affects those development 
patterns. The key to the successful integration is to recognize what 
land use goals are being pursued and how a planned transportation 
project will either lead the region closer to the goals or conflict or 
undermine the goals.
    Metro and the Portland region have implemented a number of 
integrated land use and transportation strategies through something we 
call the Region 2040 Growth Concept:
      We have had an urban growth boundary in place for 20+ 
years, which has effectively stopped the sprawling development pattern 
leapfrogging out onto farmland. As a result, all aspects of urban 
infrastructure, including roads, transit, sewer, water, schools, police 
stations, libraries and parks are focused within a compact urbanizing 
area, reducing the need for expensive extensions.
      We have used land use plans and zoning to reinforce a 
higher density development pattern in locations that can be well served 
by light rail and bus transit, producing six consecutive years of 
transit ridership increases.
      We have protected industrial areas and areas intended for 
intermodal freight terminals from conversion to big box retail, 
preserving this land and highway capacity for more important economic 
purposes. In this manner, key highway expansion projects are retained 
for their function to move freight rather than being overloaded with 
shoppers.
      We have adopted parking limitations, not just parking 
minimums to ensure new development does not overbuild parking.
      We have adopted a requirement for greater local street 
connectivity to ensure a system of cul-de-sacs does not simply shift 
local traffic onto the regional system.
      We have restricted development near streams and acquired 
open space to ensure a balance between growth and access to nature.
      We have adopted revised street design guidelines to 
ensure highways intended for through traffic are built to emphasize 
moving cars and trucks while streets in downtowns and neighborhoods 
support a strong pedestrian environment and access to transit.
      We have taken advantage of the flexibility provided by 
ISTEA and TEA-21 to target funds to a broad mix of highways, light 
rail, arterials, buses, bike trails, sidewalks, transportation demand 
management programs and transit-oriented development projects.
      We have put to good use funding made available through 
the New Starts Program to build a successful light rail system that 
helps to focus growth and has ridership 7 years ahead of forecast.
      We have leveraged the planning framework provided by the 
Federal requirement for a metropolitan planning organization into a 
broad-based intergovernmental program to coordinate regional land use 
and environmental protection plans.
    In summary, we have used transportation investments to influence 
desired land use plans and we have used land use controls to produce a 
more effective transportation system. The premise of the Metro 2040 
Growth Concept is that integrating our land use and transportation 
plans produces both better communities and better mobility.
    With this Smart Growth framework, I would like to focus on three 
transportation programs that can serve as the framework for the Smart 
Growth direction in the next transportation bill:
    1. Title 49, Section 5309--Major Capital Investment Grants for New 
Fixed Guideway Systems (Which I will refer to as the New Starts 
Program);
    2. Title 23, Section 1118--National Corridor Planning and 
Development Program (which I will refer to as the National Trade 
Corridor Program); and
    3. Section 1221--Transportation and Community and System 
Preservation Pilot Program (which I will refer to as the TCSP Program).
                         fta new starts program
    All of these programs could follow the model established by the New 
Starts program. The New Starts Program has been a sustained program for 
over 25 years providing discretionary grants to construct light rail 
projects. Since these are expensive projects, local areas have a 
significant incentive to pursue 50--80 percent Federal funds. As a 
result, competition is high and many projects from all over the country 
are waiting in line. To manage the demand:
      Congress has set clear criteria to distinguish the most 
meritorious projects;
      The legislation provides for seed money to develop a 
project with the expectation that the best projects will be in line for 
construction funding;
      The Federal Transit Administration requires local areas 
to go through a rigorous process to prove the merits of their projects;
      New Start regions collaborate on what constitutes a good 
project and hold each other to a high standard;
      The Federal Transit Administration makes a recommendation 
of projects that are ``Highly Recommended,'' ``Recommended'' or ``Not 
Recommended'' to Congress;
      With the approval of the congressional authorizing and 
appropriating committees, a multi-year funding contract is executed for 
the best projects subject to annual appropriations to fulfill this 
commitment.
    This is a very successful program. It produces good projects that 
stand up to scrutiny. It is administered in a manner that results in 
selection of a limited number of good projects from a large competitive 
field. The funding is significant enough to hold local areas and the 
projects they seek to a high standard. The projects make a significant 
difference when they are built.
    For the Portland region, the New Starts program has provided the 
means to build an essential part of the region's transportation 
infrastructure and, in the process, shape the growth of the region to 
be supportive of Smart Growth goals. It has had a profound impact on 
the ability of the region to reign in sprawl and hold tight it's Urban 
Growth Boundary, thereby eliminating the need to build public 
infrastructure in an ever-expanding urban area. It has helped produce a 
terrific downtown Portland and is now shaping the future of downtown 
Gresham, downtown Beaverton and downtown Hillsboro, as well as new 
communities sprouting up around light rail stations. And, because the 
Federal New Start funds make a significant contribution, it has been 
possible to leverage State and local funds into the projects that would 
not have been spent on the transportation system. In addition, 
decisions have been made to target various Federal formula funds into 
the New Start projects (through STP, CMAQ and FTA Section 5307).
                b. fhwa national trade corridor program
    If the New Starts Program is the transit component of a Smart 
Growth strategy, what is the equivalent for the Federal Highway 
Administration? You would think the complementary program would be the 
NHS system. It is a significant funding category available to all the 
States. It is intended for modernization and expansion of the most 
important part of the nation's highway system. However, the NHS system 
is so large and the eligible uses of these funds across this system are 
so varied, their use is not focused. In the case of Oregon, these funds 
are used primarily to rehabilitate the system that already exists. 
That's a prudent asset management decision to make but doesn't deal 
with the needs to expand and modernize that system in targeted areas of 
national economic importance.
    The National Trade Corridor Program could follow the New Starts 
model and be the strategic Federal investment in the National Highway 
System. Through the National Trade Corridor Program, there can be a 
Smart Growth connection to building a strong economic base, not just 
livable, walkable neighborhoods. To do this, the ``Borders'' and 
``Corridor'' funding categories should be separated because they are 
distinctly different. With that, the ``Corridors'' component should be 
revised to mirror the New Starts program but with a Freight and Trade 
emphasis, as follows:
      It should be authorized at a funding level sufficient to 
allow Congress and the FHWA to make multi-year funding commitments to 
significant construction projects. Like New Starts, that means $1+ 
billion per year, not the current $140 million per year (split with the 
Section 1119--Coordinated Border Infrastructure Program), allowing 
commitments to projects of $300-500 million.
      It can provide the funding for the seed money to develop 
projects, leading to a later request to fund construction (at the 
present, the National Corridors Program can only fund these studies or 
very small scale construction projects);
      Congress should set a high standard on how the funds are 
spent to ensure high quality projects are funded to produce the 
greatest impact on global economic competitiveness rather than 
spreading the funds across a list of projects of unknown merit.
      The Federal Highway Administration should ensure 
localities go through a rigorous process to establish the basis for 
their recommendation to Congress to ``Highly Recommend,'' ``Recommend'' 
or ``Not Recommend'' projects for a multi-year funding contract.
      With the approval of the congressional authorizing and 
appropriating committees, a multi-year funding contract can be 
executed, subject to annual appropriations.
      Through this process and the high degree of national 
competition, State and local governments should be encouraged to 
leverage their NHS, Interstate-4R and STP funds, not to mention State 
and local funds into the project.
    This approach would provide the means for implementing significant 
highway projects needed to move freight and support the nation's 
economy.
    Let's look at a Portland case study as an example. Interstate 5 is 
a designated National Trade Corridor from Canada to Mexico through 
Washington, Oregon and California. The segment connecting Oregon and 
Washington in the Portland/Vancouver region is a significant bottleneck 
and the most congested corridor in the region. The I-5 bridges across 
the Columbia River are an antiquated pair of draw bridges (three lanes 
each northbound and southbound), the first one built in 1917, well 
before the Interstate system was imagined, and the second in 1958. 
These old bridges represent the critical bottleneck where access to the 
Ports of Portland and Vancouver provide U.S. connections to the Pacific 
Rim (the only west coast ports with a positive balance of international 
trade). This is the same corridor that accesses the intermodal 
terminals for the two transcontinental railroads (BN/SF and UP/SP). 
This is the same corridor that accesses the Portland International 
Airport to ship high value products such as the source of Intel's 
Pentium 4 chip. And, this is the same corridor where 80 percent of the 
region's truck terminals are located.
    Finally, I-5 is located in a fragile social and environmental 
setting making construction of any improvements difficult. I-5 was 
built by displacing a 3-4 block wide swath through the low income/
minority area of the region making further widening difficult. In 
addition, construction of any new bridge across the Columbia River will 
be regulated by the Endangered Species Act due to listing of salmon and 
steelhead as endangered. And to top it off, the 1917 bridge is on the 
National Register of Historic Places.
    With the tremendous benefit of a $2 million ``Borders and 
Corridors'' grant from FHWA (thank you), we have now completed an 
extensive community-based process to develop a solution to the 
``bottleneck'' and have succeeded in coming up with a fragile multi-
modal consensus on how to proceed, including:
      Upgrading the existing bridge from 6 lanes to 10 lanes 
across the Columbia River at a cost of $1.2 billion +;
      Extension of the two existing light rail lines in 
Portland north to connect as a loop in Vancouver at a cost of $1.2 
billion +;
      Implementation of aggressive measures to reduce demand, 
increase transit service and encourage the use of alternatives to auto 
commuting; and most revolutionary;
      An agreement to control land uses to avoid inducing more 
sprawl in response to a bigger freeway to simply result in a bigger 
traffic jam in the future.
    So, you say, what is the problem. TEA-21 provides significant help 
through the NHS, Interstate-4R and Bridge programs that the States of 
Oregon and Washington can choose to commit to this corridor. Well, 
Oregon has prioritized these funds to take care of over 7,500 miles of 
existing highways statewide and expansion comes after taking care of 
the existing system. Washington State priorities are focused on its 
major population center of Seattle. This corridor is currently 
unfunded. But, because of it's critical trade characteristics it would 
be a good candidate for a revised ``National Corridors Program'' in the 
manner described.
    Ironically, the LRT components of the plan have a better chance of 
being implemented through the New Starts program than the I-5 freeway 
components. The economic implications spread far beyond this corridor 
because freight that is shipped through the marine, rail, truck and air 
cargo terminals moves to and from points throughout the Pacific 
Northwest, the entire U.S. and the Pacific Rim.
  c. fhwa transportation and community and system preservation pilot 
                                program
    Let's move to the third component: the Transportation and Community 
and System Preservation Pilot Program. If the New Starts Program is 
intended to build the backbone to move people in a Smart Growth context 
and the National Trade Corridor Program is the means to build 
significant highways for moving commerce, TCSP is the model for 
building strong communities around the transportation system. Whether 
it's Transit-Oriented Development around Light Rail or an Interchange 
Management Plan to avoid incompatible development from overloading a 
new interchange, the TCSP Program was designed to make the land use 
connection to the transportation system.
    The program was conceived with all good intentions. It was founded 
on the principles of Smart Growth, based on the premise of building 
transportation projects that support good local and regional growth 
decisions. It was intended to support such concepts as urban growth 
boundaries, transit-oriented development, interchange land use 
management plans and green corridors separating metropolitan areas.
    In the first year of TEA-21, FHWA did an admirable job of setting 
guidance for the program and selecting competitive projects (in fact, 
the Portland region is now finishing a TCSP grant to do the master 
planning for a major expansion of the region's urban growth boundary). 
However, since then, Congress has earmarked the funds to a potpourri of 
projects. In the most recent appropriations bill the program originally 
authorized at $25 million was earmarked with $250 million of projects. 
This program could benefit from the rigor of the New Starts model. And 
it could be the third pillar of the national program, not to build the 
major elements of the system, like light rail and freeways, but to 
build strong communities taking advantage of and supporting the major 
elements of the transportation system:
      The Federal Highway Administration, in partnership with 
the Federal Transit Administration should continue to develop guidance 
for projects to be funded through the TCSP Program. The initial effort 
to define the principles for selecting the projects was a good start 
and should continue to ensure funding is targeted to best support good 
land use decisions rather than ignore or undermine land use decisions.
      The Federal Highway Administration should publish 
information to highlight the characteristics of successful projects and 
disseminate these ``Best Practices.''
      Congress should increase the authorized level of the 
program to $250 million, comparable to the fiscal year 2003 
appropriations.
      Congress should tighten up statutory language to ensure 
grants cannot be awarded unless they demonstrate a supportive land use 
benefit.
      Congress should require an evaluation of the merits of 
the proposed projects by the Federal Highway Administration and approve 
funding based upon a recommendation of ``Highly Recommended,'' 
``Recommended'' or ``Not Recommended.'' This should be designed to 
ensure good projects are recommended for funding, although in a more 
streamlined manner that the large multi-year contracts under the New 
Starts and National Trade Corridor Programs.
    The theme for all three of these programs is the same. The Federal 
Government ensures localities go through a rigorous process, thereby 
justifying a substantial funding commitment to a project that really 
makes a difference. With this focused undertaking, other funding 
sources and programs also are leveraged.
    In sum, I encourage you to consider what I call the three pillars 
of the Smart Growth connection to the next transportation bill: 1) New 
Starts to focus housing and jobs, 2) National Trade Corridors for 
global economic competitiveness and 3) TCSP to build strong communities 
around transportation.
    Let me turn now to a few other issues:
    1. Title 23, Section 104(f)--Metropolitan Planning Funds/Title 49, 
Section 5303--Transit Planning Funds: With the 2000 Census, there will 
be more MPOs created, potentially reducing the level of planning funds 
to existing MPOs.
    To avoid this reduction, Federal Highway Planning funds should be 
increased from a 1 percent take-down on categorical funds to a 2 
percent take-down. FTA Transit Planning funds should be increased from 
their FFY 2003 authorized level of $58.6 million consistent with the 
increase in MPO population.
    2. Title 23, Section 133(d)(3)--Surface Transportation Program 
funds to Transportation Management Areas: A portion of STP funds is 
suballocated to MPOs designated Transportation Management Areas in 
excess of 200,000 population. Again, with the 2000 Census, there will 
be more TMAs formed and an increase in population in the existing TMAs. 
To recognize this, the formula for splitting STP funds between these 
TMAs and the balance of the State should be revised accordingly.
    3. Clean Water Act--There has long been a connection between the 
Clean Air Act and transportation legislation. Planning and funding 
decisions between the two Federal acts are well integrated because 
vehicle emissions are a major contributor to air pollution problems.
    In the same manner, the road, street and highway system is a major 
contributor of polluted stormwater runoff. As such, there could be a 
tighter connection to the Clean Water Act to ensure transportation 
projects can employ more environmentally friendly stormwater handling 
methods.
    4. Endangered Species Act--State and local governments in the 
Northwest are working closely with the National Marine Fisheries 
Service to recover the salmon and steelhead listed as endangered. Past 
transportation projects have contributed to this listing by blocking 
access to important upstream habitat. There should be clear eligibility 
to use Federal transportation funds to retrofit previously installed 
culverts to restore access to this habitat.
                                 ______
                                 
   Responses of Andrew Cotugno to Additional Questions from Senator 
                                Jeffords
    Question 1. Do you feel that computer simulations, an example of 
which would be TRANSIMS, are (or could be) valuable in the planning 
process? Are, or could they be, effective in the examination of various 
planning options?
    Response. Computer simulation tools are a valuable asset to have in 
the planning process. Depending upon the degree of sophistication of 
these tools, transport and land use allocation models can be linked to 
provide a comprehensive analysis of regional growth strategies. 
Specifically, the allocation of population and employment is subject 
not only to the land availability, but also to the degree of 
accessibility provided by the transportation infrastructure. This 
capability is essential if the allocation is seen as a means to reduce 
travel demand and the corresponding expense to provide infrastructure.
    A well-specified simulation tool can aid the decisionmaker in 
quantifying the travel impacts from localized urban design 
alternatives. For example, the consequences of developing a high-
density mixed-use center around a light rail station can be quantified 
in terms of the effect on auto ownership, origin and destination 
patterns, and mode choice (including walk and bicycle) decisions.
    Multi-modal accessibility is a key consideration in the development 
of a balanced transport system. Options must be available to minimize 
the reliance on single occupant vehicles. Simulation models are used to 
analyze the effectiveness of proposed system improvements. For example, 
the tools can be used to quantify new transit riders, vehicle-miles-
traveled impacts, roadway delay, and air quality consequences for a 
particular project or system plan. The measured benefits can be 
compared to costs to provide assessment measures.
                                 ______
                                 
   Responses of Andrew Cotugno to Additional Questions Senator Smith
    Question 1. In the current marketplace, what are the Federal 
obstacles to transit-oriented development?
    Response. In the current marketplace there are actually very few 
Federal obstacles to transit-oriented development. In fact, Metro 
operates a transit-oriented development implementation program that has 
used Federal funds for TOD projects since 1998, the first of its kind 
in the United States. The Federal processes for TODs are not well known 
and are difficult, but Metro has several outstanding TODs completed. 
Other areas of the country have studied Metro's program and Maryland 
appears ready to launch a similar but more ambitious program. The Metro 
TOD Program was made possible through Section 5309 of TEA-21 (carried 
forward from Sec.3 (a)(1)(d) of the Transportation Act of 1978) and the 
Federal Transit Administration Joint Development policies issued March 
14, 1997. Three other key elements of the FTA policy that significantly 
facilitate TODs are use of a ``highest and best transit use'' appraisal 
for real estate sale, the ``Exception to the Common Grant Rule'' for 
return of the revenue to subsequent eligible transit expenses, and the 
use of a two step process to meet requirements of the National 
Environmental Protection Act (NEPA). It is important that favorable use 
of Section 5309 including acquisition of real estate for TOD purposes 
based upon the standard ``highest and best use'' appraisal with 
subsequent sale to a TOD developer based upon a ``highest and best 
transit use'' appraisal and the exception to the common grant rule be 
continued in new legislation. Metro's current TOD Program operates 
under a ``"programmatic environmental assessment'' that allows it to 
evaluate potential TOD opportunities within any station area of the 
light rail transit system. Once a project is selected, a detailed NEPA 
analysis is conducted through a ``documented categorical exclusion.'' 
This process allows the TOD Program to forge public private 
partnerships that can respect and function within the fast-paced 
environment of private sector real estate development, and this 
interpretation of NEPA must also be retained.
    The main obstacles to TODs within the private sector include 
developers and builders who are unfamiliar with the product type, 
banking practices that do not recognize TOD as a standard financial 
product, and suburban real estate economics that favor land consumptive 
sprawl patterns over high quality, more compact, walkable environments. 
Obstacles that may exist within the public sector include local zoning 
codes that do not allow mixed-use project and minimum parking ratios 
that preclude developing projects at higher transit-supportive 
densities.
    Despite these problems, facilitating TODs is good public policy. 
They reap a tenfold increase in transit use and nearly 2 1/2 times 
increase in biking and walking compared to standard suburban 
development.
    Improvements to FTA regulations could be made in the way TOD 
projects are analyzed. Current policy requires a ``greater economic 
benefit to transit,'' relying on capitalized value of added transit 
fare box revenue as the measure of Federal financial investment in a 
TOD project. This should be broadened so that a TOD project simply be 
more cost effective in time saved/transit ridership gained than the 
transit system it is enhancing.
                               __________
 Statement of Judith Espinosa on behalf of the Surface Transportation 
                             Policy Project
    Mr. Chairman, I am Judith Espinosa, Director of the Alliance for 
Transportation Research Institute at the University of New Mexico. I 
appear today on behalf of the Surface Transportation Policy Project 
(STPP) where I serve as a member of the Board of Directors. I would 
like to thank you, Mr. Chairman, and the members of this committee for 
inviting me to testify and for structuring your hearings so that you 
may hear from a diverse representation of views on reauthorization of 
TEA-21.
    The STPP coalition has taken an active role in the debate on 
Federal transportation policy since its inception in 1990, helping 
provide policy support for what became ISTEA and later TEA-21.
    As we begin the debate on the renewal of TEA-21, I wanted to 
describe briefly STPP's process for identifing specific recommendations 
to support further progress on a national transportation reform agenda. 
We have embarked on a broad national outreach effort, called the 
Alliance for a New Transportation Charter (ANTC), to support consensus 
proposals, based on input from hundreds of national, regional and local 
organizations as well as State and local elected leaders. To support 
this, our Charter focuses on seeking reforms in the following key 
areas: 1) enhancing health, safety and security; 2) conserving energy 
and enhancing the environment; 3) promoting social equity and livable 
communities; and 4) advancing economic prosperity. STPP's 
recommendations on reauthorization will reflect our Charter's focus 
areas and a broad perspective on improvements to current law as made by 
those groups and organizations that advocate the principles in the 
Charter. ISTEA/TEA-21
    I would like to offer a few observations to guide this panel's 
efforts as you prepare to renew TEA-21 next year. First, the STPP 
coalition strongly believes that the basic structure of the TEA-21 law 
is fundamentally sound and should be preserved. It is our belief that 
transportation policy in America has been fundamentally reshaped as a 
result of the 1991 ISTEA law. If there is a single shortcoming, it is 
that the law has not been fully implemented. As a result, we do not see 
the Federal, State and local partnership developed to the point where 
it is promoting the full intent of ISTEA and TEA-21. In short, despite 
much progress, we have failed to fully capitalize on the many 
opportunities this law has intended to make available to our States, 
regions and communities. We see renewal of TEA-21 as another step in 
the continuum of the transportation reform process that will span 
longer than simply the last decade.
    In December, STPP along with other key partners celebrated ``Ten 
Years of Progress'' at a special event where we had an opportunity to 
take stock of the many transportation changes that the ISTEA 
legislation fostered. In celebrating this record of progress, we were 
particularly pleased to recognize Senator Daniel Patrick Moynihan with 
a special award, named after the late Senator John H. Chafee. Senators 
Chafee and Moynihan were longstanding members of this panel whose 
efforts helped this panel, the Senate and the Congress move forward on 
a national transportation policy reform agenda.
    What particularly impresses me, a person who has worked extensively 
with local and regional transportation advocates, is the depth of the 
public's awareness about the role of transportation infrastructure 
investment and how they see its power to influence their lives, their 
neighborhoods, and their communities within the context of their 
broader regions and States. ISTEA and TEA-21 have stimulated the 
public's appetite for transportation improvements that offer more 
choice and balance in their transportation options and that add value 
to their lives and to their communities. At the same time, I would note 
that implementation of the law has been a struggle in many places and 
it is certain that the law has not been implemented equitably across 
States and within areas of individual States. We believe that U.S. DOT 
and its modal agencies can now provide renewed leadership to ensure the 
public they are engaged in the full implementation of this law. States, 
MPOs and local governments must likewise renew their stewardship to 
improvements in implementation.
A Decade of Milestones
    To frame some of my perspectives on the issues before the panel 
today--``Transportation Planning and Smart Growth''--I have highlighted 
some key policy developments of the last 10 years, suggesting areas for 
further review as this committee crafts legislation renewing TEA-21.
      ADA: ISTEA was crafted immediately following the 
enactment of the Americans with Disabilities Act. While we have not 
seen a level of progress in implementing this law relative to the 
transportation sector, we now know and have come to appreciate that 
efforts to address the mobility needs of persons with disabilities can 
simultaneously deliver broader societal benefits, be it increased 
emphasis on pedestrian safety benefiting children, seniors and the 
broader public or a stronger emphasis on bicycle/pedestrian 
infrastructure that anticipates the aging of our nation's population 
and the market push toward investment in existing places.
      Brownfields: When ISTEA was being developed, its authors 
recognized the potential of underdeveloped or underutilized lands in 
proximity to major highway, rail and port infrastructures and their 
desirability for reuse. No one could have anticipated the national 
debate that would follow on the reuse of vacant lands. This debate 
recently culminated in the enactment of Public Law 107-118. Mr. 
Chairman, Senator Chafee and others on this panel who played such an 
important role in moving this legislation forward after years of 
disagreement, we thank you. A broad national commitment to recycling 
America's land is an important policy thrust and we encourage you to 
look for additional ways in the TEA-21 renewal bill to prompt broader 
reuse--both planning and investment policies--of these many thousands 
of brownfields throughout the Nation. We see this focus on the 
reclamation of brownfields and others vacant lands as a significant new 
community development priority.
      Census: The 2000 Census challenges the upcoming debate on 
TEA-21 renewal in a number of ways. It underscores the need to 
accelerate our policy efforts to prepare for the aging of the nation's 
population. At a recent committee hearing, we learned that the 
demographics of Florida, which were once thought to be unique to that 
State, will be found in other States in the near future. We also see 
that, as the Nation is getting older, there is also a boomlet of the 
very young, giving rise to initiatives, like Safe Routes to School and 
others, which focus transportation dollars on facility improvements to 
offer more protection for our most vulnerable. The new Census also 
shows us the changing racial composition of our cities, suburbs and 
rural areas as a result of immigration and other trends of the last 
decade. This calls attention to the need to further strengthen our 
efforts on environmental justice and Title VI of the Civil Rights Act. 
Finally, we continue to see changes in the population and land areas of 
our nation's urbanized areas. A recent DOT notice shows that there will 
61 new MPOs, with many others whose boundaries are being redrawn and in 
other cases urbanized areas will be renamed. We see the new Census data 
as informing our policy reform discussions on TEA-21 renewal just as 
the 1990 Census helped support review of the Federal transportation law 
that became ISTEA in 1991. Specifically on the MPO issues, this new 
data should prompt us to review the range of issues surrounding the MPO 
structures of current law to modernize these agencies, reforms that 
were not pursued in TEA-21 or ISTEA. The 2000 Census, along with the 
many new challenges and expectations now before MPOs, necessitates a 
new look at how MPOs are funded, structured and supported.
      Clean Air: Like ADA, ISTEA followed the enactment of 
amendments to the Clean Air Act. At that time, the relationship between 
transportation sector investments and clean air objectives was not 
fully understood. Since that time, we have come to realize that 
attainment of clean air standards would prove more difficult than 
expected, even with the commitment of new resources under ISTEA and its 
Congestion Mitigation and Air Quality (CMAQ) program. We now understand 
that mobile sources would become more dominant, not less, as the key 
determinant for most regional efforts to achieve attainment with 
national standards. More recently, the Supreme Court's decision 
affirming EPA's stance on the need to move forward with new air 
standards further amplifies the need to preserve, and further expand 
our resource commitments here, be it an expanded CMAQ program or other 
means to further local efforts to achieve attainment of national air 
quality standards.
      Environmental Justice: Over the last 10 years, we have 
seen the emergence of a broad movement to examine the linkages between 
social justice and our public investment decisions. ISTEA with its 
emphasis on ``early and continuous'' public involvement, and its 
broader data collection and research efforts, opened up the public 
dialog on many social equity concerns which too often were overlooked 
or ill-informed in transportation decisionmaking. This is a significant 
area of public debate that continues to challenge our planning and 
other processes under TEA-21 to ensure that EJ concerns are addressed 
in a much more systematic manner. Research is needed, data systems must 
be updated and further capacity should be built at the State and MPO 
level if we are to effectively address the difficult challenges in this 
area. I am pleased to have been recently appointed by EPA Administrator 
Whitman to serve on the National Environmental Justice Advisory Council 
(NEJAC) to work with other interested parties to assist Federal 
agencies in efforts which relate to environmental justice. I would be 
pleased to provide any support to this committee's review of these 
issues that are very much a part of our national views on 
transportation equity.
      Metropolitan Economics: This committee previously has 
heard testimony from the mayors and others on the importance of the 
nation's metropolitan economies in driving the economic prosperity of 
this Nation. This is new data that wasn't available prior to ISTEA. We 
know that these areas account for a disproportionate share of U.S. 
economic output. These economic studies also project that the nation's 
300+ metropolitan areas, largely represented by MPOs under the TEA-21 
law, will warehouse virtually all of the key sectors--high technology 
and financial and business services--that will drive the nation's 
future economic output. As we look at the issues of planning and smart 
growth, improvements to TEA-21 are crucial in ensuring the broader 
health and vitality of these economic engines. Among the issues that we 
would ask the committee to examine is the relative funding commitment 
to these areas. For example, the current law provides certainty to only 
the largest MPOs, those serving areas of 200,000 or more in population 
and representing about 54 percent of the nation's population. And, they 
are only certain that about 6 cents of every dollar (i.e. STP 
suballocated funds) will be made available each year from TEA-21, a 
modest commitment to areas that collectively account for a substantial 
share of the nation's economic output, a large majority of all transit 
use, aviation passengers and port tonnage as well as critical elements 
of the nation's freight rail and passenger rail capacities. We suggest 
that increased local control over TEA-21 funds be seriously considered 
in the new law.
      Rural Economies: In contrast to metropolitan areas, we 
know that rural areas face a whole set of other challenges. In the last 
decade, we continue to see the erosion of rural economies despite many 
transportation infrastructure upgrades to State highway facilities. At 
the same time, these areas are impacted by the sustained urbanization 
of our metropolitan areas, which push outward and place enormous 
pressure on rural communities and land resources. More recently, we 
have seen new information that documents the significant safety needs 
of our rural road systems. We have looked at data that shows that there 
has been a sustained investment in rural areas within many States, 
investments that are generally disproportionate to the population of 
these areas. There is a need to rethink the investment patterns in our 
rural areas and look at alternatives, which will improve safety, 
promote sustained economic advancements, and give people choices for 
travel. Many State highway investments in these areas are pursued in 
the name of economic development or safety but many may simply be 
missing the mark.
    We have seen great success with a relatively small investment that 
has been made in the National Scenic Byways Program. Here is a program 
that creates a strong linkage among rural communities along a large 
corridor, creating an opportunity to leverage other public resources 
and capturing new private sector investment in areas that would 
otherwise have been overlooked. We have seen how modest commitments of 
Transportation Enhancement funds have stimulated tourism and other 
economic activity through improvements to main streets, trails, 
historic train stations and other projects. Many of these same projects 
could be funded with State STP funds but, instead, are usually 
committed to other investments in State highway facilities.
    There has been reluctance by many States to commit safety funds to 
areas where signage, markings and shoulders would make a difference at 
much less cost. In my State, our rural agencies, known as rural 
planning organizations or RPOs, have worked hard to plan and develop a 
transportation investment agenda for their areas utilizing a broad 
scope of public input. Their recommendations and plans are largely 
ignored by our State's transportation department or set aside as a low 
priority agenda. When these rural planning organizations are viewed as 
advisory only, true regional transportation planning becomes flawed. To 
have effective planning, there has to be a connection between resources 
and the local areas that are planning and seeking the improvements. In 
New Mexico, our RPOs plan projects but never will receive any resources 
to implement them.
    Failure to implement TEA-21 and use its flexibilities, we are 
talking about the many opportunities that are lost when State 
transportation officials ignore the potential of these more modest 
projects and the impetus they can provide in stimulating rural 
economies. Likewise, U.S. DOT must become more aggressive in addressing 
rural transportation planning needs. Despite directives in TEA-21 to 
address rural planning issues, U.S. DOT regulations have yet to be 
issued.
      Stewardship Movement: Increasingly, we see that ISTEA's 
reforms have played a significant role in helping revive an interest in 
stewardship of our systems, with the public and State and local elected 
leaders engaged in trying to look at transportation in a more 
comprehensive manner. At its core, ISTEA's transportation planning 
process was the first effort at ensuring that transportation 
investments are considered in a multi-disciplinary manner, considering 
impacts on air quality, communities, energy use, and so on. As we 
approach TEA-21 renewal, this engagement of the public and elected 
leaders envisions a broader stewardship agenda, be it habitat 
protection, biodiversity, air and water quality, or the preservation of 
cultural, historic and land resources. We see this move toward 
stewardship as a very positive development, but we must ensure that the 
resource commitments are there to move it forward. Our coalition is now 
reviewing how an environmental stewardship initiative could support 
this broader vision.
      Taxpayer Engagement: ISTEA was designed to encourage a 
broader public discourse on transportation investment. This week The 
Washington Post is calling for reader ideas on ``things that could be 
done quickly and cheaply to alleviate traffic congestion.'' We now see 
a level of engagement of the taxpayer in this debate which is 
unprecedented. Whether you accept the rubric of smart growth or smart 
planning, these issues resonate with taxpayers who are increasingly 
pressing public decisionmakers to get more return from their public 
investments, particularly return from existing investments. The public 
now understands that the outward development of their regions, and the 
road improvements that are needed to develop these outlying areas, are 
stressing public capital resources and diminishing what is available to 
places where most of them now live and work. In rural areas, there is a 
growing recognition that funds are generally available for major new 
State highway projects, but not for other transportation needs. The 
message from the public increasingly is that they want a better return 
on the use of their tax dollars, not just moving money out to 
undeveloped or underdeveloped areas. This is real and is growing 
broadly throughout the Nation. The public's renewed appreciation of 
these issues is challenging our planning processes which historically 
have not accounted for an engaged public, many of whom may not always 
participate in each step of the process but certainly are increasingly 
aware of and vocal about the outcomes.
      Transit Use: The growth in transit use, particularly in 
later part of the ISTEA decade, reversed a multi-decade decline in 
public transportation. In fact, over the last 5 years, transit use has 
grown at about twice the rate of auto use (as measured by VMT), with 
transit trips today reaching levels not achieved since 1960. In the 
wake of ISTEA and its emphasis on local decisionmaking, we have seen a 
dramatic increase in demand for transit investment, particularly rail 
transit, in the nation's larger urban areas. When local areas are 
empowered to shape future investment plans for their regions, it is 
clear that local areas are often making different decisions and ones 
that emphasize broader transportation choices for their regions. There 
has been a virtual explosion in demand for rail transit, for example, 
since MPOs were empowered to share future transportation decisions for 
their regions.
    It is interesting to note that of the top 50 metropolitan areas, 
which represent a substantial share of the nation's economy and 
population, 48 of these areas are planning new rail transit projects, 
expanding existing rail systems or constructing new rail systems. The 
emergence of rail transit and the broader push for increased transit 
investment overall is an important development as we look to renewal of 
TEA-21.
      Water Quality: During the last 10 years, we have a better 
understanding of the implications of the ``Water Quality Act of 1987'' 
and its emphasis to move beyond point sources to control of urban 
runoff through municipal and other stormwater discharges. Today, 
hundreds of communities hold permits, requiring water quality 
monitoring, best management practices and even structural improvements. 
We have assembled a substantial record that documents how highway 
runoff and other transportation-related uses are contributing to the 
degradation of our nation's water quality. When ISTEA was first 
enacted, stormwater regulatory efforts were in their infancy, which is 
certainly not the case today. We see this as a substantial new 
development that should be more fully considered as the TEA-21 renewal 
moves forward, both in the planning process and in the allocation of 
resources.
      Welfare Reform: The 1996 welfare reform legislation was 
particularly important in reminding transportation professionals and 
system operators that existing planning efforts did not fully account 
for the new demands of a large number of Americans who would be making 
the transition from welfare to work. In TEA-21, the Job Access and 
Reverse Commute (JARC) program followed immediately in the wake of the 
welfare reform legislation, helping transit and other providers fill 
the many gaps resulting from the spatial mismatch of workers and job 
centers. This program was also deployed to help workers in rural areas 
get to jobs in other parts of their region. This area will continue to 
challenge us to use JARC funds and find other resources under TEA-21 to 
further refine these strategies, be it adding routes where transit 
services are now offered, supporting new services in areas where 
services are unavailable, or incentives to plan and support the 
location of training and support services at key transit and 
transportation facilities. We see the renewal of the TANF law this year 
as one part of a broader effort to coordinate and establish new 
linkages between TEA-21 and TANF to further the transition of thousands 
of Americans from welfare to work.
      9/11: Finally, I would note that we closed out the ISTEA 
decade with the catastrophic events of September 11. We are still 
grappling with the implications of this attack and its subsequent 
threats, with most of the Federal policy efforts focused on redesigning 
our aviation and port security capabilities. We do know that the 
surface transportation systems of New York and Washington, DC were 
diversified to a level that allowed them to absorb these shocks without 
further disruption to these major regional economies and the broader 
U.S. economy. In fact, New York and Washington are the top two rail 
transit systems in the Nation and are also linked to the nation's only 
high-speed passenger rail corridor. We see the need to carefully 
consider how we can use available transportation resources to further 
diversify our transportation systems. With this disruption to the 
nation's aviation system and subsequent realignments in service, there 
is a compelling case to be made for moving swiftly on expanding the 
nation's intercity passenger rail capacities, providing more economic 
stability over the longer term and providing intercity rail options to 
communities, some of which have lost or have reduced air service.
Specific Recommendations on Planning and Smart Growth
    As I noted in the opening of my statement, STPP's coalition 
partners are now developing a detailed set of recommendations on TEA-21 
renewal that we will share these with the committee at a later date. I 
do, however, offer several suggestions on areas where STPP has 
previously recommended action or where our coalition has identified 
initial recommendations.
      Can't Plan Without Good Data--STPP urges immediate action 
on a broader investment plans that will immediately move toward a 
modernization of our data sets, an effort that is crucial to effective 
State, regional and local planning efforts. We must move to upgrade key 
transportation surveys and others data systems to correct for 
limitations (i.e. exclusions of population groups, failure to account 
for pedestrian trips, etc.) that undermine effective policy choices at 
the State and local levels. Investment in this area should be 
frontloaded in the new bill, even in advance of new funding for 
research commitments. Research funding could be ramped up in later 
years after key data sets are improved.
      Can't Plan or Invest Effectively Without Funding 
Transparency--One of the real deficiencies of TEA-21 is the lack of 
transparency about where funds are invested, by project, program and 
place within the States. It frustrates the public's confidence in the 
system, it diminishes the value of other public and private sector 
investments, and erodes the partnership that was envisioned under 
ISTEA. In an era of the Internet, GIS mapping and GPS locators, we 
currently have a system in place that can't readily account for the 
expenditure this year of about $32 billion of the public's money. This 
is extraordinary by any measure. Like modernizing the data sets, it is 
also crucial that we modernize the reporting systems on the use of TEA-
21 so that State and local funding decisions are fully accessible to 
all governmental partners and to the public.
      Can't Plan Without Certainty About the Budget--As noted 
earlier in my statement, the larger MPOs (i.e. those serving areas with 
a population of 200,000 or more) are the only substate agencies who 
have any certainty about annual funding, and it is only that portion of 
TEA-21 highway funds that are suballocated in the law, funding that 
nationwide represents about six cents of every dollar that is made 
available to the States. To put the Federal commitment to these areas 
in a local context, consider that local governments and their agencies 
are the largest single investors in transportation--air, transit and 
highways. The suballocated funds to the nation's largest MPOs, 
similarly, represent a small fraction of total local transportation 
spending. The level of commitment to these and other MPOs and rural 
areas is an area that should be examined more thoroughly in preparing 
legislation renewing TEA-21. If you want local elected officials, the 
private sector and the public more engaged in building a meaningful 
planning at the local level, there must be real resources on the table 
that are subject to the process. STPP believes that more resources 
should be moved from State decisionmakers to local areas, and we expect 
to provide further suggestions in this area when we submit our broader 
recommendations for TEA-21 renewal.
    Under current law, MPOs serving areas of 50,000--200,000 have no 
idea from year to year what funds will be made available to their 
areas, a circumstance that is generally shared with rural areas of the 
States. Among the immediate reforms that would increase certainty to 
selected local areas is change how funds are delivered through the 
Congestion Mitigation and Air Quality program. We would urge that CMAQ 
funding be proportionately obligated and then suballocated (based on 
the formula that delivers funds to the States in the first instance) to 
non-attainment and maintenance areas so they can more effectively 
budget funding for air quality projects.
    Among the existing budget tools in TEA-21, we strongly support the 
position of AMPO and others about the need to preserve the fiscal 
constraint provisions of current law. On a related issue, we were 
disappointed that there was no apparent commitment to implement current 
provisions on cooperative revenue forecasting which were intended to 
bring MPOs together with their State transportation departments and 
transit providers to develop shared estimates of future TEA-21 funding. 
This is about the enhancing the ability of the MPO to plan and budget 
beyond a 1-year horizon. By contrast, the funding guarantees of the 
TEA-21 delivered considerable funding certainty to the States, allowing 
State transportation departments to readily forecast their revenue flow 
over the 6-year period of the law.
      Can't Plan Without Capacity--We agree with suggestions 
that there should be a broader commitment to MPOs and capacity-
building. Given the many developments directly affecting regional and 
local agencies--air and water quality, broader environmental 
stewardship, integration of air, rail and highway networks, smart 
growth, welfare reform, urban congestion, etc.--it is clear that 
additional Federal commitments are needed to help MPOs absorb the 
growing demands on these agencies. However, we do suggest that as part 
of an expanded commitment to capacity-building at the MPO level, it be 
coupled with a more complete review of these structures to modernize 
their operations in light of the Census and other considerations.
    On a related issue, STPP will be recommending a new initiative to 
focus financial and other resources to help develop broader State and 
MPO capacity for environmental stewardship. We are concerned that the 
continuing calls for environmental streamlining have overshadowed the 
real and substantial needs that now exist for capacity-building within 
State transportation departments and MPOs to reasonably address the 
many environmental challenges before them. We believe that investing in 
stewardship is where we should be focusing our attention if we are 
serious about improving the pace and quality of environmental reviews. 
It is our hope that we could share these recommendations with you at 
your upcoming hearing on this subject.
      Can't Plan Without Good Research--I had the opportunity 
to serve on TRB's Committee for the Surface Transportation 
Environmental Cooperative Research Program Advisory Board that was 
charged with developing a long-term strategy for environmental 
research. This panel's findings were just released in Special Report 
268. I would like to excerpt from this report's recommendations about 
the state of our current research efforts. ``The effectiveness of 
current transportation planning and decisionmaking methods and tools is 
limited by the fact that they are based in engineering principles, 
facility standards, and an emphasis on mobility defined as travel time 
and cost . . . Too often, planners and other interested parties become 
frustrated with the inadequacy of these old methods and tools for 
dealing with current problems.'' STPP is now developing a set of 
recommendations on the research agenda to further inform the 
committee's specific consideration of funding commitments to a broader 
research agenda. This excerpt simply illustrates the importance of 
solid research in supporting the many State and local planning efforts 
in addressing the operations and management challenges before 
communities, regions and States. I would also note that this panel 
concluded that a long-term, coordinated research strategy with 
sufficient funding is the only way of adequately preparing 
transportation policymakers to confront the substantial challenges of 
an increasing population and expanding economy.
      Can't Plan Effectively Without Anticipating New 
Challenges--There remain a whole set of new challenges before MPOs and 
State transportation planning officials. We see a very strong push from 
the public and elected leaders to address lessons learned as a result 
of 9/11. We think that means taking a fresh look at the potential of 
intercity passenger rail and to consider how transportation investment 
plans at the State and regional levels can accelerate efforts to move 
toward more balanced and integrated surface transportation systems.
    Another example of a new challenge is the new research that 
documents the growing epidemic of obesity, particularly among America's 
youth, and other health concerns like rising rates of diabetes, which 
are particularly linked to lack of exercise and fitness. At the same 
time, we have developed a transportation infrastructure that too often 
frustrates pedestrian activities and even discourages unplanned 
pedestrian trips as we continue to design systems that focus on auto 
trips and auto dependency. This is an area where MPOs and State 
planning efforts need to lead by taking additional steps to help 
reengineer our transportation systems in ways that promote non-
motorized travel, principally pedestrian activities, that can provide 
new avenues to combat these negative health trends over the longer 
term. * Can't Plan Smarter without the Tools--How to plan smarter is an 
area where the STPP coalition is focusing considerable attention as 
move toward renewal of TEA-21. In my testimony, I have identified 
several issues that link directly to a broader emphasis on smart 
growth. The expansion of suballocated funding would give local 
decisionmakers more control over transportation funds, moving resources 
closer to the officials who are in the best position to align land use 
decisions with transportation investments. A stronger emphasis on 
modernizing the data, research and transparency features of the law 
will contribute substantially to local planning efforts as local 
officials work to calibrate their transportation decisions with local 
land use plans. I talked about the increased emphasis on brownfield/
vacant land reuse. I see this policy emphasis as a powerful ally in 
helping local areas grow smarter, by restoring sites where existing 
transportation and other infrastructures are already in place. Here is 
a case where more modest investments to improve existing facilities can 
directly benefit taxpayers, in contrast to greenfield development which 
relies on substantially more public investment to build-out new 
infrastructures. We particularly want to underscore our strong support 
for continuation of TEA-21's TCSP program. While we have been 
challenged by a rash of congressional earmarks, the original intent of 
the program is very sound and stimulated a broad range of initiatives 
in local areas all across the country that is making a real difference 
in these communities in connecting transportation to other community 
priorities.
    We know that there is a need to modernize the models that are used 
to support State and MPO planning efforts. A new idea is to look for 
ways to replace some of our modeling structures with visioning 
exercises that, through a broadly participatory process, allows 
communities to decide for themselves how they want to design their own 
communities and then how to construct transportation facilities that 
serve these goals. In Chicago, planners are already using a modified 
version of the SimCity computer game to look at development and 
transportation to simulate a different future. There are some modest 
investments that could be supported under TEA-21 that could facilitate 
such efforts.
    A broader agenda on smart growth will be among the areas that the 
STPP coalition members will be bringing back to the committee as you 
continue your deliberations on TEA-21 renewal.
Closing Comments
    Mr. Chairman, let me conclude by emphasizing that democracy means 
paying attention. ISTEA and TEA-21 provide the policy framework for 
developing transportation systems serve our nation's need for access 
and mobility, while also promoting community health, wealth and quality 
of life. But we must pay attention to the details, promoting the means 
that make our transportation agencies accountable, transparent and 
participatory.
    I thank you, Mr. Chairman, and member of the committee for this 
opportunity to share the views of STPP on these important issues.
                                 ______
                                 
   Responses of Judith Espinosa to Additional Questions from Senator 
                                Jeffords
    Question 1. Do you feel that computer simulations, an example of 
which would be TRANSIMS, are (or could be) valuable in the planning 
process? Are, or could they be, effective in the examination of various 
planning options?
    Response. The short answer to these questions is, ``yes''. These 
computer simulations are a valuable part of the planning process and 
will become even more so in the future. There are many efforts to 
deploy these technologies, ranging from the more complicated systems 
such as TRANSIMS to the use of visioning software techniques that can 
dramatically strengthen the public's understanding of various 
transportation and development scenarios.
    Let me explain further. As with all models and computer analysis 
tools, the data input and intended application are critical to the 
quality of the outcomes, as is the efficiency of the model itself. 
Therefore, if the data is not well developed or lacking in integrity, 
the outcome of the computer model is faulty and will not represent a 
true picture.
    TRANSIMS is an example of a new model for analyzing travel patterns 
in large urban settings. However, as with many other travel models 
developed over the last 50 years, it does not include variables that 
are critical to analyzing how we travel and how that travel impacts our 
land use patterns and social and environmental needs. While we do not 
expect TRANSIMS to be broadly deployed given its cost and complexity, 
its use will help further inform and instruct transportation 
policymakers as we continue to develop, and refine these and other 
predictive models.
    We would also note that some agencies have invested their efforts 
in fine-tuning traditional four-step models, showing some promising 
results, such as those in San Francisco County. But perhaps the most 
important application of modeling and simulations has been in the area 
of community design and decisionmaking. Such tools, which range from 
public involvement technologies (e.g. the Electronic Town Hall) to 
computer-based graphic simulation programs (e.g. Community Viz), can 
help facilitate the democratic process in community planning, enable 
people to visualize how proposed changes might affect their 
communities, and more accurately forecast fiscal, environmental, 
economic and social impacts. The predictive ability of this emerging 
set of technologies has enabled communities to develop better estimates 
for everything from traffic impacts to infrastructure costs. And, the 
ability to graphically depict potential changes makes it easier for the 
public to be engaged in making informed choices.
    Overall, we see great potential in these technologies and would 
encourage this committee to examine ways to support such efforts where 
relatively modest investments now can result in substantial returns in 
the future, as communities, regions and States seek to foster broader 
public input into better informed transportation planning efforts, 
helping the public more fully anticipate and understand the outcomes of 
the various options before them.
                                 ______
                                 
Responses of Judith Espinosa to Additional Questions from Senator Smith
    Question 1. Please explain how ``smart growth'' would address the 
increased traffic congestion from densification of urban and suburban 
areas.
    Response. The weight of academic research reveals that denser 
development actually reduces traffic because compactness results in 
greater travel choices, including walking, cycling and transit. One 
recent study by the U.S. EPA found that dense ``infill development'' 
sites were projected to generate 48 to 61 percent less traffic than 
comparable sprawling ``greenfield'' sites. (Allen, E., Anderson, G., 
and Schroeer, W., ``The Impacts of Infill vs. Greenfield Development: A 
Comparative Case Study Analysis,'' US EPA, Office of Policy, EPA 
Publication #231-R-99-005, September 2, 1999.) In another recent study 
of the benefits of location efficiency, a number of studies were 
reviewed, showing significant reductions in driving associated with 
higher residential density. In one of the studies of world's largest 
cities, it was noted that driving is reduced 30 percent every time 
density doubles. (John Holtzclaw, Robert Clear, Hank Dittmar, David 
Goldstein, and Peter Haas, ``Location Efficiency: Neighborhood and 
Socio-Economic Characteristics Determine Auto Ownership and Use--
Studies in Chicago, Los Angeles and San Francisco,'' Journal of 
Transportation Planning and Technology, Volume 25, 2002.)
    While less of an academic review, but nonetheless part of the 
committee's record, is testimony by The U.S. Conference of Mayors on 
brownfields and related policy reforms. The statement of Elizabeth 
Mayor, J. Christian Bollwage, for the committee's February 27, 2001 
hearing on S. 350, reviewed findings of the Conference's survey on 
brownfields. He states,''One of the very interesting findings came from 
survey respondents who were asked to quantify how many people their 
communities could absorb without adding appreciably to their existing 
infrastructure. 118 cities estimated they could support an additional 
5.8 million people, a capacity that is nearly equivalent to the 
population of Los Angeles and Chicago. This capacity is more than 2 
years of U.S. population growth.'' In this survey, a relatively small 
number of U.S. cities reported on their capacity to absorb additional 
population, with these cities indicating that their infrastructures 
could meet traffic and other effects of increased density. Among the 
cities in the sample were those where substantial population losses had 
occurred over the last several decades, and which have latent 
transportation and other capacities in place to handle much larger 
populations. It follows that increased traffic, and potentially even 
increased congestion associated with densification, is more about 
tapping the considerable capacity and infrastructure that now exists in 
the cities described by Mayor Bollwage and which are capable of 
handling larger populations.

    Question 2. A recent report by the Transportation Research Board on 
long-term research needs states, ``Research on transportation and the 
environment has only recently begun to explore in any significant depth 
the complex relationships among land development patterns, 
transportation investments, travel behavior and consequent 
environmental impacts.'' Please comment on the practicalities of 
implementing a ``"smart growth"'' program given our limited 
understanding of these relationships.
    Response. I am a member of the Transportation Research Board's, 
Committee for the Surface Transportation Environmental Cooperative 
Research Program Advisory Board, which wrote the report that is quoted. 
That statement is certainly factual, but the Report further goes on to 
detail and cite research currently proceeding that explores and begins 
to explain these very relationships and issues of ``"smart growth''.'' 
The Report from the TRB Advisory Committee further calls for a strong 
national research program that will support increased funding to public 
agencies, academic institutions, NGO's and others to bolster our 
knowledge and science of ``smart growth,'' and the relationships 
between land use, transportation, travel, environment, and other social 
needs.
    Many States and local governments have already instituted ``smart 
growth'' initiatives, plans and legislation to address how their 
communities grow in the 21st century. The State of Oregon, a 
representative from which was on the Transportation Planning and 
``smart growth'' Panel, has certainly been a leader. But there are 
other examples of broad-based initiatives and many other targeted 
efforts among States and local governments. The many programs in States 
and in hundreds of communities to recycle brownfield sites are one 
example of a targeted effort, which at its core is about ``smart 
growth.'' Growing interest in brownfields comes from environmental 
justice representatives in communities, such as, Atlanta, Chicago, 
Austin and the San Francisco Bay Area. They continue to note that 
``smart growth'' programs coupled with brownfields development and 
transportation access is key to community revitalization and job 
opportunities.
    The public debate within urban centers, rural areas of the Nation, 
communities of color, suburban commuters, and business and industry has 
begun to inform policymakers. It is about how we, as a people, expect 
to grow and prosper through environmentally sound transportation 
choices and land use and planning initiatives that promote our quality 
of life. The TRB Advisory Board Report takes note of how transportation 
and environment initiatives are linked, and further expands by 
illustrating where we currently have gaps in knowledge, data 
collection, and planning tools to address our national ``smart growth'' 
needs in an environmentally sound, efficient and socially responsible 
fashion. I believe, along with local and State agencies and communities 
across this Nation, that a strong Federal role is needed in support of 
current ``smart growth'' initiatives and expansion of the research 
base. A well reasoned Federal approach to and support for a ``smart 
growth'' agenda will lead to better program planning and implementation 
and is a must if we are to compete in a technologically advanced global 
economy.
                               __________
   Statement of Thomas M. Downs, Professor, University of Maryland, 
  Director, National Center for Smart Growth, Research, Education and 
                                Training
    Mr. Chairman and Members of the Environmental and Public Works 
Committee: It is a pleasure to appear before you this morning to 
address the role of the planning process and its linkages to 
transportation planning, land use planning, economic development and 
growth management.
    I will lean heavily on the recent work of Dr. Susan Handy, a 
professor at the University of Texas, who is both an engineer and a 
planner.
    Dr. Handy did a comprehensive review of all of the literature that 
has focused on the transportation and land use connections.
    It turns out that there are few major studies at the national level 
that have looked at the connections between transportation and land use 
patterns. While we as a nation have spent hundreds of millions of 
dollars on developing better pot-hole material, better cement, and 
better bridge steel; we have spent almost nothing on the most important 
aspect of transportation--how it has changed the way we live and work.
    Dr. Handy found that in a study in 1999 by Hartgen and Curly that 
regions without beltways grew faster and that population densities 
declined faster in regions with beltways. She also learned that a 1980 
study by Payne and Maxie found beltways had no impact, positive or 
negative, on economic growth. This study also found that office and 
apartment development locates near a beltway, but at the expense of 
other parts of the region.
    After Dr. Handy looked at beltways, she then examined the research 
on the effects of highway corridors. She found that a 1998 study by 
Hansen concluded that highway capacity expansion stimulates development 
activity, both residential and non-residential, in the expanded 
corridor. A 2002 study by Ten Siethol and Kockelman demonstrated 
dramatic increases in property valuations most proximate to the freeway 
corridor. A large review study by Boarnet and Houghwout in 2000 
suggests that highways influence land prices, population, and 
employment changes near the project, and that the land use effects are 
likely at the expense of losses elsewhere. Dr. Handy's conclusions from 
these studies is ``Building new highways will not increase the rate of 
growth, but will influence where in a region growth occurs and what 
kind of growth occurs. Not building highways will not necessarily 
prevent continued decentralization.'' The research seems to suggest 
that highway capacity expansion serves to move the economic chairs 
around a region, but does not create a new net growth in a regions 
economy.
    Dr. Handy then looked at the issue of increasing highway capacity 
and induced demand (or build it and they will come). She found that 
there does seem to be some correlation between capacity expansion and 
vehicle miles of travel (VMT), but that the elasticities are lower than 
suggested by popular literature. She concludes that simply not building 
new highways will not significantly slow the growth in VMT.
    The conclusions about highways impact on land use only serves to 
show us how little we know about the real outcomes of these large scale 
national investments. We, in part, do not know because we are not 
funding the research that would give us better answers.
    On the transit side, Dr. Handy looked at the research on the 
effects of light rail transit (LRT) investments on land use and 
development. She found a TCRP report in 1995 that shows that transit 
investments and services are incapable by themselves of bringing about 
significant and lasting land use and urban form changes. A 1996 study 
by Vesalli showed that transit system's impacts on land use are limited 
to rapidly growing regions with a healthy underlying demand for high--
density development.
    The research on transit impacts shows us what we all intuitively 
know, that outcomes really depend on the local governments land use 
decisions and on the health of the regional economy. The research 
suggests that the real accountability for outcomes in transit 
development rests squarely on local land use decisionmakers. A close 
look at the Washington region's success or failure in capturing the 
enormous Federal investment in METRO proves this point.
    Lastly, Dr. Handy looks at assumptions that changing development 
patterns will effect travel behavior and she comes to the conclusion 
that ``land use and design strategies may reduce automobile use a small 
amount'', Kitamura, et al. 1997.
    The conclusions of her review of research findings over the last 15 
years is:

    1. New highway capacity will influence where new growth goes, but 
not the overall growth within a region.
    2. New highway capacity probably increases travel a little.
    3. LRT can encourage density with the right help.
    4. New Urbanist design strategies make it easier for those who want 
to drive less to do so.

    Dr. Handy then asks why the data does not yield more, and answers 
that the interactions between transportation investments, land use 
patterns and travel patterns are much more complicated than we have 
assumed. We are not collecting data on those complex interactions in 
part because we have traditionally looked only at the movement of 
people and goods as the outcomes of transportation investments.
    Dr. Handy suggests that we must be able to use increasingly 
sophisticated statistical techniques to handle the complex web of 
connections and the limitations of the data. She strongly suggests that 
we invest in better and more sophisticated data collection and that the 
focus after that should be on the translation of empirical results into 
planning and forecasting tools.
    While Dr. Handy's work looks at the actual outcomes of investments 
in highways and transit within a region, there are several areas that 
are not reviewed , because the issues are mostly ignored.
    The first area that has almost no data available is the 
relationship of regional health to transportation investment. If 
childhood asthma is increasing at catastrophic rates, is it related to 
air quality, VMT, or land use patterns; and if so, how? If the Nation 
is now in a spiral of obesity, is there a relationship to the type and 
quality of transportation investments in a region?
    Recent research also suggests that auto mobility comes at a very 
high price for the poor, exceeding expenditures on health, education, 
and food. Do we know if these impacts on the poorest 25 percent of 
families varies by region, and do we know what strategies work to 
relieve the strain of that cost burden?
    We can now ask even more ambitious questions. How do these health 
costs and family transportation costs effect the economic health of a 
region? We do not now know the answer, but it is clear we now have the 
tools to begin to understand those relationships, we just have to make 
the effort.
    We have not, as a Nation, looked at the results of our investments. 
The creation of the Bureau of Transportation Statistics was supposed to 
help with research on data quality and integrity, as well as how to use 
the data in complex regional models. It is unclear how BTS lost its 
way, but it has, until recently, been either a hobby shop where 
research focused on what was of interest to the researcher; or it 
became a job shop for the Office of the Secretary, doing small scale 
projects. BTS is also limited by the fact that it receives most of its 
funding from FHWA.
    Several suggestions to strengthen our understanding of the complex 
relations between transportation, land use, and behavior:

    1. Take mandatory set asides out of Transit, Highway, and Aviation 
to fund an independent BTS.
    2. Require BTS to not only report annually to the Congress on its 
funding agenda, but also its findings, with recommendations on the 
relationship of those findings to the regional planning and forecasting 
process.
    3. Given the real and understandable Federal reluctance to engage 
in any local land use decisions, the next step in the accountability 
chain would be to take the introductory purpose statements of TEA-21 
and place those objectives in the planning language section of the new 
bill. It would then provide a framework for developing accountability 
for outcomes at the regional level. Because there are no expectations 
of outcome, beyond clean air, there is little we can do as a country to 
measure the results of our investments.
    4. If there is going to be a research chapter in this 
reauthorization, do not let it be totally dominated by one mode or one 
profession. If we could establish, through research, better data, 
better models, and better frameworks for decisionmaking, we could 
become more accountable for the results of our transportation 
expenditures as a Nation.
    5. Incorporate requirements into the planning process to address 
issues of health, pedestrian trips, and land use impacts. It is 
important to have the planning process address these areas, not to make 
judgments about the outcomes, but to make sure they are part of the 
factors considered in planning.

    While this may seem a long digression there are several key points 
to be made in summary:

    1. There is little real relationship between the transportation 
planning processes and its impact on land use and travel.
    2. The planning process is primarily a way to move a capital 
program into the pipeline, and not a series of complex competing goals 
needing resolution.
    3. Unless we begin to measure and compare actual outcomes of our 
investments, we will be exactly in this same spot for the next 
reauthorization.
    4. Unless there are outcome requirements for the MPO planning 
process and some direct, non-modal funds to meet those requirements, 
MPO planning will not change.
    5. We need to actually look at what we want as outcomes of our 
national investments in transportation. It looks increasingly like it 
should mean making it easier for Americans to make a wide variety of 
choices in transportation.
                               __________
  Statement of Joy Wilson, President and CEO, National Stone, Sand & 
                           Gravel Association
    Good morning. I am Joy Wilson, president and chief executive 
officer of the National Stone, Sand and Gravel Association-NSSGA-
located in Arlington, Virginia.
    NSSGA represents the nation's aggregate industries-producers of 
crushed stone, sand and gravel, as well as suppliers of equipment and 
services to aggregate producers. Our 850 member companies turn out 90 
percent of the crushed stone and 70 percent of the sand and gravel 
consumed annually in the United States. Nearly three billion tons of 
aggregate valued at approximately $14.5 billion were produced in this 
country in 2001, according to the U.S. Geological Survey (USGS). The 
aggregate industry workforce is made up of about 120,000 men and women 
across America.
    Just to provide some perspective, there are 10,000 construction 
aggregate operations nationwide. Virtually every congressional district 
is home to a crushed stone, sand or gravel operation. Proximity to 
market is critical due to high transportation costs, so 70 percent of 
our nation's counties include an aggregate operation.
    Construction aggregates are used primarily in asphalt and concrete. 
Ninety-four percent of asphalt pavement is aggregate; 80 percent of 
concrete is aggregate, whether used in pavement, buildings, dams, 
sewage treatment plants and the like. About 10 tons of aggregate per 
person are used annually in America. Every lane-mile of interstate 
consumes 38,000 tons of aggregate; about 400 tons of aggregate are used 
in construction of the average home.
    While I appear this morning representing the aggregates industry, I 
also appear as a representative of the Partnership for Quality Growth 
that includes 13 labor and industry organizations that share a common 
interest and concern for the future of our country's transportation 
systems and infrastructure and how they relate to our national quality 
of life.
    I know this is something we share with the members of the 
Environment and Public Works Committee, so we particularly appreciate 
Chairman Jefford's and Senator Smith's initiative in holding this 
hearing to examine the issues surrounding ``Transportation Planning and 
Smart Growth.''
Our industry-labor coalition has a significant interest in ``smart 
        growth''
    Among other things, this diverse group adheres to the basic concept 
that Americans should continue to be allowed the freedom to live and 
travel where and when they please.
    We also recognize that, as our population continues to grow, all 
planning-Federal or local-must accommodate that continued growth, plus 
the collateral increase in the transport of freight that will be needed 
to support that population.
    We hope to insure that Federal policies respect as much planning 
power as possible in local communities to meet growth needs-especially 
with regard to transportation and other infrastructure improvements. 
Use of Federal transportation law to drive local planning decisions 
should be approached with extreme caution, lest local and State land 
use decisions become usurped by Federal determinations.
    It is essential that local planners have the ability and 
flexibility to formulate their plans with a sound basis of knowledge 
about where and what the aggregate resources around them are. While 
those resources are plentiful across the United States, they vary in 
quantity and quality from location to location. It's important for 
planners to know if their local resources are suitable for multiple 
uses, including construction, erosion control, water quality protection 
and the like. And they must know how long their supply of the resource 
will be available.
    Geological mapping is a key tool for planners in pinpointing 
resources. The placement of a school, a shopping mall or a hospital, 
for example, atop a rich aggregate deposit would indefinitely eliminate 
that deposit's beneficial use by the community.
    That is another reason why our industry is attuned to discussions 
about land use planning and concerned about the potential impacts of 
the ``smart growth'' movement on Americans' mobility, our industry, on 
transportation planning and construction and on the reauthorization of 
TEA-21.
    I will begin by discussing these points and then I will offer some 
observations on how we have an opportunity in the reauthorization 
process to promote ``quality growth.''
    Let me define some terms.
    ``Quality growth,'' as defined by the Quality Growth Coalition, is 
planned growth that respects the fundamental freedom of Americans to 
choose where they live, their choice of housing and how they travel.
    It promotes quality urban development and growth management by 
improving the entire transportation network-including additional road 
capacity, better management of traffic flow and more efficient public 
transit.
    Defining ``smart growth'' is more challenging.
    Generically, ``smart growth'' principles are motherhood and apple 
pie: preserving green spaces, easing traffic congestion, restoring 
sense of community, promoting regional growth strategies and nurturing 
a high quality of life.
    Leaders in the major political parties and at all levels of 
government have embraced these basic principles.
    However, others interpret ``smart growth'' to mean no expansion of 
suburban development; the imposition of urban growth boundaries; 
increased housing density; getting people away from individual car use; 
reduced emphasis on road improvement-especially road capacity-and 
disproportionate investment in rail and mass transit.
    Others see a strong Federal land-use planning role to combat what 
some call unorganized spreading out, or ``sprawl,'' prodding Americans 
to infill within urban areas.
    We do not believe that the vast majority of Americans want 
restrictions on their freedom of mobility. And air pollution from 
mobile sources has declined so much that today, while still a concern, 
it's not even the primary source of air pollution in most areas of the 
United States.
    Over the past 30 years we've seen more than more than a 30 percent 
increase in population, the number of licensed drivers increase by 64 
percent, a 125 percent increase in vehicle miles traveled and 87 
percent increase in licensed vehicles, according to the U.S. Department 
of Transportation.
    Air pollution reductions from mobile sources have been dramatic. 
According to a January 2002 U.S. Department of Transportation report,
      Carbon monoxide is down 43 percent over this same 30-year 
period; volatile organic compounds are down 59 percent;
      Particulate matter is down 42 percent;
      NOx is holding nearly steady and
      Lead has been virtually eliminated from our air.
    There are many interpretations of ``smart growth,'' but we and our 
industry colleagues believe the focus should be on ``quality growth.''
    After all, as one of the greatest friends of the environment this 
country has ever known-President Theodore Roosevelt-once said: 
``Conservation means development as much as it does protection.''
    We have facts and studies, and we must put the debate more fully in 
the sunshine-with decisionmakers at all levels of government.
    We found that with two statewide ballot initiatives in Arizona and 
Colorado in 2000 that the citizens-once apprised of the true impacts of 
the ``smart growth'' initiatives-did not agree at all with such extreme 
measures that took away personal freedoms, property rights and ability 
to plan for future growth.
    Both these ballot initiatives were defeated by majorities of more 
than 70 percent with the support of coalitions of business, labor and 
government.
    Let's look in our own backyard. Many of you are familiar with the 
1960's National Capitol Transportation Plan for the Washington area 
that called for 14 new roads, mass transit and high-occupancy vehicle 
lanes.
    Well, we got Metro and the HOV lanes-but only one of the 14 roads. 
And look at our congestion now-second worst in the entire nation. Road 
capacity did not increase in parallel to population increases and the 
desire of people to make multiple stops on the way to and from work and 
throughout the day.
    So, one impact of ``smart growth'' on transportation planning is 
the misunderstanding, or even misinterpretation of how much congestion 
relief mass transit can assume.
    In fact, a growing body of evidence suggests that Americans will 
choose to drive and that government policies will not change their 
behavior.
    In his book, Commuting in America, noted transportation expert Alan 
Pisarski observes that, over the past three decades and despite 
billions of dollars invested in alternatives to driving, every means of 
commuting, except lone drivers who can't use HOV lanes, has lost market 
share from 1980 levels.
    Year 2000 census data released this past August showed the trend 
continuing and confirmed Pisarski's findings.
    We are concerned about claims in the name of ``smart growth,'' that 
putting what's tantamount to a moat around a city-an urban boundary-
will maximize the use of our resources and prevent open spaces from 
being developed.
    Matthew Kahn of Tufts University and others at the University of 
Illinois and the University of Southern California who've studied the 
phenomenon find growth in suburbs to be a pattern resulting essentially 
from increased prosperity.
    Rocky Moretti of The Road Information Program recently unearthed a 
fascinating nugget of research that tells us much about human behavior.
    What he found is that the human race has been ``sprawling'' for 
some time.
    He located a city in Central America with an urban corridor 
connected to suburbs by series of roads. Research showed that, as the 
core of the city expanded and filled with commercial and other 
activity, inner city residents moved to the suburbs. The town is called 
Caracol and the movement to the suburbs predated the automobile by 1200 
years. This suggests a strong human propensity to seek space when 
possible.
    We agree with Alan Pisarski's recommendation that transportation 
policies should facilitate Americans' lifestyle choices, not thwart 
them.
    Another factor where ``smart growth'' interacts with transportation 
planning is in the myth that proponents of better roads want to pave 
America over-and that if you build, widen or improve a road, more cars 
will be attracted to it as if it were a magnet. The data and surveys 
contradict this hyperbole.
    We do not have a shortage of land, a shortage of farmland or a 
shortage of forests. What we have is a desire by most people to live in 
certain core areas, and those areas, not surprisingly, are densely 
populated-generally characterized by urban centers and suburban growth.
    As the National Center for Policy Analysis in Dallas reports:

      Less than 5 percent of the nation's land is developed and 
three-quarters of the population lives on 3.5 percent of the land.
      Only about one-quarter of the farmland lost since 1945 is 
attributable to urbanization.
      Predictions of future farmland loss based on past trends 
are misleading because farmland loss has been moderating since the 
1960's, falling from a 6.2 percent decline in farmland per decade in 
the 1960's to a 2.7 percent decline in the 1990's. Other factors, such 
as crop yield and market conditions, have had a greater impact.

    And freedom of choice is the fundamental issue here. The freedom to 
choose where to live and how to travel to work, to recreation and to 
two working parents' unending errands.
    Americans continue to choose to buy and drive cars, SUV's and 
trucks.
    They choose lifestyles-including ordering goods by e-commerce-that 
put ever more trucks on the road to deliver consumer products to their 
stores and homes.
    Their lifestyle choices have relegated commuting to a scant 20 
percent-one-fifth-of all trips. America's highway travel is growing and 
will continue to grow in the future.
    So, Americans are choosing to drive, but they're also choosing the 
suburbs over the cities.
    Some indict government-sponsored infrastructure investments-like 
sewer and water lines and highways-for suburban migration. The logic 
goes, ``stop the infrastructure investments, stop the sprawl.'' But is 
that true? Studies have shown that Americans move from cities to 
suburbs because of prosperity. As we become more successful and 
prosperous, we want a better quality of life-and many find it by moving 
out of cities.
    Public opinion polls further buttress these conclusions. When 
asked, Americans list quality public schools, affordable housing, good 
jobs and low traffic congestion as their top priorities in choosing 
where to live. Secondary priorities are open space and low-density.
    And the principal factors used in deciding where to live aren't 
compatible with high-density living and limited highway capacity.
    In a nationwide survey by National Association of Homebuilders in 
the late 1990's, 83 percent of respondents said they would prefer a 
detached, single family home in the suburbs over an equally priced 
urban townhouse near transit, even though the suburban home would 
entail longer distances to work and shopping.
    Today, more than half of Americans live in suburbs. Forty percent 
of our jobs are located there, and more jobs are being created in 
suburban communities than anywhere else.
    When the public's clear choice to drive and to live in the suburbs 
is suppressed, or if policy decisions try to change behavior by 
reducing or stopping highway investments, decisionmakers will allow 
traffic congestion to worsen.
    With nearly all Americans choosing to drive, public policies that 
ignore that vast majority will fail.
    In contrast, relieving traffic congestion will reap very real 
benefits to our communities and our quality of life.
    Two years ago, NSSGA supported American Highway Users Alliance's 
definitive study on the benefits of congestion mitigation.
    The study found that improving America's 167 worst traffic 
bottlenecks would produce dramatic safety, environmental, fuel economy 
and time-saving improvements over the next 20 years:
    First, safety: * 290,000 fewer crashes, 141,000 fewer injuries, 
1,100 fewer fatalities;
    Second, environmental improvement:

      45 percent reduction in carbon monoxide,
      44 percent reduction in smog-causing volatile organic 
compounds,
      71 percent less CO2, and

    Finally, economic productivity:

      A reduction of 19 minutes for each vehicle driving 
through the bottlenecks.
    Road investments enhance our freedom of mobility and democratized 
mobility for all Americans. With more than 90 percent of American 
households having access to automobiles, mobility reaches through all 
classes and incomes.
    Road investments have made it possible for lower income workers to 
live in areas they can afford yet commute to higher paying jobs in 
areas where they cannot afford to live.
    Road investments have increased the opportunity for more Americans 
to buy their dream homes and boosted leisure time.
    Road investments create jobs. The U.S. Department of Transportation 
estimates that 42,100 total full-time jobs are created with every $1 
billion that is invested in Federal-aid highways: 27,600 in highway 
construction and related industries and 14,500 that are induced in 
other industries as the 27,600 spend the wages they've earned. Highway 
dollars create construction jobs, which create supplier jobs, which 
create jobs for businesses that provide the goods and services they 
want.
    Last but not least, road improvements reduce commute times. In its 
2001 Urban Mobility Report, the Texas Transportation Institute (TTI) 
concluded that traffic congestion in 68 major cities wastes 4.5 billion 
commuter hours annually costing $78 billion in lost time and 
productivity.
    The last time a rush hour was really an hour was in the late 
l960's. The rush hour grew into the ``rush period'' of 3 hours daily by 
1982. And in 1999, the rush period was almost 6 hours (about 3 hours 
each way).
    The TTI study also showed about 6.8 billion gallons of excess fuel 
is consumed annually in what they call a ``congestion tax.''
    And pollution is reduced when you can reduce emissions from idling 
traffic to smooth-flowing traffic.
    This leads me to my final point: how the reauthorization of TEA-21 
can promote quality growth.
    We are faced with challenge after challenge in our nation's courts 
to highway projects authorized by TEA-21 and approved through the 
local, State and Federal environmental permitting processes and are 
needed by commuters.
    The challenges have come in the guise of protecting air quality 
under the Clean Air Act. But, occasionally, you find an admission by 
opponents that they just don't want these projects built in Atlanta, 
Sacramento, Baltimore, Salt Lake City or in other key urban areas 
because they fear the projects will enable growth.
    The reauthorized highway bill must anticipate harassment litigation 
on projects prioritized by the States and approved by the Federal 
Government. These are projects that have passed through all the 
environmental hoops and local planning processes.
    They're projects that communities want for capacity, for gridlock 
reduction, for relieving traffic congestion and for improving air 
quality and the quality of their lives. They're projects that can 
reduce the loss of life, time, money and fuel.
    The Partnership for Quality Growth firmly believes that such anti-
road litigation is one facet of ``smart growth'' that isn't and doesn't 
contribute to ``quality.''
    We want to be positive about the contribution of sound planning to 
our quality of life. Some opponents would paint us as ``anti-
planning.'' But that's not true; let's look at planning recommendations 
our industries propose for local consideration at the community level:

      Well-designed suburban communities
      Flexible planning and zoning regulations
      Protection of key open space
      Comprehensive transportation systems with adequate road 
capacity
      Improved road design, and
      Preservation and redevelopment of previously occupied 
sites.

    Over the past 30 years, our roads have increased capacity only by 6 
percent when our population has grown by more than 30 percent.
    And, our population is expected to grow by 100 million people by 
the year 2050.
    TEA-21-the largest infrastructure bill ever passed by any Congress-
is going to make a dent in that, but the need is so immense that the 
challenge for the next transportation bill is even more formidable.
    Quality growth principles can help frame the debate during 
reauthorization. These principles are:

      Acknowledging our freedom to choose how to live and 
travel,
      Acknowledging that growth is good if managed properly,
      Sharing the benefits of improved mobility as broadly as 
possible-mobility is a major factor in the quality of our democracy,
      Advocating that decisions should be made locally and 
involve local citizens, and
      Believing that our policies should facilitate American 
culture and choices, not thwart them.

    Investment and use of mass transit and public transportation--
whether buses or rail--are necessary and important tools in our battle 
to solve congestion. But these tools need to be in some proportion to 
Americans' interest in using them, and should not be used as weapons 
against roads and vehicle use. HOV lanes, Heavy Vehicle or Dedicated 
Truck Lanes, and other gridlock-busting alternatives also must be 
examined to lift our nation out of congestion.
    TEA-21 is being impacted by ``no growth'' litigation over highway 
projects, projects already approved through the local, State and 
Federal transportation, community and environmental processes.
    The successor legislation must make and embody a critical 
philosophical choice-are we as a nation trying to dictate cultural 
change in America, or are we trying to serve and facilitate the freedom 
of movement that has characterized this nation from its beginning?
    In embracing the beneficial planning goals of quality growth, the 
new legislation should support the local, State and Federal 
decisionmaking processes that, once completed, should not be subject to 
delay by interminable court battles due to legal loopholes.
    Our industries are committed to ensuring that America continues to 
grow and that it will be quality growth.
    Mr. Chairman, I respectfully wish to submit for the hearing record 
a copy of the Quality Growth Coalition's publication, Building Better 
Communities: A Toolkit for Quality Growth, which expands on some of the 
points I touched on today.
    Thank you for your consideration.
                               __________
 Statement of Richard Stolz, Deputy Director of Public Policy, Center 
                          for Community Change
    On behalf of the Center for Community Change and the Transportation 
Equity Network, I am pleased to submit testimony to the Senate 
Environment and Public Works Committee on the topic of Smart Growth and 
Transportation Planning. I commend the chairman and the committee on 
its decision to hold a hearing on this important topic.
    The Center for Community Change is a 30-year old national non-
profit organization deeply rooted in low-income and minority 
communities in both urban and rural areas. Our mission is to help 
grassroots organizations build and improve their capacity to effect the 
policies that impact the day-to-day lives of their membership.
    The Transportation Equity Network (TEN) is a national coalition of 
grassroots organizations based in low-income and minority communities 
organizing to reform transportation policies at the local, regional, 
statewide and national level. TEN's membership includes faith-based 
networks of congregations, community organizing projects, community 
development corporations, social service organizations, civil rights 
groups, organizations of transit riders and other low-income people, 
and progressive transportation agencies. TEN groups are active in more 
than 30 States and TEN includes dozens of organizational members and 
affiliates.
    In 1997--1998, the Center and TEN worked closely with Members of 
Congress and a coalition of allies in Washington, DC to include several 
provisions related cto transportation planning in the Transportation 
Equity Act for the 21st Century (TEA-21):

      A requirement that Metropolitan Planning Organizations 
(MPO) provide to the public an annual list of projects for which 
Federal funds have been obligated.
      A public involvement requirement in the statute in the 
MPO certification process.
      A provision that ensures that transit users are consulted 
in the statewide and metropolitan transportation planning process.
      The newly created Job Access and Reverse Commute 
competitive grant program.

    As Congress renews TEA-21, the Center and TEN urge Congress to pay 
particular attention to the impact of transportation planning and 
investment on low-income and minority communities, and to establish 
strategies for using surface transportation legislation to support the 
revitalization of rural and urban communities and regional economies. 
The Center also reminds Congress that more work is needed to ensure 
that the nation's transportation planning system is fully accountable 
and transparent to taxpayers.
Sprawl is neither Class nor Race Neutral, and the same can be said for 
        Smart Growth
    From the perspective of low-income and minority communities, 
particularly in metropolitan urban areas, sprawl has a particularly 
pernicious and deleterious impact. A growing body of research, and an 
emerging consensus among researchers and advocates, asserts that in 
metropolitan areas, the relationship between the concentrated poverty 
of central city communities and the relative affluence of suburban 
enclaves is not coincidental.
    According to John A. Powell of the Institute on Race and Poverty at 
the University of Minnesota, ``Sprawl and regional fragmentation on the 
one hand, and concentrated poverty and social inequity on the other 
hand, are flip sides of the same dynamic.''\1\ The same factors that 
push and pull families away from urban centers and to the suburbs trap 
the families left behind. Those able to leave have the human and 
financial capital to do so. They leave for better jobs, better schools 
and they invest their financial capital in property likely to increase 
in value. Those left behind must deal with struggling schools, less 
human capital and fewer financial resources.
---------------------------------------------------------------------------
     \1\``How Sprawl Makes Us Poor'' by John A. Powell in The 
Albuquerque Journal, March 22, 2002.
---------------------------------------------------------------------------
    Powell goes on to explain that the Federal Government defines 
concentrated poverty as a census tract with 40 percent or greater of 
its residents living below the poverty level. This is significant 
because joblessness, blight, crime, and other circumstances destructive 
to families characterize concentrated poverty. Central city 
communities, which are more likely to hold areas of concentrated 
poverty, therefore carry the burden of having to address more social 
problems, which serve to push out more families that can afford to 
leave. As a result, these communities often lack the tax base necessary 
to address the social ills that plague them.
    There is a further layer to concentrated poverty--race. Of those 
living in concentrated poverty, more than half are African American 
(note that African Americans make up only 12 percent of the national 
population), and a quarter are Hispanic. While the reasons behind the 
stark residential race and class segregation in America's metropolitan 
regions are complex, the reality is unavoidable. Paul Jargowski, as he 
writes in Poverty and Place: Ghettos, Barrios, and the American City, 
is on solid ground when he explains that ``neighborhood poverty is not 
primarily the product of the people who live there or a ghetto culture 
that discourages upward mobility, but the predictable result of the 
economic status of minority communities and the degree to which 
minorities are residentially segregated from whites and from each other 
by income.''\2\ Sprawl both contributes to and facilitates this 
residential segregation.
---------------------------------------------------------------------------
     \2\Poverty and Place: Ghettos, Barrios and the American City. Paul 
Jargowski. 1997.
---------------------------------------------------------------------------
    Since sprawl and its counterpart, concentrated poverty, must be 
analyzed in tandem in order to more fully understand the impact of 
willy nilly suburban growth, it stands to reason that Smart Growth also 
has a counterpart: equal access to economic opportunity. The 
Transportation Equity Network believes that any effort undertaken in 
the name of Smart Growth that fails to address concentrated poverty and 
does not advance equal access to economic opportunity is inadequate. 
For example, Smart Growth strategies that encourage economic 
development in central city communities should be mindful on the impact 
of such development on the availability of affordable housing. And 
strategies that seek to protect environmental treasures on the edges of 
suburban growth should also be mindful of the need to improve access to 
economic opportunity in areas of concentrated poverty.
The Role of Transportation Planning
    In metropolitan regions across the country, experience has shown 
that suburban development often follows road and highway construction. 
As Dr. Susan Handy of the University of Texas concluded in 1999 (also 
quoted in testimony by Tom Downs from the University of Maryland) 
``Building new highways will not increase the rate of growth [in 
metropolitan regions], but will influence where in a region growth 
occurs and what kind of growth occurs.'' While she goes on to say that 
not building highways will not necessarily prevent decentralization, 
her conclusion does suggest that growth follows highway development, 
and may do so at the expense of other areas within a metropolitan 
region.
    In the Intermodal Surface Transportation Efficiency Act (ISTEA) 
Congress laid the groundwork for significant reform in the 
transportation planning process by establishing the metropolitan 
planning process. As such, Metropolitan Planning Organizations, which 
are often the only governmental entities in a particular place with 
regional jurisdiction, can play a very significant role with respect to 
Smart Growth. Furthermore, because transportation investments play such 
a large role in determining the nature of growth in metropolitan 
regions, the choices made by MPOs have lasting impacts on the growth 
patterns of metropolitan regions.
    In 1999, the issue of Smart Growth and equal access to economic 
opportunity came to a head in northwest Indiana. That was when a 
coalition of African-American, White and Latino congregations named the 
Interfaith Federation publicly challenged the planning practices of the 
Northwest Indiana Regional Planning Commission (NIRPC) on both moral 
and legal grounds.
    Northwest Indiana, which includes the cities of Gary, Hammond and 
East Chicago, is one of the most racially segregated metropolitan 
regions in the country. It is also a region characterized by both 
sprawl and concentrated poverty. Gary, Hammond and East Chicago have 
all three experienced declines in population following the collapse of 
the manufacturing and steel industries over the last three decades. 
These cities are largely low-income, have relatively high property 
taxes, and share symptoms of urban decay, including failing schools and 
high rates of unemployment. Around these cities lies an extensive 
network of suburban communities of varying degrees of affluence, and 
they grow in affluence the further away they get.
    The Interfaith Federation complained that NIRPC had contributed to 
the decline of the region's central cities by placing undue emphasis on 
the construction and expansion of roads and highways, while neglecting 
the needs of residents living in areas of concentrated poverty. All 
three cities are located in the northern half of Lake County, Indiana. 
Over the last decade, the region's job growth has taken place in the 
southern half of Lake County. The transit-dependent residents of Gary, 
Hammond, and East Chicago had no way of accessing areas of high job 
growth in south county by public transportation.
    While some may contend that the Interfaith Federation had 
challenged NIRPC on grounds that were beyond the MPO's control, it was 
certainly clear that NIRPC had entirely neglected the region's neediest 
residents and had failed its neediest jurisdictions. In response to the 
Interfaith Federation's concerns, NIRPC contended that it had done 
nothing wrong. The Interfaith Federation, undeterred, pointed to 
several regulations and provisions of Federal law that the MPO had 
ignored. The Federal Highway Administration and the Federal Transit 
Administration, after lengthy deliberation, concurred with the 
Interfaith Federation, and conditionally certified NIRPC's planning 
process. The FHWA also provided NIRPC with a discretionary grant to 
help it better plan for the needs of low-income and minority 
communities under its jurisdiction.
Examining Transportation Equity and Inequity
    Though ISTEA and TEA-21 both represent enormous improvements in the 
national transportation planning landscape compared to what existed 
before, from the perspective of low-income and minority communities, 
ISTEA and TEA-21 represent a mixed bag.
    A case in point is Miami, Florida. In the late 1960's portions of 
unincorporated Dade County were vibrant African American communities 
with strong local economies and solid middle class families. The State 
tragically steam-rolled these communities at the end of that decade 
when the State built Interstate 95 right through many of these 
neighborhoods. Not only were families and business displaced, but also 
over the ensuing decades declining property values and other symptoms 
of social decay took hold. This is a story not unique to Miami-Dade 
County. Similar stories can be found in Montgomery, Alabama; Los 
Angeles, California; Atlanta, Georgia, and other cities across the 
country.
    In the 1990's the State further stripped these communities of their 
dignity by widening the I-95 corridor to within feet of people's homes 
and erecting wire meshed fencing to protect these households from 
highway noise and traffic. Residents endured years of house-rattling 
noise, cars rolling into their back yards, shrapnel from exploding 
tires and fear, and constant phone calls to State transportation and 
locally elected officials led to no improvements.
    Finally in 2001, an organization of local residents named 
Neighborhoods in Action (NIA) organized to get the attention of the 
State's regional Department of Transportation office. Only after NIA 
invoked the term ``environmental justice'' did the DOT act in a 
responsive manner. In a matter of months, the State of Florida 
constructed a mitigation wall to protect residents of unincorporated 
Miami-Dade County from both noise and physical harm.
    Ironically, NIA discovered at about that time that the mitigation 
wall had been written into the MPO's TIP for years, but had simply been 
skipped over every year. They also discovered that similar sound walls 
had long since been built along I-95 to protect other more affluent 
communities. Though in the end the structure of ISTEA and TEA-21 helped 
to encourage the State DOT to do the right thing, clearly the State had 
not made the needs of these communities a priority.
    But this is not an a-typical situation. Robert Bullard and Glenn 
Johnson of the Environmental Justice Resource Center (EJRC) have 
written extensively of the impact of transportation planning that fails 
to consider the needs of low-income and minority communities.
    For instance, the EJRC reports that the pedestrian fatality rate 
for people of color is higher than that for whites. One explanation for 
the difference in rates is the difference in walking patterns among 
different racial groups. For example, African Americans walk 82 percent 
more than whites, while Hispanics walk 58 percent more than non-
Hispanic whites (US Department of Transportation, 1997).
    Also consider that asthma, which is a leading cause of disability 
among children in the United States, is more likely to strike inner 
city, and therefore, minority children. The hospitalization rate due to 
asthma is three to four times higher among black children than white 
children. Pollution from automobiles, and the proximity of roads and 
congestion to low-income communities is believed to be a factor in 
asthma prevalence among minority children.
    But transportation inequity is not only about race, though race is 
a significant factor. In Driven To Spend, a report released by the 
Surface Transportation Policy Project and the Center for Neighborhood 
Technology in 2000, researchers found that transportation (the cost of 
an automobile, its maintenance and other costs) often rivaled the cost 
of housing for low-income families. The report also found that the 
greater degree of sprawl in a metropolitan area, the greater the cost 
of owning and maintaining an automobile.
    Then there are those households that lack automobiles. According to 
the 2000 census, more than 10 percent of the American public does not 
own an automobile, and are dependent on transit or other sources of 
transportation besides a personal automobile to get around. This number 
is likely to increase as the nation's population continues to age, and 
more and more of us eventually succumb to various physical and mental 
disabilities and impairments.
    Transportation equity, in contrast, is about ensuring that all 
communities enjoy access to economic opportunity, and that no community 
is unfairly burdened with negative economic and environmental impacts. 
Transportation equity is also about ensuring that planning processes 
are fully transparent, accountable and accessible to the general 
public. Congress should strive to ensure that every Federal dollar 
spent on transportation carries with it the principle of transportation 
equity.
Access to Jobs: What We Learned from Welfare Reform
    Transportation is a daily struggle for many Americans. This 
challenge is particular acute for low-income people and working 
families that lack access to safe, reliable and timely public 
transportation and cannot afford private car ownership. The low wage 
labor market is often unforgiving for hard-working breadwinners unable 
to get to work on time, if at all. For families on welfare who face 
federally imposed work requirements and time limits, the inability to 
get to jobs due to transportation, could render these families 
ineligible for public assistance as well as leave them unemployed.\3\
---------------------------------------------------------------------------
     \3\This material is covered in greater detail in Policy Brief: 
Transportation and Access to Jobs. Center for Community Change & STPP. 
2002. [Draft]
---------------------------------------------------------------------------
    An example of an innovative Job Access and Reverse Commute (JARC) 
program is in Columbus, Ohio. The project was driven by a coalition of 
churches called Building Responsibility Equality And Dignity (BREAD), 
which realized early on the potential of the JARC program enacted in 
TEA-21.
    BREAD partnered with the Central Ohio Transit Authority and the 
Mid-Ohio Regional Planning Commission, the city of Columbus, the 
Federal Transit Administration, and the county welfare office to 
establish a new transit hub in a low-income community in Columbus that 
is home to a large public housing project. The transit hub, which drew 
funds from a number of sources, featured express bus service to areas 
of high job growth in the suburbs, including feeder bus service that 
could take riders closer to their work sites. The transit hub itself 
also co-located child care services and job referral and training 
support services so that it could simultaneously meet the multiple 
needs of this community.
    As demonstrated by the Columbus example, one of the JARC program's 
most innovative features is its emphasis on collaboration among various 
stakeholders, including transportation, welfare, and housing agencies 
and the affected community.
    Although most low-income people may want cars, the reality of car-
ownership can undermine the aspirations of families seeking to make a 
better life for themselves and their children. For many poor families 
trying to work their way out of poverty, car ownership is expensive and 
does little to generate equity over time, and the cost of owning a car 
can place other important wealth-generating assets, like homes, out of 
reach. But if a family is without a reliable vehicle and beyond the 
range of mass transportation--whether publicly or privately operated--
that family will be economically, socially and culturally isolated. In 
rural communities, the circumstances are even worse. Forty percent of 
rural counties lack public transit, and 36 percent of all rural 
residents are considered transit dependent.\4\
---------------------------------------------------------------------------
     \4\Status of Rural Public Transportation. Federal Transit 
Administration. 2000-2001
---------------------------------------------------------------------------
    Residents of large cities often forget that in smaller communities 
public transportation systems tend to be less well funded and receive 
fewer planning resources. But even in large cities, bus service may not 
accommodate the needs of second or third shift workers, or be able to 
accommodate the multiple trips mothers may need to take to get their 
children to childcare on the way to work.
Considering Metropolitan Planning Organizations
    The Center for Community Change and the Transportation Equity 
Network have developed a great deal of experience working with and in 
some instances pressuring MPOs to reform their planning practices. Over 
the last 6 years, the Center has gathered a good deal of information 
about MPOs. The nearly 400 MPOs across the Nation represent a very 
mixed bag of both good and bad practice. Certainly, experience has 
shown that though MPOs--as all layers of government--often request less 
oversight from the Federal Government, some oversight is inevitably 
necessary. The transportation planning process is one example of where 
lack of accountability and standard minimum expectations has harmed the 
public interest.
    In 1998, Congress enacted several provisions in TEA-21 related to 
the metropolitan transportation planning process. The Transportation 
Equity Network focused on three:
    1) The first was an annual listing of projects for which Federal 
funds had been obligated in the prior year. The intent of this 
provision is to increase the degree of transparency in the 
transportation planning process by creating a tool by which the public 
can ascertain how Federal funds are spent in their metropolitan region, 
and thereby determine funding patterns in metropolitan regions over 
time. A survey conducted of a diverse sample of MPOs found that 5 years 
after the law was enacted:

      Approximately 80 percent of MPOs surveyed had an annual 
list of projects;
      Many MPOs were still having difficulty gathering data on 
project obligations because a) States were not willingly sharing the 
data; or b) non-compatible data collection or coding systems within 
States made this a very time consuming process;
      Some MPOs felt that additional information would make the 
list a more useful planning tool.

    The survey and experience has also revealed that MPOs vary 
significantly with respect to capacity. Many MPOs lack necessary 
staffing resources and expertise in various kinds of data collection. 
Furthermore, many MPOs had staff who were unaware of various TEA-21 
requirements, including the annual listing of projects.
    Having said that, there are a number of items that would make the 
annual list of projects a more effective planning tool. The first would 
be to geographically code projects in both the TIP and the annual list; 
this would allow these projects to be readily mapped using Geographic 
Information Systems (GIS) technology. The second would be to include 
more project data, including the point at which the project is in the 
project development and construction process. The list should also be 
more clearly marked within the TIP, or separated from the TIP as a 
distinct document so that it might be more visible and easy to find.
    2) The second provision added the term ``transit user'' to the list 
of stakeholder groups that must be consulted in the metropolitan and 
statewide transportation planning process.
    Over the last 5 years, the Center has examined the public 
involvement programs of a broad range of MPOs. In too many instances, 
the MPO has been found lacking.

      During a certification review conducted by the Federal 
Highway Administration and the Federal Transit Administration in 2001, 
the Montgomery, Alabama MPO deliberately misled Federal officials and 
the public by claiming that it had a Citizen Advisory Council (CAC). In 
fact, while the MPO had a provision for a CAC on the books, it had 
never convened one. While Federal law does not mandate CACs, the FTA 
and FHWA do consider them a recommended planning practice. Months 
later, after the MPO did convene a CAC, the MPO refused to provide it 
with any resources making it impossible for the CAC to conduct 
business.
      When community representatives from Jackson, Mississippi 
approached their MPO in person to request a copy of their TIP, several 
MPO officials refused to provide it.\5\ Similarly, when residents of 
Baton Rouge, Louisiana approached their State DOT to request a copy of 
the State Transportation Improvement Program, DOT officials 
unblinkingly informed them that there was no such document.
---------------------------------------------------------------------------
     \5\Getting on Track. Center for Community Change. 2000.
---------------------------------------------------------------------------
    These are three particularly egregious examples of how MPOs, as 
well as States, have failed to take the public involvement provisions 
of TEA-21 seriously. On the other hand, many MPOs are very responsive 
to requests for information, and have invested a great deal of time in 
building public trust in their planning activities.
      The Birmingham, Alabama Metropolitan Planning 
Organization is admired by communities across the South for the role it 
has established for its Citizen Advisory Council, and its efforts to 
provide the public with opportunities to participate in alternative 
transportation analyses. The MPO also has a Public Involvement Plan, 
another FHWA/FTA recommended practice, with which it may be held 
accountable by the CAC and the general public.
    Over the last several years, the Center and TEN have learned that 
MPOs tend to have better public involvement processes when a strong 
community presence is there willing to agitate them to improve. 
Experience has also shown that early and broad-based community outreach 
and public involvement can ease the transportation planning process, 
and greatly improve it, over both the short and long term.
    3) A third provision established a statutory requirement for public 
involvement in the certification process, by which the FHWA and FTA 
review the planning processes of MPOs.
    Though this provision applies to metropolitan planning, in some 
ways it provides some insight into the role of the FHWA and FTA in the 
metropolitan planning process. In the certification process, the FHWA 
and FTA are required to examine an MPO's planning practices every 3 
years to determine whether or not the MPO is appropriately addressing 
planning factors and requirements in Federal regulations, TEA-21, civil 
rights law, air quality requirements, and other Federal law. As a 
digression, the Center and TEN have found a number of shortcomings at 
both FTA and FHWA.
      In 1999 the Center for Community Change submitted a 
Freedom of Information Act request to the FTA to provide recently filed 
certification reports. At the time, there was no central depository for 
certification reports at FTA or FHWA. Neither agency had any way of 
standardizing how it approached implementation of the various planning 
requirements in TEA-21. Nor could FTA and FHWA make any effort to 
assess its own effectiveness with respect to implementing this 
provision of Federal law.
      The FTA and FHWA, for their own part, tend to be rather 
obscure institutions. Advocacy organizations, researchers and community 
residents seeking information on the status of projects, trends in 
State funding behavior, levels of unobligated balances, and other 
information are likely to be given reams of hard copy print outs of 
indecipherable tables. As such, unless an outsider--let alone a DOT 
employee--intends to spend an inordinate amount of time pouring through 
numbers, there is no reasonable way to accurately compare the behavior 
of a State with other States, and it is often overly taxing to even 
make simple judgments on how much money States have spent on particular 
projects. That same researcher may or may not have an easier time 
gathering similar data at the State level, where some data collection 
systems almost seem designed to create confusion and obscure 
accountability.
    With respect to the certification process, there are a number of 
factors that can be improved in order to improve FHWA and FTA 
performance, as well as MPO planning performance.
      MPOs are consistently uncertain about what they should be 
expected to do to conduct an appropriate examination of social equity 
or environmental justice impact on low-income and minority communities. 
The FHWA and FTA allow a great deal of ambiguity, and as a result have 
no set standard against which to judge effective planning with respect 
to low-income and minority communities. This has led to greater tension 
between transportation planners and community residents frustrated with 
moving targets and confusing messages.
      Since FHWA and FTA are primarily responsible for 
conducting certification reviews, there should be a minimum expectation 
laid upon FHWA and FTA for what should be considered an appropriate 
public involvement process in certification reviews. Such consistency 
will serve to improve public confidence in the metropolitan 
transportation planning process and serve to model best practices for 
MPOs.
    4) In addition to these issues, there are governance-related 
questions that need clarification in Federal law.
      The relationship between tribal governments and State 
DOTs and MPOs. In all circumstances, tribal governments should be 
treated as sovereign entities, but they should also be consulted early 
and often in all decisionmaking processes that may impact on their 
land, population or infrastructure.
      The matter of one person-one vote. It seems unreasonable 
that in some metropolitan areas, a community 1/10th the size of the 
largest city in a metropolitan region has voting power equal to the 
largest city. While some MPOs have implemented a number of schemes to 
weight voting power, the Federal Government should clarify the 
principle that larger jurisdictions should have more say in the 
transportation planning process.
Environmental Justice
    The principle of environmental justice is vitally important in 
Federal transportation law and transportation planning. Environmental 
justice, which is grounded in Federal Civil Rights Law, is important 
not only because it establishes a coherent vision that seeks to protect 
low-income and minority communities from environmental harms, but also 
because it fully acknowledges the role of income as well as race in 
unjust planning practices. Furthermore, environmental justice does not 
simply apply to public involvement processes. The goal of environmental 
justice, as articulated by the Center and by TEN, is the commitment 
that those communities that have suffered most will soon get the 
resources they need to revitalize themselves. Environmental Justice 
must be seen as a tool or criteria by which planning agencies 
prioritize the importance of projects or the need to re-examine them.
Recommendations
    The Center for Community Change and the Transportation Equity 
Network urge the committee to consider the following recommendations. A 
more detailed set of legislative proposals is forthcoming. In the 
interim, the following are intended to create dialog.
1) Public Involvement
      Congress should set aside a fund for community 
involvement by grassroots organization stakeholders in the 
transportation planning process. These resources would help pay for the 
cost of programs for MPOs and States to train interested parties in the 
transportation planning process, and would be re-granted to community-
based organizations to support community outreach efforts. Such a fund 
would help MPOs and States meet their public involvement and 
environmental justice obligations.
      Congress should earmark some funds for a planning 
initiative to create a ``Best of the Best'' reserve fund. FHWA and FTA 
would use such a fund to provide financial incentives for innovative 
and effective community outreach.
      Congress should establish a minimum set of expectations 
for all MPOs and States with respect to their public involvement 
practices. For example, all MPOs should have a Citizen Advisory 
Council, a Public Involvement Plan, and a requirement that comments 
formally submitted by interested parties must be fully addressed by 
MPOs or States prior to the publishing of key decision documents. The 
latter is a process already utilized by the Atlanta Regional Council 
and commonly used in public comment processes related to important 
public documents at both the Federal, State and local level.
2) Research, Data & Accountability
      MPOs should be required to maintain demographic profiles 
(ace, rage, income) of the metropolitan planning area. This information 
would be used to identify locations of socioeconomic groups, including 
low-income and minority populations. These profiles should be used to 
develop base maps and other planning and modeling tools to assess the 
impact of current transportation services and programs on low-income 
and minority communities.
      Congress should establish a multi-year process by which 
surveys, data gathering tools and other measurement tools will be 
modified to more accurately reflect the populations that both use and 
are impacted by various kinds of transportation investments. Similarly, 
Congress should require a greater degree of consistency across data 
sets held at both the local, metropolitan, State and Federal levels to 
ensure better coordination among layers of government. Furthermore, all 
projects in new TIPs, Annual Lists and related documents should be 
geographically coded to facilitate GIS mapping.
      Congress should exercise its role as the steward of 
Federal resources by strengthening public accountability in the 
transportation planning process. While the drive to streamline 
transportation planning and project delivery processes may be difficult 
to resist, regionally significant and controversial transportation 
projects must be justified against economic and environmental criteria 
in a thorough manner.
3) Smart Growth & Access to Economic Opportunity
      Congress should create a new Transit Oriented Development 
& Economic Revitalization Incentive Fund that provides local 
communities with a monetary incentive for locating mixed-income 
housing, business, and retail developments near public transportation 
centers.
      Congress should create various incentives for encouraging 
cooperation--shared data, coordinated planning, and project 
implementation--among transportation agencies, welfare agencies, work 
force investment boards, and housing agencies to most effectively meet 
the needs of low-income families.
      Congress should establish goals, performance measures, 
and benchmarks for employment transportation in the metropolitan and 
statewide transportation planning processes with public input. There 
should also be stronger mechanisms for accountability and transparency 
to evaluate the responsiveness of State DOTs to community input and 
these economic objectives.
    In conclusion, I hope that the committee will find these comments 
to be helpful as it develops its own proposals for reauthorization. 
Though the issues confronting low-income and minority communities are 
often not seen as transportation issues per se, such prejudices are 
inaccurate. Research and experience place poverty and race clearly at 
the center, rather than the margins, of transportation planning and 
project delivery. On behalf of the Transportation Equity Network, I 
urge the committee to view transportation reauthorization in this 
light.











                       REAUTHORIZATION OF TEA-21

                              ----------                              


                         TUESDAY, JULY 30, 2002

                                       U.S. Senate,
                 Committee on Environment and Public Works,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:32 a.m. in room 
406, Senate Dirksen Building, Hon. James M. Jeffords [chairman 
of the committee] presiding.

                     TRANSPORTATION AND AIR QUALITY

    Present: Senators Jeffords, Clinton, Carper, Inhofe, Bond, 
Voinovich, Smith, and Chafee.

OPENING STATEMENT OF HON. JAMES M. JEFFORDS, U.S. SENATOR FROM 
                      THE STATE OF VERMONT

    Senator Jeffords. The hearing will come to order.
    Good morning, everyone, and welcome to our hearing on 
transportation and air quality. In particular, I want to thank 
our witnesses, many of whom have traveled great distances to 
lend a hand as we consider renewal of the Nation's surface 
transportation program. Today's topic, transportation and air 
quality, is particularly appropriate for the Committee on 
Environment and Public Works. Since 1837, this committee has 
guided Federal investments to enhance the Nation. In early 
history, as the committee on Public Buildings and Grounds, 
featured stewardship of the growing Federal city of Washington, 
DC. In 1956, the then Committee on Public Works reported the 
Federal Aid Highway Act, creating the modern interstate highway 
system in 1963. The committee took on the challenge of air and 
water pollution control. And in 1977, the committee was given 
responsibility for wildlife resources and given its current 
full name.
    In 1991, the members of the committee were the driving 
force behind the Intermodal Surface Transportation Efficiency 
Act, ISTEA, which brought a new approach to transportation. 
With completion of the interstate highway system, our focus 
shifted toward integration of the various modes of 
transportation: highway, transit, aviation and rail. ISTEA also 
brought greater attention to transportation's influence on our 
communities and the lives of our citizens. We recognized 
investment in transportation is not an end in itself, it is a 
means to an end. I was a member of the committee in 1991. I 
believed then and I believe today that the needs and ends that 
we seek should be a strong community, healthy communities, 
strong economy, healthy communities and a clean environment. 
And clean air is essential to each of these aspects.
    Over the past year, this committee has spent considerable 
time on air pollution. We have focused on emissions from 
stationary sources, power plants in particular. This included 
marking up the Clean Air Power Act, a bill which significantly 
reduces emissions of sulfur dioxide, nitrogen oxides, mercury 
and carbon dioxide. I am pleased that the Administration has 
finally, after much delay, sent us up a three pollutant bill. 
Unfortunately, it is much too late in the Congress for it to be 
considered. From a quick review, it appears that the 
legislation provides too little in the way of reductions and 
they come much too late.
    The bill also ignores the dire warnings in the 
Administration's own report about global warming, which is 
caused in part by U.S. power plant emissions of carbon dioxide. 
Last August, the committee held a general hearing on the impact 
of the emissions from the transportation sector on public 
health and the environment. We found that statutory and 
regulatory limits on individual mobile sources and technology 
improvements will reduce both total emission of conventional 
pollutants from the sector. But we also found that 
transportation will continue to be a significant source of our 
non-attainment problem, not to mention a major contributor to 
air urban toxics exposure and to global warming.
    Today, we will hear more testimony about the progress that 
has been made to control air pollution from transportation. We 
will hear the good news that today's motor vehicles are cleaner 
burning than earlier models, so that each car or truck pollutes 
less. But we will hear that Americans are driving so much more, 
that many of the technology gains have been offset.
    We will hear that the low emitting transportation control 
measures encouraged in our most polluted cities and regions 
have so far produced modest results. As cars get cleaner, some 
will suggest that investment in transit or bicycle lanes or 
more workable and developmental patterns may not be worthwhile. 
But we know that a pedestrian or a transit rider generates far 
less pollution per passenger mile than a motorist in even the 
cleanest of today's cars.
    We will hear that the process used to manage transportation 
pollution conformity is not always the most efficient. 
Achieving the twin goals of clean air and improved mobility is 
complicated and relies on the coordination of many people and 
resources. It takes cooperation and sound information.
    In summary, we will hear that our campaign to clean up the 
transportation sector is well underway, but has a long way to 
go. And as we renew the overall surface transportation program, 
we can and should refine air quality linkage to build success 
and make improvements. Today's hearing is the eighth in our 
reauthorization series. We began in January, and we'll wrap up 
later this fall. Through these hearings, we have explored a 
wide range of topics, but with a consistent theme. We have 
called upon experts from around the Nation to share the lessons 
they have learned over the past 10 years, and we have asked 
them to cite any changing conditions that they foresee. They 
set upon lessons learned and changing conditions.
    We have sought fresh ideas for improving our current 
national transportation program. We have assembled a fine panel 
of witnesses today, and I look forward to their insights. Our 
first panel will represent the Administration. I am pleased to 
welcome Administrator Mary Peters of the Federal Highway 
Administration and Assistant Administrator, Jeffrey Holmstead, 
of the U.S. Environmental Protection Agency.
    Our second panel brings perspectives from around the 
Nation. First and foremost, I am delighted to be joined this 
morning by Scott Johnstone, the Secretary of the Agency of 
Natural Resources from the State of Vermont. Welcome, Scott. 
We'll be getting to you later, an I'm guessing it will be a bit 
cooler in the Green Mountain State than it is here, and hope 
you can survive.
    Also on our second panel is the Honorable Ron Harris, 
County Judge from Collin County, Texas. Ron serves on the board 
of the North Central Texas Council of Governments and the 
Metropolitan Planning organization of the Dallas-Fort Worth. He 
is also the chair of the North Texas Clean Air Steering 
Committee. And Lynn Terry is the Deputy Executive Officer of 
the California Air Resources Board. Lynn will tell us about 
recent developments in the Golden State.
    James Stephenson wears many hats. He is President of the 
Yancy Brothers Company, a construction equipment supplier. He 
is also on the board of the Georgia Regional Transportation 
Authority in the Atlanta area. Today James represents the 
American Road and Transportation Builders Association, on whose 
board he also sits. And finally, Michael Replogle is with us 
here today. Michael is the Transportation Director for the non-
profit group, Environmental Defense Fund, and a frequent 
witness before the committees of Congress.
    I want to welcome all the witnesses, and I now turn to 
Senator Smith.

  OPENING STATEMENT OF HON. BOB SMITH, U.S. SENATOR FROM THE 
                     STATE OF NEW HAMPSHIRE

    Senator Smith. Thank you very much, Mr. Chairman, and good 
morning, Ms. Peters and Mr. Holmstead. Good to have you here.
    This is an especially significant hearing, because we're 
the only committee that has jurisdiction over both the Clean 
Air Act and the Transportation authorization bill. With over 10 
years of experience of implementing the so-called ISTEA and 
TEA-21, and related Clean Air Act amendments of 1990, I think 
we have to take a hard look at how well the transportation 
conformity program is working to improve air quality, indeed, 
is it working to improve air quality.
    In New Hampshire, the southern and the sea coast areas are 
designated non-attainment for ozone, and the region has 
background ambient air quality problems primarily from out of 
State sources, not our own State. The region's 3 year 
conformity update is due in October of this year, and on this 
Friday, the Federal and State agencies will be meeting to 
discuss how to avoid a conformity lapse and the funding 
penalties associated with it. Their discussion will be about 
data and models concerning those funding penalties and penalty 
lapses, but they're not going to be about transportation 
projects. They cannot significantly change the air quality 
model's emission projections with changes to transportation 
projects. But they can change the emission projections with 
adjustments to the data for vehicle fleet mix and truck 
percentages.
    I'm frankly baffled that New Hampshire's highway funds 
could be diverted and projects delayed, not as a penalty for 
failing to properly consider the air quality impacts of 
transportation projects, but as a result of data flaws in an 
air quality model that is attempting to predict a precise 
emission level 20 years into the future. And like many areas of 
the country, the air quality in southern New Hampshire is 
getting better, the congestion is getting worse, and the 
conformity program threatens to further delay badly needed 
highway projects. It doesn't seem to make sense to me.
    There are a couple of major issues with transportation 
conformity that need to be addressed in the reauthorization of 
TEA-21, whatever we wind up calling it, Mr. Chairman. First, we 
must address the CMAQ program funding levels and the 
apportionment formulas. Second, we need to take a hard look at 
the air quality benefits and cost effectiveness of 
transportation control measures, TCMs, aimed at reducing 
vehicle travel. When the Senate debated the 1990 Clean Air Act 
amendments, expectations were very high that transportation 
controls were cost effective in a simple way to make large 
reductions in vehicle emissions. One reason for the role of 
these transportation control measures in the conformity program 
is that historically, the growth in the amount of vehicle 
travel was anticipated to offset much of the gains from EPA 
vehicle emission standards.
    More recently, vehicle travel is having a smaller and 
smaller impact on emissions, however, believe it or not. I 
would call your attention to the chart behind Senators Bond and 
Inhofe. And the impact of cleaner cars and trucks on future 
vehicle emissions is shown by the EPA data on chart one. It's 
significant because current projections show that the emission 
levels continue to decline, which is the blue and the green 
line, yet vehicle miles traveled continue to increase. So in 
spite of the fact that we're traveling more, we're still 
putting less and less pollutants in the air. As you can see, by 
the year 2040, it drops substantially.
    So this steep decline in NOX and VOC emissions suggests 
that the impact of vehicle travel on emissions is substantially 
less than it was in the 1970's and 1990's, through that period 
from 1970 to 1990. In TEA-21, Congress expressed its strong 
support for the CMAQ program, increasing budget authority from 
$1 billion to $1.6 billion. At the same time, congressional 
debate raised questions concerning the efficacy of the program.
    This study came to several conclusions regarding CMAQ and 
the cost effectiveness of transportation control measures. 
First, the report concluded that CMAQ was an extremely popular 
program and should be continued potentially at an increased 
level of funding. Second, emission reduction from TCMs are 
generally small and more expensive than the technological 
advances. Last, technology and regulations, like new vehicle 
emission and fuel standards in vehicle scrappage programs 
generally have been more successful than most CMAQ strategies 
relying on changes in travel behavior.
    So as TEA-21 reauthorization proceeds, we're going to need 
to talk a lot more and understand the effectiveness and cost 
effectiveness and role of TCMs and conformity in meeting these 
transportation and clean air goals.
    Finally, transportation and air quality officials have 
raised concerns that conformity is becoming increasingly 
process driven and that as a result, clean air is becoming a 
secondary factor. Drive the process, and clean air is a 
secondary factor. Moreover, there are ambiguities in the 
statute and regulations being resolved in the litigation which 
increasingly indicates a lack of clarity that Congress should 
address, Mr. Chairman.
    But I want to thank, in conclusion, 15 cities that 
responded to your and my request for information on their 
experiences with the conformity program. These responses are 
very helpful, and I would just ask unanimous consent that those 
responses be made part of the record.
    Thank you, Mr. Chairman.
    Senator Jeffords. They will be made so.
    [The prepared statement of Senator Smith and the 
information referred to follows:]

    Statement of Hon. Bob Smith, U.S. Senator from the State of New 
                               Hampshire

    Thank you, Mr. Chairman, and welcome to our Administration 
witnesses, Mary Peters and Jeff Holmstead. This hearing is 
especially significant because this is the only Congressional 
committee that has jurisdiction over both the Clean Air Act and 
the transportation authorization bill.
    With over 10 years of experience implementing ISTEA, TEA-21 
and the related Clean Air Act Amendments of 1990, I think we 
need to take a hard look at how well the transportation 
conformity program is working to improve air quality.
    In New Hampshire the southern and seacoast areas are 
designated non-attainment for ozone. The region has background 
ambient air quality problems primarily from out of state 
sources.
    The region's 3-year conformity update is due in October of 
this year, and on this Friday, the Federal and state agencies 
will be meeting to discuss how to avoid a conformity lapse and 
the funding penalties associated with it.
    Their discussion will be about data and models, not about 
transportation projects. They cannot significantly change the 
air quality model's emission projections with changes to 
transportation projects. They can, however, change the emission 
projections with adjustments to the data for vehicle fleet mix 
and truck percentages.
    I'm baffled that my state's highway funds could be diverted 
and projects delayed--not as a penalty for failing to properly 
consider the air quality impacts of transportation projects, 
but as a result of data flaws in an air quality model that is 
attempting to predict a precise emission level 20 years into 
the future.
    Like many areas of the country, the air quality in southern 
New Hampshire is getting better, the congestion is getting 
worse, and the conformity program threatens to further delay 
badly needed highway projects.
    There are a couple of major issues with transportation 
conformity that need to be addressed in reauthorization of TEA-
21. First, we must address the CMAQ program funding levels and 
apportionment formula. Second, we need to take a hard look at 
the air quality benefits and cost effectiveness of 
transportation control measures (TCMs) aimed at reducing 
vehicle travel.
    When the Senate was debating the 1990 CAA amendments, 
expectations were very high that transportation controls were a 
cost-effective and simple way to make large reduction in 
vehicle emissions.
    One reason for the role of TCMs in the conformity program 
is that historically the growth in the amount of vehicle travel 
was anticipated to offset much of the gains from EPA vehicle 
emission standards.
    More recently, vehicle travel is having a smaller and 
smaller impact on emissions.
    --The impact of cleaner cars and trucks on future vehicle 
emissions is shown by the EPA data on Chart 1.
    --This chart is significant because current projections 
show that emission levels continue to decline, even as VMT 
(vehicle miles traveled) increase.
    The steep decline in NOx and VOC emissions suggests that 
the impact of vehicle travel on emissions is substantially less 
than it was in the 1970's-1990's. In TEA-21, Congress expressed 
its strong support for the CMAQ (SEE-MACK) program, increasing 
budget authority from $1 billion per year to $1.6 billion per 
year. At the same time, however, the Congressional debates 
raised questions concerning the program's efficacy.
    In response, Congress directed the National Academy of 
Sciences' Transportation Research Board (TRB) to evaluate the 
program's benefits and cost-effectiveness. This study came to 
several conclusions regarding the CMAQ program and the cost-
effectiveness of transportation control measures. First, the 
report concluded that CMAQ was an extremely popular program and 
should be continued, potentially at an increased level of 
funding. Second, emission reductions from TCMs are ``generally 
small'' and more expensive than technological approaches.
    Lastly, technology and regulations like new-vehicle 
emission and fuel standards and vehicle scrappage programs 
``generally have been more successful than most CMAQ strategies 
relying on changes in travel behavior.''
    As the TEA-21 reauthorization proceeds, further discussion 
is needed to better understand the effectiveness, cost-
effectiveness and role of TCMs and conformity in meeting our 
transportation and clean air goals.
    Another concern to be addressed is the need for more 
information and tools to deal with particulate matter (PM 2.5) 
pollution, and to prepare for the new PM 2.5 NAAQS. While it is 
known that PM2.5 represents a serious health risk, and that 
most transportation related PM 2.5 emissions come from diesel 
engines, more information and research is needed on the 
effectiveness and cost-effectiveness for different PM 2.5 
control strategies.
    Finally, transportation and air quality officials have 
raised concerns that conformity is becoming increasingly 
process driven, and that the result, cleaner air, is becoming a 
secondary factor. Moreover, there are ambiguities in the 
statute and regulations being resolved in litigation, which 
increasingly indicates a lack of clarity that Congress should 
address.
    Let me conclude by thanking the 15 cities that responded to 
the chairman's and my request for information on their 
experiences with the conformity program. Your responses are 
very helpful and will certainly help inform the reauthorization 
process. I ask unanimous consent to include these responses in 
the record of this hearing.
                                ------                                

                      Atlanta Regional Commission
                        40 courtland street, ne
                         atlanta, georgia 30303
                           (By Tracy Clymer)
                         Updated: June 25, 2002
Conformity History for the Atlanta Non-Attainment Region
    November 15, 1993--Georgia Environmental Protection Division (EPD) 
submits 15 percent Rate of Progress (ROP) Plan to Environmental 
Protection Agency (EPA) for approval. Provides for at least 15 percent 
reductions of VOC from 1990-1996.
    November 15, 1994--EPD submits 9 percent ROP Plan to EPA for 
approval. Provides for at least a 3 percent per year reduction of NOx 
for 1997, 1998 and 1999.
    June 28, 1995--Atlanta Regional Commission (ARC) adopts conforming 
2010 Regional Transportation Plan (RTP) and Fiscal Year (FY) 1996-2001 
Transportation Improvement Program (TIP)--six-year TIP, two 3-year 
tiers. Conformity based on VOC budget established in the 15 percent ROP 
Plan. ARC Resolution 18-95.
    August 7, 1995--United States Department of Transportation (USDOT) 
conformity determination for 2010 RTP and fiscal year 1996-2001 TIP.
    June 17, 1996--EPD submits revisions to the 15 percent ROP Plan and 
9 percent ROP Plan. NOx budget established, 214.77 tpd.
    Note: ARC was unable to develop a fiscal year 1997-1999 TIP that 
conformed to the NOx emission budget established in the 9 percent ROP 
Plan. Fiscal year 1997-1999 TIP was 21.93 tpd over budget.
    September 25, 1996--ARC amends the fiscal year 1996-2001 TIP. ARC 
Resolution 22-96.
    June 25, 1997--ARC amends the fiscal year 1996-2001 TIP. ARC 
Resolution 17-97.
    Note: Amendments were limited to projects considered exempt from 
transportation conformity requirements.
    December 30, 1997--ARC adopts Interim TIP (ITIP), fiscal year 1998-
2000 with contingencies (several project removals). ARC Resolution 32-
97.
    January 17, 1998--Conformity lapse begins due to failure to 
redetermine conformity of RTP within 18 months of the State's most 
recent State Implementation Plan (SIP) revision that establishes Motor 
Vehicle Emission Budgets (MVEB), as required by 93.104(e) of 
transportation conformity rule.
    Note: fiscal year 1996-2001 TIP, approved in August 1995 by USDOT, 
valid for 2 years. TIP was to expire in August 1997. However, on 
February 21, 1997 the Federal Highway Administration (FHWA) Georgia 
Division office extended the expiration of the TIP until December 31, 
1997, due to previous extenuating circumstances of the 1996 Olympic 
Games (which concluded in early August 1996) and contingent upon ARC 
having a new, conforming RTP by December 31, 1997. As of December 1997, 
ARC was not expected to have a conforming RTP until April 1998, at the 
earliest. On December 22, 1997, FHWA and Federal Transit Administration 
(FTA) again extended expiration of the TIP, upon request of 
headquarters and in consultation with EPA, until January 17, 1998.
    January 28, 1998--ARC adopts fiscal year 1998-2000 ITIP, 
contingencies met. ARC Resolution 2-98.
    April 22, 1998--ARC amends fiscal year 1998-2000 ITIP. ARC 
Resolution 12-98.
    July 22, 1998--ARC adopts Interim 2020 RTP and ITIP amended to add 
fiscal year 2001, fiscal year 1999-2001. ARC Resolution 25-98.
    December 2, 1998--fiscal year 1999-2001 ITIP amended. ARC 
Resolution 38-98.
    January 20, 1999--Georgians for Transportation Alternatives (GTA) 
v. Shackelford\1\ filed. Plaintiffs challenge decisions made to adopt, 
approve or fund certain highway projects on the grounds that decisions 
violate Clean Air Act (CAA) provisions, the Transportation Equity Act 
for the 21st Century (TEA-21), the National Environmental Policy Act, 
and the Administrative Procedure Act.
---------------------------------------------------------------------------
     \1\Plaintiffs: GTA, Georgia Conservancy, and Sierra Club. 
Defendants: Wayne Shacklford--Commissioner of Georgia Department of 
Transportation (GDOT), GDOT, Secretary USDOT, FHWA Administrator, FTA 
Administrator, Georgia Division FHWA and FTA Regional Administrators, 
ARC.
---------------------------------------------------------------------------
    March 18, 1999--9 percent ROP Plan Approved (64 FR 13348).
    April 26, 1999--15 percent ROP Plan Approved (64 FR 20186).
    June 18, 1999--GTA v. Shackelford settled. Settlement agreement 
requires extensive Peer Review of transportation modeling process 
within 90 days of Board adoption of conforming TIP and RTP.
    June 23, 1999--ARC adopts fiscal year 2000-2002 ITIP. ARC 
Resolution 17-99.
    1999--Development/refinement of new draft plan for 2025 RTP and 
fiscal year 2001-2003 TIP.
    October 27, 1999--ARC amends fiscal year 2000-2002 ITIP. ARC 
Resolution 25-99.
    October 28, 1999--EPD submits Attainment SIP to EPA for approval. 
MVEB established, NOx = 224.13 tpd, VOC = 132.21 tpd.
    February 28, 2000--MVEB adequacy announced in Federal Register (65 
FR 10490).
    March 22, 2000--ARC adopts conforming 2025 RTP and fiscal year 
2001-2003 TIP. Conformity based on MVEB established in Attainment SIP 
submittal.
    April 28, 2000--Petition for Review filed by GTA, et al\2\. with 
USEPA in US Court of Appeals for the Eleventh Circuit. Petitioners seek 
review of MVEB adequacy determination.
---------------------------------------------------------------------------
     \2\Petitioners: GTA, Sierra Club, Southern Organizing Committee 
for Economic and Social Justice and Georgia Coalition for the People's 
Agenda. Respondent: USEPA.
---------------------------------------------------------------------------
    June 8, 2000--Petition to EPA for Reconsideration of MVEB Adequacy 
Determination filed by Southern Environmental Law Center (SELC) on 
behalf of GTA et. al\3\.
---------------------------------------------------------------------------
     \3\GTA, Sierra Club, Southern Organizing Committee for Economic 
and Social Justice, Georgia Coalition for the People's Agenda and 
Environmental Defense.
---------------------------------------------------------------------------
    June 14-16, 2000--Peer Review of ARC transportation modeling 
process. Peer Review found transportation and emission models ``state 
of the practice.''
    June 29, 2000--Final written request to EPA for a stay of the MVEB 
adequacy determination, pending review by 11th Circuit Court.
    July 5, 2000--60-day notice of intent to sue sent by SELC to EPA 
Administrator.
    July 10, 2000--EPA counsel denies stay.
    July 11, 2000--Motion to Stay on Expedited Basis, pending Courts 
ruling on merits of April 28 Petition, filed by GTA et. al.\4\ in 11th 
Circuit Court of Appeals. Petitioners request that the order state the 
MVEB may not be used by USDOT for purposes of transportation conformity 
or TIP approval/implementation.
---------------------------------------------------------------------------
     \4\Petitioners: GTA, Sierra Club, Southern Organizing Committee 
for Economic and Social Justice and Georgia Coalition for the People's 
Agenda. Respondent: USEPA. Intervening Respondent: Georgia EPD.
---------------------------------------------------------------------------
    July 18, 2000--Motion to Stay granted by 11th Circuit Court of 
Appeals, pending the Court's decision on the merits of the petition. 
Expedited schedule issued for further proceedings.
    July 18, 2000--EPA concurs with positive conformity determination.
    July 25, 2000--USDOT makes positive conformity determination for 
2025 RTP and fiscal year 2001-2003 TIP.
    Note: Because the MVEB established in the October 1999 SIP 
submittal could not be used due to litigation, the positive conformity 
determination was based on the MVEB established in the 9 percent ROP 
Plan (last legally approved budgets).
    August 8, 2000--EPD requests that EPA rescind the positive adequacy 
determination.
    August 10, 2000--Motion for Voluntary Remand filed by EPA in 11th 
Circuit Court of Appeals. EPA requests that the Court remand the matter 
back to the Agency so that the positive MVEB adequacy determination 
could be withdrawn. EPA argues that the MVEB adequacy determination is 
no longer relevant for any purpose considering the conformity 
determination was made using previously established budgets.
    August 24, 2000--Motion for Voluntary Remand refused by 11th 
Circuit Court of Appeals.
    August 30, 2000--US Court of Appeals for the District of Columbia 
decides that implementation of NOx SIP Call cannot be required before 
May 31, 2004
    December 21, 2000--EPD sends letter to EPA withdrawing MVEB 
contained in the October 28, 1999 SIP submittal. EPD asks EPA to not 
consider budgets further until State concludes work needed to submit a 
revised budget (speed study, updated registration data, etc).
    December 22, 2000--Joint motion (EPD/EPA) filed with 11th Circuit 
Court to stay further proceedings for review of MVEB adequacy 
determination. Motion based on agreement that MVEB established in 
October 28, 1999 SIP submittal are no longer appropriate for purposes 
of making a transportation conformity decision. Joint motion also 
requests permission for EPA to withdraw finding of adequacy.
    January 12, 2001--11th Circuit Court grants EPA motion to withdraw 
adequacy determination.
    January 26, 2001--MVEB adequacy determination withdrawn by EPA. 
Withdrawal based upon EPD's request that EPA not consider budgets until 
further work is completed for budget revisions and NOx SIP Call 
Implementation delay until 2004. (66 FR 7904)
    January 17, 2001--Sierra Club et. al.\5\ file suit in US District 
Court of Northern District of Georgia against EPA Administrator for 
failure to reclassify Atlanta from ``serious'' to ``severe''. BUMP-UP 
SUIT. Petitioners seek to require that EPA perform mandatory finding as 
to whether Atlanta attained the ozone standard by Nov 15, 1999 under 
Section 181/182 of the CAA.
---------------------------------------------------------------------------
     \5\Plaintiffs: Sierra Club, Southern Organizing Committee for 
Economic and Social Justice, Georgia Coalition for the People's Agenda 
and Environmental Defense. Defendant: EPA Administrator.
---------------------------------------------------------------------------
    February 13, 2001--Sierra Club et. al. v. ARC et. al.\6\ filed in 
US District Court of Northern District of Georgia. Suit seeks 
declaratory judgment based on alleged violations of CAA conformity 
requirements, violations of TEA-21 Transportation Law, and public 
participation requirements for the 2025 RTP and fiscal year 2001-2003 
TIP. In addition to declaratory relief, plaintiffs enjoin advancement 
of 2025 RTP and fiscal year 2001-2003 TIP.
---------------------------------------------------------------------------
     \6\Plaintiffs: Sierra Club, Southern Organizing Committee for 
Economic and Social Justice, Georgia Coalition for the People's Agenda 
and Environmental Defense. Defendants: ARC, GDOT, Georgia State 
Transportation Board, UDOT, FHWA, FTA, and directors of these agencies.
---------------------------------------------------------------------------
    April 5, 2001--Sierra Club et. al. request preliminary injunction 
to stop advancement of any projects in the 2025 RTP or fiscal year 
2001-2003 TIP until Federal lawsuit is heard.
    May 28, 2001--Declaration of Michael A. Repogle for plaintiffs
    May 29, 2001--Declaration of Robert A Johnston for plaintiffs
    June 5 and June 6, 2001--Injunction Hearing
    June 15, 2001--Judge Beverly Martin, U.S. District Judge, denies 
request for injunction. Directs parties to file preliminary planning 
report and scheduling order.
    July 25, 2001--Request for Production of Documents and 
Interrogatories from plaintiffs.
    July 31, 2001--Sierra Club et.al. file Motion for Partial Summary 
Judgement
    August 27, 2001--Defendants object to Request for Production of 
Documents and Interrogatories.
    January 8, 2002--USEPA publishes approval of MVEBs submitted with 
July 17, 2001 SIP submittal in FR (67 FR 887).
    January 18, 2002--Judge Beverly Martin rules in favor of defendants 
for February 2001 lawsuit. She finds that State and Federal agencies 
did not violate the Clean Air Act when they approved the 2025 RTP and 
fiscal year 2001-2003 TIP in 2000. (Sierra Club v. Atlanta Regional 
Commission, N.D. Ga., No. 1:01-CV-0428, 1/18/02).
    January 23, 2002--MVEBs become effective.
    March 1, 2002--Petitioners (see case below) submitted to EPA a 
written request for a stay of MVEB adequacy determination.
    March 7, 2002--Sierra Club et. al v. USEPA\7\ filed in 11th Circuit 
Court of Appeals. MVEB CHALLENGE. Petitioners ask that the Court vacate 
the Final Rule approving the MVEBs submitted with the July 17, 2001 SIP 
submittal. Argument based on extension policy to 2004. Petitioner's 
also file Petition for Review and accompanying Motion to Stay on an 
Expedited Basis.
---------------------------------------------------------------------------
     \7\Plaintiffs: Sierra Club, Southern Organizing Committee for 
Economic and Social Justice, Georgia Committee for the People's Agenda 
and Environmental Defense. Defendant: USEPA.
---------------------------------------------------------------------------
    March 13, 2002--Affadavit of Charles Krautler, ARC re: Petitioners 
Petition for Review and accompanying Motion to Stay on an Expedited 
Basis filed in 11th Circuit Court.
    March 14, 2002--Response of the State of Georgia in Opposition to 
Petioners' Motion for Stay on an Expedited Basis and Cross-Motion by 
the State to Stay all Further Proceedings filed in 11th Circuit Court.
    March 14, 2002--Respondent's (EPA) Opposition to Petitioners' 
Motion for Stay and Cross-Motion for a Stay of the Proceeding filed in 
11th Circuit Court.
    April 17, 2002--11th Circuit Court grants Motion for Stay of MVEB.
    May 7, 2002--USEPA Approval and Promulgation of Georgia 1-Hour 
Ozone Attainment Demonstration, Motor Vehicle Emissions Budgets,
    Reasonably Available Control Measures, Contingency Measures and
    Attainment Date Extension (67 FR 30574)
    Note: Trigger clock was halted 21 days--from date of MVEB stay 
(April 17) to date of SIP approval (May 7).
    Note: In May 2002, EPA also filed a Motion to Dismiss as Moot in 
regards to the Bump-Up lawsuit; the argument being that the approval of 
the Atlanta Attainment SIP authorized the extension of the attainment 
date from 1999 to 2004. More specifically, under Section 307 of the CAA 
the US District Court does not have jurisdiction to review EPA SIP 
determinations, only Circuit Court of Appeals have this authority. 
Sierra Club has requested that the District Court retain jurisdiction 
over this case in the event that the 11th Circuit Court overturns EPA's 
approval of the SIP (assuming that a petition challenging EPA's 
approval of the SIP will be filed, on an expedited basis, between June 
18 and July 8, 2002 with the 11th Circuit Court-see comment below).
    May 22, 2002--Petition for Review of the MVEB dismissed--clerk's 
dismissal only (EPA's Motion to Dismiss as Moot never docketed). Case 
already dismissed for want of prosecution as a result of Sierra Club 
failure to file abstracts of the administrative record.
    June ? 2002--11th Circuit Court reinstates the MVEB lawsuit, orders 
EPA to file brief on the merits of the case by June 26, 2002. EPA will 
refile its Motion to Dismiss as Moot.
    Note: The MVEB stay is back in place as a result of 11th Circuit 
Court reinstating the MVEB lawsuit. The MVEB cannot be used for 
conformity analysis until the stay is lifted.
    June 7, 2002--Sierra Club asks EPA Regional Administrator to 
withdraw or stay EPA's SIP approval.
    June 13, 2002--Regional Administrator denies request to stay or 
withdraw EPA's SIP approval. EPA, therefore, expects that a petition 
challenging EPA's approval of the SIP will be filed, with Motion for an 
Expedited Stay, between June 18 and July 8, 2002 (challenge must be 
filed within 60 days of publication of approval of the SIP in the 
Federal Register, deadline is July 8). Petition will challenge the 
extension of the attainment date to 2004.
    June 26, 2002--SELC for Southern Organizing Committee, Georgia 
Coalition for Peoples Agenda vs EPA. Petition filed for Review of EPA's 
Approval of the Georgia Attainment SIP. Motion filed for Expedited Stay 
of EPA's Approval with 11th Circuit Court
    July 2, 2002--Sierra et al vs ARC, GDOT, USDOT. Appeal of 2/28/02 
Final Judgment. Oral arguments to be rescheduled after August with 11th 
Circuit Court.
    July 2, 2002--Sierra vs EPA. DC Court vacated (removed approval of) 
revised SIPs for DC area. Basis of argument--EPA not authorized to 
approve revised SIPs that extend area's attainment date.
                                 ______
                                 
                North Central Texas Council of Governments,
                                      Arlington, TX, July 30, 2002.
The Honorable Jim Jeffords, Chairman
Committee on Environment and Public Works
U.S. Senate
Washington, DC 20510-6175

Dear Chairman Jeffords: This letter is in response to a request made by 
the Committee on Environment and Public Works of the U.S. Senate, dated 
July 3, 2002, regarding our experience with the Clean Air Act 
conformity program and transportation control measures, and the impact 
these have had on our transportation and air quality efforts. Attached 
you will find responses to the series of specific questions that were 
transmitted to us.
    We appreciate the opportunity to provide input on the 
reauthorization of the Transportation Equity Act for the 21st Century 
process. If I can be of further assistance on this subject matter, I 
can be reached at (817) 695-9240.
            Sincerely,
                                      Michael Morris, P.E.,
                                         Director of Transportation
                   difference in timing of schedules
    Question. Describe how the different schedules for the SIP, TIP, 
conformity, etc. and the impacts of data changes on out year emissions 
affect your ability to develop effective and timely transportation and 
air quality plans. Provide a time-line or narrative description of your 
various schedules.
    Response. The differences of the schedules for the SIP, TIP, 
Metropolitan Transportation Plan (MTP), and Conformity are varied and 
can come without warning. For the Dallas-Fort Worth Metropolitan 
Planning Organization (MPO), the MTP is usually prepared every 3 years, 
consistent with Federal rules. However, SIP or TIP influences could 
trigger a new MTP out of sequence. As a result, a new conformity 
analysis is required. As highlighted in Table 1, the MPO decided a MTP 
Update was required in 2001 (less than a year after receiving Federal 
approval on a similar effort) to ensure a 3-year MTP cycle due to a SIP 
schedule that would establish new motor vehicle emission budgets 
(MVEBs) and conformity.
    A new TIP is developed every year due to the number of 
transportation projects being planned. This is above the typical 2-year 
cycle. As a result, a new conformity analysis is required. However, due 
to Tier II regulatory language contained in our applicable SIP, the 
region is unable to perform a necessary conformity analysis on the TIP 
in 2003, therefore our TIP schedule, and associative conformity 
analysis, changed to make TIP modifications prior and after our freeze 
(see Table 1).

                          TABLE 1: DALLAS-FORT WORTH METROPOLITAN PLANNING ORGANIZATION
                                   TRANSPORTATION PLANNING DOCUMENT SCHEDULES
                                                Current Schedules
----------------------------------------------------------------------------------------------------------------
                                                                                                Conformity (used
                Year                  SIP (as needed or     MTP (every 3       TIP (every 2     to measure SIP,
                                       attainment date)        years)             years)          TIP and MTP)
----------------------------------------------------------------------------------------------------------------
1997................................                                     X                  X                  X
1998................................                                                        X                  X
1999................................                  X                                     X                  X
2000................................                                     X                                     X
2001................................                                    *X                  X                  X
2002................................                                                        X                  X
2003................................
2004                                                  X                  X                  X                  X
2005................................                                                        X                  X
2006................................
2007                                                                     X                  X                  X
----------------------------------------------------------------------------------------------------------------
MTP Update required to ensure 3-year cycle maintained as result of new SIP 2004

    These conflicting schedules hinder a region's ability to 
appropriately implement policies, programs, and projects in a Plan or 
TIP as planning documents continue to be the focus. In addition, 
differences in timing of schedules and premature adjustments to 
schedules impede development of an out year strategic milestone 
calendar, sending confusion to our regional partners and resource 
agencies as they try to incorporate their planning activities to these 
Federal obligations.
    Question. What impact have these schedules had on investments in 
highway and safety projects, construction costs, and air quality 
projects and activities?
    Response. The timely implementation of transportation projects and 
programs are of high priority. Therefore, to avoid impacts, schedules 
of the TIP and MTP are often adjusted, within the limits allowed by 
regulations, to ensure that projects and programs that are ready for 
implementation can proceed. However, SIP-related requirements are often 
out of sync with the TIP and MTP and have the potential to cause TIP 
and MTP modification freezes due to the inability to perform an air 
quality conformity analysis. This could cause recommended projects from 
being able to proceed because they may be inconsistent with TIP or MTP. 
Unnecessary delays could cause construction costs to increase and have 
a negative impact on air quality if projects cannot be implemented as 
expected. Generally, more time is spent on replanning already approved 
plans than working on the implementation of specific projects. Greater 
focus on mobility and air quality project delivery is necessary.
    Question. What has been your experience coordinating your SIP and 
conformity processes with SIP submittals or updates?
    Response. Keeping in mind the varying schedules with SIPs and 
conformity associated to a MTP and TIP, experiences in coordinating 
among these elements have been a challenging process in the Dallas-Fort 
Worth Metropolitan Area. This can be attributed to coordinating a MTP 
that has a 3-year update cycle, a TIP that has a 2-year update cycle, 
and a SIP submittal process influenced by real-time observed air 
quality data.
    As experienced in the DFW area, a SIP submittal can introduce 
regulatory language that would require changing air quality conformity 
schedules of a MTP and TIP. An example is the Environmental Protection 
Agency's (EPA) position with regards to use of Tier II automobile 
standards in the MOBILE5 emission factor model. This situation required 
the region to take a step back in its implementation of policies, 
programs, and projects and reissue multiple planning activities.
                   mobile6 versus mobile5 projections
    Question. Compare and contrast your MOBILE5 and MOBILE6 emission 
projections.
    Response. In the fall of 2001, the EPA sponsored a study to 
evaluate the differences of MOBILE5 and MOBILE6 using local data from 
the Dallas-Fort Worth region. Although a final report has not yet been 
published, draft reports indicate an increase in MOBILE6 projected 
Volatile Organic Compounds (VOC) and Nitrogen Oxides (NOx) of up to 50 
percent over MOBILE5. After approximately 2008, projected emissions are 
similar between MOBILE6 and MOBILE5. This significant trend continues 
to occur into the future where we see MOBILE6 emissions well below 
those of MOBILE5 emissions. These trends are consistent with national 
research performed on MOBILE6 versus MOBILE5.
    Question. How does the increase in near term emissions (through 
2010) from MOBILE6 affect your conformity status?
    Due to the significant differences in near term emissions between 
the two emission factor models, it would be extremely difficult for a 
region to pass a conformity analysis using MOBILE6 against SIP motor 
vehicle emissions budgets previously developed with MOBILE5. Since this 
is an obvious analysis mismatch, the Dallas-Fort Worth nonattainment 
area has planned its schedules accordingly to avoid such an evaluation 
(as noted in the Differences in Timing of Schedules responses above). 
The proper method, which is included in our mid-course review, is to 
recalibrate the air chemistry model with the new MOBILE6 emission 
software and reforecast the emissions permitted in a demonstration of 
attainment (i.e., higher emission do not necessarily mean a SIP or 
conformity analysis would not be successful.)
    Question. How will your air quality planning process take the new 
MOBILE6 into account, and will the SIP be updated before or after the 
new MOBILE6 projections?
    Response. As part of the Dallas-Fort Worth SIP submittal in April 
2000, a mid-course SIP review is committed to EPA by May 2004. Within 
this process, MOBILE6 emission projections will be incorporated into an 
air chemistry model through new on-road mobile source emission 
inventories. This modeling process will establish MOBILE6 derived motor 
vehicle emissions budgets for the nonattainment area for use in an air 
quality conformity analysis scheduled in 2004.
    Question. Will the new 8-hour NAAQS likely lead to an increase or 
decrease in your vehicle emissions budget?
    Response. As an example, if more on-road mobile emission reductions 
are necessary to ultimately meet the 8-hour standard, then it could be 
assumed the resulting motor vehicle emissions budgets will decrease. 
More information will be available through a comprehensive emissions 
analysis following final rules. A different mix of controls may be 
necessary to meet an 8-hour standard, which are not well understood 
today (e.g. role of VOC emissions.)
                  additional vehicle emission controls
    Question. What additional existing controls could be implemented in 
your area to significantly reduce vehicle emissions, e.g., inspection 
and maintenance, reformulated fuels, diesel retrofit, TCMs?
    Response. Having just completed a comprehensive and technical 
review of on-road mobile control strategies for the Dallas-Fort Worth 
SIP, there is no other existing control strategy to significantly 
reduce vehicle emissions that could be feasibly implemented in the 
region. As we continue to seek or develop additional controls, we keep 
in mind the main elements of on-road mobile emissions; cold starts, pre 
10 a.m. emissions, hard acceleration, excessive idling, high emitting 
vehicles, diesel engines, low speeds, excessive speeds. Another 
approach to reduce vehicular emissions is to advance already existing 
Federal gasoline, diesel, and engine standards earlier than required. 
One has to remember that Dallas-Fort Worth is already implementing an 
aggressive high-emitting vehicle program, freeway management curriculum 
for fire and police, vehicle speed reduction with enforcement, and 
sustainable development projects.
    Question. Would these controls be sufficient to address the 
potential increase in emissions projected under MOBILE6?
    Response. One cannot conclusively state that the above-mentioned 
measures would counter all the potential increases in emissions 
projected in MOBILE6, since the model is yet to be tested under Dallas-
Fort Worth specific conditions and the appropriate methodology is to 
recalibrate the air chemistry models to determine needed emission 
budgets.
                role of transportation control measures
    Question. What role do TCM's plan in helping to meet attainment? 
Please list the TCMs and CMAQ projects in your plan, and the associated 
``off'' or ``on'' model emission reduction credits for each.
    Response. Conformity could not be certified without CMAQ funds and 
Transportation Control Measures (TCMs). TCMs, along with other 
pollution reduction strategies, have assisted the Dallas-Fort Worth 
region in working toward attainment by continually reducing the number 
of ozone exceedance days recorded in the region from 15 in 1995 to 2 in 
2001. Currently, the Dallas-Fort Worth region is under a conforming MTP 
that includes Intersection Improvements, Rail Projects, Bicycle and 
Pedestrian Facilities, High Occupancy Vehicle Lanes, Vanpools, Park and 
Ride Lots, and Grade Separations. Table 2 outlines the emission 
reduction estimates associated with each TCM category. Most TCMs in the 
plan are funded through the CMAQ Program. Although not classified as 
TCMs, additional strategies utilizing CMAQ funds and included in the 
region's SIP include clean vehicles, Intelligent Transportation 
Systems, vehicle retirement, sustainable development, and traffic 
signal improvements.

                                                     Table 2
----------------------------------------------------------------------------------------------------------------
                                                                Emission Reduction Estimates (lbs/day)
                                                     -----------------------------------------------------------
 Transportation Control Measures      Commitments      Volatile Organic Compounds          Nitrogen Oxides
                                                     -----------------------------------------------------------
                                                        2007      2015      2025      2007      2015      2025
----------------------------------------------------------------------------------------------------------------
Intersection Improvements.......  775 Locations.....     2,306     1,450     1,293     4,635     2,420     2,150
Grade Separations (1)...........  15 Locations......        --        --        --        --        --        --
HOV Lanes (1)...................  76 Miles..........        --        --        --        --        --        --
Park-n-Ride Lots (2)............  8,236 Spaces......        94        60        54       190       100        87
Pedestrian/Bicycle Facilities...  710 Miles.........     1,140       727       649     2,290     1,202     1,046
Rail (1)........................  96.9 Miles........        --        --        --        --        --        --
Vanpool.........................  547 Vanpools......       341       217       194       685       360       313
    TOTAL (lbs/day).............  ..................     3,881     2,454     2,190     7,800     4,082     3,596
    TOTAL (tons/day)............  ..................      1.94      1.23      1.10      3.90      2.04      1.80
----------------------------------------------------------------------------------------------------------------
(1) Emission reduction benefits have been included directly in the Dallas/Fort Worth Regional Travel Model
  (DFWRTM).
(2) Emission reduction benefits are both post-processed and included directly in the DFWRTM.

    Question. What percentage of total emission reductions do they 
represent?
    Response. TCMs amount to approximately 5 percent of on-road NOx 
emission reductions in 2007 and 4 percent of on-road VOC emission 
reductions. Without CMAQ funding, conformity could not have been 
certified.
    Question. Are there CMAQ projects in your plan for which you have 
not applied any on or off model emissions reductions?
    Response. No. All CMAQ projects have identified emission reduction 
credits as requested by the Texas Department of Transportation for a 
CMAQ Annual Report. It should be noted that the CMAQ program has 
encouraged a great deal of planning and funding creativity due to 
different regulations impacting CMAQ and the Surface Transportation 
Program. This creativity has shaped air quality policies, programs, and 
projects for the benefit of reaching attainment and better quality of 
life for each citizen. Without innovative programming, a less 
aggressive air quality program would have resulted.
                      impacts of conformity lapse
    Question. If your area has experienced a conformity lapse, describe 
the effect this has had on transportation and air quality planning, 
funding process, preconstruction, and construction.
    Response. The Dallas-Fort Worth region has not experienced a 
conformity lapse.
    Question. When projects were reactivated, after U.S. DOT approved 
your conformity determination, what impact did this have on funding, 
project completion dates, personnel, renegotiation of contracts, 
updating old information, etc.
    Response. This question does not apply to the Dallas-Fort Worth 
region.
    Question. What impact did the March 1999 U.S. Court of Appeals 
decision to eliminate the EPA ``grandfather'' provision from the 
conformity regulations have on your transportation investments?
    Response. The March 1999 U.S. Court of Appeals decision did not 
have any noticeable impact on transportation investments in the Dallas-
Fort Worth region.
          role of motor vehicle emission estimates and models
    Question. How has conformity analysis helped improve the quality of 
estimates of motor vehicle emissions for SIPs to better protect public 
health?
    Response. The procedure for estimating on-road mobile emissions is 
consistent for both the SIP and the Air Quality Conformity Analysis. 
However, conducting a conformity analysis on a more frequent time scale 
allows for the use of latest planning assumptions and tools to better 
quantify vehicle emissions. Many parameters involved in the 
quantification of emissions change over time such as roadway and 
transit networks, vehicle mix, and demographic data. As a result, new 
emission estimates are actually created with each conformity analysis. 
In addition, the effectiveness of control strategies, including TCMs 
are evaluated based upon implementation schedule and before/after 
studies. The regular study of a region's dynamics and the consequential 
effect on emissions better prepare an agency when it is time to develop 
a new SIP. Better knowledge of vehicle emission estimates ultimately 
leads to better protection of public health. This replanning effect is 
offset by less time actually implementing aggressive air quality 
strategies.
    Question. How accurate and consistent have estimates of regional 
motor vehicle emissions been when compared with each other over time 
and with actual experience?
    Response. Regional on-road motor vehicle emissions estimates in the 
Dallas-Fort Worth nonattainment area have been consistently following a 
decreasing trend due to the region implementing many control strategies 
over the past 10 years. Specifically, significant emissions reductions 
are attributed to inspection and maintenance, reformulated fuels, 
transportation control measures, continual advances in vehicle 
technology, and associated vehicle fleet turnover. Table 3 lists the 
official on-road mobile emission estimates for the Dallas-Fort Worth 
ozone nonattainment area.

                                 TABLE 3
               Dallas-Fort Worth Ozone Nonattainment Area
                    Motor Vehicle Emission Estimates
------------------------------------------------------------------------
            YEAR                    VOC (tpd)             NOx (tpd)
------------------------------------------------------------------------
1990........................  306.60..............  293.03
1996........................  235.00..............  NOx Waiver
1999........................  125.25..............  NOx Waiver
2007........................  75.34...............  149.72
------------------------------------------------------------------------

    Question. How have official estimates of motor vehicle emissions in 
your metropolitan region changed over the past 10-20 years and how well 
have they tracked actual emissions in years past?
    Response. The overall decrease in modeled motor vehicle estimates 
compare well with monitor data from 1990 to 2001. During this time 
period, the extents to which the monitors violate the 1-hour ozone 
standard have steadily decreased indicating a concurrent decrease in 
precursor pollutants released into the atmosphere. In comparison to 
observed monitored data, the highest number of exceedances recorded at 
any given monitor over a 3-year averaging period has decreased from 12 
exceedances in the 1994 to 1996 timeframe to 3 exceedances in the 1999 
to 2001 timeframe.
                     role of transportation models
    Question. Has conformity analysis been supported by adequate 
regional transportation analysis models that accurately reflect how 
changes in highway capacity affect total travel and air pollution 
emissions?
    Response. Yes and no. Transportation analysis models in use today 
were originally developed for macroscale level planning, not micro-
scale level planning required in air chemistry modeling. Issues include 
time-of-day, speeds, functional classification, vehicle miles of 
travel, etc. For more information on concerns regarding existing 
transportation analysis models and recommendations for future models, 
please refer to a report published by the National Research Council; 
Modeling Mobile Source Emissions, 2000, National Academy of Science. 
However, transportation models are more accurate than emission models 
(e.g., MOBILE5 vs. MOBILE6) and air chemistry models (e.g., for 20 
years urban areas were told to reduce VOC emissions instead of NOx 
emissions.)
    Question. How well have your region's travel models tracked actual 
experience with growth in vehicle miles of travel (VMT)?
    Response. The Dallas-Fort Worth Regional Travel Demand Model tracks 
vehicle miles of travel very well. The roadway travel model calibration 
and validation process are major steps prior to the forecasting process 
to ensure the travel model replicates observed human travel behavior in 
the region adequately. In the Dallas-Fort Worth region, models project 
20 years backward before they are asked to project 20 years forward.
    Question. Please include an indication of how sensitive your/these 
models are to effects of induced traffic.
    Response. The travel model is sensitive to the effects of induced 
traffic. It depends on your definition of induced travel. Induced 
travel includes population and employment relocation, and trip length 
increases with freeway investments. This travel model does this. Route 
choice and time of day travel is not classified as induced travel 
although most models successfully address this. The better question is 
how well does EPA forecast emissions and air quality models forecast 
ambient ozone levels accurately. A review of the previously cited NAS 
document is suggested.
                               __________
                    Denver Regional Council of Governments,
                                                     July 24, 2002.

Committee on Environment and Public Works
U.S. Senate
Washington, DC 20510-6175

Dear Mr. Chairman: Thank you for the opportunity to provide for your 
consideration our experience with the Clean Air Act conformity program 
and transportation control measures and the impact these have had on 
our transportation planning efforts. We are pleased to hear that the 
committee will evaluate the conformity program as part of the 
reauthorization of TEA-21.
    As the Metropolitan Planning Organization (MPO) for the Denver 
region, the Denver Regional Council of Governments (DRCOG) has had 
extensive experience with the conformity requirements of the Clean Air 
Act. In response to your letter we have attached a document, ``Denver, 
Colorado Conformity Case Study,'' which addresses in some detail the 
seven issue areas you identified, including an assessment of the impact 
on our ability to perform our responsibilities under TEA-21.
    Our overall characterization of the conformity program is that it 
is an important and largely successful Federal program that could be 
improved both with the addition of some flexibility that would allow 
transportation and air quality agencies to adapt the requirements to 
local circumstances and with some funding to better enable 
transportation and air quality agencies to meet this mandate.
    Our experience in Denver in particular points out the need for some 
flexibility in the State Implementation Plan (SIP) process to allow for 
updating mobile source budgets to incorporate current information and 
models and to achieve consistency between the transportation and air 
quality planning processes and resulting documents. Similarly, 
consistency between the transportation and air quality planning 
processes and documents, both in the timing of the schedules for their 
adoption and amendment and in the timeframes used in the transportation 
and air quality analyses, would greatly assist our efforts to meet the 
national goals of clean air and efficient transportation.
    Our other recommendations regarding the conformity program relate 
to our experience with the conformity analysis process. The process for 
determining conformity is very complex and time consuming. We have had 
to assign significant funding and staff resources from other projects 
to perform the mandated conformity analyses. It would be very helpful 
if reauthorization would provide resources for conformity determination 
efforts.
    The law also should provide some flexibility in the use of the 
transportation models for conformity determinations to better account 
for the inherent limitations of these models. The regional 
transportation analysis models only produce relative levels of impacts 
but under the existing conformity program have been required to provide 
``hard'' estimates that become legally binding. It makes more-sense to 
us that the law allow the use of estimates in ranges, rather than 
absolute numbers. Also, further study of the amount of ``induced travel 
demand'' is necessary to better account for it in the transportation 
modeling process. This could be a useful addition to the transportation 
modeling process provided agreement could be reached as to how to 
account for it.
    The attached document provides additional detail and background for 
these policy recommendations, as well as summarizing cur experience 
withh the other issue areas you have identified. We hope that you find 
our experience and recommendations useful in your efforts to improve 
the conformity program and its role in achieving the national 
priorities of clean air and efficient transportation. If you would like 
further information, please do not hesitate to contact Jeff May at 303-
480-6746 or mailto:[email protected].
            Sincerely,
                                             Karin McGowan,
                         Director, Policy and Legislative Division.
                                 ______
                                 
                 Denver Colorado Conformity Case Study
 (Submitted by The Denver Regional Council of Governments on July 23, 
                                 2002)
    This paper is organized according to the issues identified in the 
above referenced letter and questionnaire.
Difference in Timing of Schedules
    The difference in timing of schedules for adopting and amending 
transportation and air quality plans and for adopting conformity 
findings has created a situation where transportation and air quality 
agencies have had to expend an enormous amount of resources to 
coordinate the inconsistent federally mandated schedules.
    The air quality planning process and the transportation planning 
process in the Denver region have accommodated conflicting Federal 
requirements in terms of schedules for the State implementation process 
(SIP), Regional Transportation Plan (RTP), Transportation Improvement 
Program (TIP), and conformity requirements. Over the last 12 years, the 
process has worked only because of cooperative and collaborative 
efforts by the Regional Air Quality Council (RAQC), which is the lead 
air quality agency for the Denver area, the Air Pollution Control 
Division (APCD) of the Colorado Department of Health and Public 
Environment, the regional office of the United States Environmental 
Protection Agency (EPA), local project implementation agencies, 
including the Colorado Department of Transportation (CDOT) and the 
Denver Regional Council of Governments (DRCOG) as Metropolitan Planning 
Organization (MPO). The SIP documents for Denver are now all 
maintenance plans, which have been developed by the air quality 
planning agencies and approved or found adequate by the USEPA. Both the 
RAQC and the APCD as well as the EPA regional office have been very 
cognizant of the impact of the adoption of their documents on the 
transportation planning process and have modified their schedules for 
development and adoption of air quality planning documents so as not to 
negatively impact the transportation planning process.
    In addition, local efforts have had to overcome inconsistent 
federally mandated timeframes. Even though Federal regulations only 
call for short term analysis of air quality problems, the RAQC 
developed a non-regulatory long-range air quality plan (Blue Print for 
Clean Air) which bridges the gap between the federally SIP mandated 3-
10 year planning horizon on SIP documents, and the federally mandated 
longer range, 6 to 20 year planning timeframe of the transportation 
planning process documents. In addition the development of each mobile 
source budget has been accompanied by an informal review of long-range 
impacts to ensure that the Transportation Planning Process in 
conformity determinations can logically meet the proposed budget.
    The problems encountered in the Denver area could be reduced by 
providing more flexibility in the SIP process for updating mobile 
source budgets, using more current information and models than was 
available when these SIP documents were prepared, and also by creating 
consistency between the analysis timelines for all the various 
documents in the air quality and transportation planning process.
    The lack of congruity between the transportation and air quality 
schedules has had impacts on the cost of investments in highway and 
safety projects. At one point early in the conformity process, the 
Denver region was unable to proceed with new capacity projects for 
approximately 18 months, during which time only projects exempt from 
the conformity process were moved forward. During the 1-year period in 
which we could not move forward with new capacity projects, the 
Colorado construction costs index increased approximately 4 percent 
percent.
    The conformity process has had a larger impact on transportation 
funded air quality projects and activities. The process has reinforced 
the need for transportation projects that aid in finding conformity. An 
example of these projects are PM-10 programs which use local, State and 
Federal highway funds for street de-icing and anti-icing programs and 
street sweeping.
    The Transportation Planning Process works cooperatively with the 
Air Quality Planning process to develop logical air quality emissions 
budgets that protect public health and allow necessary transportation 
projects to proceed.
    Experience in the Denver region has led us not to include many 
items as Transportation Control Measures (TCM's) in the SIP-documents. 
The combination of logical budgets and few legally mandated TCMs has 
allowed the region to process ten conformity findings in the last 12 
years. Only in 1993 was the Transportation Planning Process unable to 
find conformity and a list of projects was adopted rather than a 
Transportation Improvement Program. Our inability to meet the emission 
budgets in 1993 was resolved by the Air Quality Planning process 
agreeing to make changes to the vehicle inspection and maintenance 
program sufficient to reduce mobile source emissions below the adopted 
budget and allow a conformity finding.
MOBILE6 Versus MOBILE5 Projections
    There is a need for recognition in the Air Quality Planning Process 
of the impacts of applying Mobile6 projections in the conformity 
determination as compared to Mobile5 projections. The emissions budgets 
adopted through the Air Quality Planning Process will have to be 
changed to ensure conformity of the RTP in the new 2030 horizon year.
    Mobile6 significantly changes estimated emissions from those 
estimated using Mobile5. The most significant problem for the Denver 
region is in terms of carbon monoxide. Our current budget is 800 tons 
per day. Using Mobile5 we have met this budget for all years out to our 
long-range planning horizon of 2025. In contrast Mobile6 emissions 
exceed the current budget in all future horizon years. In 2010 Mobile6 
estimates approximately 1200 tons per day, 400 tons higher than the 
existing budget. Note that the Mobile6 rate of decrease in emissions 
over time is greater than that projected by Mobile5 out to all horizon 
years. This will greatly simplify our ability to demonstrate that a 
higher CO budget can be allowed while still protecting the CO National 
Ambient Air Quality standard (NAAQS). For other pollutants such as VOC 
and NOx associated with ozone and NOx associated with PM10, this 
problem will not exist. The emissions are less than the current budgets 
in all future horizon years out to 2025. In all cases the Mobile6 rate 
of decrease in emissions is greater than that found in Mobile5 for all 
horizon years.
    The carbon monoxide budget will have to be changed in order for 
Denver to find conformity using Mobile6. This includes the budget not 
only through 2010 but through all horizon years. The Air Quality 
Planning process, with assistance from DRCOG and CDOT is moving to 
implement Mobile6. This will necessitate legal actions to change the 
budget that are currently planning for mid 2003. This should allow 
conformity processes to move forward for adoption of our 2030 RTP and 
the related sub-documents. These conformity findings are expected late 
in 2003 and in 2004.
    It is unknown whether the new 8 hour ozone standard will lead to an 
increase or decrease in vehicle emissions budget. The Denver region has 
been very close to the standard, but has not yet violated the NAAQS. If 
a violation of the NAAQS occurs, the Air Quality and Transportation 
Planning processes will have to deal with the development of new 
vehicle emissions budgets.
Additional Vehicle Emission Controls
    Denver currently has a centralized I&M 240 program in place. It has 
been proposed to replace some of the centralized operation with a clean 
screen remote device-sensing program. The negative impact of a clean 
screen program versus a centralized program has already been accounted 
for in the maintenance plan. Implementation of clean screen is unsure, 
as State legislative authority has not yet been obtained.
    The Denver area led the way nationally in terms of oxygenated fuel 
programs aimed at carbon monoxide emission reduction in wintertime. 
During the summer, local refineries and dealers voluntarily change fuel 
specifications to reduce the danger of an ozone violation. It seems 
unlikely that additional vehicle emission controls which can be 
implemented independently within the State of Colorado would be 
sufficient to offset the increase in emissions projected under Mobile6 
for carbon monoxide.
Role of Transportation Control Measures
    Adopted Transportation Control Measures play a part in attainment 
demonstration. Today there is only one outstanding Transportation 
Control Measure (TCM) not fully implemented. That project is the 
construction of a light rail line in the southeast (I-25) corridor. 
This project is included in the RTP and funded in the TIP. It has a 
Full Funding Grant Agreement and is projected to be completed in 2007. 
Credit for this is taken as an 'on' model emission reduction. As such, 
the emission reduction is not separately calculated.
    The effect is CMAQ projects funded through the TIP are included in 
the air quality conformity documentation. These emission reduction 
credits are calculated 'off' model, with the exception of a few transit 
projects that are included 'on' model. The 'off' credits are not used 
in the conformity finding directly, but instead are considered a safety 
margin in meeting the emissions budgets. In past conformity findings 
the emission credits for such 'off' model projects have typically been 
on the order of 3 to 5 percent of total emissions.
Impacts of Conformity Lapse
    Immediately after the adoption of ISTEA, and the promulgation of 
conformity regulations and guidelines, the Denver region was unable to 
show conformity for approximately 18 months. During this time period in 
1993, the Denver region adopted a list of projects (LOP) in place of a 
TIP. During this period of time only safety and other exempt projects 
could proceed forward. Other projects could not move forward if they 
resulted in additional highway capacity. During this year the Colorado 
construction index went up 3.6 percent. The project completion dates 
were pushed back by approximately 1 year because of this delay.
    The impact of the March 1999 U.S. Court of Appeals decision to 
eliminate the EPA ``grandfather'' provisions from the conformity 
regulations was to increase the level of uncertainty concerning the 
Denver region's ability to implement projects. No longer could 
implementing agencies assume that a project could move forward after a 
certain point in the planning and implementation process. This may have 
led to early implementation of preliminary phases of projects to get 
them underway and effectively grandfathered for implementation.
Role of Motor Vehicle Emission Estimates and Models
    The Air Quality conformity analysis is heavily dependant upon 
accurate and precise estimates of motor vehicle emissions. The effect 
of this has been to increase the resources dedicated to development of 
motor vehicle emissions estimates. The emission estimates have much 
improved through the agency coordination and inter-agency cross 
checking of data and information. As the Federal Government did not 
provide additional resources for the conformity process, the dollar and 
manpower resources use in this analysis had to be taken from other 
planning efforts.
    The factor that has led to the largest changes in estimates of 
regional motor vehicle emissions has been changes in the MOBILE models. 
As each generation of mobile model has been released, the estimates of 
emissions increased or decreased, often significantly (See Mobile5 vs. 
Mobile6 discussion earlier). In addition trends through time have 
changed with various Mobile models having more pessimistic or more 
optimistic views of the future. That said, the tie between emissions 
estimates and base year air quality monitored data, has led to 
comparatively accurate estimates of the air quality situation over the 
last 10 years. As projected the Denver region has met and protected the 
NAAQS for public health. Monitored air quality has tended to be better 
than modeled air quality, but this is to be expected as the model 
situation was meant to represent a worse case situation.
Role of Transportation Models
    The regional transportation analysis models were originally 
developed as planning tools. The tools were meant to project such items 
such as number of lanes that will be needed, transit patronage on 
future rapid transit lines, and the impact of major land uses on 
transportation. These models are now being used to develop legally 
binding estimates of motor vehicle emissions. The effect was to lead 
the environmental community to nationally question such items as how 
changes in highway capacity effect total travel and hence air pollution 
emissions. In the Denver area this resulted in changes to the highway 
assignment algorithm to (1) estimate 10 time periods of the day to more 
accurately develop air pollution estimates, and to (2) effectively 
match highway demand and capacity provided. It also led to a direct tie 
between highway speeds used in the distribution phase of the model and 
those estimated at the end of the model, to accurately reflect the 
effect of congestion on trip making.
    The region's travel models' estimates of VMT have been checked 
through the Carbon Monoxide Monitoring Program, which was mandated by 
the 1991 Clean Act Amendment. This monitoring program continued for 
approximately 5 years and recorded deviations of approximately 1 to 4 
percent in estimated vs. actual VMT.
    Induced travel demand is a controversial subject over which there 
continues to be much debate as to its magnitude and cause. The Denver 
Travel Demand Model accounts for the following portions of induced 
traffic. First congested speeds are used in the trip distribution 
model. The Denver Model has a mode share model that moves travelers in 
highway traffic off of congested facilities and onto alternative modes 
such as rapid transit lines or available carpool lanes. Testing 
indicates that the Denver model estimates these model features lead to 
changes in VMT as large as 10 percent. This difference is between 
extreme cases of combined land use and transportation strategies 
contrasting centralized growth and disbursed growth and their impact on 
congestion. The Denver model uses steep traffic diversion curves to 
simulate the impact of congested roadways. This means that the 
introduction of additional lanes in areas where the highway network is 
near saturation, results in those lines being fully utilized through 
additional VMT that effectively represents induced demand.
                               __________
TO: U.S. Senate, Committee on Environment and Public Works
FROM: Metropolitan Planning Organization of the Houston Galveston Area 
        Houston-Galveston Area Council of Governments
1) Differences in Timing of Schedules
    There are a variety of problems resulting from the various 
schedules of the State Implementation Plan (SIP), Transportation 
Improvement Plan (TIP), and conformity, etc. The Clean Air Act requires 
a conformity demonstration once every 3 years, yet numerous other 
triggers render this requirement irrelevant, for all practical 
purposes. Under the Environmental Protection Agency's (EPA) rules, 
nonattainment areas must demonstrate conformity each time EPA proposes 
or approves an initial SIP submittal, each time the EPA modifies a 
control measure that impacts the motor vehicle emissions budget (MVEB), 
and each time a transportation control measure is added, modified, or 
deleted. Conformity demonstrations are also needed each time the 
metropolitan planning organization needs to add or modify a project in 
its transportation plan (since a road or transit project cannot move 
forward unless it is specifically included in a conforming 
transportation plan). This overabundance of conformity triggers means 
that planning organizations are frequently performing conformity 
demonstrations, with limited corresponding benefit.
      Question: Describe how the different schedules for the 
SIP, TIP, conformity, etc. and the impacts of data changes on out year 
emissions affect your ability to develop effective and timely 
transportation and air quality plans.
    Response. An ``initial'' SIP has been submitted to the EPA from the 
State of Texas for the Houston-Galveston Area approximately every 12 to 
18 months for the past 5 years. An initial SIP submittal contains a 
MVEB requiring new conformity analyses and documentation. These 
frequent submissions have caused H-GAC to spend a considerable amount 
of time over the past 5 years conducting analyses and preparing 
conformity documentation.. The time and resources required to prepare 
detailed conformity determinations has come at the expense of planning 
and implementing new transportation and air quality strategies. The 
latest conformity finding received Federal approval in May 2002. In 
order to complete this finding, work was suspended on the more 
fundamental re-evaluation of the region's transportation plan due to 
the time and resource constraints of conformity. Many of the new areas 
of investigation intended to further reduce vehicle emissions 
(including major expansion of high capacity transit corridors and 
exploration of more travel efficient land use development) were 
delayed.
      Question: What impact have these schedules had on 
investments in highway and highway and safety projects, construction 
costs, and air quality projects and activities.
    Response. For the most part, the region has managed to move its 
transportation and air quality improvements forward under the current 
conformity regime. However, as discussed in other sections, the current 
conformity process has taken away from the time that is needed to 
update the metropolitan transportaion plan (MTP), delayed some projects 
due to a conformity lapse, and adversely impacted resources needed to 
plan and implement air quality projects.
      Question: What has been your experience coordinating your 
SIP and conformity processes with SIP submittals and updates?
    The development of the SIP, Metropolitan Transportation Plan (MTP) 
and TIP are seldom in alignment. The SIP process is conducted on an 
independent schedule (with the timing of actions often dictated by the 
EPA or the courts) without regard to the timing of MTP or TIP 
development. For example, the Houston-Galveston nonattainment area is 
now working to develop its new MTP based on soon-to-be completed 
corridor studies. Because the State does not plan to incorporate the 
EPA required MOBILE6 emissions budget until late 2003 or 2004, the 
region's Transportation Policy Council (MPO governing body) may not be 
able to formallyact on locally preferred alternatives developed in 
these corridor studies, due to the MOBILE6 conformity black-out period. 
The MOBILE6 blackout refers to the period of time that MPOs have to use 
MOBILE5, 1 year post-release of the new model or January 29, 2003. 
However, States have 2 years from the release of the new model to 
develop a new MVEB creating a 1-year window where MPOs may not be able 
to develop a new plan and required conformity demonstration.
    These coordination and scheduling issues could be addressed, in 
part, through more formally required coordination processes between the 
States and MPOs.
2) MOBILE6 Versus MOBILE5 Projections
      Question: Compare and contrast your MOBILE5 and MOBILE6 
emission projections.
    Response. For this section, we are using the Houston-Galveston area 
(HGA) attainment date of 2007 as the point of comparison for MOBILE5b 
and MOBILE6. The HGA 2007 MVEB using MOBILE5b was adjusted downward 
when the NOx budget was set to 156.6 tpd. The adjustments to the 
modeled results were due to off-model calculations beyond the 
capabilities of MOBILE5, as well as to programs such as the Voluntary 
Emissions Reductions Program (VMEPs). Please note that none of the 
numbers in Table 1 reflect the impacts of the VMEPs. The VOC budget was 
set at 79.5 tons per day.
      Table 1 is a comparison of the MOBILE5b results used by 
the Texas Natural Resource Conservation Commission (TNRCC) to establish 
the motor vehicle emissions budget for the attainment year 2007 and the 
results produced by MOBILE6 using the same regulatory programs. The 
change in vehicle miles traveled (VMT) is the result of more recent 
planning data, rather than a change in the MOBILE model. Although there 
is some consistency in the overall total budgets between MOBILE5 and 
MOBILE6, there is a significant difference in where the emissions are 
being generated. MOBILE6 more accurately reflects diesel emissions and 
better incorporates engine and fuel improvements which result in lower 
emissions from light-duty vehicles than MOBILE5.

                           Table 1: Impacts of MOBILE6 on the HGA Attainment Year 2007
 
----------------------------------------------------------------------------------------------------------------
                Model                            VMT                   VOC (tpd)                NOx (tpd)
----------------------------------------------------------------------------------------------------------------
MOBILE5b.............................  129362378..............  74.24..................  167.12
MOBILE6..............................  133274706..............  82.94..................  140.17
----------------------------------------------------------------------------------------------------------------

      Question: How does the increase in near term emissions 
(through 2010) from MOBILE6 affect your conformity status?
    Response. The focus of the current HGA SIP is on reducing NOx 
emissions. MOBILE6 leads to lower calculated NOx emissions when 
compared to MOBILE5b, in spite of a 3 percent increase in VMT. The new 
emissions model facilitates meeting the NOx budget in 2007. The same 
cannot be said for the VOC emissions. Although the VMT is 3 percent 
higher, VOC emissions are roughly 8 percent higher. The current 2007 
VOC budget is 79.5 tpd. This number, like the NOx number, is based on 
MOBILE5b modeling and off-model calculations. Using the MOBILE6 model 
and the measures currently in the SIP, the HGA could not make the 
established MOBILE5b VOC budget for the attainment date 2007.
      Question: How will your air quality planning process take 
the new MOBILE6 into account and will the SIP be updated before or 
after the new MOBILE6 projections?
    Currently the State is planning to do a major, mid-course revision 
to the SIP in 2004. It plans to incorporate MOBILE6 into this revision. 
This schedule for an updated SIP with a new budget using MOBILE6 is not 
consistent with the current schedule for updating the MTP.
      Question: Will the new 8-hour NAAQS likely lead to an 
increase or decrease in your vehicle emissions budget?
    Response. At this time H-GAC is unaware of any analysis done on the 
8-hour standard or budget for the HGA. The assumption is that the 
budget will be lower than under the 1-hour standard. Modeling has not 
yet been conducted to verify this statement.
3) Additional Vehicle Emission Controls
      Question: What additional existing controls could be 
implemented in your area to significantly reduce vehicle emissions, 
e.g., inspection maintenance, reformulated fuels, diesel retrofit, TCM?
    Response. In the HGA, the on-road mobile sector currently has been 
required to reduce emissions in a greater proportion than the sector 
contributes in comparison to other nonattainment areas. The on-road 
mobile portion of the emissions inventory is under great pressure as a 
result of the region being a severe nonattainment area for ozone, 
uncertainties regarding precursor contributions from NOx and VOCs in 
the photochemical model, and additional issues related to the emissions 
inventory. . The HGA has employed every conceivable on-road emission 
reduction strategy currently available, except for no-drive days.
      Question: Would these controls be sufficient to address 
the potential increase in emissions projected under MOBILE6?
    Response. As mentioned above, the focus of the HGA SIP has been on 
NOx reductions. The biggest problems anticipated in the utilization of 
MOBILE6 are as follows:
      Light duty vehicles will yield less NOx emission 
reductions under MOBILE6 than MOBILE5, making current emission 
reduction strategies (those that target light-duty vehicles), 
exceedingly more expensive for limited emission reduction benefits.
      Measures that target the reduction of VMT under the 
current plan may have congestion mitigation benefits but limited NOx 
emission reduction benefits.
      Efforts and programming plans for emission reduction 
strategies may change in priority and focus under MOBILE6, creating 
uncertainties in implementing the programs.
4) Role of Transportation Control Measures
      TCMs play a very small role in helping to meet HGA's 
attainment. The total reductions from the HGA TCMs under MOBILE5 are 
slightly more than 1 tpd for NOx with roughly 2 tpd for VOC. Using 
MOBILE6, the HGA TCM reductions for NOx emissions are less than 1 tpd 
and are roughly 1 tpd for VOCs. TCMs represent 0.1 percent of the SIP's 
total reductions. The region is implementing a number of transportation 
projects that address congestion and also have air quality benefits, 
but have not been formally committed as TCMs. The cost through TIP year 
2004 for these TCMs and other related projects is in the hundreds of 
millions of dollars. A summary of TCM commitments for the region is 
listed below.

 
 
 
 
Signalization......................................  52.2 miles
High Occupancy Vehicle lanes.......................  18.2 miles
                                                     225 vans
Park and ride lots.................................  15,098 spaces
Arterial Traffic Management System.................  343.48 miles
Computerized Traffic Management System.............  387.37 miles
Bicycle lanes......................................  435.998 miles
Accident investigationsites........................  3.2 miles
 

5) Impacts of Conformity Lapse
    From November 1999 until June 2000, the Houston-Galveston region 
experienced a conformity lapse due to the time required to evaluate its 
MTP against a new budget for NOx. This lapse delayed design and right-
of-way acquisition for several significant transportation projects, 
including the widening and reconstruction of US 59 South and Interstate 
10 West. The lapse occurred because of a change in the interpretation 
of a post-NOx waiver SIP submittal from a 'revision' to an 'initial' 
SIP with an MVEB. The MVEB was submitted a month after the SIP and had 
been interpreted by the conformity consultation committee as a 
revision. EPA staff made an interpretation that the budget was an 
``initial'' submittal in the Rate of Progress SIP submission by the 
State of Texas to the EPA. Notification of this interpretation was not 
received in time for the MPO staff to conduct a new conformity 
determination prior to the November lapse deadline.
6) Role of Motor Vehicle Emissions Estimates and Models
      Question: How has conformity analysis helped improve the 
quality of estimates of motor vehicle emissions for SIPs to better 
protect public health?
    Response. Both the development of MVEBs and transportation 
conformity require a level of detail and precision that is inconsistent 
with real world experience, and the capabilities of travel demand 
estimation and mobile emission models. However, the on-road emissions 
estimates are probably the best evaluated portion of the total 
emissions inventory. Due to the requirements of ozone models, much more 
data has been collected and evaluated to determine hourly VMT, vehicle 
speed, vehicle type and age distribution. The value of this information 
to public health must be tempered by the fact that other significant 
portions of the ozone forming emissions inventory are poorly measured, 
particularly emissions for aircraft and most off-road and marine 
vehicles. The EPA's new MOBILE6 emissions model suggests that heavy-
duty trucks play a disproportionate role in NOx emissions production. 
The analysis and measurement of freight travel is traditionally one of 
the weakest areas of urban travel forecasting. HGAC has attempted to 
develop specific data for truck origins and destinations for major 
generators, such as its ports and airports.
      Question: How accurate and consistent have estimates of 
regional motor vehicle emissions been when compared with each other 
over time and with actual experience?
    Response. Although the primary travel inputs to motor vehicle 
emissions estimates (vehicle miles of travel, vehicle speed and vehicle 
mix) have been relatively consistent over time, the estimate of motor 
vehicle emissions has been radically altered by revisions to EPA's 
mobile source models and modeling procedures for control strategies 
such as vehicle inspection/maintenance programs. Because of the 
revisions to EPA's MOBILE models, it is unlikely that any area's 
emissions estimates from the early 1990's for 2005 or 2007 would 
resemble those made today.
      Question: How have official estimates of motor vehicle 
emissions in your metropolitan region changed over the past 10-20 years 
and how well have they tracked actual emissions in years past?
    Response. They have increased mostly because of changes between 
MOBILE models. On-road emissions have increased on a gram/mile basis 
with the release of each model since MOBILE4 (VOC nearly doubled 
between MOBILE4.1 and MOBILE5a-h). Economic cycles also play a major 
role in changing on-road budgets, since fleet ages change rapidly in 
strong economic cycles.
7) Roles of Transportation Models
    Adequate regional transportation analysis models have supported the 
conformity analysis. These models accurately reflect how changes in 
highway capacity affect total travel, travel speeds, travel paths and 
resultant air pollution emissions (to the extent the EPA emissions 
models have revised emissions rates, the emissions estimates may vary).
    The region's travel models have tracked reasonably well the growth 
in VMT. As compared to forecasts made in the late 1980's or early 
1990's, the sustained economic growth of the 1990's has required upward 
revisions in future year population and employment estimates, which 
subsequently have increased future year travel estimates.
    The regional travel models are sensitive to traffic changes that 
are induced by changes in travel patterns in the region.
Recommendations
    Transportation conformity determinations should only be required 
once every 5 years. Currently, full transportation conformity 
determinations are required each time the EPA or the State proposes or 
approves an initial SIP, each time the EPA or State modifies a control 
measure that impacts the motor vehicle emissions budget, and each time 
a transportation control measure is added, modified, or deleted. 
Conformity determinations are also currently required if the planning 
organization needs to add to or revise a transportation project in the 
transportation plan (since road and transit projects cannot generally 
proceed unless they are specifically included in the plan).
    Amend TEA-21 to require MTP, TIP, and SIP updates not less than 
every 5 years with the transportation conformity rule applying after 
each 5-year SIP update requirement is met. If a more frequent update of 
the TIP is needed, as is often the case today, this would be allowed 
using the same assumptions used in the most recent transportation plan 
and SIP.
    The newly released MOBILE6 emissions factor model further 
exacerbates this situation. MOBILE6 has not been used at all in SIP 
development and there is no requirement to update SIPs using MOBILE6 
prior to using it for conformity determinations. Regardless, 
transportation conformity determinations must use this model within 24 
months.
    Planning organizations should have the ability to add or modify a 
road or transit project and TCMs (to some degree) without the need for 
a full conformity demonstration. Currently, planning organizations must 
go through a full conformity analysis to make minor changes. This 
exercise is unnecessary and a waste of valuable local, State, and 
Federal resources.
    Encourage TCM substitution without a SIP revision, so long as 
equivalent emission reductions are forthcoming from other measures. 
Such a substitution would not trigger a new conformity determination. A 
model for such a process might be the Emission Budget Adequacy process 
used by the U. S. EPA, if expanded to address outdated, but currently 
approved, SIP budgets.
                               __________
      Metro and Oregon Department of Environmental Quality,
                            Portland, OR 97232-2736, July 23, 2002.

Committee on Environment and Public Works,
U.S. Senate,
Washington, DC. 20510-6175.

Dear Mr. Chairman: The following are Metro and Oregon Department of 
Environmental Quality (DEQ) responses to the conformity case study 
questions raised in the July 3,2002 letter from the Senate Committee on 
Environment and Public Works:
Differences in Timing of Schedules
    Question: Describe how the different schedules for the SIP, TIP, 
Conformity, etc. and the impacts of data changes on out year emissions 
affect your ability to develop effective and timely transportation and 
air quality plans. Provide a timeline or narrative description of your 
various schedules.
    Response: The SIP mobile source element is updated infrequently. 
The last SIP included the ``Maintenance Plans for CO and Ozone'' and 
was acknowledged by the State EQC in 1996. It will not have to be 
updated until 2006. The MTIP is updated every 2 years and occasionally 
is amended such that it requires a conformity determination. The RTP is 
updated every 3 years, and includes a conformity determination. The 
major issue we deal with regarding timing is trying to align, to the 
degree possible, any required conformity actions. To the extent that 
the action occurs on schedule, we are experienced enough that we can 
adequately manage conformity determinations. It does become problematic 
(time consuming and expensive) when we conform our long-range plan 6 
months prior to a TIP conformity, which can occur due to schedules, 
project needs.
    Question: What impacts have these schedules had on investments in 
highway and safety projects, construction costs, and air quality 
projects and activities.
    Response: Required conformity has caused slight three to 4 month 
delays in projects, which may or may not affect project cost and 
schedule (dependent on construction season, interest rates that apply 
to bond financing, etc). The schedules have no impact on project 
selection.
    Question: What has been your experience coordinating your SIP and 
conformity processes with SIP submittals or updates?
    Response: Since the Clean Air Act Amendments of 1990 and ISTEA, 
requiring air quality conformity in its current state, we have had only 
a single SIP submittal and update. It followed the completion of our 
1995 long-range plan and the associated travel networks and forecasts 
were used both for the SIP and long-range plan. In other words, our 
timing was fortunate and we were able to use ``off the shelf'' analysis 
for SIP conformity.
MOBILE6 versus MOBILE5 Projections
    Question: Compare and contrast your MOBILE5 and MOBILE6 emission 
projections.
    Response: Metro has not used MOBILE6 for any conformity estimates 
to date. To this point, Metro has only used MOBILE6.2 for estimating 
emission rates for air toxics work. Furthermore, we have added detail 
to the stratifications of emission rate categories such as county-
specific vehicle fleet age characteristics, separated emission rates by 
roadway functional class, updates to fuel type, ambient temperatures, 
and I/M programs. Therefore, even if we had MOBILE6 emission rates (or 
resulting total motor vehicle emissions) for CO, NOx, and VOC, we would 
not be able to make apples to apples comparisons between the results 
without rerunning MOBILE5 with the updated stratifications. Oregon DEQ 
has not determined exactly how they will be applying the new Mobile 6 
model, but initial runs appear to be consistent with what EPA 
anticipated. More specifically, Mobile 6 emissions to be higher than 
Mobile 5 emission prior to 2005 (approximately) then progressively 
lower thereafter.
    Question: How does the increase in near term emissions (through 
2010) from MOBILE6 affect your conformity status?
    Response: Metro has not done any conformity work using MOBILE6, 
thus we have no basis to make an evaluation of how it affects our 
conformity status. However, Oregon DEQ expects that increased emissions 
in the near term should not jeopardize conformity if the last Mobile 5 
conformity determination is timed occur near the end of the 2 year 
phase in period for Mobile 6.
    Question: How will your air quality planning process take the new 
MOBILE6 into account, and will the SIP be updated before or after the 
new MOBILE6 projections?
    Response: The Portland Metropolitan area is still working with 
budgets that were established using MOBILE5. The Oregon Department of 
Environmental Quality is planning to update the budgets using MOBILE6 
sometime later this year. At that time, Metro will begin using MOBILE6 
for subsequent conformity work. Portland's Carbon Monoxide and Ozone 
maintenance plans must be reworked and resubmitted to EPA by the end of 
2004. Those plans will include new, lower emission budgets based on 
Mobile 6, but those budgets are not likely to take effect until 
approximately 2006.
    Question: Will the new 8-hour NAAQS likely lead to an increase or 
decrease in your vehicle emissions budget?
    Response: The new 8-hour ozone standard will probably not affect 
the motor vehicle emissions budgets by much.
Additional Vehicle Emission Controls
    Question: What additional existing controls could be implemented in 
your area to significantly reduce vehicle emissions, e.g., inspection 
and maintenance, reformulated fuels, diesel retrofit, TCMs?
    Response: Additional existing controls that could be implemented 
include diesel retrofits and elimination of an emissions allowance set 
aside for industrial growth.
    Question: Would these controls be sufficient to address the 
potential increase in emissions projected under MOBILE6?
    Response: The available controls would probably not be adequate to 
avert a conformity crisis if we had to immediately demonstrate 
conformity using Mobile 6.
Role of Transportation Control Measures
    Question: What role do TCMs play in helping to meet attainment? 
Please list the TCMs and CMAQ projects in your plan, and the associated 
``off'' or ``on'' model emissions reductions credits for each.
    Response: The Metro 240 Growth Concept. Metro has adopted 
integrated land use and transportation system plans that modeling 
predicts will decrease reliance on single occupant vehicle travel. A 
5.0 percent VMT reduction credit is associated with inclusion of 
Metro's code-based Growth Concept enforcement mechanisms in the 
Maintenance Plan (code provisions related to Requirements for 
``Accommodation of Growth"; ``Regional Parking'' ratios (minimum and 
maximum permitted amounts); and ``Retail in Employment and Industrial 
Areas''). The actual emissions reductions vary by pollutant and year 
but in 2010, a 5 percent VMT reduction equated to HC, NOx and VOC 
reductions of approximately 6.4, 5.4 and 6.6 percent, respectively.
      DEQ Employee Commute Options (ECO) Rule. Employers of 50 
persons or more must submit plans showing mechanisms for achieving 10 
percent VMT reductions from employees. The credit was originally pegged 
at a 1.0 percent reduction of emission in 2010 but was reduced to 0.5 
percent based on realized mode shift indicated in annual surveys 
administered by ECO program staff.
    Question: What percentage of total emission reductions to they 
represent?
    Response: The region must provide annual transit system service 
increases averaging 1.5 percent annually, and an equal increase of 
service in the Downtown core. There is no emission credit associated 
with this requirement. Additionally, the South/North Light Rail 
Concept, or an equivalent transit system enhancement must be 
operational by 2007. (The Westside MAX extension was completed, as 
required.)
    The region must add no less than 28.0 miles of regionally 
significant bikeways by 2006. Reasonable progress on this task is 
defined as funding no less then 5.0 miles of improvements each 
biennium. There is no emissions credit associated with this 
requirement.
    The region must add no less than 9.0 miles of regionally 
significant pedestrian facilities by 2006. Reasonable progress on this 
task is defined as funding no less then 1.5 miles of improvements each 
biennium. There is no emissions credit associated with this 
requirement.
    Question: Are there CMAQ projects in your plan for which you have 
not applied any on or off model emissions reductions?
    Response: CMAQ funds have been used to meet the funding based TCMs 
noted above, though other sources have also been used and not all CMAQ 
funds have been dedicated to these purposes. No on or off model credit 
is taken for any CMAQ funded projects, although emissions reductions 
attributable to CMAQ projects are calculated to demonstrate CMAQ 
program eligibility.
Impacts of Conformity Lapse
    Question: If your areas has experiences a conformity lapse, 
describe the effect this has had on transportation and air quality 
planning, funding process, preconstruction and construction.
    Response: Our area has not experienced a lapse.
Role of Motor Vehicle Emission Estimates and Models
    Question: How has conformity analysis helped improve the quality of 
estimates of motor vehicle emissions for SIPs to better project public 
health?
    Response: Conformity analysis requirements have caused Metro to 
implement a more rigorous process (programs to continually implement 
demand model improvements and strive to ensure that functions used for 
speed estimation reflect observed data) by which VMT, speed, and 
resulting motor vehicle emissions are estimated. Conformity 
requirements have not affected the way motor vehicle emissions factors 
are generated for SIPs.
    Question: How accurate and consistent have estimates of regional 
motor vehicle emissions been when compared with each other over time 
and with actual experience?
    Response: Regional motor vehicle emissions seem to be valid, 
reliable and consistent. The following table illustrates the historical 
profile and consistency of emissions estimates of recent conformity 
runs:

                             TIP Conformity Emissions Estimates--Historical Summary
----------------------------------------------------------------------------------------------------------------
                                      1990 Budget (est.
                                            1995)               1990               1998               2000
----------------------------------------------------------------------------------------------------------------
CO (000's lbs)......................               1812               1795                814                828
VOC (tons)..........................                 92                 88                 41                 42
NOx (tons)..........................                 75               64.5               52.3                 51
----------------------------------------------------------------------------------------------------------------

    Question: How have official estimates of motor vehicle emissions in 
your metropolitan region changed over the past 10-20 years, and how 
well have they tracked actual emissions in years past?
    Response: Estimates of motor vehicle emissions have generally 
decreased as Federal and State regulations have become progressively 
more stringent. Because we do not monitor mobile source emissions 
separately from other sources, there is no way to accurately compare 
projected emissions with actual emissions. A subjective impression, 
however is that the two are not inconsistent. The following tables 
illustrate the consistency of future year model projections for 
emissions estimates of recent conformity runs:

                               TIP Conformity Emissions Estimates--2010 Model Year
 
----------------------------------------------------------------------------------------------------------------
                                                         2010 Budget (est.
                                                               1995)               2000               2002
----------------------------------------------------------------------------------------------------------------
CO (000's lbs).........................................                760                645                644
VOC (tons).............................................                 40                 32                 32
NOx (tons).............................................                 52               50.9               50.9
----------------------------------------------------------------------------------------------------------------


                               TIP Conformity Emissions Estimates--2020 Model Year
----------------------------------------------------------------------------------------------------------------
                                      2020 Budget (est.
                                            1995)               1999               2000               2002
----------------------------------------------------------------------------------------------------------------
CO (000's lbs)......................                842                740                728                713
VOC (tons)..........................                 40               37.6                 37                 36
NOx (tons)..........................                 59               58.7               58.2               57.6
----------------------------------------------------------------------------------------------------------------

    Metro does not have the data to demonstrate the comparisons between 
modeled and actual observed emissions.
Role of Transportation Models
    Question: Has conformity analysis been supported by adequate 
regional transportation analysis models that accurately reflect how 
changes in highway capacity affect total travel and air pollution 
emissions?
    Response: Metro's transportation demand modeling process includes 
many features that take into account changes in, among many other 
things, highway capacity and its effects on total travel and air 
pollution emissions.
      Metro's demand model is multi-modal. This means that any 
changes in highway capacity which result in changes in travel time, 
relative to other modal attributes, affects the choice of both 
destination and mode of transportation. For example, adding a new lane 
on a freeway improves travel time through that corridor. All else being 
equal, the auto mode becomes relatively more desirable than other 
modes. In addition, the improvement in accessibility to areas served by 
that freeway attracts more trips to those areas.
      The model is sensitive to the urban environment. The mix 
of households and employment opportunities influence the choice of 
destination and mode.
      We use the EMME/2 software for assignment of trips onto 
the highway network. It uses an equilibrium capacity restrained 
assignment algorithm to determine path choice for trips. An iterative 
process is used to reach equilibrium travel times among path choices 
between TAZ (Transportation Analysis Zone) pairs.
      In addition, we maintain a comprehensive region-wide 
count data base for validation and calibration purposes to ensure that 
the model is producing accurate and reasonable outputs.
    Question: How well have your region's travel models tracked actual 
experience with growth in vehicle miles of travel (VMT)?
    Response: The following shows how VMT estimated using Metro's 
travel demand model has tracked actual growth in VMT between 1985 and 
2000.

                     Region's Model Estimated VMT vs. Regional HPMS Derived (``actual'') VMT
----------------------------------------------------------------------------------------------------------------
                                                  Model*                                   HPMS
                                 -------------------------------------------------------------------------------
                                                        Total Modeling
                                    Urbanized Area          Region          Urbanized Area      Total Region**
----------------------------------------------------------------------------------------------------------------
1985............................  14,922,127........  n/a...............  14,140,000........  n/a
1990............................  17,970,876........  19,282,419........  17,970,000........  22,400,000
1994............................  n/a...............  24,685,960........  n/a...............  26,500,000
2000............................  n/a...............  28,485,076........  n/a...............  31,500,000
----------------------------------------------------------------------------------------------------------------
* Model does not include truck trips or external trips
** HPMS Total Region is the Portland-Vancouver, OR-WA Urbanized Area (UZA 27)

    Question: Please include an indication of how sensitive your/these 
models are to effects of induced traffic.
    Response: Comparing local survey data through time has shown that 
trip generation rates generally remain stable with changes in travel 
times. So, it is assumed that induced demand refers to additional trips 
choosing a certain destination or mode based on improvements in 
accessibility resulting from increases in highway capacity, but not 
necessarily an increase in the total universe of trips in the system. 
Our model responds to changes in infrastructure in destination choice 
and mode choice by an iterative process of feeding output travel times 
back to the beginning of the model, and rerunning until equilibrium is 
reached.
    For example, we use generic existing travel times for input into an 
initial model run. Let's assume a new development with households and 
employment is added to the region. The new opportunities presented by 
this development will attract more trips to the area. Given the 
additional trips, the resulting travel times in this area will show 
increased congestion. These more congested travel times are then fed 
back to the beginning of the model and the model is rerun. This time, 
the increased congestion (or slowed travel times) will reduce the 
attractiveness of the destination and may also make non-auto modes more 
desirable for this destination. If capacity is added to the highway 
network serving this development (improving travel times), then more 
iterations of the model will show additional trips attracted to this 
area and changes in mode share chosen by people who travel there.
    Thank you for the opportunity to participate in this survey. Please 
feel free to contact Mike Hoglund at 503-797-1743 if you have any 
questions, or require further assistance.
            Sincerely,
                                         Andrew C. Cotugno,
                                          Planning Director, Metro.
                               __________
            Metropolitan Washington Council of Governments,
     National Capital Region Transportation Planning Board,
                              777 North Capitol Street, NE,
                          Washington, DC 20002-4226, July 17, 2002.

Honorable Jim Jeffords, Chairman,
Committee on Environment and Public Works,
U.S. Senate,
Washington, DC 20510-6175.

Honorable Bob Smith, Ranking Member,
Committee on Environment and Public Works,
U.S. Senate,
Washington, DC 20510-6175,

Dear Senator Jeffords and Senator Smith: Thank you for your letter of 
July 3, 2002 requesting information about transportation and air 
quality planning efforts in the metropolitan Washington region. I 
appreciate the opportunity to contribute to the deliberations of the 
Senate Environment and Public Works Committee on this subject in the 
context of the TEA-21 reauthorization process.
    Air quality planning for the metropolitan Washington non-attainment 
area is conducted by the Metropolitan Washington Air Quality Committee 
(MWAQC), which includes representatives of the local governments in the 
non-attainment area, the State air agencies, and the State 
transportation agencies. Air quality plans developed by MWAQC are 
incorporated into the State Implementation Plans (SIPs) submitted to 
the Environmental Protection Agency (EPA) by the District of Columbia, 
the State of Maryland, and the Commonwealth of Virginia. Transportation 
planning in the metropolitan Washington region is conducted by the 
National Capital Region Transportation Planning Board (TPB), the 
Metropolitan Planning Organization (MPO) for the area, which includes 
representatives of the local governments in the metropolitan area, the 
State transportation agencies, the Washington Metropolitan Area Transit 
Authority (WMATA), the Metropolitan Washington Airports Authority 
(MWAA), and Federal agencies.
    MWAQC and TPB are staffed respectively by the Department of 
Environmental Programs and the Department of Transportation Planning of 
the Metropolitan Washington Council of Governments (MWCOG), and several 
policy officials serve on both bodies. Close policy and staff 
coordination between MWAQC and TPB provided within the MWCOG structure 
has been critical in helping the Washington region to address linkages 
between air quality and transportation planning, and in particular to 
meet the transportation conformity requirements of the Clean Air Act. 
Despite this close coordination, however, we have experienced some 
significant challenges in carrying out our transportation and air 
quality planning activities, and we welcome the in-depth interest of 
the Senate Environment and Public Works Committee that is reflected in 
the questions you have posed. The responses I have provided to your 
questions have been coordinated with local government officials on 
MWAQC and TPB as well as with representatives of the State 
transportation and air agencies.
Difference in Timing of Schedules
    ? Describe how the different schedules for the SIP, TIP, 
conformity, etc. and the impacts of data changes on out year emissions 
affect your ability to develop effective and timely transportation and 
air quality plans. Provide a time-line or narrative description of your 
various schedules.
    Question: What impact have these schedules had on investments in 
highway and safety projects, construction costs, and air quality 
projects and activities.
    Question: What has been your experience coordinating your SIP and 
conformity processes with SIP submittals or updates?
    Response: State SIPs are developed to meet a current attainment 
year of 2005, the regional constrained long range transportation plan 
(CLRP) has a horizon year of 2025, and the current 6-year TIP is for 
fiscal years 2003-2008. Mobile emissions budgets for VOC and NOx are 
set for 2005 as part of the attainment plan. Higher VOC and lower NOx 
budgets have been developed for 2015 and 2020 using VOC/NOx 
substitution procedures approved by EPA. The CLRP is updated every 3 
years (1997, 2000, 2003, etc.), the 6-year TIP is typically updated 
every year, and the SIPs are updated as needed to meet EPA and regional 
air quality requirements.
    Changes in input data on vehicle registration and vehicles miles of 
travel by vehicle type in the FY2002-2007 TIP update cycle caused 
projected mobile NOx emissions to increase by 8 tons per day in 2005. 
No updates were undertaken to the State SIPs to reflect these changes 
in vehicle registration and vehicle miles of travel input data. 
Consequently, the entire 8 ton per day increase in NOx emissions had to 
be addressed within the transportation conformity process, using mobile 
emissions budgets which had been set in the SIPs using earlier input 
data. In order to provide time to address this difficult issue, 
proposed TIP updates had to be deferred for a year and were 
subsequently included in the FY2003-2008 TIP cycle. While there has not 
yet been a TIP lapse (since the approved FY2001-2006 TIP continues to 
be valid until January of 2003), there have been some delays in 
incorporating new projects into the CLRP and TIP.
    Synchronizing SIP updates with CLRP/TIP and conformity schedules 
requires extensive communication, coordination, and cooperation between 
MWAQC, TPB, EPA, and the Federal Highway Administration (FHWA) and the 
Federal Transit Administration (FTA). CLRP/TIP conformity and SIP 
update schedules as currently prescribed in Federal regulations and as 
administered by FHWA, FTA, and EPA do not in themselves ensure 
synchronized processes. Regulatory changes are needed to improve 
coordination between these schedules; to place SIP planning and 
conformity on the same timeframes (with out-years of, say, 10 years 
beyond the attainment date); and to require that key input data used in 
the SIP to establish mobile budgets continue to be used for conformity 
until the SIP is revised.
MOBILE 6 Versus MOBILE5 Projections
    Question: Compare and contrast your MOBILE5 and MOBILE6 emission 
projections.
    Question: How does the increase in near term emissions (though 
2010) from MOBILE6 affect your conformity status?
    Question: How will your air quality planning process take the new 
MOBILE6 into account, and will the SIP be updated before or after the 
new MOBILE6 projections?
    Question: Will the new 8 hour NAAQS likely lead to an increase or 
decrease in your vehicle emissions budget?
    Response: The Washington metropolitan area has been working on 
preparing inputs for the Mobile6 model, but has not yet developed 
emissions projections using the model. Consequently, we are unable to 
provide any comparisons to Mobile 5 projections.
    We do not yet know how emissions projections from Mobile 6 will 
affect our conformity status.
    We are planning to update our regional air quality plan and our 
State SIPs to reflect Mobile6 emissions projections.
    We do not yet know what the effect of the new 8 hour NAAQS will be 
on our vehicle emissions budgets.
Additional Vehicle Emission Controls
    Question: What additional existing controls could be implemented in 
your area to significantly reduce vehicle emissions, e.g., inspection 
and maintenance, reformulated fuels, diesel retrofit, TCMs?
    Question: Would these controls be sufficient to address the 
potential increase in emissions projected under MOBILE6?
    Response: In seeking measures to mitigate projected excess NOx 
emissions from mobile sources in 2005, the TPB has developed and 
analyzed an extensive list of Transportation Emission Reduction 
Measures (TERMs) which could provide additional reductions in mobile 
emissions. These measures and associated analyses of potential costs 
and effectiveness in terms of emissions reductions are documented in a 
report entitled ``Transportation Emissions Reduction Measures (TERMs) 
Under Consideration for Conformity of the 2002 Constrained Long Range 
Plan (CLRP) and FY2003-2008 Transportation Improvement Program (TIP),'' 
June 28, 2002. In terms of cost-effectiveness, the most promising 
additional measures for NOx reductions appear to be diesel fuel 
additives, diesel engine replacements, and other potential diesel 
retrofit measures. These measures appear to be in the range of $2,000 
to $10,000 per ton in cost-effectiveness, and have the added advantage 
of providing substantial reductions in particulates. Since it will be 
several years before the EPA heavy-duty diesel regulations will result 
in significant changes in the diesel fleet, measures aimed at reducing 
emissions from existing diesel engines appear to be very promising in 
the short time-frames addressed in air quality attainment plans. 
Measures aimed at promoting more telecommuting and more effective 
enforcement of speed limits on freeways and other high speed facilities 
might also have significant short-term benefits.
    As noted earlier, the metropolitan Washington region is still 
developing inputs for the Mobile 6 model, and we do not yet know how 
Mobile 6 will affect our emissions projections.
Role of Transportation Control Measures
    Question: What role do TCMs play in helping to meet attainment? 
Please list the TCMs and CMAQ projects in your plan, and the associated 
``off'' or ``on'' model emission reduction credits for each.
    Question: What percentage of total emission reductions do they 
represent?
    Question: Are there CMAQ projects in your plan for which you have 
not applied any on or off model emissions reductions?
    Response: Transportation Control Measures (TCMs) play a very small 
role in the regional air quality attainment plan, accounting for only 
0.2 tons per day of VOC reductions and 0.4 tons per day of NOx 
reductions in 2005. As you know, once TCMs are included in SIPs they 
can be changed only through a lengthy SIP amendment process. Because of 
this lack of flexibility, the only TCMs included in the Washington area 
SIPs are TCMs associated with capital projects that have already been 
completed. Such measures include park-and-ride lots, bus and rail 
transit vehicle replacements, and bicycle facilities. By comparison, 
emissions reductions of around 4.5 tons per day of VOC and 7.7 tons per 
day of NOx are being achieved through Transportation Emission 
Reductions Measures (TERMs) which are incorporated into the CLRP and 
annual TIP updates as they are needed to meet conformity requirements. 
These latter measures include employer outreach programs to promote 
increased carpooling and van pooling, transit use and telecommuting, 
CNG buses, and bicycle facilities. Should any of these ``TERMs'' not 
meet anticipated emissions reductions goals, new or revised TERMs can 
be developed and implemented through the CLRP and TIP update process, 
without requiring amendments to the SIPs.
    TCMs and TERMS collectively provide 4.7 tons per day of VOC 
reductions and 8.1 tons per day of NOx reductions in 2005. Of these 
totals, TCMs account for 4.3 percent of the VOC reductions and 4.9 
percent of the NOx reductions.
    Emissions reductions credits are taken for all CMAQ projects 
included in the CLRP and TIP as part of meeting conformity 
requirements.
Impacts of Conformity Lapse
    Question: If your area has experienced a conformity lapse, describe 
the effect this has had on transportation and air quality planning, 
funding process, preconstruction, and construction.
      When projects were reactivated, after USDOT approved your 
conformity determination, what impact did this have on funding, project 
completion dates, personnel, renegotiation of contracts, updating old 
information, etc.
    Question: What impact did the March 1999 U.S. Court of Appeals 
decision to eliminate the EPA ``grandfather'' provision from the 
conformity regulations have on your transportation investments?
    Response: The metropolitan Washington area has not experienced a 
conformity lapse, and consequently has not had to address any of the 
three issues raised above.
Role of Motor Vehicle Emission Estimates and Models
    Question: How has conformity analysis helped improve the quality of 
estimates of motor vehicle emissions for SIPs to better protect public 
health?
    Question: How accurate and consistent have estimates of regional 
motor vehicle emissions been when compared with each other over time 
and with actual experience?
    Question: How have official estimates of motor vehicle emissions in 
your metropolitan region changed over the past 10-20 years and how well 
have they tracked actual emissions in years past?
    Response: Conformity analysis requirements have focused attention 
on key transportation and land use variables that can significantly 
affect the levels of motor vehicle emissions, and provided a better 
understanding of the relative importance of these variables for 
policymakers and the general public. In particular, the increase of 8 
tons per day of NOx emissions resulting from changes in input data on 
vehicle registrations and vehicle miles of travel by vehicle type in 
metropolitan Washington has highlighted the importance of obtaining 
accurate data on these vehicle inputs, and on how these inputs may be 
changing through time.
    Substantially increased planning resources need to be devoted to 
improving data collection procedures for these vehicle fleet variables, 
and to analyzing measures such as diesel fuel additives that can 
produce significant reductions in emissions from high-emitting vehicle 
classes.
    The greatest challenges in maintaining consistency in estimates of 
motor vehicle emissions over time have been related to the vehicle 
fleet mix inputs discussed above. While land use and transportation 
system inputs generally change relatively slowly over time and are 
relatively easy to track, changes in fleet mix have been occurring 
rather rapidly and have been difficult to track accurately with current 
data collection procedures. Changes in these data collection procedures 
have resulted in significant changes to fleet mix estimates and to 
regional emissions estimates, creating challenges in demonstrating 
conformity to mobile emissions budgets developed using earlier 
procedures and data. Forecasting changes in vehicle fleet mix and 
vehicle miles of travel into the future is an additional challenge for 
planners and policymakers. With ever-changing vehicle technologies, 
emissions and fuel economy standards, and consumer preferences, 
estimating motor vehicle emissions even a few years into the future is 
subject to considerable uncertainty. This uncertainty compounds as the 
out-years stretch to 2015, 2020, and 2020.
    Official estimates of motor vehicle emissions have shown steady 
declines in overall emissions over the past 10-20 years, despite steady 
growth in vehicle travel in the Washington region. Improvements in 
emission control and fuel technologies have been largely responsible 
for these declines. Further substantial reductions in mobile emissions 
are projected to result from EPA's TIER II/low sulfur rule and heavy-
duty diesel standards over the next 10 to 15 years. While current 
conformity procedures do not permit anticipation of new technology in 
emissions calculations, further technological advances such as hydrogen 
fuel cells are likely to produce additional mobile emissions reductions 
over the longer term.
Role of Transportation Models
    Question: Has conformity analysis been supported by adequate 
regional transportation analysis models that accurately reflect how 
changes in highway capacity affect total travel and air pollution 
emissions?
    Question: How well have your region's travel models tracked actual 
experience with growth in vehicle miles of travel (VMT)?
    Question: Please include an indication of how sensitive your/these 
models are to effects of induced traffic.
    Response: Conformity analysis requirements have placed new demands 
on regional transportation analysis tools, and prompted us to invest a 
significant portion of our MPO planning funds into upgrading these 
models to address emerging conformity issues. The Washington region is 
currently introducing a new ``Version 2'' set of travel models which 
will significantly enhance our current ``Version 1'' model 
capabilities. Continuing development and upgrading of these models is 
anticipated over the coming years, placing continuing demands on our 
planning resources. We believe that we have been keeping pace with the 
``state-of-the-practice'' in regional travel modeling, and we are 
continuing to introduce ``state-of-the-art'' improvements as they are 
developed and validated. The models have been used to assess the 
impacts on travel and air emissions of changes in highway, transit, 
telecommuting and other transportation programs, and have produced 
results that policymakers find useful and credible.
    We regularly compare vehicle miles of travel (VMT) estimates 
produced by our regional travel models with observed VMT collected 
through FHWA's Highway Performance Monitoring System (HPMS), and 
provide reports to EPA on these comparisons. My most recent letter to 
EPA, dated April 23, 2002, transmitted regional comparisons of 
estimated versus observed data for 1997, 1998, 1999 and partial data 
for 2000. These comparisons showed that the results of the regional 
travel modeling process track quite well with observed VMT data.
    In response to a request by the TPB, we recently conducted an 
extensive study of the concept of induced travel and how it is 
addressed by our regional travel models. The study, which is available 
on our web site at www.mwcog.org, concluded that all of the significant 
aspects of induced travel are captured in our modeling process, 
although induced travel is not generally broken out from other changes 
in travel behavior (such as travel that is diverted from one route to 
another by a highway improvement.)
    I hope these responses will be helpful to the committee as it 
continues its deliberations on these important issues. I would be 
pleased to provide any additional information you may require. I can be 
reached at 202-962-3310 or by e-mail at [email protected].
            Sincerely,
                                 Ronald F. Kirby, Director,
                             Department of Transportation Planning.
                               __________
 OKI Response to Questions about the Transportation Conformity Process
Difference in Timing of Schedules
    Question: Describe how the different schedules for the SIP, TIP, 
conformity, etc. and the impacts of data changes on out year emissions 
affect your ability to develop effective and timely transportation and 
air quality plans. Provide a time-line or narrative description of your 
various schedules.
    Response. The Transportation Plan, and SIP must use the latest 
planning assumptions at the time of each update. Because these 
documents are updated at different frequencies, we commonly encounter 
several mismatch issues in regards to planning assumptions. For 
example, the SIP budget for Northern Kentucky and the SIP budget for 
Southwest Ohio were last revised in 1999. Since then, OKI has 
incorporated new advancements in our travel forecasting model and 
revised our vehicle fleet mix. Our most recent Transportation Plan, the 
2030 Plan adopted in September 2001, included these new assumptions. We 
were able to pass conformity, but only due to off-model CMAQ credits. 
Since then, we anticipate three major new assumptions on the horizon; 
1) new population projections based on the 2000 Census, 2) further 
enhancements to the travel forecasting model, and 3) MOBILE6. We have 
several rapid growth counties in the region, resulting in a significant 
increase in the population projections and hence VMT through 2030. 
Improvements in our travel forecasting model have also resulted in 
higher VMT's. Without the ability to modify the SIP budget, OKI 
anticipates serious difficulties in passing future conformity tests. 
Any future unforeseen changes in several projects' scope and schedule 
we cause us to amend our Plan, and conformity will be in jeopardy. 
Aligning the update schedules for the SIP, TIP and Plan would allow us 
to make quality traffic forecasts while being able to more accurately 
determine whether our transportation decisions are improving air 
quality.
    Question: What impact have these schedules had on investments in 
highway and safety projects, construction costs, and air quality 
projects and activities?
    Response. Making air quality conformity determinations is a complex 
task requiring significant staff resources, and allowance for adequate 
opportunity for public comment. This leads to some reluctance to amend 
the TIP/Plan for changes or additions of non-exempt projects. Major 
amendments are frequently delayed so that we may analyze a combination 
of several changes to non-exempt projects at the same time.
    Question: What has been your experience coordinating your SIP and 
conformity processes with SIP submittals or updates?
    Response. Coordination is difficult when dealing with two States 
and two Federal regions. The SIP update process is the responsibility 
of the State air quality agencies. Coordination among the State air 
agencies and the Federal regions is difficult. We are working the 
States, FHWA-Kentucky Division, FHWA-Ohio Division, EPA Region 4 and 
EPA Region 5 to try to reach a better understanding of coordination 
procedures.
    We were pleased that the two States were able to have concurrent 
SIP update processes in 1999. Due to differing legal constraints and 
priorities, it is not likely that both States will have a concurrent 
process for the next SIP update. Ohio EPA is revising their SIP to 
address certain area source deficiencies. OKI is currently working to 
provide Ohio EPA with a revised mobile source budget that can be 
included in the SIP revision. We will be using the latest planning 
assumptions to develop that budget. There is no requirement for 
Kentucky to revise their SIP or mobile source budget. The result for 
the region will be two separate budgets created with two different sets 
of planning assumptions. This will likely increase the difficulty in 
making conformity determinations.
MOBILE6 Versus MOBILE5 Projections
    Question: Compare and contrast your MOBILE5 and MOBILE6 
projections. How does the increase in near term emissions (through 
2010) from MOBILE6 affect your conformity status?

 
----------------------------------------------------------------------------------------------------------------
                                                                   VOC                           NOx
----------------------------------------------------------------------------------------------------------------
2010 Region.........................................                    -6 percent                   +18 percent
2030 Region.........................................                   -40 percent                   -40 percent
----------------------------------------------------------------------------------------------------------------

    Preliminary results for the OKI region have shown that MOBILE6 
causes NOx projections to increase by 18 percent for 2010 (our 
maintenance year). VOC projections for 2010 decrease 6 percent. For 
2030, VOC and NOx projections decrease by 40 percent with MOBILE6. We 
will not be able to pass conformity with MOBILE6 if the existing 
budgets are maintained.
    Question: How will your air quality planning process take the new 
MOBILE6 into account, and will the SIP be updated before or after the 
new MOBILE6 projections?
    Response. Not sure when SIP budgets will be updated with MOBILE6. 
Ohio is currently in the process of revising SIP, with new mobile 
source budgets, using MOBILE5.
    Question: Will the new 8-hour NAAQS likely lead to an increase or 
decrease in your vehicle emissions budget?
    Response. It is likely that the new 8-hour NAAQS would lead to a 
decrease in our vehicle emissions budget.
Additional Vehicle Emission Controls
    Question: What additional existing controls could be implemented in 
your area to significantly reduce vehicle emissions, e.g., inspection 
and maintenance, reformulated fuels, diesel retrofit, TCMs?
    Response. Nearly all of the controls with the most significant 
impact have already been implemented in the OKI region. Currently we 
have an inspection and maintenance program in Northern Kentucky and 
Southwest Ohio. Reformulated gas is used in Northern Kentucky, 
oxygenated fuels in Southwest Ohio. We have also implemented a region-
wide Intelligent Transportation System called ARTIMIS that has 
significantly reduced vehicle delays due to traffic incidents. Upcoming 
Federal requirements for cleaner heavy-duty diesel engines and cleaner 
gasoline will help. We don't anticipate any additional controls to be 
implemented locally.
    Our 2030 Plan recommends the adoption and implementation of 
comprehensive land-use and transportation policies that support SOV 
alternatives, such as transit use, biking and walking.
    Question: Would these controls be sufficient to address the 
potential increase in emissions projected under MOBILE6?
    Response. Not sure.
Role of Transportation Control Measures
    Question: What role do TCMs play in helping to meet attainment? 
Please list the TCMs and CMAQ projects in your plan, and the associated 
``off'' or ``on'' model emission reduction credits for each.
    Response. TCM and CMAQ type projects play a role in helping us meet 
conformity targets. However, there are no required TCMs in our SIP.
    We have taken ``off-model'' credit for three CMAQ projects and one 
STP project in our Transportation Plan. The projects include the 
Kentucky and Ohio elements of ARTIMIS (Advanced Regional Traffic 
Interactive Management and Information System) and continuation of 
OKI's efforts to promote ridesharing. Details of off-model credits are 
provided in the table below.

 
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                      2020 and 2030      2020 and 2030
                         Project                             Funding Source     2010 Daily VOC     2010 Daily NOx       Daily VOC          Daily NOx
                                                                               reduction (tons)   reduction (tons)   reduction (tons)   reduction (tons)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Ohio ARTIMIS.............................................                STP               0.54               1.14               0.27               0.45
Ohio RideShare...........................................               CMAQ               0.20               0.17               0.10               0.07
Kentucky ARTIMIS.........................................               CMAQ               0.14               0.30               0.07               0.12
Kentucky RideShare.......................................               CMAQ               0.05               0.05               0.03               0.02
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Question. What percentage of total emission reductions do they 
represent?
    Response. The emission reductions from the four projects represent 
2 percent of regional VOC emissions and 3 percent of regional NOx 
emissions in 2010.
    Question. Are there CMAQ projects in your plan for which you have 
not applied any on or off model emission reductions?
    Response. There are at least 6 other CMAQ projects in our TIP/Plan 
for which we have not taken off-model credit. We estimate that the 
total VOC and NOx emissions of these projects represent less than 1/2 
of 1 percent of regional emissions.
Impacts of Conformity Lapse
    Question. If your area has experienced a conformity lapse, describe 
the affect this has had on transportation and air quality planning, 
funding process, preconstruction, and construction.
    Response. The region experienced a 9-day conformity lapse in 
October 2001. Because of the short duration of the lapse, only one 
project was impacted. The design phase of a bridge project in 
Middletown, OH was delayed approximately 2 weeks.
    Question. When projects were reactivated, after USDOT approved your 
conformity determination, what impact did this have on funding, project 
completion dates, personnel, renegotiation of contracts, updating old 
information, etc?
    Response. No impact.
    Question. What impact did the March 1999 US Court of Appeals 
decision to eliminate the EPA ``grandfather'' provision from the 
conformity regulations have on your transportation investments?
    Response. The March 1999 decision has not impacted any projects in 
our region.
Role of Motor Vehicle Emission Estimates and Models
    Question. How has conformity analysis helped improve the quality of 
estimates of motor vehicle emissions for SIPs to better protect public 
health?
    Response. The conformity requirement has prompted us to continually 
update certain planning assumptions such as VMT mix and vehicle age 
distributions.
    Question. How accurate and consistent have estimates of regional 
motor vehicle emissions been when compared with each other over time 
and with actual experience?
    Response. How have official estimates of motor vehicle emissions in 
your metropolitan region changed over the past 10-20 years and how well 
have they tracked actual emissions in years past?
    Estimates of regional motor vehicle emissions have changed over 
time due to changes in planning assumptions including demographic and 
socioeconomic conditions, changes in the analysis years, and new 
updates to the MOBILE model. Output from the travel and emission models 
provides our best estimate of the actual regional motor vehicle 
emissions. The Ohio EPA and the Kentucky Division of Air Quality 
maintain detailed records of monitored pollutant concentrations.
Role of Transportation Models
    Question. Has conformity analysis been supported by adequate 
regional transportation analysis models that accurately reflect how 
changes in highway capacity affect total travel and air pollution 
emissions?
    Response. The OKI Travel Demand Model is a traditional 4-phase 
sequential model (trip generation, trip distribution, modal choice and 
trip assignment) with a feedback process from trip assignment phase to 
trip distribution phase. In this model, the capacity constrained 
algorithm is utilized in the trip assignment phase. The assignment 
algorithm considers the effect of changes in roadway capacity on the 
degree of congestion and thus the travel speed of the roadways, which 
in turn affect the distribution of the traffic loads among the roadways 
in the roadway network. In addition, the feedback process allows the 
impact of change in roadway capacity on trip distribution (where trips 
should be sent) and modal choice (which transportation should be used) 
to be properly considered. The speeds and traffic loads determine the 
amount of emission. With the speed and traffic load reflecting the 
impact of the changes in roadway capacity, the impact of capacity 
changes on emissions is properly reflected as well. In summary, OKI's 
model adequately reflects how changes in highway capacity will affect 
total travel and emissions.
    Question. How well have your region's travel models tracked actual 
experience with growth in vehicle miles of travel (VMT)?
    Response. The growth in vehicle miles of travel is mainly due to 
the growth and distribution in population as well as the increase in 
automobile ownership. In the OKI Travel Demand Model, the estimation of 
population and its distribution closely follow the building permits 
issued and land development plans. The auto ownership trend is tracked 
and forecasted into the future. Thus the amount of trips and distance 
traveled are properly simulated in the model.
    Question. Please include an indication of how sensitive your/these 
models are to effects of induced traffic.
    Response. Highway improvements that add capacity to a specific 
corridor or a regional transportation network will attract increased 
levels of vehicle traffic. The model is very sensitive to the effects 
of added roadway capacity. The model will divert the traffic to the 
roadways with new and/or added capacity. In addition, changes in the 
transportation system (highway or transit) cause travelers to change 
their transportation mode (drive-alone, share-ride or transit) and/or 
destination. OKI's model simulates these effects too.
                               __________
        Submission of the Sacramento Area Council of Governments
                        conformity questionnaire
Difference in Timing Schedules
    The Metropolitan Transportation Plan (MTP) is updated every 3 
years. The SACOG Board adopted the most recent MTP on July 18, 2002. 
The Metropolitan Transportation Improvement Program (MTIP) is updated 
every 2 years. The SACOG Board adopted the most recent MTIP on July 18, 
2002.
    The State Implementation Plan (SIP) for the Sacramento Federal 
ozone nonattainment area was last updated in 1994. The Sacramento 
region is currently discussing the need for an update to the 1994 SIP 
due to conformity implications. The Sacramento region faces a 
conformity ``lockdown'' after December 31, 2002. A conformity 
``lockdown'' is a term coined by SACOG staff and means that we will be 
unable to make any changes, additions, or deletions to non-exempt 
projects in either the MTP or MTIP until a new SIP is approved by the 
EPA with new conformity budgets. If a new SIP is not approved by July 
2005, the SACOG region will lapse conformity until a new SIP is 
approved and we can make a positive conformity determination.
    Coordinating SIP updates and the conformity process has been 
difficult at times. This is because the Sacramento Federal ozone 
nonattainment area covers five air districts, each with its own Board 
of Directors. It is sometimes difficult to get all five air districts 
together to discuss issues of mutual interest. There is a real concern 
by some air districts that they do not want conformity to drive their 
air quality programs (i.e., a SIP update).
MOBILE6 Versus MOBILE5 Projections
    In California we use an emissions model called EMFAC, but the same 
issues that you raise about MOBILE5 versus MOBILE 6 apply to EMFAC7F/7G 
versus EMFAC 2001. The difference between EMFAC7F, which was used to 
prepare Sacramento's 1994 SIP, and the new EMFAC2001 emissions model is 
dramatic. If the Sacramento region were required to use EMFAC2001 when 
preparing conformity determinations the region would fail. This is 
because EMFAC 2001 is projecting far greater on-road mobile source 
emissions than EMFAC7F did for the 1994 SIP and out years.
    The region is currently discussing the need for a new SIP that 
would incorporate the use of EMFAC 2001. It has not been decided if the 
region will update its SIP before 2005, which is when the current plan 
projects that the Sacramento region will attain the Federal 1-hour 
ozone standard. There is considerable discussion occurring over whether 
the region will attain the standard in 2005 and whether the region 
should be embarking on a new SIP. We are anticipating that the 
requirement to use the EMFAC 2001, or its successor, will occur before 
our mandated attainment date of 2005. We anticipate that the 2-year 
grace period on EMFAC 2001 will start sometime early next year (Feb/
March 2003). This would mean that all nonattainemnt areas in California 
will have to use EMFAC 2001 to prepare conformity determinations once 
the 2-year grace period is up (Feb/Mar 2005). Unless the Sacramento 
region has a new SIP in place at that time, we will be unable to make a 
positive conformity determination and the region will go into a 
conformity lapse for an unknown period of time.
    It is unknown whether or not the new 8-hour NAAQS will lead to an 
increase or decrease in our vehicle emissions budget. Our best guess 
would be that it would lead to higher budgets initially (i.e., 2005). 
It is also unclear whether or not the SACOG region would be able to 
pass future conformity tests with these new budgets.
Additional Vehicle Emission Controls
    The SACOG region is currently implementing the Sacramento Emergency 
Clean Air and Transportation (SECAT) program. The SECAT program was 
created as a way to help truck owners and fleet operators reduce their 
vehicles' emissions in a business-friendly manner. There are two 
options available to truck owners: diesel engine retrofits or 
replacement of their older truck with a cleaner-burning newer truck. 
The goal of the SECAT program is to reduce NOx emissions from heavy-
duty vehicles by two tons per day by 2002 and a total of three tons per 
day by 2005 within the Sacramento Federal 1-hour ozone nonattainment 
area. The current program is funded with $70 million in state and local 
funds. If this program were to be continued after the moneys are 
expended, additional NOx emissions reductions could be achieved. We do 
not believe it would be sufficient to make up the projected increase in 
on-road emissions associated with EMFAC 2001.
Role of Transportation Control Measures (TCMs)
    TCMs do not play a big role in helping the Sacramento region 
achieve attainment of the ozone standard. The 1994 SIP calls for 
reductions of 26 tons per day of NOX and 35 tons per day of ROG 
emissions from proposed new measures. The 1994 SIP shows a 1 ton 
reduction in both ROG and NOX from ``TCMs/Land Use'' measures. These 
measures have never been defined. This 1 ton represents approximately 4 
percent of the NOx reductions needed and approximately 3 percent of the 
ROG reductions needed to achieve attainment.
    The SACOG region does not take any credit for CMAQ projects in its 
conformity determinations. This is because CMAQ projects are difficult 
to quantify.
Impacts of Conformity Lapse
    The SACOG region has not experienced a conformity lapse within the 
last couple of years. The SACOG region, however, intentionally let 
conformity lapse several years ago because the schedule for updating 
the MTP and conformity didn't mesh and the SACOG Board of Directors did 
not want to accelerate the MTP development for conformity reasons. The 
SACOG region lapsed for several months and it had no impact on project 
deliveries.
    The SACOG region is facing a lapse in October 2004 that could last 
quite a while, depending on when a new SIP is approved. As indicate 
above, the SACOG region is currently discussing the need for a new SIP 
and, depending on the outcome of those discussions, the region could 
face a conformity lapse that could last anywhere from several months to 
several years.
    The March 1999 U.S. Court of appeals decision had no effect on 
SACOG's transportation investments.
Role of motor vehicle emission estimates and models
    The conformity analysis has not helped the motor vehicle emissions 
inventory for SIPs because there has not been a SIP update since 1994. 
The motor vehicle emissions inventory is prepared by ARB. We have not 
done a systematic analysis of changes in each update of the inventory.
Role of Transportation Models
    Yes it has. The transportation demand models have met or exceeded 
the guidelines in the CAAA and include full feedback from traffic 
assignments to trip generation and all travel modes including walking 
and bicycling.
    The travel model has been updated several times since 1994. The 
base year of the model has changed from 1990 to 1994 to 1997 to 2000. 
Each update has shown at least the same and generally better validation 
of the models traffic assignment to actual traffic counts. We have a 
data base of 2000+ traffic counts for each calibration year.
    If you define ``induced traffic'' as the traveler's response to 
changes in congestion, the model we use has accessibility measures in 
auto ownership, trip generation, trip distribution, and mode choice 
steps.
    The inclusion of the accessibility measures means that as 
congestion increases over time, or given higher congestion levels in 
one area of the model area versus another, auto travel (both trip and 
VMT) are reduced. The amount of reduction is generally small, but 
measurable in the order of a few percentage points.
                               __________
 San Joaquin Council of Governments, Stockton, California Air Quality 
                     Conformity Case Study Response
   (Prepared by Julia E. Greene, Executive Director, San Joaquin COG)
                             July 19, 2002
    Air quality conformity has had a positive impact over the past 6 
years in merging transportation investments with the objectives of 
achieving air quality standards in this region. The Congestion 
Mitigation and Air Quality (CMAQ) program is an excellent example of 
how transportation objectives and air quality objectives can be 
integrated. Great progress has been made. Nevertheless there are 
challenges that still need to be met. The timing of air quality 
attainment plans, the conformity process, and regional transportation 
plans has led to confusion and unnecessary work. To a large extent the 
timing of conformity drives the transportation planning process rather 
than the other way around. Also, the transportation modeling tools that 
have been accurate for assessing regional impacts of transportation 
improvements have had a greater set of expectations placed on them with 
air quality requirements. These tools have not always proven up to the 
task, and the investment required for staffing and upgrading of these 
tools has been inadequate.
    In the San Joaquin Valley of California the task of achieving 
Federal and state air quality attainment standards is daunting. The 
requirement to reduce emissions by 30 percent by 2005 is not 
achievable. As a result this valley will join the Los Angeles air basin 
within the next year under the ``Extreme'' air quality designation. 
Merging the efforts of technology improvements, transportation control 
measures and capital and operating transportation investments will be a 
large challenge for this region, and attainment of air quality 
standards will still be an uncertain thing. We need the ability to use 
all these tools in our effort to bring acceptable clean air to the San 
Joaquin Valley.
                        point by point responses
Difference in Timing Schedules
    California's State Implementation Plan (SIP) process in the San 
Joaquin Valley Air Basin has been driven by Environmental Protection 
Agency (EPA) findings of inadequacies, rather than by a regular 
schedule for SIP updates. Our Regional Transportation Plan and Federal 
Transportation Improvement Program are updated on schedules determined 
by our transportation planning requirements, and by the ever-changing 
nature of our conformity and the San Joaquin Valley's attainment 
status.
    To date the SIP process has not yet impacted our highway 
investments. The San Joaquin Valley Air Basin experienced a lapse of 7 
weeks due to an inadequate SIP. The impact was minimal in San Joaquin 
County, only due to the time of year in which it occurred. Had it 
occurred during early spring there would have been a project delivery 
impact.
    The entire eight county San Joaquin Valley Air basin faces a 
constant threat of highway funding sanctions that could halt over $3 
billion in transportation projects valley-wide. SJCOG has always 
voluntarily placed a high priority on clean air projects, independent 
of the SIP planning process.
    SJCOG has prepared four air quality conformity certifications in 
the past 12 months. This has been the result of both the requirements 
of the transportation planning process and our SIP status.
MOBILE6 Versus MOBILE 6 Projections
    California uses the EMFAC air quality model, rather than the MOBILE 
air quality model. We face the same problem as the rest of the Nation 
as the new EMFAC 2001 model reportedly projects higher emissions levels 
than the older EMFAC 7F and EMFAC 7G models it will replace.
    In California, the challenge is even greater in that EPA and the 
California Air Resources Board (CARB) have not sanctioned EMFAC 2001 
for use in most of the state's non-attainment areas. (The reason is 
somewhat arcane but is based upon the assumptions for vehicle fleet mix 
that are used in California and their adequacy.) Federal Highway 
Administration has made it known that if this is not achieved by 
December of 2002, a conformity freeze will be in effect. This will mean 
that no Regional Transportation Plan, Federal Transportation 
Improvement Program or amendment to either will be approved by FHWA 
unless the modified projects fall into the exempt category. It is 
almost a surety that most of California's regions will suffer an air 
quality conformity ``lockdown'' or ``freeze'' as a result of this 
modeling issue.
    The impact of the new model is still unclear as a new SIP is 
pending for our air basin. MPOs in the San Joaquin Valley believe that 
from the results of tests at the University of California at Davis, 
there will be great difficulty in meeting conformity and that emissions 
budgets will go up due to changes in the new EMFAC model.
    The new EMFAC 2001 model, or an updated version, will be used to 
prepare our next SIP. At this point it is still uncertain what air 
quality status the SIP will address. The San Joaquin Valley is 
currently designated as Severe, but the San Joaquin Valley Unified Air 
Pollution Control District (SJVUAPCD) has declared ``an intent'' to 
voluntarily designate the air basin as Extreme.
    Technical staffs in the San Joaquin Valley estimate that the new 8-
hour standard will be more difficult to attain, than the previous 1-
hour standards. We also are given to understand that the 1-hour 
standard will remain in place until it has been attained.
Additional Vehicle Emissions Controls
    San Joaquin COG already is subject to inspection and maintenance, 
reformulated fuels, the standard TCMs (i.e. ridesharing, transit 
alternatives etc.), and is even involved in funding an Air District 
sponsored diesel retrofit program as well as our own CNG fueled school 
bus replacement program (removes older diesel powered school buses from 
California) here in San Joaquin County.
    New Federal Vehicle Emission Controls scheduled for 2007 are 
estimated to have a significant impact in our air basin. The 
effectiveness of Transportation Control Measures varies by region. 
SJCOG has placed a very high priority on ride-sharing, vanpool, and 
commuter rail projects that have been very successful in our region due 
to a very large percentage of long distance commuters to the San 
Francisco Bay Area that reside in our region.
    The new Vehicle Emissions Controls will not be implemented in time 
to assist in attainment of the Severe area deadline of 2005. They may 
allow for development of a SIP to meet an Extreme area designation by 
the 2010 deadline, though this is highly uncertain.
Role of Transportation Control Measures
    Transportation Control Measures alone cannot attain air quality 
standards, but does have the following effect:

      Encourage public agencies to invest in alternative 
transportation modes (other than street and roads) that improve air 
quality. For example, the city of Lodi has an aggressive program to 
purchase CNG powered public vehicles (buses, police cars, trucks).
      Result in incremental (phase by phase) implementation of 
large-scale, air quality beneficial projects, wherein the ultimate 
project will have the largest air quality gains. (Example: citywide 
traffic signal coordination/synchronization; clean air bus acquisition/
fleet conversion)
      Provide multiple transportation options for the general 
public, resulting in reduced vehicle trips and vehicle idling. An 
example is our vanpool program that has 90 vans leaving our region 
every workday morning for the Bay Area.

                                     TCMS AND ESTIMATED EMISSION REDUCTIONS
----------------------------------------------------------------------------------------------------------------
                                                                  ROG          NOx           CO         PM-10
----------------------------------------------------------------------------------------------------------------
Traffic synchronization and signal installation (Not
 quantifiable)..............................................
 
           Intercity and interregional bus transit
Total Reduced Emissions (kg/day)............................           60           30          n/a           25
                     Rideshare Programs
Total Reduced Emissions (kg/day)............................           36           61          n/a           26
 
             Bicycle Programs (Not quantifiable)
 
         Alternative Fuel Fleet Conversion Programs
Total Reduced Emissions (kg/day)............................           10            2            0            3
                        Rail transit
Total Reduced Emissions (kg/day)............................           21           39          n/a           25
----------------------------------------------------------------------------------------------------------------

    TCMs represent between 4 and 5 percent of total emission reductions 
in our region. The SJCOG Model projects that it will be as much as 10 
percent by 2020. The effectiveness of TCMs varies greatly by region. In 
San Joaquin County rideshare, vanpool, and commuter rail provide 
significant emissions reductions. Again, this is due to the large 
percentage of San Joaquin County residents that have long distance 
commutes into the San Francisco Bay Area. These TCMs have an even 
greater value in the San Francisco Bay Area where the VMT reduced is 
even greater than in our own county.
    CMAQ projects are considered in an overall qualitative analysis of 
air quality improvements and are performed off model. CMAQ money and 
CMAQ projects are a key component of our strategy to demonstrate air 
quality conformity.
    Emissions reductions are the major criteria for selection of CMAQ 
projects, and are quantified in our project selection process. See the 
attached list of CMAQ projects and their air quality impact.
Impacts of Conformity Lapse:
    As mentioned earlier, the entire San Joaquin Valley Air Basin 
experienced a conformity lapse of less than 2 months that did not 
significantly impact any project delivery. We were fortunate that the 
conformity lapse occurred during the off peak period of project 
contract awards.
    We are unaware in our region of any costs to project due to the 
conformity lapse, but there are five other MPOs in the Central Valley 
of California that may have experienced a more serious issue during 
these 7 weeks.
    The lapse was brief but did result in some project schedules 
slipping. We had enough lead-time to avoid any major re-startup costs 
or problems.
    The March 1999 U.S. Court of Appeals decisions to eliminate the 
``grandfather'' clause did not have a significant impact during our 
brief lapse. It certainly would have a major impact during an extended 
lapse of conformity. Bringing a multi-million dollar project to a halt 
during the middle of construction would cause millions in re-startup 
costs and contractor penalties. Even a halt during project design would 
result in the loss of hundreds of thousands of dollars.
    It should be pointed out that any delay is fraught with concern. 
Even a short delay at the wrong time could greatly impact project 
schedules. For instance, a 2-month delay during a USFWS permitted time 
for pile driving piers into a river would result in reapplying for the 
permit, and could add 6 to 18 months to the project schedule if the 
Service requires even more mitigation than was identified under the 
original permit.
Role of Motor Vehicle Emissions Estimates and Models:
    The conformity process has put a greater burden on transportation 
models to accurately represent the regional picture in transportation 
planning. As a result, there has been a higher level of expectation put 
on model outputs, and therefore a more rigorous set of calibration 
requirements. Our models are marginally better today as a result of 
conformity. These models are the basis for estimating emissions budgets 
for each region, and have been beneficial in assessing the full impact 
of mobile sources on the air quality picture.
    The bigger challenge has been with increased expectations there is 
a greater demand for more comprehensive and better performing modeling 
tools. This translates into cost. Not so much for the tools themselves 
(though the promise of better tools has not matched actual performance 
in the real world), but for the data to be input into the model, and 
the skill needed to produce the model itself, run it effectively and 
maintain it.
    In San Joaquin County the results have been consistent over the 
past 10 years. Where differences have occurred it has been the result 
of changes in planning assumptions such as population and employment 
projections. These did change in San Joaquin County in future years and 
had a proportional impact on Vehicle Miles of Travel and therefore 
emission projections.
    There has been some variation over the 20-year period of time. With 
the introduction of new technology for emissions reductions, modeling 
assumptions changed substantially in the late 1980's, and emission 
reductions were substantial. In the past 10 years we have captured this 
impact well, and produced a more consistent and we believe more 
accurate picture of emissions.
Role of Transportation Models:
    Impacts of individual highway capacity projects are difficult to 
determine in a regional air quality conformity process because of the 
accepted level of accuracy of a region project. However, when assessing 
the impacts of a larger number of capacity projects the effectiveness 
of the modeling tool is better. The size of the regional modeling tool 
means that it is relatively insensitive to a few small capacity 
increasing projects. However, as the number of projects increase, the 
impact is better captured on the regional system.
    The Federal planning regulations require that models be 
``calibrated,'' or adjusted, to reflect current vehicle miles traveled 
as reported in the Federal Highway Performance Monitoring System (HPMS) 
every 10 years. Estimates during interim periods from existing 
conditions varied. The primary reason was that population and 
employment projections for the region proved too high. Actual emissions 
were likely lower than those predicted.
    None of the models in the San Joaquin Valley produce a specific 
estimate of the impacts of induced travel. Using manual techniques an 
estimate of induced trips can be made, but the level of accuracy is 
highly uncertain.






                               __________
               Southern California Council of Governments
Difference in Timing of Schedules
    Question: Describe how the different schedules for the SIP, TIP-
conformity, etc., and the impacts of date changes on out year emissions 
affect your ability to develop effective and timely transportation and 
air quality plans.
    Response. Southern California is one of many areas in the Nation 
that is facing a mismatch between air quality planning and 
transportation planning schedules. This mismatch is important because 
it could interrupt the flow of millions of Federal transportation 
dollars to the region. The question posed has been answered in the 
following two parts; mismatch in the schedules and frequency of 
Regional Transportation Plan (RTP) and State Implementation Plan (SIP) 
updates; and mismatch between the RTP and SIP planning horizon 
requirements and its affect on out-year emissions.
Mismatch in the Schedule and Frequency of RTP and SIP Updates
    In non-attainment and maintenance areas, the conformity of the RTPs 
must be re-determined at least every 3 years. However, there is no 
Federal requirement for a regular or frequent SIP update. This has 
created a situation where RTPs are updated regularly while SIPs are 
updated on a discretionary basis inconsistent with the RTP process.
    An RTP provides inputs (planning assumptions, i.e. socio-economic 
data and transportation activity data) to the SIP development process. 
While a SIP provides the set of constraints (e.g., emissions budgets 
and TCMs) for the RTP. The development of these two documents should be 
sequential and cumulative, not concurrent and independent.
    Both the RTP and the SIP are required to use the Latest Planning 
Assumptions, as stipulated by the Federal agencies, whenever they are 
updated. The Latest Planning Assumptions include the most recent 
sociodemographic and vehicle activity data (e.g., population 
distributions, vehicle age and fleet mix). Since the SIPs are updated 
much less frequently than the RTPs, the planning assumptions in the 
SIPs tend to be much older than those in the RTPs.
    In the SCAG region, there are 11 non-attainment areas, with 13 
associated SIPs stipulating emissions budgets for transportation 
conformity. At the present time, there are only five applicable ozone 
SIPs and one applicable NOx SIP in place. However, all of them were 
developed and based on planning assumptions that are now seven to 10 
years old. As such, they are too obsolete for pertinent conformity 
analysis.
    A related factor is the Federal requirement that any update of a 
SIP, with its associated new emissions budgets, triggers an 18-month 
clock within which all relevant RTPs must re-demonstrate conformity 
using these new emission budgets. This requirement, together with the 
mismatch in frequency of RTP and SIP updates discussed above, results 
in debilitating procedural inconsistencies.
Mismatch Between the RTP and SIP Planning Horizon Requirements and 
        Impacts on Out Year Emissions
    Federal regulations require at least a 20-year planning horizon for 
the development of any RTP. However, SIPs are only required to address 
the time period up to the attainment or maintenance date for the 
relevant area. Thus, SCAG's 2001 RTP extends up to the year 2025, and 
the upcoming 2004 RTP will extend up to the year 2030. However, and as 
one example, the 1-hour Ozone SIP for the South Coast Air Basin (SCAB) 
in the SCAG region is only required to consider the period preceding 
its stipulated attainment year of 2010. As a consequence, there is 
always a gap of about 15 to 20 years between SIP and RTP planning 
horizons. The complex interplay of socio-demographic projections and 
emission budgets between the SIP and the RTP processes means that there 
is almost always the potential of a procedural conformity lapse.
    Additionally, under the current conformity rule, all transportation 
agencies must demonstrate conformity up to the last year of the RTP. 
However, the applicable emissions budgets contained in the relevant 
SIP, and which are only required to extend up to the attainment year or 
last year of maintenance, establish a ceiling for conformity analysis. 
Thus, the RTP and Regional Transportation Improvement Program (RTIP) 
emission budgets for these future years-i.e., beyond the attainment 
year or the last maintenance year-cannot exceed this SIP-established 
ceiling. As a result, demonstrating attainment for the out-years beyond 
the attainment year of the last year of maintenance becomes problematic 
for all MPOs.
    This is particularly a problem for PM10 non-attainment or 
maintenance areas, as there is a direct relationship between population 
growth, increases in annual vehicle miles traveled (VMT), and annual 
PM10 (particulate matter) emissions. Generally, and because both of 
these metrics trend upward through time, both VMT and PM10 emissions 
tend to increase into these future years. For example, the current PM10 
attainment year for the SCAB and for the Coachella Valley portion of 
the Salton Sea Air Basin (SSAB) is 2006. The gap between this PM10 
attainment year and the stipulated planning horizon year ranges from 19 
to 24 years (for the 2001 RTP and the 2004 RTP, respectively). In the 
absence of realistic PM10 emissions budgets for these future years, it 
is difficult, if not impossible, to demonstrate conformity beyond the 
attainment year of 2006.
    Question: Provide a time-line or narrative description of your 
various schedules.
    Response. A timeline, which incorporates both the air quality and 
transportation planning schedules for the SCAG region, is attached to 
the end of this document for your review. SCAG's next RTIP comes due on 
October 6, 2002 and the next RTP comes due on June 8, 2004. In order to 
avoid an adverse impact on conformity, SCAG is working closely with the 
local, state and Federal air agencies to ensure the timely approval of 
an adequate emissions budget.
    Question: What impact have these schedules had on investments in 
highway and safety projects, construction costs, and air quality 
projects and activities?
    Response. As mentioned, a real potential exists for a conformity 
lapse due to the mismatch of air quality and transportation planning 
schedules, and the SCAG region will continue to face this constant 
threat. However, so far, the mismatch in schedules has not had an 
impact on investments in highway and safety projects, construction 
costs and air quality projects and activities. During a conformity 
lapse only certain projects can be implemented, such as: safety-related 
projects; those which are regional emission-neutral (known as exempt 
projects); and TCM projects. Generally, no capacity enhancement 
projects (such as all-purpose-lane highways) can be implemented during 
a conformity lapse. (The SCAG region experienced short-term, mild 
conformity lapses due to reasons beyond the mismatch of schedules 
during 1998 and 2001. These lapses are described in the last section of 
this document).
    Question: What has been your experience coordinating your SIP and 
conformity processes with SIP submittals or updates?
    Response. A few months ago, in California, all MPOs and the State 
were facing a potential conformity lapse for all RTIPs and some RTPs. 
The transportation agencies were asked to use the most recent vehicle 
data to demonstrate conformity for the RTP and RTIPs. However, the 
Federal regulations also require that the RTPs and RTIPs conform to the 
applicable SIPs, which are currently based on old data.
    The California situation has been temporarily resolved through 
inter-agency cooperation. The California Air Resources Board (CARB) and 
the local air agencies have committed to update all SIPs between late 
this year and late 2003, and, in return, the United States 
Environmental Protection Agency (USEPA) has agreed to process the 
emissions budgets based on this provisional schedule. In addition, the 
Federal Highway Administration (FHWA) has issued a letter permitting a 
limited use of the old version of the mobile source emissions inventory 
model, EMFAC7F and 7G, and its associated data through the end of the 
current calendar year of 2002. Therefore, the six-county SCAG region 
will be in what amounts to a conformity lockdown from January 1, 2003 
until June 8, 2004, when the 2004 RTP should be in place as the 
region's federally approved and conforming RTP. This conformity 
lockdown means that no changes requiring conformity analysis and 
finding can be made to any transportation plans during this period. For 
a region as economically dynamic as Southern California, this is an 
unreasonable constraint.
    To illustrate this SIP-related problem, the conformity lockdown 
situation described above will begin to have effects in the SCAB 
portion of the SCAG region as early as November 2002. With SCAG's 
concurrence, the air agencies have had to re-submit their 1997 PM10 SIP 
in order to request a needed extension of the attainment year from 2001 
to 2006. To extend the attainment date, USEPA will approve this PM10 
SIP in mid-November, at which time the associated emission budget 
becomes the mandatory basis for all conformity analyses. However, this 
PM10 SIP is based on obsolete emission budgets that cannot, 
realistically, be used for present-year conformity determinations.
    In the SCAG region, the situation is further complicated by the 
fact that some air basins have been designated non-attainment for more 
than one criteria pollutant. For instance, the SCAB is non-attainment 
for four pollutants: ozone (O3), carbon monoxide (CO), nitrogen dioxide 
(NO2), and particulate matter less than 10 microns in aerodynamic 
diameter (PM10). Therefore, all pertinent SIPs for this air basin must 
be prepared on the same schedule, otherwise risking a conformity lapse.
            emfac2000/emfac2001versus emfac7f/7g projections
    The state of California utilizes its own mobile source emissions 
inventory model, known as EMFAC, rather than USEPA's model, Mobile. 
CARB has long maintained a California specific model, which represents 
conditions unique to California. Therefore we have addressed the 
questions specifically to EMFAC. However, we do face a similar 
situation as the rest of the Nation, as there is a projected emissions 
increase between model versions, as described below.
    Question: Compare and contrast your EMFAC7F/7G and EMFAC2000/2001 
emission projections.
    Response. EMFAC2001 (Version 2.08) will soon be the working version 
of the motor vehicle emissions inventory model. USEPA intends to 
approve this model for new SIP development purposes on a statewide 
basis in the near future. This new EMFAC version replaces the previous 
model versions: EMFAC2000 (which was approved on a limited basis for 
SIP development in the San Francisco Bay area only) and EMFAC7F and 7G. 
In California, most of the current SIPs and their associated emission 
budgets are based on EMFAC7F or 7G, which use seven to 10 year old 
data. As previously mentioned, Federal agencies require that conformity 
determinations be based on the Latest Planning Assumptions, which 
includes the most recent socio-demographic and vehicle activity data 
(e.g., population distributions, vehicle age, and fleet mix). Effective 
January 1, 2003, all RTPs and RTIPs in the State of California will be 
required to be based on the most recent EMFAC2001 model, which 
incorporates these Latest Planning Assumptions.
    EMFAC2000 was under development for 5 years and represented a 
complete rewrite of computer code and algorithms. EMFAC2000 represents 
a significant change to the existing on-road motor vehicle emissions 
inventory as compared to EMFAC7F and 7G. Emission inventories based on 
EMFAC2000 increase substantially for nearly every category of motor 
vehicle fleet and for all pollutants, with NOx being somewhat less 
impacted than reactive organic gases (ROG) and CO. NOx emissions from 
heavy-duty diesel vehicles have doubled for this vehicle class in year 
2000. For light-duty cars and trucks, the calendar year 2000 ROG 
inventory has increased by 192 percent, the CO inventory has increased 
by 204 percent, while the NOx inventory has increased by a modest 3 
percent. Much of the light-duty vehicle ROG increase is related to the 
way EMFAC2000 handles evaporative emissions, which increase threefold 
when compared to EMFAC7G.
    EMFAC2001 (Version 2.08) is one of a series of minor updates 
planned for the on-road model, and reflects clean-up items and 
incorporation of the impacts of new emission standards (e.g., Federal 
Tier 2 standards) and new data (e.g., travel activity data); there are 
no major changes to algorithms or structure. It is unclear how the 
proposed changes will impact overall inventory estimates, but it 
appears that EMFAC2001 will have lower emissions when compared to 
EMFAC2000, especially for calendar years 2010 and beyond. However, 
EMFAC2001 will certainly have higher emissions than the current EMFAC7F 
and 7G models
    Question: How does the increase in near term emissions (through 
2010) from EMFAC2001 affect your conformity status?
    Response. It is unclear how the increase in near term emissions 
from EMFAC2001 will affect the conformity status of the SCAG region. 
There have been considerable delays in the development of the SIPs for 
the SCAG region, and hence there are no emission budgets established at 
this time.
    Question: How will your air quality planning process take the new 
EMFAC2001 into account, and will the SIP be updated before or after the 
new EMFAC2001 projections?
    Response. The 2003 SIPs for the SCAG region will be updated 
subsequent to the finalization of EMFAC2001. As mentioned previously, 
USEPA intends to approve EMFAC2001 for SIP development purposes on a 
statewide basis in the near future. The emission budgets of the SIPs 
for the SCAG region will be based on EMFAC2001, which are scheduled to 
be approved by EPA in mid-2003. Subsequently, SCAG's 2004 Regional 
Transportation Plan (RTP), which comes due June 8, 2004, will be based 
on budgets generated from EMFAC2001. SCAG is working with the 
respective air agencies to maintain consistency between the SIP and 
2004 RTP schedules.
    Question: Will the new 8 hour NAAQS likely lead to an increase or 
decrease in your vehicle emissions budget?
    Response. It is unclear if the new 8 hour NAAQS standards will 
increase or decrease SCAG's vehicle emissions budget. Implications of 
the new 8-hour Ozone NAAQS are currently being assessed by the CARB. 
USEPA plans to implement the new 8-hour ozone standard and the new 
PM2.5 standard over the next few years. Implementation of the 8-hour 
ozone standard will occur in the early part of the TEA-21 
reauthorization period, while that of the PM2.5 standard may occur 
somewhat later. The impacts will probably include conformity 
requirements for the existing RTPs and RTIPs, and some new areas will 
need adequate time to prepare to meet these new requirements.
    Congress provided a 1-year grace period for new areas to 
demonstrate conformity after the new 8-hour ozone or PM2.5 non-
attainment designations are made. One year is not sufficient for 
transportation agencies to address conformity issues.
Additional Vehicle Emission Controls
    Question: What additional existing controls could be implemented in 
your area to significantly reduce vehicle emissions, e.g., inspection 
and maintenance, reformulated fuels, diesel retrofit, TCMs?
    Response. SCAG has no regulatory authority, and, therefore, does 
not formulate or administer rules and regulations pertaining to 
vehicular emission controls. However, a number of additional vehicle 
emission control measures and related actions which promise air quality 
benefits are being considered or implemented by regulatory agencies 
within the region. These include the following measures.

      Improved implementation of Air Quality Investment 
Program, under the South Coast Air Quality Management District's 
(SCAQMD's) Ridesharing Rule 2202
      Improved implementation of SCAQMD's Fleet Rules 1186.1/
1191-96--These fleet rules require new garbage trucks, sweepers, buses 
and airport vehicles to switch to alternative fuels such as natural 
gas.
      Incentivize use of reformulated fuels (such as biodiesel)
      Controls on truck-idling at goods movement centers (such 
as the Ports of Los Angeles and Long Beach)
      Urban forestry for heat island mitigation (tree 
plantation in open-to-sky parking lots and thoroughfares-reduction in 
evaporative emissions and indirect benefits of evapo-transpiration)
      Use of innovative technologies (e.g., fuel cells, 
personal transportation devices, photocatalytic VOC-and NOx-reducing 
chemical coatings such as titanium dioxide, which can be applied to 
wall surfaces in semi-enclosed areas which see high volumes of 
vehicular emissions such as parking garages)
    Question: Would these controls be sufficient to address the 
potential increase in emissions projected under EMFAC2001?
    Response. As mentioned previously, emission budgets based on 
EMFAC2001 have not been established at this time. Therefore, it is 
unclear if the control measures described above are adequate to offset 
a potential increase projected under EMFAC2001.
Role of Transportation Control Measures
    Question: What role do TCMs play in helping to meet attainment? 
Please list the TCMs and CMAQ projects in your plan, and the associated 
``off'' or ``on'' model emission reduction credits for each.
    Response. There are 11 non-attainment areas in SCAG's six-county 
region, with 13 SIPs associated with them. Only two of the six 
applicable SIPs contain Transportation Control Measures (TCMs)-the 
South Coast Air Basin's 1997 Ozone SIP, and the Ventura County portion 
of the South Central Coast Air Basin's 1994 Ozone SIP.
TCMs in the South Coast 1997 Ozone SIP/AQMP (as amended in 1999):
    1. High Occupancy Vehicle (HOV) Improvements
    HOV projects and related pricing alternatives and park and ride 
lots/intermodal facilities.
    2. Transit/System Management
    The following system management measures improve congestion and 
reduce emissions:

      Bus, rail, and shuttle transit improvements.
      Bicycle and pedestrian facilities.
      Urban freeway system management improvements.
      Smart Corridors system management programs.
      Railroad consolidation programs (e.g., Alameda Corridor).
      Congestion Management Plan-based demand management 
strategies.
      County/corridor-wide vanpool programs.
      Telecommunication facilities/satellite work centers.
      Seed money for transportation management associations.
      Transportation Demand Management (TDM) demonstration 
programs/projects eligible for programming in the RTIP.

    3. Information Services
    By targeting individuals who travel to and from employment sites 
and other activity centers (e.g., airports, schools, shopping centers, 
and special event centers) and providing them with information 
specifically tailored to facilitate use of alternative travel modes, 
vehicle travel and the associated emissions can be significantly 
reduced. Providing information services offers an innovative way of 
reducing vehicle emissions when combined with facility improvements, 
service enhancements, product development, extensive education, 
marketing, and promotion.
    Potential actions to reduce congestion and emissions through 
individual efforts include:

      Promoting multi-modal strategies to maximize all options 
available to commuters.
      Targeting peak period trips for reduction.
      Marketing and promoting the use of HOV lanes to the 
general public.
      Marketing and promoting rail lines to the general public.
      Educating the public regarding cost, locations, 
accessibility, and services available at park and ride lots.
      Promoting and marketing vanpool formation, incentive 
programs promoting ride-matching through the Internet, and other means 
of making alternative travel option information more accessible to the 
general public.

    TCM strategies in the Ventura County portion of the South Central 
Coast Air Basin's 1994 Ozone SIP:

    1. Clean Fuel Bus Fleets & Support Facilities
    2. Improved Public Transit
    3. Bicycle & Pedestrian Facilities
    4. Traffic Flow Improvements

    SCAG's Regional Transportation Model generates the vehicle miles 
traveled (VMT) based on all projects in the system. The regional 
emissions estimates are the product of the collective action of all 
strategies (HOV lanes, transit, mixed flow, etc), not just an 
aggregation of the individual projects and programs, including the TCM 
projects. It is not possible to allocate specific emission credits for 
individual TCMs.
CMAQ Projects Associated with Regional Transportation Plans
    All CMAQ program funds are allocated to a variety of projects that 
meet the CMAQ eligibility criteria (such as HOV lanes, purchase on the 
alternative fuel buses, signal synchronization, rideshare program, 
etc.). Some of these projects are regionally significant, e.g., HOV 
lanes, while some are not, e.g., bicycle parking racks.
    All regionally significant projects and programs were included in 
SCAG's Regional Transportation Model (RTM) and their regional emissions 
were calculated directly through the model. No off-model emission 
reduction credits were claimed.
    Question: What percentage of total emission reductions do they 
represent?
    Response. TCMS for the South Coast 1997 Ozone SIP/AQMP (as amended 
in 1999)
    Emission reductions resulted from the major TCM categories and were 
calculated for the year 2010 for the SCAB area. They are reflected in 
the applicable SIP as follows.

 
------------------------------------------------------------------------
                                percent Reduction     percent Reduction
             TCM                       VOC                   NOx
------------------------------------------------------------------------
HOV Lanes...................  19 percent..........  19 percent
Transit/System Management...  16 percent..........  18 percent
Information Services........  10 percent..........  13 percent
------------------------------------------------------------------------

    No emission reduction benefits were claimed for any of the TCM 
strategies in the Ventura County portion of the South Central Coast Air 
Basin's 1994 Ozone SIP:
    Question: Are there CMAQ projects in your plan for which you have 
not applied any on-or off-model emissions reductions?
    Response. Yes. There are two types of CMAQ projects for which no 
emission reduction credits were applied: 1) small projects, which are 
not regionally significant and which are not included in SCAG's RTM 
(e.g. bike racks), and 2) some technology-based projects, such as 
alternative fuel infrastructure and the replacement of old buses with 
new, clean fuel ones. No off-model emission reduction credits were 
taken for any type of project.
Impacts of Conformity Lapse
    Question: If your area has experienced a conformity lapse, describe 
the effect this has had on transportation and air quality planning, 
funding process, preconstruction, and construction.
    Response. Since the publication of the Transportation Conformity 
Rule in November 1993, SCAG has experienced a conformity lapse three 
times. However, because none of these lapses in conformity extended for 
more than 2 months, in no case was SCAG required to prepare an Interim 
RTP/RTIP. Each conformity lapse is described below.
      The first conformity lapse occurred in 1998, because SCAG 
did not complete its 1998 RTP on time. Due to the size and complexity 
of the Federal non-attainment areas contained within the SCAG region, 
preparation of the RTP-including the required conformity analysis-
sometimes took more time than other MPOs. Presently, the completion of 
one RTP marks the beginning of the next one. It takes more than 2 
years, from the beginning to the Federal approval, to complete an RTP 
in the SCAG region. However, from the Draft RTP stage-i.e., once most 
of the RTP's projects, programs, and policies are set-the associated 
regional emissions analysis, publication of the Draft, public review 
and comment, public hearing, through SCAG's submission for Federal 
approval takes at least 9 months.
      The next conformity lapse was caused by a non-
transportation related development. The U.S. Court of Appeals' March 2, 
1999, ruling invalidated the use of submitted emission budgets in 
conformity findings. SCAG revisited the 1998 RTP and 1998 RTIP in the 
PM10 non-attainment areas in the region and re-affirmed their original 
conformity finding by using the build/no-build method for conformity 
determination.
      The most recent conformity lapse was caused by the 
USEPA's interpretation of the PM10 construction-related emission 
analysis. This occurred during the 2001 RTP process; only two PM10 non-
attainment areas were affected and the lapse lasted for less than 2 
months.
    Due to the short duration of each lapse, SCAG did not survey the 
transportation project sponsors to determine which projects were 
halted. However, all constituents were informed of the lapse and its 
resolution.
    Question: When projects were reactivated, after USDOT approved your 
conformity determination: what impact did this have on funding, project 
completion dates, personnel, renegotiation of contracts, updating old 
information, etc.
    Response. SCAG's RTIP has a 6-year planning horizon, in compliance 
with California requirements, and is valued at about $22-24 billion. 
However, only the first and second fiscal years of each TIP are used in 
estimating the cost of a conformity lapse. Therefore, between $0.5 and 
$2 billion of all transportation projects were subject to postponement 
during the 1998 and the 2001 conformity lapses, respectively. All 
projects were fully implemented, once the conformity status was 
reinstated.
    Question: What impact did the March 1999 U.S. Court of Appeals 
decision to eliminate the EPA ``grandfather'' provision from the 
conformity regulations have on your transportation investments?
    Response. Due to the fact that, in each instance of conformity 
lapse, the SCAG region was out of conformity for less than 2 months, 
and, hence, no interim RTP was required, the implications of the above 
decision were not evaluated.





    Senator Jeffords. Senator Inhofe.

 OPENING STATEMENT OF HON. JAMES M. INHOFE, U.S. SENATOR FROM 
                     THE STATE OF OKLAHOMA

    Senator Inhofe. Thank you, Mr. Chairman.
    Today's hearing is a subject I've spent a good deal of time 
on, back when we were in the majority I chaired the 
Subcommittee on Clean Air. We addressed some of the problems, 
we worked to make sure the States had tools necessary to meet 
Clean Air requirements. Title VI of TEA-21 is a result of the 
subcommittee's efforts. Following passage of TEA-21, there was 
concern with the effects of conformity on newly designated 
areas of non-attainment. Specifically, we were concerned that 
these new areas had adequate time to bring their communities 
back into attainment before we lost critical highway dollars. 
Every time I think about one of these programs where holding 
back highway dollars reminds me of 1966, Mr. Chairman, when I, 
as a newly elected State legislator, came to Washington to 
testify before this very committee. At that time, Jennings 
Randolph was the chairman. And here we are right now, we lost 
the fight then, now we're going to try to win it again after 
all these years.
    As a result of our efforts, and working with other members, 
we were successful in attaching language to the fiscal year 
2001 VA-HUD appropriation bill, of which Senator Bond was the 
chairman and was very helpful to us. That established a 1 year 
grace period before an area newly designated as non-attainment 
must demonstrate conformity. As the Ranking Member of the 
Transportation Infrastructure Subcommittee, I now have the 
opportunity to work more closely on making sure that the Clean 
Air requirements and transportation needs do not conflict.
    I believe there is still much that needs to be done. For 
instance, the recent data shows, as Senator Smith pointed out, 
that the impact of increased vehicle travel is having a smaller 
and smaller impact on emissions, because of the improvements in 
emissions control technology. I want to explore with our 
witnesses what practical effect this has on choices States can 
make, given that many of the emission goals are based on old 
data.
    I will be interested to hear if our witnesses believe we 
should re-examine how the current congestion mitigation air 
quality programs, CMAQ programs, work and what changes if any 
need to be made in the program to make it more usable for the 
States. Additionally, I have concerns with the new rule on 
diesel engine nitrogen oxide, which is scheduled to go into 
effect on October 1st of 2002. While I understand this is 
consistent with the provisions of a consent decree entered into 
with engine manufacturers, my concern is that the trucking 
community has raised several valid issues, not the least of 
which is that there has not been sufficient time to thoroughly 
test new engines. And given the presence of Mr. Holmstead from 
the Air Office of the EPA, I hope we can spend a little time 
exploring that issue further, which we have talked about 
privately.
    Finally, and most importantly, I want to thank Mary Peters. 
We had a disaster in Oklahoma that was similar to the one that 
happened down in Texas, in Port Isabelle, Texas. It didn't get 
much publicity down there, because it happened at the same time 
that the September 11th tragedy took place, and that is, a 
barge running into a bridge and then the cars going over and 
several people falling to their deaths. That happened in 
Oklahoma. Mary, it's kind of funny, because most people in this 
room don't even know that we're navigable in Oklahoma, we have 
a navigation lane. But sure enough, we do.
    Well, this happened, you were there just a matter of days 
afterwards. We put together a very aggressive repair schedule. 
We actually ended up yesterday opening it up 30 days earlier 
than we would have otherwise. While there are some penalties in 
the provision for us, it was certainly to the benefit of 
everyone, particularly those in Oklahoma, for not having to go 
that long route to circumvent the disaster area.
    So I just want to thank you for coming out, not just when 
this first happened, not just when we started the project, but 
also yesterday when we dedicated it, and all the work that you 
have done. Because it couldn't have been done without your 
personal attention, and I thank you very much for that.
    Thank you, Mr. Chairman.
    Senator Jeffords. Senator Bond.

  OPENING STATEMENT OF HON. CHRISTOPHER S. BOND, U.S. SENATOR 
                   FROM THE STATE OF MISSOURI

    Senator Bond. Thank you very much, Mr. Chairman, for 
holding this hearing on transportation and air quality issues. 
We all depend upon and expect clean, healthy air for our 
families, our children and our elderly to breathe. We also all 
depend upon safe, affordable and accessible transportation to 
get our breadwinners to work, take our family to buy groceries, 
get to the hospital in an emergency or visit our relatives. We 
must succeed at providing both air quality and transportation 
solutions.
    I'm very pleased to have been working with my colleagues on 
this committee in the Congress, as well as colleagues when I 
was in the Governor's Conference, to make sure we're on that 
path. Congress, as part of its debate to reauthorize the next 
transportation program, will reconsider congestion mitigation 
and air quality programs in ways to ensure conformity between 
transportation plans and air qualities. I support the goals of 
these programs and plans.
    However, 10 years of CMAQ and conformity requirements have 
shown us that many of our original assumptions in the way we 
set up the programs are outdated, mistaken or in need of 
reform. The transportation sector, as Senator Smith has 
demonstrated, has made great progress, improving air quality 
over the last 30 years. Between 1970 and 1999, carbon monoxide 
emissions from on-road vehicles were reduced by 43 percent. 
Volatile organic compounds, a precursor to ozone, were reduced 
by 59 percent. Particulate matter, PM10 emissions, have been 
reduced by 33 percent. NOX emissions from automobiles have been 
down 31 percent since 1970.
    As we review the CMAQ and conformity programs, we should 
remember that most of the air quality improvements in the 
transportation sector came from new vehicle emission and fuel 
standards, not transportation control measures or blocked 
transportation projects. Indeed, a recent National Academy of 
Science transportation research board study, which has already 
been cited, evaluating the effectiveness of the CMAQ program, 
raised some serious questions that ought to be considered, and 
concluded that approaches aimed directly at emissions 
reductions generally have been more successful than CMAQ 
strategies relying on changes in travel behavior.
    Furthermore, as we see greater and greater benefits from 
vehicle emission reductions, the CMAQ strategies have less and 
less relevance in terms of further reduction of pollutants. 
These results shouldn't be surprising. No matter how well 
intentioned the proposals, most Americans just don't want to 
live in dense urban areas serviced by mass transit. Nor do we 
want to ride our bikes to work. Some of our most disadvantaged 
depend upon cars. Single mothers need cars to drive their 
children to day care. Low income workers need workers to get 
from their affordable housing to oftentimes distant jobs in 
suburbs.
    Likewise, by 2004, cars will be 100 times cleaner than they 
were in 1970, 100 times. That means that a ride share program 
to reduce vehicle miles traveled will be 100 times less 
effective in 2004 as it was in 1970 in reducing air pollution. 
As the Transportation Research Board states, transportation 
control measures, such as public transit, HOV lanes, traffic 
flow and bicycle lanes may help air quality on the margins, but 
they are becoming increasingly less relevant. I believe the 
solution to air quality lies in programs aimed directly at 
emissions reductions. We must continue to develop the next 
generation of vehicles with low emission or no emission 
technology and I think it is vitally important that we must 
also preserve alternative modes of transportation like barge 
traffic. We in Missouri, St. Louis, are at the heart of the 
heaviest truck transportation lanes in the Nation. The Federal 
Highway has come out with a study that shows the red lines, and 
the brightest red lines all converge in St. Louis. And we have 
a choice, a single 15 barge tow will carry the cargo of 870 
semi-trucks. That means 870 trucks come off our congested 
highways and 870 fewer trucks polluting the air as they go 
through that critical area.
    Transporting one ton of cargo by barge produces 85 percent 
less hydrocarbon than by truck. We cannot close off these other 
forms of transportation, like some are trying to do on the 
Missouri River. A sidebar, but an important one.
    Senator Jeffords. I got you.
    [Laughter.]
    Senator Bond. In the meantime, we must aggressively pursue 
clean burning renewable fuels, such as bio-diesel. And you knew 
that was coming, too. Bio-diesel reduces particulate matter and 
the harmful air toxics that can cause cancer. Bio-diesel 
reduces sulfur dioxide emissions, unburned hydrocarbons and 
life cycle CO2 emissions. At my urging, and by strong request, 
the St. Louis transportation authority has committed to begin 
burning the B-20 bio-diesel blend in its vehicles, and we 
expect that Kansas City will follow suit. Instead of being 
engulfed by the noxious fumes of diesel as you follow a bus in 
our major cities, you will think of stopping for french fries, 
and you'll be getting cleaner air.
    Last year, I introduced legislation with Senator Johnson, 
S. 1071, to expand the CMAQ program to address additional air 
pollutants and make eligible for funding technologies such as 
bio-diesel that improve air quality in these areas. The recent 
National Research Board report supports expanding the CMAQ 
program to include particulate matter, air toxics, sulfur 
dioxide and CO2. I hope we will take a hard look at this 
proposal. This is one area where I think CMAQ funds can make a 
very significant reduction in air pollution by making it 
economically affordable for more cities to burn the B-20 blend.
    As for transportation improvements, the current process 
unfortunately leaves highway construction bogged down and 
overlapping and conflicting deadlines, planning processes out 
of sync, litigation tying the hands of planners and 
construction workers, and congestion mitigation measures which 
don't work. The result is gridlock, congestion and traffic 
jams. Unfortunately, traffic jams do not clean the air. Bumper 
to bumper slow moving or idling cars do not reduce asthma. In 
fact, they increase it. That's why when I was Governor of 
Missouri, I was proud to sign a right turn on red light 
measure, to get idling cars off the road. A small measure, but 
one of the things that can make a difference. All the bike 
racks in the world and nice bike trails won't make that much 
difference.
    Transportation opponents follow the reverse of the old 
adage, if you build it, they will come. They believe if you 
don't build it, then they won't come. Well, not only are the 
coming, but they're here. Meanwhile, congestion costs to the 
economy have more than tripled from $21 billion to $72 billion 
from 1982 to 1997.
    Transportation opponents have the right to oppose cars. I 
support funding for their innovative transportation programs to 
help where they can. But the remaining 99 percent of us must 
also have transportation capacity to allow for safe and vibrant 
communities, not only cleaning up the environment, but saving 
lives. Taking away transportation money is not the solution. We 
shouldn't punish commuters struck in traffic trying to get home 
to their families. How can we look these people in the face and 
say, we're making their lives miserable in the name of air 
quality when this committee just doomed any hope of passing 
this year additional SOX-NOX and mercury air pollution 
reductions from electric utilities in order to make a political 
point about carbon dioxide?
    We have the chance to make real improvements in the 
transportation and air quality planning process. We have the 
chance to give metropolitan planning organizations flexibility 
and certainty. We have the chance to give our families cleaner 
air. We have the chance to give our communities, our workers 
and our families safe and accessible transportation. I look 
forward to working with my colleagues to pursue all of these 
noble objectives.
    I thank the chair.
    [The prepared statement of Senator Bond follows:]

 Statement of Hon. Christopher S. Bond, U.S. Senator from the State of 
                                Missouri

    Mr. Chairman, thank you for holding this hearing on transportation 
and air quality issues. We all depend upon clean, healthy air for our 
families, our children and our elderly to breathe. We also all depend 
upon safe, affordable and accessible transportation to get our 
breadwinners to work, take our family to buy groceries, get to the 
hospital in an emergency, or visit our relatives. We must succeed at 
providing both air quality and transportation solutions.
    Congress, as part of its debate to reauthorize the next 
transportation bill, will reconsider congestion mitigation and air 
quality programs, and ways to ensure conformity between transportation 
plans and air quality plans. I support the goals of these programs and 
plans.
    However, 10 years of CMAQ and conformity requirements have shown us 
that many of our original assumptions and the way we set up the 
programs are outdated, mistaken, or need reform.
    The transportation sector has made great progress improving air 
quality over the last 30 years. Between 1970 and 1999, carbon monoxide 
emissions from on-road vehicles were reduced by 43 percent. Volatile 
organic compounds, a precursor to ozone--were reduced 59 percent. 
Particulate matter (PM-10) emissions have been reduced 33 percent. NOx 
emissions from automobiles are down 31 percent since 1970.
    As we review the CMAQ and conformity programs, we should remember 
that most of these air quality improvements in the transportation 
sector came from new-vehicle emission and fuel standards, not 
transportation control measures or blocked transportation projects. 
Indeed, a recent National Research Council study evaluating the 
effectiveness of the CMAQ program concluded that approaches aimed 
directly at emissions reductions generally have been more successful 
than most CMAQ strategies relying on changes in travel behavior.
    These results shouldn't surprise anyone. No matter how 
wellintentioned the proposals, most Americans just don't want to live 
in dense urban areas serviced by mass transit. Nor do we want to ride 
our bikes to work. Some of our most disadvantaged depend upon cars. 
Single mothers need cars to drive their children to daycare. Low-income 
workers need cars to get from their affordable housing to often-times 
distant jobs in suburbs.
    Likewise, by 2004, cars will be one hundred times cleaner than they 
were in 1970. That means that a ride share program to reduce vehicle 
miles traveled will be one hundred times less effective in 2004 as it 
was in 1970 in reducing air pollution. As the NRC states, 
transportation control measures such as public transit, HOV lanes, 
traffic flow, and bicycle lanes may help air quality on the 
``margins,'' but are becoming increasingly irrelevant.
    I believe the solution to air quality lies in programs aimed 
directly at emission reductions. We must continue to develop the next 
generation of vehicles with low-emission or no-emission technology.
    In the meantime, we must aggressively pursue clean-burning, 
renewable fuels such as biodiesel. Biodiesel reduces particulate matter 
and the harmful air toxics that can cause cancer. Biodiesel reduces 
sulfur dioxide emissions, unburned hydrocarbons, and lifecycle C02 
emissions.
    Last year, I introduced legislation with Sen. Johnson, S. 1071, to 
expand the CMAQ program to address additional air pollutants, and make 
eligible for funding technologies such as biodiesel that improve air 
quality in these areas. The recent NRC report supports expanding the 
CMAQ program to include particulate matter, air toxics, sulfur dioxide 
and C02. I hope we will take a hard look at this proposal.
    As for transportation improvements, the current process leaves us 
bogged down in overlapping and conflicting deadlines, planning 
processes out of sync, litigation tying our hands, and congestion 
mitigation measures which don't work. The result is gridlock, 
congestion and traffic jams.
    Unfortunately, traffic jams do not clean the air. Bumper-to-bumper, 
slow moving or idling cars do not reduce asthma. All the bike racks in 
the world will not ease congestion.
    Transportation opponents follow the reverse of the old adage ``if 
you build it they will come.'' They believe that ``if you don't build 
it, then they won't come.'' Well, not only are they coming, but they're 
already here.
    Transportation opponents have the right to oppose cars. I support 
funding for their innovative transportation programs to help where they 
can. But the remaining 99 percent of us must also have the 
transportation capacity to allow for safe and vibrant communities.
    Taking away transportation money is not the solution. We shouldn't 
punish commuters stuck in traffic trying to get home to their families. 
How can we look these people in the face and say we are making their 
lives miserable in the name of air quality when this committee just 
doomed any hope of passing this year additional SOx, NOx and mercury 
air pollution reductions from electric utilities in order to make a 
political point about carbon dioxide?
    We have the chance to make real improvements in the transportation 
and air quality planning process. We have-the chance to give 
metropolitan planning organizations flexibility and certainty. We have 
the chance to give our families cleaner air. We have the chance to give 
our communities, our workers and our families safe and accessible 
transportation. I look forward to working with my colleagues on all of 
these issues. Thank you.
    Senator Jeffords. Senator Voinovich.

  OPENING STATEMENT OF HON. GEORGE V. VOINOVICH, U.S. SENATOR 
                     FROM THE STATE OF OHIO

    Senator Voinovich. Thank you, Mr. Chairman. I thank you for 
calling today's hearing on transportation and air quality. I 
think it's important to examine the effectiveness of the 
congestion mitigation and air quality program and conformity.
    As a past chairman and current Ranking Member of the Clean 
Air Subcommittee, and the past chairman of the Transportation 
Subcommittee, I understand full well the importance and the 
significance of the overlap between highway planning and air 
quality. When I began my term as Governor, 28 Ohio counties 
were in non-attainment for ozone. I spent considerable time to 
get them in attainment.
    In addition, working with the utilities to reduce their 
emissions, I implemented an automobile emissions testing 
program called EJECT to help bring Ohio counties into 
compliance. At that time, Ohio was one of only few States that 
had enhanced auto emissions testing in urban areas. The program 
was a success, according to the 1997 EPA report. Volatile 
organic compounds and nitrogen oxides, which are major 
components in the formation of ozone and are emitted by cars 
and trucks, have been dramatically reduced between 1970 and 
1996.
    Emissions of VOCs were reduced by 49 percent and NOx by 26 
percent. Additionally, air toxins in Ohio were reduced from 
approximately 381 million pounds in 1987 to 144 million pounds 
in 1996. Due to these reductions, all of Ohio's 88 counties 
have met the national air quality standard. But this, Mr. 
Chairman, was not an easy battle. The EJECT project was 
criticized because it required vehicle owners in smoggy areas 
to pay for annual emissions testing and to make their necessary 
repairs when they found that the emissions needed to be 
repaired on the automobile. And due to its unpopularity, Ohio's 
general assembly passed a bill revoking the program. However, I 
stood up for the program and vetoed the bill, because I believe 
it was important and a necessary step to clean up Ohio's air.
    I believe hard choices like these are important. The 
conformity program has helped encourage cleaner air and 
transportation planning and has benefited from coordination 
with the air quality planners. As we move forward with the 
reauthorization of the Highway Bill, we must reevaluate the 
conformity and CMAQ programs and be willing to make those hard 
choices if we're not getting the benefits that we should be 
getting, or if the program should take on a new dimension.
    Mr. Chairman, as you know, the National Academy of Sciences 
issued a good assessment of CMAQ. They have made some good 
recommendations and some constructive criticisms and we should 
take their advice. In fact, I wish we would have a witness from 
them here today.
    I hope the committee will use this time for a good, hard 
evaluation of the program and I would like to outline a few 
areas which I think deserve attention today and in the coming 
months. First, we need to examine the timing issues between the 
SIP process and the transportation improvement plan process. We 
need to see if there is room for improvement between the two 
processes. Too many times they are not coordinated.
    Are the CMAQ projects getting us the best air quality 
reductions for the money we are spending? The National Academy 
of Sciences study indicated that first of all, with the limited 
evidence available, approaches aimed directly at emissions 
reductions, new vehicle emission and fuel standards, well 
structured inspection and maintenance programs, vehicle 
scrappage programs generally have been more successful than 
most CMAQ strategies relying on changes in travel behavior.
    For example, in Chicago an inspection and maintenance 
program provided a 30 ton per day credit for emission 
reductions. By comparison, several hundred CMAQ funded TCMs 
provided a 2 ton per day credit. We ought to look at where is 
this money going and can we get a bigger bang for our dollar.
    So often we spend money on pet projects to make us feel 
better or make some group feel better. I always say that we 
need to work harder and smarter, we need to do more with less. 
I think it's time we reevaluate some of the projects we've been 
funding and shift the focus to deal more with existing air 
quality problems. I look forward today to hearing from our 
witnesses.
    [The prepared statement of Senator Voinovich follows:]
Statement of Hon. George Voinovich, U.S. Senator from the State of Ohio
    Mr. Chairman, thank you for calling today's hearing on 
Transportation and Air Quality. I believe it is important to examine 
the effectiveness of the Congestion Mitigation and Air Quality Program 
(CMAQ) and conformity.
    As the past chairman and current ranking member of the Clean Air 
Subcommittee, and the past chairman of the Transportation Subcommittee, 
I understand full well the importance and significance of the overlap 
between highway planning and air quality.
    When I began my term as Governor, 28 Ohio counties were in non-
attainment for ozone. I spent considerable effort to get them into 
attainment. In addition to working with utilities to reduce their 
emissions, I implemented an automobile emissions testing program, 
called E-check, to help bring Ohio counties into compliance. At that 
time, Ohio was one of only a few states to have an enhanced auto 
emissions test in its urban areas.
    This program was a success. According to a 1997 EPA report, 
volatile organic compounds and nitrogen oxides, which are major 
components in the formation of ozone and are emitted by cars and 
trucks, have been dramatically reduced between 1970 and 1996 in Ohio. 
Emissions of VOCs were reduced by 49 percent and NOx by 26 percent. 
Additionally, air toxins in Ohio were reduced from approximately 381 
million pounds in 1987 to 144 million pounds in 1996. Due to these 
reductions, all 88 Ohio counties have met the national air quality 
standards. But this was not an easy battle.
    The E-Check program was criticized because it required vehicle 
owners in smoggy areas to pay for annual emissions testing and to make 
the necessary repairs. Due to its unpopularity, Ohio's General Assembly 
passed a bill revoking the program. However, I stood up for the program 
and vetoed the bill because I believed it was an important and 
necessary step to cleaning up Ohio's air.
    I believe hard choices like these are important. The conformity 
program has helped encourage cleaner air and transportation planning 
has benefited from coordination with the air quality planners.
    As we move forward with the reauthorization of the Highway Bill we 
must reevaluate the conformity and CMAQ programs and be willing to make 
hard choices if we are not getting the benefits that we should be 
getting, or if the program should take on a new dimension.
    Mr. Chairman, the National Academy of Sciences issued a good 
assessment on CMAQ. They have made some good recommendations and some 
constructive criticism and we should take their advice. In fact I wish 
they were testifying today.
    I hope the committee will use this time for a good hard evaluation 
of the program and I would like to outline a few areas in which deserve 
attention today and in the coming months.

      First, we need to examine the timing issues between the 
Air Quality SIP (State Implementation Plan) process and the 
transportation TIP (Transportation Improvement Plan) process. We need 
to see if there is room for improvement between the two processes.
      Are the CMAQ projects getting us the best air quality 
reductions for the money we are spending, in other words are they cost-
effective? The NAS study has recommended that we broaden the pollutants 
covered to include for example particulate matter and to allow more 
cost-effective programs such as vehicle scrappage programs be funded at 
the local level.
      If the typical CMAQ project is not cost-effective, are 
there more cost-effective measures such as using the funds to retro-fit 
diesel engines? So often we spend money on projects to make us all feel 
better. I always say we need to work harder and smarter and do more 
with less. Maybe its time we re-evaluate the types of projects we have 
been funding and shift the focus to deal more with existing air quality 
problems.

    These are just a few of the topics I hope we can address before we 
move forward with the reauthorization of the highway program next year.
    Senator Jeffords. Senator Clinton.

OPENING STATEMENT OF HON. HILLARY RODHAM CLINTON, U.S. SENATOR 
                   FROM THE STATE OF NEW YORK

    Senator Clinton. Thank you, Mr. Chairman. And thank you for 
holding this important hearing.
    I'm glad that we're going to be looking at transportation 
as well as other sources of pollution that are stationary, so 
that as we gear up for the TEA-21 reauthorization we have a 
better idea of how to proceed. I'm also pleased we're going to 
be looking at some additional technological ways to deal with 
emissions. For example, in New York, Corning's environmental 
technology products and services are offering some leading, 
cutting edge solutions for emissions control changes.
    I have a particular interest in today's hearing because of 
the terrorist attacks on the World Trade Center. Once again, we 
are dealing with consequences of the horror of September 11th. 
As some of you may be aware, as a result of the terrorist 
attacks on the World Trade Center, the State of New York and 
the New York Metropolitan Transportation Council are seeking a 
3-year waiver from conformity in metropolitan planning 
requirements. The New York Metropolitan Transportation Council, 
commonly known as NYMTC, is responsible for preparing the 
area's conformity analysis.
    Now, NYMTC's offices were located on the 82d floor of One 
World Trade Center. Obviously their offices, their equipment 
and their records, as well, sadly as the life of several staff 
members, were lost. While NYMTC is up and running again, they 
are faced with the challenge of establishing baseline regional 
travel patterns in emission conditions in the aftermath of 
September 11th without the records that they had compiled over 
many years.
    Now, with everything that New York is facing, one might 
ask, why worry about a conformity determination? But concerns 
have been raised that a possible conformity lapse could hinder 
the rebuilding efforts in lower Manhattan, which are ahead of 
schedule and below budget at this point. And I think every one 
of us wants to do everything we possibly can to help in the 
rebuilding process. And I thank the members of this committee, 
particularly the chairman and the ranking member, for 
everything that they've done to help New York. I especially 
appreciate the support of legislation that I sought to waive 
limitations on the use of the emergency highway funds to pay 
the cost of projects needed as a result of the September 11th 
attack.
    I think we have a dilemma, though. We want to do everything 
we possibly can to help New York rebuild, but we also have to 
make sure that the health of New Yorkers is protected, 
particularly those who live and work in lower Manhattan. Now, 
I'm confident that with the leadership of this committee, we 
can strike the right balance to ensure that the rebuilding 
efforts move forward unimpeded, while at the same time ensuring 
that the air quality in the New York Metropolitan area 
improves. I am concerned, however, that a bill currently moving 
through the House has not yet achieved quite that right 
balance.
    So I look forward to working with the committee, 
particularly again with the chairman and the ranking member, as 
we not only learn more about conformity in transportation and 
air quality issues in general, but in trying to address New 
York's ongoing needs because of the horrible, destructive 
attacks by the terrorists on September 11th.
    I apologize, Mr. Chairman, I have to leave early to 
preside. But I have the testimony and I will, with consent, be 
submitting questions for the record as well.
    Senator Jeffords. Thank you. And your questions will 
certainly be accepted.
    Senator Chafee.

OPENING STATEMENT OF HON. LINCOLN CHAFEE, U.S. SENATOR FROM THE 
                     STATE OF RHODE ISLAND

    Senator Chafee. Thank you, Mr. Chairman, for holding this 
hearing. As many people have testified earlier, Senator Smith 
said earlier, we're making a great deal of progress since the 
1970's. And Senator Inhofe said that he came here as a 
municipal official in 1966 talking about air quality issues. So 
we are making great progress, and I think we should continue to 
be aggressive on this issue. It's my belief not only for our 
own health, obviously, but also it's an industry that we can 
export, as we travel around the world and see some of the 
developing cities, as the world evolves from more of a rural 
population to an urban population, Mexico City, Beijing, Lagos, 
these are all issues that if we keep here in the United States 
aggressive on this, it's going to be an industry and an economy 
unto itself that will help us prosper here in the United 
States.
    Thank you.
    Senator Jeffords. Thank you. Thank you all for excellent 
statements.
    We now will turn to our witnesses. Our first witness is 
Mary Peters. Thank you for coming, and we look forward to 
listening to you. Please proceed.

  STATEMENT OF MARY E. PETERS, ADMINISTRATOR, FEDERAL HIGHWAY 
   ADMINISTRATION, UNITED STATES DEPARTMENT OF TRANSPORTATION

    Ms. Peters. Thank you, Mr. Chairman, members of the 
committee.
    I appreciate the opportunity to discuss, this morning, 
transportation and air quality, two vitally important topics. I 
would ask that my written statement be entered into the record 
in its entirety, and I will confine my remarks to a few high 
points this morning.
    Meeting the dual challenges of congestion relief and air 
quality improvement is a high priority for the Department of 
Transportation, as I know it is for members of this committee. 
Secretary Mineta has noted that one of the core principles of 
the Department's efforts to reauthorize TEA-21 will be to 
ensure an efficient infrastructure while retaining 
environmental protections that enhance our quality of life.
    As indicated in the chart attached to my written statement, 
and as several members have referred to this morning, we have 
made remarkable progress over the last 30 years in reducing air 
pollution, especially from transportation sources. Since 1970, 
carbon monoxide emissions have been reduced by 43 percent, 
coarse particulate matter, or PM-10 emissions, by 33 percent, 
and volatile organic compound emissions by 59 percent, despite 
substantial increases in population, gross domestic product and 
vehicle miles traveled.
    While this downward trend in emissions is expected to 
continue, some of the Nation's largest metropolitan areas still 
face challenges in meeting the current 1 hour ozone standard. 
TDM and TCM programs have not performed as expected in terms of 
air quality benefits. As we prepare to meet the challenges of 
implementing new air quality standards, we need to develop new 
strategies for dealing with these more stringent requirements.
    We have gained considerable knowledge about the linkages 
between transportation and air quality, including that there is 
no one right way for the entire Nation to reduce congestion and 
improve air quality. The problem requires flexible, multi-level 
solutions. The CMAQ program provides State flexibility to fund 
transportation improvements that cross traditional Federal-aid 
program boundaries, including transit, ride sharing, bicycle 
and pedestrian, alternative fuels in vehicles, emission 
inspection and maintenance, and ITS implementation programs. In 
addition, CMAQ supports experimentation by States and MPOs to 
meet travel demand in the most environmentally sensitive ways, 
and has encouraged cooperation between transportation and air 
quality agencies.
    As we approach reauthorization, I believe we must consider 
stakeholder concerns about the CMAQ program. One issue relates 
to the statutory apportionment formula. The current formula 
does not take into account areas that would be designated under 
the new air quality standards.
    We now have almost a decade of experience in implementing 
the Clean Air Act's transportation conformity provisions. 
Stronger institutional links between transportation and air 
quality planning agencies have been created. While conformity 
provisions have been very instrumental in fostering 
improvements to the modeling processes, models that lack 
precision are being used to predict precise emission levels to 
determine conformity.
    We have heard concerns that transportation and air quality 
plans are not synchronized, and that this mismatch can cause 
unwarranted lapses in conformity and disruption to the 
transportation funding and planning processes. While 
transportation plans have very long planning horizons and are 
updated frequently, most air quality plans have very short 
planning horizons and are updated less frequently.
    Important planning considerations and public participation 
may not get the needed emphasis because transportation planners 
must devote considerable time and resources to avoid conformity 
lapses.
    Mr. Chairman and members of the committee, I assure you 
that the Department is committed to continue the collective 
progress that we have made in reducing motor vehicle emissions. 
Continued progress will require improved coordination of the 
transportation and air quality planning processes. The American 
public demands and deserves both mobility and healthy air. I 
believe that these are not mutually exclusive goals.
    Mr. Chairman and members of the committee, that concludes 
my oral statement. I look froward to working with you as we 
prepare for reauthorization of the surface transportation 
programs, and would be pleased to address any questions that 
you may have. Thank you.
    Senator Jeffords. Thank you very much for an excellent 
statement.
    Next witness is the Honorable Jeffrey Holmstead, Assistant 
Administrator for the Office of Air and Radiation, U.S. 
Environmental Protection Agency. Please proceed.

STATEMENT OF JEFFREY HOLMSTEAD, ASSISTANT ADMINISTRATOR, OFFICE 
 OF AIR AND RADIATION, UNITED STATES ENVIRONMENTAL PROTECTION 
                             AGENCY

    Mr. Holmstead. Good morning, thank you, Chairman Jeffords 
and members of the committee.
    The innovative programs and funding provided by ISTEA and 
TEA-21 have established really for the first time a strong link 
between transportation planning and air quality planning. 
Congressional reauthorization of TEA-21, I believe, is an 
opportunity to reaffirm this connection.
    It is also an important opportunity to improve parts of the 
program. I think we all recognize that, and I would like to 
thank you, Chairman Jeffords and the members of the committee, 
for initiating this discussion. At your request, I will briefly 
offer my thoughts on the two programs that deal with the link 
between transportation and air quality, as you have already 
mentioned, transportation conformity and the CMAQ program.
    First, though, I would like to also take the opportunity to 
remind all of us about the enormous progress we have made as a 
Nation to reduce the air quality problems that arise from the 
transportation sector. As several of you have mentioned, since 
the passage of the Clean Air Act in 1970, we have been 
extremely successful in reducing emissions from what we refer 
to as mobile sources. For example, new cars that we purchase 
today are more than 95 percent cleaner than cars purchased 30 
years ago. Concentrations of the four criteria pollutants that 
are most affected by the transportation sector, carbon 
monoxide, nitrogen dioxide, ozone and particulate matter, have 
all declined substantially since 1970. These reductions help to 
protect public health by reducing incidents of premature 
mortality, asthma attacks and other health problems caused by 
air pollution. The other thing I would like to remind people is 
that cars, trucks and buses, and in fact virtually every type 
of engine used in this country will be substantially cleaner 
still within the next few years. Beginning in 2004, cars, light 
trucks, minivans and SUVs will all have to meet the same 
stringent new emission standards. Then beginning in 2007, heavy 
duty diesel trucks and buses will be required to reduce their 
emissions of particulates and NOX by 90 percent and 95 percent 
respectively. These dramatic improvements are made possible in 
large part because of new requirements for cleaner gasoline and 
diesel fuel.
    Within the next 2 years, EPA will also be setting the same 
type of standards for non-road diesel engines, such as 
construction equipment, which are significant sources of air 
pollution that today are still largely uncontrolled. In the 
meantime, our voluntary diesel retrofit program encourages 
owners of diesel trucks, buses and non-road engines to install 
modern pollution controls. Last year, we received commitments 
for about 70,000 diesel retrofits and by the end of this year, 
we plan to increase this number to 130,000 diesel retrofits.
    Unfortunately, however, cleaner cars and cleaner fuels 
alone are not sufficient to achieve the kind of air quality 
improvements we need, in large part, as you've noted, because 
Americans today are driving more than ever. In 1970, 
collectively we drove about 1 trillion vehicle miles per year. 
By the year 2000, that number had jumped to almost 2.8 
trillion, and as we all know, even much cleaner cars can 
contribute to air pollution.
    Fortunately, Congress has recognized that a successful 
strategy for reducing emissions from mobile sources must 
include the vehicles we drive, the fuels we use, and the roads 
on which we travel. The two programs that have been created, 
conformity and CMAQ, are things that I think we believe should 
be looked at and improved if possible. But we think it's 
especially important to recognize that Congress created 
transportation conformity in order to coordinate transportation 
activity with air quality goals, there by requiring for the 
first time that State and local transportation and air quality 
officials work together.
    There is widespread agreement among State and Federal 
officials that conformity has helped to maintain progress 
toward meeting air quality goals without compromising 
improvements in our transportation network. After over a decade 
of working with conformity issues, however, we recognize that 
the merging of two complex and lengthy processes, 
transportation planning and air quality planning, has created 
some concerns. And we are now working with the Department of 
Transportation to make conformity work better without weakening 
its contribution to air quality.
    CMAQ, as you've mentioned, is another important tool for 
reducing mobile source emissions. CMAQ funds have helped to 
bring bike lanes, transit systems and car pooling programs to 
communities struggling to meet air quality goals. Many of these 
projects have the added benefit of making communities more 
livable.
    Despite CMAQ's benefits, there are some elements of the 
program that ought to be improved. Currently, CMAQ funding is 
allocated according to three factors: the number of carbon 
monoxide and 1-hour ozone non-attainment areas in the State, 
the severity of the pollution problem and the population within 
those areas. This system doesn't reflect the improvements we 
have made in reducing carbon monoxide pollution. Today, for 
example, there are only 13 areas in the country that are still 
in non-attainment for carbon monoxide.
    It also does not reflect the importance of achieving new 
health based ozone and particulate matter standards. Although 
fine particulate matter is clearly the biggest health concern 
posed by air pollution, and is also clearly linked to motor 
vehicles, the current system does not specifically allocate 
CMAQ funding to address particulate matter improvement. In 
addition, regions that are able to make the leap from non-
attainment to attainment receive considerably less funding from 
CMAQ. While it makes sense to provide less money to clean 
areas, the way in which this change currently occurs serves as 
a disincentive to cleaning up the air.
    Our stakeholders have suggested a number of changes that 
may improve the CMAQ allocation process. For example, we've 
been asked to consider including the new fine particulate 
matter non-attainment areas and the new 8-hour ozone non-
attainment areas in the funding formula. We've also been asked 
to consider changes to provide more stable funding for areas 
redesignated to attainment.
    There are other improvements I know that we all ought to be 
talking about, and I look forward to working with this 
committee and with Mary Peters and her agency as we continue to 
work on how we can improve these important programs. Thank you.
    Senator Jeffords. Thank you both for excellent statements. 
I want to assure you that we're going to be working very 
closely with you through the period of time when we prepare our 
bill.
    Despite our progress on vehicle emissions technology, we 
are still having trouble attaining our national air quality 
standards. Estimates indicate that about 150 million people are 
currently breathing unhealthy air that's polluted by ozone and 
fine particulates. What is transportation's percentage 
contribute to the non-attainment problem? Either one or both.
    Mr. Holmstead. I don't have the numbers at my fingertips. I 
do know that it's still significant. I believe the 
transportation sector accounts for roughly 50 percent of the 
NOX emissions and probably something upward of 50 percent of 
the carbon monoxide emissions. Its contribution to other 
problems is less than that, and its share of the pie is 
decreasing over time as the new standards come into place. But 
it certainly is fair to say that for many of the pollution 
problems that we face, the transportation sector is still a 
large portion of the problem, and in some cases, the biggest 
portion of the problem.
    Senator Jeffords. I would appreciate if either or both of 
you would see if you can help us with answering that question.
    Mr. Holmstead. We can provide exact numbers for you, yes.
    Senator Jeffords. I would appreciate that. Thank you.
    Ms. Peters. Mr. Chairman, again, as Mr. Holmstead said, it 
varies depending on the type of pollutant. Approximately one-
third of the ozone precursors on a regional scale are 
attributable to transportation sources, about 51 percent on CO. 
So it varies by the particular issue that we're dealing with. 
We would be happy, as Mr. Holmstead said, to follow up with you 
with specific details.
    I would also take this opportunity to commend to you a very 
excellent book that was put together by staff on transportation 
and air quality that contains a number of selected facts and 
findings. We have worked very closely with EPA in producing 
this book.
    Senator Jeffords. Of course, we'd be interested in the 
impact of the non-attainment, not just the emissions also, if 
you have data on that, we'd appreciate it.
    According to a recent study by the Brookings Institution, 
public transportation produces a fraction of the pollution of 
private vehicles on a passenger per traveled mile basis. The 
study says it's about 95 percent less for carbon monoxide, 92 
percent less for VOCs and 50 percent less for carbon dioxide. 
Have your agencies looked at the effectiveness of transit and 
other transportation control measures in reducing pollution?
    Ms. Peters. Mr. Chairman, yes, we have. And, as indicated 
earlier in my testimony, we've looked at both transportation 
control measures and demand management measures. While they 
have had some effectiveness in certain areas, and we absolutely 
want to continue to pursue transit as part of our 
transportation solutions, the benefits we get from some of 
those measures aren't as great as was mentioned in terms of 
overall emissions reductions. But clearly, they are important 
measures and ons, and considerations that we would suggest be 
considered.
    Senator Jeffords. Mr. Holmstead, how important do you think 
transportation control measures will be in the future for 
achieving air quality goals?
    Mr. Holmstead. Our sense is that they will continue to be 
important in certain areas of the country. As I think all of 
you have acknowledged, the contribution per vehicle mile 
traveled is much lower than it was even a few years ago, and 
will continue to get lower over time. The studies that we've 
seen, however, suggest that in specific areas transportation 
control measures will continue to be an important strategy for 
improving air quality. And collectively over time, they can 
make a significant difference.
    Senator Jeffords. One of the problems we have heard about 
seems to be that States are not regularly revising or updating 
their SIPs. Is that truly a problem with the conformity 
process, and what should be done to correct it?
    Mr. Holmstead. I think we all recognize that a better 
harmonization between the SIP process and the transportation 
planning process would be better. I think I agree with you that 
one of the things we ought to be considering is perhaps a more 
efficient way in which we update SIPs. SIPs, as you mentioned, 
tend to be a very long and cumbersome process, even more than 
transportation plans. And if there were ways that we could 
improve that process and make it happen more often, I think 
that would be an effective way to address some of these 
concerns.
    Ms. Peters. Mr. Chairman, I agree. I think the mismatch of 
the cycles sometimes causes planners to be focused more on 
process than on the outcome. The outcome ought to be good 
transportation plans that ensure good, healthy air quality in 
areas. I do commend the committee for conducting the survey 
that you did of the MPOs on a very bipartisan basis. I think it 
was important. The input that you got, as well as input that we 
received when we polled our district offices, indicates that 
getting those two cycles more in sync with each other can have 
benefits both in the quality of air quality plans and the 
quality of transportation plans.
    Senator Jeffords. Thank you both. Senator Smith.
    Senator Smith. Thank you, Mr. Chairman.
    I think this would be better for Administrator Peters, this 
question, but Mr. Holmstead, feel free to respond as well if 
you wish.
    I talked about in the opening statement about the mismatch 
between the State implementation plans, conformity and 
transportation plans. It's a mess. I cited some of the letters. 
Let me just take a couple of excerpts from four cities, just to 
give you a feel for it, then I'd ask you to respond to it. This 
is Dallas. Generally more time is spent on replanning already 
approved plans than working on the implementation of specific 
projects. Denver, transportation and air quality agencies have 
had to expend an enormous amount of resources to coordinate the 
inconsistent federally mandated schedules. Houston, the 
overabundance of conformity triggers means that planning 
organizations are frequently performing conformity 
demonstrations with limited corresponding benefit. And L.A., a 
real potential exists for conformity lapse due to the mismatch 
of air quality and transportation planning schedules.
    Just address for me if you would your concerns about this 
rigid conformity process and the effect it's having on 
transportation planning.
    Ms. Peters. I will, Mr. Chairman, and Senator, I will do 
that. As indicated in your survey and also a survey that we 
conducted of our division offices, we believed that we could do 
a much better job of transportation planning if those two 
processes were in sync. To share with you one of the comments 
that I received from our division offices, MPOs are forced to 
produce updates that simply push the planning horizon out and 
determine conformity to avoid a lapse, but don't address, as 
fully as we would like, other planning issues. They attribute 
this to simply chasing a conformity clock. Planners want to do 
a good job of ensuring that a region's transportation plans are 
comprehensive and deal with that area's needs on a very 
substantial basis. Of course, needs can differ from one area of 
the country to another. Or their desires can differ from one 
area of the country to another.
    But clearly, healthy air is equally important. Having those 
two processes more in sync would allow, for example, very 
substantive public comment to be taken into account and 
incorporated into planning revisions. Whereas today, sometimes 
there simply isn't time to do that, because the conformity 
lapse would kick in. So, there again, chasing a conformity 
clock was the phrase that was used by some of the respondents.
    Senator Smith. Specifically, what flexibility do you have 
in invoking the penalty, if you will, of a conformity lapse?
    Ms. Peters. Sir, we do not have flexibility in invoking the 
penalty for a conformity lapse.
    Senator Smith. None whatsoever?
    Ms. Peters. No, sir.
    Senator Smith. Mr. Holmstead, you saw the chart that I put 
up in my opening remarks. Would you agree that the projections 
that I put up there are significant change that should warrant 
some adjustment in the transportation conformity framework?
    Mr. Holmstead. I do agree with that.
    Senator Smith. As we move into the out years, the decline 
is even sharper.
    Mr. Holmstead. Yes, I do agree with that. As I said, I 
think that that chart is quite striking. We ought to be 
acknowledging that the contribution of the transportation 
sector to air quality problems is decreasing over time.
    I think it's important, and I think virtually everyone 
agrees, that the transportation conformity program has been a 
good thing, and that really for the first time, it required 
transportation planners and air quality planners to work 
together. I think what we all want to do is preserve the 
benefits of that sort of coordinated process while eliminating 
some of the problems that have been identified by you and 
Chairman Jeffords and others.
    Senator Smith. Could either of you give me an indication, 
as a follow-up to the previous question to you, Administrator 
Peters, what flexibility would you like to have, if we could do 
it legislatively, what would you like to have?
    Ms. Peters. Mr. Chairman and Senator Smith, and please know 
that I haven't discussed this with Secretary Mineta, but I 
think the flexibility that we would like to have goes to the 
point that you made, and I spoke to earlier as well. Models are 
very good, but they simply predict future results. Today's 
models require us to use something that can't be precise, 
because we're projecting into the future, to determine very 
precise levels of emissions into the future, and therefore 
conformity. I think some latitude in making that determination 
that would recognize the variability in the models might be 
beneficial, and that's certainly something some of our 
customers have related to.
    Senator Smith. Thank you very much. Thank you, Mr. 
Chairman.
    Senator Jeffords. Senator Voinovich.
    Senator Voinovich. Ms. Peters, the Transportation Research 
Board's assessed that the CMAQ program concluded that projects 
designed to change travel behavior may have been less 
successful than other CMAQ programs, such as inspection and 
maintenance. Can you comment at all on that, or some of the 
conclusions that came out of that report?
    Ms. Peters. Senator, I can. As the report indicated, while 
these measures were not ineffective, they were less effective 
on a cost benefit analysis, if you will, than programs that 
deal with emissions issues in a larger sense. Emissions control 
programs seem to be where we have achieved the best benefit. 
Some of those, such as emissions inspection programs, have been 
very, very effective in reducing emissions.
    As Mr. Holmstead indicated, and the data shows, the fleet 
has become much cleaner, the fuels have become much cleaner. So 
transportation demand management programs or control measures 
have been less effective, not ineffective, but less effective 
than wider spread emission control programs.
    Senator Voinovich. With the crisis that we have with our 
Federal budget, I would really be interested in having you 
folks come back and look at these programs in terms of their 
cost effectiveness, to give us some direction in terms of what 
we ought to be doing with this next budget that we're putting 
together. Everybody's calling for more money. And I'm not going 
to go into details with some of the CMAQ projects I know about. 
But a lot of them have helped subsidize some projects that one 
has to really question as to what impact are they really having 
on reducing the emissions that we're concerned about.
    So I think that somebody ought to really look at those. As 
I say, too often, some of them get pulled off into other areas 
where they end up being, helping a project to be undertaken 
rather than having, the impact that it's having on reducing 
emissions is very little.
    In reading the testimony of Mr. Stephenson, we learned that 
a study by the American Road and Transportation Builders 
Association estimates that $1.3 billion worth of highway 
projects were canceled or delayed in 2000 due to transportation 
conformity problems. Do you think that figure is accurate?
    Ms. Peters. Mr. Chairman, Senator, I don't know the basis 
for the figure, but it would seem to be reasonable to me.
    Senator Voinovich. We had a real problem here about 2 years 
ago, I think, in terms of with the new emission standards 
coming out and the conformity. There were many projects that, 
well, a lawsuit was filed, and because States' SIPs were not in 
conformity, many projects were delayed. Do you have any 
information on where we are with that today? I guess the EPA 
did not come out with the new, with a map of the non-attainment 
areas based on the proposed ozone and particulate standards, 
and that that may have had something to do with changing that 
situation.
    But I think it was a year or 2 years ago, there was 
widespread concern all over the country that many highway 
projects were going to be held in abeyance because of the fact 
that the State's SIP was not in conformity with what it should 
be, or their transportation was not in conformity with their 
SIP. Could you tell us where we're at?
    Mr. Holmstead. I know that there were some concerns 
expressed about that. I think that those were largely, in fact, 
I think they were completely addressed by the agency. There is 
some concern in the future about the implications for 
conformity. As you know, Senator, we have not yet designated 
areas as either attainment or non-attainment under the new 
standards. We expect to do that fairly soon. But once that 
happens, then there is a need to do a conformity analysis, I 
think within a year afterwards. That's something that we're 
working on internally, we think it's something we can probably 
address administratively, to provide newly designated areas 
with the kind of flexibility that they'll want. But I do think 
that that continues to be an issue, once we newly designate 
these non-attainment areas.
    Senator Voinovich. I'd like to be updated on it. Because if 
we're going to have the problem forthcoming, there may be 
something we can do in drafting this reauthorization that would 
respond to that particular problem. I understand that you're 
going to be designating more of your rural areas, in your 
testimony, small urban and rural areas may be designated non-
attainment for the first time. What do you anticipate in terms 
of their compliance and the impact it's going to have on those 
areas?
    Ms. Peters. Senator, we do realize that when the new 
standards take effect, and as Mr. Holmstead indicated, the 
areas would then have 1 year to demonstrate conformity. We are 
working with, and look forward to continue working with, EPA as 
we approach reauthorization, and hope to jointly bring you some 
solutions or some suggestions in terms of the Administration's 
reauthorization proposal.
    Senator Voinovich. The last thing I'd like to say is, I go 
to these hearings and in my opening statement, I mentioned that 
there are some significant reductions that we've had in Ohio as 
a result of our efforts. I might just mention for the benefit 
of the chairman that, we always just talk about our power 
plants. But we've made significant reduction in other things 
that contribute to ozone that, you know, some contend float in 
the direction of the Senator's State and others.
    But I'd like to, and maybe, Mr. Holmstead, you can provide 
us with a big picture about where are we in the country in 
terms of reducing pollution from various sources, and what 
challenges remain? What basically are the sources of those 
challenges? I think we have something about transportation is 
contributing about 50 percent of the NOX problem that we have 
in the country. Obviously we've made some real progress, I 
guess, in transportation and NOX reductions, haven't we? And in 
other areas we haven't done as well. And the same way with 
carbon monoxide.
    I think too often we just talk about that we have a major 
problem. But I think it's important that we know where we are, 
kind of a benchmark figure that I'd like to have, and I think 
it would be very, very helpful to this committee to really get 
a sense of where are we today in terms of the issue, what 
progress have we made and where are the areas that really need 
to continue to be addressed. So often, again, we have this 
tendency to, an issue comes up and you go in that direction, 
and then you're over here. When you look over here, you say, 
gee, that's even a much worse problem, but we're spending all 
of our time dealing with this one.
    Mr. Holmstead. If I can just quickly address that, and 
we'll provide something for the record that I think will be of 
more use to you, every year the Agency does what we call an 
emissions trends report that provides in some detail 
information about the progress that we've made. And it gets 
relatively little attention, because it's good news. And it 
shows that air quality has improved in the country pretty 
dramatically since 1970. And we've had enormous economic 
growth, we've had a significant increase in population, we've 
had almost a threefold increase in vehicle miles traveled. And 
over that same time period, we have reduced aggregate emissions 
of the major pollutants, and we can say definitively that air 
quality is better in virtually all parts of the country. We're 
trying to do a better job of helping people to understand that.
    I think, and this is not meant to be a criticism of the 
media, but they tend to pay more attention to problems than 
they do to things that have gotten better over the years. But I 
think your point is very well taken.
    I would say, though, that there are some major challenges 
that still lie ahead. As you and I have discussed, and the 
chairman and I have discussed, notwithstanding the improvements 
that have been made, pollution from power plants continues to 
be the biggest single source of air pollution in the country. 
Probably the second most important contribution has to do with 
emissions from non-road diesel engines, something that we also 
are going to be addressing with a regulatory proposal in the 
next, probably in the next 6 months or so.
    I think as you mentioned, NOX emissions from the 
transportation sector in particular, and diesel emissions, I'm 
sorry, particulate emissions from diesels, continues to be an 
issue. And the CMAQ program, in particular, I think, has been 
very helpful and can be helpful in addressing those problems. 
Everyone has examples of CMAQ programs that may be somewhat 
questionable. One of the things I think we've found is that it 
funds a wide variety of programs and allows people to look for 
innovative ideas. Some of the funding that has been used, for 
instance, for diesel retrofits, has been enormously successful 
and I think in terms of cost benefit analysis, would be very 
cost beneficial compared to many, many other strategies. So I 
think there is an important role for that program in helping us 
to address the continuing issues that we face.
    Ms. Peters. Mr. Chairman and Senator, if I could just 
briefly add, and I think Mr. Holmstead did a good job of 
outlining the issue, but really, using data I think helps us 
tremendously. Our collective challenge is not to let drop any 
of the progress that we have made in a number of areas, but let 
the data drive us where we have the best opportunity to make 
significant improvements. One of those areas that was mentioned 
was off-road mobile sources.
    As you know, I was the director of the Arizona Department 
of Transportation prior to having the opportunity to have this 
job. It was very important to me, particularly in the urban 
area, because we had a number of projects ongoing, not 
transportation projects only, but a lot of building projects. 
Off-road mobile source was of particular importance to me in 
that area in trying to reach conformity. I think that using the 
data to drive us where we have the best opportunity for 
solutions is important.
    Senator Jeffords. Thank you, Senator. Excellent questions. 
We appreciate it very much.
    Ms. Peters, has any area lost their transportation funding 
due to conformity lapse?
    Ms. Peters. Sir, they have not lost their funding, Mr. 
Chairman, per se. They have, however, had to divert funding to 
different sources. States are very ingenious and very 
infrequently do they let funds lapse. But they have had to 
divert funds from planned projects to different projects 
because of conformity lapses.
    Senator Jeffords. Mr. Holmstead, what is the Agency's 
schedule for making the new designations under the revised 
ozone and the fine particulate matter standards?
    Mr. Holmstead. At present, we face a bit of a quandary. And 
it's related to the issue that we've been talking about here 
where there's not harmonization between the transportation 
planning process and the SIP planning process. Even within our 
own SIP planning process we have a challenge, and that is, 
because of the way the Clean Air Act works, we are under an 
obligation to do non-attainment designations for the new 8-hour 
ozone standard in the fairly near future. We have to go through 
a rulemaking, we hope to be able to do that and begin 
designations perhaps in 2003. But then we're not even allowed 
to do designations for the new PM-2.5 standard until 2004. And 
one of the things that we may be approaching the committee 
about is seeing whether there is a way that we can harmonize 
the designation dates, so that air quality planners can look at 
both ozone and PM-2.5 at the same time.
    So the short answer to your question is, we are required to 
begin doing designations for 8-hour ozone in the very near 
future. There is still some debate about exactly when that is, 
perhaps as early as 2003. And yet we're not even allowed to do 
designations for PM-2.5 until 2004 and perhaps later. If we 
could figure out a way to make those designations all at the 
same time, so that State air quality planners could plan for 
both at the same time, we think that would be a useful thing.
    Senator Jeffords. We will work with you on that. Thank you.
    Ms. Peters, the average CMAQ obligation rate for States has 
been under 80 percent over the course of ISTEA and TEA-21. How 
can we expand the rate so that States are making better use of 
it? Like Connecticut with its laudable 94 percent obligation 
rate, should we sub-allocate these directly to MPOs in non-
attainment areas to make sure that these funds are spent 
expeditiously? And should we protect the CMAQ program during 
the annual obligation limit distribution through proportional 
obligations?
    Ms. Peters. Senator, I think that our data indicates, at 
least in terms of TEA-21, that the CMAQ program has a slightly 
lower rate of usage than conventional Federal aid. Our data 
indicates that through 2001, approximately 80 percent of all 
CMAQ program funds were obligated. This is versus the total 
rate for the entire Federal-aid program of approximately 90 
percent. And we are seeing the obligation rate for the CMAQ 
program continue to increase and, importantly, no CMAQ funds 
have lapsed. I think that's a very important consideration in 
the program.
    In terms of sub-allocation, sir, as I have testified to 
before you on various occasions, my preference is to have less 
strings attached to the Federal dollars that go back to the 
States and local governments and more flexibility to use those 
dollars. So, while I would prefer to defer to our 
reauthorization proposal in terms of any further sub-
allocation, let me say that I think the best transportation 
plans are developed in concert with State and local 
governments.
    Senator Jeffords. To both of you, as you know, greenhouse 
gas emissions from the transportation sector account for about 
one-third of the U.S. total, or close to 8 percent of the 
world's total. What are your agencies projecting for these 
emissions into the future, and how are we going to control 
them?
    Mr. Holmstead. I'll have to respond to that question for 
the record. I know that we do have estimates of that, of what 
we're projecting over time those emissions will be. I can tell 
you that we are actually doing a number of things to address 
those. Within our transportation office, we have a number of 
programs that have been quite successful in trying to encourage 
things like commuter choice. We have a program that we work 
with Mary Peters' office on that encourages companies to 
provide a full range of commuter benefits to their employees to 
encourage things like mass transit and ride share and a number 
of other voluntary, non-regulatory programs that we think can 
help in that area. I would be happy to provide you with a more 
detailed list of all of those programs. But it's actually quite 
a substantial sweep of non-regulatory programs that we're 
implementing right now.
    Ms. Peters. Mr. Chairman, I would also prefer to respond in 
more detail in a question for the record. But, we are very 
actively working with EPA on programs about commuter choice and 
encouraging, through public education programs, things like 
trip chaining and other things. We are trying to get people to 
understand that cold starts are more detrimental than if they 
are able to chain trips together, so that they're making a 
consistent set of trips and then coming back home, as opposed 
to going home, stopping, coming back again. But again, we would 
provide a more comprehensive answer for the record.
    Senator Jeffords. Thank you. Senator Voinovich?
    Senator Voinovich. Getting back to this issue of the 
reductions that have occurred, it would be interesting also to 
know what contributed most to the reductions. And that is, for 
example, we're anticipating some significant reductions because 
you required that sulfur be removed from gasoline. And it looks 
like a big thing. The auto industry has done some great things 
with catalytic converters and all the other stuff that they 
have.
    Then as we look down the road, we talk about fuel cells and 
the impact that they're going to have. I think that kind of 
information also would be valuable to us as decisionmakers on 
where we're going and what we're requiring to be done, and 
again, where we're going to be allocating our resources. I have 
to believe that my grandchildren, maybe my children, we may not 
be using oil, we may be using other sources of--I know we will, 
because it's coming, it's coming down the pike. It's like we 
have this Bjorn Lomborg, who's done a big book on the whole 
issue of greenhouse gases, and talking about allocation of 
resources and if we put all the money to comply with, say, 
Kyoto, going back to 1990 in terms of what Kyoto would require, 
that the cost of that would be astronomical, and that money 
would be better spent in the area of technology, for example, 
clean coal technology, that could be used to reduce pollutants 
and be sold overseas or given away. Then he talks about the 
money that could be made available also for Third World nations 
that are going to be most impacted negatively by greenhouse 
gases in terms of water and sewage and education and health 
care.
    I think we don't do enough of that in terms of big picture 
things. And I'd really be interested, what made the big 
differences in terms of reducing pollution? The Clean Air Act, 
obviously, and I know the acid rain provisions of the Clean Air 
Act, other things. Where have we really been getting the 
biggest bang for our buck or getting the biggest return on 
legislation that we've passed around here?
    Mr. Holmstead. I can address, I think, that general 
question. And I think the first thing to say is, we all just 
need to recognize the remarkable technological advances that 
have been made over the last 30 years, spurred in large part by 
the Clean Air Act. Senator Bond I think wasn't quite right when 
he said cars are 100 percent cleaner than they were in the 
1970's, but by the time this next round of emissions standards 
comes into place, cars will be 99 percent cleaner for 
hydrocarbons and 98 percent cleaner for NOX. And that sort of 
advance is just pretty remarkable.
    Then if you look beginning in 2007, diesel engines will be 
95 percent cleaner for NOX and 90 percent cleaner for 
particles. Probably the biggest advances that we've made in 
improving air quality have been from improvements in 
technology. And I, like you, am optimistic that we will 
continue to see those advances, whether fuel cells will be the 
answer or something else. But I'm convinced, and I think all of 
us who work in this area have been just really impressed at the 
innovation that can be spurred by legislative changes and 
regulatory changes, and in the transportation sector. I mean, 
if you look at the significant improvements that we've gotten 
over time in cleaning up our air, most of that is attributable 
to the transportation sector, and most of that is attributable 
to advances in things like catalytic converters, cleaner fuels. 
The fuel industry has done its part by initially getting lead 
out of gasoline to enable the use of catalytic converters, and 
more recently by reducing the sulfur levels.
    But it really is quite a success story, and we'd be happy 
to provide you more information on that.
    Senator Voinovich. One last thing, and that is the issue of 
diesel fuel. The Europeans really use a lot of diesel fuel. 
It's my understanding that in terms of miles per gallon you get 
a tremendous amount more out of diesel than you do out of our 
gasoline. The tradeoffs that are there, I understand if you use 
diesel you've got more pollutants, but you get better gas 
milage. I still can't understand why more of our auto companies 
aren't producing more diesel powered vehicles, especially since 
there has been some significant improvement in diesel fuel.
    Any comment on that?
    Mr. Holmstead. I think the people who have looked at this 
issue believe that the biggest reason the Europeans have so 
much more usage than we do of diesel fuel is the differential 
in the price of fuel. The fact that the taxes are so much 
higher on fuel in Europe means that, I believe that fuel prices 
are about twice as high. So they have a very strong economic 
incentive to use more fuel efficient vehicles. And as you 
mentioned, diesel is much more efficient in terms of providing 
power for transportation.
    We believe at EPA that we will see significant increases in 
diesel fueled vehicles over the coming years. I've mentioned a 
couple of times the Tier 2 rule, it will actually for the first 
time require diesel powered vehicles and gasoline powered 
vehicles to meet the same emissions standards. So beginning in 
model year 2004, the technology will be available, partly 
because of the cleaner fuel and partly because of advances in 
hardware on cars and trucks. But there will be technology 
available to allow diesels to be basically as clean as cars, or 
as gasoline powered vehicles.
    Our hope is that the combination, once people understand 
that diesels are not dirtier, that they can be as 
environmentally clean as other vehicles, that we will see 
significant increases in the amount of diesel used, and again 
largely because of the fact that you can get increased fuel 
efficiency from diesels as compared to gasoline powered 
vehicles.
    Senator Jeffords. It sounds very interesting. Thank you. 
Good question.
    Thank you. I have some additional questions for you in 
writing, as you know, but we want to get on to the next panel. 
Thank you very much for very helpful testimony, and we look 
forward to working with you.
    Thank you. I want to welcome the next panel. We have a very 
interesting group of individuals who will help us understand 
better the problems that we face.
    We have the Honorable Scott Johnstone, Secretary of the 
Vermont Agency of Natural Resources. We're pleased to have you 
here from Waterbury, Vermont. The Honorable Ron Harris, the 
County Judge from Collin County, Texas. Lynn Terry, the Deputy 
Executive Officer of the California Air Resources Board from 
Sacramento, California. James Stephenson, President of Yancy 
Brothers Company, Atlanta, Georgia, on behalf of the American 
Road and Transportation Builders Association. And Michael 
Replogle, the Transportation Director of the Environmental 
Defense Fund, Washington, DC. Good to see you as well.
    Scott, please proceed.

STATEMENT OF HON. SCOTT JOHNSTONE, SECRETARY, VERMONT AGENCY OF 
                       NATURAL RESOURCES

    Mr. Johnstone. Thank you for this opportunity to appear 
before this committee to offer comments on the relationship 
between transportation and air quality, and particularly on the 
congestion mitigation and air quality program.
    Vermont, the Green Mountain State, is known for its lush 
green hills, maple syrup, autumn colors and beautiful lakes. 
Less known is the fact that Vermont does suffer adverse effects 
from air pollution. While we are the only State in the 
northeast which is in attainment for all of the health based 
criteria pollutants regulated under the Federal Clean Air Act, 
the health of Vermont citizens and our environment are 
adversely affected by air pollution. Indeed, Vermont has long 
suffered disproportionately from the impacts of acid rain and 
regional haze.
    We are also concerned about public exposure to toxic 
emissions and about global issues such as the depletion of the 
ozone layer and climate change. Many of these threats have a 
direct link to vehicular emissions that can be addressed 
through reauthorization.
    Surface transportation remains the largest in-State source 
of air pollution in Vermont. On a per capita basis, Vermonters 
drive more miles in a year than residents in 39 other U.S. 
States. Besides the criteria pollutants, such as ozone, that 
CMAQ has focused on in the past, other air pollution problems 
need to be addressed, such as fine particulate matter, toxics 
and greenhouse gases. Air toxics contribute significantly to 
the formation of ground level ozone, and in Vermont, represent 
the area of air quality where we do not meet some of our own 
air quality standards. Greenhouse gases contribute 
significantly to overall air pollution problems and to climate 
change.
    The importance that our State places on the control of 
dangerous motor vehicle emissions is reflected in the number of 
control programs we have put in place over the past decade that 
go beyond the Federal minimum requirements. For example, 
Vermont is one of only four States in the U.S. to voluntarily 
adopt the California low emission vehicle program in lieu of 
the Federal Motor Vehicle Standards, including the zero 
emission vehicle sales mandate. To support this regulatory 
program the State created E-Vermont to promote the development 
and deployment of advanced electric vehicles.
    CMAQ funds have been of great assistance to Vermont and 
other States in the region. Over the life of TEA-21, CMAQ has 
been funded at approximately 4 percent of the total Federal 
surface transportation program. Given the air quality impacts 
of surface transportation and the fact that it is the only 
transportation program designed to reduce air pollution, CMAQ 
should not only be reauthorized, it should be expanded to 
represent a larger percentage of the overall transportation 
budget.
    While the CMAQ program was conceived to address both 
congestion and air quality, great weight has been and should 
continue to be given to air quality improvement goals. The 
transfer of CMAQ funds to non-air quality uses as currently 
allowed should be examined so that the air quality improvement 
goal may be met. Further, the CMAQ allotment scheme should be 
modified to provide weight to factors such as high per capita 
vehicle miles traveled, areas that are in attainment but at 
risk of slipping into non-attainment due to mobile source 
emissions, and areas with disproportionately high percentage of 
emissions from mobile sources.
    A reauthorization bill should require CMAQ to consider fine 
particulate matter, air toxics and greenhouse gases in both 
allocation and eligibility. Greenhouse gas reduction goals and 
incentives could also be incorporated into reauthorization by 
tracking the vehicle miles traveled of all major transportation 
projects and by providing incentives for transportation 
projects which promote smart growth and reductions of 
greenhouse gas emissions and vehicle miles traveled.
    The committee should also consider the inclusion of 
programs to reduce particulate and toxic pollution from diesel 
powered vehicles in the CMAQ program. Reducing diesel emissions 
is of critical importance to protect public health. Diesel 
school buses, non-road equipment, trucks and transit buses emit 
particulates and other toxics in close proximity to children, 
workers and the public. As these engines last as long as 30 
years, progress in cleanup that relies on normal fleet 
transition will be slow. Thus, consideration should be given to 
include a mechanism in CMAQ that encourages transit agencies 
and school districts to replace or retrofit their bus fleets 
with clean buses.
    I suggest the committee also look at the broader funding 
system for transportation projects. Much of our air quality and 
congestion problems come from the very poor use of land that 
has come to pass over the past decades, the practice we now 
call sprawl. I suggest to you that in part, it has come about 
due to our method of funding transportation projects. 
Communities do look at funding sources in designing their land 
use systems. We ought not be surprised that strip zoning and 
sprawling development is most often associated with the 
highways eligible for State and Federal funding. What occurs is 
sprawl, and the transportation cure, little to no local cost to 
fix the problem by increasing lanes or building new highways.
    I suggest you consider what would occur if we provide 
incentives instead for grid patterns and public transit. I 
believe the result would be better land use, less congestion, 
better air quality and ultimately smarter growth. The use of 
CMAQ funds should be encouraged for programs which simply make 
sense, regardless of an area's attainment status. One such 
program is vehicle onboard diagnostic system inspection and 
maintenance. Such a program is cost effective and relatively 
simply to implement as it relies on technology already 
installed in the vehicle, as opposed to requiring expensive 
investments in emissions testing and equipment.
    In closing, in Vermont as elsewhere, CMAQ has encouraged 
environmental and transportation agencies to talk, to plan and 
to work with each other. It is a program that has helped 
achieve important progress in the fight against air pollution. 
But much remains to be done and CMAQ must be updated to reflect 
our evolving understanding of the real risks society faces from 
vehicle related air pollution. Vermont's environmental future 
and the health of our citizens requires such attention.
    Thank you for this opportunity to testify.
    Senator Jeffords. Thank you very much.
    Ron?

 STATEMENT HON. RON HARRIS, COUNTY JUDGE, COLLIN COUNTY, TEXAS

    Judge Harris. Thank you. I am very pleased, quite frankly, 
to sit in and listen to some of the comments that have been 
made this morning from an elected official's viewpoint. Because 
we sometimes feel that we're abandoned out there at the local 
level, because things get too weighty and bureaucratic in 
trying to accomplish these goals. But it sounds like this 
committee, and certainly from the testimony we've heard this 
morning, are headed in our direction to clean up the air and 
provide good mobility.
    And with that, a lot of my speech was taken away, which 
should be good news. But certainly, what Mr. Holmstead 
indicated this morning, as well as Ms. Peters, pretty well 
reflects the concerns of North Texas, and indeed, the State of 
Texas, as we attempt to clean up our air. We are very 
aggressively working as a result certainly of the leadership of 
our last legislature group of individual cities and counties 
that represent 37 of our counties, which indeed represents 67 
percent of the population, 71 percent of the jobs in Texas, 
called the Texas Clean Air Working Group, where we brought 
people in from TexDOT, the EPA and the Texas Natural Resources 
Conservation Commission, to study how we're all working toward 
using congestion mitigation air quality funds, and how we can 
learn from each other and through partnerships. It is really 
with the lead of Greg Cook, who's our regional EPA 
administrator, that has encouraged a lot of us to work on 
these.
    I would encourage you, as you put this together, to find 
ways to create these partnerships. Because people tend to like 
to work together more than they do to feel someone up on high 
is pushing something, and the natural urge, I think, not being 
a psychologist, but only as an individual is to react, to push 
back. I think the efforts of CMAQ have really been a 
significant help to us in the north Texas area in particular 
with our HOV lanes, which are some of the highest used in the 
State, and I think even in the Nation. Signalization, which is 
one of my pet peeves and I'm sure yours too, sitting what is 
really probably a matter of 45 seconds at a stop light, but to 
you and me, that's 10 to 15 minutes of our lives that we feel 
is wasted.
    Certainly in working with free right turns, bus lanes, 
these are pieces that really can continue to help in air 
quality performance. We've also, with the CMAQ funds, used them 
in what certainly we've seen in visiting California and some of 
their really good programs as well as Atlanta, Georgia, on 
motorist assistance. Truly 80 percent of our incidents on the 
roads that cause tremendous rubberneckers and slowdowns are 
secondary incidents to the first accident or overheated 
vehicle. In our area, again, the North Texas Turnpike 
Authority, the Dallas Area Regional Transit Authority, TexDOT, 
and our MPO have worked together to make this work.
    Another piece that would really be of significant help in 
technology would be encouraging intelligent transportation 
systems on our roadways and coordinating multiple 
jurisdictions. We have, like many cities and counties across 
the Nation, multiple cities who, as I refer to when I talk 
about the courthouse, are like herding butterflies, that 
they're all beautiful in their own sight. But it's very 
difficult to control them as they go.
    The EDS commercial on cats during the Super Bowl is a very 
good example, sometimes, of coordinating local government. 
They're all trying to serve their citizens, but they have some 
difficulty in working together, which we're very fortunate, 
certainly, in Collin County, that we have these partnerships 
and that they do move us forward without that. North Texas 
would not have been able to come up with our State 
implementation plan that we indeed came up with.
    We would encourage whatever you can do to focus more 
assistance on cleaning up the off-road equipment. I think that 
will be through technology and I think it will be through lower 
sulfur diesel, if you can move that forward. We would also 
suggest an assistance, and maybe through CMAQ funds, to do what 
the Texas legislature has started, and we have to come back for 
more funding, because their source got ruled unconstitutional, 
as it has in five States, for incentives to retrofit diesels. I 
know my own brother-in-law is in the diesel business in dirt 
moving, and I daresay his equipment is probably approaching 20 
or 30 years old. When it breaks down, he simply goes in and 
does a lot of work that I don't think I would care to do, but 
that's his company. And I think if we can make incentives to 
the small business people, I think the big ones will turn over 
their fleets, and certainly if these new equipment standards 
come down, they will hit that.
    Conformity, as you have heard, is a very big issue. It's 
consistent with the testimony you've already heard.
    With that, I do appreciate being invited to come down, I 
consider it an honor and hope that we can work together with 
you and your staffs to continue to clean up the air and provide 
mobility. Thank you.
    Senator Jeffords. Thank you. We appreciate your being here 
and working with you.
    Lynn?

 STATEMENT OF LYNN TERRY, DEPUTY EXECUTIVE OFFICER, CALIFORNIA 
                      AIR RESOURCES BOARD

    Ms. Terry. Good morning. And it really is morning in 
California.
    Thank you for the opportunity to comment on California's 
experience in integrating air quality and transportation 
planning. Over the years, we have been able to meet the Clean 
Air Act transportation conformity requirements through a 
cooperative effort with local, State, Federal agencies. At the 
same time, we are encountering some process challenges that do 
need to be addressed. We look at this issue in the context of 
our overall air quality program in California, which now 
includes global warming gases due to some recent legislation 
signed by the Governor.
    The concept of transportation conformity is a simple one. 
Air pollutant emissions from the transportation sector must be 
consistent with air quality plans. This is critical to ensure 
that health based standards are met in the required timeframes. 
The process itself requires looking at emissions today as well 
as in the future. This is necessary to make sure that we 
continue clean air progress into the future as our population 
and economy grows.
    Over the last 20 years, reducing air pollution from the 
transportation sector has been essential to California's 
dramatic process in improving air quality in the Los Angeles 
region, historically the Nation's smoggiest region. As 
discussed earlier, for transportation that progress has been 
largely due to cleaner vehicle technology. A new car in 2010 
will omit only one-tenth the ozone forming pollution of even a 
1990 model vehicle. As a result, transportation control 
measures that reduce travel have shown less benefit than 
anticipated.
    Also, there is little flexibility for transportation 
agencies in terms of implementing transportation control 
measures once they are in an air quality plan. This discourages 
innovation because new, more effective measures can't replace a 
measure that appears to be infeasible. In terms of complying 
with the conformity requirements, we believe the focus should 
be on emission reduction goals, rather than the implementation 
of specific transportation control measures.
    In addition to TCMs, another important mechanism to address 
air pollution is CMAQ. We strongly support these funds as a way 
for transportation agencies to provide significant emission 
reductions in a cost effective way. There are many cleaner 
technologies, diesel has been widely discussed that can be 
funded to reduce both ozone and particulate pollution from the 
transportation sector.
    For us, the most difficult problem with the current 
conformity process is the inability to take new information 
into account in a workable way. SIPs must define the emission 
target needed to achieve clean air as defined by the national 
ambient air quality standards. That emission target is based on 
the state of the science at the time the air quality plan is 
done. Once approved by EPA, the SIP is the federally 
enforceable benchmark for conformity.
    There is no requirement to update a SIP prior to the 
deadline for meeting air quality standards. On the other hand, 
transportation plans are routinely updated and as a practical 
matter, changes in individual transportation projects in major 
urban areas are frequently proposed. These changes typically 
trigger a process that requires new information to be used in 
the conformity analysis. When the SIP has not been updated with 
that same information, the inherent consistency can derail the 
process.
    In California, we face this issue virtually statewide in 
urban areas. As a result, we will be revising 23 SIPs over the 
next year or so. And while this will put us back on a 
consistent process track in the near term, it's a major 
undertaking that in itself doesn't provide air quality 
benefits. What we want to avoid in the future is the triggering 
of comprehensive SIP revisions each time new information 
becomes available. Under today's rules, this is the only way to 
avoid conformity problems as the science improves.
    We believe it is more appropriate to comprehensively revise 
air quality plans when the underlying facts have changed so 
substantially that the approach to meeting air quality 
standards needs to be revised. Otherwise, we need an option of 
a streamlined mechanism to respond to new information.
    For example, a streamlined mechanism could make sense when 
a region is close to meeting a standard, when emissions are 
declining and when all the measures in the SIP are being 
implemented. In this type of transitional situation, a 
reconciliation of old and new vehicle emission estimates would 
make more sense than a comprehensive plan update.
    For regions that have a long way to go to meet air quality 
standards, more frequent SIP updates are clearly needed. For 
example, we recognize the air quality plan for the Los Angeles 
region needs a comprehensive update, and that is in progress. A 
number of new studies are available, including improved data 
related to motor vehicle emissions and travel. From a process 
standpoint, what these situations demand is an ability to link 
timing and transportation plans and conformity with the 
completion of new SIPs.
    In conclusion, California is pursuing statewide SIP 
revisions as a means to provide the necessary consistency 
between air quality and transportation plans. But we want to 
use our resources effectively to protect both our Federal 
transportation dollars and the integrity of our clean air 
plans. We believe that with some focused process changes, we 
can accomplish both.
    Thank you for the opportunity to be here today.
    Senator Jeffords. Thank you.
    James?

   STATEMENT OF JAMES STEPHENSON, PRESIDENT, YANCY BROTHERS 
                            COMPANY

    Mr. Stephenson. Thank you, Mr. Chairman.
    Conformity is an issue I have taken a very personal role in 
as a board member of the Georgia Regional Transportation 
Authority, which was established in 1999 to tackle Georgia's 
massive conformity problems. Our current regional 
transportation plan calls for congestion to get 30 percent 
worse as we invest $36 billion over the next 25 years. We're 
going to spend $36 billion to lose that game.
    This conformity issue is of utmost importance to ARTBA, 
which has spent significant resources over the past 3 years 
helping Government agencies to defend their planning process in 
court. As you know, the transportation sector is really the 
only sector that pays a price when an area is not meeting air 
quality standards. Mr. Chairman, there is no doubt that we've 
made great progress over the past 30 years in improving the 
Nation's air quality. Most of the success has been achieved 
from the transportation sector in spite of a very large 
increase in vehicle miles traveled. This came not from 
transportation control measures, but through technology 
advancements in better engines and better fuels.
    In Atlanta alone, we added a million people in the last 10 
years with their cars. We went from 3 million to 4 million 
people. Yet we reduced air pollution over that time.
    Mr. Chairman, when the Clean Air Act amendments of 1990 
were enacted, they were based on a mistaken premise that 
increases in vehicle miles traveled would overwhelm the 
emissions reduction capacity of technology advances. Quite the 
opposite has happened. One of the programs that was based on 
this mistaken premise is CMAQ. Most CMAQ funded programs have 
not yielded significant emissions reductions. We need 
accountability built into this program. Please spent the money 
on activities that produce quantifiable results.
    The conformity process was based on the same mistaken 
premise. There are two things I hope you take from this hearing 
today, one, that Government agencies must have more flexibility 
in administering the conformity process; and two, the public 
needs more predictability in the planning process. One of the 
major problems with the conformity process is that people have 
tried to turn it into an exact science when it is anything but. 
Conformity lapses don't occur due to severe clean air problems. 
They occur because of missed deadlines and paperwork problems. 
The conformity process has become more of a game of ``gotcha'' 
rather than engaging the public in true transportation 
planning.
    One court decision striking down the longstanding practice 
of grandfathering had a devastating impact in my home town of 
Atlanta. At the time of the decision, Atlanta was in a 
conformity lapse, and 54 of 71 major priority projects that had 
been vetted through years of planning were put on hold.
    Mr. Chairman, while many of the professional environmental 
groups talk about wanting a more inclusive transportation 
planning process, the facts are really quite different. Since 
ARTBA started its litigation alliance to help defend the 
planning process, the Sierra Club and many of its colleague 
organizations have fought relentlessly to keep ARTBA out of the 
process. The truth is that these organizations do not want an 
inclusive process. They want to trump the planning process 
through court proceedings where they and they alone can drive 
the process. When the planning process is allowed to be 
hijacked by any one individual viewpoint, bad decisions result.
    Please don't forget, delays in transportation improvement 
projects have tragic consequences. Forty-two thousand people 
are killed each year on our Nation's highways, 15,000 of these 
due to substandard roadway conditions, obsolete designs, or 
roadway hazards. Delay is not harmless, delay kills.
    Delays also have other costs as well. Besides increased 
congestion, when an area is in a conformity laps, it can be 
sanctioned with a loss of Federal highway and transit moneys. 
This happened in Atlanta for about a year and a half. Rather 
than penalizing areas that failed to meet air quality 
standards, Congress should consider rewarding those communities 
that make the greatest progress in cleaning their air. Using 
sanctions that cutoff badly needed transportation improvement 
funds only exacerbates the problem, resulting in increased 
congestion and worsened air quality. Couldn't we try using a 
carrot instead of a stick?
    Finally, Mr. Chairman, we are headed for another conformity 
train wreck when EPA implements its new, tighter standards for 
ozone and particulate matter. Several hundred counties are 
going to get an expensive education in court in the conformity 
process.
    Mr. Chairman, I have included more detailed comments, as 
well as some proposed legislative fixes in my written 
testimony. I look forward to any questions you may have.
    Senator Jeffords. Thank you.
    Michael?

    STATEMENT OF MICHAEL REPLOGLE, TRANSPORTATION DIRECTOR, 
                     ENVIRONMENTAL DEFENSE

    Mr. Replogle. Good morning, Mr. Chairman and members of the 
committee. Thank you for the opportunity to appear today. I'm 
Michael Replogle, Transportation Director of Environmental 
Defense. I'm testifying today also on behalf of Sierra Club and 
the Surface Transportation Policy Project.
    Vehicles account for a large share of the air pollution 
that kills tens of thousands of Americans each year and injures 
millions. Pollution cuts from cleaner cars have been in part 
offset by growth in driving. Over 160 million Americans still 
live in areas with poor air quality, 14 million with asthma 
gasp for air when ozone levels rise. Those living near big 
roads can face cancer risks as high as 1 in 500 from air 
toxics. And transportation greenhouse emissions are up 9 
percent since 1990.
    DOT estimates the health effects of air pollution costs us 
$40 billion to $65 billion a year, dwarfing the $27 billion in 
Federal transportation spending. This hidden tax of over $600 a 
year per household falls most heavily on our children, elders 
and infirm. Responding to the failures of air quality controls 
between 1970 and 1990, Congress required transportation 
decisions to conform with SIPs. This has improved air quality 
accounting and spurred investments in cleaner fuels, vehicles 
and maintenance, transportation choices and smart growth that 
cuts traffic and pollution.
    But conformity has only just gotten into gear since many 
ozone attainment SIPs were adopted only last year. Failure of 
transportation plans to comply with SIPs is why most areas 
failed to meet ozone standards in 1987. Many areas again failed 
to attain by 1999, because vehicle emissions weren't cut to 
levels needed for attainment. While conformity is working, it 
faces challenges that could again cause SIPs to fail. Congress 
should require the use of best modeling practices to estimate 
future travel and emissions with clear DOT and EPA 
responsibilities to identify best practices, audit regional 
models and when timely, correction of deficiencies in these 
accounting systems.
    Congress should fund enhanced data collection, evaluation 
and analysis methods and create a transportation environmental 
research program. CMAQ should be reauthorized at a much higher 
level, recognizing the larger population in non-attainment 
areas. States have failed to spend one in four out of all CMAQ 
dollars, almost $3 billion. Let's sub-allocate these funds to 
MPOs and get them spent.
    Congress must ensure priority funding for transit and 
economic incentive programs needed to attain air quality. 
Barriers to planning and implementing facilities and services 
needed for attainment should be lowered. Non-attainment areas 
should get priority access to funds, such as projects to fund 
such projects using unprogrammed minimum guarantee funds and 
funds proposed for flex between funding categories by the 
States.
    Before 1990, some States cooked their books with unfunded 
promises of transit to offset pollution from new roads. The 
roads got built, the transit didn't, and vehicle emissions 
soared, contributing to the failure of SIPs in the 1970's and 
1980's. Today conformity and SIPs are undermined by lack of 
local match funds for transit, weak accounting for funds, lax 
Federal oversight of planning requirements. Project costs are 
widely underestimated. FHWA's failure to lapse fund balances 
unspent by the States as required by law exacerbates a growing 
fiscal mess.
    Congress should assure the frequency of conformity supports 
timely attainment. Less frequent analysis means bigger 
surprises and less timely model updates. A 3- or 5-year cycle 
may fail to catch and correct fast growth in traffic or 
emissions. Schedule coordination must flow from good 
interagency coordination, not from less frequent checks and 
balances.
    EPA is already obligated by law to track and report non-
attainment area emissions every 3 years, and assure remedial 
measures in SIPs are implemented when emission reduction 
targets aren't met. SIPs will again fail if areas don't 
consider long term impacts of major projects.
    Congress should ensure conformity lapses don't block 
conformity exempt or emission reducing transportation projects 
from being added to non-conforming TIPs and transportation 
plans. FHWA should mitigate the adverse health impacts suffered 
by communities exposed to air toxics caused by expansion of 
major highways. Congress should boost incentives for employer 
paid transit benefits, road pricing and use based car 
insurance, and investments in rail, bus, rapid transit, 
pedestrian, bicycle and intermodal travel, which can cut 
traffic and emissions growth by a quarter from trends and boost 
transportation system performance in a very cost effective way.
    During the Atlanta Olympics, Georgia brought in a thousand 
more buses, promoted travel alternatives and incentives, and 
cut morning traffic and ozone by a quarter, cutting asthma 
incidents by 42 percent. We can replicate that success story 
elsewhere.
    I close by presenting you with letters from 16 national 
health and environmental leaders, asking Congress and the 
Administration to enhance accounting for the effects of 
transportation on health, air quality and the environment. We 
look forward to working with you on the reauthorization of TEA-
21. I have more detail in my written testimony. Thank you.
    Senator Jeffords. I believe you.
    [Laughter.]
    Senator Jeffords. Thank you all for very excellent 
statements. This is obviously an extremely important area that 
we're looking at for the future of this Nation. So I will have 
some questions.
    Given the challenges posed by implementation of the revised 
ozone and fine particulate standards, should we increase the 
funding for CMAQ and if so, by how much?
    We'll start with Scott and move on down.
    Mr. Johnstone. As I said in my testimony, I certainly think 
that CMAQ funding should be increased. I think it goes with the 
widening range of issues that we need to deal with, whether 
it's ozone, particulate matter, greenhouse gases, air toxics. 
There's more to do. Obviously it should be spent in ways that 
are thoughtful, in ways that will produce results. But there is 
real need to get our air clean. And this is a great program and 
a great way to make progress on that front.
    So I think we certainly should see an increase in the 
percentage of the transportation budget going to this work.
    Judge Harris. Mr. Chairman, we would concur, but there are 
uses that increases could allow more participation in. As 
you've heard and all of you know, particularly in our area, 80 
percent of the problem on mobile is caused by about 10 percent 
of cars, which works out to be 40 percent, running through all 
those numbers, of our emission problems. And we've started 
something called the LIARP, which is low income assistance and 
repair or replacement program that the legislature authorized 
and will be kicking off September 1st. It's funded through some 
fees on inspections of vehicles. And it's to help those who 
really are the backbone of all of our cities and areas in this 
country that do the very physical work most times of brick 
laying, of various construction projects, servers are 
McDonald's, Wendy's, wherever. They are the least able, again, 
to help themselves when faced with a $300 repair bill to get 
their vehicle into compliance. And our inspection stations are 
even worse, a vehicle that's diagnosed as costing too much, 
which could be in excess of $600 to $1,000, to be repaired.
    So they need assistance, you know, $1,000 won't buy a 
vehicle. But we feel this is a way to help address some of the 
most polluting, and certainly we could have the ability to then 
use some of the CMAQ funds, again, not all of them, I think, 
back into partnerships. Certainly the State of Texas has put 
forward and effort, and if some moneys could be put together to 
help that, I think it would really benefit the entire country 
to get those cars off the road.
    Ms. Terry. We certainly agree that we need more CMAQ 
dollars. Given the health effects of particulate pollution an 
increased emphasis there is absolutely essential. As we look at 
the health effects, we see from the studies that the ``safe 
levels'' continue to be even more difficult to achieve than we 
had thought previously. So combining additional CMAQ moneys 
with that focus, and with a really long term vision for 
continuing the declining emissions, while progress has been 
tremendous, we still have a very long way to go.
    Mr. Stephenson. My view would be that an increase would be 
appropriate to the extent that you have an increase in the 
overall investment in transportation in the country. And 
further, to the extent that you have quantifiable results and 
measurable accountable programs that you're funding with it.
    Mr. Replogle. I think the CMAQ program is a very effective 
program and one that should be increased proportionate to the 
increase in population in non-attainment areas. In 1999, there 
were about 54 million people living in areas that didn't meet 
the 1 hour ozone standard, which is the basis for allocating 
CMAQ dollars today. According to EPA's latest data, 123 million 
people live in the 333 counties that violate the 8-hour ozone 
standard, and 82 million live in 173 counties that violate the 
PM fine standards.
    So together, when EPA makes its designations, there's 
likely to be somewhere between 150 and 165 million people 
living in non-attainment areas that ought to be fully eligible 
for those CMAQ dollars. So we really need a several fold 
increase in this program, simply to avoid diluting the level of 
effort in current non-attainment areas.
    Senator Jeffords. Thank you. Scott, thank you for taking 
the time to come down and be with us today. Assuming that we 
can get power plant pollution under control at some point soon, 
what else can Vermont do to address the other air quality 
problems of vehicles?
    Mr. Johnstone. First let's hope we get the former taken 
care of, and we'll continue on the work to get that done 
through the lawsuits we're a party to. There are other sources 
in Vermont, and clearly, surface transportation is where we 
have to start. It's almost half of our in-State sources come 
from vehicles. So that's where we've got to start. And whether 
it's continuing with the California low emission program, 
whether it's promoting the light rail and various train service 
that we've got, even in a rural State like Vermont. Park and 
rides most people think don't work in rural areas. But look 
around Vermont. Every place we've got one, it's full.
    So we can make great progress. And I would add too that I 
am more convinced every day that critical to solving the air 
quality problem is finally addressing the issue of how we grow. 
It's not a question of do we grow or don't we grow from my 
perspective. It is how we grow. If the sprawl that we face is 
what creates this increased mileage that everyone is talking 
about that we travel in our cars, it's how we grow. And that 
really comes back to how we fund projects, from my perspective. 
In Vermont, we're using up our land at a rate that's two or 
three times that which our population growth is growing. That's 
not sustainable, and it's really an issue we've got to address 
if we're going to meet our air quality goals. And frankly, have 
a sustainable Vermont that people want to live in.
    So those are the primary sources. Then after surface 
transportation, we've got to meet our residential heating and 
our business sector needs by replacing energy sources that are 
fossil fuel today with cleaner technology and different 
technology.
    Senator Jeffords. Thank you. Lynn, unfortunately, the 
Administration and Congress are not in a rush to take any steps 
to significantly reduce greenhouse gases from the 
transportation sector. So I'm glad to see that California has 
stepped up to the plate. Can you please tell us about the 
California program to reduce greenhouse gas emissions from 
mobile sources?
    Ms. Terry. Certainly. Governor Davis just signed a bill 
that will require the Air Resources Board to adopt regulations 
by January 1st of 2005 to reduce greenhouse gas emissions to 
the maximum extent feasible in a cost effective manner. It 
requires the board to look at passenger cars and that includes 
everything that people typically drive, from small sedans, 
sports cars, to SUVs, and look at ways to reduce greenhouse gas 
pollutants. We're required to look at alternatives, to provide 
flexibility, to look at consumer costs. But other than that, 
we're free to look at the gamut of technological solutions.
    We also have clear directions from the legislature not to 
prohibit certain vehicle types, not to address speed limits, 
gasoline pricing, those kinds of strategies. It is very much a 
technology focus.
    So we will be integrating those kinds of regulations with 
our technology assessments that we're doing to address those on 
a particulate pollution. So it will be looked at in that 
context. The legislature, recognizing the innovative approaches 
that were possible, has asked us to provide a year for formal 
review by the legislature, including legislative hearings. They 
do not have veto power over the regulations, but certainly they 
have the opportunity to consider legislation if they want to go 
to different directions.
    But we see this whole approach as very compatible with our 
longstanding history of technology advancement in the vehicle 
sector. So we have a lot of work to do.
    Senator Jeffords. We appreciate the work you are doing.
    Michael, your in-depth knowledge on the topic has been of 
great assistance to the committee in the past, and we look 
forward to your help in the future. How can we get better 
resources to the States and the planners, to ensure that the 
successes continue to outnumber the failures in the area?
    Mr. Replogle. I think it's important to increase the 
setasides for planning, for metropolitan planning, and perhaps 
to create a new setaside for State planning, to create 
integrated transportation natural resource and growth 
management plans. A lot of the problems that I think we see in 
the disconnect between air quality and transportation come 
because for decades transportation was a world of its own that 
developed a system to meet the externally developed forecasts 
for growth of land use.
    Today, over the last decade, we have begun to change that, 
so the transportation planners and air quality planners are 
sitting down routinely, coordinating their activities. I think 
we can extend that to other areas of water planning, greenhouse 
gas emission reduction planning, protection of sensitive 
habitats and other natural resources and historic resources, so 
that we can make sure that transportation projects, as they 
move into the environmental review process, are the right 
projects that have avoided adverse impacts by recognizing where 
sensitive resources were, and by recognizing what kinds of 
things we ought to be investing in to minimize damage to our 
environment and to maximize benefits for our society and cost 
effectiveness in our spending of transportation dollars.
    In that way, we can minimize the costs of pollution 
cleanup, because we won't have to clean up as much pollution. 
This is where markets make real sense and information makes 
real sense. Integrating the activities of our agencies to meet 
broader societal goals beyond just mobility is a key part of 
making sure that we get the right intelligence.
    We also need some help at the national level. I think 
creating a national program for transportation environmental 
research as the National Academy of Sciences committee just 
recently recommended would be an excellent step in the right 
direction. It's a program that needs $15 million to get 
started.
    We need to be investing in a clearinghouse for better 
transportation modeling and emission modeling practices. The 
U.S. DOT today still spends a fraction of what was spent even 
20 years ago on developing appropriate modeling techniques to 
evaluate travel behavior changes as a result of transportation. 
We need a new generation of models that help us to do better 
decisionmaking and support elected officials and the public 
with good information.
    Finally, I'd say we need to make sure that the 
transportation planning process at all levels is looking at 
alternative scenarios, instead of just looking at one size fits 
all, one approach, business as usual track, we need to make 
sure that transportation plans and programs also consider 
system management strategies that can help meet our needs for 
mobility with less vehicle miles of travel, less land 
consumption for urbanization and less emissions.
    Senator Jeffords. Thank you. Ron, your testimony was that 
there should be consistent, submitted frequencies for SIPs and 
TIPs. Do you have any specific solutions in mind?
    Judge Harris. I think we would be working these out purely 
with the technicians that understand this. But I do know in our 
area that it has become increasingly difficult to map out 
transportation projects that ultimately will reduce congestion, 
which I believe does reduce air emissions for cars running 
versus stop and start. And we've been working very hard to be 
in conformity and to clean up the air. With this movement 
around, for instance, right now we're facing, and I think the 
legislature will fix this funding shortfall, which has 
jeopardized our current proposed SIP.
    And if that should happen, then 60 to 90 days later, we 
would be in a conformity freeze, even though we are doing just 
about everything we can do, and the citizens are behind us, 
businesses are behind us. We wouldn't even have time to 
rearrange those plans to make it work. And yet we've been 
working on these conformity plans diligently for years. Just 
this little blip could throw us out of conformity. I think this 
is not untrue across the Nation, as you've heard this morning. 
But that's our imminent piece, and of course, we're working to 
not get to that point.
    But still, beyond that, for consistency in planning, it 
would help if we could marry up those dates.
    Senator Jeffords. James, you said that one of the best ways 
to achieve the goals of better air quality and reduce 
congestion is by reducing bottlenecks on the Nation's roads. 
Are you aware of any recent studies which show that those kinds 
of projects would improve the quality in the short and long 
term?
    Mr. Stephenson. It would improve air quality?
    Senator Jeffords. Air quality.
    Mr. Stephenson. Reducing bottlenecks, you mean a study as 
opposed to just using common sense and understanding that cars 
going through an intersection instead of stopping and starting 
produce more pollution?
    Senator Jeffords. Yes.
    Mr. Stephenson. I'm not aware of one. I'll see if I can get 
one and send it to you. I know there are studies that show that 
cars produce less pollution at about 40 or 50 miles an hour 
than they do either idling or when they're accelerating or from 
a stop.
    Senator Jeffords. Scott, as you said, Vermont is lucky to 
be an attainment State. You suggested some changes to the CMAQ 
formula, so that Vermont could stay in attainment. Does this 
change become increasingly necessary as the revised standards 
go into effect?
    Mr. Johnstone. I think it does, because we will have more 
and more challenges in Vermont, both as standards get harder 
over time, which ought to happen, and as we face continued 
problems of other air pollution sources. We've got a hard job 
to stay in attainment. We are there, and I'm proud to say that. 
We're not there by much. And I don't want Vermont to be facing 
non-attainment.
    So we need to take this issue on, that's why we take it so 
seriously. I sometimes get folks in Vermont saying, why do you 
guys work so hard on air quality? We are in attainment. Well, 
that's exactly the point. We want to stay there. And there are 
major challenges. As our vehicle miles traveled just continue 
to balloon, we are in danger of falling out of attainment. So 
it's really important for us to face that challenge and stay 
where we're at, because it's a lot better to be in attainment 
than non, from my perspective.
    Senator Jeffords. We're ready to help in any way we can, 
without cheating.
    Mr. Johnstone. Of course.
    [Laughter.]
    Senator Jeffords. Michael, what should Congress do while 
EPA considers revising its rule on mobile source air toxics?
    Mr. Replogle. I think one of the important steps to take is 
to first of all, make CMAQ dollars available to communities to 
help deal with air toxics problems. Second, make sure that the 
Federal Highway Administration is considering and avoiding or 
mitigating the impact, the health impacts of air toxics on 
communities affected by increased air toxics caused by 
expansion of highways. This is an issue that's coming up in Las 
Vegas and a number of other places around the country.
    Third, I think make sure that there is continued timely 
progress to implement cleaner diesel technologies and no 
backsliding on the programs that have been put in place for 
that. I think fourth, do everything possible to encourage early 
adoption and availability of low sulfur diesel fuel, and the 
provision of incentives and programs for States to adopt to 
reduce the off-road diesel emissions, which are a significant 
contributor to air toxics. There are a lot of things that need 
to be done.
    Senator Jeffords. Thank you. Lynn, you mentioned that 
California will be revising 23 SIPs over the next year. What 
kinds of resources does it take to manage that kind of effort? 
And do you think it will all be done in time to avoid a 
conformity lapse?
    Ms. Terry. It will be done in time to avoid a conformity 
lapse. It will be a long year. Fortunately, some of those SIPs 
are for carbon monoxide, and it really does amount to a 
reconciling of emission inventories. But the sort of technical 
aspects aside, the reality is we still have to go through, in 
California, a local level process of public comment hearings, 
again at the State level, and then EPA has to approve those 
plans. So it's a workload at all three levels. And U.S. EPA 
Region IX has been terrific in sitting down with us and trying 
to prioritize and work through the timeframes. But it's a huge 
resource burden for all of those levels of Government. And what 
we'd really like to do is focus on those areas that are far 
from meeting the standards, have a long way to go and we really 
need to come up with new, innovative control strategies.
    So that was really the heart of our comments about a 
streamlining mechanism, and we're going to try to develop one 
as we go through this process in the next few months. I think 
that will give us some very specific recommendations that we'd 
like to put into the record in terms of when streamlining makes 
sense and when a comprehensive revision is really unnecessary, 
so that this fundamental concept of conformity does work.
    Senator Jeffords. I want to welcome Senator Carper here. 
The questions are yours now.

 OPENING STATEMENT OF HON. THOMAS R. CARPER, U.S. SENATOR FROM 
                     THE STATE OF DELAWARE

    Senator Carper. Thanks, Mr. Chairman.
    I apologize for not being here earlier. We have, as you 
know, a number of hearings that are going on in this building, 
and I've been trying to get to all of them. I'm just glad that 
you're still here.
    The question I have relates to the use, providing States 
and local governments with some discretion in using congestion 
mitigation funding from the Federal Government for passenger 
rail purposes. Have any of you discussed this in any of your 
comments? Has it been raised at all in your comments today?
    [Witnesses respond in the negative.]
    Senator Carper. Before I joined Senator Jeffords, I was 
Governor of Delaware for 8 years, and involved in the National 
Governors Association. I always thought it was peculiar that we 
in the States could use our congestion mitigation money for 
bicycle paths, we could use it for freight railroads, we could 
use it for roads, highways, bridges, but we could not use it, 
didn't have the discretion to use any of our congestion 
mitigation money for inter-city passenger rail, even if that 
made sense in terms of reducing congestion.
    The Senate has passed, I suspect with the vote of our 
chairman on a couple of occasions, legislation providing 
flexibility to Governors and others in States to use their 
congestion mitigation money and some other Federal 
transportation moneys more flexibly to support not only bicycle 
paths, freight railroads, building roads, highways, bridges, 
but also provide some additional funding for passenger rail 
service, if that made sense in the discretion of chief 
executives in our States. I would just ask if any of you care 
to comment on that notion. Is that a good idea, bad idea? Is 
that an idea whose time has come, has gone?
    Mr. Replogle. I think it's an artificial restriction. I 
think the funds should be available for passenger rail, and I 
think States should also be looking at opportunities for more 
widespread use of the national highway system funds to support 
passenger rail services. Because usually passenger rail is in 
fact operating to serve the same markets that are served by the 
national highway system.
    Ms. Terry. And we certainly support flexibility in the use 
of CMAQ funds. A lot of the discussion this morning has been 
about cost effectiveness. But certainly in California, air 
quality is a very long term problem. So passenger rail in our 
view really needs to be part of the long term future.
    Mr. Johnstone. I certainly would support that flexibility 
from Vermont's perspective. But with the notion, and I think it 
would be an easy test, for any passenger rail service I can 
think of. I just don't want it to come back to some nexus with 
improvement in air quality, which I think would be an easy test 
to accomplish.
    Judge Harris. I think, Senator, any time you can allow the 
local folks to focus on issues that are specific to their 
areas, we're all better off. Certainly trains, we've got a 
couple moving between cities in Texas that do take a lot of 
people off, I've watched them and been at those stations. But 
again, the word flexibility is always an outstanding attribute 
for any legislation.
    Senator Carper. Mr. Stephenson, I see you're with the 
American Road and Transportation Builders Association.
    Mr. Stephenson. Yes, sir.
    Senator Carper. I would welcome any comments that you have, 
pro or con.
    Mr. Stephenson. My perspective is, I think, similar to 
Judge Harris's, that flexibility is good. I would urge that any 
restrictions that were placed on that flexibility be in the 
nature of calling for quantifiable and measurable results in 
terms of not just emissions, but that first word that the C 
stands for, which is congestion.
    Senator Carper. Mr. Chairman, I'm glad you and the 
witnesses were still here, and I appreciate very much the 
chance to raise some questions.
    Senator Jeffords. Well, we were waiting for your arrival.
    [Laughter.]
    Senator Carper. Why didn't that first panel wait, too? No, 
I'm just kidding. Thank you. Thank you all.
    Can I ask a question of Mr. Johnstone? Are you from 
Vermont?
    Mr. Johnstone. I am.
    Senator Carper. My recollection is that Vermont uses its 
local and State moneys to fund some passenger rail services. Is 
that correct?
    Mr. Johnstone. I believe that's true, yes.
    Senator Carper. President Bush, in his recommendations to 
Congress with respect to Amtrak, deals with the use of States, 
the ability of States to use their own money. In fact, I think 
there's an expectation that the present Bush Administration 
has, as we go forward with passenger rail service in the 21st 
century, to the extent that the Federal Government continues to 
play a role, the States should play a role, too. I would just 
note for the record that Vermont is one of the States that's 
been very active in providing its own funds to help support 
inter-city passenger rail service. I think it may go on to 
Canada, as I recall. I'm not sure.
    Mr. Johnstone. I don't think it does through rail at this 
time. The rail connects to bus service. But the direct rail 
connection is something that over the past few years hasn't 
been able to be continued.
    Senator Carper. I think part and parcel, if we're going to 
act on that aspect of the President's recommendation, in which 
we would expect States to do more to support train service, it 
may not make money, it may not be finished. In my own judgment, 
it simply makes sense to give States some additional 
flexibility with respect, for example, to their congestion 
mitigation money to help make ends meet. But not to require 
that, but to give States and Governors that flexibility and 
those tools.
    Thank you, Mr. Chairman.
    Senator Jeffords. I agree with you on that. Vermont used to 
have a direct train service to Montreal, but union problems 
made it impossible. So they bus them up from the end in 
Vermont.
    Senator Carper. We even had a name for that train. It's 
called the Montrealer.
    Senator Jeffords. Yes, those were the good old days. Maybe 
some day it will come back.
    Well, thank you. This has been a very exciting time for me 
to talk with people that really are involved and knowledgeable 
and enthusiastic. Thanks. It made my day. I hope it helped 
yours. Thank you.
    [Whereupon, at 11:55 a.m., the committee was adjourned, to 
reconvene at the call of the chair.]
    [Additional statements submitted for the record follow:]
 Statement of Hon. Jon S. Corzine, U.S. Senator from the State of New 
                                 Jersey
    Thank you, Mr. Chairman, for holding these continuing hearings on 
the reauthorization of the Transportation Equity Act for the 21st 
Century--TEA-21, and I'd like to join you in welcoming our witnesses.
    The issue of air quality is very important to me. Most of the state 
I represent--New Jersey--is designated as a ``non-attainment area'' for 
the Clean Air Act criteria pollutants. This degree of air pollution 
affects the health and well-being of our residents, especially the 
young, the elderly and the infirm. While much of our air pollution 
comes from out-of-state sources, there is no doubt that the cars on our 
roads contribute as well.
    To its credit, New Jersey has taken steps to help itself. We've 
instituted such congestion reducing measures as EZ-Pass. We've invested 
heavily in new rail systems to help get more drivers off the roads. And 
we've revamped our motor vehicle inspection system to help ensure that 
cars meet tougher Federal air quality standards.
    But New Jersey and states like it need more help, Mr. Chairman. We 
need assistance from the Federal Government in programs like the 
Congestion Mitigation and Air Quality Program. I look forward to an 
ongoing dialog in the committee as to how to make this good program 
even better as we re-authorize TEA-21. And we need to look into other 
measures that will help states help themselves.
    But we also need to do more to reduce vehicle emissions by 
requiring automakers to raise gasoline efficiency standards. I was 
disappointed when Congress failed to include an increase in CAFE 
standards as it considered the Energy bill. I hope we get the chance to 
do so again.
    Thank you again, Mr. Chairman, for holding this hearing and I look 
forward to hearing from our witnesses.
                               __________
      Statement of Mary E. Peters, Administrator, Federal Highway 
              Administration, Department of Transportation
    Mr. Chairman and members of the committee, thank you for this 
opportunity to discuss implementation of the transportation and air 
quality provisions of the Clean Air Act (CAA) and the Transportation 
Equity Act for the 21st Century (TEA-21).
    Meeting the dual challenges of congestion relief and air quality 
improvement is a high priority for all of us at the Department of 
Transportation, as I know it is for members of this committee. In TEA-
21, you gave us new tools and authorities to assist us in achieving 
this goal, and we are proud of the progress that has been made. In 
reauthorization, the Department wants to continue to buildupon the 
successes of TEA-21 and the Intermodal Surface Transportation 
Efficiency Act of 1991 (ISTEA). Yet, as Secretary Mineta stated at a 
hearing before you earlier this year, we have an obligation to do much 
more to address surface transportation concerns. Secretary Mineta has 
also noted that one of the core principles of the Department's 
reauthorization efforts is ensuring an efficient infrastructure while 
retaining environmental protections that enhance our quality of life.
    In my testimony today, I will address three main points. First, I 
want to assure you that progress has been made in reducing 
transportation-related emissions of pollutants, and that the Department 
of Transportation is committed to doing its part to ensure progress 
continues. Second, I will describe how the Congestion Mitigation and 
Air Quality Improvement Program (CMAQ) has assisted States and 
localities in addressing their mobility, air quality, and quality of 
life concerns. Finally, I want to restate the commitment of the Federal 
Highway Administration and the Department to work with our 
transportation planning and air quality planning partners for effective 
coordination of the transportation and air quality planning processes.
              continued focus on air quality improvements
    As a Nation, we have made remarkable improvements in reducing air 
pollution, especially pollution that comes from transportation sources. 
Where transportation is a significant source of pollutants, the 
Environmental Protection Agency (EPA) reports that ozone (formed by the 
reaction of volatile organic compounds (VOC) and oxides of nitrogen 
(NOx)), carbon monoxide (CO), and particulate matter (PM), have all 
decreased substantially since 1970. A majority of the areas designated 
as nonattainment since 1990 now meet national air quality standards. 
Air quality monitoring data through 2000 shows that 76 out of 78 carbon 
monoxide nonattainment areas, 69 out of 85 coarse particulate matter 
(PM10) areas, and 81 out of 101 ozone areas no longer show 
air pollution levels that exceed the national ambient air quality 
standards. And, while the CAA has led to reduced pollutant emissions 
from all air pollution sources, the greatest success can be found in 
the reduction of motor vehicle emissions: CO emissions have been 
reduced by 43 percent since 1970, PM10 emissions reduced by 
33 percent, and VOC emissions by 59 percent from motor vehicles (see 
Attachment). While NOx emissions increased by 16 percent over the 
period, the rate of increase was less than the increase from all 
sources (21 percent). And, NOx emissions from automobiles (excluding 
sport utility vehicles (SUVs) and light trucks) decreased by 31 
percent. For VOC and CO, motor vehicle emission reductions were greater 
than the reductions from all other sources. Thus, motor vehicle 
emissions now make up a smaller percentage of total emissions. In 1970, 
motor vehicles contributed 59 percent of total emissions of carbon 
monoxide, NOx, VOCs, and PM10, when compared to stationary, 
area, and non-road mobile sources. However, by 1999, the motor vehicle 
portion of emissions of these pollutants dropped to 48 percent. Most of 
these emissions reductions have resulted from stricter emissions 
standards, improved engine technology, and cleaner fuels.
    It is especially important to note that these reductions in 
emissions were accomplished during a period of 33 percent increase in 
population, 147 percent growth in gross domestic product (GDP), and 143 
percent increase in vehicle miles traveled. The automotive, fuels, 
highway, and transit communities have managed to achieve this success 
in improving air quality while at the same time working to address 
increasing demands to improve mobility.
    The downward trend achieved in emissions is expected to continue 
into the future. Engines and fuels are to become even cleaner under 
recent EPA-issued regulations for emissions standards and cleaner fuel 
requirements. Between 2004 and 2007, more protective tailpipe emissions 
standards will be phased in for all passenger vehicles, including SUVs, 
minivans, vans, and pick-up trucks. This regulation marks the first 
time that larger SUVs and other light-duty trucks will be subject to 
the same national pollution standards as cars. In addition, the EPA 
tightened standards for sulfur in gasoline, which will ensure the 
effectiveness of low-emission control technologies in vehicles and 
reduce harmful air pollution. When the new tailpipe and sulfur 
standards are implemented, Americans will benefit from the clean-air 
equivalent of removing 164 million cars from the road. These new 
standards require all passenger vehicles sold after the phase-in period 
to be 77 to 95 percent cleaner than those on the road today, and will 
reduce the sulfur content of gasoline by up to 90 percent.
    We expect that motor vehicle emissions will be reduced as new 
heavy-duty vehicles that meet the 2004 emissions standards for heavy-
duty engine standards enter the fleet. Beginning with the 2007 model, 
heavy-duty engines for trucks and buses must meet even tighter 
emissions standards, and the level of sulfur in diesel fuel must be 
reduced by 97 percent by mid-2006. As a result, after a phase-in 
period, each new truck and bus will be more than 90 percent cleaner 
than current models. In addition to tighter standards, the Federal 
Transit Administration (FTA) has been working with industry to develop 
and demonstrate low-and zero-emissions advanced propulsion technologies 
for transit buses, including hybrid-electric, battery electric, and 
fuel cell-powered buses. Under FTA/DOT leadership, a national program 
is underway to accelerate the development and commercial viability of 
these advanced technologies.
    However, despite dramatic improvements in air quality, some of the 
nation's largest metropolitan areas still face challenges in meeting 
the current ozone standard (also known as the 1-hour standard due to 
the averaging time for the ozone concentration levels). Furthermore, 
the Nation as a whole, and the transportation community in particular, 
face additional challenges as new air quality standards are 
implemented. The new 8-hour ozone and fine particulate 
(PM2.5) standards will be more stringent, and many areas 
across the eastern U.S. and in California have pollution levels now 
exceeding these standards. Some of these areas, including small urban 
and rural areas, may be designated nonattainment for the first time. 
Other existing nonattainment areas may become larger and involve more 
jurisdictions under the new standards. The Department and EPA are 
working with these areas to increase their capacity to deal with new 
nonattainment designations.
       congestion mitigation and air quality improvement program
    We have learned a great deal about transportation and air quality 
over the last 30 years, and over the last 10 years in particular. One 
thing we have learned is that there is no one ``right way'' to address 
transportation needs that meets the requirements of the entire nation. 
The transportation needs of Houston differ markedly from those of 
Chicago. This is doubly true when trying to reduce congestion and 
improve air quality. We have also learned that if we are to address our 
mobility and air quality needs simultaneously, we must incorporate 
national approaches, State and local planning, and project-level 
investments.
    The CMAQ Program was established in 1992 by ISTEA as one of the 
programs designed to provide States and metropolitan areas flexibility 
to better address their particular needs. The CMAQ program is the only 
Federal transportation program specifically targeted at air quality 
improvements. Through this program, we have provided $6 billion during 
the life of ISTEA and $8 billion under TEA-21 (1998-2003) to States and 
local governments for innovative programs and projects that demonstrate 
an air quality benefit and contribute to attainment of a national 
ambient air quality standard.
    The concept of the CMAQ program is to provide needed flexibility to 
fund transportation improvements, whether they be highway, transit, 
shared ride, bicycle and pedestrian or other types of projects. This 
flexible approach allows for investments that cross traditional 
boundaries of the Federal-aid program to support projects focused on 
transit systems, alternative fuels and vehicles, intermodal highway 
facilities, emissions inspection and maintenance (I&M) programs, and a 
host of other projects.
    The CMAQ program has also supported more highway and systems 
management improvements that contribute to emissions reductions through 
traffic flow enhancements or other means, and has been an important 
funding source in the implementation of Intelligent Transportation 
Systems (ITS). In Arizona, for example, CMAQ funding accounted for 87 
percent of the Federal funds used for ITS investments.
Overview of CMAQ-Funded Projects
    Through fiscal year 2001, about $9.5 billion had been obligated 
under the CMAQ program. According to the latest data, the majority of 
CMAQ funding goes for new and enhanced transit services and traffic 
flow improvements that ease congestion, reduce starts and stops, and 
reduce emissions. These two categories are the backbone of any 
metropolitan area's transportation system, but they are also the most 
capital-intensive of the types of projects eligible under the program.
    A breakdown of CMAQ funding is provided in the table below.

                     CMAQ Funding by Type of Project
                                1992-1999
------------------------------------------------------------------------
                                     Amount Obligated
          Type of Project              ($ Millions)         Percent
------------------------------------------------------------------------
Transit...........................             $2,700         43 percent
Traffic Flow......................             $2,042         32 percent
Shared Ride.......................               $260          4 percent
Demand Management.................               $214          3 percent
Bicycle/Pedestrian................               $198          3 percent
Inspection and Maintenance and                   $445          7 percent
 Other............................
States with no Nonattainment or                  $430          7 percent
 Maintenance Areas................
------------------------------------------------------------------------

    In recent years, there has been a significant increase in the 
amount of CMAQ funding used for emissions I&M programs. Both Illinois 
and New Jersey have used CMAQ funding extensively for this purpose. In 
fact, 75 percent of New Jersey's recent CMAQ funding has been used for 
its I&M program. This is noteworthy because I&M programs have proven to 
be important strategies for meeting Federal air quality standards, 
demonstrating relatively large emission reductions, especially in acute 
ozone nonattainment areas.
The Benefits of the CMAQ Program
    Some CMAQ projects and programs, for example those supporting 
vehicle I&M programs, have registered notable emissions reductions. 
According to the States' annual CMAQ reports, I&M programs can yield 
about 5 tons per day in VOC in Illinois to over 40 tons per day in New 
Jersey. Regional projects, like traffic management centers and other 
projects that contribute to a modern, intelligent transportation 
system, also demonstrate larger emissions reductions than local or 
corridor level projects. Finally, we foresee greater potential for 
projects that advance new vehicle and fuel technologies. On the transit 
side, funding for bus replacement, removing older higher polluting 
vehicles from city streets in favor of newer models, has shown results, 
as have heavy-duty diesel retrofit programs and the introduction of 
alternative fuels.
    Further, even the more traditional transportation control measures 
(TCMs), such as High Occupancy Vehicle Lanes (HOV), turn lanes, and new 
buses, funded under the CMAQ program can help our State and local 
partners achieve other goals in addition to improving air quality. They 
improve our quality of life, by reducing pollution, by relieving 
congestion, and by allowing us to walk or bike in a more pleasant 
environment.
    Finally, the flexibility of the CMAQ program supports 
experimentation by our partners in the States and metropolitan planning 
organizations (MPOs) to meet travel demand in the most environmentally 
sensitive ways. In addition to ITS services, intermodal projects, and 
I&M programs, the CMAQ program has funded:

      Station cars and car-sharing programs
      Telecommuting
      Parking cash-out programs
      New vehicle technologies, including fuel cell vehicles
      Alternative fuels
      Public-private partnerships
      Transit-oriented development

    The National Academy of Sciences (NAS) recently released a 
comprehensive assessment of the CMAQ program. A number of findings and 
recommendations were offered, with the study concluding the program is 
valuable to State and local governments and should be continued. The 
assessment highlighted in particular the importance of the program's 
flexibility, encouragement of innovative approaches to reduce 
emissions, and support for new partnerships across jurisdictions.
Recent Issues
    In recent discussions, our stakeholders have raised several issues 
about the CMAQ program and its role in the overall surface 
transportation program. The first involves concerns about the CMAQ 
funding formula. The statutory formula apportions funds to the States 
based on the population living in nonattainment and maintenance areas 
and the severity of the ozone and CO pollution problem. However, the 
statutory formula does not include factors for the EPA's new air 
quality standards. Thus, a State whose nonattainment population will 
grow under the new EPA standards will receive no comparable increase in 
CMAQ funding. The NAS report and others in the air quality community 
have also pointed out the importance of addressing the new fine 
particulate matter standard, because of the mortality impacts 
associated with this type of pollution.
    Expanding the eligible use of CMAQ funding for operating assistance 
constitutes a second issue. One of the current strengths of the program 
is the focus on improvement projects, which could be diminished by 
providing assistance for routine operations. Currently, we provide 
operating assistance for up to 3 years under the CMAQ program for new 
services to help them get established
    A third issue that has been raised is whether to expand CMAQ 
funding to areas outside of existing nonattainment and maintenance 
areas. In January of this year, we published a Federal Register notice 
maintaining our current policy of limiting funding to nonattainment and 
maintenance areas, but allowing projects to be funded that are in close 
proximity to, and primarily benefiting, a nonattainment or maintenance 
area. Comments to the docket revealed that our stakeholders are divided 
on the issue of funding outside of existing nonattainment and 
maintenance areas, although the majority of States and MPOs favored 
retention of our current policy.
    We will consider these issues as we develop our reauthorization 
recommendations.
the transportation conformity process: coordinating transportation and 
                          air quality planning
    Conformity refers to a requirement of the CAA that is designed to 
ensure that federally funded or approved highway and transit projects 
conform to the air quality goals and priorities established in a 
State's implementation plan (SIP). For programs administered by the 
Federal Highway Administration and the Federal Transit Administration, 
we determine whether highway and transit projects conform to a State's 
SIP by comparing the total expected air quality emissions from the 
whole transportation system within the nonattainment or maintenance 
area, including the expected emissions that would result from projects 
contained in the transportation plan and transportation improvement 
program (TIP), with the emissions budget for motor vehicles in the SIP.
    A failure or inability to make a conformity determination by the 
required deadline is referred to as a ``conformity lapse.'' During a 
conformity lapse, the use of Federal highway and transit funds is 
restricted. Currently, most areas of the country are in conformity. 
But, as of July 22, 2002, five areas are in a conformity lapse.
    Fulfilling the transportation conformity requirements has created 
stronger institutional links between two sets of agencies--
transportation and air quality--that operated quite independently of 
each other prior to enactment of the Clean Air Act Amendments of 1990 
(CAAA). This interagency consultation has played a crucial role in the 
development of more realistic and achievable transportation and air 
quality plans. In addition, the transportation conformity provisions 
have been instrumental in fostering improvements to the travel demand 
and emissions modeling processes, because of the specificity of data 
necessary to meet conformity requirements.
    We now have almost a decade of experience in implementing the 
transportation conformity provisions of the CAAA and, despite 
successes, our stakeholders indicate that there remain opportunities to 
improve the transportation conformity process. Transportation 
conformity was intended to form strong linkages between the 
transportation and air quality planning processes. However, there is a 
concern among transportation agencies-and even some air quality 
agencies-that transportation plans and SIPs are not synchronized with 
one another due to different planning horizons and update frequencies. 
This sometimes causes ``lapses'' in conformity, often disrupting the 
transportation funding process. While transportation plans have very 
long planning horizons and have to be updated frequently, most air 
quality plans have comparatively shorter planning horizons and are 
updated less frequently.
    TEA-21 and the CAA require that transportation plans must cover at 
least 20 years and be found conforming for that entire time period. 
However, air quality plans have much shorter planning horizons, often 
only 5-10 years, resulting in a ``mismatch'' in which transportation 
plans must consider emissions controls in the absence of comprehensive 
air quality planning. Without comprehensive air quality planning, there 
is no analysis of the most cost-effective emissions controls across all 
sources beyond the end of the SIP timeframe. If an MPO has a conformity 
problem in the timeframe beyond that covered by the SIP, it has limited 
options for achieving substantive emissions reductions with programs 
over which the transportation agencies have control. Traditional TCMs 
have little impact on regional emissions levels, and such strategies 
will provide even fewer reductions in the future, as technology 
continues to reduce total mobile source emissions. Although MPOs bear 
the responsibility of assuring that plans conform to air quality 
budgets, they do not have the authority under current law to establish 
more effective measures, like I&M programs or reformulated fuels. That 
process of identifying future control strategies is the intended 
purpose of the SIP.
    This ``mismatch'' can be further aggravated by differences in the 
frequency with which transportation plans and air quality plans are 
updated. Conformity determinations for transportation plans must be 
made at least every 3 years, must be based on the latest demographic 
and travel information, and must use the latest emissions estimation 
model. However, air quality plans are not updated on a regular cycle, 
and may reflect out-of-date assumptions or may have been developed 
using an outdated emissions estimation model. When a conformity 
analysis is performed in such a situation, it is impossible to 
determine whether the emissions associated with the transportation plan 
are truly consistent with the emissions budget in the air quality plan. 
This may be because the transportation plan emissions were estimated 
under one set of assumptions and model, while the emissions budget was 
developed under another. Our stakeholders have reported that such 
situations have occurred and are likely to happen again with the recent 
release of a new emissions estimation model.
    EPA, in coordination with U.S. DOT, has allowed a 2-year grace 
period before States have to use the new emission model, MOBILE6, for 
conformity. EPA also requires that SIPs that are started after the 
official release use MOBILE6. While the Clean Air Act does not require 
SIP updates in all cases, EPA guidance encourages States to evaluate 
the effects of MOBILE6 early to plan for any needed SIP updates to 
accommodate change.
    Our stakeholders indicate that conformity lapses have occurred 
because areas could not complete the complex, comprehensive 
transportation planning and conformity processes within the required 
timeframes, even though they met their emissions budgets. Data 
collection, model development, public outreach, and consensus building 
can all take a considerable amount of time and resources. MPOs also 
face other daily challenges of ever-increasing congestion, 
transportation needs due to economic growth, protection of water 
quality and other environmental resources, efficient freight 
management, safety, and security.
    Many of our stakeholders have suggested bringing the planning 
horizons and frequency of updates of both the transportation plans and 
air quality plans much closer together. Some have suggested a shorter 
planning horizon, and less frequent updates, while others have 
suggested a longer air quality planning horizon. We note that some area 
have opted to voluntarily extend their air quality planning horizons.
    In any case, some stakeholders have suggested it is in the best 
interests of an effective, integrated process that the air quality 
plans and the transportation plans are both using the latest, and most 
consistent, set of planning assumptions, and that the air quality plans 
include the necessary control measures to ensure timely attainment of 
the standards. Stakeholders have stated that this would also help us 
anticipate air quality problems and correct them in a more proactive 
and coordinated transportation and air quality planning process.
    The ``mismatch'' issue also extends to the consequences associated 
with an area's failure to demonstrate conformity versus an area's 
failure to submit or implement an adequate SIP. When an area is unable 
to demonstrate conformity and enters into a conformity lapse, the 
consequences of the lapse on federally funded or approved highway and 
transit projects, as well as regionally significant non-Federal 
projects, can be immediate. Alternatively, under the CAA, if an area 
fails to submit or implement an adequate SIP, there is a range of time, 
a minimum of 18 to 24 months, before sanctions are imposed, during 
which the State can remedy any problems. Some of our stakeholders 
suggest that a similar delay in impacts should be considered for the 
conformity process.
    The Department recognizes the value of transportation conformity, 
and is committed to reducing motor vehicle emissions. Over the years, 
we have worked closely with EPA and our State and local stakeholders to 
improve the transportation conformity process. We are committed to 
better coordinating the transportation and air quality planning 
processes and will continue to work with EPA and our stakeholders to 
identify ways to remedy the mismatch issues, including consideration of 
possible remedies in the development of our reauthorization proposal.
                               conclusion
    In conclusion, the Department of Transportation is committed to 
continuing the progress made over the last 30 years in reducing motor 
vehicle emissions and strongly supports the goals of the Clean Air 
Act's transportation conformity provisions. Improving transportation 
safety and mobility, while protecting the environment and enhancing the 
quality of life for all of our communities, are compatible goals. I am 
proud of the successes we have achieved under the CMAQ program by 
providing flexible funding for innovative transportation projects that 
improve air quality and by improving interagency cooperation between 
transportation and air quality agencies. However, I also recognize that 
additional improvement in the coordination of the transportation and 
the air quality planning processes can be achieved.
    Integrating transportation and environmental decisionmaking can 
effectively advance environmental stewardship and improve our 
efficiency in meeting our nation's mobility needs.
    The American public demands and deserves both mobility and clean 
air, and we must remain focused on providing the highest level of 
service and environmental protection that we can provide.
    Mr. Chairman and members of the committee, this concludes my 
statement. I again thank you for the opportunity to testify today and I 
look forward to working with you as we prepare for reauthorization of 
the surface transportation programs.
    I will be pleased to answer any questions you may have.



    
    
                                 ______
                                 
 Responses of Mary Peters to Additional Questions from Senator Jeffords
    Question 1a. Questions were raised at the hearing by Mr. Replogle 
about the quality of traffic and emission forecasts for SIPs and 
conformity analysis. Please identify how well the estimated regional 
VMT related to each conformity determination made since January 1, 1995 
has corresponded to the estimated observed regional VMT to date.
    Have forecasts of 1999/2000/2001 traffic made in 1994/1995/1996 
been modified as time went on?
    Response. Yes. Metropolitan Planning Organizations (MPOs) in 
designated nonattainment and maintenance areas are required to 
determine conformity of their long-range transportation plans and 
transportation improvement programs (TIPs) no less frequently than 
every 3 years, but often do so more frequently. When metropolitan areas 
update their long-range plans, they incorporate updated information on 
population and employment forecasts, changes in the transportation 
network, and other factors. In metropolitan nonattainment and 
maintenance areas, conformity determinations on transportation plans 
and TIPs must be based on the latest planning assumptions which include 
estimated regional vehicle miles of travel (VMT). The travel models use 
these updated data to produce revised forecasts that better reflect 
changes that have occurred since the last plan update. The 
transportation planning and conformity processes are iterative 
processes that are continually being updated with the latest 
information. This represents good planning practice, and the Federal 
Highway Administration (FHWA) strongly encourages such updates. In 
January 2001, FHWA issued joint guidance with the Federal Transit 
Administration (FTA) and the Environmental Protection Agency (EPA) 
clarifying the requirements for use of the latest planning assumptions 
in transportation conformity determinations. The guidance strongly 
encourages areas to review, and strive toward, regular 5-year updates 
of planning assumptions. This guidance can be accessed at: http://
www.fhwa.dot.gov/environment/cnfplngg.htm.

    Question 1b. Please provide copies of submitted conformity analyses 
and a summary of the pattern in the quality of forecast versus observed 
VMT growth.
    Response. We conservatively estimate that well over 700 individual 
conformity analyses have been conducted since the transportation 
conformity rule was promulgated in November 1993. Many of the 
conformity reports and their related technical documents are very 
voluminous and in a wide variety of formats. In addition, these 
analyses may be incorporated into the transportation plan or TIP. Also, 
even if they are separate documents from the plan and TIP, it may be 
necessary to review the plan and TIP as well to perform any analysis. 
For example, the documents supporting the most recent conformity 
determination on Houston's Plan and TIP conformity determination 
totaled about 790 pages, with MOBILE6 input files and associated tables 
(e.g., project tables) used to run the emissions analyses comprising 
much of this documentation. The plan and TIP themselves account for 
approximately 292 and 455 additional pages. (Source: http://
www.hgac.cog.tx.us/transportation/pubs.html.) Below is a list of some 
MPO websites where conformity documents are available.
    Other MPOs with conformity documents on their websites include:

      Maricopa Association of Governments: http://
www.mag.maricopa.gov/project.cms?item=131
      Southern California Association of Governments: http://
www.scag.ca.gov/rtp/webpdfs/appendix--H.pdf
      Metropolitan Washington Council of Governments: http://
www.mwcog.org/trans/aqcsummaryrpt.html
      Miami-Dade MPO: http://www.co.miami-dade.fl.us/mpo/docs/
MPO--2025--mdtp--aq--20011206.pdf
      Atlanta Regional Commission: http://www.atlreg.com/
mobilityair/PlansPrograms/cdr.html

    FHWA does not centrally collect conformity analyses. Our 52 
Division Offices act on these analyses, and documents are filed 
locally. However, even the current conformity analyses are not 
sufficient to do an analysis of forecast versus observed VMT growth. To 
do this sort of analysis, previous and archived technical analyses 
would need to be retrieved, and would require a substantial amount of 
effort, not only by FHWA, but most likely also by the MPOs and the 
State Departments of Transportation, as FHWA may not have archived 
technical data in its files. Even if we could collect the data, a 
national pattern would be difficult to establish or justify, as the 
factors affecting forecasts vary significantly from one urban area to 
another (see our response to the next question for more details). A 
precise comparison of forecasted versus observed VMT on a national 
level is not possible due to limited data. At least in some instances, 
forecast VMT as used in SIPs and reported in transportation planning 
documents may underestimate observed VMT. Finally, it should also be 
noted that even though areas collect travel data, this ``observed'' 
data is based on sampling; it must be expanded, through estimation and 
modeling, to reflect total VMT for an area.

    Question 1c. How much of the difference in forecasts has been due 
to changes in estimated population and employment, changes in motor 
vehicle use, changes in transit fares and transportation costs, 
improvements in transportation models or other factors?
    Response. Differences in forecasts can be attributed to a variety 
of factors, including changes in estimated population and employment 
and their distribution within a metropolitan area, changes in service 
availability and transportation costs (i.e., fuel prices, transit 
fares, parking costs, etc.), and improvements in travel models, to name 
a few. In addition, changes in how VMT is measured can also impact the 
difference in forecast vs. ``observed'' VMT. Because these factors can 
vary significantly from one urban area to another and the difference in 
forecasts, to a large extent, is due to the interaction among all these 
factors, there are no simple quantitative measures relating the 
proportional contribution of each factor to the overall difference 
between forecast and observed VMT. However, as a general rule, 
differences in the regional distribution of population and employment 
can have a significant impact on forecasts of regional travel behavior. 
In most areas across the Nation, population and employment location are 
influenced by larger societal trends over which transportation agencies 
have limited or no regulatory authority. The time-span of data used for 
developing a trend--i.e. the number of years of estimated observed VMT 
used to estimate VMT growth--also has a noteworthy and significant 
effect on forecasting VMT.
    In most cases, regional travel demand forecasting models simply may 
not adequately account for shifts in population and employment 
resulting from the addition of new transportation facilities, and 
subsequently the increase in travel activity due to these shifts. While 
the exact amount of travel growth resulting from induced demand is 
uncertain, there is growing consensus in the transportation planning 
profession that the induced travel is a reality.

    Question 2. Recent peer-reviewed research papers published by TRB 
showed an average observed elasticity of regional vehicle miles 
traveled (VMT) with respect to regional lane miles of capacity of 0.83. 
Has FHWA reviewed and evaluated the adequacy of regional travel models 
used for conformity analysis with respect to this important measure of 
induced traffic, which can have a profound impact on forecast traffic 
and motor vehicle emissions? If not, what steps will FHWA take in the 
next months to assure timely progress in assessing regional travel 
models against this scientific benchmark and to assure timely 
correction of MPO models that do not now adequately reflect induced 
traffic effects?
    Response. We are very aware of the issue, its complexity, and 
potential impact on travel demand analysis. A comprehensive study on 
the relationship between highway capacity expansion and mobile source 
emissions is contained in the Transportation Research Board (TRB) 
report entitled, ``Expanding Metropolitan Highways; Implications for 
Air Quality and Energy Use'' (Special Report 245 (1995), TRB/National 
Research Council (NRC)). This report states that:

``The complex and indirect relationship between highway capacity 
    additions, air quality, and energy use, which is heavily dependent 
    on local conditions, makes it impossible to generalize about the 
    effects of added highway capacity on air quality and energy use, 
    even with improved models. On the basis of current knowledge, it 
    cannot be said that highway capacity projects are always effective 
    measures for reducing emissions and energy use. Neither can it be 
    said that they necessarily increase emissions and energy use in all 
    cases and under all conditions.''

    Later studies have considered the issue of induced demand. Using 
data sources and applying them to a dataset from the Milwaukee area, 
Kevin Heanue, in an article entitled ``Highway Capacity and Induced 
Travel: Issues, Evidence and Implications,'' concluded that 78 percent 
to 94 percent of VMT increases are caused by social, and economic 
factors such as population, employment, and household sizes. (Highway 
Capacity Expansion and Induced Travel, Transportation Research 
Circular, No. 481 (1998), TRB/NRC.) Noland and Cowart (1999) found 
that, depending on the metropolitan area, there was a range of between 
15 and 45 percent of increase in VMT attributable to induced travel. 
From a statewide analyses, Noland (1999) found approximately 21-29 
percent of VMT growth attributable to induced travel, while Cowart 
(2001) comparably found approximately 26-31 percent of VMT growth 
attributable to induced travel for urban areas over 1 million. The TRB 
has also published numerous papers that have attempted to develop 
elasticity measures of induced travel. These elasticity measures have 
varied depending on the location, time period of analysis, and data 
sources used. While these more recent examples do find that induced 
travel has the potential to be a factor in some cases, we still believe 
that current modeling practice is inadequate to fully address the 
complex questions regarding induced demand.
    In February 2001, FHWA, EPA, and the Eno Foundation co-sponsored a 
national symposium of experts to discuss induced travel. The findings 
of this symposium are summarized in a forthcoming publication from the 
Eno Foundation. In addition, nearly all participants agreed that 
changes in transportation services that reduce travel time or costs 
will (and should) result in increased use of that service. This 
increased use resulting from improved service is generally defined as 
``induced demand.'' While participants agreed on some aspects of 
induced demand, other issues remain unresolved, such as the magnitude 
and the effect of this increase. There was also disagreement about what 
methodologies are applicable where, and consequently about which 
elasticity values are appropriate in different contexts. Furthermore, 
there is substantial disagreement about whether a capacity elasticity 
that has no time component is a meaningful indicator.
    The relationship between changes in highway service (capacity) and 
increases in vehicle miles traveled and ``induced travel'' is very 
complex. The analyses cited above employed different approaches and 
definitions making their interpretation and comparison challenging. 
Induced travel may include longer routes, change in travel mode, 
changes in trip destination and an increase in trip making. New highway 
capacity may also shift the time of day of travel, though such a shift 
should not be interpreted as induced travel. Regional growth may occur, 
accompanied by a corresponding increase in travel. This may also be 
interpreted as induced travel but many in the transportation community 
would disagree.
    Induced travel may also occur across modes, that is changes in one 
mode may induce travel in another. For example, commuter rail service 
into areas previously unserved by transit may support new residential 
development which in turn brings increased use of the highway system. 
Or, a new highway that connects to a rail station may promote increased 
use of the transit system.
    Some induced demand may be accounted for in forecasts made by 
regional travel models. The extent to which travel models account for 
induced demand depends on many factors, including the size of the 
transportation improvement, the timeframe of the forecast, the accuracy 
of the assumptions on population and employment growth, and the 
sophistication of the travel models themselves. As such, concerted 
effort and considerable sophistication is needed to both develop the 
data and operate the models for this purpose. Even under the best of 
circumstances, accurately assessing induced demand is a difficult 
process.
    FHWA is a strong advocate for improving travel models to better 
address transportation planning issues, including induced demand. 
FHWA's Travel Model Improvement Program (TMIP) conducts research, and 
provides training and technical assistance to State DOTs and MPOs to 
improve the current state-of-the-practice in travel modeling. Current 
research projects are investigating methods for incorporating 
commercial vehicle movements and departure time considerations in 
current travel models. The TMIP Program also oversees the development 
of a new generation travel model, the Transportation Analysis and 
Simulation System or TRANSIMS, which uses microsimulation techniques to 
better represent the travel activity behavior of individuals in 
response to the capacity and system characteristics of the regional 
transportation system. The microsimulation can also represent vehicle 
operational characteristics that may lead to more precise estimates of 
emissions. TRANSIMS is currently being tested in Portland, Oregon, with 
additional deployments to other metropolitan areas beginning in 2003. 
When fully implemented, we expect that TRANSIMS will make the 
incorporation of induced demand impacts easier to model.

    Question 3. For each metropolitan area classified as a serious, 
severe or extreme ozone nonattainment area or serious PM-10 
nonattainment area, please identify the dates when conformity 
determinations have been made for the regional transportation plans 
and/or transportation improvement programs adopted by any MPO, and 
where conformity has lapsed for any period of time within any such 
nonattainment areas, and identify the dates when the conformity lapse 
commenced and when a new conformity determination was made. Also, 
please identify the dates when current conformity determination lapse.
    Response. Table 1 presents the most recent conformity 
determinations on Plans and TIPs in MPOs that are located in 
nonattainment areas classified as serious and above for ozone or 
serious for particulate matter of under 10 microns (PM-10). Conformity 
determinations must be updated no less frequently than every 3 years.

                                           Table 1: Metropolitan Areas, Serious and Above for Ozone and PM-10
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             Classification                      Latest Plan
                Area                         States         -----------------------------------------------       Conformity       Latest TIP Conformity
                                                                      Ozone                  PM-10              Determination          Determination
--------------------------------------------------------------------------------------------------------------------------------------------------------
Atlanta............................  ......................  Serious...............
Atlanta Regional Commission........  GA....................  ......................  .....................  7/25/2000............  11/28/2001
Baltimore..........................  ......................  Severe................
Baltimore Metropolitan Council.....  MD....................  ......................  .....................  2/2/2002.............  2/2/2002
Baton Rouge........................  ......................  Serious...............
Capital Region Planning Commission.  LA....................  ......................  .....................  5/15/2001............  5/15/2001
Boston, MA-NH......................  ......................  Serious...............
Boston MPO.........................  MA....................  ......................  .....................  6/18/2002............  10/1/2001
Old Colony MPO.....................  MA....................  ......................  .....................  11/12/2001...........  10/1/2001
Southeastern Massachusetts MPO.....  MA....................  ......................  .....................  1/12/2001............  10/1/2001
Montachusett MPO...................  MA....................  ......................  .....................  1/12/2001............  10/1/2001
Cape Cod MPO.......................  MA....................  ......................  .....................  1/12/2001............  10/1/2001
Merrimack Valley MPO...............  MA....................  ......................  .....................  1/12/2001............  10/1/2001
Northern Middlesex MPO.............  MA....................  ......................  .....................  1/12/2001............  10/1/2001
Central Massachusetts MPO..........  MA....................  ......................  .....................  1/12/2001............  10/1/2001
Salem/Plaistow MPO.................  NH....................  ......................  .....................  8/26/2002............  8/26/2002
Southern New Hampshire Planning      NH....................  ......................  .....................  8/26/2002............  8/26/2002
 Commission.
Nashua Regional Planning Commission  NH....................  ......................  .....................  8/26/2002............  8/26/2002
Chicago............................  ......................  Severe................
Chicago Area Transportation Study..  IL....................  ......................  .....................  11/2/2000............  6/6/2002
Northwestern Indiana Regional        IN....................  ......................  .....................  2/26/2001............  2/26/2001
 Planning Commission.
Dallas--Fort Worth.................  ......................  Serious...............
North Central Texas Council of       TX....................  ......................  .....................  10/19/2001...........  10/19/2001
 Governments.
El Paso............................  ......................  Serious...............
El Paso MPO........................  TX....................  ......................  .....................  7/18/2001............  7/18/2001
Greater Connecticut................  ......................  Serious...............
Central Connecticut Regional         1CT...................  ......................  .....................  3/2/2001.............  10/1/2001
 Planning Agency.
Capitol Region Council of            CT....................  ......................  .....................  5/10/2001............  10/1/2001
 Governments.
South Central Regional Council of    CT....................  ......................  .....................  3/2/2001.............  10/1/2001
 Governments.
Southeastern Connecticut Council of  CT....................  ......................  .....................  3/2/2001.............  10/1/2001
 Governments.
Council of Governments of the        CT....................  ......................  .....................  3/2/2001.............  10/1/2001
 Central Naugatuck Valley.
Midstate Regional Planning Agency..  CT....................  ......................  .....................  3/2/2001.............  10/1/2001
Houston............................  ......................  Severe................
Houston-Galveston Area Council.....  TX....................  ......................  .....................  6/4/2002.............  6/4/2002
Las Vegas..........................  ......................  Serious...............
Regional Transportation Commission   NV....................  ......................  .....................  3/27/2001............  13/27/2001
 of Southern Nevada.
Los Angeles South Coast Air Basin..  ......................  Extreme...............  Serious..............
Coachella Valley (Riverside County)  ......................  ......................  Serious..............
Ventura County.....................  ......................  Severe................
Southeast Desert Modified AQMA.....  ......................  Severe................
Southern California Association of   CA....................  ......................  .....................  6/28/2001............  9/26/2001
 Governments.
Milwaukee--Racine..................  ......................  Severe................
Southeastern Wisconsin Regional      WI....................  ......................  .....................  3/14/2002............  3/14/2002
 Planning Commission.
New York-Northern New Jersey-Long    ......................  Severe................
 Island, NY-NJ-CT.
Housatonic Valley Council of         CT....................  ......................  .....................  4/30/2001............  10/1/2001
 Elected Officials.
South Western Regional Planning      CT....................  ......................  .....................  11/19/2001...........  10/1/2001
 Agency.
Greater Bridgeport/Valley MPO......  CT....................  ......................  .....................  3/2/2001.............  10/1/2001
Newburgh-Orange County               NY....................  ......................  .....................  9/28/2001............  12/15/2000
 Transportation Council.
New York Metropolitan                NY....................  ......................  .....................  9/30/1999............  9/26/2001
 Transportation Council.
North Jersey Transportation          NJ....................  ......................  .....................  9/20/2002............  9/20/2002
 Planning Authority.
Philadelphia--Wilmington--Trenton,   ......................  Severe................
 PA-DE-MD-NJ.
Delaware Valley Regional Planning    PA....................  ......................  .....................  7/6/2001.............  7/6/2001
 Commission.
Delaware Valley Regional Planning    NJ....................  ......................  .....................  6/27/2002............  6/27/2002
 Commission.
South Jersey Transportation          NJ....................  ......................  .....................  7/22/2002............  7/22/2002
 Planning Organization.
Dover/Kent County MPO..............  DE....................  ......................  .....................  7/20/2001............  7/20/2001
Wilmington Area Planning Council...  DE-MD.................  ......................  .....................  4/13/2000............  9/9/2002
Phoenix............................  ......................  Serious...............  Serious..............
Maricopa Association of Governments  AZ....................  ......................  .....................  8/5/2002.............  8/5/2002
 (MAG).
Portsmouth--Dover--Rochester.......  ......................  Serious...............
Seacoast MPO.......................  NH....................  ......................  .....................  8/26/2002............  8/26/2002
Providence.........................  ......................  Serious...............
State Planning Council.............  RI....................  ......................  .....................  11/26/2001...........  2/20/2000
Reno...............................  ......................  Serious...............
Regional Transportation Commission   NV....................  ......................  .....................  12/12/2001...........  12/12/2001
 of Washoe County.
Sacramento.........................  ......................  Severe................
Sacramento Area Council of           CA....................  ......................  .....................  7/24/2002............  10/5/2000
 Governments.
San Diego..........................  ......................  Serious...............
San Diego Association of             CA....................  ......................  .....................  4/13/2000............  10/6/2000
 Governments.
San Joaquin Valley.................  ......................  Severe................  Serious..............
Kern County Council of Governments.  CA....................  ......................  .....................  9/25/2001............  9/25/2001
Council of Fresno County             CA....................  ......................  .....................  2/22/2002............  2/22/2002
 Governments.
Merced County Association of         CA....................  ......................  .....................  9/25/2001............  2/22/2002
 Governments.
Stanislaus Area Association of       CA....................  ......................  .....................  12/21/2001...........  12/21/2001
 Governments.
San Joaquin County Counicl of        CA....................  ......................  .....................  2/22/2002............  2/22/2002
 Governments.
Tulare County Association of         CA....................  ......................  .....................  2/22/2002............  2/22/2002
 Governments.
Santa Barbara--Santa Maria--Lompoc.  ......................  Serious...............
Santa Barbara County Association of  CA....................  ......................  .....................  6/4/2002.............  9/19/2000
 Governments.
Springfield (Western MA)...........  ......................  Serious...............
Berkshire Regional Planning          MA....................  ......................  .....................  1/12/2001............  10/01/2001
 Commission.
Pioneer Valley MPO.................  MA....................  ......................  .....................  1/12/2001............  10/01/2001
Washington, DC-MD-VA...............  ......................  Serious...............
Fredericksburg Area MPO............  VA....................  ......................  .....................  1/22/2001............  1/22/2001
National Capital Region              DC-MD-VA..............  ......................  .....................  1/22/2001............  1/22/2001
 Transportation Planning Board.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Conformity lapse information was not collected on a regular basis 
before 1999, but it was collected on an ad-hoc basis. Therefore, we are 
providing lapse information for serious and above ozone and PM-10 areas 
since that time. Table 2 shows a record of transportation conformity 
lapses in serious and above ozone and PM-10 areas since July 1999 (as 
of September 17, 2002).

     Table 2: Conformity Lapses in Serious and Above Ozone and PM-10
                   Nonattainment Areas Since July 1999
------------------------------------------------------------------------
                 Location                          Dates of Lapse
------------------------------------------------------------------------
Atlanta, GA..............................  01/17/98-07/25/00
Baton Rouge, LA..........................  10/30/00-04/09/01
Coachella Valley and Mohave portions of    06/09/01-08/03/01
 LA Metro Area (SCAG), CA.
Dover (Kent County), DE..................  07/05/99--08/12/99
Greater Bridgeport & Valley, CT..........  03/03/01-03/15/01
Houston-Galveston, TX....................  11/99-04/00
Manchester, NH...........................  10/01/00-11/27/00
Nashua, NH...............................  10/01/00-11/27/00
Philadelphia (DVRPC), NJ portion.........  04/10/01-05/21/01
Reno, NV.................................  10/01/01-11/29/01
Santa Barbara County, CA.................  01/18/99--10/21/99
South Central, CT........................  03/03/01-03/15/01
South Jersey (SJTPO), NJ.................  04/10/01-06/18/01
------------------------------------------------------------------------

    Although only information on serious and above ozone and PM-10 
areas was requested, it is important to note that transportation 
conformity applies to all areas that are designated nonattainment or 
maintenance for the criteria pollutants: ozone, carbon monoxide, 
nitrogen dioxide and PM-10. Therefore a failure to demonstrate 
conformity of a metropolitan plan or TIP in any of these areas also 
results in a conformity lapse. Since the implementation of the 
conformity program under the 1990 Clean Air Act Amendments, a number of 
lapses with various lengths and degrees of impacts have occurred in 
these other nonattainment and maintenance areas.

    Question 4. Despite our progress on vehicle emissions technology, 
we are still having trouble attaining our national air quality 
standards. Estimates indicate that about 150 million people are 
currently breathing unhealthy air that's polluted by ozone and fine 
particles. What is transportation's percentage contribution to this 
non-attainment problem?
    Response. FHWA's ``Transportation Air Quality Selected Facts and 
Figures,'' (see: http://www.fhwa.dot.gov/environment/aqfactbk/
index.htm) as referenced by Administrator Peters in her testimony, 
notes that in 1999 on-road mobile emissions nationally accounted for 29 
percent of volatile organic compound (VOC) emissions, 34 percent of the 
nitrogen oxide (NOx) emissions, 51 percent of the carbon monoxide (CO) 
emissions, and 10 percent of the PM-10 emissions.
    These are national estimates, and percentages for specific 
nonattainment areas could be higher or lower. For example, in the 
Atlanta serious ozone nonattainment area, on-road mobile source 
emissions contribute approximately 47.3 percent of VOCs and 62.5 
percent of NOx as compared to other sources, according to air quality 
modeling data from 1999. This data, as well as data for all other 
counties, is available on the EPA Air Data web page, located at http://
www.epa.gov/air/data. Also, it is important to note that emissions do 
not have a direct linear relationship with actual pollutant 
concentrations in the air. Other factors, including meteorology and 
topography, can have a great influence on nonattainment.
    Where transportation is a significant source of pollutants, the EPA 
reports that ozone (formed by the reaction of VOC and NOx), CO, and PM-
10, have all decreased substantially since 1970. (Presented by Jeff 
Clark, Director, Policy Analysis and Communications Staff, Office of 
Air Quality, Planning and Standards, U.S. EPA at the ``National Energy, 
Environment and Transportation Summit'', May 15-17, 2002, New York 
City.) A majority of the areas designated as nonattainment since 1990 
now meet national air quality standards. Air quality monitoring data 
through 2000 shows that:

      76 out of 78 CO nonattainment areas,
      69 out of 85 PM-10 areas, and
      81 out of 101 1-hour ozone areas

    no longer show air pollution levels that exceed the current 
national ambient air quality standards. And, while the Clean Air Act 
(CAA) has reduced emissions from all air pollution sources, the 
greatest success can be found in the reduction of motor vehicle 
emissions: CO emissions have been reduced by 43 percent since 1970, PM-
10 emissions reduced by 33 percent, and VOC emissions by 59 percent 
from motor vehicles.
    The one exception to this consistent, downward trend in criteria 
pollutants from motor vehicles since 1970 is a 16 percent increase in 
NOx emissions, even though emission rates per vehicle have decreased 
due to increasingly cleaner technology. Looking across vehicle types, 
total NOx emissions from light-duty passenger cars decreased 31 percent 
since 1970, while NOx emissions from light-duty trucks and SUVs 
increased 28 percent, NOx emissions from heavy-duty gas trucks 
increased 65 percent, and NOx emissions from heavy-duty diesel trucks 
increased 116 percent.
    It is significant to note that all of these changes in emissions 
from transportation sources have occurred during a time period where 
population increased 33 percent, gross domestic product increased 147 
percent, and vehicle miles traveled increased 143 percent.
    To establish what impact transportation sources will have on future 
air quality trends, it is important to understand how mobile source 
emissions are determined. EPA recently released its new motor vehicle 
emissions model, MOBILE6, that in simplest terms calculates total 
emissions from transportation sources by multiplying vehicle miles 
traveled by a relevant emission factor. Such emission factors take into 
account emission reductions achieved from technological and Federal 
measures, as well as some local control measures. On a national basis, 
emissions estimates calculated from MOBILE6 show that all emissions, 
including NOx, will decrease significantly through 2020 based on the 
emission reductions achieved primarily from existing Federal 
regulations.
    Specifically, engines and fuels are to become even cleaner under 
recent EPA-issued regulations for emissions standards and cleaner fuel 
requirements. These new standards require all passenger vehicles, 
including higher emitting SUVs, sold after the phase-in period to be 77 
to 95 percent cleaner than those on the road today, and will reduce the 
sulfur content of gasoline by up to 90 percent. Also, after a phase-in 
period, each new truck and bus will be more than 90 percent cleaner 
than current models. This will lead to substantial emissions 
reductions, not just per vehicle, but also in total. For example, NOx 
emissions from passenger vehicles are projected to decrease 61 percent 
by 2030, and NOx emissions from heavy-duty trucks are projected to 
decrease 88 percent by 2030. (The passenger vehicle projection assumes 
a VMT growth rate of 1.7 percent per year from 2007 to 2030. Source: 
Cleaner Vehicles and Cleaner Gasoline Tier 2 / Gasoline Sulfur Rule, 
December 22, 1999, Regulatory Impact Analysis, http://www.epa.gov/otaq/
regs/ld-hwy/tier-2/frm/ria/chiii.pdf. The heavy-duty truck projection 
assumes a variable growth rate for VMT by Heavy-Duty Diesel Engines 
that averages 2.5 percent per year. Source: Control of Air Pollution 
from New Motor Vehicles: Heavy-Duty Engine and Vehicle Standards and 
Highway Diesel Fuel Sulfur Control Requirements, Regulatory Impact 
Analysis (EPA420-R-00-026), http://www.epa.gov/otaq/regs/hd2007/frm/
ria-ii.pdf.)
    It should be noted that although information is presented above for 
the current national ambient air quality standards, similar information 
in not yet fully developed for the new PM and ozone standards. 
Corresponding information will be developed for the new standards as 
part of the implementation process associated with those standards.

    Question 5. Does the Administration plan to propose any substantial 
changes to either the CMAQ program or to conformity, as we go forward 
with reauthorization? If you do, I hope you'll get all the major 
stakeholders on board first.
    Response. The Administration is still in the process of formulating 
its legislative proposal. As part of the development process, FHWA has 
met with literally dozens of organizations and groups representing a 
wide range of interests in the highway and transit programs. We are 
evaluating this diverse stakeholder input as we develop the legislative 
proposal. We are also evaluating the recommendations of the National 
Academies of Science (NAS) study of the Congestion Mitigation and Air 
Quality program (CMAQ).
    The major stakeholders have raised a significant number of issues 
affecting the air quality aspects of the transportation program and 
there is a great diversity of opinion on what changes should be 
implemented. Some of the more significant issues include:
    CMAQ's air quality benefit analysis requirement--Some find it 
burdensome and would replace it with categorical listings, while others 
endorse technical analysis and would prefer that it be used to rate and 
rank projects as well as to find them eligible.
    Suballocation of CMAQ funds--Some stakeholders would require that 
CMAQ funds be suballocated to metropolitan areas, but others wish 
States to have greater authority in deciding where the funds should be 
used.
    Congestion mitigation--Some stakeholders believe that congestion 
mitigation and bottleneck relief would be air quality beneficial and 
would use CMAQ to fund some limited amount of single occupant vehicle 
capacity expansion, which conflicts with those who believe that any 
congestion relief leads to induced travel demand and should not be 
funded at all.
    CMAQ apportionment formula--A number of stakeholders believe that 
the CMAQ funding formula should be revised to support the nonattainment 
areas that EPA is expected to designate for the new air quality 
standards; but they are also concerned about diluting the available 
funds.
    CMAQ authorization levels and project priority--Various 
stakeholders have requested more funding for transit, for freight, for 
bicycle projects, for clean fuels, and for congestion mitigation, among 
other proposals, or that such activities be given priority for funding. 
Others cite the program's flexibility as one of its greatest assets and 
argue against a ``one size fits all'' approach.
    Coordination of the planning and conformity processes--Some 
stakeholders indicate that there remain opportunities to improve the 
transportation conformity process. They cite the fact that 
transportation plans and SIPs are not synchronized with one another due 
to different planning horizons and update frequencies. Others are 
concerned that any changes may eventually create additional problems 
for achieving air quality goals.
    Although final decisions have not been made on approaches to 
address the air quality aspects of the transportation program, to the 
greatest extent possible, we will address these stakeholder concerns in 
the final Administration reauthorization proposal.

    Question 6. According to the recent report from the Transportation 
Research Board, it seems that air quality agencies don't have a big 
role in making decisions about State expenditures of CMAQ funding. What 
incentives can we provide so that State DOTs open this process up more?
    Response. In our experience, the extent to which air quality 
agencies have input into the CMAQ project selection process varies. The 
CMAQ program apportions funds to States to provide support to over 100 
nonattainment and maintenance areas for ozone and/or carbon monoxide. 
State and local officials may develop their own project selection 
processes, as long as they keep within the statutory requirements. Some 
employ very open and decentralized processes while others maintain 
tighter control over the funds.
    While there is no standard model, some States and MPOs have air 
quality committees that serve a number of functions including assisting 
with SIP development, coordinating conformity determinations, and 
reviewing CMAQ proposals. State and local air quality officials, as 
well as Federal personnel, are routinely represented on these 
committees. How big a role is played by the air quality officials 
depends on many local factors such as the size and membership of the 
committee, the importance of air quality issues in the metropolitan 
area, and the project selection procedures set up by the MPO Board of 
Directors.
    As noted in the NAS report, the CMAQ Program Guidance has 
consistently promoted close collaboration with air quality agencies. On 
page 162, the panel concluded, ``Program regulations encourage 
consultation with State and local air quality agencies in the 
development of appropriate project selection criteria and the agencies' 
involvement in project selection and program funding decisions.'' We 
agree that greater participation would likely enhance the process and 
may improve the effectiveness of some projects funded under the 
program. When we commented back to the NAS panel on this point, they 
made it clear that their recommendation did not extend to a process of 
reaching consensus with air agencies over projects selected for 
funding. Nonetheless, we intend to reinforce the need for consultation 
with air quality agencies in our future communications with State 
Departments of Transportation (DOTs) and MPOs, consistent with the NAS 
recommendation.

    Question 7. Since many surface transportation projects are already 
targeted at congestion mitigation, should we split off that purpose 
from the CMAQ program and focus more on air quality?
    Response. The CMAQ program is already targeted at air quality 
improvement. Only projects that demonstrate an air quality benefit may 
be funded. This is evidenced by the statutory requirements tying 
eligibility for funding to direct air quality benefits or to inclusion 
in a strategy to reduce air pollution. A demonstration of such benefits 
is required under the program before funding is authorized. Congestion 
mitigation in the CMAQ program is addressed primarily by the 
recognition that many transportation control measures (TCMs) aimed at 
reducing emissions will also have congestion reduction benefits by 
either reducing vehicle use or improving the efficiency of the 
transportation system. Congestion relief is an ancillary benefit that 
can enhance the attractiveness of such projects. For many projects-
including traffic flow improvements, transit, ridesharing, pricing 
strategies, and even bicycle and pedestrian projects-emission reduction 
and congestion relief can be closely related, but not all congestion 
relief projects will reduce emissions.
    The need for TCMs has been legislatively recognized for a long 
time. The CAA and title 23 of the United States Code (USC) include 
provisions promoting TCMs for both their air quality and congestion 
relief benefits, especially traffic flow improvements. Section 
108(f)(1)(A)(v) of the CAA identifies, ``traffic flow improvement 
programs that achieve emissions reductions'' as one of the 
transportation control measures, and the Intermodal Transportation 
Efficiency Act of 1991 (ISTEA) required that they be given priority for 
funding. The 108(f) TCMs are eligible for funding not only under the 
CMAQ program but also under the Surface Transportation Program. And the 
CAA makes TCMs one of the few project categories exempt from highway 
funding sanctions. Finally, Section 149(b)(5) of title 23 makes traffic 
flow improvements explicitly eligible under the CMAQ program.
    The greatest potential for air quality gains is through cleaner 
fuels and vehicles (especially diesel powered vehicles), faster fleet 
turnover of older vehicles, and maximally effective inspection and 
maintenance (I/M) programs. Some of these activities are eligible for 
CMAQ funding and some States, like New Jersey, Illinois, California and 
Connecticut have used their CMAQ funding to good advantage for I/M and 
diesel retro-fit programs. Some, like scrappage programs, are 
legislatively prohibited. But the largest impact, that of new vehicle 
standards and mandated cleaner fuels, is largely outside the realm of 
Federal transportation funding.
    Traditional TCMs like transit and traffic flow improvements have 
small air quality impacts because their benefits are realized at the 
corridor level and are much less significant at the regional level. 
Based on the CMAQ annual reports, no category of traditional TCMs shows 
significantly greater emissions reductions over any of the others. The 
emissions impacts of traffic flow improvements, for example, are no 
worse than the other types. At least for regional pollutants like 
ozone, what appears to be an important determinant is the size of the 
project. This is not obviously true for PM-10 due to the localized 
nature of the pollutant. Larger, more regionally focused projects, like 
traffic management control centers, have concomitantly larger benefits.
    Smaller projects can have some decided advantages. Some congestion 
relief projects that also demonstrate emission reductions can be 
implemented quickly. This can be crucial to a nonattainment area facing 
a short term CAA deadline of 2005 or 2007 and is even more important to 
those whose deadlines have passed. And CMAQ-funded projects that reduce 
emissions and relieve congestion have been important to meeting 
conformity determinations in several areas.

    Question 8. In general, would you agree that conformity is spurring 
investments in transportation strategies and technologies that reduce 
air pollution and create better interagency cooperation?
    Response. The purpose of transportation conformity is to ensure 
that transportation activities that receive Federal funding and 
approval are consistent with air quality goals. It ensures that 
transportation activities in nonattainment and maintenance areas will 
not create new violations of the Federal air quality standards, will 
not increase the frequency or severity of existing violations of the 
standards, or will not delay attainment of the standards. It is not, 
however, the purpose of conformity to serve as an emission reduction 
program. It is actually the role of the State air quality 
implementation plan (SIP) process to develop control measures that will 
be needed to reduce emissions and meet the National Ambient Air Quality 
Standards (NAAQS).
    Transportation conformity was intended to form strong linkages 
between the transportation and air quality planning processes. 
Fulfilling the transportation conformity requirements has created 
stronger institutional links between two sets of agencies--
transportation and air quality--that operated quite independently of 
each other prior to enactment of the Clean Air Act Amendments of 1990 
(CAAA). This interagency consultation has played an important role in 
the development of more realistic and achievable transportation and air 
quality plans.
    The vast majority of emissions reductions from motor vehicles have 
come from and will continue to come from technological advances: engine 
emissions standards and cleaner fuels that are the direct result of 
other requirements of the Clean Air Act. Thus, these emission reduction 
programs cannot be directly attributable to transportation conformity. 
However, the benefits of these regulations are accounted for in the 
SIP's mobile source budgets used for conformity and/or in the 
conformity determinations for transportation plans and TIPs.
    Although it is difficult to segregate the impacts of potential 
changes in the transportation-air quality linkage, FHWA believes that 
funding flexibility--especially the CMAQ program-initiated under ISTEA 
and continued in the Transportation Equity Act for the 21st Century 
(TEA-21) has been a major factor in spurring investments in 
transportation strategies that reduce motor vehicle emissions. To date, 
over $11 billion in CMAQ funding has been invested to reduce 
transportation emissions, about $4.8 billion of which has been used for 
transit. An additional $3.1 billion in Surface Transportation Program 
(STP) funding has been used for transit purposes as well.

    Question 9. In general, what is the general ratio of spending on 
planning in the States for air quality versus transportation planning?
    Response. For fiscal year 2002, FHWA and FTA apportioned $836 
million to the States for metropolitan and statewide transportation 
planning and research. In addition, National Highway System (NHS), STP, 
and Minimum Guarantee funds may also be utilized for transportation 
planning. FHWA does not collect information regarding expenditures of 
State and local funding on transportation planning. However, it can be 
assumed that these expenditures will vary widely from State to State, 
and city to city. The portion of transportation planning dollars spent 
on conformity analysis varies from area to area. But in some areas it 
can be a significant portion.
    The costs of air quality planning accrue from both the overall air 
quality planning by State and local air agencies as well as costs 
incurred by MPOs and State Departments of Transportation in the 
development of the mobile source portion of air quality plans. FHWA 
does not collect any information regarding funding for air quality 
planning. We defer to the individual States and metropolitan areas to 
provide this information.

    Question 10. As you noted, emissions per vehicle mile traveled have 
dropped. But it seems to be taking longer on average for a car to 
travel a mile because of congestion. Does this increase in ``idling 
time'' offset the emissions reductions from control technologies?
    Response. The relationship between congestion and air quality is 
complex. But generally, if we reduce congestion in the lower speed 
ranges, which is where congestion typically occurs, vehicle emission 
rates will be reduced. For example, NOx and CO emission rates per 
vehicle will generally decrease as speeds are increased up to 
approximately 35mph, at that point these emission rates will start to 
slightly increase.
    VOC emissions, on the other hand, appear to uniformly decrease as 
speed is increased and congestion is reduced.
    The above is based on current models. However, current models do 
not adequately assess the full benefits of reducing the number of stops 
and starts and idling emissions. Rather, they tend to use average 
speeds. Recent research, funded by EPA and FHWA, indicates that 
reducing the number of accelerations, a byproduct of reducing 
congestion, can reduce emissions at the corridor level. Reports from 
the Georgia Institute of Technology and University of California at 
Riverside show that emissions increase greatly under hard accelerations 
and thus can be reduced by smoothing traffic flow. On a regional basis, 
the emissions reductions will be smaller, as has been our experience 
with most TCM-type projects.
    Retrospectively, it has been correct to say that generally as 
speeds increase, and as the smoothness of flow of traffic improves, the 
rate of emissions attributable to an average in-use vehicle will 
decrease, albeit with different profiles for the different pollutants. 
But as speeds increase and likelihood of congestion delay decreases, 
there will also be some measurable increase in the total number of 
vehicles using the system at those places and at those times where the 
flow/speed improvement have occurred. Whether the reduction in the 
specific rate of emissions caused by the speed/flow increase is offset 
by the increase in volume of vehicles producing emissions is an open 
question that can only be answered by studying the particular 
conditions of specific instances (and even there, many question whether 
current modeling capabilities can adequately address such a question). 
These points are fundamental to understanding whether or not increases 
in idling time or congestion will offset improved emission rates from 
emission control technology. At any rate, it cannot always be asserted 
that increases in speeds or improvements in flow of traffic reduce 
overall emissions of local pollutants or contribute to an improvement 
in air quality.
    There is a particularly significant reason why the air quality 
benefit from congestion relief measures, including traffic flow, 
transit and other types of improvements, will decline in the future. As 
a result of EPA's Tier II emissions performance regulations, new 
passenger cars and light trucks will need to meet stringent emission 
standards. EPA reports that not only will the average emission rates be 
much lower, we will also not see significant differences in emission 
rates versus speed. As such, emission rates for vehicles under all 
driving conditions, including heavy stop and go traffic, are expected 
to be significantly cleaner. The difference between emission rates for 
congested conditions and free flow traffic will decline.
                                 ______
                                 
Responses of Mary Peters to Additional Questions from Senator Voinovich
    Question 1. During the hearing, I asked about the small urban and 
rural areas that may be designated as non-attainment for the first 
time. I have a few more questions about this matter. What particular 
challenges do these areas face in terms of transportation and air 
quality planning and the conformity process? Are there going to be 
massive conformity problems resulting in delays or highway projects 
because of new designations? What can specifically be done to help 
these communities?
    Response. The new 8-hour ozone and fine particulate matter (PM-2.5) 
standards will be more stringent, and many areas across the eastern 
U.S. and in California have pollution levels now exceeding these 
standards. Some of these areas, including small urban and rural areas, 
may be designated nonattainment for the first time. Other existing 
nonattainment areas may become larger and involve more jurisdictions 
under the new standards. The Department and EPA are working with these 
areas to increase their capacity to deal with new nonattainment 
designations.
    Some of the challenges these areas face include a lack of resources 
(i.e., funding and staff), a lack of technical expertise, a lack of 
knowledge and experience, and the fact that many are the more complex 
nonattainment areas such as those that encompass multiple States and 
multiple MPOs.
    It is too early to tell the magnitude of transportation and air 
quality planning and conformity issues that might surface following 
implementation of the new standards. However, based on our experience 
when the 1990 Clean Air Act amendments were implemented, we would 
expect these areas to face challenges in the early years. Therefore, 
DOT and EPA will be considering ways to make the integration of the two 
planning processes as workable as possible.
    DOT and EPA have worked closely in providing technical assistance 
to areas to address conformity and transportation air quality issues. 
In anticipation of the number of new areas designated nonattainment for 
the first time, DOT has embarked on a number of activities to prepare 
the areas for this challenge:

    1. FTA worked closely with FHWA and EPA in developing a basic 
transportation conformity training course. The course was offered six 
times during fiscal year 2002 and was attended by about 230 people 
representing both public (Federal, State, and local governments) and 
private sectors of both transportation and air quality disciplines.
    2. FHWA and EPA co-funded 6 MOBILE6 training courses after the 
release of the model in January 2002. All the training courses were 
well attended. In addition, FHWA Resource Center staff was in great 
demand in providing MOBILE6 training.
    3. FHWA and EPA field staff have held numerous workshops across the 
country on conformity, CMAQ and other topics in transportation and air 
quality.
    4. In May 2002, FHWA launched a Transportation Conformity Community 
of Practice website to allow for free exchange and discussions on 
topics related to conformity among practitioners.
    5. FHWA and FTA are working on the development of three different 
training courses which will be available through National Highway 
Institute next year:
      Estimating Regional Mobile Source Emissions,
      CMAQ Program: Purpose and Practice, and
      The Implication of Air Quality Planning on 
Transportation.
    6. FHWA, FTA, and EPA have implemented a public education and 
partnership-building initiative, ``It All Adds Up to Cleaner Air,'' in 
response to State and local governments' requests for help in meeting 
their traffic congestion and air quality goals under TEA-21 and the 
Clean Air Act. The program is instrumental to the formation of The 
Alliance for Clean Air and Transportation (ACAT or the Alliance), a 
national coalition of public and private organizations working together 
to advance solutions for the nation's traffic congestion and air 
pollution challenges.
    ``It All Adds Up'' is designed to inform the public about the 
connection between their transportation choices, traffic congestion, 
and air pollution. The program emphasizes simple and convenient actions 
that people can take to improve air quality and reduce traffic 
congestion, while saving themselves time, money, and stress. During the 
demonstration phase of the initiative, 14 communities implemented the 
initiative locally and more than 60 others requested materials and 
information for use in their regions.
    7. EPA and DOT jointly funded a cooperative agreement with the 
National Association of Regional Councils that includes a number of 
outreach efforts (newsletter, website, workshops) aimed at transferring 
knowledge about integrating transportation and air quality planning 
from experienced MPOs to those MPOs that will be facing the challenges 
for the first time.

    Question 2. As I mentioned during the hearing, the current Federal 
budget crisis demands that we look at the cost-effectiveness of our 
government's programs. Could you provide detailed information to put in 
perspective how cost effective transportation and air quality projects 
have been?
    Response. The NAS report refrained from making statements 
concerning the cost-effectiveness of CMAQ projects because the basic 
data needed to carry out such an analysis are not available. The lack 
of data is primarily due to the wide variety of projects funded with 
CMAQ dollars, and the fact that evaluations are based on projected 
rather than actual outcomes.
    Even with similar projects it is difficult to make meaningful 
comparisons across projects because of differences in assumptions and 
methods, as well as background conditions. Therefore, there is a wide 
range of cost-effectiveness results for TCMs, even for the same type of 
CMAQ strategy, which suggests that performance depends largely on 
context, that is, on where and how the projects are executed. The 
report reviewed previous studies on cost-effectiveness. It showed a 
huge range, from costs of about $1,000 per ton of hydrocarbon removed 
for a ridesharing project to almost $10,000,000 for a telework project. 
To lesser extents, each TCM category studied showed broad but less 
dramatic ranges, usually from about $10,000 a ton to several hundred 
thousand dollars per ton of VOC reduced.
    The NAS noted that ``the limited evidence available suggests that, 
when compared on the sole criterion of emissions reduced per dollar 
spent, approaches aimed directly at emission reductions (e.g., new-
vehicle emission fuel standards, well-structured inspection and 
maintenance (I/M) programs, vehicle scrappage programs) generally have 
been more successful than most CMAQ strategies relying on changes in 
travel behavior.'' We concur with this conclusion. Fuel standards will 
affect every new vehicle purchased, and all vehicles over time will 
conform to these standards. Similarly I/M programs typically affect 
nearly all of the vehicles in the region. And, based on our experience, 
I/M programs are more effective than other projects. For example, the 
I/M program in New Jersey is funded in large part by the CMAQ program 
and is estimated to reduce volatile organic compounds (VOCs) by 40 tons 
per day. States like New Jersey, Illinois, and Connecticut have devoted 
large sums of CMAQ funding to their I/M programs. By contrast, many 
investments (transit, traffic flow) may be limited to corridor level 
improvements whose benefits will have a limited impact on the region as 
a whole. These may be very effective projects, but their small size 
limits their regional impact.
    There are two other types of projects that appear to be more cost-
effective in comparison to other projects. Advancing new technology in 
the vehicle fleet through the use of alternative fuels, diesel 
retrofits, and the purchase of new buses (both clean-diesel and 
alternative fuel) appears to be a cost-effective strategy. In fact, a 
1998 California Air Resources Board (CARB) study estimated that buses 
fueled by compressed natural gas (CNG) have a cost effectiveness of 
$10,000 to $12,000 per ton of NOx reduced, much better than many 
traditional transportation investments.
    Also, regional programs, such as ridesharing, tend to show more 
cost-effective benefits. For example, the cost-effectiveness of a 
ridesharing program can range from a low of $1,200 to a high of $16,000 
per ton of VOC, due both to the relatively low cost and regional focus 
of such programs. And, while not a part of the NAS study, there is 
reason to believe that Intelligent Transportation systems (ITS) 
improvements when implemented on a regional scale, like a traffic 
management center, can have relatively larger benefits. Some regional 
freight projects, like those funded in Ohio, might also fall into this 
category.
    Cost effectiveness numbers have not been collected in a rigorous 
way for CMAQ-funded projects. FHWA/FTA have allowed and even 
occasionally required the use of program funds for evaluation in the 
case of experimental pilot projects, but this is the exception rather 
than the rule. As such every dollar used for evaluation purposes is 
employed at the expense of additional transportation investments, and 
transportation and air quality agencies have shown a reluctance to 
redirect investment funding for evaluation purposes.
    One alternative would be to use Federal research funds for 
evaluation purposes, but this is currently infeasible. The costs of 
rigorously evaluating transportation projects can be quite high. The 
National Highway Cooperative Research Program Report 462, ``Quantifying 
Air Quality and Other Impacts of Transportation Control Measures'' 
noted that, in some cases, the costs of evaluation could exceed the 
costs of the project itself. The costs of the evaluation, which would 
need to account not only for the changes in usage to the transportation 
network, but also for local and regional changes in the economy, 
opening/closing of activity centers, wind patterns and other changes in 
emission rates from stationary and area sources, could overwhelm the 
surface transportation research budget, leaving little or no funding 
for the many other environmental needs. Report 462 from the National 
Highway Cooperative Research Program found that, ``[the evaluation 
costs] may be comparable to or even greater than the costs of the TCMs 
themselves.''
    Methods for measuring the effects of many CMAQ-funded projects on 
emissions and air quality are limited at present, and few evaluations 
have been conducted following the completion of transportation projects 
to determine whether modeled estimates have been realized. In addition, 
virtually all strategies are affected by modeling uncertainties. These 
uncertainties are magnified for TCMs, which require predicting the 
travel as well as the emission effects of projects.
    We are continuing to evaluate the NAS report, the last two 
recommendations of which concern project evaluation and national 
program evaluation, both leading to development of more information on 
the effectiveness and cost-effectiveness of CMAQ-funded projects.
                                 ______
                                 
  Responses of Mary Peters to Additional Questions from Senator Smith
    Question 1. While the National Academy of Sciences did a good job 
on the CMAQ report, they did not answer one fundamental question: What 
is the effectiveness of the CMAQ program? In other words, what has been 
the emission reduction from projects funded by CMAQ?
    Response. In its report, the NAS noted how difficult it would be to 
identify the effects of numerous small projects. One of the findings of 
the report is that it is not possible to undertake a credible 
scientific quantitative evaluation of the cost-effectiveness of the 
CMAQ program at the national level. The lack of data is primarily due 
to the wide variety of projects funded with CMAQ dollars and the fact 
that evaluations are based on projected rather than actual outcomes.
    Even with similar projects it is difficult to make meaningful 
comparisons across projects because of differences in assumptions and 
methods as well as background conditions. Therefore, there is a wide 
range of cost-effectiveness results for TCMs, even for the same type of 
CMAQ strategy, which suggests that performance depends largely on 
context, that is, on where and how the projects are executed. The 
report reviewed previous studies on cost-effectiveness. It showed a 
huge range, from costs of about $1,000 per ton of hydrocarbon removed 
for a ridesharing project to almost $10,000,000 for a telework project. 
To lesser extents, each TCM category studied showed broad but less 
dramatic ranges, usually from about $10,000 a ton to several hundred 
thousand dollars per ton of VOC reduced.
    The NAS noted that ``the limited evidence available suggests that, 
when compared on the sole criterion of emissions reduced per dollar 
spent, approaches aimed directly at emission reductions (e.g., new-
vehicle emission fuel standards, well-structured inspection and 
maintenance (I/M) programs, vehicle scrappage programs) generally have 
been more successful than most CMAQ strategies relying on changes in 
travel behavior.'' We concur with this conclusion. Fuel standards will 
affect every new vehicle purchased and all vehicles over time will 
conform to these standards. Similarly, I/M programs typically affect 
nearly all of the vehicles in the region. Based on our experience, I/M 
programs are more effective than other projects. For example, the I/M 
program in New Jersey is funded in large part by the CMAQ program and 
is estimated to reduce volatile organic compounds (VOCs) by 40 tons per 
day. States like New Jersey, Illinois and Connecticut have devoted 
large sums of CMAQ funding to their I/M programs. By contrast, many 
investments (transit, traffic flow) will be limited to corridor level 
improvements whose benefits will have a limited impact on the region as 
a whole. These may be very effective projects, but their small size 
limits their regional impact.
    There are two other types of projects that appear to be more cost-
effective in comparison to other CMAQ projects. Advancing new 
technology in the vehicle fleet through the use of alternative fuels, 
diesel retrofits, and the purchase of new buses (both clean-diesel and 
alternative fuel) appears to be a cost-effective strategy. In fact, a 
1998 California Air Resources Board (CARB) study estimated that CNG-
fueled buses have a cost effectiveness of $10,000 to $12,000 per ton of 
NOx reduced, much lower than many traditional transportation 
investments.
    Also, regional programs, such as ridesharing, tend to show more 
cost-effective benefits. For example, the cost-effectiveness of a 
ridesharing program according to the NAS study can range from a low of 
$1,200 to a high of $16,000 per ton of VOC, due both to the relatively 
low cost and regional focus of such programs. And, while not a part of 
the NAS study, there is reason to believe that Intelligent 
Transportation systems (ITS) improvements when implemented on a 
regional scale, like a traffic management center, can have relatively 
larger benefits.
    Cost-effectiveness is not the only measure that is relevant to 
transportation investments. For CMAQ-funded projects, an additional 
indicator is the extent to which a strategy might be significant in 
achieving the air quality standards. For example, a strategy to promote 
cleaner fuels can be very cost-effective, but to employ this strategy 
in the broad vehicle fleet requires that a substantial number of 
vehicles in any given metropolitan area run on clean fuels. While such 
projects are an important element in our efforts to clean the air, 
alternative fuel vehicles represent a small share of the total vehicle 
fleet. Nationally, there are just 400,000 of them out of a fleet of 
about 200 million.
    Cost effectiveness numbers have not been collected in a rigorous 
way for CMAQ-funded projects. FHWA/FTA have allowed, and even 
occasionally required, the use of program funds for evaluation in the 
case of experimental pilot projects, but this is the exception rather 
than the rule. Because every dollar used for evaluation purposes is 
used at the expense of additional transportation investments, 
transportation and air quality agencies have shown a reluctance to 
redirect investment funding for evaluation purposes.
    One alternative would be to use Federal research funds for 
evaluation purposes, but this is currently infeasible. The costs of 
rigorously evaluating transportation projects can be quite high. The 
National Highway Cooperative Research Program Report 462, ``Quantifying 
Air Quality and Other Impacts of Transportation Control Measures'' 
noted that, in some cases, the costs of evaluation could exceed the 
costs of the project itself. The evaluation costs would overwhelm the 
surface transportation research budget, leaving little or no funding 
for the many other environmental needs.
    Methods for measuring the effects of many CMAQ-funded projects on 
emissions and air quality are limited at present, and few evaluations 
have been conducted following the completion of CMAQ projects to 
determine whether modeled estimates have been realized. In addition, 
virtually all CMAQ strategies are affected by modeling uncertainties. 
These uncertainties are magnified for TCMs, which require predicting 
the travel as well as the emission effects of projects.
    We are continuing to evaluate the NAS report, the last two 
recommendations of which concern project evaluation and national 
program evaluation, both leading to development of more information on 
the effectiveness and cost-effectiveness of CMAQ-funded projects.

    Question 2. Based on the CMAQ data from Federal Highway's web site, 
which I understand has some limitations, CMAQ projects were estimated 
to reduce emissions by around one-half million tons of VOCs from 1992-
1999. During this same time, EPA reports that total emissions of VOC 
from vehicles decreased by about 1.8 million tons. It would appear that 
CMAQ reductions equaled about 28 percent of the total reductions. This 
sounds impressive, but these reductions are primarily from inspection 
and maintenance programs and signalization.
    Would you agree that efforts to reduce vehicle miles of travel have 
not been as effective as these technology-based programs?
    Response. We cannot reproduce the numbers cited in the question.
    But, we would point out that the emissions estimates contained in 
the CMAQ annual reports have, as you note, serious limitations for this 
kind of analysis. First, they are predicted estimates, rather than 
results from before and after studies that must be evaluated carefully. 
There are many possible sources of error, including the assumptions 
employed about service utilization and emission rates. Second, in many 
cases individual project sponsors develop these estimates, and may have 
a tendency to overstate some estimates. While these estimates may 
individually fall within reasonable parameters, collectively they may 
project higher emission reductions than are likely to occur. Third, and 
perhaps most significant, the data base contains many instances of 
double counting which would require a substantial effort to eliminate. 
This double counting occurs when a project is funded over multiple 
years. Since emission reductions are realized only when the project is 
completed, current program guidance requires that any request for 
funding carry an emission reduction estimate for the whole project. 
Thus, each request for funding over multiple years will carry the same 
emissions estimate and is likely to be double counted.
    Nonetheless, we would agree with your overall conclusion. In our 
experience, projects that accelerate the introduction of cleaner 
technologies or maintain the operating condition and emissions 
characteristics of the current fleet, such as I/M programs, have been 
much more successful than efforts to reduce vehicle miles of travel. I/
M programs are estimated to reduce VOC emissions by as much as 40 tons 
per day, while most transportation control measures, including traffic 
signalization projects, yield but kilograms per day.
    Demand for travel has grown as population and economic prosperity 
have increased. Most traditional transportation investments, including 
those designed to reduce emissions or relieve congestion, are small in 
comparison to the total network and carry concomitantly small benefits 
when viewed regionally, even if these projects may be important for 
individual corridors. However, it should be noted that larger, more 
regional projects could also have larger impacts since they affect a 
greater portion of the existing transportation network.

    Question 3. As you know, Congress established a 1-year grace period 
before newly designated non-attainment areas must demonstrate 
conformity. However, EPA will give these areas from three to 4 years to 
develop a SIP with an emissions budget. Since the goal of conformity is 
to encourage better coordination between transportation and air quality 
plans, would it make more sense to coordinate the conformity 
demonstration grace period with development of the SIP motor vehicle 
emissions budget?
    Response. We have heard this comment from some of our stakeholders, 
including the American Association of State Highway and Transportation 
Officials, as well as during the comment period on EPA's August 6, 
2002, rulemaking that incorporated the 1-year grace period into the 
conformity rule (67 FR 50808). When considering these comments on the 
rulemaking, both DOT and EPA agreed at that time that the statutory 
language precludes EPA from extending the conformity grace period, as 
the October 2000 Clean Air Act amendment specifically provides newly 
designated areas with a 1-year grace period, after which conformity 
applies.
    However, the Administration has not yet taken a position on the 
suggestion that the Clean Air Act be amended to allow for a longer 
grace period. That said, FHWA does support simplifying Federal 
transportation programs and continuing efforts to streamline project 
approval and implementation when such efforts provide for environmental 
stewardship. It is the policy of the Administration, as noted in the 
recent Executive Order on Environmental Stewardship and Transportation 
Infrastructure Project Reviews, that the development and implementation 
of transportation infrastructure projects in an efficient and 
environmentally sound manner is essential to the well-being of the 
American people and a strong American economy.
                               __________
Statement of Jeffrey Holmstead, Assistant Administrator, Office of Air 
             and Radiation, Environmental Protection Agency
    Thank you, Mr. Chairman and members of the committee, for the 
invitation to appear here today to discuss the Congestion Mitigation 
and Air Quality Improvement (CMAQ) program and the transportation 
conformity program in the context of reauthorization of the 
Transportation Equity Act for the 21st Century (TEA-21). There has been 
considerable progress in achieving better air quality for Americans 
since the passage of the Clean Air Act Amendments in 1990. In addition, 
building on the fundamental structure of ISTEA, TEA-21 further 
emphasized the importance of transportation in fulfilling environmental 
goals, as well as significantly contributing to the social and economic 
well-being of our Nation.
    Achieving and maintaining healthy air quality remains an important 
national priority. EPA sees the reauthorization of TEA-21 as an 
opportunity to employ all tools available to improve air quality, 
including transportation, in ways that could help cities across the 
country make progress toward attainment under both the pre-1997 and the 
new health-based standards for ozone and fine particulate matter.
    Air quality monitoring data show that in the period from 1991 to 
2000, concentrations of all six criteria pollutants have declined, 
including the four criteria pollutants that are most affected by the 
transportation sector: carbon monoxide, nitrogen dioxide, ozone (smog), 
and particulate matter (soot). For example, air quality concentrations 
of carbon monoxide declined 41 percent and concentrations of coarse 
particulate matter declined 5 percent.
    These air pollution data are good news, and are attributable to the 
transportation and air quality programs currently in place. However, 
there are approximately 35 million Americans living in 46 counties that 
are not achieving the old 1-hour ozone ambient air quality standard, 
and 8.3 million people living in 10 counties that are not achieving the 
old standard for coarse particulate matter. Furthermore, when we begin 
to implement the new, more health-protective standards for ozone and 
particulate matter and designate the areas that are not attaining the 
standards, the number of people living in areas with air quality 
considered unhealthy will dramatically increase. Although EPA has not 
formally identified areas that fail to meet these standards, it appears 
that more than 80 million people live in 233 counties not meeting the 
new 8-hour ozone standard, and 75 million people live in 144 counties 
not meeting the new fine particulate matter standard.
    The Criteria pollutant emissions from transportation sources have a 
significant impact on the health of Americans. Particulate matter is 
linked to aggravation of pre-existing respiratory ailments, reductions 
in lung capacity, and a significant number of premature deaths. Ozone 
can impair lung function, cause chest pain and coughing, and worsen 
respiratory diseases and asthma. Carbon monoxide can aggravate angina 
(heart pain).
    Even though emissions have been dramatically reduced, on-road 
mobile sources continue to be a major portion of some of our pollution 
problems. In 1999, motor vehicles accounted for 51 percent of the total 
carbon monoxide emissions, 29 percent of the ozone precursor of 
volatile organic compounds (VOCs), 34 percent of the ozone precursor 
nitrogen oxides (NOx), and 10 percent of the traditionally inventoried 
direct emissions of particulate matter nationwide. On a regional scale, 
motor vehicles can be an even larger portion of an area's inventory. 
For example, in 1999, on-road vehicles accounted for 48 percent of NOx 
in Atlanta, Georgia. According State air quality plans for these areas, 
on-road vehicles account for 63 percent of the area's total NOx in 
Springfield, Massachusetts; 56 percent of the area's total NOx in the 
Los Angeles region in California; and 80 percent of the area's total 
carbon monoxide and 53 percent of the area's total coarse particulate 
matter in Las Vegas, Nevada. Although emissions reductions from 
stationary sources are important in many areas throughout the country, 
these data demonstrate the continuing need to reduce air pollution from 
motor vehicles . As a Nation, our techniques for reducing motor vehicle 
emissions have to encompass both technology improvements to vehicles 
and fuels, as well as programs that encourage other, less polluting, 
transportation choices.
    Technology has provided significant air quality benefits in the 
past and will continue to do so into the future. Emissions from today's 
new cars have been reduced by more than 95 percent relative to new cars 
30 years ago. EPA's new Tier 2 vehicle standards program is designed to 
reduce the emissions of new passenger cars and light trucks even 
further. The rule combines these requirements with requirements for 
much lower levels of sulfur in gasoline. By 2020, NOx produced by 
vehicles will be approximately 70 percent lower as compared to what the 
levels of NOx would have been without the Tier 2 program in place.
    EPA's new clean diesel program for large trucks and buses is 
another technology-based program. It will achieve emissions reductions 
based on the use of high-efficiency exhaust emissions control devices 
coupled with changes in diesel fuel sulfur levels. This program will 
result in particulate matter and NOx emissions levels that are 90 and 
95 percent below the current standards for heavy duty engine emissions 
in effect today.
    A third example of emissions reducing technologies is EPA's 
Voluntary Diesel Retrofit Program, which is designed to help owners of 
trucks, buses, and off-road equipment install innovative and cost-
effective emission control technology on their diesel engines. These 
technologies can result in significant reductions of particulate matter 
and volatile organic compounds (which are a precursor to ozone).
    But technology cannot do it alone. Although emissions per vehicle 
have declined dramatically, the number of miles Americans are driving 
continues to increase. In 1970, Americans traveled just over one 
trillion vehicle miles per year; in 2000 it was almost 2.8 trillion. 
Growth in vehicle miles traveled (VMT) has far outpaced population 
growth. From 1970 to 1999, population grew 33 percent, but VMT grew 143 
percent. These trends are continuing. A conservative national estimate 
of VMT growth is approximately 2 percent per year. However, in many 
cities, particularly in the southern and western States, VMT is growing 
much faster than this average. For example, in the early 1990's, 
Charlotte's VMT grew about 4.9 percent per year, Denver's VMT grew 4.5 
percent per year, and Salt Lake City's VMT grew by 4.3 percent per 
year. Las Vegas projects that its VMT will increase more than 4 percent 
per year through the year 2020. The integration of transportation 
planning and air quality planning is the means to preserve and continue 
the progress we have made in ensuring that Americans breathe healthy 
air.
    The growth in vehicle traffic also leads to congestion. Traffic 
congestion cannot be relieved only by adding more road capacity--either 
building more roads or widening the existing ones. Recent studies have 
estimated a wide range of VMT growth that is attributed to increases in 
roadway capacity. . In areas with poor air quality, decisions about how 
to reduce congestion and improve mobility in a way that will not worsen 
air pollution must be addressed proactively.
    Programs that are based on providing travel choices are also 
important in achieving better air quality. For example, the Commuter 
Choice Leadership Initiative is a new and successful non-regulatory 
approach to achieving emission reductions. Built around the tax-free 
commuter benefits in TEA-21 and modeled after the Energy Star 
partnership programs, the Commuter Choice Leadership Initiative is an 
EPA and DOT voluntary partnership with business to reduce traffic and 
traffic-related emissions. In just 1 year, 300 companies from 25 States 
have signed voluntary agreements to offer 500,000 employees commuter 
benefits meeting a national standard of excellence. EPA projects that 
if half of U.S. employees worked for employers that offered commuter 
benefits at the national standard of excellence promoted by the 
Commuter Choice Leadership Initiative, air pollution and traffic would 
be cut by the equivalent of taking 15 million cars off the road every 
year.
The Congestion Mitigation and Air Quality Improvement Program
    The CMAQ program, initially begun under ISTEA, provides funding for 
transportation projects to improve air quality and reduce congestion. 
The CMAQ program is a valuable transportation funding tool for air 
quality improvement because the pool of potential projects is largely 
restricted to areas with poor air quality, (non-attainment areas), or 
those that had poor air quality in the past (maintenance areas). Unlike 
many other Federal-aid transportation programs, it is not limited to 
traditional highway uses, and can fund Travel Demand Management (TDM) 
programs such as park and ride lots, car and van pool programs and 
public education. CMAQ also funds unique Transportation Control 
Measures (TCMs) and other measures such as alternative fuel vehicles 
and facilities, diesel engine retrofit programs through public/private 
partnerships, and certain costs for vehicle Inspection and Maintenance 
programs. If TCMs are included in a State's air quality plan, those 
projects are given funding priority.
    An EPA analysis of the benefits of TCMs, such as those funded by 
the CMAQ program, documents the range of emission reductions from 22 
different shared ride, bicycle and pedestrian, traffic flow, transit 
and demand management programs. While the projects individually produce 
relatively small emission reductions, cumulatively these projects can 
add up to larger reductions over the life of an air quality plan. CMAQ 
projects can be important for helping a State to meet air quality 
planning and conformity requirements. The benefits of the CMAQ program, 
and particularly projects that reduce VMT or manage system capacity, 
extend beyond emissions reductions. Other benefits include roadway 
congestion relief, energy conservation, greenhouse gas emission 
reductions, as well as economic development and community livability. 
By requiring the project to be implemented in nonattainment areas, more 
local government and public involvement in transportation investment 
decisions has been encouraged.
    EPA and DOT have documented CMAQ's numerous benefits in reports, 
brochures and fact sheets available to transportation and air quality 
planners. From EPA's perspective, there is little doubt that the 
program is beneficial for air quality and is an important program for 
nonattainment areas that want to address transportation emissions. As 
directed by Congress, a National Academy of Science study undertaken by 
the Transportation Research Board, draws similar conclusions. The 
findings of ``Special Report 264. The Congestion Mitigation and Air 
Quality Improvement Program: Assessing 10 Years of Experience'' were 
generally favorable, but the report did make recommendations to 
Congress on how to improve the program. In particular, the report 
emphasized the need to focus CMAQ expenditures on projects that improve 
air quality.
    While EPA generally agrees with the NAS recommendations, there are 
two additional important issues to which I will direct the committee's 
attention. These considerations fall into two main categories--
apportionment and project eligibility.
    According to some stakeholders an important apportionment issue is 
that the amount of available CMAQ funds may decrease when air quality 
improves and they are redesignated to attainment status. Although 
originally intended for use in non-attainment areas, CMAQ funds now 
continue to be available to areas that have been redesignated to 
attainment status and have an approved maintenance plan. However, an 
area's redesignation to maintenance could also result in a reduction in 
CMAQ funding which has been used to reach attainment. Many TDM 
strategies are long term initiatives that must maintain small but 
steady levels of funding over a longer term than capital investment 
types of projects.
    For example, Illinois estimates their apportionment of CMAQ funds 
would decrease by approximately $32 million if the Chicago area were 
redesignated from severe nonattainment for ozone to attainment. It is 
not clear that Chicago would have adequate funding for its continuing 
needs after such a loss. Illinois included many of the CMAQ funded 
projects in its State Implementation Plan as transportation control 
measures. These projects now total 5-6 tons per day or over 1500 tons 
per year of reductions in VOCs. Consideration should be given to an 
apportionment formula that recognizes the need for an adequate source 
of funding for air quality beneficial transportation projects after a 
nonattainment area redesignates to maintenance.
    As EPA begins implementation of the new 8-hour ozone standard, 
several changes regarding nonattainment areas are anticipated. A change 
in the classification of nonattainment areas, or the number of areas, 
will likely change the amount of CMAQ funds apportioned to each State 
and available to nonattainment areas. Given the current statutory 
language in TEA-21, nonattainment areas designated under the 8-hour 
ozone standard would be eligible for CMAQ funding, but the funds 
apportioned to the States would not account for the new areas and would 
not be available to help reduce transportation emissions. The issue 
needs to be addressed in the apportionment formula.
    Strategies to reduce the very small but hazardous particulates 
known as PM2.5 will increase in importance. Generally, both 
diesel and gasoline powered vehicles emit fine particulate matter as 
well as NOx and VOCs that lead to its formation. Both near and long-
term emission reduction programs need to be planned. The focus of most 
TCM strategies has been the reduction of VOCs and NOx, and the 
effectiveness of TCMs for reducing PM2.5 is less understood. 
However, there is optimism that some travel demand strategies, new 
technologies and cleaner fuels can produce reductions in concentrations 
of PM2.5. The CMAQ program offers the opportunity for 
regions to explore innovative strategies to address this pollutant. 
Consideration should be given to amending the apportionment formula to 
target some of the CMAQ funds to this emerging air quality issue.
    CMAQ funding can be useful to all nonattainment areas and 
maintenance areas, classified in accordance with the 1990 Clean Air Act 
amendments. All ozone, carbon monoxide and particulate matter 
nonattainment areas should be considered for inclusion in an 
apportionment formula that directs CMAQ funds to nonattainment areas 
based on the greatest air quality need. EPA is working with DOT to 
assess how the apportionment formula could be adjusted to fund projects 
equitably in all these areas.
    TEA-21's flexible guidelines allow DOT to issue project eligibility 
guidance that cuts across traditional modal boundaries and makes the 
funds available for highway, transit and non-traditional program areas. 
The overarching criteria for eligibility are that the transporation 
project be implemented in an area designated nonattainment or 
maintenance for ozone, carbon monoxide, or particulate matter, and that 
the project reduce emissions. An examination of CMAQ program spending 
reveals that two project categories, traffic flow and transit, account 
for over 75 percent of the obligated funds.
    These traditional transportation projects have historically been 
funded under transportation funding programs other than CMAQ. EPA and 
DOT need to continue our collaborative work with areas to encourage 
that projects selected for CMAQ funding will be tailored to the area's 
particular air quality needs.
    Operating expenses for new CMAQ projects are currently limited to 3 
years of eligibility. As the CMAQ program has grown and evolved, there 
has been more interest in extending the eligibility period or 
eliminating the restriction altogether. Local transit agencies have 
long expressed concern over the shortage of funding to sustain existing 
transit services. These agencies argue that as long as the project is 
producing emission reductions, it should be eligible for CMAQ funds. 
State DOT's have expressed interest in expanded use of CMAQ funds for 
operating ITS to facilitate traffic monitoring, management and control. 
However, the operating expense restriction was included in the program 
for the express purpose of stimulating innovation and to avoid 
obligating all the available funds to existing programs. The benefit of 
testing new ideas, especially in light of the changing air quality 
context under the 8-hr ozone and fine particulate standards, needs to 
be weighed against the benefit of maintaining the operating costs of 
ongoing projects for which other transportation funds are designated.
Transportation Conformity
    Transportation conformity was established by Congress in the Clean 
Air Act Amendments of 1990 and was designed to help ensure that an 
area's transportation activities are consistent with its air quality 
goals. EPA is responsible for writing the conformity regulations and 
the Department of Transportation (DOT) must concur with all conformity 
rules, as DOT is our Federal partner in the implementation of the 
program. EPA first published the conformity rule in November 1993. We 
subsequently streamlined and clarified the rule in August 1997, based 
on extensive discussions with State and local air pollution officials, 
transportation planners, and other stakeholders, as well as the 
experience of both DOT and EPA in the field. In March 1999, however, a 
decision from the D.C. Circuit Court of Appeals changed several aspects 
of the 1997 conformity rule. In response to that decision, we have 
proposed, and will soon finalize, a modification improving flexibility 
consistent with the court decision. We also plan to incorporate EPA and 
DOT's existing guidance implementing the court decision into the 
conformity regulations.
    The transportation conformity program requires that the impact of 
new transportation activities on air quality is evaluated on a regular 
basis. Areas that have air quality worse than the national standards 
(nonattainment areas) or that have violated the standards in the past 
(maintenance areas), are required to examine the long-term air quality 
impacts of their transportation system to ensure that such systems are 
compatible with clean air goals. In the simplest terms, conformity 
serves as an ``accounting check'' to assure that a nonattainment or 
maintenance area's future transportation network conforms to thearea's 
air pollution reduction plan.
    The benefit of conformity accounting is that it requires State and 
local governments, and the public, to consider the air quality impacts 
of the planned transportation system as a whole and over the long 
term--before transportation plans are adopted and projects are built. 
Billions of dollars every year are spent on developing and maintaining 
our transportation system. Conformity helps ensure that these dollars 
are not spent in a manner that would worsen air quality, as that 
outcome would only necessitate spending additional money to reverse the 
air quality impact. Certainly it makes sense to examine future impacts 
of what are essentially permanent decisions.
    Prior to the 1990 Clean Air Act, transportation planners and air 
quality planners often did not consult with one another or even use 
consistent information regarding future estimates of growth. As a 
result of this disconnect, the 1990 Clean Air Act Amendments explicitly 
linked the air quality planning and transportation planning processes 
in a manner that had not previously existed. Above all, transportation 
conformity has compelled the two planning agencies to work together 
through the interagency consultation process to find creative and 
workable solutions to air quality issues. Most everyone agrees, that 
consultation is an important benefit of conformity. A 1999 Harvard 
study on the conformity program that was jointly funded by DOT and EPA 
confirmed this benefit.
    Consultation is meaningful because air quality and transportation 
planners have a common goal: transportation activities that conform 
with the State's air quality goals. A State's air quality plan (a State 
implementation plan, or SIP) establishes emissions ceilings, or 
budgets, for the various types of sources that contribute to air 
pollution problems. Conformity makes State and local agencies 
accountable for keeping the total motor vehicle emissions from an 
area's current and future transportation activities within these air 
quality plan budgets.
    Communities have choices about how to address their transportation 
and air quality needs. When a transportation plan's emissions are 
greater than the allowable budgets in the air quality plan, areas can 
decide whether to revise the transportation plan or revise the air 
quality plan. For example, some areas have added transit programs to 
reduce the emissions of their transportation plan, while others have 
gone back to the State air quality plan to see if other sources of 
pollution could be further controlled to allow the transportation 
sector's emissions budget to grow. An area can choose to build 
transportation projects that increase emissions, as long as the net 
effect of the total system is consistent with the State air quality 
plan. Most areas have been able to continue adding to their 
transportation network and still stay within their clean air budgets.
    At the heart of the conformity accounting process are computer 
models of an area's transportation system that estimate the emissions 
that are produced. In many areas, modeling begins with the area's own 
travel demand model that calculates the number of vehicle miles 
traveled on the area's transportation network, and at what speeds 
vehicles are traveling. This information is then used in EPA's MOBILE 
model to determine how much pollution will result from the on-road 
transportation sector.
    Some of the conformity stakeholders have said that the uncertainty 
in both the transportation and air quality emissions modelsshould be 
taken into account in the conformity process. I would like to address 
this comment. Although there is no way to know exactly how emissions 
will change as a result of changes to the transportation system and 
travel patterns, models help planners make reasonable estimates. All 
the models used in this effort are surrogates of reality, and like all 
predictions, some degree of uncertainty will always be inherent. 
Because sound transportation and emissions modeling is essential to 
support planning, the challenge lies in developing models that use 
current and accurate dataand can consistently represent how changes in 
travel activity and vehicle operational dynamics affect emissions. EPA 
and DOT work together continuously to upgrade our models to meet this 
challenge.
    While modeling will always have inherent uncertainty, the 
appropriate response to this fact is not to abandon modeling, but to 
continue to improve it. The 1999 Harvard study, ``Linking 
Transportation and Air Quality Planning: Implementation of the 
Transportation Conformity Regulation in 15 Nonattainment Areas,'' 
funded jointly by DOT and EPA, found that conformity has encouraged 
improvement in modeling and the necessary data collection. The better 
the information going into the modeling, the more reliable the results. 
Transportation and air quality modeling has improved in the few years 
that conformity has been in place. For example, Charlotte, NC, is 
collecting new data about travel patterns of households in the area. 
New York, New Jersey, and Connecticut also have recently partnered to 
collect new household travel data. Portland, OR, is working on a new 
method of modeling their transportation system that relies on 
simulating actual vehicle trips.
    Furthermore, EPA's MOBILE model was updated this year. The current 
version of the model, MOBILE6, incorporates our recent knowledge about 
how cars and trucks function, as well as the effects of new air quality 
programs that will be in effect in the future, such as Tier 2 vehicle 
standards. These improvements in data collection as well as in the 
models themselves yield progressively better results both in States' 
air quality plans and in conformity determinations.
    The new air quality standards for ozone and particulate matter may 
necessitate changes in the conformity program. EPA plans to propose 
rules and guidance for implementing the 8-hour ozone standard by the 
end of the year, and we anticipate that it will then take us about 
eight to 10 months to respond to comments and finalize the rules and 
guidance. For the fine particulate matter standard, we plan to propose 
implementation rules and guidance in spring of 2003 and finalize them 
in 2004. EPA intends to designate areas as attainment, nonattainment, 
or unclassifiable with respect to the 8-hour ozone standard in late 
2004. EPA expects to designate areas with respect to fine particles 
starting in 2004.
    Areas designated under the new standards will have to prepare a 
conforming transportation plan after a 1-year grace period that was 
recently added to the Clean Air Act. A few issues related to the new 
standards will have to be resolved for implementing conformity. For 
example, some areas that will be designated as nonattainment for the 8-
hour standard are currently nonattainment with respect to the 1-hour 
standard. EPA intends to address the process and basis for determining 
the 1-hour standard no longer applies in an area in its implementation 
rules and guidance, considering input from stakeholders and the public. 
This will occur prior to designating areas so that the conformity 
requirements as well as impacts of such a change on CMAQ apportionments 
will be clear well before areas are subject to them. EPA and DOT, as 
well as stakeholders across the U.S., have a wealth of experience in 
implementing conformity. Newly designated areas will benefit from our 
collective experience, and EPA and DOT will provide timely guidance to 
these areas before and as they implement the program under the new 
standards.
    We understand that there are two aspects of the conformity process 
that some transportation planning stakeholders would like to change via 
the TEA-21 reauthorization process. The first is how often conformity 
is required. The Clean Air Act requires that conformity be determined 
when a transportation plan or transportation improvement program (TIP) 
is adopted, and no less frequently than every 3 years. In addition, 
EPA's conformity rule requires conformity within 18 months of certain 
``SIP triggers.'' If an area cannot meet a conformity deadline, then 
only certain types of activities can proceed (e.g., projects necessary 
to improve safety).
    An added requirement to determine conformity is derived from the 
transportation requirements. The Clean Air Act requires transportation 
plans and TIPs to conform before they are adopted. Transportation plans 
must be updated every 3 years, but TIPs must be updated every 2 years. 
Adopting a new TIP every 2 years means that conformity determinations 
must be done at least this often.
    According to some transportation planners, conformity is required 
too often, leaving them with little time to focus on planning. Some air 
quality planners, however, are concerned that changing the minimum 
frequency of conformity would delay the use of new information in 
modeling. Model inputs that affect total emissions, such as population 
growth, and the percentage of sport utility vehicles, trucks, and 
minivans in an area's vehicle fleet, have been rapidly changing in the 
last decade. Some air quality planners think that a frequency of every 
3 years is important for introducing new information into the 
conformity process, so that trends can be seen early before their 
impact is great and to leave time to accommodate new information in the 
process. Additionally, some air quality planners also appreciate the 
benefits of updating their SIP and emission inventories to reflect 
latest planning assumptions or other new information in a timely 
manner.
    EPA intends to eliminate some of the 18-month ``SIP triggers'' in 
the conformity rule in an upcoming rulemaking. Though further 
discussion must occur on the issue of how often conformity must be 
done, amending the rule would simplify the process and address some of 
the concern.
    The second aspect of conformity that some transportation planners 
would like to see changed is the timeframe over which conformity must 
be demonstrated. Currently, the conformity process examines the amount 
of pollution that is projected to occur over the entire life--20 
years--of a transportation plan. Therefore, in conformity, emissions 
from the last year (in most cases, the 20th year) are examined and 
compared to the motor vehicle emissions budgets in an area's air 
quality plan. However, air quality plans cover a period of 10 years or 
less.
    Transportation planners suggest it is unfair to determine 
conformity for the 20 year life of the plan when the air quality plan 
is at best, only half as long. They explain that since the air quality 
plan ends before the transportation plan, the burden of growth that 
occurs in the years that make up the remainder of the transportation 
plan solely rests with the transportation sector.
    On the other hand, air quality planners are concerned that if 
transportation plans are 20 years, but conformity is done for a shorter 
period, the responsibility for mitigating transportation pollution in 
the future will rest on their shoulders alone. That is, if 
transportation projects are approved and built today without regard to 
their long-term impacts on air quality, the transportation planners 
will be dictating the size of the budget in future years to the air 
quality planners. Air quality planners feel they would be left to 
figure out how to accommodate a predetermined budget within the overall 
air quality reductions from transportation as well as from other 
sources that will be necessary to attain or maintain the air quality 
standards in years to come.
    Several air quality planners and environmental groups also point to 
the time scale of land use decisions a as reason for retaining the 20 
year conformity analysis. They indicate that land use decisions take 
many years to have an effect on air quality, and only when examining 
air quality 20 years into the future can the effects of different plans 
for land use be seen. They point to areas across the country that have 
examined long term implications of land use, including Portland, 
Oregon; Charlotte, North Carolina; Sacramento, California; and Denver, 
Colorado. For example, as a result of conformity, Charlotte, North 
Carolina, realized that their air quality would be jeopardized in the 
future. During the period of time where they could not meet conformity, 
Charlotte focused on developing a coordinated land use and transit 
plan, and Charlotte's citizens voted for a sales tax to help fund the 
new transit system. Charlotte realized that in order to stay a 
competitive city for business, it needs to remain an attractive place 
for people to want to work and live. Another example where the impact 
of land use decisions have been recognized is Atlanta, GA. Atlanta has 
made decisions about land use and investing in transit that will have 
long term benefits for the area.
    In conclusion, EPA is committed to partnering with DOT to continue 
our progress in meeting both transportation and air quality goals as 
the nation's transportation system is developed. CMAQ, conformity, and 
our programs for new vehicle standards and fuels are all important 
tools in achieving clean air. Thank you again for this opportunity to 
testify today and discuss our programs with you. I would be happy to 
respond to any questions that you may have.
                                 ______
                                 
  Responses by Jeffrey Holmstead to Additional Questions from Senator 
                                Jeffords

    Question 1. The Northeast States are not happy with the Mobile 
Source Air Toxics rule. They believe it is not sufficiently protective 
of public health. As Mr. Johnstone's testimony points out--air toxics 
from mobile sources are expected to exceed Vermont's standards for the 
next three decades. What is the current status of the review of this 
rule?
    Response. EPA estimates that its programs will reduce mobile source 
air toxics by over one million tons by 2007. However, because of the 
continuing concern about the potential health impacts of public 
exposure to air toxics, EPA also committed in the 2001air toxics rule 
to prepare a Technical Analysis Plan designed to improve our 
understanding of the risk posed by air toxics to public health and 
welfare, and evaluate potential control strategies to further reduce 
risk. Based on the information developed through this Technical 
Analysis Plan, we will evaluate the need for additional control.
    EPA is currently following through on our commitment to carry out 
this Technical Analysis Plan, and we are in the process of collecting 
and analyzing the data that will help us address specific data gaps 
identified in the plan. We recently briefed States on our progress in 
carrying out this plan. We are evaluating additional controls and will 
continue to work with our stakeholders on completing this reevaluation.

    Question 2. Does the Administration plan to propose any substantial 
changes to either the CMAQ program or to the conformity [rule], as we 
go forward with reauthorization? If you do, I hope you'll get all the 
major stakeholders on board first.
    Response. CMAQ: The Administration has not finished developing a 
final proposal. EPA and DOT are currently discussing whether 
refinements to the program would be appropriate. We are also reviewing 
the recommendations of the National Academy of Sciences CMAQ study to 
determine whether to propose changes in response to these 
recommendations. Since CMAQ eligibility and apportionment are tied to 
the air quality status of an area, we are concerned about how to 
account for States' need to implement the new 8-hour ozone and PM2.5 
air quality standards. Under active consideration is a proposal that 
maintains a balance between making the program available to new 
nonattainment areas and continuing to provide support to the existing 
nonattainment and maintenance areas.
    EPA is in the process of reaching out to our stakeholders to get 
their views on the issues. Air quality agencies support the program and 
desire a more definitive and consistent role in project evaluation and 
selection.
    Transportation Conformity--: The Administration has not yet 
finished developing a final proposal. EPA believes that transportation 
conformity continues to serve its purpose of ensuring that new 
transportation activities are consistent with areas' clean air goals. 
However, some stakeholders believe that targeted improvements, perhaps 
through TEA-21 reauthorization, may be warranted. While we have heard 
some views and recommendations for changing the conformity program, EPA 
is still reviewing information from the full spectrum of stakeholders. 
EPA is committed to considering options and recommendations from the 
full range of conformity stakeholders prior to forming final positions 
on specific issues.

    Question 3. Since many surface transportation projects are already 
targeted at congestion mitigation, should we split off that purpose 
from the CMAQ program and focus more on air quality?
    Response. We believe no additional benefit would be gained from 
eliminating congestion mitigation from the program in the law. 
Statutory language and the program guidance developed jointly by DOT 
and EPA clearly establish emission reductions as a requirement for 
project eligibility. Congestion mitigation projects are eligible, but 
only if they produce emission reductions in addition to their effect on 
traffic flow. While there may be disagreement as to the efficacy and 
permanence of traffic flow improvement projects, there is wide 
agreement that some traffic flow improvement projects, if designed and 
implemented with air quality improvement as a primary purpose, can 
produce emission reductions.
    Those who oppose using CMAQ funds for congestion mitigation 
projects have focused most of their attention on what they perceive to 
be a bias toward funding traffic flow projects. This category of 
projects accounts for approximately 33 percent of CMAQ funds and 43 
percent of the CMAQ projects, and is second to the largest category of 
funding which is transit. Multiple goals for a regional transportation 
system and the complexity of transportation funding can, in some cases, 
create a tendency to propose projects and then match the project to 
eligible funding programs. In that case, air quality improvement may be 
viewed as a secondary benefit of the project. Critics argue that 
projects should be developed with emphasis on effectiveness in 
achieving the purpose of the funding program as the priority.
    EPA recognizes the need to balance multiple transportation goals, 
including both air quality and congestion relief, and that the 
flexibility of CMAQ eligibility is of great value for regional 
planning. Restricting congestion mitigation projects from CMAQ funding 
would remove a potential transportation tool for State and local 
agencies to address their air quality problem. EPA believes that 
sharpening the focus on air quality improvement could be done 
administratively through revised guidance while preserving the 
flexibility for areas to fund congestion mitigation projects with air 
quality benefits.

    Question 4. Last August, Mr. Brenner told us that the Agency would 
soon be issuing a determination on a petition to regulate greenhouse 
gas emissions from vehicles as pollutants. What's the status of that 
petition?
    Response. On October 29, 1999, the International Center for 
Technology Assessment and a coalition of 18 environmental and energy 
organizations petitioned EPA to regulate certain greenhouse gas 
emissions from new motor vehicles. The petition asks EPA to carry out 
what petitioners assert to be a mandatory duty under Clean Air Act 
section 202(a)(1).
    EPA opened a public docket for the petition in January 2000 and 
published a request for public comment in the Federal Register on 
January 23, 2001. The public comment period closed on May 23, 2001. EPA 
received about 50,000 comments on the petition. EPA is currently 
preparing a response to the petition. We expect to publish the response 
in the Federal Register after it completes internal management review 
and is signed by Administrator Whitman.

    Question 5. In general, would you agree that conformity is spurring 
investments in transportation strategies and technologies that reduce 
air pollution and create better interagency cooperation?
    Response. Yes. By its very nature, the conformity process ensures 
that only transportation strategies and technologies as a whole that 
are consistent with clean air goals are invested in. When areas have 
found that preliminary projections from planned transportation projects 
exceed the emissions budgets established in the SIP, they have several 
options from which to choose for resolving the air quality issue and 
finalizing a transportation plan and TIP that conforms. For example, 
some areas have chosen to revise their SIP and emissions budgets by 
updating planning assumptions or investing in additional control 
measures in the SIP to allow for additional growth in transportation. 
Alternatively, other areas have changed the mix of projects and/or 
invested in projects that have an emissions benefit to their plan and 
TIP so that conformity could be demonstrated. In particular, some of 
these areas have invested in transit and land-use strategies that could 
potentially provide air quality benefits. (See below for a list of 
examples that have utilized these various approaches to resolve 
conformity issues.)
    We also believe that transportation conformity has been very 
successful at integrating transportation and air quality planning 
through the interagency consultation process. We routinely hear from 
both transportation and air quality agencies that conformity has 
markedly improved the interagency consultation and working 
relationships between the two agencies. This interaction between 
transportation and air quality planners has become particularly 
critical to the timely resolution of conformity issues in high growth 
areas where emissions from cars and trucks are a major contributor to 
the air quality problem. Specific examples of where positive air 
quality results and interagency consultation have occurred via the 
conformity and/or SIP processes include the following:
      Baltimore, MD: Revised SIP and added transit and other 
control measures to plan/TIP (1999/2000).
      Kent and New Castle Counties, DE: Added new control 
measures, including OBD and expanded transit, to the TIP (2001).
      Hampton Road, VA: Revised SIP by adding local controls 
and added CMAQ projects (2001).
      Washington DC: Revised SIP to incorporate a NOx 
substitution mechanism (1999/2000).
      Atlanta, GA: Altered land-use strategies and added 
control measures (2000).
      Dayton / Springfield, OH: Revised SIP to incorporate a 
safety margin and therefore enlarge the motor vehicle emissions budgets 
(1999).
      Salt Lake City, UT: Revised SIP to incorporate a PM-10/
NOx trading mechanism (2002)
      Las Vegas, NV: Revised SIP to add/extend control measures 
to ensure conformity in future years (2000).
      Sacramento, CA: SIP and conformity issues lead to 
investment of $70 million in a diesel retrofit program (2000).
      Charlotte, NC: Conformity issue prompted voters to pass a 
$50 million tax referendum to support a long-term transit/land-use plan 
(1998).

    Question 6. In general, what's the general ratio of spending on 
planning in the States for air quality versus transportation planning?
    Response. EPA does not maintain information related to individual 
State funding on air quality planning versus transportation planning, 
but suspects the amount of funding for each activity will vary from 
State to State depending on the extent of air quality problems and 
growth that exists in each State. To gain a comprehensive comparison of 
funding for transportation and air quality planning, the respective 
agencies in each State should be queried.

    Question 7. Why did it take so long to finalize the MOBILE6 model 
and when does EPA plan to update that model?
    Response. The scope of MOBILE6 was unprecedented both in terms of 
the science that went into the model, and the review process under 
which the model was developed and released. In terms of the science of 
the model, many significant changes were made to reflect new data in 
several areas, including in-use deterioration, ``real-world'' driving, 
fuel sulfur content, and ``off-cycle'' heavyduty vehicle emissions. In 
terms of the review process, all of the technical aspects of MOBILE6 
underwent public review as well as formal peer review--a process which 
was conducted for over 50 technical documents. Following the 
development and review of these technical inputs, once the model was 
complete in draft form it underwent a ``preview'' period for State and 
local agencies at the request of STAPPA/ALAPCO, which lasted over 1 
year. The length of time to finalize MOBILE6 was directly related to 
the effort needed to update the broad range of science incorporated in 
the model, and to ensure the model underwent sufficient review in the 
scientific, stakeholder and user communities.
    EPA is planning to update MOBILE6 with MOVES (Multi-scale Motor 
Vehicle & Equipment Emission System). A primary impetus for this effort 
is the National Research Council's review of EPA's mobile source 
modeling program, published in 2000, which recommended a) the 
development of a modeling system more capable of supporting smaller-
scale analyses; b) improved characterization of emissions from high-
emitting vehicles, heavy-duty vehicles, and offroad sources; c) 
improved characterization of particulate matter and toxic emissions; d) 
improved model evaluation and uncertainty assessments; and e) a long-
term planning effort coordinated with other governmental entities 
engaged in emissions modeling. EPA is planning to replace the current 
MOBILE6 model with the new MOVES model by the fall of 2005.

    Question 8. As the Congress moves forward with a renewable fuels 
standard and ban MTBE, what affect will that have on areas ability to 
attain the 8-hour ozone standard and develop new vehicle emissions 
budgets to use in conformity?
    Response. The version of the energy bill passed by the Senate in 
2002 would have required EPA to maintain the emission benefits derived 
from the reformulated gasoline (RFG) program. The RFG program contains 
minimum emission reduction requirements that must be achieved 
regardless of the type of oxygenate that may be used in RFG. Therefore, 
we would not have expected the Senate energy bill to have any 
significant effect on areas' ability to attain the new ozone standard 
or their ability to develop new motor vehicle emissions budgets for use 
in conformity. EPA is currently developing its proposed rule designed 
to implement the new 8 hour ozone standard. We expect the RFG program 
to continue to be an integral part of our national strategy in 
assisting areas to reach attainment under the new standard. The 
Administration looks forward to working with the 108' Congress on a 
comprehensive energy bill that will enhance our energy security, 
protect our environment and support our economy.

    Question 9. When will EPA and DOT promulgate changes to the 
regulations to implement the 1999 court decision on conformity?
    Response. EPA is currently working on a proposed rulemaking to 
incorporate into the conformity rule EPA's May 14, 1999, and DOT's 
January 2, 2002, revised guidance implementing the court decision; we 
anticipate publication of this proposed rule in early 2003. 
Specifically, this proposal will address two major issues affected by 
the court regarding projects during a conformity lapse and EPA's 
process for finding newly submitted budgets appropriate to use in a 
conformity determination (i.e., the ``adequacy process''). EPA's May 
14, 1999, guidance and DOT's revised January 2, 2002, guidance describe 
how the conformity program is to be implemented in a manner that is 
consistent with the court decision. Nonattainment and maintenance areas 
have been operating under this existing guidance since the court 
decision was made on March 2, 1999.
    EPA also published a final rulemaking on August 6, 2002 (67 PR 
50808) that revised the timing for redetermining conformity after a 
State submits an air quality plan for the first time (i.e., an 
``initial'' SIP submission). This rule change was necessary as a result 
of the court's decision that EPA must first find newly submitted 
budgets appropriate for conformity purposes (i.e., ``adequate'') before 
such budgets could be used. An effect of the combination of the court 
decision and EPA's previous rule was that a significant portion of the 
18-month time period given to demonstrate conformity to an initial SIP 
could elapse prior to the time EPA made a determination that the 
submitted budgets were adequate. This final rule corrects the 
disconnect that existed between the previous rule and court decision, 
and as a result, gives areas the full 18months to determine conformity 
to budgets from an initial SIP.

    Question 10. Please submit to the committee information on the 
share of emissions of VOC, NO, PM, and CO that comes from motor 
vehicles today, in 2005, and in any future SIP attainment years for the 
50 largest cities in the U.S. (Or for all non-attainment areas).
    Response. In January 2001, EPA promulgated 2007 heavy-duty engine 
and vehicle standards and highway diesel fuel sulfur control 
requirements. For this rulemaking, EPA developed emission estimates for 
metropolitan areas in 1996, 2007, 2020 and 2030 for the following 
pollutants--volatile organic compounds (VOCs), nitrogen oxides (NO,), 
particulate matter (PM) and carbon monoxide (CO). Table 1 presents the 
share of emissions in the above three calendar years for each of the 
following source categories--area, electrical generation, on-road 
mobile sources and non-road mobile sources--in the 50 most populous 
metropolitan areas in the U.S.
    EPA does not routinely prepare emissions projections for future 
years. Rather, projections are made for particular projects or actions 
which require them. The most recent such project that has reached 
completion is the January 2001 rulemaking on emissions from highway 
heavy-duty diesel vehicles/engines and sulfur content of highway diesel 
fuel. For that rulemaking, projections were based on the 1996 base year 
and included only 2007, 2020, and 2030. We are therefore unable to 
provide projections at the requested SIP attainment year intervals 
(e.g., 2005).
    It is also necessary to explain that having been created by EPA 
during the year or so prior to the January 2001 promulgation of the 
diesel rule, these estimates are now somewhat dated. Emissions 
estimation approaches evolve continually, and the last several years 
have been a time of considerable change for mobile source methodologies 
in particular. For example, the projections presented in the attached 
tables are based on a modified version of the MOBILE5 emissions model, 
while MOBILE6 is now the current method. We will soon be publishing on 
our website emission estimates for the 1970 through 2001 period based 
on MOBILE6 and other recent improvements in data and methods. These new 
estimates will not exactly match the information for 1996 presented in 
the tables provided here, and it would be inappropriate to compare them 
to the 2007, 2020, or 2030 projections. Also, these estimates cannot be 
expected to exactly match estimates prepared and published by 
individual State or local air pollution or transportation planning 
agencies. Generally, State and local agencies are more able than EPA to 
incorporate more detailed data on local conditions, which improves the 
quality of the emission estimates they prepare.

    Question 11. EPA has released for the first time in 10 years a new 
National Air Toxics Assessment, which provides estimates by zip code, 
of hazardous air pollutants by source. A very high share of these is 
from motor vehicles. Based on this new data, please submit to the 
committee estimates for the maximum exposures from hazardous air toxics 
and the share of these emissions that come from mobile sources, for 
each of the 50 largest cities in the U.S.
    Response. EPA's National Air Toxics Assessment (NATA) assesses 
emissions, ambient concentrations, inhalation exposure, and inhalation 
risk from 33 hazardous air pollutants emitted by outdoor sources in 
1996. While results of the assessment were determined at the census 
tract level, because of inventory limitations, they are most meaningful 
when viewed at the National, State, or County level.
    The assessment estimates upper-bound lifetime cancer risks to an 
average exposed individual at each census tract in the country. That 
means that actual risks are likely to be either equal to or less than 
the risks estimated by this study, but some risks may be greater. It 
also estimates hazard quotients for adverse health effects other than 
cancer. A hazard quotient is the ratio between the potential exposure 
to the substance and the highest level of exposure at which the risk of 
adverse effects is considered to be negligible. If a hazard quotient is 
calculated to be less than 1, then no adverse health effects are 
expected as a result of exposure. If a hazard quotient is greater than 
1, then adverse health effects are possible. While the hazard quotient 
cannot be directly translated to a probability that adverse health 
effects will occur, increasing the value of the hazard quotient above 1 
corresponds to increasing risk of adverse health effects. . It is 
especially important to note that a hazard quotient greater than 1 does 
not necessarily mean that adverse effects will occur, just that they 
are possible.
    Table 2 presents cumulative upper bound lifetime (70 year) 
inhalation cancer risks for a typical person in each of the 100 largest 
counties in the United States. On average, mobile sources, including 
highway motor vehicles and non-road equipment (e.g., lawnmowers, 
construction equipment, boats, planes, locomotives) are predicted to 
account for 40 percent of the cumulative upper bound cancer risk and 
about 80 percent of the non-cancer effects. Although EPA has concluded 
that diesel exhaust is a likely human carcinogen, cancer risks are not 
quantified for this pollutant. This is because data are not sufficient 
to develop a numerical estimate of carcinogenic potency. However, EPA 
has concluded that diesel exhaust ranks with the other substances that 
the national-scale assessment suggests pose the greatest relative risk.

    Question 12. Recent peer-reviewed research papers published by TRB 
showed an average observed elasticity of regional vehicle miles 
traveled (VMT) with respect to regional lane miles of capacity of 0.83. 
Has EPA reviewed and evaluated the adequacy of regional travel models 
used to prepare SIP motor vehicle emissions inventories and attainment 
plans with respect to this important measure of induced traffic, which 
can have a profound effect on forecast traffic and motor vehicle 
emissions? If not, what steps will EPA take in the next months to 
assure timely progress in assessing regional travel models against this 
scientific benchmark and to assure correction of MPO models that do not 
now adequately reflect induced traffic effects?
    Response. EPA recognizes the importance of this issue and the 
effect it can have on travel demand forecasting, but the Agency does 
not have a direct role in reviewing regional travel models. DOT is 
responsible for evaluating regional travel forecasting models as part 
of the Metropolitan Planning Organization (MPO) certification process. 
EPA regional offices participate in the certification process and have 
established consultative agreements with DOT and the State and local 
transportation planning agencies. EPA has guidance on the use of travel 
models and the forecasting process, especially regarding the travel 
activity data and growth assumptions that are used in the analysis, but 
we generally defer to the travel model experts at DOT when we have 
questions about the adequacy of the models themselves.
    The complex nature of induced travel demand is the subject of 
several recent and highly regarded studies, yet definitive conclusions 
about the relationship between added capacity and air quality have not 
been drawn. Current thinking by travel forecasting and travel modeling 
experts generally support the conclusion that reduced travel costs 
(usually measured in terms of reduced travel time and increased 
convenience) result in additional travel. There is a wide range of 
estimates about the amount of travel induced. Whether or not the 
induced travel translates into degradation of air quality is highly 
dependant on local transportation, economic, and meteorological 
conditions.
    EPA's Office of Transportation and Air Quality (OTAQ) has jointly 
sponsored travel model research, training and technical assistance to 
transportation and air quality agencies through the Federal Highway 
Administration's Travel Model Improvement Program. For the longer term, 
the best potential for accurately representing induced travel effects 
of added capacity is through a new transportation analysis tool known 
as the Transportation Analysis Simulation System (TRANSIMS). TRANSIMS 
is a suite of data bases, models, and simulations being developed by 
DOT with the participation and support of OTAQ's transportation and 
emissions modeling staff.

    Question 13. Part 1: Various comments at the hearing pertained to 
coordination of the timing of SIPS, TIPs, and transportation plans. It 
would be helpful to this review of facts to understand EPA's 
administration of SIP revisions and how motor vehicle emissions budgets 
(MVEB's) have been modified over time, and how frequently conformity 
determination have been updated.
    Response. Review of Facts: Timing of Conformity Frequency and 
Updates for Plans, TIPs and SIPS Transportation conformity is 
implemented to achieve its purpose as defined by the Clean Air Act 
under the following air quality and transportation schedules: Clean Air 
Act Requirements
    Transportation Conformity: According to the Clean Air Act, 
transportation plans and TIPs in nonattainment and maintenance areas 
must conform to the SIP before they are adopted by an MPO. Under DOT's 
transportation planning regulation, metropolitan nonattainment and 
maintenance areas must develop a new transportation plan that covers at 
least a 20 year timeframe every 3 years. In addition, Title 23 requires 
these areas to update their TIPs every 2 years. TIPs cover a shorter 
timeframe (at least 3 years) and consist of a subset of projects from 
the transportation plan. Since TIPs are required to be updated every 2 
years, metropolitan nonattainment and maintenance areas are required to 
demonstrate conformity at a minimum of every 2 years. An option that 
has been suggested to eliminate the mismatch between frequency of plan 
and TIP updates via TEA-21 reauthorization is to streamline the plan 
and TIP into one planning document. EPA recognizes the advantages of 
aligning the frequency of TIP updates with transportation plan updates.
    The Clean Air Act also requires conformity to be determined at 
least every 3 years. In nonattainment and maintenance areas, both the 
metropolitan transportation plan update cycle and the conformity 
determination cycle start at the time FHWA and FTA make. the conformity 
determination on the plan; thus, both plan and conformity updates occur 
on the same 3 year cycle.
    SIPS: Once a SIP is submitted for a particular Clean Air Act 
purpose, and approved by EPA, the . motor vehicle emissions budgets in 
the approved SIP remain in effect until the State decides to update the 
SIP. The SIP's motor vehicle emissions budgets, in effect, estimate the 
amount of emissions from the transportation sector that the air could 
absorb and still allow the area to attain the National Ambient Air 
Quality Standards. There is no statutory or administrative requirement 
to update approved SIPs on a regular basis, with few exceptions. For 
example, rate of progress and attainment SIPs, as well as regular 
emissions inventory updates that could trigger a SIP revision, are 
required in serious and above ozone areas. See EPA's response to 
Senator Jeffords questions #14-18 for more information on SIPs in 
serious and above ozone areas. The types of SIPs that must be submitted 
by an area are dictated by the Clean Air Act and vary according to the 
pollutant and classification of the area.
    Although the CAA does not mandate regular SIP updates, some areas 
have updated or are in the process of updating their SIPs and as a 
result, may have more recent mobile source emissions budgets available 
for conformity purposes. In particular, areas that have had conformity 
difficulties have often addressed such issues by revising their SIPs to 
incorporate new planning assumptions and data and/or additional control 
measures to allow for growth in transportation (e.g., Baltimore MD, New 
Jersey, Salt Lake City UT, Albuquerque NM). In addition, under EPA's 
MOBILE6 policy, all States that took MOBILE5-based preliminary 
estimates of credit for Tier 2 vehicle emission regulation benefits in 
their current SIPs are committed to revise their mobile source budgets 
with MOBILE6 within 1-2 years after MOBILE6's release on January 29, 
2002 (e.g., New York City, Philadelphia PA, Baltimore MD, Washington 
DC, Houston TX, Dallas TX, St. Louis MO). Also, States typically update 
their SIPs after a change in attainment status, for example, when an 
area requests redesignation and develops a maintenance plan with new 
motor vehicle emissions budgets (e.g., Denver CO, Louisville KY, 
Pittsburgh PA, Cincinnati OH, Richmond VA, Nashville TN). In these 
cases, however, once areas develop a maintenance plan such budgets can 
be in place for up to 10 years because maintenance plans cover a 10-
year timeframe.
Transportation Conformity Rule Requirements
    In addition to the statutory requirements, there are specific 
triggers in the conformity regulation that warrant a new conformity 
determination within 18-months of certain SIP actions. For instance, 
EPA's conformity rule requires conformity to be done within 18 months 
of EPA's adequacy finding for an initial SIP and within 18 months of 
EPA's approval of a SIP. This 18 month requirement is intended to 
ensure that when an area has a new SIP that establishes a new budget, 
the new air quality information is, integrated into the conformity 
process in a timely manner (otherwise, areas could wait up to 3 years 
before that new, relevant air quality information is incorporated). EPA 
is currently working on a proposed rulemaking to eliminate some of 
these 18-month triggers and streamline others to reduce redundancy and 
unnecessary burden on conformity implementers.

    Question 13. Part 2: Please identify each MVEB that has been 
approved, found to be adequate or submitted with a determination 
pending for NOx, VOCs, primary PM, and PM precursors, if any, for each 
nonattainment area. This should be submitted for each metropolitan area 
or region of a State that at any time following November 15, 1990, has 
been classified as a serious, severe or extreme ozone nonattainment 
area or a serious PM-10 nonattainment area, based on approved or 
submitted ozone and PM-10 SIPs, or the documents containing such 
information. This should include MVEB's that applied in the past and 
MVEB's that apply to future milestone, attainment and maintenance 
deadlines.
    This should include for each WEB the date such MVEB was submitted 
to EPA, the date it became effective for transportation conformity 
purposes, the numerical limitation on motor vehicle emissions within 
the nonattainment area established by the MVEB for each of the 
pollutants listed in this require; the dates when conformity 
determinations were made by the MPO, and/or US DOT with respect to each 
such MVEB; and copies of any such conformity determinations received by 
EPA.
    Response. Please see Table 3. Also, note that this table includes 
information on when conformity determinations have been made using any 
adequate or approved budgets. In addition, we have attached to our 
responses to the Senate EPW Committee EPA's written comments on these 
conformity determinations where available. However, several of the EPA 
Regional Offices' comments are typically expressed verbally via the 
interagency consultation process, and therefore, specific dates and 
comments could not be provided.
    Considering the volume of information/documentation (e.g., MOBTLF, 
input tables; tables of link listing) that is contained within a 
transportation plan and TIP and its respective conformity 
determination, we have only provided this specific information for 
conformity determinations as agreed to by your staff. Although not 
exhaustive, this table, accompanying materials and our preceding review 
of facts, should provide you with a general understanding of the SIP 
and transportation planning schedules and availability of SIP budgets 
for conformity purposes.

    Question 14. For each serious, severe or extreme ozone 
nonattainment area, please state the total allowable emissions, or 
``target value,'' for each ozone precursor pollutant that has been 
established for the 1996 VOC reduction milestone, and each post-1996 3-
year milestone deadline that EPA has approved as part of a SIP revision 
submitted to meet the reasonable further progress (rate of progress) 
requirements of section 182(c)(2)(B) and (C) of the Act.

                   Table 1: Target VOC emissions and target NOx emission substitutions for ROP milestone in Ozone SIPs in tons per day
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Extreme Area
---------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   1996        1999            2002            2005            2008            2010
                              Area                               ---------------------------------------------------------------------------------------
                                                                    VOC     VOC     NOx     VOC     NOx     VOC     NOx     VOC     NOx     VOC     NOx
--------------------------------------------------------------------------------------------------------------------------------------------------------
South Coast, CA.................................................    1144    1161      NR    1012      NR     876    1419     739    1294     414     530
--------------------------------------------------------------------------------------------------------------------------------------------------------


 
                                                  Severe Areas
----------------------------------------------------------------------------------------------------------------
                                           1996        1999            2002            2005            2007
                  Area                   -----------------------------------------------------------------------
                                            VOC     VOC     NOx     VOC     NOx     VOC     NOx     VOC     NOx
----------------------------------------------------------------------------------------------------------------
CT Portion of NY-NJ-CT..................     116     108     116      95     115      83     115      77     113
NJ portion of NY-NJ-CT..................     732     735     102     616     403     578     461     574     470
NY portion of NY-NJ-CT..................     884     844      52     758     105     738     144     724     149
NJ portion of PA-NJ-DE-MD...............     279     284      69     202      NR     184      NR      NR      NR
Baltimore, MD...........................     253     253     397     242     366     230     342      NR      NR
MD portion of Philadelphia-Wilmington-        14      13      12      11      12       9      12      NR      NR
 Trenton................................
PA portion of Philadelphia-Wilmington-       488     488     382     456     362     431     340      NR      NR
 Trenton................................
DE portion of Philadelphia-Wilmington-       116     112     147      99     146      96     135      NR      NR
 Trenton................................
IL-Chicago/ Northwest IN................     857     808    1820     770    1657     741    1514     739    1413
IN-Chicago/ Northwest IN................     158     140      NR     120      NR     103      NR      93      NR
WI-Milwaukee/Racine.....................     288     249     368     234     343     226     316     222     299
Houston, TX.............................     813     772    1192     696    1127     695     694     936
Southeast Desert, CA....................      NA
Sacramento, CA..........................      NA     142     172     124     142     107      98      NR      NR
San Joaquin Valley, CA..................     433     383     379       *
Ventura, CA.............................      68      60      NR      53      57      45      52      NR      NR
----------------------------------------------------------------------------------------------------------------
* Area bumped up to Severe on December 10, 2001


 
                              Severe Areas
------------------------------------------------------------------------
                                                   1996        1999
                      Area                       -----------------------
                                                    VOC     VOC     NOx
------------------------------------------------------------------------
Greater CT......................................     331     307     298
Providence, RI..................................     142     137      86
Springfield, MA.................................     122     115      97
MA portion of Boston-Lawrence-Worcester.........     658     588     828
NH portion of Boston-Worcester..................      41      38      48
Portsmouth-Dover-Rochester, NH..................      30      28      39
Washington, DC-MD-VA............................     385     380     615
Atlanta, GA.....................................     443     420      NR
Dallas-Fort Worth, TX...........................     466     406     580
El Paso, TX.....................................      57      IP      NR
Baton Rouge, LA.................................     164     144      NR
East Kem, CA....................................      13      12      40
Phoenix, AZ.....................................     232      NR      NR
Santa Barbara, CA...............................      42      43      43
San Diego, CA...................................     241     212     174
------------------------------------------------------------------------
NR: Not required
NOx reductions are substitutes for some VOC reductions.
Milestones not required for attainment years. The attainment dates for
  the ozone area classifications are as follows:
    Serious . . . . 1999 f    Severe. . . 2005 or 2007
    Extreme . . . . 2010
IP: Not required because rate of progress not required due to
  international transport. NA: EPA has not acted on proposed target(s).


    Question 15. Please identify any nonattainment area for which a 
rate-of-progress allowable emission target has not been established for 
any precursor pollutant, for any milestone period; and identify the 
specific milestone period(s) defined by section 182(c)(2)(B) and (g) 
for which no rate-of-progress target has been established. Also, please 
provide copies of each milestone compliance demonstration required by 
section 182(g) that has been submitted by the State for each 
nonattainment area included within the scope of this request, copies of 
each determination or other action the Administrator or EPA regional 
office has made with regard to each submitted milestone compliance 
demonstration, and with regard to each milestone compliance 
demonstration not filed, and copies of any submissions made by any 
State to satisfy the obligations prescribed by Clean Air Act section 
182(g)(3).
    Response. ``Rate-of-Progress'' milestones were established for all 
nonattainment areas except:
    1. Southeast Desert Nonattainment Area in California. A major cause 
of the area's nonattainment is transport of pollutant from the Los 
Angeles area (South Coast Air Quality Management District).
    2. El Paso, Texas did not have a 1999 ROP target because a major 
portion of its pollution is caused by international transport of 
pollutant from Mexico.
    3. Sacramento, California: 1996 ROP target.

  Table 2: List of Requested Documents Relating to Milestone Compliance
                             Demonstrations
------------------------------------------------------------------------
             Area                          Documents/comment
------------------------------------------------------------------------
        Extreme Areas
South Coast, CA..............  See Document No. 32 through 36
                                Attachment.
         Severe Areas
DE portion of PA-NJ-DE-MD....  See document Nos 47--56 Attachment
IL portion of Chicago/         See Document No. 17, 20 and 21
 Northwest IN.                  Attachment.
IN portion of Chicago/         See Document No. 19.
 Northwest IN.
Milwaukee/ Racine, WI........  See Document No. 18.
Southeast Desert, CA.........  See Document No. 32 through 36, 41 and 42
                                Attachment. A major cause of the area's
                                nonattainment is transport of pollutant
                                from the Los Angeles area (South Coast
                                Air Quality Management District).
Sacramento, CA...............  See Document No. 32 through 36 and 39 and
                                40 Attachment
San Joaquin Valley, CA.......  See Document No. 32 through 36 and 38
                                Attachment
Ventura, CA..................  See Document No. 32 through 36 Attachment
        Serious Areas
Atlanta, GA..................  See Documents No. 9 through 16 Attachment
El Paso, TX..................  See Document No. 25 Attachment. El Paso
                                not required to have a plan for 3
                                percent per year after 1996 because the
                                ozone concentrations caused by
                                international transport.
East Kern, CA................  See Document No. 32 through 36
                                Attachment. Eastern Kern County
                                Nonattainment area was previously a part
                                of the San Joaquin Valley Nonattainment
                                Area.
Phoenix, AZ..................  See Document No. 46 Attachment
San Diego, CA................  See Document No. 32 through 37 and 43
                                Attachment
------------------------------------------------------------------------

    In the late 1990's, EPA began to draft a rule outlining two 
possible approaches that States could use to perform milestone 
compliance demonstrations called for under section 182(g): (1) emission 
inventory updates (where possible) and/or (2) indicators of compliance 
such as growth rates, VMT change information, regulations planned and 
adopted, etc. As it analyzed the issue, EPA recognized that technical 
problems, centering upon the timeliness of State emission inventory 
updates and associated growth projections, would arise in many States 
when the control agencies would attempt to develop complete milestone 
demonstrations. In other words, many States would have problems with 
getting the periodic inventories synchronized with the milestone 
compliance time period. For States with this problem, the cost would 
have been prohibitive to implement a revised emissions inventory 
program, or a separate new inventory program, that matched the 
compliance milestone demonstration period. EPA found that it would have 
been prohibitively costly (if not impossible) to condense the process 
of collecting and quality assuring emissions data, which could take 
from 12 to 18 months, into a 90-day period. For these reasons, and 
because we did not find reliable, readily available methods to evaluate 
milestone compliance demonstrations, EPA did not finalize a rule 
requiring such demonstrations. However,
    EPA has issued the following guidance documents that outline how to 
calculate the many different inventories and how to prepare rate-of-
progress SIP revisions:
    1. Guidance on the Adjusted Base Year Inventory and the 1996 Target 
for the 15 Percent Rate-of-Progress Plans, EPA-452/R-92-005, October 
1992. (Document No. 1 Attachment)
    2. Guidance for Growth Factors, Projections, and Control Strategies 
for the 15 Percent Rate-of-Progress Plans, EPA-452/R-93-002, March 
1993.
    (Document No. 2 Attachment)
    3. Guidance on the Relationship Between the 15 Percent Rate-of-
Progress Plans and Other Provisions of the Clean Air Act Amendments, 
EPA-452/R-93-007, May 1993. (Document No. 3 Attachment)
    4. Guidance on Preparing Enforceable Regulations and Compliance 
Programs for the 15 Percent Rate-of-Progress Plans, EPA-452/R-93-005, 
June 1993. (Document No. 4 Attachment)
    5. Guidance on the Post-1996 Rate-of-Progress Plan and Attainment 
Demonstration, EPA-452/R-93-015, January 1994.(Erratta 2-18-94) 
(Document No. 5 Attachment)

    Question 16. For any nonattainment area that has not demonstrated 
compliance with section 182(g) either based on a submission that 
demonstrates noncompliance or the failure to submit a demonstration, 
please provide copies of any documents to or from the State that 
discuss or include information regarding actions that have been taken, 
are to be taken or that are under consideration to correct the failure 
to achieve the emissions reductions required for such milestone.
    Response. For the reasons explained in the response to question 15, 
we sent no correspondence to States on the topic of failure to submit 
milestone compliance demonstrations. We did, however, send some States 
letters concerning methods of demonstrating compliance.
    In May 1997, letters were sent to Connecticut, Massachusetts, and 
New Hampshire regarding actions the States could take to document that 
their ROP plans were on track. (See Documents Nos. 6, 7, and 8.) In 
response to our letter, Connecticut submitted rule effectiveness 
studies for their cutback asphalt and gasoline loading racks rules, and 
Massachusetts evaluated compliance rates with its gasoline station 
vapor recovery systems and eventually submitted a revised regulation to 
address compliance problems it discovered with this rule. (These State 
studies and regulations are not included with this response.)

    Question 17. For each ozone nonattainment area classified as 
``serious'' prior to 1999, please provide copies of (i) any 
determination made by EPA pursuant to Clean Air Act section 
181(b)(2)(A) with regard to determining whether such area attained the 
NAAQS on or before November 1999, and (ii) any notice published 
pursuant to section 181(b)(2)(B).

Table 3: Determination of Attainment under 181(b)(2)(A) of the Clean Air
                                   Act
------------------------------------------------------------------------
             Area                               Comment
------------------------------------------------------------------------
        Serious Areas
Greater CT...................  See http://www.epa.gov/fedrgstr/EPA-AIR/
                                2001/January/Day-03/a62.htm
Providence, RI...............  See http://www.epa.gov/fedrgstr/EPA-AIR/
                                1999/June/Day-09/al4595.htm
                               See http://www.epa.gov/fedrgstr/EPA-AIR/
                                2000/July/Day-20/al7472.htm
                               See http://www.epa.gov/fedrgstr/EPA-
                                AIW2000/July/Day-25/al7472.htm
Springfield, MA..............  See http://www.epa.gov/fedrgstr/EPA-AIR/
                                2001/January/Day-03/a38.htm
MA portion of Boston-Lawrence- See http://www.epa.gov/fedrgstr/EPA-AIR/
 Worcester.                     1999/June/Day-09/al4595.htm
                               See http://www.epa.gov/fedrgstr/EPA-AIR/
                                2000/July/Day-20/al7472.htm
                               See http://www.epa.gov/fedrgstr/EPA-AIR/
                                2000/July/Day-25/al7472.htm
NH portion of Boston-Lawrence- See http://www.epa.gov/fedrgstr/EPA-AIR/
 Worcester.                     1999/June/Day-09/al4595.htm
                               See http://www.epa.gov/fedrgstr/EPA-AIR/
                                2000/July/Day-20/al7472.htm
                               See http://www.epa.gov/fedrgstr/EPA-AIR/
                                2000/July/Day-25/al7472.htm
Portsmouth-Dover-Rochester,    See http://www.epa.gov/fedrgstr/EPA-
 NH.                            AIR11999/June/Day-09/al4595.htm
                               See http://www.epa.gov/fedrgstr/EPA-AIR/
                                2000/July/Day-20/al7472.htm
                               See http://www.epa.gov/fedrgstr/EPA-AIR/
                                2000/July/Day-25/al7472.htm
Washington, DC-MD-VA.........  See http://www.epa.gov/fedrgstr/EPA-AIR/
                                2001/January/Day-03/a6l.htm
                               U.S. Court of Appeals for DC vacated the
                                SIP/extension on 7/2/02
Atlanta, GA..................  See Document No. 13 Attachment
                               http://www.epa.gov/fedrgstr/EPA-AIR/2002/
                                May/Day-07/al 1176.htm
                               11th Circuit stayed EPA's SIP approval
Dallas-Fort Worth, TX........  See http://www.epa.gov/fedrgstr/EPA-AIR/
                                2001/January/Day-18/aI346.htm
El Paso, TX..................  International transport area
Baton Rouge, LA..............  See http://www.epa.gov/fedrgstr/EPA-AIR/
                                2002/October/Day-02/a24763.htm
San Joaquin Valley, CA.......  See http://www.epa.gov/fedrgstr/EPA-AIR/
                                2001/November/Day08/a27289.htm
East Kern, CA................  See http://www.epa.gov/fedrgstr/EPA-AIR/
                                2001/November/Day08/a27289.htm
Phoenix, AZ..................  See http://www.epa.gov/fedrgstr/EPA-AIR/
                                1997/November/Day06/a29396.htm and http:/
                                /www.epa.gov/fedrgstr/EPA-AIR/2001/May/
                                Day30/a 13512.htm
Santa Barbara, CA............  See http://www.epa.gov/fedrgstr/EPA-AIR/
                                1997/December/Day10/a32332.htm and http:/
                                /www.epa.gov/fedrgstr/EPAAIR/2002/August/
                                Day-27/a21285.htm
San Diego, CA................  http://www.epa.gov/fedrgstr/EPA-AIR/2002/
                                August/Day-23/a21560.htm
------------------------------------------------------------------------


    Question 18. For each ozone nonattainment area classified as 
``severe,'' please provide copies of the SIP revision required by Clean 
Air Act section 185, any correspondence to or from the State where such 
area is located regarding such submission, and any proposed and final 
actions by EPA regarding such SIP submissions.
    Response. Table 4 lists the requested documents pertaining to 
section 185 SIP revisions (emissions fees in severe areas that fail to 
attain by their Clean Air Act attainment date).

 Table 4: SIP Submissions for Emission Fees for Failing to Attain Under
                        185 of the Clean Air Act
------------------------------------------------------------------------
             Area                               Comment
------------------------------------------------------------------------
         Severe Areas
Milwaukee/ Racine, WI........  See http://www.epa.gov/fedrgstr/EPA-AIR/
                                2002/June/Day-25/a15870.htm. See
                                Documents No. 22-24 Attachment.
San Joaquin Valley, CA.......  See Documents No. 27-31 and 58-62
                                Attachment. San Joaquin Valley APCD Rule
                                3170 (Document 61) is also available at:
                                http://www.valleyair.org/rules/
                                currntruies/r3170.dpf.
                               The provision was adopted on May 16, 2002
                                and submitted to EPA on August 6, 2002.
                                EPA is reviewing the submitted materials
                                and plans to propose its action in March
                                2003 and complete action in September
                                2003.
------------------------------------------------------------------------
Note: We are aware of one State, Pennsylvania, that has adopted State
  regulations with an emissions fee provision in response to the section
  185 requirement. The fee would apply in the Pennsylvania portion of
  the Philadelphia nonattainment area. See Section 4006.4 in Document
  57.

                       list of attached documents
    1. Guidance on the Adjusted Base Year Inventory and the 1996 Target 
for the 15 Percent Rate-of-Progress Plans, EPA-452/R-92-005, October 
1992
    2. Guidance for Growth Factors, Projections, and Control Strategies 
for the 15 Percent Rateof-Progress Plans, EPA-452/R-93-002, March 1993
    3. Guidance on the Relationship Between the at Percent Rate-of-
Progress Plans and Other Provisions of the Clean Air Act Amendments, 
EPA-452/R-93-007, May 1993
    4. Guidance on Preparing Enforceable Regulations and Compliance 
Programs for the 15 Percent Rate-of-Progress Plans, EPA-452/R-93-005, 
June 1993
    5. Guidance on the Post-1996 Rate-of-Progress Plan and Attainment 
Demonstration, EPA452/R-93-015, January 1994. (Erratta 2-18-94)
    6. Letter dated May 30, 1997, to Thomas Noel, Deputy Director, 
Department of Environmental Services, Concord, New Hampshire from David 
B. Conroy, Chief, Air Quality Planning Unit, Region I, Boston, 
Massachusetts
    7. Letter dated May 30, 1997, to Joseph Belanger, Department of 
Environmental Protection, Hartford, Connecticut from David B. Conroy, 
Chief, Air Quality Planning Unit, Region I, Boston, Massachusetts
    8. Letter dated May 30, 1997, to Nancy Seidman, Department of 
Environmental Protection, Boston, Massachusetts from David B. Conroy, 
Chief, Air Quality Planning Unit, Region I, Boston, Massachusetts
    9. Letter dated February 14, 1997, to Winston A. Smith, Division 
Director, Region IV, Atlanta, Georgia from Ron Methier, Chief, Air 
Protection Branch, Department of Natural Resources, Atlanta, Georgia
    10. 62 PR 48027, Friday, September 12, 1997, Proposed Conditional 
Interim Approval--Approval and Promulgation of Implementation Plans; 
Georgia: Approval of Revisions to the Georgia State Implementation Plan
    11. 63 FR 45172, Tuesday, August 25, 1998, Direct Final Rule--
Approval and Promulgation of Implementation Plans Georgia: Approval of 
Revisions to the Georgia State Implementation Plan
    12. 67 FR 30574, Tuesday, May 7, 2002, Final Rule--Approval and 
Promulgation of Implementation Plans; Georgia: 1-Hour Ozone Attainment 
Demonstration, Motor Vehicle Emissions Budgets, Reasonably Available 
Control Measures, Contingency Measures and Attainment Date Extension
    13. 66 FR 63972, Tuesday, December 11, 2001, Supplemental Proposed 
Rule--Potential Clean Air Reclassification and Notice of Potential 
Eligibility for Attainment Date Extension and Approval of Attainment 
Demonstration, Georgia: Atlanta Nonattainment Area; Ozone
    14. Table of Regulations and Rule Improvements Implemented in the 
15 percent Plan with Associated Emission Reductions
    15. List of 15 percent Plan Codified Regulations
    16. List of 15 percent Plan Rule Improvements
    17. Letter dated January 15, 2002, to Bharat Mathur, Director, 
Region V, Chicago, Illinois from David J. Kolaz, Chief, Bureau of Air, 
Environmental Protection Agency, Springfield, Illinois
    18. Letter dated May 2, 1997, to David Kee, Director, Region V, 
Chicago, Illinois from Donald F. Theiler, Director, Department of 
Natural Resources, Madison, Wisconsin
    19. Letter dated February 13, 1997, to David Kee, Director, Region 
V, Chicago, Illinois from Felicia George, Acting Assistant 
Commissioner, Department of Environmental Management, Indianapolis, 
Indiana
    20. Letter dated February 13, 1997, to David Kee, Director, Region 
V, Chicago, Illinois from Bharat Mathur, Chief, Bureau of Air, 
Environmental Protection Agency, Springfield, IL
    21. Table 4, Chicago 15 percent ROP Plan Measures, August 29, 1996
    22. Letter dated December 22, 2000, to Frank Lyons, Administrator, 
Region V, Chicago, Illinois from Tommy G. Thompson, Governor, State of 
Wisconsin, Madison, Wisconsin
    23. 67 FR 10116, Wednesday, March 6, 2002, Proposed Rule--Approval 
and Promulgation of Air Quality Implementation Plans; Wisconsin; Excess 
Volatile Organic Compound Emissions Fee Rule
    24. 67 FR 42729, Tuesday, June 25, 2002, Final Rule--Approval and 
Promulgation of Air quality Implementation Plans; Wisconsin; Excess 
Volatile Organic Compound Emissions Fee Rule
    25. Letter dated August 9, 1994, to Ms. Beverly Hartsock, Deputy 
Executive Director, Texas Natural Resource Conservation Commission, 
Austin, Texas from A. Stanley Meiburg, Director, Region VI, Dallas, 
Texas
    26. Letter dated September 6, 1994, to Ms. Jodena Henneke, 
Director, Air Quality Planning Division, Texas Natural Resource 
Conservation Commission, Austin, Texas from Gerald W. Fontenot, Chief, 
Region VI, Dallas, Texas
    27. Letter dated May 1, 2002, to Scott Nester, San Joaquin Valley 
Unified Air Pollution Control District, Fresno, California from Andrew 
Steckel, Chief, Region IX, San Francisco, California
    28. E-mail dated January 30, 2002, to Andrew Steckel, Chief, Region 
IX, San Francisco, California from Scott Nester, San Joaquin Valley 
Unified Air Pollution Control District, Fresno, California
    29. E-mail dated January 4, 2001, to Chris Frank, Ventura County 
APCD from Dave Jesson, Region IX, San Francisco, California
    30. E-mail dated December 12, 2000 to David Jesson, Region IX, San 
Francisco, California from Chris Frank, Ventura County APCD
    31. E-mail dated December 12, 2000 to Chris Frank, Ventura County 
APCD from David Jesson, Region IX, San Francisco, California
    32. Letter dated December 28, 2001, to Mr. Jack Broadbent, 
Director, Region IX, San Francisco, California from Michael P. Kenny, 
Executive Officer, Air Resources Board, Sacramento, California
    33. Enclosure A to December 28, 2001 letter to Mr. Jack Broadbent--
1999 Milestone Compliance Demonstration: Background
    34. Enclosure B to December 28, 2001 letter to Mr. Jack Broadbent--
1999 Milestone Compliance Demonstration: Summary Tables for California 
Nonattainment Areas Southeast Desert: Mojave Desert Portion
    35. Enclosure C to December 28, 2001 letter to Mr. Jack Broadbent--
1999 Milestone Compliance Demonstration: Status of State and Federal 
Measures
    36. Enclosure D to December 28, 2001 letter to Mr. Jack Broadbent--
1999 Milestone Compliance Demonstration: Status of Local Measures
    37. San Diego County Air Pollution Control District Measures--
Changes Since the 1996 Milestone Compliance Demonstration
    38. San Joaquin Valley Unified Air Pollution Control District--2000 
Ozone Rate of Progress Report, April 20, 2000 (Revised April 27, 2000)
    39. Letter dated May 17, 2000 to Michael Kenny, Executive Officer, 
Air Resources Board, Sacramento, CA from Norm Covell, Air Pollution 
Control Officer, Sacramento Metropolitan AQMD, Sacramento, CA--
Sacramento Area Regional 1999 Milestone Report, April 2000
    40. Sacramento Area Regional 1999 Milestone Report--technical 
Appendices, April 2000
    41. Letter dated April 6, 2000 to Michael Kenny, Executive Officer, 
California Air Resources Board, Sacramento, CA from Charles L. Fryxell, 
Air Pollution Control Officer, Lancaster, CA--Final Draft Antelope 
Valley APCD 1999 Milestone Compliance Demonstration
    42. Letter dated April 6, 2000 to Michael P. Kenny, Executive 
Officer, California Air Resources Board, Sacramento, CA from Charles L. 
Fryxell, Air Pollution Control Officer, Lancaster, CA--Final Draft 
Mojave Desert AQMD 1999 Milestone Compliance Demonstration
    43. Letter dated February 18, 1997 to Felicia Marcus, Regional 
Administrator, Region IX, San Francisco, CA from Michael P. Kenny, 
Executive Officer, California Air Resources Board, Sacramento, CA--1996 
Milestone Compliance Demonstration for the San Diego County Portion of 
the 1994 California Ozone State Implementation Plan
    44. Letter dated May 19, 1997 to Felicia Marcus, Regional 
Administrator, Region IX, San Francisco, CA from Michael P. Kenny, 
Executive Officer, California Air Resources Board, Sacramento, CA--1996 
Milestone Compliance Demonstration for the Ventura County Portion of 
the 1994 California Ozone State Implementation.Plan
    45. Letter dated February 14, 2000 to Richard Grow, Region IX, San 
Francisco, CA from Scott Johnson, Planning Manager, Ventura County Air 
Pollution Control District--Ventura County 1999 Milestone Compliance 
Demonstration
    46. Letter dated September 11, 1997 to David Howekamp, Director, 
Region IX, San Francisco, CA from Nancy C. Wrona, Director, Air Quality 
Division, Department of Environmental Quality, Phoenix, AZ
    47. Letter dated February 18, 1997 to W. Michael McCabe, Regional 
Administrator, Region III, Philadelphia, PA from Christophe A.G. Tulou, 
Secretary, Department of Natural Resources & Environmental Control, 
Dover, DE
    48. Letter dated March 13, 1997 to Darryl Tyler, Director, 
Department of Natural Resources & Environmental Control, Dover, DE from 
David L. Arnold, Chief, Region III, Philadelphia, PA
    49. Letter dated March 24, 2000 to Nicholas A. DiPasquale, 
Secretary, Department of Natural Resources & Environmental Control, 
Dover, DE from Bradley M. Campbell, Regional Administrator, Region III, 
Philadelphia, PA
    50. Letter dated February 25, 2000 to Bradley M. Campbell, Regional 
Administrator, Region III, Philadelphia, PA from Nicholas A. 
DePasquale, Secretary, Department of Natural Resources & Environmental 
Control, Dover, DE
    51. Certification that public hearing was held January 4, 2000 to 
consider a proposed revision to the State of Delaware Implementation 
Plan for Achieving and Maintaining the National Ambient Air Quality 
Standard for Ozone
    52. Secretary's Order No. 2000-A-0006--Re: SIP Revision--Delaware 
1996 Milestone Demonstration for Kent and New Castle Counties
    53. Memorandum dated February 2, 2000 to Nicholas A DePasquale, 
Secretary from Valerie Satterfield, Hearing Officer re: SIP Revision--
Delaware 1996 Milestone Demonstration for Kent and New Castle Counties
    54. Affidavit of Publication in the News Journal for New Castle 
County
    55. Affidavit of Publication in the Delaware State News for Kent 
County
    56. Final Submittal--Delaware 1996 Milestone Demonstration for Kent 
and New Castle Counties, February 2000
    57. Purdon's Pennsylvania Statutes Annotated--Title 35 Health and 
Safety, Sections 1151 to 6200
    58. Transmittal documents for California SIP revisions including 
Rule 3170 (ozone nonattainment fee) for San Joaquin Valley Unified Air 
Pollution Control District.
    59. Resolution No. 02-05-05, Governing Board of the San Joaquin 
Valley Unified Air Pollution Control District, adopting rule 3170 
(ozone nonattainment fee).
    60. Certification of publication of notice of public hearing on 
Rule 3170 (ozone nonattainment fee) for San Joaquin Valley Unified Air 
Pollution Control District.
    61. Rule 3170 (ozone nonattainment fee) for San Joaquin Valley 
Unified Air Pollution Control District, adopted May 16, 2002.
    62. May 16, 2002, Memo to San Joaquin Valley Unified Air Pollution 
Control District Governing Board, from David L. Crow, Executive 
Director/Air Pollution Control Officer, and Scott Nester, Project 
Coordinator, regarding adoption of proposed rule 3170 (ozone 
nonattainment fee)
                                 ______
                                 
  Responses of Jeffrey Holmstead to Additional Questions from Senator 
                               Voinovich

    Question 1. The recently released National Academy of Sciences 
report, which assesses the CMAQ program, recommends that the ``program 
should be broadened to include, at a minimum, all pollutants regulated 
under the Clean Air Act.'' Do you agree with this recommendation? What 
do you think would be the effect of broadening the CMAQ program?
    Response. The full text of the NAS report recommended: ``At a 
minimum, the eligibility criteria and allocation formula should include 
all pollutants regulated under the Clean Air Act, which would cover 
PMIO, as well as sulfur dioxide and air toxics.'' Without regard to 
CMAQ funding constraints, EPA would agree with the recommendation. 
However, in light of the CMAQ funding levels established by Congress, 
extending geographic eligibility, the apportionment of funds, and 
project eligibility to all Clean Air Act pollutants could dilute the 
amount of funds available to any given area to such an extent as to 
render the program less effective. The NAS study recognized this 
limitation as well.
    EPA believes it is prudent to consider extending eligibility only 
to those pollutants for which we have ambient standards and to which 
mobile sources are a significant contributor. In light of the evidence 
on the health effects of fine particulate matter, and the relationship 
between travel activity and PM emissions, the administration is 
considering recommending inclusion of PM nonattainment areas in the 
apportionment formula. Sulfur dioxide emissions come primarily from 
fuel combustion processes at point sources, with transportation sources 
accounting for only a minor fraction of the inventory. The absence of 
ambient standards for air toxics, together with limitations on the 
information relating travel activity to human health effects from 
exposure to air toxics, would make it difficult to develop a funding 
formula and direct money to useful mitigation projects. Given these 
limitations, EPA would not, at this time, recommend extending 
eligibility and allocation of CMAQ funds for sulfur dioxide and air 
toxic pollutants.

    Question 2. As I mentioned during the hearing, the current Federal 
budget crises demands that we look at the cost-effectiveness of our 
government's programs. Could you provide detailed information to put in 
perspective how cost effective transportation and air quality projects 
have been?
    Response. The National Academy of Sciences CMAQ report concluded 
that ``It is not possible to undertake a credible scientific 
quantitative evaluation of the cost-effectiveness of the CMAQ program 
at the national level.'' A limited number of studies have been done to 
quantify the actual effectiveness of transportation control measures 
(TCMs) as defined by the Clean Air Act, Section 108(f), for improving 
air quality. Most estimates of effectiveness are not derived from 
observed changes in travel activity, but are estimated through the use 
of models. Most models are not designed to estimate the emission 
impacts of individual small scale projects within the context of the 
much larger regional transportation system.
    Even if the data and models were available, the regional variation 
in physical, social and
    economic conditions, as well as the project selection criteria 
which is external to the air quality considerations, would render a 
generalization about the cost-effectiveness of TCMs highly speculative 
for any specific area. It is important to recognize. that 
transportation projects, including those funded by CMAQ and intended to 
reduce emissions, are considered for implementation within the context 
of multiple societal goals that transportation planners seek to 
address. Assigning a portion of the cost of any TCM to each of the 
individual goals, including air quality, introduces a bias that could 
skew cost-effectiveness analyses.
    Given the caveats above, TCM cost-effectiveness estimates in the 
current literature range approximately from $1,000 to several million 
dollars per ton of hydrocarbon reduced. These estimates are limited in 
usefulness because there is no reference point for the temporal effects 
(the timeframe over which the project produces emission reductions) nor 
the cost-effectiveness of the control strategies that have already been 
implemented in an area. For example, evaluation of a well designed 
commuter rail project would indicate different annual cost-
effectiveness figures if it were evaluated over the first 5 years of 
operation, versus a 20 to 30 year timeframe. Additionally, if an area 
has already implemented a substantial set of the most cost-effective 
controls, but still needs additional emission reduction to achieve 
healthy air quality, it may choose to implement more costly 
transportation control measures than to place more controls on its 
industry and power generation sources. We should note, however, that 
these cost-effective estimates assign all of the cost of a particular 
measure to its pollution reduction instead of apportioning it between 
the pollution reduction benefits and other societal benefits (e.g., 
less time spent in traffic).
    The CMAQ study concluded, with significant qualifications, that 
technology based strategies appear to be more cost effective than 
strategies designed to reduce travel activity. The study also noted 
several exceptions where travel demand management projects appear to be 
at a similar costeffectiveness level as technology based measures.
    EPA supports the CMAQ study recommendation for a significant 
national program of evaluation of transportation control measures, 
which would provide State and local transportation and air quality 
agencies with up to date information on cost-effectiveness.

    Question 3. In the past, transportation projects across the country 
have experienced delays due to new emissions standards and conformity. 
As we discussed during the hearing these project delays need to be 
considered prior to EPA's new non-attainment designations. Could you 
please provide an update on the steps EPA has taken since the 
conformity problems were identified? How is EPA preparing to deal with 
problems that may arise after the new designations? Additionally, 
should, and if so how, this matter be addressed during the 
reauthorization of the transportation bill to prevent or alleviate some 
of the delays?
    Response. Under the Clean Air Act section 176(c)(6), transportation 
conformity will apply to nonattainment areas designated under new air 
quality standards 1 year after the effective date of an area's 
designation. Since the 8-hour ozone and PM-2.5 standards are different 
standards from the 1-hour ozone and PM-10 standards, respectively, 
every area that is designated nonattainment for the new ozone and PM 
standards will have a 1-year grace period before conformity applies for 
those standards, regardless of whether or not an area was previously 
designated nonattainment for the 1hour ozone or PM-10 standards.
    EPA is currently developing an overall implementation strategy for 
the new air quality standards; we plan to propose an implementation 
strategy for the 8-hour ozone standards in the very near future. EPA's 
strategy will include a proposal for how areas will be classified and 
when the onehour standard will be revoked, Some areas or part of areas 
that will be designated as nonattainment for the 8-hour standard are 
currently nonattainment for the 1-hour standard. To transition areas 
from the 1-hour to the 8-hour ozone standard, a key option that EPA is 
considering is to revoke the 1-hour ozone standard 1 year after the 
effective date of designations made under the 8-hour standard. While 
this is only one option for transitioning to the new ozone standard, 
this option would allow the revocation of the 1-hour standard to 
coincide with the end of the 1-year conformity grace period, and 
therefore, conformity would only be required for one ozone standard at 
any given time.
    Once the implementation strategy has been proposed, EPA will have 
to update the conformity rule to make it consistent with the new 
standards. EPA has ideas for simplifying the process that we can 
consider in this rulemaking. Stakeholders will also have the 
opportunity to express their view and ideas in this process.
    EPA and U.S. DOT, as well as stakeholders across the U.S., have a 
wealth of experience in implementing conformity. Newly designated areas 
will benefit from our collective experience; EPA and DOT will provide 
timely guidance to these areas before and as they implement the program 
to make the transition to the new standards as smooth as possible and 
to avoid any unnecessary delays in transportation projects. We 
recognize that additional assistance to States and local areas will 
likely be necessary and we plan on extending ourselves to help with 
this transition to new air quality standards.

    Question 4. Too often we talk only about the major problems with 
our air quality and forget to assess how far we have come. Please 
provide for the committee a big picture analysis with benchmark figures 
to get a sense of where we are today, what progress we have made, what 
areas remain as challenges, and what are the sources of these 
challenges. Do you have any State-specific numbers for air quality 
improvements (specifically Ohio)? What has contributed most to the 
country's reductions in air pollution? Where has our Nation been 
getting the biggest returns on legislation and investments to reduce 
air pollution? What emerging new issues need to be addressed and how?
    Response. We agree with the sentiment expressed in this question. 
There has in fact been very substantial progress made in improving air 
quality in this country. Since 1970, aggregate emissions of the six 
principal pollutants tracked nationally have been cut 25 percent. 
During that same time period,
    U.S. gross domestic product has increased 161 percent, energy 
consumption increased 42 percent, and vehicle miles traveled increased 
149 percent. National air quality levels measured at thousands of 
monitoring stations across the country have shown improvements over the 
past 20 years for all six principal pollutants. Despite this progress, 
almost 170 million tons of pollution are still emitted air each year in 
the United States, and approximately 133 million people live in 
counties where monitored air in 2001 was unhealthy because of high 
levels of least one of the six principal air pollutants.
    With respect to State-specific trends, we do not track or publish 
State-specific statistics; normally this is done by the State itself. 
(The Division of Air Pollution Control in the State of Ohio's 
Environmental Protection Agency produces a trends analysis that can be 
found at http://www.epa.state.oh.us/dapc/ams/data.html.) However, we 
can supply the following regarding air quality improvements in Ohio's 
metropolitan areas:
      In 1991, seven Ohio metropolitan areas were designated as 
nonattainment areas for the 1-hour ozone standard. Today, all have air 
quality meeting the 1-hour ozone standard.
    Cleveland-Akron-Lorain, Dayton-Springfield, Toledo, Canton, and 
Columbus, and Youngstown-Warren all were redesignated as meeting the 
standard in 1995 or 1996. The seventh area, Cinncinati-Hamilton, OH-KY, 
also has air quality meeting the standard; the Kentucky portion is 
redesignated and the State of Ohio is working to satisfy requirements 
necessary for redesignation of the Ohio portion.
      EPA trends data for major Metropolitan Statistical Areas 
in Ohio during the 1990-1999 period shows downward trends in six of 
seven areas where carbon monoxide is monitored, 10 of 12 areas where 
PM-10 is monitored, and 10 of 13 areas where SO2 is monitored. The 
progress on S02 occurred primarily as a result of the Acid Rain 
Program. Today, all areas in Ohio meet the national air quality 
standards for carbon monoxide and coarse particulate matter (PM-10). 
All areas have air quality that meets the air quality standard for 
sulfur dioxide with the possible exception of one county near Toledo; 
the State is currently examining whether levels there now meet the 
standard.
    Regarding your question concerning where we have gotten the 
greatest returns on legislation, we believe that one of the greatest 
successes has been the market-based Acid Rain Program which the 
Congress authorized in 1990. As you know, this program established 
overall goals, but allowed industry to find the cost-effective ways to 
comply with those goals. As noted above, the success of this program 
guided us in the design of the proposed Clear Skies Act.
    Regarding your question concerning the remaining challenges, we 
believe that the challenge of attaining the ozone and particulate 
matter (PM) standards is undoubtedly the greatest we face today. Along 
with many others, we believe that region-wide emissions of sulfur 
dioxide (Sox) and nitrogen dioxide (Nox) are the major precursors 
contributing to the high levels of ozone and PM. Based on the success 
of the Acid Rain program, we believe that any effort to attain the 
ozone and PM standards should include cost-effective, region-wide 
reductions of these precursors. As you know, we have submitted to 
Congress the Administration's Clear Skies legislation which, if 
enacted, would reduce emissions of these precursor pollutants from the 
utility industry by some 70 percent through a nationwide cap and trade 
program. I believe that this is the greatest issue we currently face 
and that passage of strong multi-pollutant legislation is an important 
first step. Under the current Act we are focusing on the development of 
rules to reduce emissions from on-road transportation and also non-road 
diesels. These rules will bring reductions in emissions over the next 
few years. Additional reductions beyond those provided by legislative 
initiatives and national rules will be needed to provide clean air in 
the future.
    Finally, for more than 25 years we have documented air quality 
progress in the annual National Air Quality Trends and Emissions 
Report. More recently we also began publishing a summary report on 
Latest Findings on National Air Quality. We also have a website 
(www.epa.gov/AIRTRENDS ) that presents information on the nation's air 
quality, where the many ``trends'' reports and summary report can be 
found, respectively, at http://www.epa.p-ov/airtrends/reports.html, and 
http://www.epa.gov/oar/agtrnd0l/sununarv.pdf.

    Question 5. The Europeans use a lot more diesel fuel in their cars 
then we do because they get more mileage out of each gallon. However, 
this is at the cost of higher emissions. While I understand that 
Europeans use more diesel fuel due in part to their higher gas tax, in 
your opinion, why have U.S. car companies not made this transition? How 
is technology progressing and what is the time line to reduce the 
missions associated with the use of diesel fuel?
    Response. The higher retail prices of motor vehicle fuels in Europe 
relative to prices in the United States has influence on car buying 
habits. Diesel vehicles tend to be more fuel-efficient than gasoline 
vehicles and so European car buyers, for whom fuel costs are a very 
large consideration, are more likely to buy them, even though cars 
powered by diesel engines may be higher priced. In addition, there is a 
perception among some Americans that diesel cars may be unreliable, due 
to problems encountered in past attempts to introduce diesels here. 
These problems have been largely overcome over the years and several 
manufacturers are now considering plans to market new diesel models in 
the U.S. Rapid progress is being made in equipping diesels with high-
efficiency catalytic exhaust controls that will meet the same stringent 
Tier 2 emission standards required of gasoline vehicles over the next 
several years. Key to the introduction of very low-emission diesel 
vehicles is EPA's requirement, for desulfurized highway diesel fuel in 
2006.
                                 ______
                                 
  Responses of Jeffrey Holmstead to Additional Questions from Senator 
                                 Smith

    Question 1. In 1990, Congress' Office of Technology Assessment 
concluded that transportation control measures are a cost-effective and 
technologically simple was to lower emissions, which can result in very 
large improvements. Yet the CMAQ report cites an example in Chicago 
where several hundred TCMs only produced a 2 tons per day reduction in 
emissions, and that many TCMs cost above $50,000 per ton. Is it fair to 
say that the transportation conformity program was based on a set of 
assumptions that are disputed by experience?
    Response. Under the 1990 Clean Air Act, the current conformity 
program was established to better integrate the transportation and air 
quality planning processes. Prior to 1990, some believed that this lack 
of integration contributed to some areas failing to meet the air 
quality standards. In an attempt to correct this situation Congress 
established a transportation conformity process that would integrate 
transportation and air quality planning, that would be dynamic and 
iterative, and that would require areas to consider the impact of their 
transportation decisions before such projects have been built.
    The purpose of conformity as intended under the 1990 Clean Air Act, 
however, had little to do with ensuring that TCM's are cost-effective. 
In general, EPA does not have sufficient data to adequately assess the 
cost effectiveness of transportation control measures. However, we do 
recognize that some TCMs are estimated to have small regional emissions 
impact and, based upon these estimates, some projects would have high 
costs per ton of emissions reduced. Please see our answer to Senator 
Voinovich question #2 for further discussion on this issue.
    Under the current Clean Air Act, areas may choose how to achieve 
conformity as they deem most appropriate. For example, if emissions 
reductions are needed to demonstrate conformity, areas may choose to 
include projects with emissions reduction benefits in the plan/TIP. 
Alternatively, some areas have resolved conformity issues by revising 
their SIP to add new control measures and/or adjust upward the motor 
vehicle emissions budgets to accommodate emissions that exceed the 
motor vehicle emissions budget initially established in the SIP.
    Regardless of the situation, however, EPA does not decide for areas 
how to resolve their transportation and air quality issues. Under the 
current Clean Air Act areas have the choice as to how they will 
approach and resolve conformity difficulties via the interagency 
consultation process. Therefore, we regard such conformity issues and 
their respective solutions as evidence that the conformity program is 
serving its purpose of ensuring that Federal dollars are spent in a 
manner that is consistent with both mobility and clean air goals.

    Question 2. I understand that this chart accounts for existing EPA 
regulations and standards for vehicle emissions. Do these projections 
account for hybrid and fuel cell vehicles? Do you think these new 
technologies will play an important role in reducing vehicle emissions, 
and if so, when?
    Response. As the auto industry continues its progress toward 
bringing the costs down for hybrid technologies (electric and hydraulic 
hybrids) and well as fuel cell and hydrogen technologies, we are 
optimistic that the future will include increasing numbers of these 
more fuel efficient and often cleaner vehicle designs. As this future 
takes shape, we will be evaluating the benefits of the entry of large 
numbers of these vehicles into the U.S. vehicle fleet.

    Question 3. The TRB CMAQ report says TCM effectiveness will decline 
as cars get cleaner. For example, a carpool program in 1970 that 
reduced 100 miles of driving would abate 1000 grams of VOC. In 1990 a 
1000 gram reduction would require drive 1250 miles less, and in 2009 
this number would be 14000 miles less driving. What does this say about 
the future effectiveness of projects and programs aimed at reducing 
vehicle use?
    Response. We were unable to substantiate the numerical comparison 
between 1990.and 2009. As indicated elsewhere in the record (see 
Senator Voinovich question #2), direct cost-effectiveness of an 
individual project is not necessarily the most relevant factor in which 
to evaluate the CMAQ program. These estimates are limited in usefulness 
because there is no reference point for the temporal effects (the 
timeframe over which the project produces emission reductions) nor the 
cost-effectiveness of the control strategies that have already been 
implemented in an area.
    However, we do agree that our new vehicle emission performance 
standards have been very effective in reducing vehicle emission rates. 
As a result of the emission regulations EPA has already promulgated, 
future passenger vehicles and light duty trucks will be approximately 
98 percent cleaner than uncontrolled cars and trucks. As a natural 
consequence of reducing the emissions per vehicle mile traveled, the 
benefit of reducing vehicle miles traveled by a fixed amount with 
today's vehicles will be greater than the benefit of reducing the same 
amount of vehicle miles traveled with vehicles of the future.
    While emission rates per vehicle mile traveled will continue to 
decrease, total emissions from a growing vehicle fleet and increased 
travel will still contribute to air pollution in metropolitan areas. 
Absent additional technological advances and assuming the continuation 
of current growth trends into the future, additional control measures 
may be needed. Therefore, we expect air quality and transportation 
planners to continue to consider TCMs, as defined by the Clean Air Act, 
Section 108(f), for air quality, mobility and quality of life purposes. 
EPA supports investment in TCMs, especially those that are focused on 
air quality, but recognize that decisions on which TCMs, if any, to 
pursue are best made at the State and local level.

    Question 4. I'm concerned about the cost-effectiveness of the CMAQ 
projects. According to the CMAQ report, only 21 percent of the CMAQ 
money is spent on projects that cost less than $10,000 per ton, and 
almost 80 percent is spent on projects that exceed $10,000 per ton, and 
many are well above $100,000 per ton. These more cost-effective 
projects are producing ten times the emission reductions of the 
$100,000 per ton projects. Isn't it more important that we focus CMAQ 
funds on the selection of the most cost-effective pollution-reducing 
projects?
    Response. EPA doesn't collect information on cost-effectiveness of 
CMAQ projects, so we cannot confirm these figures. We would rely on DOT 
for verification of the percentages. Measuring the costeffectiveness of 
CMAQ projects solely on the basis of emission reductions can sometimes 
be misleading. Transportation planners tell us that CMAQ project 
selection often involves consideration of other important societal 
benefits of the project. For example, traffic signal upgrades and 
transit projects, which account for the majority of CMAQ funds, may 
have the added benefit of relieving traffic congestion.
    EPA encourages CMAQ projects that focus on air quality, but just as 
different non attainment areas have various strategies for controlling 
air pollution, they also have different strategies for using their CMAQ 
funds. When considering potential changes to the program it is 
important to consider flexibility for areas wanting to address air 
quality and transportation needs. Thus, decisions on which projects to 
fund are best made by local and State planning officials. Nevertheless, 
the CMAQ report suggested the need for better information and 
accounting of the air quality impacts of funded projects. To the extent 
this would allow a more informed decisionmaking process, EPA would 
support improvement in the estimation and assessment of the emission 
impacts of CMAQ projects.

    Question 5. I am very concerned that some MPO's, through no fault 
of their own, may suffer a conformity lapse due to the new higher 
emissions predicted by EPA's new MOBILE6 model. For example, using 
these new models the Dallas MPO is reporting a 50 percent increase in 
VOC and NOx emissions, Cincinnati is reporting an 18 percent increase 
in NOx emissions, and LA is reporting a doubling of NOx emissions from 
heavy-duty trucks. MPOs are saying that their toolbox is empty, and the 
CMAQ report seems to support that opinion. Where are we going to get 
the necessary reductions? What can we do to make sure that needless 
lapses in highway spending are prevented?
    Response. To assist areas with the transition to the new MOBILE 
model, EPA and U.S. DOT have established the regulatory maximum, 2-year 
grace period before MOBILE6 is required for new conformity 
determinations in most cases. During this 2-year grace period areas may 
continue to use MOBILE5 for conformity determinations based on their 
current MOBILE5 budgets. This 2-year grace period became effective on 
January 29, 2002, the date MOBILE6 was officially released; however, 
MPO's were generally informed of this schedule before January 2002, and 
therefore, have had more than 2 years to reflect this requirement in 
their plans.
    Areas should use the time provided by the grace period to examine 
how MOBILE6 will impact their future conformity determinations. When 
using MOBILE6, some areas may find that emissions estimates are higher 
than those estimates previously made to establish the motor vehicle 
emissions budgets using MOBILE5. As a result of these potential 
emissions increases using MOBILE6, some areas can choose to revise 
their SIP and thus the motor vehicle emissions budgets with MOBILE6 
before the end of the grace period, since doing so may be necessary to 
ensure that conformity can be demonstrated after the 2-year grace 
period has expired and MOBILE6 is required. Currently, we are aware of 
a number of areas that have begun or plan to begin in the near future a 
MOBILE6 SIP revision including, Washington DC, Baltimore, Dallas, 
Houston, Chicago, St. Louis, and Philadelphia.
    Compared to MOBILE5, MOBILE6 provides a much better tool for 
estimating emissions from motor vehicles. The outputs from MOBILE6 
allow a more accurate assessment of transportation's contribution to 
air pollution and the actions necessary to assure clean air. Thus, it 
is the best tool available and should be used in all subsequent 
conformity updates or SIP revisions after a reasonable grace period. 
EPA and DOT concur on this and are jointly working to facilitate the 
use of MOBILE6 in future SIPs and conformity determinations.
    As an alternative or in parallel to SIP revisions, areas can adopt 
additional control measures or modify their current plan/TIP (e.g., 
modify specific projects) to offset any increases in emissions that are 
projected with MOBILE6, particularly in the near term. Such measures 
could include TCM's; however, areas could also explore I/M 
enhancements, voluntary programs (e.g., a voluntary diesel retrofit 
program), or fuels programs to obtain the necessary reductions.
    EPA recognizes that in some cases finding adequate control measures 
may be difficult, as the magnitude and complexity of air quality issues 
can vary from area to area. Therefore, we have been and will continue 
to work with individual States/areas on a case-by-case basis to explore 
potential emissions reductions controls to achieve and maintain clean 
air.

    Question 6. MPOs and Air Quality Agencies have been raising serious 
concerns about the mismatch in the SIP and conformity schedules. For 
example, the Atlanta MPO stated,``. . . the differences in the timing 
and scheduling of SIPs, RTPs, TIPs and associated conformity analysis 
create a very confusing regulatory environment.'' In Sacramento, the 
MPO reports, ``the Sacramento region faces a conformity ``lockdown'' . 
. . [which] means that we will be unable to make any changes, 
additions, or deletions to non-exempt projects . . . until a new SIP is 
approved by EPA.'' What steps is EPA taking to clarify its SIP and 
conformity regulations, and prevent needless conformity lapses from 
occurring?
    Response. From the two examples provided above, there appears to be 
two separate issues that need to be addressed. First, the statements 
made by the Atlanta MPO suggest that the current SIP, plan/TIP and 
conformity schedules have caused some difficulties and unnecessary 
burdens on conformity implementers. Second, the comments made by the 
Sacramento MPO appear to refer to conformity issues that have surfaced 
as a result of the SIP being based on a set of older planning 
assumptions than a conformity analysis that is based on newer, more up-
to-date planning assumptions. Because we have interpreted the 
statements you have quoted here as referring to two distinct issues, we 
have provided below a thorough discussion and response for each issue: 
Conformity Frequency and Latest Planning Assumptions.
Conformity Frequency: Current Requirements
    Transportation conformity is implemented to achieve its purpose as 
defined by the Clean Air Act under the following air quality and 
transportation schedules:
Clean Air Act Requirements
    Transportation Conformity: According to the Clean Air Act, 
transportation plans and TIPs in nonattainment and maintenance areas 
must conform before they are adopted by an MPO. Under DOT's 
transportation planning regulation, metropolitan nonattainment and 
maintenance areas must develop a new transportation plan that covers at 
least a 20-year timeframe every 3 years. In addition, Title 23 requires 
these areas to update their TIPs every 2 years. TIPs cover a shorter 
timeframe (at least 3 years) and consist of a subset of projects from 
the transportation plan. Since TIPs are required to be updated every 2 
years, metropolitan nonattainment and maintenance areas are required to 
demonstrate conformity at a minimum of every 2 years. An option that 
has been suggested to eliminate the mismatch between frequency of plan 
and TIP updates via TEA-21 reauthorization is to streamline the plan 
and TIP into one planning document. EPA recognizes the advantages of 
aligning the frequency of TIP updates with transportation plan updates.
    The Clean Air Act also requires conformity to be determined at 
least every 3 years. In nonattainment and maintenance areas, both the 
metropolitan transportation plan update cycle and the conformity 
determination cycle start at the time FHWA and FTA make the conformity 
determination on the plan; thus, both plan and conformity updates occur 
on the same 3-year cycle.
    SIPS: Once a SIP is submitted for a particular Clean Air Act 
purpose, and approved by EPA, the motor vehicle emissions budgets in 
the approved SIP remain in effect until the State decides to update the 
SIP. The SIP's motor vehicle emissions budgets, in effect, estimate the 
amount of emissions from the transportation sector that the air could 
absorb and still allow the area to attain the National Ambient Air 
Quality Standards. There is no statutory or administrative requirement 
to update approved SIPs on a regular basis, with few exceptions. For 
example, rate of progress and attainment SIPs, as well as regular 
emissions inventory updates that could trigger a SIP revision are 
required in serious and above ozone areas. See EPA's response to 
Senator Jeffords questions #14-18 for more information on SIPs in 
serious and above ozone areas. The types of SIPs that must be submitted 
by an area are dictated by the Clean Air Act and vary according to the 
pollutant and classification of the area.
    Although the CAA does not mandate regular SIP updates, some areas 
have updated or are in the process of updating their SIPs and as a 
result, may have more recent mobile source emissions budgets available 
for conformity purposes. In particular, areas that have had conformity 
difficulties have often addressed such issues by revising their SIPs to 
incorporate new planning assumptions and data and/or additional control 
measures to allow for growth in transportation (e.g., Baltimore MD, New 
Jersey, Salt Lake City UT, Albuquerque NM). In addition, under EPA's 
MOBILE6 policy all States that took MOB1T .5-based preliminary 
estimates of credit for Tier 2 vehicle emission regulation benefits in 
their current SIPs are committed to revise their mobile source budgets 
with MOBILE6 within 1-2 years after MOBILE6's release on January 29, 
2002 (e.g., New York City, Philadelphia PA, Baltimore MD, Washington 
DC, Houston TX, Dallas TX, St. Louis MO). States also typically update 
their SIPs after a change in attainment status, for example, when an 
area requests redesignation and develops a maintenance plan with new 
motor vehicle emissions budgets (e.g., Denver CO, Louisville KY, 
Pittsburgh PA, Cincinnati OH, Richmond VA, Nashville TN). In these 
cases, however, once areas develop a maintenance plan such budgets can 
be in place for up to 10 years because maintenance plans cover a 10-
year timeframe.
Transportation Conformity Rule Requirements
    In addition to the statutory requirements, there are specific 
triggers in the. conformity regulation that warrant a new conformity 
determination within 18-months of certain SIP actions. For instance, 
EPA's conformity rule requires conformity to be done within 18 months 
of EPA's adequacy finding for an initial SIP and within 18 months of 
EPA's approval of a SIP. This 18 month requirement is intended to 
ensure that when an area has a new SIP that establishes a new budget, 
the new air quality information is integrated into the conformity 
process in a timely manner (otherwise, areas could wait up to 3 years 
before that new, relevant air quality information is incorporated). EPA 
is currently working on a proposed rulemaking to eliminate some of 
these 18-month triggers and streamline others to reduce redundancy and 
unnecessary burden on conformity implementers.
EPA Action to Relieve Burden of Conformity Frequency
    First, EPA is currently working on a proposal to revise the 
conformity rule to streamline the 18month conformity triggers for 
certain SIP actions. Specifically, we are considering a proposal that 
would only require a conformity determination if a new motor vehicle 
emissions budget becomes available for conformity purposes. In 
addition, we would propose to limit an 18-month conformity trigger to 
only those budgets that have not previously been used in a conformity 
determination. In other words, if an area satisfies the conformity 
requirement for an initial SIP submission, it would not be subject 
again to another conformity trigger when EPA approves that same SIP 
with the same motor vehicle emissions budgets.
    Second, another option that has been suggested is to streamline the 
plan and TIP into one planning document to eliminate the mismatch 
between frequency of plan and TIP updates. As described above, the 
timing mismatch between the plan and TIP under the current 
transportation planning requirements results in areas having to 
demonstrate conformity at a minimum every 2 years.
    EPA believes that implementing these two options would reduce the 
burden currently experienced by transportation agencies with regard to 
conformity frequency.
Latest Planning Assumptions: Current Requirements
    The Clean Air Act requires that SIPS use the most recent data and 
planning assumptions available at the time a SIP is developed. However, 
the Act does not require SIPs to be subsequently updated for conformity 
purposes. For transportation conformity, the Act requires that 
conformity of the plan and TIP be demonstrated at a minimum of every 3 
years, and that such conformity determinations also include the most 
recent available data. This provision recognizes the importance of 
using the best available (i.e., the most recent or up-to-date) 
information in making conformity determinations.
    Therefore, given the current statutory requirements, some areas 
have approved SIPs and motor vehicle emissions budgets that are based 
on data and planning assumptions that may no longer be the ``most 
recent available'' and may indicate that the SIP projections 
underestimate the anticipated emissions contribution from motor 
vehicles. For example, new VMT information that accounts for unexpected 
growth, more recent vehicle registration data or new emissions models 
may result in significant increases in motor vehicle emissions 
projections. As envisioned by the Clean Air Act, it would be 
inappropriate to ignore the latest information and emissions estimates 
when making conformity determinations.
    In these situations areas have several options from which to chose 
to resolve the increase in emissions from the introduction of new data; 
the area can revise its SIP to incorporate new data and possibly 
enlarge the motor vehicle emissions budget, alter/modify its plan and 
TIP, and/or add new control measures either via the SIP or 
transportation planning processes, as appropriate.
EPA Action to Alleviate Burden of Latest Planning Assumptions 
        Requirement
    EPA and DOT have concurred that by incorporating new data and 
information into the transportation and conformity processes, better 
decisions--both transportation and air quality--can be made. However, 
EPA is aware of the conformity difficulties that can arise due to the 
introduction of new information, especially when the new information 
indicates unanticipated growth in VMT of vehicles with higher rates of 
pollution (e.g., increases in truck freight traffic). Therefore, we are 
currently working on a proposal to revise the conformity rule to 
provide areas with additional time to address and incorporate new data 
into the planning process and, as a result, reduce some of the 
difficulties that have been associated with the current requirements.
    Specifically, we are considering a proposal that would allow 
conformity determinations to use the most current planning assumptions 
that are available at the time the conformity analysis begins (i.e., 
those assumptions available at the beginning of the conformity 
process). This rule revision would differ from our current policy that 
requires the use of planning assumptions that are available at the time 
that the FHWA and FTA make their conformity determination (i.e., those 
assumptions available at the end of the conformity process). This 
proposed rule change would provide certainty to transportation agencies 
that they will not have to re-start the conformity process if new data 
becomes available shortly before FHWA and PTA make the conformity 
determination. This rule change would also give areas adequate time and 
flexibility to incorporate new data when it becomes available prior to 
the beginning of the planning process, so that air quality issues can 
be addressed without undue delays in the implementation of 
transportation projects.

    Question 7. One source of confusion and unnecessary paperwork is 
the number of triggers that can require areas to re-demonstrate 
conformity. For example, SCAG in Southern California, reports that 
these various triggers, ``together with the mismatch in frequency of 
RTP and SIP updates . . . results in debilitating procedural 
inconsistencies.'' In San Joaquin, California, the MPO ``has prepared 
four air quality conformity certifications in the past 12 months.'' 
While I can understand the importance of redemonstrating conformity for 
major new highway projects, how can we reduce the number of triggers 
and make sure conformity determinations are done on a reasonable and 
predictable schedule?
    Response. As we have discussed above in our response to your 
question #6, EPA recognizes that the current conformity triggers 
created by both air quality and transportation requirements may be 
placing an unnecessary burden on transportation agencies. Therefore, we 
are currently working on a proposed rulemaking to eliminate and 
streamline the 18-month conformity SIP triggers; we also support 
combining the transportation plan and TIP into one document, thus 
eliminating the twoyear TIP requirement that is currently included in 
Title 23. EPA believes that these two possible actions could alleviate 
the concerns of transportation agencies, as well as maintain a 
meaningful, iterative process that ensures air quality goals are being 
achieved.
                                 ______
                                 
   Responses of Jeffrey Holmstead to Additonal Question from Senator 
                                 Baucus

    Question. I am concerned with the Consent Decrees between EPA and 
certain engine manufacturers with respect to the requirement that all 
new diesel engines by these manufacturers sold after October 1 of this 
year meet the January 1, 2004 NOx emission standard, the so-called 
``pull ahead'' provisions.
    EPA chose to punish some, but not all, manufacturers of diesel 
engines. Today we have a situation under which all of the United States 
manufacturers must meet the standard this October while certain foreign 
manufacturers are not going to be required to meet the new standard 
until the original January 1, 2004 date. I am aware that one foreign 
engine manufacturer in particular has begun an aggressive marketing 
campaign to exploit this competitive advantage granted to it by our 
government through your agency. What can be done to address this 
troubling condition?
    Response. The October 1, 2002, emission limits agreed to between 
several of the largest engine manufacturers and Environmental 
Protection Agency (EPA) are a result of an EPA enforcement 
investigation. In 1998 EPA announced a settlement agreement which 
resolved charges that the companies--Caterpillar Inc., Cummins Engine 
Company, Detroit Diesel Corporation, Mack Trucks, Inc., Navistar 
International Transportation Corporation, Renault, and Volvo Truck 
Corporation--violated the Clean Air Act by installing devices that 
defeat emission controls. The impacts of the emission control 
strategies used by these companies have resulted in enormous increases 
in pollution which have a serious adverse impact on human health. 
Between 1988 and 1998 the companies are alleged to have sold an 
estimated 1.3 million of the affected engines, which range from the 
type used in tractor trailers to large pick-up trucks. The affected 
engines emitted more than 1.3 million tons of excess NOx in 1998 alone, 
which is 6 percent of all NOx emissions from cars, trucks and 
industrial sources this year. This is equivalent to the NOx emissions 
from an additional 65 million cars being on the road. If the companies' 
use of defeat devices had not been detected and eliminated, more than 
20 million tons of excess NOx would have been emitted by the year 2005. 
In addition, as a condition of the consent decrees, the companies have 
been allowed to continue to sell diesel engines used in the largest on-
highway trucks (i.e., class 8 trucks) which do not meet EPA's emission 
requirements. The consent decrees allow the manufacturers to continue 
to produce the largest heavy-duty diesel engines without meeting EPA 
emission requirements until October of 2002. In exchange for the right 
to produce engines that pollute above the existing standards, the 
companies agreed to pull-ahead the new emission standards which 
otherwise were not required until 2004.
    EPA did not choose to punish some companies and not others. The 
companies listed above are those companies which violated the Clean Air 
Act prohibition of defeat devices, and the list includes both domestic 
and foreign engine manufacturers.
    During the time that these companies used defeat devices, they had 
an unfair competitive advantage over all other heavy-duty diesel engine 
manufacturers in the U.S. marketplace, including both domestic and 
foreign engine companies. In fact, this competitive advantage continued 
for the largest heavy-duty diesel engines until October 1, 2002, at 
which time the companies agreed to eliminate the use of defeat devices 
and comply with the January 1, 2004, emission standards.
    The consent decrees were voluntarily entered into by the seven 
diesel engine manufacturers. The manufacturers had full knowledge that 
the decrees would extend the competitive advantage they had illegally 
maintained over their competitors for more than a decade until October 
1, 2002, at which time they would be required to comply with the 
January 1, 2004, emission standards. Nevertheless, the Administration 
is aware of the concerns raised by the trucking industry about the 
potential economic impact of the pull-ahead of truck emission 
standards, particularly on truck purchases. EPA is working with the 
Department of Transportation and others to determine whether there are 
ways to minimize the adverse impacts.
                               __________
 Statement of Scott Johnstone, Secretary, Agency of Natural Resources, 
                            State of Vermont
Reauthorization of TEA-3
    Thank you for the opportunity to appear before this committee to 
offer comments on the re-authorization of the Transportation Equity Act 
of 2003.
    Vermont, the Green Mountain State, is known for its lush green 
hills, maple syrup, autumn colors and beautiful lakes. Less known is 
the fact that Vermont does suffer adverse effects from air pollution. 
While we are the only State in the Northeast which is in attainment for 
all of the health-based criteria pollutants regulated under the Federal 
Clean Air Act, the health of Vermont's citizens and our environment are 
adversely affected by air pollution. Even though we do not violate the 
8-hr ozone standard or the newly adopted fine particulate standard, we 
are perilously close to those standards. Indeed, Vermont has long 
suffered disproportionately from the impacts of acid rain and regional 
haze. We are also concerned about public exposure to toxic emissions 
and about global issues such as the depletion of the ozone layer and 
climate change. Many of these threats have a direct link to vehicular 
emissions that can be addressed through TEA-III.
    Congestion Mitigation and Air Quality Improvement (CMAQ) funding 
has been part of the Federal transportation bills since 1991. CMAQ 
funds are a critical component of Northeast States' efforts to improve 
air quality; States in our region have benefited from the use of CMAQ 
funding for air quality improvement projects. Today, I want to give you 
my perspective from a State that has had limited access to these CMAQ 
funds due of our status as a NAAQS attainment area.
    EPA's recent investigation of the science regarding both ozone and 
fine particulate pollution, and accepted by the Courts in the American 
Trucking case, has determined that, even though health based standards 
could be set for these pollutants, there was no ``bright line'' minimum 
that would ensure the protection of public health. In other words, 
pollution reductions translate to health benefits even in attainment 
States. In Vermont and New England, much of our air pollution problems 
can be directly attributed to the grandfathered Midwestern coal plants. 
At the same time, the Northeast has localized sources that contribute 
to these problems and each State has attempted to craft regulations to 
deal with these localized sources.
    Surface Transportation remains the largest in-State source of air 
pollution in Vermont. On a per capita basis, Vermonters drive more 
miles in a year than residents in 39 other U.S. States. Besides the 
criteria pollutants such as ozone that CMAQ has focused in the past, 
other air pollution problems need to be addressed such as toxics and 
greenhouse gases. Air Toxics\1\ contribute significantly to the 
formation of ground level ozone and in Vermont represent the area of 
air quality where we do not meets some of Vermont's own air quality 
standards. Green house gases\2\ contribute significantly to overall air 
pollution problems and to climate change.
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     \1\Air Toxics: In Vermont, mobile sources account for between 80-
90 percent of the primary emissions of Acetaldehyde, Benzene, 1,3-
Butadiene, & Formaldehyde. All are Federal Hazardous Air Pollutants 
(HAPs) and all are known or suspected carcinogens. Non-road vehicles 
contribute significantly to air toxic emissions in the State with 
approximately 60 to 70 percent of Acetaldehyde and Formaldehyde 
emissions which contribute significantly to ground level ozone 
formation. While Vermont is a so-called attainment State, ambient 
concentrations of Acetaldehyde, Benzene, 1,3-butadiene, and 
Formaldehyde currently each exceed their respective Vermont Hazardous 
Ambient Air Standard (HAAS) in all areas of the State and computer 
modeling, while predicting decreases in concentrations for these 
pollutants over the next 28 years, indicate that concentrations will 
still exceed the Vermont health standards for these pollutants in 2030. 
Finally, according to the U.S. EPA's National-scale Air Toxics 
Assessment (NATA) median ambient concentrations of mobile source air 
toxics in Chittenden County, Vermont's most populous county, 
consistently rank in the most polluted 25th percentile. For 1,3-
butadiene and Benzene, EPA modeling indicates that Chittenden County is 
in the worst 5 percent and 10 percent polluted areas in the U.S., 
respectively.
     \2\A Greenhouse Gas (GHG) inventory done in 1990 shows that 
approx. 45 percent of all GHGs emitted in Vermont are from motor 
vehicles while, according to the U.S. Dept. of Transportation and the 
U.S. EPA, motor vehicles contributed only 27 percent of the GHGs 
emitted nationally in 1999. [Note: Regarding GHGs, GHG reduction goals 
and incentives could be incorporated into TEA-3 by tracking the Vehicle 
Miles Traveled (VMT) of all major transportation projects, establishing 
a goal for the ratio of VMT/GHGs and by providing incentives for 
transportation projects which promote smart growth and reductions of 
GHG emissions and VMT.
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    The importance that our State places on the control of dangerous 
motor vehicle emissions is reflected in the number of control programs 
that we have put in place over the past decade that go beyond the 
Federal minimum requirements. For example, Vermont is one of only four 
States in the U.S. to voluntarily adopt the California low emission 
vehicle program in-lieu of the Federal motor vehicle standards--
including the Zero Emission Vehicle sales mandate. To support this 
regulatory program, the State created EVermont to promote the 
development and deployment of advanced electric vehicles. We have also 
coordinated with other Northeast and Mid-Atlantic States in developing 
a regional roadside testing program to identify and repair smoking 
trucks.
    CMAQ funds have been of great assistance to Vermont and to other 
States in the region. Over the life of TEA-21, CMAQ has been funded at 
approximately 4 percent of the total Federal surface transportation 
program.\3\ Given the air quality impacts of surface transportation and 
the fact that it is the only transportation program designed to reduce 
air pollution,\4\ CMAQ should not only be reauthorized--it should be 
expanded to represent a larger percentage of the overall transportation 
budget. While the CMAQ program was conceived to address both congestion 
and air quality, greater weight has been--and should continue to be--
given to air quality improvement goals.
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     \3\The National Academies, The Congestion Mitigation and Air 
Quality Improvement Program: Assessing 10 years of Experience--Special 
Report 264, http://www.nap.edu/catalog/10350.html, page 1
     \4\Id. p. 11
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    The transferral of CMAQ funds to non-air quality uses, as is 
currently allowed, should be examined so that the air quality 
improvement goal may be met. Further, the CMAQ allotment scheme should 
be modified to provide weight to factors such as: (1) high per capita 
VMT; (2) areas that are in attainment but at risk of slipping into non-
attainment due to mobile source emissions; and (3) and 
disproportionately high percentage of emissions from mobile source. To 
ensure effective prioritization and better quantification of the air 
quality benefits consideration should be given to requiring that local 
air quality agencies be more directly involved in the evaluation of 
proposals for CMAQ funds and in conformity determinations when needed.
    Historically, CMAQ has focused primarily on ozone, carbon monoxide 
and PM10 non-attainment. Given the breadth of real health 
risks caused by other motor vehicle-related emissions, a 
reauthorization bill should require CMAQ to consider fine particulate 
matter, air toxics and GHG's, in both allocation and eligibility. GHG 
reduction goals and incentives could also be incorporated into TEA-3 by 
tracking the Vehicle Miles Traveled (VMT) of all major transportation 
projects and by providing incentives for transportation projects which 
promote smart growth and reductions of GHG emissions and VMT.
    The committee should also consider the inclusion of programs to 
reduce particulate and toxic pollution from diesel powered vehicles in 
the CMAQ program. Reducing diesel emissions is of critical importance 
to protect public health. Diesel particulate has been labeled a 
carcinogen by the State of California and diesel exhaust has been 
classified as a probable human carcinogen by many respected 
organizations.\5\ In addition to cancer health effects of fine 
particles and diesel exhaust, significant non-cancer health effects 
have been demonstrated in the scientific literature. Diesel school 
buses, non-road equipment such as construction and agricultural 
machines, and trucks and transit buses emit particulates and other 
toxics in close proximity to children, workers, and the public. As 
these engines last as long as 30 years, progress in cleanup that relies 
on normal fleet transition will be slow. Thus, consideration should be 
given to include a mechanism in CMAQ that encourages transit agencies 
and school districts to replace or retrofit their bus fleets with clean 
buses.
---------------------------------------------------------------------------
     \5\National Institute for Occupational Safety and Health (1988), 
the International Agency for Research of Cancer (1989), and the U.S. 
EPA (draft 2000)
---------------------------------------------------------------------------
    To succeed in addressing our particulate, greenhouse gas, and toxic 
emissions challenges and the associated health and environmental risks 
that are associated with them, will require much work and new 
approaches to problem solving. Fortunately, many programs are underway 
throughout the northeast to reduce these emissions These programs 
demonstrate the potential of emission reduction projects. However, 
funding through CMAQ is needed to support these programs. I encourage 
you to look at the initiatives and recommendations provided by the New 
England Governors Conference Climate Plan\6\ and the Vermont Governor's 
Committee to Ensure Clean Air\7\ as examples of how progress can be 
made if these projects were all eligible for and received CMAQ funding. 
Examples from these reports for the transportation sector include:
---------------------------------------------------------------------------
     \6\New England Governors/Eastern Canadian Premiers, Climate Change 
Action Plan 2001. August 2001.
     \7\Committee to Ensure Clean Air, Phase II Report to Vermont 
General Assembly, January 28, 2002, http://www.anr.state.vt.us/dec/air/
docs/CECAPhaseII.pdf.

      Programs designed to manage and reduce transportation 
demand in communities (e.g., ``smart-growth'' projects which reduce 
sprawl and encourage local communities to consider the energy impacts 
of development and infrastructure construction).
      Promote the shift to higher efficiency vehicles 
(including hybrids and advanced technology vehicles), lower carbon 
fuels and advanced technologies through the use of incentives and 
education.
      Diesel retrofits and conversions to alternative fuels 
which greatly reduce or eliminate particulate and toxic hydrocarbons.
      Opportunities in freight transportation that would 
improve the energy efficiency of the movement of goods across the 
region.

    In considering the purpose of CMAQ, I would suggest the committee 
look also at the broader funding system for transportation projects. 
Much of our air quality and congestion problems come from the very poor 
use of land that has come to pass over the past decades, the practice 
we now call sprawl. I suggest to you that in part it has come about due 
to our method of funding transportation projects. Communities look at 
funding sources in designing their land use systems. We ought not be 
surprised that strip zoning and sprawling development is most often 
associated with highways eligible for State and Federal funding. What 
occurs is sprawl and the cure--little to no local cost to ``fix'' the 
problem, by increasing lanes or building new highways. I suggest you 
consider what would occur if we provided incentives instead for grid 
patterns and public transit. I believe the result would be better land 
use, less congestion, better air quality and ultimately smarter growth.
    The use of CMAQ funds should also be encouraged for programs which 
simply make sense, regardless of an area's attainment status. One such 
program is vehicle On-board diagnostic (OBD) system inspection and 
maintenance. 1996 and newer vehicles are equipped with sophisticated 
OBD systems which identify malfunctions that increase emissions, alert 
drivers through a warning light on the instrument panel, and store 
specific information which is used by repair technicians to accurately 
diagnose and repair the malfunction. Such a program is cost effective 
and relatively simple to implement, as it relies on technology already 
installed on the vehicle, as opposed to requiring expensive investments 
in emissions testing equipment. Vermont has operated such a program on 
a statewide basis for over 3 years, with much success and with very 
little public opposition to the program. Currently, a pilot project is 
underway, using CMAQ funds to evaluate systems for automating OBD data 
collection and management, hopefully leading to an even more effective 
program in Vermont.
    In summary, a State, such as Vermont, which is in attainment, can 
use some or all of the minimum allotment of CMAQ funds for any project 
in the State Transportation Plan or for a CMAQ-eligible project. 
However, attainment of the ozone and CO NAAQS alone provides an 
incomplete picture of the success of air quality control initiatives. 
Clearly, mobile source-related emissions of criteria pollutants, air 
toxics and GHG's all need to be included to address the actual risk 
from air pollution. While the current CMAQ Guidance published by the 
Federal Highway Administration encourages attainment States to ``give 
priority to use of CMAQ program funds for projects that will relieve 
congestion or improve air quality in areas that are at risks of being 
designated as non-attainment,'' I suggest that ``attainment''/''non-
attainment'' may not be a particularly relevant criterion to use in 
deciding how limited CMAQ moneys are to be used. Even in attainment 
States, transportation-related air quality issues need to be addressed. 
I believe that overall it would benefit Vermont and other attainment 
areas, for Congress to establish that, even in attainment States, CMAQ 
funds must be used in a way that retains the overall focus of air 
quality improvement.
    In closing, in Vermont, as elsewhere, CMAQ has encouraged 
environmental and transportation agencies to talk, plan and work with 
each other. It is a program that has helped achieve important progress 
in the fight against air pollution--but much remains to be done and 
CMAQ must be updated to reflect our evolving understanding of the real 
risks society faces from vehicle-related air pollution. Vermont's 
environmental future, our green hills, our maple syrup industry our 
autumn colors, our lake quality and the health of our citizens requires 
our attention.
    Thank you for this opportunity to testify.
                               __________
   Statement of County Judge Ron Harris, Collin County, Texas, North 
    Central Texas Council of Governments and Metropolitan Planning 
             Organization for the Dallas-Fort Worth Region
    Mr. Chairman and members of the committee, I am Ron Harris, County 
Judge of Collin County. Our county is located within the five-million-
person Dallas-Fort Worth Metropolitan Area. Today, my remarks represent 
the view of the policy officials from our region, specifically the 
Metropolitan Planning Organization of the North Central Texas Council 
of Governments. I am a former Council of Governments President, City 
Council member, 12 years as County Judge, and serve as chair of the 
North Texas Clean Air Steering Committee, co-chair Texas Clear Air 
Working Group and member of the Local Government Advisory Committee to 
the director of EPA. Our region has benefited from participation in 
partnerships with EPA's Regional Administrator Cook and Texas Natural 
Resources Conservation Commission. I am appearing today at your 
invitation and hope that we will be able to strengthen our partnerships 
through your leadership in fine tuning environmental and transportation 
laws to more effectively result in cleaning of the air.
    I want to thank you and the members of the committee for holding 
this series of hearings to review the critical issues surrounding air 
quality and reauthorization of the Transportation Equity Act for the 
21st Century.
    Metropolitan areas account for 75 percent of the nation's 
population and 83 percent of its economic output. They are centers of 
social and economic activity, and are the hubs of the national 
transportation system. As these centers grow, congestion frequently 
follows, and unfortunately, all too often associated air pollution. We 
think with the implementation of sustainable land use; rail transit; 
management and operations improvements; freeway improvements; toll road 
construction; and aggressive air quality policies, programs, and 
projects, urban regions can exhibit economic vitality, mobility, and 
air quality attainment.
    As you know, our agency prepared a response to questions from the 
committee. I applaud your format of requesting real world feedback from 
users around the country. I ask that you refer to that response for 
specific details to your questions. What I would like to do is address 
five of the more important policy questions.
    1. Congestion Mitigation and Air Quality Improvement Program 
(CMAQ). The Clean Air Act Amendments of 1990 and the Intermodal Surface 
Transportation Efficiency Act of 1991 permanently fused transportation 
and air quality planning and programming. The CMAQ Program is one 
mechanism to aggressively fund control measures to reduce mobile source 
Volatile Organic Compound (VOC) and Nitrogen Oxide (NOx) emissions. 
This funding and these measures are intended to lower exceedances of 
the 1-hour and soon to be 8-hour ozone standard. We anticipate that the 
CMAQ funding Program will also be eligible to reduce emissions in the 
soon-to-be implemented Particulate Matter (PM) 2.5 standard. The 
National Academy of Sciences Committee on this topic, of which our 
Transportation Director was asked to serve, recommends continuation of 
the CMAQ Program. In addition, the committee proposed a more flexible 
and more effective program by permitting eligibility for high emitting 
vehicles and assistance in reducing further emissions from diesel 
emission sources.
    2. Additional Technology, Vehicle Emission Controls, and 
Transportation Control Measures or TCMs. TCMs are important components 
to reduce emissions and greatly assist with air quality conformity. 
They often meet mobility and air quality objectives. Non-traditional 
TCMs are some of the most innovative and cost-effective programs in 
reducing vehicular emissions by way of altering emission rates or 
reducing vehicle miles of travel.
    We ask the Congress to continue its past leadership in establishing 
Federal technology programs that would otherwise be legally difficult 
to implement at a statewide or local level. Congress is encouraged to 
explore ways to reduce the growing off-road mobile source emissions. 
Another approach to reduce vehicular emissions is to advance already 
existing Federal gasoline, diesel, and engine standards earlier than 
required.
    3. Plan Submittal Frequencies. Coordination between the State 
Implementation Plan (SIP), the Transportation Plan, Transportation 
Improvement Program (TIP), and associated air quality conformity 
analysis proves to be difficult due to varied schedule requirements. 
Currently, the SIP submittal process is infrequent, but influenced by 
real-time, observed air quality data. The Transportation Plan has a 3-
year update cycle, and the TIP has at least a 2-year update cycle. It 
would be much more efficient to have consistent submittal frequencies 
and to streamline the implementation of specific policies, programs, 
and projects with less emphasis on repeating the planning process for 
already approved plans. In addition, it would lessen the confusion to 
our citizens, local governments, transportation authorities, regional 
partners, and resource agencies as they try to coordinate their 
planning activities with these Federal requirements.
    4. Conformity. The air quality conformity process is a good 
mechanism to demonstrate that sound transportation planning is 
occurring. There are three predominate concerns. First, SIP and 
emission budgets have a relatively short-term horizon, while conformity 
of the Transportation Plan may be 25 years in the future with little 
unknown out-year emission technology benefits. Second, The 
Environmental Protection Agency (EPA) can establish new emission rate 
software at irregular intervals. This creates a conflict on how to 
include new information or the often suggested inconsistency of 
comparing transportation air quality impacts between two very different 
EPA software versions. Third, conformity is often used as a litigation 
mechanism instead of the transportation assessment Congress 
established.
    5. Planning Horizons. Existing planning horizons for the SIP and 
the Transportation Plan is an issue that Congress should consider 
making more consistent. The Transportation Plan is required to maintain 
a staged 20-year horizon and the SIP to contain a near-term attainment 
date.
    Again, more detailed information is contained in our eight page 
response to your questions. Thank you for your invitation to be here 
today.
                               __________
  Statement of Lynn M. Terry, Deputy Executive Officer, Air Resources 
           Board, California Environmental Protection Agency
    Thank you for the opportunity to comment on California's experience 
integrating air quality and transportation planning as required by the 
Clean Air Act. Over the years, we have been able to meet the Act's 
transportation conformity requirements through the cooperative efforts 
of agencies at the local, State, and Federal level. At the same time, 
we are encountering some process challenges that need to be addressed. 
We are looking at this issue in the context of California's 
longstanding and successful air pollution control program--a program 
that will now address global warming as a result of the passage of 
State legislation recently signed by Governor Davis.
    The concept of transportation conformity is a simple one--the air 
pollutant emissions from the transportation sector must be consistent 
with air quality plans for a region. This is critical to ensure that we 
meet health-based air quality standards in the required timeframe. The 
process itself requires looking at today's emissions and well as those 
in the future. This is necessary to ensure that we continue to make 
clean air progress as our population and economy grows.
    Over the last 20 years, reducing air pollution from the 
transportation sector has been essential to California's dramatic 
progress in improving air quality in the Los Angeles area--historically 
the nation's smoggiest region. For transportation, that progress is 
largely due to cleaner vehicle technology. A new car in 2010 will emit 
only one tenth the ozone forming pollution of a 1990 model. As a 
result, transportation control measures that reduce travel have shown 
less benefit than anticipated.
    Also, there is little flexibility for transportation agencies in 
terms of implementing transportation control measures once they are in 
the air quality plan. This discourages innovation because new, more 
effective measures cannot replace a measure that proves to be 
infeasible. In terms of complying with the conformity requirements, we 
believe the focus should be on the emission reduction goal rather than 
the implementation of a specific transportation control measure.
    In addition to transportation control measures, there is another 
important mechanism to address air pollution from the transportation 
sector--the Federal Congestion Mitigation and Air Quality program. We 
strongly support these funds as a means for transportation agencies to 
provide significant emission reductions in a cost-effective way. There 
are many cleaner technologies that can be funded to reduce both ozone 
and particulate pollution from the transportation sector.
    The most difficult problem with the current conformity process is 
the inability to take new information into account in a workable way. 
Air quality plans or ``SIPs'' must define the emission target needed to 
achieve clean air as defined by national air quality standards. That 
emission target is based on the State of the science at the time the 
air quality plan is done. Once approved by the U.S. Environmental 
Protection Agency, the SIP is the federally enforceable benchmark for 
transportation conformity purposes. There is no requirement to update a 
SIP prior to the deadline for meeting the air quality standard.
    On the other hand, transportation plans must be updated routinely. 
And, as a practical matter, changes in individual transportation 
projects are proposed often monthly in major urban areas. These changes 
typically trigger a process that requires new information to be used in 
the conformity analysis. When the SIPs have not been updated with the 
same information, the inherent inconsistency may derail the process.
    In California, we face this issue virtually statewide. As a result, 
we will be revising 23 SIPs over the next year or so. And while this 
will put us back on a consistent process track in the near-term, it is 
a major undertaking that will not in itself provide air quality 
benefits. What we want to avoid in the future is the triggering of a 
comprehensive SIP update each time new information becomes available. 
Under today's rules, this is the only way to avoid conformity problems 
as the science improves.
    We believe it is more appropriate to comprehensively revise air 
quality plans when the underlying facts have changed so substantially 
that the approach to meeting the air quality standard must be revised. 
Otherwise, we need the option of a streamlined mechanism to respond to 
new information. For example, a streamlined mechanism could be 
appropriate when a region is close to meeting the standard, emissions 
are declining, and the strategies in the air quality plans are all 
being implemented. In this type of transitional situation, a 
reconciliation of ``old'' and ``new'' vehicle emission estimates would 
make more sense than a comprehensive plan revision.
    For regions that have a long way to go to meet the air quality 
standards, more frequent plan updates will be needed. For example, we 
recognize that the air quality plan for the Los Angeles region needs a 
comprehensive update. A number of new studies are available, including 
improved data related to motor vehicle emissions and travel. From a 
process standpoint, what these situations demand is the ability to link 
the timing of transportation plans and conformity with the completion 
of new air quality plans.
    In conclusion, California is pursuing statewide SIP revisions as a 
means to provide the necessary consistency between air quality and 
transportation plans. But we want to use our resources more effectively 
to protect both our Federal transportation dollars and the integrity of 
our clean air plans. We believe that with some focused process changes 
we can accomplish both.
    Thank you again for the opportunity to be here. I would be pleased 
to answer any questions you may have.
                               __________
 Statement of James E. Stephenson, President, Yancey Brothers Company, 
   Atlanta, Georgia, on behalf of the American Road & Transportation 
                          Builders Association
    Mr. Chairman, Senator Smith, members of the committee, thank you 
very much for providing the American Road and Transportation Builders 
Association (ARTBA) an opportunity to present its views on the 
transportation conformity process, the Congestion Mitigation and Air 
Quality (CMAQ) improvement program and new technologies before this 
committee today. I would like to say at the outset that ARTBA shares 
your interest in assuring that all Americans breathe clean air. We are 
not here today to suggest a radical overhaul of the conformity process. 
We would, however, like to suggest some badly needed ``fine-tuning'' of 
Federal law that will not only improve public health from a clean air 
perspective, but also improve the efficiency of making environmentally 
sound and needed transportation investments.
    I would also, at the start, like to thank each member of this 
committee for everything you have done this year to prevent a severe 
year-on-year cut in Federal highway investment for Fiscal Year 2003 
that potentially could occur through strict enforcement of the Revenue-
Aligned Budget Authority (RABA) provision of the Transportation Equity 
Act for the 21st Century (TEA-21). We truly appreciate the leadership 
that each member of this committee has shown on this issue.
    I am Jim Stephenson, president of Yancey Brothers Company in 
Atlanta, Georgia. We are the Caterpillar dealer for the northern half 
of the State of Georgia. As you know, Atlanta has had its share of 
problems with the conformity process over the past several years. I 
have personally taken a very active role in trying to solve these 
problems. I serve on the Board of Directors of the Georgia Regional 
Transportation Authority (GRTA), which was established by the Governor 
of Georgia in 1999 to tackle Georgia's conformity problems. I am also a 
member of the ARTBA Board of Directors.
    ARTBA celebrates its 100th anniversary this year. Based in 
Washington, DC, ARTBA was organized in 1902 by a visionary Michigan 
public official, Horatio S. Earle, for the purpose of advocating 
Federal legislation to create a ``National Capital Connecting Highway 
System.'' That vision was realized with the enactment of the Interstate 
Highway construction program and Highway Trust Fund in 1956. ARTBA has 
more than 5,000 members and provides a consensus voice representing all 
sectors of the transportation construction industry--public and 
private--before Congress, the White House and the Federal agencies. The 
industry ARTBA represents generates $200 billion annually to the 
nation's Gross Domestic Product and generates more than 2.5 million 
jobs for American workers.
General Background on the Clean Air Act
    Under the Federal Clean Air Act, the U.S. Environmental Protection 
Agency (EPA) regulates six criteria pollutants: ozone, carbon monoxide, 
nitrogen dioxide, sulfur dioxide, particulate matter (also known as 
soot and dust) and lead. For each pollutant, EPA has established 
minimal targets that must be met known as the National Ambient Air 
Quality Standards (NAAQS).
    If an area exceeds EPA's standards for any one of these 
``criteria'' pollutants, it is designated a nonattainment area, 
triggering a series of steps that must be taken to come into compliance 
with the standards. In addition, for ozone, carbon monoxide and some 
particulate matter nonattainment areas, the EPA further classifies the 
area based on the magnitude of the nonattainment. These classifications 
are used to specify what pollution reduction measures must be adopted 
for the area and what deadlines must be met to bring the area into 
attainment.
    Currently, the most pervasive problem for transportation planning 
purposes is ozone, followed by carbon monoxide and particulate matter. 
For ozone, the EPA utilizes the following classifications of attainment 
depending on the magnitude of the problem: Extreme, Severe, Serious, 
Moderate and Marginal. These classifications dictate when an area must 
achieve attainment status for ozone\1\ and what measures must be taken 
to achieve attainment.
---------------------------------------------------------------------------
     \1\Marginal ozone nonattainment areas had to meet compliance in 
1993, Moderate in 1996, Serious in 1999, Severe in 2005-2007, and 
Extreme in 2010.
---------------------------------------------------------------------------
    Ozone is formed through a complex chemical reaction between 
volatile organic compounds (VOCs) and oxides of nitrogen (NOx) in the 
presence of sunlight. To reduce ozone, one must reduce one or both of 
the precursor pollutants. VOCs are best described as fumes emitted from 
sources such as automobiles, chemical manufacturing plants, dry 
cleaners, paint shops and others that uses solvents. NOx is formed when 
combustion occurs at high temperatures. It is primarily emitted from 
electric utilities, industrial boilers and transportation sources. 
Since sunlight and warmer temperatures cause these reactions, ozone 
violations typically occur during the late afternoon hours on hot 
summer days.
Transportation Sector Successes in Achieving Cleaner Air
    Mr. Chairman, there's no doubt that we have made great progress 
over the past 30 years in improving the nation's air quality. Much of 
this progress has been achieved through technology advancements spurred 
by motor vehicle emissions standards and controls and cleaner fuels. 
Between 1970 and 1999, carbon monoxide emissions from on-road vehicles 
were reduced by 43 percent. Volatile organic compounds--a precursor to 
ozone--were reduced 59 percent. Particulate matter (PM10) 
emissions have been reduced 33 percent.
    In fact, Mr. Chairman, the only pollutant that has increased since 
1970 has been Nitrous Oxides (NOx)--the other precursor of ozone--which 
is up 16 percent. However, despite the increase in overall NOx 
emissions, the amount of NOx being emitted from automobiles is down 31 
percent since 1970.
    EPA's monitoring data are also encouraging. Exceedances of EPA's 
ozone standards are down 80 percent since 1990. Exceedances of the 
carbon monoxide standard are down 97 percent and exceedances of the PM 
standards are down 81 percent since 1990. These numbers are even more 
remarkable given that since 1970, the U.S. population has grown over 30 
percent, the number of licensed vehicles has increased about 90 percent 
and the number of vehicle miles traveled has increased 143 percent.
    Progress has also been made with the other pollutants. For 
instance, on-road sulfur dioxide emissions have been reduced nearly 60 
percent since 1970, although transportation is not considered a 
significant source of sulfur (97 percent is not transportation 
related). In addition, lead has been virtually eliminated from our air 
with the introduction of unleaded gasoline.
    Mr. Chairman, while great progress has been made all around in 
improving the nation's air quality, I want to emphasize that most of 
that progress has come from the transportation sector. For example, 
carbon monoxide emissions from on-road vehicles have been reduced 45 
percent since 1970. The reduction from non-transportation sources, over 
the samer period, however, is just over 10 percent. We hope the 
committee will keep this in mind as it moves forward with reforms in 
the future.
    I would also like to point out to the committee that reforms being 
discussed in the stationary source arena could have unintended 
consequences for transportation. As you know, for each criteria 
pollutant for which an area fails to meet EPA's standards, the Clean 
Air Act requires the State to prepare a State Implementation Plan (SIP) 
to show how it will ``attain'' the air quality standard over a 
designated period of time. A SIP typically contains restrictions on 
stationary sources (e.g., factories), area sources (e.g., landfills) 
and mobile sources (e.g., off road equipment, yard equipment, and motor 
vehicles). From a transportation planning perspective, this exercise is 
a ``zero-sum'' game. If emissions from area sources and stationary 
sources are given more leeway in the SIP, fewer emissions can come from 
transportation sources. ``Emissions reductions inequity'' can put 
severe constraints on the construction of future transportation 
improvement projects, since a region's transportation plan must 
``conform'' to the emissions budget for motor vehicles in the SIP.
    Please do not forget about the transportation sector when looking 
at approaches like emissions credits trading program for power plants, 
since it is primarily the transportation sector that is penalized when 
an area is not meeting air quality standards. If a power plant is 
allowed to emit greater emissions in the Atlanta area because of 
credits they bought from a cleaner plant in Illinois, that does nothing 
to help Atlanta solve its transportation conformity problems. It only 
puts greater pressure on the transportation emissions budget. While we 
applaud the committee's desire to think ``outside-the-box'' and use 
incentive-type systems, please do not forget that transportation 
planning is very regional and can often conflict with the commercial 
interests of large stationary polluters.
Congestion Mitigation and Air Quality Program
    Mr. Chairman, as I already stated, huge gains have been made in 
emissions reductions from automobiles. And in the future, advanced 
engine and fuel technologies such as alternative fueled vehicles, 
hybrids and fuel cells and the tighter Tier II standards--which the 
transportation construction industry actively support--will continue to 
have major, positive impacts on air quality without reducing the 
mobility of the American public. As in the past, air quality gains from 
the transportation sector will likely rely on technology advances, not 
transportation control measures.
    When the Clean Air Act Amendments of 1990 were enacted, they were 
based on a false premise or assumption--that increases in vehicle miles 
traveled (VMT) would overwhelm the emissions-reduction capacity of 
technological advances. Quite the opposite has happened. Despite an 
increase in VMT of 39 percent since 1990, vehicles have become much 
cleaner. They will be ``squeaky'' clean by 2020. With new standards for 
truck engines and diesel fuels in place, there will likely be many more 
gains from the transportation sector in improving the nation's air 
quality in the coming years.
    These facts should lead Congress to seriously examine and question 
many of the transportation-related programs that were developed in 
conjunction with the Clean Air Act Amendments of 1990. These programs 
all operate under the assumption that the only way to get meaningful 
reductions in emissions is by reducing VMT, largely by shifting people 
to non-auto modes of transportation. The conformity process is based on 
this false assumption, as is the Congestion Mitigation and Air Quality 
(CMAQ) improvement program, which was first implemented under the 
Intermodal Surface Transportation Efficiency Act (ISTEA) and then 
extended under TEA-21.
    CMAQ was authorized to spend $14.1 billion over the life of ISTEA 
and TEA-21 on programs in ozone and carbon monoxide nonattainment areas 
that primarily constitute transportation control measures, such as HOV 
lanes, mass transit, carpool/vanpool programs, etc. However, some 
programs that could prove most effective in actually reducing 
pollution, have always been excluded from receiving CMAQ funds, such a 
vehicle scrappage programs. According to EPA, less than 10 percent of 
the nation's motor vehicle fleet emits over 40 percent of mobile 
generated hydrocarbon pollution and the ``dirtiest'' 1 percent of 
vehicles emit over 25 percent. With the money that has been spent on 
CMAQ during its life, almost all of these dirtiest cars could have been 
replaced with new cars, resulting in real quantifiable reductions in 
air pollution.
    A recent report by the Transportation Research Board (TRB), 
``Assessing 10 Years of Experience'' of the CMAQ program recently 
concluded that most CMAQ-funded programs have not yielded significant 
emissions reductions and will provide even less in the future because 
the auto fleet has become so ``clean'' when it comes to emissions. TRB 
could not find any quantifiable benefits from how the CMAQ funds are 
being spent.
    Despite this conclusion, however, the committee that authored the 
report recommended that the CMAQ program be continued. The committee 
further said that ``existing restrictions on projects involving 
construction of new highway capacity should be maintained.''
    Mr. Chairman, I would suggest that if, indeed, the goal of the CMAQ 
program is to (1) reduce congestion, and (2) promote better air 
quality, that one of the best ways to achieve both goals at the same 
time is by reducing bottlenecks on the nation's roads. It is estimated 
by the Texas Transportation Institute that congestion in the nation's 
largest metropolitan areas costs Americans $78 billion per year. That 
means less time with your family and more fuel wasted. Also, cars 
perform at their worst from a pollution standpoint in stop and go 
traffic. Depending on the pollutant, car engines run most efficiently 
around 45--50 miles per hour.
    The CMAQ committee also recommended that the program be expanded to 
cover all pollutants and air toxics, not simply limiting CMAQ funds to 
those areas out of attainment for carbon monoxide and ozone. Mr. 
Chairman, as I already discussed, the main source of many of these 
other pollutants, such as sulfur dioxide, come not from transportation, 
but elsewhere. To apply CMAQ funds to these additional areas would only 
dilute the program even more and turn a not very effective program into 
a very ineffective program.
    We think some accountability needs to be built into the CMAQ 
program so that money is only being spent on activities that produce 
real, quantifiable emissions-reduction results.
    Mr. Chairman, many have also called for substantially increasing 
the funding for CMAQ during the reauthorization of TEA-21. Such a goal 
could be accomplished by substantially increasing funding for the 
entire highway program.
Problems with the Conformity Process
    Mr. Chairman, that leads me to my comments about the conformity 
process itself. There are two things I hope you take from this hearing 
today, (1) that government agencies and planning bodies need more 
flexibility on conformity and (2) the public--especially those who 
contract with government agencies to build transportation improvement 
projects--need more predictability in the transportation conformity 
process.
    One of the major problems with the conformity process is that 
people have tried to turn it into an exact science, when it is anything 
but. All you have to do is to look back at the predictions made during 
the enactment of the Clean Air Act Amendments of 1990 to understand 
that ``modeling of future events'' often does not reflect reality.
    An example of this is EPA's transition from the current Mobile V 
model to the Mobile VI model for predicting future on-road emissions. 
In applying the new Mobile VI model to current data, regions will 
experience a substantial short-term increase in predicted emissions as 
compared to the Mobile V model. While over the long term, the Mobile VI 
model shows decreasing emissions, this could cause substantial problems 
for many areas and threaten a potential conformity lapse in the short 
term. Even though the data being entered into the models is the same, 
each shows very different outputs.
    This problem is amplified by the fact that quite often 
transportation plans and the SIPs they are supposed to conform with are 
often out of sync with one another. This is largely due to the fact 
that transportation plans have very long planning horizons and have to 
be updated frequently, while most air quality plans have very short 
planning horizons and are updated infrequently. As a result, many of 
the planning assumptions that must be used for conformity 
determinations of transportation plans are not consistent with the 
assumptions that were used in the air quality planning process to 
establish emissions budgets and to determine appropriate control 
measures. In other words, because the most recent planning data must 
always be used, an increase in emissions and possible conformity lapse 
can occur simply because the numbers or models relied on in the 
transportation plan are not the same numbers relied upon in the air 
quality plan.
    Part of this is due to the fact that the priority of various 
transportation projects often changes and every time this occurs, the 
plan needs to be updated. While many have suggested that the planning 
horizons should be brought more in sync with one another, another 
option would be to simply allow greater flexibility in the process, 
recognizing the inexact science involved. Rather than requiring plans 
to conform to the ``nth-degree,'' perhaps a 10 percent ``cushion'' 
should be allowed so that transportation planners would not have to 
amend their plans every time they want to add or subtract even a 
relatively insignificant project. In addition, such a cushion would 
permit some differences in planning data or models and would allow a 
margin of error for modeling assumptions planning organizations make 
but have no real way of predicting with precision--such as economic 
growth or the current price of gasoline--even though such things have a 
substantial impact on future travel or the use of larger vehicles like 
SUVs.
    Very few conformity lapses occur because a region has a major clean 
air problem. They occur because one of the parties involved cannot meet 
a particular deadline. As a result, the conformity process has become a 
top-heavy bureaucratic exercise that puts more emphasis on ``crossing 
the t's and dotting the i's'' rather than engaging the public in true 
transportation planning that is good for the environment and the 
mobility of a region's population.
Litigation
    Mr. Chairman, flexibility in the conformity process has also been 
constrained by litigation initiated over the past several years by 
parties opposed to individual transportation projects and/or the 
concept of increasing highway capacity. In 1997, in Sierra Club v. EPA, 
the court said EPA could not continue the practice of allowing areas 
that are new non-attainment areas to have a 1-year grace period before 
they need to perform a conformity test. This could have had a 
devastating impact on communities when EPA implements its new ozone and 
PM2.5 standards, now slated for 2004. However, seeing the 
unfairness of this, Congress acted and reinstated this grace period 
through the legislative process.
    In yet another court case in 1999, in Environmental Defense Fund v. 
EPA, the court struck down EPA's practice of ``grandfathering'' 
projects when a conformity lapse occurs. Up to this point, when an area 
went into a conformity lapse, projects could proceed if they had 
already met all of the necessary environmental requirements and were 
part of a conforming transportation plan at the time of the lapse. In 
defending its own rule before the court, EPA stated:

      ''EPA's rule reflects its rational judgment that Congress 
intended a more reasoned approach to transportation planning during 
periods in which there is no applicable SIP, that Congress intended 
that there be an attempt to balance the general pollution-reduction 
requirements of the Act with the needs of State and local planning 
organizations for certainty and finality in their transportation 
planning process. 42 U.S.C. 7506(c)(2). [EDF v. EPA, Case No. 97-1637, 
Respondent's Brief, June 10, 1998, p. 30.]
      ''EPA explained that it 'has always believed that there 
should only be one point in the transportation planning process at 
which a project-level conformity determination is necessary. This 
maintains stability and efficiency in the transportation planning 
process.''' [EDF v. EPA, Case No. 97-1637, Respondent's Brief, June 10, 
1998, p. 36.]

    This decision had a devastating impact in my own hometown of 
Atlanta. At the time of the decision, Atlanta was in a conformity 
lapse. As a result of the decision, 54 of 71 major priority projects 
that had been vetted through years of planning were put on hold, even 
though they had already passed all of the necessary environmental 
tests.
    During the last Congress, Senator Bond introduced legislation that 
would have restored the practice of grandfathering. While his 
legislation passed this committee, it never made it to the Senate 
floor. We would strongly urge this committee to take this issue up once 
again.
    Two other long-standing practices have also been struck down by the 
courts, which has reduced flexibility in the conformity process and 
deserve this committee's attention:

      EPA is often not able to approve a State's motor vehicle 
emissions budget in time for a conformity determination to be made. 
Prior to the EDF v. EPA case mentioned above, these budgets were 
assumed to be automatically approved if EPA did not act within a 
certain period of time. That decision, however, struck down this long-
standing practice.
      Many States have not been able to meet their ozone 
compliance deadlines since much of their clean air problem is the 
result of ozone drifting in from other areas, known as ozone transport. 
In the past, EPA has granted extensions to the deadline in some of 
these areas. However, in Sierra Club v. EPA (D.C. Cir. 2002), the court 
ruled that EPA does not have the authority to grant these extensions 
and must, instead, ``bump'' these areas into the next higher 
classification of nonattainment, which would trigger several additional 
mandatory control measures.

    Without the flexibility option of ``grandfathering'' projects, we 
have seen a significant increase in conformity-related litigation. 
Those opposed to an individual project-or the mix of projects or modal 
funding in a transportation plan-have been given tremendous leverage by 
the EDF v EPA decision. They can now use conformity-related litigation 
as a sure way to temporarily, if not permanently, stop previously 
approved, environmentally sound projects and plans. Threatened with 
such litigation-or actually sued over conformity process-related 
issues-State and local planning agencies are put under enormous 
pressure to either give into the demands of the dissenting minority, or 
face endless rounds of litigation.
    In response to this reality, ARTBA joined with several other 
industry groups in 1999 to form Advocates for Safe and Efficient 
Transportation (ASET), a litigation group aimed at assisting 
governmental entities in defending the transportation planning and 
delivery process. While many of the professional environmental groups 
talk a lot about wanting a more ``inclusive'' transportation planning 
process, the fact of the matter is really quite different. Since ASET 
was formed, it has spent hundreds of thousands of dollars, not in 
arguing the merits of many of these cases, but in battling with 
environmental groups over simply trying to get a seat at the table. I 
could provide you a pile of court briefs where groups like the Sierra 
Club argue adamantly that the construction labor organizations and 
industry should not have a say in the final decision about 
transportation plans. The truth is the Sierra Club and many of their 
colleague organizations do not want an inclusive planning process. They 
want a process where they and they alone make the decisions.
    When the planning process is allowed to be hijacked by any one 
individual group, bad decisions are made. The truth is that America 
needs a dynamic transportation network to meet the needs of a growing 
population and economy. Such a network should include improving public 
transit, increased utilization of synchronized traffic signalization 
and other ``smart road'' technologies, improving local management of 
traffic incidents to clear roadways quickly and adding road capacity 
where appropriate and desired by a majority of local citizens. This is 
key to reducing traffic congestion and the unnecessary auto, truck and 
bus emissions it causes. It is also essential to maintaining time 
sensitive ambulance, police and fire emergency response service.
    Mr. Chairman, I believe very strongly in the transportation 
planning process--a process that involves public involvement by all 
stakeholders and final decisions that are made by public officials. 
However, we have come to a point where the planning process is breaking 
down under a mound of litigation. It Atlanta alone, there have been no 
fewer than seven lawsuits over the past three-and-a-half years 
challenging the conformity process in some way. I would urge this 
committee to reform the conformity process so we can get away from all 
of this litigation and return the planning process to the people 
through our elected public officials, not a few special interest 
groups.
Delay Kills and Costs
    Unfortunately, Mr. Chairman, the main purpose of many of these 
obstructionist lawsuits brought by the environmental groups is to delay 
badly needed transportation improvement projects. One witness from the 
environmental community put it best before this very committee during 
testimony in 1999. He said, ``In the struggle between proponents and 
opponents of a . . . [highway] project, the best an opponent can hope 
for is to delay things until the proponents change their minds or tire 
of the fight.'' According to an ARTBA study last year of State 
departments of transportation, an estimated $1.3 billion worth of 
highway projects were canceled or delayed in 2000 due to transportation 
conformity problems.
    Sadly though, such delay can have tragic consequences. According to 
the U.S. Department of Transportation (DOT), almost 42,000 people are 
killed each year on our nation's highways. One third more people in the 
U.S. die of traffic crashes each year than from bronchitis and asthma 
combined. One person in the U.S. dies from a traffic crash every 13 
minutes and there is one crash-related injury every 10 seconds. Traffic 
crashes are the leading cause of death in the U.S. for people ages 6-
33, and their economic cost is estimated to be $230.6 billion each year 
in added medical costs, insurance costs, etc. That's about 2.3 percent 
of the U.S. gross domestic product. To put this figure in perspective, 
the total annual public and private health care expenditures caused by 
tobacco use have been estimated at $93 billion annually!
    Indeed, Mr. Chairman, roadway safety is a huge public health 
crisis! The sad part is that, according to U.S. DOT, approximately 
15,000 of these deaths annually--are in crashes in which substandard 
roadway conditions, obsolete designs or roadside hazards are a factor. 
According to a Federal Highway Administration (FHWA) study, for every 
$100 million we spend on highway safety improvements, we can save over 
145 lives over a 10-year period.
    Delays, however, also have other costs associated with them. 
Besides the costs associated with increased congestion, when an area is 
out of conformity, it can be sanctioned with the loss of Federal 
highway and transit moneys. This happened in Atlanta for about a year-
and-a-half. It's true that when sanctions are put in place that the 
money isn't completely cutoff. Instead, States are forced to choose 
between redirecting the money to other transportation improvement 
projects in the State or forfeiting it back to Washington, DC, at the 
end of the year to be sent to another State. In our case, however, this 
led to some very fast and rash decisions, since we either had to spend 
the money or lose it.
    As you know, transportation improvement projects simply cannot be 
created overnight. As a result, the money was spent on a lot of simple 
projects that were definitely not a priority in the State prior to the 
sanctions kicking in. In addition, since design and right-of-way 
acquisition were cutoff on several priority projects at the time, it 
has taken a long time to get these projects back up-and-running, since 
the money that would have been spent on them was spent on lower 
priority projects. Sanctions were lifted in Georgia about 2 years ago, 
but over half of the projects that were put on hold at the time are 
still lingering.
    Because of the inefficiencies involved in highway sanctions, I 
would urge Congress to rethink how this entire process works. Rather 
than penalizing areas that fail to meet air quality standards, perhaps 
Congress should consider rewarding those communities that make the 
greatest progress in cleaning their air. Using sanctions that cutoff 
badly needed transportation improvement funds only exacerbates the 
problem resulting in increased congestion and worsened air quality. 
However, incentive-based systems have been very successful in other 
arenas and perhaps this would also work in transportation planning.
The Future of Conformity--Implementation of the New Ozone and 
        PM2.5 Standards
    Mr. Chairman, the most troubling part about all of this is that we 
are headed for a potential train wreck in a few years when EPA 
implements its new tighter standards for ozone and fine particulate 
matter. According to preliminary numbers obtained from the U.S. DOT, 
the number of counties that will be out of attainments for the ozone 
standard alone will rise from 414 counties presently to 656. Many more 
will be out of attainment for particulate matter.
    As you know, these new standards were first proposed in 1997 and 
have been held up by the courts until just recently. EPA currently 
plans to designate the new nonattainment areas in 2004 and State 
implementation plans (SIPs) will be due in 2007-2008 for these new 
areas.
    According to U.S. DOT, the new standards will result in much larger 
nonattainment areas that will be more complex, covering a lot of multi-
State areas and rural areas. Rural areas, especially, will have a 
difficult time meeting the conformity requirements since they lack the 
resources and expertise to properly deal with all of the requirements 
under conformity. Many of these areas will not be able to develop air-
tight plans right off the bat, thus, opening the door to lawsuits. 
These areas must be given adequate time (at least 2 years) and 
resources to develop the detailed data bases that are needed to 
demonstrate conformity.
    Congress should also examine closely how the new standards will be 
implemented. As I said, EPA plans to designate the new nonattainment 
areas in 2004. As a result of the 1-year grace period passed by 
Congress a couple of years ago, conformity determinations will have to 
be made in these areas starting in 2005. However, it is highly unlikely 
that States will have emissions budgets in place at that time since the 
SIPs will not be due until 2007-2008. Without an emissions budget to 
conform to, how will these determinations be made? In the past, EPA has 
used what it calls a ``build--no build'' test. However, under this test 
it is very hard to demonstrate that various transportation projects 
fall into conformity. The test is also an easy target for those who 
would rather litigate.
Conclusion
    Mr. Chairman, Senator Smith, and other members of the committee, I 
truly appreciate your willingness to hear from me today on behalf of 
ARTBA. If I could just summarize my comments:
    1) We are making huge progress on cleaning up the air, but almost 
all of this progress can be attributed to technology gains, not 
transportation control measures;
    2) In changing how stationary sources of pollution are regulated, 
please keep in mind the unintended consequences it can have on 
transportation planning;
    3) In reauthorizing TEA-21, results-based accountability should be 
built into the CMAQ improvement program;
    4) Greater flexibility and predictability is needed in the 
transportation planning and conformity process;
    5) We need to do something to put a stop to the endless litigation 
that is tying our planning process into knots;
    6) Congress should consider rewarding those communities that make 
the greatest progress in cleaning their air rather than simply relying 
on sanctions to enforce the Clean Air Act, and;
    7) Delaying transportation improvement projects results in deaths 
and other costs to society.
    I have attached a list of proposed legislative reforms as Appendix 
A to my written testimony. Thank you for listening and I look forward 
to any questions the committee might have.
               appendix a--possible legislative solutions
    1. Recognize the imprecision of data inputs. Modeling is an inexact 
science at best. Requiring conformity to be demonstrated to the nth 
decimal point makes little sense from a public policy standpoint. As a 
result, conformity should be allowed to be demonstrated if the 
emissions from the transportation plan are at least within 10 percent 
of the emissions budget and SIPs should contain an adequate ``margin of 
safety'' to avoid conformity lapses due to marginal changes in 
expectations. For example, MPOs have no control over economic growth or 
the price of gasoline, yet these are the primary factors in determining 
increased travel or the use of larger vehicles like SUVs.
    2. Transportation emissions are treated much differently in a SIP 
than emissions from other sources, such as area or stationary sources. 
While transportation emissions are essentially treated as a sectoral 
``cap,'' other sectors only have to meet source-by-source regulations. 
Transportation emissions regulations should be refocused to SIP 
elements that can actually make a difference in achieving emission 
reductions, such as inspection/maintenance programs, different fuels, 
etc.
    3. Clean up ambiguities in the statute and the regulations. Over 
the years, there have remained several ``holes'' in the conformity 
process and many more have been produced through adverse court 
decisions and legislative action, making it difficult for planning 
bodies to ascertain clear guidance. This often leads to confusion and, 
ultimately, litigation. These ambiguities need to be cleaned up to 
restore predictability and stability to the transportation planning 
process.
    4. Restore grandfathering or create other safe harbors for 
projects. Conformity must be forward-looking. Retroactive invalidation 
of projects after funding approval is disruptive and equally bad for 
smart growth and mobility. A conformity lapse stops all projects, 
transit and highway alike, and puts construction crews out of work 
without notice. EPA previously permitted limited grandfathering until a 
1999 court ruling invalidated it. Once a transportation project is in a 
conforming plan, it should be permanently grandfathered until built or 
removed from the plan.
    5. A new conformity determination should not be required if one or 
several projects are added to the transportation plan, as long as the 
net emissions from their inclusion will not add more than 3 percent to 
projected transportation emissions in the plan. In reality, added 
emissions from a single highway project are minuscule and this will 
avoid what is largely a paperwork exercise.
    6. Provide Motor Vehicle Emissions Budget (MVEB) adequacy and 
regulatory flexibility. A 1999 court ruling struck down an EPA rule 
that conferred automatic MVEB approval if EPA did not act promptly and 
called into question EPA's overall process for approving MVEBs in 
submitted-but-not-yet-approved SIPs. Conformity obligations often arise 
with short notice due to changes in attainment status or failure of EPA 
to timely approve MVEBs or SIPs. Without an approved MVEB, conformity 
determinations cannot be found and transportation projects cannot be 
approved.
    7. Prohibit MVEB judicial review. Under existing regulations, EPA 
can declare a MVEB adequate for transportation planning purposes prior 
to approval of the entire SIP. This approval process is not as 
comprehensive as full SIP approval and EPA reserves the right to 
withdraw its approval at anytime (therefore, it is not a final agency 
action). Environmental groups have filed lawsuits alleging that 
preliminary MVEB approval must be as rigorous as final SIP approval and 
EPA has not contested jurisdiction in these lawsuits. (Example: 1000 
Friends of Maryland suit against EPA.)
    8. Further protection from lawsuits. Planners have to rely on good 
faith and current state-of-the-art modeling and estimates to develop 
air quality and transportation plans. Environmental groups are 
attacking the estimates and demanding exactitude that doesn't exist. 
There has to be protection from disruptive lawsuits that paralyze the 
process, perhaps by requiring plaintiffs to make an initial showing of 
bad faith before filing suit. In absence of that, agreement by the MPO, 
State air quality agency, EPA and U.S. DOT should be per se evidence of 
the validity of emissions estimates. (Example: Sierra Club sued 
Sacramento for using EPA's own numbers.) Almost 200 counties will face 
conformity for the first time under the revised ozone and particulate 
matter standards. They will not be able to develop airtight plans right 
off the bat, thus opening the door to lawsuits. These areas must be 
given adequate time (at least 2 years) and adequate resources to 
develop the detailed data bases needed to demonstrate conformity. 
Smaller MPOs, in particular, are ill-prepared to fulfill all of the 
conformity requirements.
    9. Equal intervention rights. Environmental groups are using 
lawsuits to pressure policymakers and exclude other stakeholders. 
Contractors and transportation users should have the right to 
participate in lawsuits as equals to environmental groups. A double 
standard leads to duplicative lawsuits and moves the planning process 
out of the public forum and into the courtroom.
    10. Adequate funding. Smart growth planning depends on 
interconnectivity and multi-modal options, i.e., a mix of integrated 
transit and highway. No one wants to ride a bus to a metro station if 
the bus is stuck in traffic. Congress should provide both highway and 
transit funding and recognize that highway capacity projects that 
connect to transit systems are beneficial. (Example: Sierra is opposing 
HOV lanes in Atlanta that access MARTA and provide emergency vehicle 
access.)
    11. Try to develop a system where areas that make progress to clean 
air quality receive an incentive for doing so, rather than relying on 
sanctions to enforce the Clean Air Act. One possible option would be to 
divert additional CMAQ funding to these areas.
                                 ______
                                 
  Responses of James Stephenson to Additional Questions from Senator 
                                Jeffords
    Question 1. In general, would you agree that conformity is spurring 
investments in transportation strategies and technologies that reduce 
air pollution and create better interagency cooperation?
    Response. I do not think conformity has been very effective in 
reducing air pollution. While the exercise of conformity has been 
somewhat effective in getting the different agencies to work together, 
virtually all of the reductions in air pollution from the 
transportation sector have been caused by engine and fuel technology 
advances, not the conformity process. Conformity was based on a false 
assumption that a large increase in vehicle miles traveled would 
outstrip technology advances. Conformity was also intended by its 
proponents to tilt the local decisionmaking process toward mass transit 
rather than highway capacity options. That has happened. But transit 
ridership has not risen--nor will it--to the point that it will have 
anything but marginal impacts on emission reductions. With cleaner air 
technologies and cleaner fuels expected to continue to come online, the 
transportation sector will continue to dramatically reduce its 
emissions share. None of this is the result of conformity, but rather 
direct mandates from Congress and the U.S. Environmental Protection 
Agency (EPA). If Congress is really interested in reducing pollution 
rather than just creating more paperwork, it should focus on programs 
that have been proven to work.

    Question 2. If Congress does make any changes in the conformity 
process as part of the next transportation bill, what would be your No. 
1 suggestion and please be specific?
    Response. My No. 1 priority is to restore the grandfathering of 
projects when a conformity lapse occurs. Grandfathering would allow 
projects that were part of a previously conforming transportation plan 
to proceed even though an area has entered a lapse. As I noted in my 
written testimony, most conformity lapses occur because of slow moving 
paperwork and missed deadlines not because an area has worsening air 
pollution. Grandfathering would return some stability to the 
transportation planning process so that projects that have already been 
vetted through the lengthy planning process cannot be shut down at the 
last minute simply because someone missed a deadline. Shutting down 
highway and transit projects only exacerbates clean air problems since 
many of these projects are designed to reduce congestion and reduce air 
pollution. The Clinton Administration's EPA recognized this as an 
important concept and as a result, it allowed the grandfathering of 
projects under the original conformity regulations. However, this part 
of the regulation was struck down by the courts in 1999 in 
Environmental Defense Fund v. EPA (D.C. Circuit). I strongly urge 
Congress to make the needed statutory changes so that EPA can once 
again allow for the grandfathering of projects.
                                 ______
                                 
  Responses of James Stephenson to Additional Questions from Senator 
                               Voinovich
    Question 1. Like you, I think Congress should rethink the entire 
process. With our current Federal budget crisis, I think we should be 
looking at the cost-effectiveness of these transportation and air 
quality projects. In your opinion, what projects have been the most 
cost-effective, achieving the greatest air quality improvements for the 
least cost? Do you think there are more cost-effective options for 
achieving air quality improvements in the transportation sector than 
through the current programs?
    Response. According to the recent Transportation Research Board 
study on CMAQ, vehicle inspection and maintenance programs achieve the 
greatest air quality improvements for the least cost. According to EPA, 
less than 10 percent of the nation's motor vehicle fleet emits over 40 
percent of mobile generated pollution and the ``dirtiest'' 1 percent of 
vehicles contribute over 25 percent. As a result, the government's 
focus should be on getting these very high polluting vehicles off the 
road. As I stated in my written testimony, CMAQ funds should be made 
available for auto salvage programs, which would help achieve the ends 
desired. Through Fiscal Year 2001, we have spent about $9.5 billion on 
marginally, or completely ineffective programs in terms of achieving 
measurable emissions reductions. With that same investment, we could 
have bought new, cleaner burning automobiles for every person driving a 
car in the ``dirtiest'' 1 percent category, resulting in demonstrable 
air quality benefits!
    I would also suggest that technology can be better utilized to 
reduce the number of gross emitters of pollution on the road. One 
example is the mobile roadside emissions tester, which is being tested 
by the Georgia Institute of Technology. This device allows one to 
identify high polluting trucks and automobiles in traffic with a laser 
beam, similar to a speed radar gun.

    Question 2. Additionally, you specifically suggest an incentive 
based system that rewards ``those communities that make the greatest 
progress in cleaning the air,'' rather than ``penalizing areas that 
fail to meet air quality standards.'' How would you propose such a 
system work?
    Response. When the conformity lapse occurred in Atlanta, several 
high priority highway and transit projects were put on hold due to 
sanctions placed on the metropolitan area by the Federal Government. 
The purpose of many of these projects was to reduce congestion and 
improve air quality in the region. Because of the sanctions though, 
many of these projects still have not been built and Atlanta continues 
to suffer through increased congestion and worsened air quality. As the 
Atlanta situation clearly demonstrates, sanctions are 
counterproductive--they make a bad situation even worse. On top of 
that, sanctions only penalize the transportation sector, even though 
power plants or refineries might be the biggest contributor to an 
area's air pollution problems. I find it amazing that the 
transportation sector has provided the largest gains in improving the 
nation's air quality, yet it is the only sector that is penalized when 
overall air quality goals are not met. Instead, the Federal Government 
should provide an incentive to areas that are making improvements to 
air quality. Each year, EPA publishes the Latest Findings on National 
Air Quality that shows the status and trends in air quality around the 
Nation. If an area is making substantial progress in air quality, 
Congress should consider exempting these areas from the conformity 
process, as long as progress continues in the future. That would create 
a tremendous incentive for communities to make air quality progress. 
This suggestion is just a starting point for Congress to consider in 
creating a carrot in it air quality improvements, rather than just a 
stick.

    Question 3. As you state in your testimony, the EPA planned 
designation of new nonattainment areas in 2004 will presumably lead to 
an increase in the number of nonattainment areas. Given your 
experiences in Atlanta, how will this affect smaller communities that 
have not had to deal with conformity in the past?
    Response. The new designations are going to have a tremendous 
impact on smaller communities and rural areas. Many of these smaller 
areas simply do not have the professional resources to do all of the 
modeling and collect all of the data that is necessary to perform an 
adequate conformity determination. Even in large urban areas where we 
have a number of resources to tap into, conformity determinations have 
proven to be a real challenge. For smaller communities that do not have 
these resources, it will prove to be even a greater challenge. When 
areas fail to have adequate conformity determinations in place, it 
makes them susceptible to lawsuits from environmental groups. This 
causes an even a greater drain on limited resources and often forces 
these smaller communities to settle the lawsuits out of court, often on 
terms that are not favorable to the traveling public.
                                 ______
                                 
  Responses of James Stephenson to Additional Questions from Senator 
                                 Smith
    Question 1. As you are aware, Atlanta experienced one of the 
longest and most dramatic conformity lapses in the country. Even though 
each city has unique challenges, I believe what occurred in Atlanta 
could repeat itself in other high growth areas of the country. What 
happens to highway construction companies during a conformity lapse? Do 
workers get laid-off? What was the funding impact on Atlanta's 
transportation program and project decisions?
    Response. Different companies were affected differently by the 
lapse. Even though there was a very long conformity lapse in Atlanta, 
the State still spent as many Federal transportation dollars as they 
would have if there had not been a lapse. Some of these funds were 
shifted to projects outside of the Atlanta area or to projects that 
were exempt from the conformity process. For instance, simple 
resurfacing projects and replacement of hazardous bridges are the type 
of projects that can continue even during a lapse. It was largely 
capacity adding projects, such as adding new traffic lanes or building 
new roads that were put on hold. As a result, simple road paving 
contractors were probably not largely impacted by the lapse. However, 
heavy construction contractors who specialize in earth moving and other 
activities associated with new construction were very adversely 
affected. Several of my customers indicated they laid off workers 
because of the lack of work. And the negative impact did not stop at 
the end of the lapse. Because the practice of grandfathering had been 
struck down by a Federal court in 1999, activities such as completing 
the design or purchasing the right of way for these new projects was 
also put on hold. As a result, when the lapse ended, many of these 
priority projects were still not at the stage of being able to be let 
for construction. While the Federal Highway Administration (FHWA) has 
since slightly relaxed its rules on what activities can take place 
during a lapse, that was not the case in Atlanta. At the time, nothing 
could proceed on a project during a lapse unless Federal funding had 
already been signed off on the project and it was essentially already 
under construction. Also many of these priority projects cannot proceed 
because funding for them is no longer available. Because a State must 
either spend its Federal transportation dollars or forfeit them, 
several projects funded during the lapse were not high priority 
projects. As a result, that money is now gone and Georgia is facing 
many challenges to find adequate funding for the high priority projects 
once again. My wife, children, and I have all been directly impacted by 
the conformity lapse in Atlanta since we live in an area that was 
slated to have one of these canceled projects built. Almost 4 years 
later, the project still has not been built and as a result, we have 
wasted time, money and energy stuck in traffic and gridlock.

    Question 2. A number of areas have successfully employed voluntary 
programs to reduce emissions from off-road heavy-duty diesel 
construction equipment, and credited the emissions reductions to the 
conformity budget. Do you believe CMAQ money should be used to support 
this type of voluntary programs?
    Response. I am generally opposed to any program that uses Federal 
highway funds for non-construction activities. I believe that all of 
the money in the Congestion Mitigation and Air Quality (CMAQ) 
Improvement Program should be used for activities such as building high 
occupancy vehicle (HOV) lanes or building new capacity that will reduce 
bottlenecks on the nation's roadways. That being said, since the 
inception of CMAQ in 1990, most CMAQ money has been spent on transit 
operations and transportation control measures that the Transportation 
Research Board said in a recent report have no quantifiable benefits. 
If money is going to continue to be spent in this manner, I believe it 
should be spent on activities that can produce quantifiable results. We 
know that many of these voluntary retrofit programs for off-road 
construction equipment have produced quantifiable results. As a result, 
I would support the use of CMAQ funds for these programs if CMAQ funds 
must continue to be spent on non-construction related activities.

    Question 3. I understand that the new EPA diesel engine regulations 
may increase diesel engine prices higher than anticipated. What impact, 
if any, would this have in your dealership?
    Response. Since I do not sell engines for on-highway trucks, it 
will probably not have a significant impact on my dealership. However, 
Caterpillar is the world's leader in the production of diesel, natural 
gas and gas turbine engines used for both stationary and mobile 
applications. The debate over the 2002 diesel engine emissions 
reduction requirements sheds some interesting light on the government's 
often misguided desire to regulate and the over-reaction and falsehoods 
spread by the extreme factions of the environmental community. As you 
probably know, certain heavy-duty engine manufacturers are required to 
have new emissions reducing technologies in place by October 2002. To 
meet this challenge, Caterpillar has opted to develop a breakthrough, 
which still demands more testing. Competitor's technologies require 
forced air to operate. As a result, they only work on trucks moving 
down the road at a substantial rate of speed. Caterpillar elected to 
develop a more sophisticated technology that does not rely on forced 
air. Thus, Caterpillar's new cleaner burning diesel engine technology 
can be used on stationary and off-road machinery--such as generators 
and construction equipment--as well as trucks. Caterpillar requested a 
temporary waiver from the Federal Government to permit complete testing 
of this new technology. The waiver was denied. Once again, this is a 
perfect example of government policy encouraging the business community 
to do enough to get by the minimal standards, while discouraging an 
approach that will have much broader and longer term benefits.
                               __________
 Statement of Michael Replogle, Transportation Director, Environmental 
                                Defense
    Mr. Chairman, I am Michael Replogle, Transportation Director of 
Environmental Defense. I am pleased to appear here this morning to 
present testimony on behalf of both Environmental Defense and the 
Surface Transportation Policy Project where I serve as chairman of the 
Energy and Environment Task Force of the Alliance for a New 
Transportation Charter and a member of the STPP steering committee.
    The Environmental Defense, a leading, national, NY-based nonprofit 
organization, represents 300,000 members. Environmental Defense links 
science, economics, and law to create innovative, economically viable 
solutions to today's environmental problems. The Surface Transportation 
Policy Project or STPP is a nationwide network of hundreds of 
organizations, including planners, community development organizations, 
and advocacy groups, devoted to improving the nation's transportation 
system.
    I am pleased to have this opportunity to discuss transportation and 
air quality, especially focusing on transportation conformity and the 
Congestion Mitigation and Air Quality Program and to offer our views on 
how the reauthorization of TEA-21 can enhance these programs.
    I would like to highlight the following recommendations for 
congressional action:

      Clean Air Act transportation conformity is working 
increasingly well to hold transportation plans accountable to air 
quality control strategies, but steps should be taken to assure better 
modeling of traffic and emissions and better compliance by the 
Department of Transportation and States to assure that transportation 
plans and programs are fiscally constrained. Poor accounting threatens 
underestimation of motor vehicle emissions and the failure of SIP 
control strategies to deliver on the promise of clean air for all 
Americans.
      Congress should assure that areas in a conformity lapse 
will be able to add new emission-reducing transportation projects to 
non-conforming short-term Transportation Improvement Programs (TIP) and 
long-range transportation plans, even if those projects were not 
previously contained in a conforming, fiscally constrained TIP or plan.
      Congress should reject proposals to reduce the frequency 
of conformity analyses, which are now required at least once every 2 
years for TIPs and once every 3 years for transportation plans. Such 
proposals threaten to introduce more surprises and conformity problems 
and to reduce the timely improvement of motor vehicle emissions 
estimates to protect the integrity of SIP control strategies. When 
transportation conformity is done more frequently, it results in timely 
updates to modeling assumptions that improve accountability.
      Congress should require all State and metropolitan areas 
to develop and periodically update, with public involvement, integrated 
transportation, natural resource protection, and growth management 
plans that consider at least one alternative scenario that considerably 
reduces traffic growth and enhances environmental performance through 
better system management. Agencies should annually report on the 
current and projected performance of their transportation system 
management, investment, and proposed programs and plans, accounting for 
cumulative and secondary impacts on growth patterns, public health, 
greenhouse gas emissions, the achievement of natural resource planning 
goals for air, water, and habitat protection, and the provision of 
equal access to jobs and public facilities for all residents, including 
those without cars, without undue time and cost burdens.
      The Congestion Mitigation Air Quality Program (CMAQ), 
which helps local communities and States reduce traffic and 
transportation pollution, should be reauthorized at a substantially 
higher level, recognizing the much larger population living in non-
attainment areas and exposed to hazardous air pollutants. CMAQ funds 
should be targeted to innovative strategies that produce lasting 
traffic and pollution reduction, rather than to short-term one-time 
emission reduction strategies or traffic flow improvements,
      Congress should establish and fund a Transportation 
Accounting Standards Board to assure timely progress toward honest 
accounting for how transportation funds are spent, including oversight 
of innovative finance programs, to assure compliance with 
transportation planning fiscal constraint requirements, and assure the 
integrity and timely improvement of transportation agency environmental 
management systems, including travel and emissions analysis models, 
which should be required to demonstrate adequate sensitivity to induced 
traffic and land use effects of expanded road capacity.
      Congress should strengthen national transportation data 
collection, spatial data analysis, and evaluation, to support 
performance-based funding and decisionmaking.
      Congress should assure timely EPA action to regulate air 
toxics and assure that FHWA accounts for and avoids or mitigates the 
adverse health impacts of exposure of communities to hazardous air 
pollutants caused by expansion of major highways.
      Congress should strengthen incentives for employers to 
pay for transit benefits and offer cash incentives in lieu of parking, 
promote other market-incentive transportation strategies such as road 
pricing and use-based car insurance, and encourage increased investment 
in rail, bus rapid transit, pedestrian, bicycle, and intermodal travel 
options.

I. Accounting for Transportation Air Pollution: A Hidden Tax Burden on 
        Americans
    While motor vehicles and expanded highways have offered many 
Americans unprecedented levels of mobility, the costs of that system on 
public health, the environment, and social equity have been poorly 
accounted for. Motor vehicles account for a major share of harmful air 
pollution emissions that cause shortness of breath, respiratory 
disease, cancer, death, structural deterioration, crop damage, and 
decreased visibility affecting cities, national parks, and rural areas, 
and global climate change, constituting a hidden tax on our health and 
well being. Since 1970, our Nation has tried to reduce this pollution 
problem through the Federal Clean Air Act. While we have made 
remarkable progress in reducing many kinds of pollution, growth in 
motor vehicle use has offset a large share of emission reductions 
gained through cleaner technologies, especially for nitrogen oxides 
(NOx) and particulate matter (PM).
    Three decades after the 1970 Clean Air Act, more than 125 million 
Americans--including 70 percent of the people most vulnerable to air 
pollution--live in areas that exceed the National Ambient Air Quality 
Standards (NAAQS)\1\, and this number may increase by as much or more 
than 40 million once EPA completes the new designations for the 8-hour 
ozone and fine particle NAAQS. Ozone causes asthma, lung damage, and 
illness in children, and increases the risk of stroke mortality. More 
than 14 million Americans with asthma--a record number--gasp for air 
when ozone levels rise and more than 5,000 Americans die each year from 
exposure to high ozone levels. The number of high ozone days increased 
19 percent between 2000 and 2002 in U.S. counties with air quality 
monitors.
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     \1\Environmental Protection Agency, Latest Findings on National 
Air Quality: 1999 Status and Trends, Washington, DC, August 2000, page 
5.
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    Particulate matter causes cancer, including childhood leukemia, as 
well as respiratory disease and death. New research in shows that 
people living proximate to high traffic volume highways breathe 
traffic-related air toxics that expose them to cancer risks at times 
greater than 1 in 500.\2\
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     \2\South Coast Air Quality Management District, Multiple Air 
Toxics Exposure Study-II, March 2000, Los Angeles, CA.
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    The U.S. accounts for vastly disproportionate greenhouse emissions. 
Although Americans account for 5 percent of the world's population, we 
account for almost a third of greenhouse emissions worldwide. In 1996, 
mobile sources counted for more than 30 percent of CO2, more 
than 40 percent of VOC, 50 percent of NOx and 80 percent of CO emitted 
in the U.S.\3\ Between 1990 and 1999 U.S. greenhouse gas emissions from 
transportation rose almost 9 percent.
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     \3\State and Territorial Air Pollution Program Administrators/
Association of Local Air Pollution Control Officials, Reducing 
Greenhouse Gases & Air Pollution: A Menu of Harmonized Options, 
Executive Summary, Washington, DC, October 1999. page 5.
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    A U.S. DOT report, included in this testimony as Attachment 1, 
estimates the annual cost to the public in 2000 of the adverse health 
effects attributable to air pollution from motor vehicles at $40 
billion to $65 billion, depending on the value ascribed to a human 
life.\4\ A disproportionate share of these costs are imposed on the 
most vulnerable--those with respiratory diseases, children, and the 
elderly. So while taxpayers bore a cost of $27 billion in 2000 for 
direct Federal transportation investments, all face far greater true 
costs. Moreover, this DOT cost accounting does not even consider the 
costs of health effects of air toxics or fine particles, which DOT now 
admits is the biggest air quality health issue to be dealt with; nor 
does it include the costs for agricultural losses, impaired visibility, 
damage to buildings, acid rain, impairment of various terrestrial and 
aquatic ecosystems from excess nitrogen, and other adverse impacts of 
air pollution. Nor does it include the costs of global climate change 
or traffic accidents. New research from the Centers for Disease Control 
associates rising obesity levels with declining physical activity and 
impaired mental health with reduced social interactions, both 
associated with car-dependent mobility and development patterns. These 
add further to the hidden burden of true transportation system costs on 
Americans.
---------------------------------------------------------------------------
     \4\U.S. Department of Transportation, Addendum to the 1997 Federal 
Highway Cost Allocation Study Final Report, May 2000, Washington, DC. 
Page 11. Available at: www.fhwa.dot.gov/policy/hcas/addendum.html.
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    The toll exacted by these adverse health and other impacts continue 
because 32 years after passage of the 1970 Clean Air Act (CAA) most 
non-attainment areas have still not attained the long-standing 1-hour 
ozone or PM National Ambient Air Quality Standards (NAAQS). Health 
research has shown that additional controls on 8-hour ozone and fine 
particulate matter (PM 2.5) are needed to protect public health, but 
EPA is moving only slowly to designate related non-attainment areas and 
timetables for States to adopt related pollution control strategies.
II. Transportation Conformity: Accounting for Motor Vehicle Air 
        Pollution in State Air Quality Control Plans
    Why Conformity? The 1990, Clean Air Act amendments strengthened the 
transportation conformity provision to assure that transportation 
infrastructure spending and poor accounting for mobile source emissions 
would not continue to unwittingly undermine progress toward healthful 
air quality. Expansion of highways and resultant growth in traffic and 
pollution led to widespread, systematic underestimation of motor 
vehicle air pollution in State air pollution control plans between 1970 
and 1990, causing those plans to fail.
    Transportation conformity is a straightforward concept, at times 
made complex by overly lengthy transition rules designed to undermine 
its simple operation. Conformity requires the regional transportation 
system to contribute to timely attainment of healthful air quality and 
to be designed so that emissions from transportation sources in a non-
attainment area are less than the levels established by the State's 
adopted plan for attaining healthful air quality.
    The CAA requires that SIPs for achieving healthful air quality in 
polluted areas establish emission budgets for mobile sources (cars and 
trucks), stationary sources (powerplants and factories), and area 
sources (paints, agriculture), including control strategies limiting 
emissions from each. Trade-offs can be negotiated between control of 
various sources, encouraging exploration of the lowest cost means for 
timely attainment. The CAA and Federal transportation laws passed since 
1990, ISTEA and TEA-21, require short-term (1-6 year) fiscally 
constrained funding programs--called Transportation Improvement 
Programs (TIPs)--and long-term (20-year) fiscally constrained Regional 
Transportation Plans (RTPs) to conform to SIP emission budgets so that 
new transportation approval, acceptance, and funding decisions will not 
violate emission limits or delay timely air quality attainment.
    By requiring TIPs and RTPs to be fiscally constrained, Congress 
sought to address a problem that had caused the failure of an 
ineffectual earlier, weaker version of CAA conformity: many States and 
regions demonstrated conformity relying on a hefty, expensive, fantasy 
wish list of emission-reducing projects that could not be built on the 
schedule identified in the transportation program. This false 
accounting for transportation projects contributed to the 
underestimation of motor vehicle emissions and the failure of SIP 
control strategies in the 1970's and 1980's.
    Bad State and Federal accounting for transportation funds, lax 
Federal oversight of transportation and air quality planning 
requirements for fiscal constraint of TIPs and RTPs, and abuse of TEA-
21 funding flexibility and innovative financing provisions undermine 
conformity and threaten to undermine SIP control strategies in the 
coming decade. Many State and local project sponsors grossly 
underestimate project costs so they can adopt fiscally unconstrained 
transportation plans and programs. Many States are increasing their 
reliance on Federal dollars and reducing State commitments to fund 
transportation while running up large debts that sacrifice future 
fiscal capacity. This is further exacerbated by the recent failure of 
the Federal Highway Administration to lapse unspent fund obligations to 
the States as required by TEA-21. Environmental accountability is 
further undermined by under-forecasting of motor vehicle traffic and 
air pollution in SIPs, TIPs, and plans due to use of travel models that 
discount induced traffic. Together, these problems amount to another 
national accounting scandal affecting not just the $217 billion, 6-year 
Federal TEA-21 authorization, but hundreds of billions more in State 
and local transportation spending.
Conformity Is Increasingly Successful: Better Accounting, Coordination, 
        Support for Emission Reduction Strategies
    By fostering cooperation between transportation and air quality 
agencies over the past decade, conformity has improved accounting for 
transportation air pollution in State Implementation Plans (SIPs) for 
air quality attainment and it has increased consideration of air 
quality as a factor in transportation decisionmaking, as intended by 
Congress.

      Since 1990, transportation conformity has increasingly 
ensured that State and local air quality planners account for the 
growth in vehicle driving activity and other sources of vehicular 
emissions, helping assure progress on clean air goals in the past 
decade.
      Conformity has assured that transportation agencies 
coordinate with State and regional environmental agencies through 
interagency consultation procedures to evaluate the emissions impacts 
of major transportation investments before funding decisions are final. 
Where conformity lapses have occurred because of problems in 
coordination, they have been generally of only a few months duration 
and have led to improved local administration and governance to 
coordinate air quality, transportation, and growth management.
      Conformity has almost invisibly led to increased 
investments in cost-effective pollution-reducing transportation 
strategies that support more diverse travel choices, equitable access 
to jobs and public facilities, smarter growth, improved traffic safety, 
safer and more attractive opportunities for walking and bicycling. 
Conformity has expanded the base of political support for control 
strategies to reduce air pollution emissions through more stringent 
emission controls on vehicles, cleaner fuels, and more effective 
inspection and maintenance. Local and State transportation agencies and 
real estate development interests and the highway construction industry 
are motivated to support such strategies to avert transportation 
conformity constraints on highway construction funding.
      Conformity has fostered continuing improvement in 
transportation forecasting and emissions models used to appraise the 
implications of transportation and land use alternatives, providing a 
more sound basis for air quality and transportation plans.
      Conformity has enhanced the public's right-to-know about 
air quality and transportation impacts before decisions have been made.

Full Implementation of Conformity Was Delayed in Many Regions Until 
        2000-2001
    These successes have come about even though transportation 
conformity has been until recently only partially implemented in many 
regions. Full implementation of the 1990 conformity amendment has 
always been dependent on the establishment of motor vehicle emissions 
budgets in attainment SIPs. Delays by the States in the development of 
air quality attainment plans for most of the nation's largest cities 
delayed the setting of emissions budgets to be met by metropolitan 
transportation systems, forcing reliance on earlier complex transition 
rules. The first motor vehicle budgets designed to attain the 1-hour 
ozone standard in most large cities were first submitted in 2000 in 
response to litigation enforcing Congress's deadlines for SIPs. EPA has 
approved most of these SIPs only in the past year. Additional revisions 
to many of these SIPs are anticipated in the coming year to reflect 
updated motor vehicle emissions estimates using EPA's Mobile 6 computer 
model.
    These new mobile source emission budgets took effect in 2000 as 
interim budgets while EPA continued to review the adequacy of the 
overall attainment plans for the more polluted metropolitan areas. 
These budgets provide a standard against which to measure the emissions 
produced by regional transportation plans. Metropolitan areas have 18 
months from the submission of the interim budgets to revise their 
transportation plans to meet the new emissions targets for motor 
vehicles in each air shed. Thus, many cities are adopting revisions to 
their transportation plans to meet the 1990 Act's conformity 
requirements only within the past year, after a decade of delay.
    For most of the 1990's, conformity in most regions relied on a 
weak, widely criticized, and often gamed 'build/no-build' test 
established by EPA as an interim stop-gap measure while States were 
developing the attainment plans with emissions budgets that are 
required by the CAA. The result was a system that required extensive 
modeling and planning, some upgrade to analysis methods, but in most 
cases produced relatively little change in transportation plans or 
investments beyond a few new ridesharing and transit projects. But now 
that attainment motor vehicle emission budgets are finally in place in 
non-attainment areas, conformity is operating as intended: holding TIPs 
and RTPs accountable to attainment SIP motor vehicle emission budgets.
Conformity Remains Critical to Clean Air Progress
    Conformity remains critical to clean air progress because motor 
vehicles account for roughly half of all ozone precursor emissions in 
most large metropolitan areas. But even in those areas where the motor 
vehicle pollution share is less, such as Houston, where heavy industry 
accounts for a much larger contribution of pollution, steps to curb 
motor vehicle pollution are critical to attaining healthful air 
quality.
    New, cleaner motor vehicle technologies mandated under the CAA Tier 
II standards will do a lot to clean up motor vehicle pollution over the 
next 15 years. But at the same time, EPA's NOx SIP call will curb 
emissions from large stationary sources such as power plants, so that 
the share of total emissions of ozone precursors and PM from motor 
vehicles may actually grow, despite cleaner vehicle technologies. And 
meeting the 8-hour ozone and PM fine pollution standards will require 
far more substantial reductions in emissions. Routine compliance of 
fiscally constrained TIPs and RTPs with motor vehicle emissions budgets 
through a strong and continuous transportation conformity program is 
essential to the success of the Clean Air Act in delivering healthful 
air quality for all Americans.
    The failure of transportation plans to comply with SIP budgets is 
the reason why most metropolitan areas failed to meet the ozone NAAQS 
in 1987. Many serious ozone non-attainment areas again failed to attain 
by 1999 (including Atlanta, Washington, DC, Baton Rouge, Dallas-
Ft.Worth, Connecticut, Springfield) is that motor vehicle emissions 
have not been reduced to the levels required for attainment. If 
Congress were to weaken conformity by reducing its frequency or 
analysis time horizon, or if conformity analyses continue to be further 
undermined by weak enforcement and oversight of fiscal constraint, 
traffic analysis, and emissions accounting methods by US DOT, the Clean 
Air Act is at risk of failing once again in the coming decade to 
deliver long-promised clean air for millions of Americans.
III. Growth in Motor Vehicle Use Threatens Air Quality Progress
    Growth of motor vehicle use is one of the most stubborn obstacles 
to lasting progress in cutting NOx, particulate matter, and cancer-
causing air toxics from the transportation sector. National and State 
programs to control air pollution from transportation through cleaner 
vehicle and fuel technologies and inspection and maintenance have 
significantly reduced motor vehicle pollution rates. But because of 
steep increases in the number of vehicle miles, cuts in the amount of 
pollutant emitted per mile, particularly for NOx and small particulates 
(PM2.5), have been offset by growth in miles driven.
    Growth in motor vehicle use stems from many factors. Large 
investments in highway system expansion, subsidies for driving and 
sprawl, and policies favoring increased car-dependence over the past 
half-century have contributed to growth in trip distances and the 
number of vehicle trips for most Americans. More than three-fourths of 
all job and housing growth since 1970 has been in suburban areas that 
have been designed to promote automobile access as the only convenient 
or available means of travel for most trips. From 1970 to 1998, vehicle 
miles traveled (VMT)-has increased by 136 percent, or more than three 
times the rate of population growth. Other indicators of driving 
activity--vehicle trips per person, average vehicle trip length, and 
number of motor vehicles per person--have also risen sharply. Traffic 
growth not only threatens air quality progress, but it adds to traffic 
congestion and travel times, greenhouse gas emissions, dependence on 
imported petroleum, and degradation of water quality and community 
livability.
Inadequate Regional Transportation Models Threaten SIPs
    One of the major causes of the failure of ozone SIPs to produce 
attainment during the 1980's was the systematic failure of the 
transportation models to account for the very significant increase in 
motor vehicle emissions that resulted from induced travel demand caused 
by new highway construction. The best evidence from the Transportation 
Research Board (TRB) studies reported during the last 5 years indicates 
that about 25 percent of total VMT growth in metropolitan areas is 
attributable to induced demand. The failure to account for that 
magnitude of motor vehicle emissions increases in the 1980's would have 
caused virtually all ozone SIPs to fail. Indeed, almost all 
metropolitan areas failed to attain even when they implemented SIPs EPA 
thought were adequate for attainment. The need for Congress in 1990 to 
enact an entire new program for ozone control in America's urban areas 
can be attributed, in significant part, to the deficiencies in the 
transportation models that failed to account for VMT growth trends of 
the last two decades.
    A large number of recent TRB peer-reviewed scientific studies, 
summarized in Attachment 4, show that increasing road capacity in an 
area by 10 percent will cause a growth of 8 percent (with ranges found 
to vary from 3-10 percent depending on context) in total area traffic. 
Yet most regional travel models used for conformity analysis--even 
after the improvements of the 1990's--fail to properly account for this 
fact.
    The most serious consequence of large errors in these 
transportation and emission models is the failure to reduce motor 
vehicle emissions enough to meet the NAAQS. In the case of Particulate 
Matter (PM) insufficient emissions reductions means hundreds or 
thousands of people will die in a non-attainment area, and for ozone it 
means tens of thousands may require hospitalization, emergency care or 
other medical treatment for debilitating conditions if the models 
under-predict emissions. While such end effects of a flawed traffic and 
emissions model are not as easily dramatized as the use of a flawed 
engineering model for design of a building that later fails and 
collapses, killing those inside and around it, the net effect of bad 
traffic models are in fact injurious to far more people over a longer 
period of time.
    When metropolitan areas first began to undertake transportation 
conformity analysis a decade ago, regional transportation planning and 
emission models were barely up to the task. Many of these analysis 
tools were estimated on old data, insensitive to induced traffic and 
land use changes caused by changes in transportation system capacity 
and user costs, and unable to represent walking, bicycling, public 
transportation, or travel choices other than driving. Typical traffic 
models used by metropolitan planning organizations (MPOs) in 1990 were 
simple highway engineering models ill suited for public policy or 
environmental analysis.
Inadequate Federal Actions to Improve Travel and Emissions Models
    To address this problem, following passage of the 1990 CAA 
amendments, the 1991 ISTEA law provided a 1.5 percent set-aside from 
several Federal transportation funding categories to support MPO 
planning, data collection, modeling, and related activities required to 
implement the conformity and transportation planning process. Congress 
also authorized the use of Congestion Mitigation Air Quality (CMAQ) 
funds and other Federal transportation funds to support such 
activities. In 1993, US DOT and EPA established a Federal Travel Model 
Improvement Program (TMIP) to help foster needed changes to MPO traffic 
models and EPA invested in further improvements to its MOBILE emissions 
factor models. TMIP provides useful training to MPOs and documents and 
disseminates current best practices in transportation and land use 
modeling, but has invested the bulk of its resources since 1995 in a 
multi-million dollar program based at Los Alamos National Lab to 
develop TRANSIMS, a supercomputer-based traffic simulation model that 
will be available for somewhat more general use by agencies over the 
next several years. MPOs in non-attainment areas increased their 
spending to update their travel models and data collection throughout 
the 1990's in response to EPA conformity regulations that established 
minimum modeling standards, but few MPOs flexed STP or NHS funds to 
support an expanded data collection and planning effort to improve 
their travel and emissions modeling capabilities. EPA's conformity 
regulations were streamlined in 1995, reducing the specificity of 
modeling requirements. FHWA in the mid-1990's issued some weak, limited 
guidance on transportation modeling practices that failed to promote 
best practices and encouraged MPOs to be satisfied with adopting 
``standard practice'' models instead. Interagency consultation 
established as part of transportation and air quality planning and 
every 3-year MPO certification reviews have been the principal source 
of oversight of the adequacy and integrity of the transportation 
modeling process.
    While most of these measures have been of value and have encouraged 
some improvement of MPO transportation modeling for conformity and SIP 
analysis, they have been grossly inadequate to effect timely MPO 
adoption of best practices.
    As TRB Special Report 245 (1995) concluded: ``The four-step 
process, as it is conventionally applied, will generally understate the 
amount of induced travel.'' And most MPOs persist in conventional 
standard-practice application of four-step process traffic models in 
2002, falling well short of best practices, meaning that most MPOs 
seriously underestimate induced traffic and related air pollution 
emissions. Unless addressed, this poses a major continuing threat to 
the success of SIP control strategies, which are likely to be 
inadequate to produce healthful air quality.
    The question that needs to be answered is: How can we make sure 
that the modeling tools are improved so that they can more reliably 
serve the purposes that the clean air objectives of the Clean Air Act 
demand? It seems unlikely that the public or the Congress will abandon 
the goal of making the air safe to breathe. Therefore, TRB, DOT, EPA, 
MPOs, and the transportation agencies need to invest the resources to 
refine the modeling tools to ensure that they become more effective at 
identifying the factors that most reliably predict vehicle use, and the 
strategies most likely to be effective in reducing VMT growth and motor 
vehicle emissions. And MPOs need to apply those tools to evaluate 
alternative TIP, RTP, and SIP control strategies that can reduce 
traffic growth and motor vehicle emissions, so these can be considered 
effectively in the interagency decisionmaking process.
    EPA last year released guidance allowing emissions reduction credit 
for land use strategies. The effectiveness of those strategies is 
linked to the quality and effectiveness of transit facilities and 
services offered to people in corridors where land use is planned to 
minimize travel demand. However, most MPO travel models have limited 
capacity to represent the travel behavior effects of transit-oriented 
development, walkable neighborhoods, new intelligent transportation 
system technologies supporting Bus Rapid Transit and ridesharing, or 
changes in parking policies and commuter travel incentives. As a 
result, the environmental and energy benefits of these strategies are 
not reliably reflected in the outputs to the traffic models.
    An excellent recent GAO report noted that ``the Federal requirement 
to demonstrate that transportation plans and programs conform to an 
emissions budget serve as the primary incentive to assessing the 
emissions impacts of different land uses. Furthermore, such estimates 
had some effect on transportation and land use decisions. For examples, 
almost half of planners who reported conducting such estimates revised 
their transportation plans as a result, and about a third reported that 
local land use plans were revised . . . In the future more of the 
transportation and air quality officials may need to consider land use 
as a means to control emissions and improve air quality if EPA 
implements, as planned, two more stringent air quality standards. These 
officials face several barriers to further considering different land 
uses and their emission impacts, however, including a lack of required 
technical tools.''\5\
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     \5\U.S. General Accounting Office, Environmental Protection: 
Federal Incentives Could Help Promote Land Use That Protects Air and 
Water Quality, Washington, DC, October 2001, GAO-02-12. page 6.
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    This GAO report notes that, ``DOT and EPA efforts to improve 
travel-demand-forecasting models may help MPOs and communities 
determine the effects of transportation improvements on congestion and 
air quality. However . . . these efforts currently do not call for 
integrating land use or environmental components into the travel demand 
model . . . Without such integrated models, communities cannot consider 
the likely effects that their transportation decisions will have on 
land use, future growth and development, and air quality.''\6\
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     \6\U.S. GAO-02-12, op. cite, page 95.
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    Most MPO travel models need updating and refinement. Recent 
independent audits of computer travel models in Washington, DC, and 
other regions have exposed serious flaws in official Metropolitan 
Planning Organization models that bias their findings strongly against 
transit investments and smart growth strategies and strongly in favor 
of expanded highway investments. Attachment 7, a recent critique of the 
Metropolitan Washington, DC travel models that found significant 
underestimation of motor vehicle emissions of both NOx and VOC, 
illustrates this problem, which, if uncorrected, puts SIP control 
strategies at risk of failing once again.
    And much greater investment is needed in national travel, land use, 
employment, demographic, and environmental monitoring data to properly 
support environmental management systems integrated with better 
decision-support for transportation planning. But this is not an 
argument to weaken conformity or to stop holding regional planning 
agencies accountable for the air quality consequences of the investment 
choices they make, or local governments accountable for the land use 
choices they make. The public health costs, and the harm to the 
personal well-being of too many Americans are too important to consider 
weakening the process. The only reason why there is any debate at all 
about the reliability and accuracy of transportation models is because 
the law requires accountability and imposes consequences. There have 
been major refinements in the planning process and the modeling tools 
used in that process since 1990. MPOs and transportation agencies are 
no longer using the overly simplistic unidimensional travel models that 
were the foundation for the grossly inadequate SIPs on the 1980's. 
Those improvements are some of the best evidence that the law is not 
broken; it is working.
    With the enactment of the 1990 Clean Air Act Amendments, for the 
first time the law required the transportation agencies to be directly 
accountable for emissions effects of their decisions. This has created 
the need for and the incentive to advance the modeling science. Some 
MPOs, such as Portland, Oregon, and Sacramento, California, have 
invested in data collection, analysis tools, and staff development, 
enabling them to demonstrate best practices in their applied analysis 
work. These best practices need to be more widely replicated. 
Portland's models are now being adapted to improve statewide models 
used by Oregon DOT and used to advance a transportation planning 
process that is integrated with environmental resource and growth 
management. Such integration is the key to improving project delivery 
and the environmental stewardship of transportation agencies. Best 
practice transportation models have multiple ways of reflecting induced 
demand and land use impacts of transportation policies and investments 
and lead to better emission estimates.
    Other regional models still are far from the mark when it comes to 
accounting for induced demand, land use effects, and the potential 
benefits of smart growth transit oriented development, pedestrian and 
bicycle enhancements, and transportation pricing strategies. As a 
result they typically continue to underestimate future VMT and motor 
vehicle emissions. In turn, this error leads to insufficient emissions 
reductions in SIPs, and to motor vehicle emissions budgets in SIPs that 
understate expected future emissions. This poses a problem for the 
transportation agencies when future actual vehicle counts show that VMT 
and emissions exceed the budget. The remedy to this problem is not to 
dispense with or make highly infrequent conformity determinations, as 
some in the transportation industry would wish. The appropriate remedy 
is to improve the models so that they honestly and routinely account 
for what are now generally well-characterized phenomena in the world of 
transportation planning.
 several actions are needed to bring about more timely improvement of 
                         regional travel models
      MPOs and transportation agencies should be required to 
make available at no cost to interested stakeholders all travel and 
emission model assumptions, data, documentation, and software driver 
files to allow routine independent oversight by outside parties. Such 
access varies now between MPOs, with some retaining a much more closed 
culture that resists disclosure or puts up barriers such as charging 
thousands of dollars for the copying of a few CD ROMs of data.
      MPOs and transportation agencies should be required to 
test their models for their sensitivity to induced demand as 
illustrated in Attachment 4. Agencies should also evaluate model 
capacity to evaluate changes in travel costs and travel times by time-
of-day, changes in pedestrian and bicycle friendliness, urban design 
factors, and other key elements, comparing model performance with best 
practice models and scientific findings. EPA and DOT should require 
independent evaluation of travel model and emissions model adequacy as 
part of conformity and planning certification reviews and approvals.
      Where models are noted to have shortcomings against best 
practices, MPOs should be required to identify through their Unified 
Planning Work Program a schedule and budget for addressing these 
shortcomings in a timely way over the course of each 3-year planning 
cycle for regional transportation plans and SIP updates.
      Congress should establish and fund a Transportation 
Accounting Standards Board. This new independent entity is needed to 
assure timely progress toward honest accounting for how transportation 
funds are spent, including oversight of innovative finance programs 
such as GARVEE and TIFIA bonds, to assure compliance with 
transportation planning fiscal constraint requirements, and to assure 
the integrity and timely improvement of transportation agency 
environmental management systems, including travel and emissions 
analysis models.
      America needs a new much stronger national transportation 
data center to replace the Bureau of Transportation Statistics. This 
center should help set a core set of uniform standards for travel 
survey data collection, transportation network coding, spatial data 
analysis, and evaluation, developing a new generation of scientifically 
valid methods for local, regional, and national travel behavior 
analysis to support performance-based funding and decisionmaking. Local 
innovation should be encouraged to augment this core set of measurement 
systems.
IV. Transportation Conformity at Work in Atlanta
    In most U.S. metropolitan areas, agencies have successfully managed 
their transportation plans and programs to stay within the limits of 
adopted air quality plans. When these have come into conflict, 
resulting in conformity lapses, these have been brief. Most have been 
resolved in a matter of several months or less after working out 
administrative problems or by adding new emission-reducing 
transportation projects to TIPs and RTPs to offset excess pollution.
    In several instances, most notably in metropolitan Atlanta, 
conformity lapses have persisted longer, thanks to ongoing interagency 
conflict and resistance from transportation and sprawl development 
interests who would prefer to ignore adopted SIP emission budgets. 
Throughout the 1970's and 1980's Georgia DOT invested heavily in 
freeway expansions, spurring massive low-density car-dependent sprawl 
development. By the mid-1990's, Atlanta area residents drove 34 miles 
per day per person, more than in any other metro area in the world. 
This came at a high price in regional air quality. The 1979 ozone NAAQS 
has been exceeded each year in Atlanta since 1980, continues to be 
violated many days each year, and exceeds the national standard by 30 
percent to 50 percent. In 1999, the year when Atlanta was required by 
the Clean Air Act to attain healthful air quality, the region had the 
highest number of unhealthy days in the decade, with 22 days above the 
1-hour health standard for ozone air pollution.
    In December 1998, Georgia Power and Southern Company completed a $3 
million scientific study to identify the primary sources contributing 
to Atlanta's ozone problem. Scientific analysis showed that power plant 
emissions caused about 15 percent of the Atlanta area's ground-level 
ozone, while mobile sources--including off-road--accounted for 70 
percent, and emissions from other sources accounted for 15 percent. 
Shortly after this study, the State finalized its first plan to reduce 
smog-causing emissions in metro Atlanta. This plan is resulting in 
investment of $850 million in new pollution control technologies on 
power plants by May 2003, reducing Georgia Power's contribution to 
ground-level ozone in the Atlanta area to 6 percent. In fact, power 
plant controls represent 86 percent of the reductions that will be 
achieved in the State plan. With these Georgia Power reductions, mobile 
sources, including on-and off-road, will be responsible for about 83 
percent of the Atlanta area's ozone problem.\7\
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     \7\The Telegraph, Jun. 15, 2002, Atlanta, GA.
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    Routine conformity analysis of the TIP and RTP has been vital to 
making progress on clean air in Atlanta. In 1996, the region's MPO 
submitted a SIP stating that the region would meet a motor vehicle 
emission budget of 214 tons per day (tpd) by 1999, when they were 
required to attain the ozone NAAQS. In 1998, the MPO wrote to EPA 
saying that its 1999 NOx emissions would actually be 238 tpd in 1999, 
reflecting the use of a refined travel model and updated growth 
forecasts. In 1999, the MPO found that real-time NOx emissions were 264 
tpd. In 2001, the MPO admitted that it would not reach the 214 tpd 
motor vehicle NOx budget until 2005.
    Conformity requirements led the Atlanta MPO to admit in September 
1996 that its proposed new TIP would exceed the SIP emission budget 
submitted in June 1996. In response, the region deferred plans to add 
even more road expansion projects to the TIP and began to limit changes 
to its TIP to conformity-exempt projects. However, various proposals to 
adopt more stringent motor vehicle inspection and maintenance programs, 
cleaner fuel standards, and expanded transit services and emission 
reduction strategies proposed by local agencies and the regional 
transit agency were blocked by Georgia officials, although together 
these local actions could have resolved the conformity lapse.
    In late 1997, just prior to the expiration of the TIP, Georgia DOT, 
with FHWA concurrence and opposition from EPA, sought to exempt nearly 
$1 billion in highway capacity expansion projects from transportation 
conformity so they could continue building these sprawl, traffic, and 
pollution inducing new roads through what many expected to be a lengthy 
conformity lapse.
    After the conformity lapse began in January 1998, the MPO adopted 
several interim TIPs and RTPs. In response to a suit filed by 
Environmental Defense, the DC Court of Appeals found invalid in March 
1999 certain EPA conformity regulations that had been the basis for 
ultimately exempting over $700 million in Atlanta area road projects 
from compliance with transportation conformity. As a result, the 
Atlanta region lost no Federal funds, but did end up shifting over $300 
million in spending during the conformity lapse from sprawl-inducing, 
pollution-boosting road projects to instead fund transit, sidewalks, 
bikepaths, HOV lanes, transit-oriented brownfields infill 
redevelopment, traffic signalization, intersection improvements, 
highway safety, bridge reconstruction, maintenance, and other 
conformity-exempt projects and Transportation Control Measures.
    Atlanta's conformity problems also prompted intense engagement of 
business, civic, and community leaders to address the failures of their 
governance structures to agree on strategies to clean the air, manage 
sprawl, and provide the region's citizens with travel choices other 
than driving. It allowed Gov. Roy Barnes to get legislative approval in 
1999 to create a potentially powerful Georgia Regional Transportation 
Authority (GRTA), with authority to fund transit expansions, review and 
approve transportation and development plans, and manage growth in non-
attainment areas.
    But soon after its creation, GRTA was pressed by Georgia officials 
to approve a new Atlanta RTP that would renew massive sprawl and 
pollution inducing road system expansions, while adding new transit and 
commuter rail investments. The new Atlanta RTP supports a lot of road 
investment and sprawl, including outer beltway development, in the 
early years of the plan and promises largely unfunded major transit 
investments farther in the future. As a result, the MPO's own analysis 
shows that under the $35 billion Atlanta RTP, the share of regional 
employment reachable by those without cars will decline from 2000 to 
2005 and not return to year 2000 levels until after 2015. This raises 
serious questions about compliance of the Federal approval of this plan 
with Title VI of the Civil Rights Act, which requires consideration of 
disparate impacts of Federal spending on protected minorities, and it 
bodes ill for the region's ability to meet Clean Air Act requirements. 
Attachment 3 provides tables illustrating, with data from the Atlanta 
MPO, these troubling trends of declining access to job opportunities 
for people without cars, who are disproportionately minority 
populations and lower income residents.
    Indeed, conformity of the new RTP was dependent on an EPA 
attainment date extension policy that the U.S. Court of Appeals for the 
D.C. Circuit recently invalidated in connection to a lawsuit 
challenging approval of a SIP for the Washington, DC metropolitan area, 
which similarly depended on this policy. It also relied on a SIP 
revision to increase the motor vehicle emission budget to allow greater 
pollution, although the region was experiencing record levels of 
health-harming ozone violations in the year it was by statute required 
to come into attainment.
    FHWA, EPA, and environmental and civil rights groups all raised 
serious questions about the legal compliance of the new RTP with TEA-21 
fiscal constraint requirements; local elected officials raised 
questions about who would pay for the new transit investments and the 
costs of expanded transit operations; the regional transit agency was 
simultaneously in a severe fiscal crisis that led to a general fare 
increase and substantial bus service cutbacks, harming low income 
minority transit-dependent riders.
    In the past year, Georgia officials have sought to accelerate 
spending for their massive road program under this RTP through new 
``innovative financing'' bond issues. How to pay for transit operations 
assumed in the RTP remains a critical and unresolved problem. Should it 
later be revealed that Georgia's current transportation investments 
were imprudent from an air quality perspective, it will be too late to 
redirect this spending, and the fiscal capacity of the State to fund 
emission-reducing projects will be impaired.\8\
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     \8\Unfortunately, a number of other States are following this 
approach, using GARVEE bonds and other leveraged finance methods to 
evade fiscal constraint requirements. New Mexico, for example, several 
years ago did an end run around opposition in the State legislature to 
a 140-mile road expansion project by issuing GARVEE bonds that obligate 
transportation receipts for the next generation to the project and 
adopted a repayment scheme that avoided any payments on the bonds for 
the first several years. As a result, a large share of the State's 
transportation budget will be eaten up by debt repayment.
---------------------------------------------------------------------------
    Adding to these concerns, an independent audit of the Atlanta MPO 
traffic model by a nationally recognized modeling expert found that the 
MPO seriously underestimated motor vehicle emissions by misrepresenting 
travel speeds on freeways. A later speed study commissioned by GRTA 
affirmed these findings, but was suppressed by Georgia officials until 
after approval of the RTP and TIP conformity analysis that relied on 
the seriously flawed model. The mis-accounting for nearly 12 tpd NOx, 
which contributes to continuing health impairment of hundreds of 
thousands of people in the Atlanta area, was simply swept under the 
carpet by regional agencies, FHWA, and EPA. Attachment 2, ``Emissions 
Effects of Atlanta Speed Study,'' provides additional documentation.
    Unfortunately, my two decades of experience as a transportation 
engineer and modeling expert, working with many regional travel 
forecasting models across America, allows me to State with confidence 
that the kinds of problems observed in the Atlanta model with poor 
estimation of speeds are widespread elsewhere. Until independent 
critiques of regional travel models become commonplace, the integrity 
of the traffic and emissions forecasting process in most non-attainment 
areas will remain suspect, casting doubt on the success of SIP control 
strategies to deliver healthful air to all Americans.
    Following lengthy settlement negotiations that led to a tentative 
agreement in December 2000 for additional emission reductions, Georgia 
officials balked at making the agreement enforceable and withdrew from 
talks in January 2001, moving forward with new road projects in the TIP 
and RTP. This led environmental and civil rights groups to challenge 
approval of the Atlanta RTP and SIP revisions in several suits. These 
legal actions are still in process. One of the key questions, now 
before the Court of Appeals in the 11th Circuit, is whether the TIP 
must demonstrate conformity to the EPA-approved 1999 SIP motor vehicle 
emission budget at the time the TIP is approved and while the funds in 
the TIP are being spent. Georgia Governor Barnes and FHWA convinced the 
District Court that the Atlanta fiscal year 2001-2003 TIP does not need 
to demonstrate conformity until 2004, despite the CAA statutory 
requirement for Atlanta to attain healthful air quality by 1999. If 
this stands, it will represent an unfortunate weakening of the 
accountability of transportation programs to SIP emission budgets.
    While Atlanta has made progress in its governance structures, 
planning, and emission control strategy development, thanks to 
conformity, these reforms continue to encounter resistance from 
interests in the State that seek continued sprawl and road system 
expansion regardless of the consequences for air quality. The price of 
this resistance is degraded health and a tarnished quality of life, and 
likely higher future pollution cleanup costs to compensate for the 
irretrievable commitment of resources today to investments that will 
spur higher pollution for decades to come. Without conformity, there 
would be even less accountability.
V. Recent Transportation Conformity Action in Washington, DC
    Conformity has also been valuable in helping to win new emission 
reduction strategies in the metropolitan Washington, DC region and 
bringing about better accountability for transportation decisions. In 
July 2001, the MPO updated its modeling assumptions to reflect the 
growing use of sport utility vehicles (SUVs) and light trucks, which 
produce more pollution per mile driven than standard cars. As a result, 
they observed that that they could no longer add new road projects to 
their TIP and RTP and still conform with the NOx motor vehicle emission 
budget in their adopted SIP. Officials formed a task force to consider 
reopening the SIP to allow for more motor vehicle pollution by finding 
offsets from other emission sources or fixing the conformity problem by 
adopting added emission reduction measures. With adjustments for some 
refinements to their model estimates and for emission reducing measures 
already being implemented but not previously credited, the MPO found 
that the 8 tpd NOx excess emissions over budget was reduced to about 3 
tpd.
    Following further meetings and analysis, Maryland Governor 
Glendening proposed a $42 million package of transportation emission 
reduction strategies, including buying clean buses, improving 
pedestrian and bicycle access to transit, and supporting transit 
oriented development. The MPO is confident that this package, along 
with measures advanced by other jurisdictions, provides sufficient 
reductions to offset this emission budget shortfall and the region is 
moving to adopt them as part of a new TIP and RTP at the end of July 
2002. If proposals to lengthen the duration of conformity findings to 5 
years had been in effect, this $42 million package of emission 
reduction measures would not likely have been funded.
    Because of dramatic underestimation of transportation project costs 
by Virginia DOT, the region recently cut back its proposed short-term 
road program for 2005 by 100 lane miles of new road capacity. The MPO 
estimated this would result in a 1.9 tpd reduction in NOx, along with a 
0.6 percent reduction in daily VMT, a 1.3 percent increase in daily 
transit trips, a 0.1 percent decrease in VOC.
VI. Cancer Risk Must Be Accounted For In Decision-Making
    Compelling new scientific evidence suggests that people living in 
communities located near heavily traveled highway facilities are being 
exposed to concentrations of toxic and hazardous air pollutants emitted 
by motor vehicles that cause an extremely high and unacceptable risk of 
cancer including childhood leukemia, and other respiratory and 
cardiovascular disease.
    Research by California's South Coast Air Quality Management 
District demonstrates that toxic pollutants emitted by motor vehicles 
account for an unacceptably high cancer risk in the range of 
approximately 1 in 1,000 exposed individuals to 1 in 650. See, Multiple 
Air Toxics Exposure Study-II (MATES-II), March 2000. The study found 
that the total cancer risk in the Los Angeles Basin from toxic air 
pollutants measured at 8 monitoring sites ranges from 1,100 in 1 
million (or 1 in 900) to 1,700 in 1 million (or 1 in 670), and that 90 
percent of the total cancer risk is attributable to toxic air 
pollutants emitted by mobile sources. Most of the mobile source cancer 
risk is associated with exposure to the toxic pollutants benzene, 1,3 
butadiene, formaldehyde and diesel particulate matter (``DPM''). In 
addition, concentrations of toxic pollutants estimated by a regional 
air quality model show that neighborhood exposures near heavily 
traveled highways is significantly higher than exposures monitored at 
the regional monitoring stations, producing a cancer risk as high as 1 
in 130 (5800 in 1 million) in some receptor areas.
    The estimates of increased cancer risk predicted in MATES-II are 
supported by recent epidemiology data. Evidence of the incidence of 
childhood leukemia in Denver during the late 1970's and early 80's, 
Pearson and colleagues (2000), shows an association between residential 
location within 750 feet of a major traffic corridor and an elevated 
incidence of childhood leukemia. These data suggest that exposure to 
higher than regional urban background concentrations of motor vehicle 
emissions is a significant risk factor for childhood leukemia. Other 
research provides evidence of increased incidence of other adverse 
health outcomes for residents of neighborhoods near heavily traveled 
highways. Brunekreef and colleagues (1997) show that adverse health 
outcomes including premature mortality and increased morbidity through 
increased respiratory and cardiovascular effects are associated with 
the increase in ambient fine particulate matter, e.g., particles less 
than 2.5 microns in diameter (``PM2.5'') from roadway 
sources.
    Taken together, this evidence requires FHWA to prepare 
comprehensive risk assessments to determine the health risks for 
neighborhoods located near heavily traveled roadways that are proposed 
to be built or expanded in densely populated metropolitan areas, and 
that alternatives to the development of high cancer risk travel 
corridors be chosen as the preferred alternative or that mitigation be 
adopted to prevent the incremental health risk attributable to toxic 
air pollutants emitted from these projects.
    Attachment 5, A Preliminary Toxicological Review of Roadway Traffic 
Pollution, provides additional information on the need for better 
monitoring and mitigation or remediation to reduce exposure of people 
to air toxics from roadway traffic. It finds that

          Analysis of published data for traffic emission factors and 
        the resulting exposure estimates demonstrates that uncontrolled 
        expansion of roadways will significantly increase exposures to 
        both fine particulate matter and air toxins by the population 
        in the contiguous residential corridor. This is significant 
        because several epidemiological studies have shown that levels 
        of fine particulate matter typically found adjacent to heavily 
        trafficked roadways are comparable to levels that can 
        exacerbate both acute and chronic respiratory disease symptoms 
        and cause premature death among sensitive populations. This 
        finding applies to short-term exposures of a few hours to one 
        or several days. With regard to air toxins, exposures 
        experienced by roadway corridor residents are likely to equal 
        and probably exceed the air toxins levels measured at 
        monitoring sites located near heavily traveled highways and 
        reported in the Multiple Air Toxics Emissions Study II Study. 
        Risk estimates based on the levels reported in the Multiple Air 
        Toxics Emissions Study II resulted in an unacceptably high 
        cancer risk of approximately 1 in 1,000 to 1 in 650 that was 
        attributed to diesel exhaust and other motor vehicle emissions. 
        The relative impact on other roadway corridor populations could 
        be commensurate with the increased exposures to motor vehicle 
        pollution that would result from their proximity to the large 
        numbers of additional vehicles traveling the expanded highway.

    The study notes that ``Many current environmental assessments have 
not properly accounted for the differential impact that could be 
imposed on the nearby the population adjacent to expanded highways. 
This analysis of available data demonstrates that a detailed program of 
pollutant monitoring and modeling that are specific for the planned 
expansion should be undertaken to properly quantify the potential 
adverse health impacts associated with projects of this type.''
    Another study, Review of Exposure to Toxic Air Pollutants From 
Mobile Sources and the Impact of Expansion of US 95 in Las Vegas, 
Nevada, is included as Attachment 6. It relates the traffic increase 
caused by expansion of a major highway to the increased exposure of 
people in the corridor to traffic related air toxics. FHWA needs to 
assure that this kind of analysis will be routinely made a part of the 
review of major highway capacity expansion project approvals if these 
agencies are to fulfill their legal mandate to avoid adverse health 
impacts in decisions about project approvals.
    Control of mobile toxics has not been adequately addressed by EPA 
and DOT. Conformity does not currently apply to air toxic pollutants. 
Although EPA has identified 21 air toxic pollutants emitted by mobile 
sources, it has not adopted an urban air toxics strategy as required by 
section 112(k) and 202(l) to reduce mobile source toxic emissions.
VII. Prospects for Reducing Traffic Growth to Reduce Pollution and 
        Harms from Traffic
    While technology based emission control strategies have been vital 
to progress toward cleaner air, strategies that reduce VMT growth can 
make low cost contributions to timely attainment and maintenance of 
healthful air quality, offering substantial benefits beyond clean air. 
These strategies include smart growth that renews existing communities 
and incentives and investments that improve transit, walking, 
bicycling, ridesharing, and telecommuting. Together these can provide 
reductions of 15 to 25 percent in VMT, hours of vehicle travel, and 
emissions relative to trend-line automobile-dependent sprawl 
development forecast over the 20 year horizon of regional 
transportation plans.
    Recent changes in the tax code, make it more attractive for 
employers to provide transit, vanpool, and cash-in-lieu-of-parking 
benefits for their employees, which if widely implemented could reduce 
motor vehicle commute trips by 26-30 percent. These and other 
innovative strategies--such as intelligent transportation systems, 
value pricing of roads and transit, usage-based car insurance, traffic 
calming for pedestrian and bicycle safety, smart growth and telework 
can expand equitable access to jobs and public facilities and reduce 
growth in traffic, congestion, and air pollution. Regions can cap and 
reduce per capita VMT in coming years with such strategies, producing 
diverse short and long term benefits.
    Georgia officials illustrated their capacity to achieve short term 
reduction in traffic, pollution, and health hazards from traffic during 
the Atlanta Olympics. By expanding their transit system with roughly 
1000 leased buses, promoting travel alternatives, telecommuting, and 
other travel incentives, they cut morning peak traffic levels by almost 
one-fourth during the Olympics while the region accommodated one 
million visitors over a 3-week period. This led to a 28 percent drop in 
ozone levels and a reduction by 42 percent in the number of people 
seeking hospital treatment for asthma.
    Several State studies have illustrated rail's benefits for energy 
conservation, air pollution and global warming, For example, in 
California, a recent State study concluded that the State-supported 
intercity train network will prevent 265 million motor-vehicle-miles 
from being driven in 2002. While the resulting reduction in gasoline 
consumption is offset by increased diesel consumption by trains, the 
State projects a net saving of 7.3 million gallons of gasoline in 2002, 
helping to reduce both air pollutant emissions and the demand for 
imported oil (California Department of Transportation, California State 
Rail Plan 2001-02 to 2010-11, 2001, p. 6). A gasoline saving of this 
magnitude would reduce carbon dioxide emissions by about 140 million 
pounds, which is the equivalent of taking 12,000 cars off the road for 
a year. A study done for the Coalition of Northeast Governors in 1990 
estimated that the introduction of high-speed rail service between 
Boston and New York would save 20 million gallons of jet fuel and 4.5 
million gallons of gasoline per year. Although some pollution is 
generated from the electricity that powers the trains, the net effect 
of high-speed rail between Boston and New York would be to eliminate 
almost 2,700 tons of smog-forming pollutants each year.
    Public transportation has been estimated to cut gasoline use by 
more than 1.5 billion gallons a year and to prevent the emission of 
63,000 tons of hydrocarbons and 78,000 tons of nitrogen oxides. These 
numbers don't even consider the much greater indirect energy and 
environmental benefits of the efficient housing and work environments 
made possible only by the availability of rich transit networks in 
places like New York City, San Francisco, and Washington, DC. And vital 
new economic centers, such as San Jose, Denver, and Portland, Oregon, 
could not sustain and manage their growth without having invested 
heavily in transit.
    When high quality transit services are consistently developed and 
sustained over the long-term, they transform community patterns of 
travel, commerce, and urban development, producing much larger 
pollution reductions. A recent study by the National Transit 
Cooperative Research Program of the National Academy of Sciences found 
that transit-supported compact developments yield 10-30 percent less 
overall community energy use and pollution compared to low density, 
car-dependent sprawled development, as well as lower total social and 
infrastructure costs. Many regional and sub regional studies using best 
practice analysis tools to compare alternative investment strategies 
and related policies, e.g., in Denver, Portland (OR), Sacramento, and 
Washington, DC, have found that transit supported strategies can 
accommodate equivalent amounts of new development with significantly 
less traffic and pollution while automobile-oriented strategies induce 
added traffic and pollution.
    Indeed, by focusing growth around an expanded transit system, 
reducing expenditures on roads, and adopting an urban growth boundary 
and pedestrian-friendly urban design standards, Portland, Oregon has 
pursued a path different from most other U.S. metropolitan areas. Since 
the adoption of the 235,000-acre growth boundary in 1979, Portland has 
urbanized just 39,000 acres. At the same time the population inside the 
boundary has increased by more than a third. No new road capacity has 
been added to the downtown for nearly a quarter century although 
employment has nearly doubled in that time to 1-,500. Transit carries 
the equivalent of two lanes of traffic on every major thoroughfare to 
downtown. Portland tore out a six-lane expressway to create a downtown 
river front park, traded in the money for two new freeways and invested 
in transit. Between 1990 and 1996, transit ridership grew 20 percent 
faster than the growth in vehicle miles traveled, 41 percent faster 
than the growth in transit service and nearly 150 percent faster than 
the growth in population. Portland's adopted regional plan envisions a 
40 percent increase in population and just a 2 percent increase in land 
area by 2017. The experience of most cities with less consistently 
transit-focused policies has been that urban land consumed per person 
has skyrocketed, exacerbating car dependence. Seattle's experience is 
typical, with a 38 percent population increase accompanied by an 87 
percent increase in urban land area between 1970 and 1990.
    Portland has been a leader in adopting effective SIPs and 
Maintenance Plans that include high-performance Transportation Control 
Measures (TCMs). Portland expects to achieve a 5 percent cut in vehicle 
miles traveled by 2010 thanks to changes to its zoning and parking 
codes that reduce the over-supply of parking and encourage mixed-use 
development. It has previously adopted SIP TCMs that required local 
governments to modify local zoning to support transit oriented 
development, consistent with Federal Transit Full Funding Agreements 
that were predicated upon such zoning changes to assure a sound market 
for transit use.
    Another region facing sprawl pressures that are being countered 
with better transit is Denver, which anticipates accommodating a 
million new residents in the coming 20 years. A recent survey by the 
Downtown Denver Partnership shows that before the new Southwest light 
rail line opened, one in four downtown commuters used transit; since 
the new line opened, one in three do. It is estimated that it would 
take 175 additional miles of highway in the Denver metro region to 
carry all the people who use transit today. Recent public transit 
investments have been very successful; both light rail and the bus and 
carpool lanes on north I-25 have exceeded projections for ridership. 
The 14-mile light rail system takes 525 bus trips off city streets each 
day. One light rail train can replace over 200 single occupant 
vehicles. More than 33,000 people ride the light rail daily about 30 
percent above the original ridership projections. New transit 
investments are not only alleviating traffic congestion and cutting 
pollution, they are revitalizing communities by serving as 
infrastructure for creating new town centers and livable, walkable 
communities. The once dead Englewood mall has been reborn in the past 2 
years as a mixed-use city center with homes, offices, stores, cultural, 
and civic uses, thanks to Denver's Southwest light rail line that now 
serves it. And the growth attracted to this center otherwise would 
likely have taken a much more polluting, car-dependent form at the 
periphery of the metro area, but for Denver's transit-supportive 
policies.
Strengthen Commuter Choice: Boost Employer Support for Transit
    Federal and State tax policies are a key factor driving increased 
dependence on motor vehicles. For the vast majority of working 
Americans, a free parking space at work has for decades been the sole 
commuter benefit offered by employers because that was until recently 
the only tax-free commute benefit worth speaking of. So if you drive 
alone to work you gain the benefit. If you take transit, carpool, walk, 
or bike, you lose the benefit and likely pay your own daily transit 
fare. With this kind of incentive, it's no surprise that on any given 
day nine out of ten American commuters drive to work and nine out of 
ten of the cars driven to work have one occupant. Yet the 85 million 
``free'' or subsidized employer parking spaces actually cost American 
business more than $36 billion per year. By spurring more driving, 
these subsidies exacerbate traffic congestion and air pollution. A 
congressional study found that ``free'' parking of all kinds costs our 
society over $250 billion per year.
    In 1998, Congress took steps to make tax policies more equal for 
all commuters, allowing employers to offer tax-free transit and vanpool 
benefits of up to $100 a month, with taxable cash-in-lieu-of-parking 
benefits allowable for the first time. Tax-free benefit limits for 
employer-provided parking were set at $175 per month--a practice which 
still leaves solo drivers at an advantage. Allowing employee-paid pre-
tax transit benefits saves transit-using employees over $400 a year 
while saving employers a smaller amount on withholding. Having 
employers pay for transit is a bigger incentive for employees. Offering 
such a benefit to Federal executive agency employees in the national 
capital region induced 11 percent of employees who used to drive to 
work to switch to transit, taking 12,500 cars off the region's crowded 
roads every workday. At firms in California and Minnesota offering a $2 
a day incentive instead of free parking, one out of eight who used to 
drive are finding another way to get to work. Such benefits help 
employers attract and retain employees and provide the greatest help to 
low and moderate wage workers who spend the largest share of their 
incomes commuting and often ride transit, carpool, bike, or walk to 
work.
    The cost of such employer provided transit benefit programs to 
employers is very small and can easily be fit within the scope of 
ordinary cost-of-living increases offered by most employers to their 
employees on a periodic basis. State tax credits can make this cost 
even smaller. For example, in Maryland, if an employer offers an 
employee a cost of living increase, for each $1 in after-tax cost to 
the employer, the employee typically receives $0.53 in after-tax 
income. If that same $1 in after-tax employer expense is instead 
devoted to an employer-paid qualified transit benefit of $60 a month, 
the typical Maryland employee who receives it ends up gaining $1.76 in 
after-tax benefits, thanks to the leveraging effect of Federal and 
State tax provisions.
    The savings for employees offered by the Federal tax law changes 
are significant and make a high level of employer and employee 
participation in the next several years realistic across America. For 
example, an employee earning $50,000 per year who spends $780 annually 
on transit ($65/month) could realize a tax savings (at 42 percent) of 
$328 as a result of paying their transit cost using pre-tax dollars, 
exercising one of the new Commuter Choice options, while their employer 
would gain payroll tax savings (at 7.65 percent) of $60 per employee 
(Arthur Andersen). Even if the cost to set up and administer the 
program equals 2 percent of the transit benefit, the employer will 
still enjoy payroll savings of $44. Employers are likely to face new 
costs to offer transit passes or added cash income in lieu of parking, 
but these can also translate into substantial cost savings of several 
types. It is much cheaper for an employer to boost non-taxable employee 
benefits than to offer added taxable income to retain or attract 
workers, which is an increasing issue in a tight labor market. If the 
employer is able to expand employment without adding more parking 
spaces or to otherwise avoid the cost of building, leasing, or 
maintaining parking spaces for workers, capital cost savings can amount 
to $5,000 to $20,000 per avoided space and operating costs can amount 
to $750 to $3,000 or more per year per avoided space. Such savings are 
often significant enough to more than pay for a cash in lieu of parking 
or transit pass benefit.
    Commuter Choice programs have been shown to unite the diverse 
interests of environmentalists, business, labor and transit and highway 
advocates. Most realize that Commuter Choice is good for business and 
for communities. Commuter Choice is a voluntary incentive that boosts 
travel options and supports more efficient use of the roads and transit 
we already have. It can provide quick relief to traffic-strained 
communities and will expand market opportunities for new forms of 
access to suburban jobs. Low-and moderate-income workers benefit 
particularly, since commuting costs represent a larger relative burden 
on them, and they tend to be more reliant on ridesharing and transit. 
The Alliance for Clean Air and Transportation, a national group 
representing a diverse array of sectors, including the road builders, 
automobile industry, environmentalist and health groups, the American 
Association of State Highway and Transportation Officials, Highway User 
Federation, American Automobile Association, the National Association 
of Regional Councils, and the US DOT and EPA, in February 2000 adopted 
a consensus goal of making Commuter Choice benefit programs a standard 
part of the American worker benefit program over the next 5 years.
    However, Commuter Choice will have an effect on air pollution only 
if people know about it and use it, and if the opportunities for cost 
savings offered by aggressive implementation of these incentives are 
made evident and available to developers, building owners and tenants, 
and commuters. Marketing alone has been shown to be inadequate to win 
widespread adoption of Commuter Choice incentives. There are many 
strategies that can be taken by States, regional bodies, and local 
municipalities to foster rapid and widespread adoption of Commuter 
Choice incentives so these might become available to the average 
commuter. Additional financial incentives and support by transportation 
agencies and other government bodies are essential to rapid adoption of 
Commuter Choice voluntary incentives and can be highly cost-effective 
in reducing congestion and pollution.
    DOT and EPA are promoting Commuter Choice, but congressional action 
is needed to further expand efforts to foster widespread adoption of 
these voluntary incentives. EPA estimates that if half of all U.S. 
employees were covered under these commuter benefits, traffic and air 
pollution could be cut by the equivalent of taking 15 million cars off 
the road every year, saving American workers about $12 billion in fuel 
costs. For every 10 percent of U.S. employees participating, commute 
VMT would be cut by 3.2 percent, or 20 billion miles, with emission 
reductions of 54,000 tons VOC, 480,000 tons CO, 33,600 tons NOx, and 
2.36 million tons CO2. In SIP Development Guidance: Using 
Emission Reductions from Commuter Choice Programs to Meet Clean Air Act 
Requirements, EPA estimates reductions of 26-30 percent in commute 
vehicle trips for a full Commuter Choice program. Los Angeles research 
shows that those who receive free parking at work drive 72 cars per 100 
employees, while those who paid for parking at work drove 53 cars per 
100 employees, or 26 percent less (D. Shoup, ``An Opportunity to Reduce 
Minimum Parking Requirements,'' Journal of the American Planning 
Association, Winter 1995, pp. 14-28.).
    Congress should take further steps to encourage employer support 
for such 'Commuter Choice' initiatives. Congress should support for the 
following bills that would do this:

      The Commuter Benefits Equity Act of 2001 (H.B.318) would 
provide equal tax-treatment for parking and transit benefits.
      The Bike Commuter Act (H.R. 1265) would allow employees 
who bike to work the same financial incentives as transit users.
      The Mass Transit Tax Credit Act of 2001 (H.R. 906) would 
provide a 25 percent tax credit to employers for the cost of providing 
transit benefits to their employees. This is modeled after measures 
adopted by several States--including Maryland, Minnesota, Oregon, 
Washington, Georgia, New Jersey--that have begun offering tax credits 
of up to 50 percent and up to $50 per employee per month for employer-
paid non-driving commuter benefits.

    TEA-3 should also require that local and State officials do more to 
consider integrating Commuter Choice into their transportation plan and 
program development. In all non-attainment areas, transportation 
programs should assure that potential air pollution reduction benefits 
from Commuter Choice will be realized in a timely manner. These would 
include provision of these benefits to State and local government 
employees, aggressive marketing of these benefits to employers and 
employees, inclusion of Commuter Choice programs in local planning, 
development review, and other decisionmaking procedures and favorable 
local and State tax treatment. Such new travel demand management 
activities and incentives should be given priority by including them in 
air quality SIPs as Transportation Control Measures.
    This promotion should include marketing, technical and 
administrative assistance, new transit fare products, such as deep-
discount bulk purchase transit and vanpool benefits for 100 percent of 
an employer's work force in the region, and new financial incentives 
for employers and employees that are adjusted annually in an effort to 
meet Stated performance targets. State Implementation Plans should 
include targets, timetables, and expanded funding commitments for (a) 
providing different segments of the labor force with Commuter Choice 
options of various types and (b) achieving increased levels of use of 
various Commuter Choice incentives by various portions of the labor 
force. These targets could be used as the basis for estimating SIP 
credits if accompanied by commitments to reasonably linked funding and 
policy commitments that could be anticipated to meet these targets.
Financing Transit With Automated Road Pricing
    Another promising option for curbing traffic and emissions growth 
while enhancing mobility is automated time-of-day tolls and High 
Occupancy Toll (HOT) lanes, which allow solo drivers to pay to use High 
Occupancy Vehicle (HOV) lanes, while giving a free ride to buses, vans, 
and sometimes carpools. These can put to work unused capacity in HOV 
lanes and help pay for expanded transit services. A network of HOT 
lanes on existing highways is likely to provide more effective 
congestion relief than building new roads. New outer beltway toll roads 
are likely to bring more sprawl and put more jobs out of reach for 
those without cars, hurting the poor and the environment. Why not 
instead give time-stressed travelers a way to buy relief from growing 
congestion delays in existing freeway corridors and finance better 
transit?
    HOT lanes in existing road corridors can expand both travel choices 
and equity. HOT lane critics unfairly bash them as ``Lexus Lanes,'' 
serving only the rich. Real-world HOT lanes look more like ``Lumina 
Lanes,'' used by people of widely varying incomes who occasionally need 
to bypass traffic delays that disrupt their social, family, or work 
life. A working class mom who is facing a $1 a minute penalty for 
picking her kids up late at day care is happy to pay $4 to save 20 
minutes by using the HOT lane on those several days a month when she 
needs it. The typical users in California spend less than $20 a month 
on HOT lane tolls, using them on days they are in a real rush. If HOT 
lane revenues fund new bus services, as on San Diego's I-15 HOT lane, 
everyone wins. Lower income transit users and carpoolers get access to 
otherwise inaccessible suburban jobs. Drivers benefit from reduced road 
congestion and better services and choices. If HOT lane revenues help 
pay for the road, those who drive most are paying more of their fair 
share, helping all taxpayers win. Road user fees don't nearly cover the 
full cost of building and operating America's roads, which remain 
subsidized by broader taxes. And with new accounting rules forcing 
fuller disclosure of deferred maintenance, transportation providers 
need new sources of revenue to maintain systems, expand choices, and 
cope with growing travel demand.
    New non-stop electronic toll technology means motorists don't need 
to slow down to pay tolls. And HOT lane fees--higher in rush hour and 
discounted at other times--keep traffic flowing without wasting scarce 
road capacity like HOV lanes do. This makes it possible to contemplate 
future conversion of some existing general-purpose lanes to HOT lanes, 
particularly where new capacity is being added to existing roads. HOT 
lane experience indicates this strategy can garner popular support. On 
California's Route 91, diversion of traffic onto HOT lanes has reduced 
congestion on the entire road and increased the number of passengers 
per car to 1.6, compared to the average of 1.2. Similar incentives have 
been implemented or are being considered in Texas, Florida, Colorado, 
Georgia, New Jersey, New York, and other States.
    The Port Authority of NY-NJ in March 2001 introduced time-of-day 
tolls on Hudson River bridges and tunnels and Staten Island bridges, 
giving discounts for electronic toll payers who avoid rush hours and 
charging a premium in the time of most concentrated demand, just like 
movie theaters and many other services. This helps reduce congestion by 
shifting the time of day of traffic. Toll revenues support better PATH 
transit and regional transportation infrastructure and services. The NJ 
Turnpike, NY Thruway Authority, and other tolling agencies have 
implemented time-of-day tolls to manage traffic.
    Congress should encourage States and transportation facility 
operators to replace obsolete toll booths that cause congestion and 
pollution with new barrier-free customer-friendly tolling systems using 
toll transponders and image processing and billing systems. Congress 
should encourage State motor vehicle agencies to issue toll 
transponders with motor vehicle registrations to encourage their 
widespread availability in States where tolls are used. Congress should 
eliminate restrictions on tolling highways that were constructed with 
Federal aid, which can now only be tolled under limited pilot projects 
authorized by TEA-21.
Promote Smart Transit Fare Payment Systems for Productivity Gains
    New information technologies and smart management strategies are 
vital to making America's transit systems more efficient and attractive 
for users while controlling costs. There are many things that should be 
done in this regard, including improving fare collection systems and 
giving buses and trolleys greater priority in traffic. Enhancing 
priority for buses and trolleys in traffic can increase average transit 
travel speeds, schedule adherence, and the number of passenger seat-
miles per hour that can be carried by existing transit vehicles. A key 
part of this strategy involves upgrading traffic signals to support 
greater priority in traffic for buses, so they can hold a green signal 
green for a few extra seconds, or advance a red signal to green to 
avoid an extra stop. The strategy can also include building or 
configuring bus queue jumper lanes at key traffic bottlenecks to speed 
bus traffic past congestion, creating dedicated bus lanes, and bus 
boarding stations. These are often combined to provide ``Bus Rapid 
Transit'', which can often provide many of the benefits of fixed 
guideway rail services quickly at a lower cost.
    Across America, buses are slowed by passengers who must file 
through the vehicle's narrow front door to board and pay an exact cash 
fare. Encouraging near universal use of pre-paid transit fare 
instruments and other high efficiency transit payment options, as in 
Europe and Japan, enhances productivity of existing and new transit 
services by reducing delays related to fare payment at time of 
boarding. Instead of having people pay cash on boarding, require that 
passengers carry a prepaid transit pass, or other fare media that must 
be validated before or immediately after boarding a transit vehicle, 
and which at a premium cost could be purchased on board the vehicle. 
Greater use of daily, weekly, monthly, and annual transit passes helps 
accomplish this. Fare inspectors roaming transit systems and spot 
checking to verify that passengers are carrying a valid proof of fare 
payment or a pass, with large fines for fare evasion assure broad 
compliance. This enables boarding of buses through both front and rear 
doors, which boosts transit vehicle productivity.
Provide Safe Routes to Schools and Transit by Foot and Bike
    Walking and biking are pollution free modes of transportation that 
millions of americans enjoy where street and community design allows 
them to be done safely. and public transit is only as useful when 
people can get to and from its stops, which usually requires walking at 
one or both ends of the trip. A key part of the transit success story 
of recent years--with U.S. transit ridership growing faster than 
vehicle miles driven for the past 5 years--is attributable to TEA-21's 
increased support for investments in walking and bicycling. TEA-21 
reauthorization should take further actions to assure a safe route to 
schools and transit stops across America, adapting successful 
strategies from the most bicycle and pedestrian friendly communities. 
This should include requiring transit agencies to develop least-cost 
transit access plans that consider and compare walk, bike, and 
automobile access opportunities to expand the market reach along all 
their transit lines. It should include accelerated funding to local 
governments to enable the build-out of the 20 year bike and pedestrian 
plans in the next 3 years, planning funds to engage in local area 
pedestrian and bicycle planning to identify key barriers and safety 
problems, and delay of some road projects to provide funds to retrofit 
sidewalks, bike paths, and traffic calming measures within a half-mile 
of all transit stops and schools. Such measures should be required as 
reasonably available control measures in all non-attainment areas.
    About 40 percent of Americans own bicycles, and many of these 
people live one-quarter mile to two miles away from express transit 
stops. Few of these people now use transit to get to work, in part 
because of the lack of an inexpensive, convenient, safe, and fast 
transit access system suited to trips of this distance. In the Silicon 
Valley of California, 40 percent of those using bicycle lockers at rail 
stations leave bicycles in them overnight and use them to get from the 
station each morning to their nearby schools and employment, just as in 
the Netherlands.
    Another means of reducing traffic is to implement neighborhood 
traffic calming to reduce motor vehicle speeds on many streets to 
improve safety for pedestrians, bicyclists, and motorists, and reduce 
emissions from car travel. Traffic calming has been shown by research 
to reduce idle times by 15 percent, gear changing by 12 percent, brake 
use by 14 percent, and gasoline use by 12 percent, injuries by 60 
percent, fatilities by 53 percent, and air pollution by 10 to 50 
percent. The majority of all urban and suburban streets and roads are 
already quite suitable for bicycling, with relatively low traffic 
speeds and low traffic volumes. However, such residential streets 
usually lead to bicycle-hostile major roads before reaching major 
activity centers and schools. Frequently, development of small missing 
links can make the difference between safe bicycle access and lack of 
access.
    Experience shows that high levels of bicycle use only occur where 
the street system is bicycle-friendly. Where well-connected networks of 
bicycle friendly streets, bicycle paths, and bicycle lanes have been 
provided--such as Davis, Palo Alto, and Santa Barbara, California, 
Madison, Wisconsin, and Gainesville, Florida--bicycle mode shares of 
10-25 percent are common. Where such networks are not available, only 
the hardiest of cyclists take to the roads for purposeful travel, 
leading to bicycle mode shares of 2 percent or less. (Michael Replogle, 
Bicycle and Pedestrian Policies and Programs in Asia, Australia, and 
New Zealand, U.S. Federal Highway Administration, Washington, DC 1993). 
Marketing, education, and promotion programs are also needed to 
encourage greater and safer use of bicycles for short utilitarian 
trips, including transit access, particularly in conjunction with 
initiatives that reduce the current barriers of theft, security, 
safety, and legitimacy which impede non-recreational bicycle use in 
America.
Build Guarded Bike Parking at Major Transit Stops
    U.S. metro areas have invested in costly park-and-ride systems that 
have made transit increasingly dependent on the automobile. Other 
regions, especially in Europe but also in some U.S. communities, have 
been strengthening the potential for people to walk and bicycle to and 
from transit, boosting ridership at a far lower cost. In much of 
Europe, the fastest growing and often predominant access mode to 
suburban express transit services is the bicycle. Bike-and-ride 
services expand the potential market area of express public 
transportation at low cost without the very high air pollution emission 
and energy use rates per VMT, excessive space requirements, and high 
capital costs of automobile park-and-ride systems. While park-and-ride 
enables those living in lower density areas to travel from home-to-
transit stop, bike-and-ride systems providing secure overnight bicycle 
parking can facilitate both access and egress to transit, enabling 
travelers to get from transit stops to nearby workplaces and schools 
which are otherwise unreachable by transit. Bicycle access can be 
invaluable in adapting transit to serve 21st century suburban 
development patterns.
    In many U.S. communities, transit access planning looks only at 
automobile access. Yet many people don't use transit because they can't 
find affordable or available parking nearby when they want it. It costs 
$5,000-$20,000 to build a single additional parking space, and $750-
3,000 a year to operate a park-and-ride space. Providing bike lockers, 
bike racks, and guarded bicycle parking at transit stops can free up 
car parking spaces for those who can't bike or who live too far to bike 
to transit, while offering a low cost healthy way for those 1/2 mile to 
2 miles from the transit station or stop get to and from transit. 
Guarded bike parking at transit is a predominant part of transit access 
in European and Japanese suburbs, where it costs 1/10 to 1/100 as much 
as auto parking at transit to provide and operate. And secure overnight 
bike parking at transit allows people to get from transit to nearby 
schools and jobs that are beyond walking distance of the transit stop.
    In 1996 the city of Long Beach implemented the nation's first 
attended bicycle parking facility, or ``Bikestation.'' These facilities 
provide a range of clean transportation options--including secure, 
bicycle parking, bicycle repairs and accessory sales, changing and 
restrooms, and bicycle rentals. Bikestations have sinced opened in the 
communities of Palo Alto and Berkeley and are under development in San 
Francisco, Denver, Seattle, Santa Barbara, Los Angeles and Pittsburgh, 
Pennsylvania. (see www.bikestation.org)
Congestion Mitigation Air Quality Funding: Vital For Clean Air
    All of the traffic reduction strategies discussed above are 
eligible for funding under the $8.1 billion 6-year Congestion 
Mitigation Air Quality Program (CMAQ) and under most other flexible 
TEA-21 programs. However, spending by State DOTs of CMAQ projects have 
gone disproportionately toward more traditional investments, such as 
buying conventional fuel transit vehicles and making conventional 
improvements to facilitate traffic flow. States have flexed little STP 
or NHS funding to the kinds of traffic reduction programs described 
above.
    CMAQ was first established in the 1991 ISTEA law to assure that 
regions and States would have funds to help cleanup pollution from 
transportation and to meet the conformity and planning requirements of 
the 1990 Clean Air Act. While funds could have been better spent in 
many cases on more innovative traffic reduction activities, the CMAQ 
program has proven its value and earned wide support.
    Funding for CMAQ should be substantially expanded in TEA-21 
reauthorization in recognition of the increased problem of air quality 
non-attainment. Traffic flow enhancement projects should have reduced 
eligibility for funding under CMAQ, as there are more than ample other 
sources of Federal and State funds available for these types of 
projects. CMAQ should not be opened up to become a general operating 
assistance program for transit, but should focus on funding innovative 
air pollution reducing initiatives and a wide array of strategies and 
programs to reduce or managing travel demand, including incentives for 
smart growth; revision of local zoning, parking, and design codes; 
creation of accessory apartments near jobs and transit; freight and 
goods movement management strategy planning; traffic calming; and much 
better data collection and analysis to support and evaluate these 
initiatives before and after implementation.
    State and local air quality agencies should be given authority to 
allocate CMAQ funds in consultation with transportation agencies to 
foster more cost-effective and innovative investments. More funding for 
public-private partnerships working to reduce traffic and pollution 
growth should be funded with CMAQ. Projects producing reductions in 
greenhouse gas emissions and air toxics should be recognized and 
funded. And CMAQ project approvals should be simplified to facilitate 
innovation and timely response, with a stronger emphasis on program 
evaluation to facilitate organizational learning. The obligation rate 
for CMAQ funds has been a major problem, with many State DOTs 
overspending other fund accounts and short-changing CMAQ eligible 
projects that could have delivered more timely progress on clean air. A 
significant portion of CMAQ funds should be sub-allocated to 
metropolitan areas and counties to assure a stronger local voice in 
project selection.
    U.S. EPA has promulgated new health-standard based National Ambient 
Air Quality Standards (NAAQS) under the Clean Air Act in recognition 
that the old NAAQS were insufficiently protective of public health. The 
Supreme Court has upheld this new standard following an industry 
challenge, and new designations are now overdue. According to the 
latest available monitoring data from EPA, 123 million people live in 
the 333 counties violating the 8-hour ozone standard and 82 million 
live in 173 counties that violate the PM fine NAAQS. There is some 
overlap but it is reasonable to expect that the total population living 
in areas with unhealthy air will be approximately 150 to165 million. In 
1999, nearly 54 million people live in areas that do not meet the 1-
hour ozone standard. Currently only ozone non-attainment area 
population is recognized in TEA-21's CMAQ obligation formula.
    It would be equitable to allocate CMAQ funds to help counties, 
cities, and States deal with fine particulates and air toxics in 
addition to ozone. Reauthorization apportionments should recognize the 
expanded scope of funding needs by proportionate expansion of CMAQ 
funding based on both population and the degree of pollution 
remediation needed. Otherwise existing non-attainment areas will suffer 
crippling cut-backs in funds for air pollution reduction programs even 
while being asked to take additional steps to further cut pollution to 
protect public health. An increase from the 54 million population in 
ozone non-attainment areas to 150 million in new non-attainment areas 
would imply far more than a doubling of funds is needed just to assure 
maintenance of effort in older non-attainment areas.
    Some argue that CMAQ projects and TCMs are not cost-effective, but 
a recent TRB study concluded that it was not possible to undertake a 
credible scientific evaluation of the cost-effectiveness of the CMAQ 
program at the national level. Lack of data collection, deficiencies in 
regional travel analysis models, and the wide ranging nature and small 
scale of many CMAQ funded TCMs, which affect only a small segment of a 
large regional transportation system limits the ability of anyone to 
evaluate this program's cost-effectiveness.
    The more answerable and important question to pose may be: What is 
the cost-effectiveness of overall regional transportation and growth 
plans vs. smart growth and transportation-choice-enhancing 
alternatives? This is a vital query that could be answered over the 
course of the next transportation reauthorization if Congress requires 
States and metropolitan areas to develop integrated transportation, 
environmental resource management, and growth management plans, with 
public involvement and consideration of alternatives.
VIII. Accountability and Stewardship: Key to Clean Air and Sustainable 
        Mobility
    Public support for transportation funding will be sustained only if 
Federal, State and local agencies improve transparency about how they 
spend money and can be held more accountable for the long-term effects 
of transportation projects, programs, and plans.
    Some State DOTs are carrying through on the mandate of TEA-21 to 
integrate the Major Investment Study requirements into NEPA project 
reviews and the transportation planning process, despite the absence of 
DOT regulations, and by doing so are considering smart system 
management, pricing, partial build scenarios, and smart growth 
strategies as they consider major new investments. Some States are 
pursuing stewardship initiatives to change the culture of State DOTs 
and to foster closer planning and operational partnerships with State 
resource agencies and key stakeholders. Most States have improved 
interagency cooperation so that their transportation plans conform with 
their adopted air pollution control plans. To accomplish this, some 
regions, like Charlotte, NC, are adopting SIP TCM air pollution control 
strategies, such as new regional transit with supportive growth 
management to help offset future emission increases from highway 
transportation. Congress should encourage these best practices.
    Other transportation agencies and road builders are trying to 
scapegoat environmental laws for their own administrative failures 
which are manifested in a lack of local consensus on proposed projects, 
insufficient State and local funding match dollars, and stalled reviews 
due to inadequate consideration of alternatives, inadequate mitigation 
and avoidance of adverse impacts, and efforts to end-run Federal 
requirements. These interests want to expedite transportation project 
delivery by weakening Clean Air Act conformity requirements, setting 
deadlines for project reviews, diminishing consideration of 
alternatives and indirect impacts, limiting opportunities for 
stakeholders and resource agencies to influence decisions, and limiting 
judicial review. Congress should reject these proposals that would 
undermine core environmental protections, spur greater conflict, erode 
public support for transportation funding, and make it less likely that 
communities will consider and implement investments and policies that 
improve and support transit.
    In reauthorizing TEA-21, Congress should require all State and 
metropolitan areas to develop and periodically update, with public 
involvement, integrated transportation, natural resource protection, 
and growth management plans that consider at least one alternative 
scenario that considerably reduces traffic growth and enhances 
environmental performance through better system management. Agencies 
should annually report on the current and projected performance of 
their transportation system management, investment, and proposed 
programs and plans, accounting for cumulative and secondary impacts on 
growth patterns, public health, greenhouse gas emissions, the 
achievement of natural resource planning goals for air, water, and 
habitat protection, and the provision of equal access to jobs and 
public facilities for all residents, including those without cars, 
without undue time and cost burdens.
    The GAO recently noted, ``Those MPOs in areas without air quality 
problems that anticipate rapid growth in the future might benefit the 
most from conducting emissions assessments and considering land use 
because their areas still have the opportunity to shape growth in ways 
that will also protect against future air quality degradation. However, 
because so few of them conduct assessments and are not required to do 
so, they may not realize these benefits.''\9\
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     \9\U.S.GAO-02-12, op. cite, page 45.
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    California's recently enacted AB 2140 law provides a model for 
this, (1) establishing a standardized set of basic transportation 
performance indicators related to safety, congestion, road repair needs 
and public transit that each region must begin to track; (2) 
establishing a standard method of financial reporting to help the 
public and local officials know what their money's being spent on; and 
(3) requiring an ``alternative planning scenario'' in the development 
of each region's 20 year transportation plan in order to provide a 
clear alternative to present growth patterns that could minimize future 
demand on transportation infrastructure while reducing congestion, 
protecting open space, and saving taxpayers money. Adopting a Federal 
version of AB 2140 in TEA-3 would give the public and local elected 
officials expanded transportation investment choices including options 
to better support transit and manage both traffic and land development, 
supporting an environmentally sound approach to expediting project 
delivery.
    Proposals to weaken transportation conformity by having it apply 
less frequently to combined 5-year TIPs and RTPs threaten to put this 
accountability system into a deep freeze where it can be ignored except 
during periodic conformity crises that occur each time conformity 
analysis is performed. Rather than helping transportation agencies make 
accountability for air quality an ordinary part of doing business, less 
frequent conformity analysis requirements would allow much greater 
pressures to build in the system between analyses, causing more 
frequent failure of SIP control strategies and more frequent conformity 
lapse surprises. By demonstrating conformity of TIP amendments 
routinely, transportation agencies get early warning of problems with 
'conformity lockdowns' that prevent new traffic and pollution inducing 
projects from being added to RTPs and TIPs until resolved. Most 
agencies are thus able to act in a timely manner to avoid conformity 
lapses, which more seriously limit them to advancing projects that 
already have funding agreements, exempt projects, and TCMs.
    Proposals to weaken conformity by having it apply only to the first 
10 years of the RTP or to the last horizon year in the SIP also 
threaten to cause a renewed widespread failure of SIP control 
strategies. This proposal would allow major projects, such as new outer 
beltways, to advance far into planning, development, and construction 
before accounting more fully for their profound long-term impacts on 
regional growth and traffic patterns, and related air pollution. 
Regional traffic models are already too insensitive to induced traffic 
and land use effects. This proposal would exacerbate this problem. Some 
State DOTs complain that they must make up for pollution growth from 
traffic in the out years of their 20 year transportation plans, without 
help from SIP control strategies after the attainment year. While SIPs 
are not required to adopt control strategies beyond the attainment year 
until the attainment year is reached and requirements for a 10 year 
maintenance plan are triggered, at least a half dozen States have 
adopted SIP control strategies that extend beyond or begin after the 
attainment year, to help transportation agencies deal with this 
problem.
    For example, Denver was faced with a terrible PM problem in the 
1980's. Agencies began taking action against wood burning. There was 
progress made during this period, but PM was still measuring 185 g/m3 
compared to the NAAQS of 150 g/m3. Conformity made transportation 
planning and air quality agencies look at other sources of PM. They 
started looking at street maintenance practices and implemented street 
sanding and sweeping strategies in the mid 1990's. Strategies have been 
implemented beyond what is legally required by the CAA. Within 2 years 
PM level dropped to 80 g/m3. Conformity really woke everyone up. Denver 
legally has enough measures in maintenance plan to meet health 
standards through 2015. Conformity provided additional incentive for 
developing light rail in Denver since it would help mitigate the PM 
problem. Conformity also led to the development of Metro Vision 2020 
which recommends limiting growth to a 700 square mile area and is 
committed the region to transportation alternatives to support this 
goal. Denver also has a number of TDM strategies in their long range 
plan such as a RideArrangers program and a telework program. They do 
not take credit for TDM system management in the 2025 conformity 
finding, but they recognized the potential for reduction and retain 
them as a safety margin in meeting the emissions budget.
    TCMs represent nearly 5 percent of total emission reductions in the 
San Joaquin region of California. The SJCOG Model projects that TCMs 
will deliver as much as 10 percent reduction in emissions by 2020. In 
San Joaquin County rideshare, vanpool, and commuter rail provide 
significant emissions reductions, with a large percentage of San 
Joaquin County residents facing long distance commutes into the San 
Francisco Bay Area.
    Charlotte, North Carolina's struggle with conformity in the out 
years of its RTP has helped it to recognize the importance of making 
careful land use and transit decision to avoid losing jobs and housing 
to areas outside the center city, and becoming overburdened by 
congestion, problems that other cities are currently facing. The 2025 
Transit Land/Use plan for Charlotte-Mecklenburg proposes a rapid 
transit system to support the five major transportation and development 
corridors identified in the 1994 Centers and Corridors Plan as well as 
connections to key development hubs between these corridors. The plan 
includes proposals to:

      Concentrate jobs around stations
      Provide residential multi-family housing at stations
      Develop rail technology
      Establish Bus Rapid Transit

    Capital costs, plus operation, maintenance and other expenditures 
will cost $1.085 billion over 25 years and quantifiable benefits such 
as travel time savings and vehicle operating cost savings total $72 
million a year, generating a benefit cost ratio of 1.6. There are also 
numerous benefits of the plan that are not quantifiable such as 
improved access to jobs and revitalization of the core center. Funding 
for the plan will come from a combination of local, State, and Federal 
funding. Mecklenburg County Voters approved a half cent local sales tax 
in 1998 to fund expansion of bus service and rapid transit improvements 
in major corridors. The requirement that the RTP conform 20 years into 
the future was a vital element in motivating this regional progress and 
action. Limiting conformity determinations to a 10-year time horizon 
might reduce the incentive for other regions to take the kind of 
leadership initiatives seen in Charlotte.
    States and local governments have the opportunity to use their SIP 
process to establish caps on pollution from the transportation sector 
that will make conformity a meaningful performance objective for 
progress in attaining more healthful air quality by reducing traffic 
growth. If they choose, by law they may increase technology-based 
emission controls on transportation vehicles and fuels and non-
transportation sources to allow extra room for growth in motor vehicle 
use while still meeting deadlines for timely attainment of healthful 
air quality. If States relax emission controls or allow increased 
emissions from power plants, new energy development, airport 
expansions, or other activities, States may need to further curb motor 
vehicle emissions to offset these other sources of pollution and 
protect public health.
    Conformity will help assure progress toward timely attainment of 
newly revised National Ambient Air Quality Standards (NAAQS). Proposed 
and potential emission controls on diesel engines and fuels and off-
road mobile emissions will create considerable new room for growth in 
motor vehicle use within conforming 1-hour ozone transportation plans 
until new 8-hour ozone SIPs are put in place unless the on-road SIP 
motor vehicle emission budgets are reduced to assure more timely 
attainment of healthful air quality. Many transportation agencies will 
seek to use such near-term emission controls to make irretrievable 
commitments to sprawl-inducing outer beltways and other traffic and 
pollution generating investments in advance of the setting of new more 
stringent motor vehicle emission budgets that are part of attainment 
demonstrations to the new NAAQS. If this occurs, the public, utilities, 
and industry alike will face higher costs and greater delay to attain 
healthful air quality.
    Congress should resist pressure from the road builders to weaken or 
rework conformity before it has had opportunity to operate under the 
framework of adopted emission budgets demonstrating attainment, which 
have only taken effect during the last year in most seriously polluted 
regions. Conformity is working. We need to strengthen its 
accountability to help reinforce the trend that is evident in some 
States for stronger environmental stewardship by transportation 
agencies.
    The concerns I raise today are shared by hundreds of thousands of 
members of diverse environmental and public health groups, represented 
by the two letters, Attachments 9 and 10, enclosed for the record.
                               __________
       Addendum to the 1997 Federal Highway Cost Allocation Study
            final report--u.s. department of transportation
                     federal highway administration
                                may 2000
Introduction
    When the 1997 Federal Highway Cost Allocation Study (HCAS) was sent 
to Congress in August 1997, estimates of air pollution-related costs of 
highway use were not included. Research by the Environmental Protection 
Agency (EPA) on social costs associated with air pollution was being 
completed and the Department of Transportation wanted estimates of air 
pollution costs attributable to highway use by motor vehicles to 
reflect the new EPA research. This addendum to the 1997 Federal HCAS 
presents estimates of air pollution-related costs of highway use and 
summarizes how these costs relate to other costs analyzed in the 1997 
Federal HCAS. In this addendum, as in the 1997 HCAS report, costs of 
air pollution, congestion, and other impacts of highway use not borne 
by transportation agencies represent social and economic costs incurred 
by affected individuals, not engineering costs to comply with standards 
or to mitigate adverse impacts as the term ``costs'' is often used in 
the environmental literature.
    Two changes relevant for highway cost allocation have occurred 
since the 1997 Federal HCAS was submitted to Congress. First, proceeds 
of 4.3 cents per gallon of motor fuel tax that had been dedicated for 
deficit reduction by the Omnibus Budget Reconciliation Act of 1993 
(P.L. 103-66) were directed to the Federal Highway Trust Fund beginning 
October 1, 1997 by the Taxpayer Relief Act of 1997 (P.L. 105-34). This 
not only increased total highway user revenues available for highway 
and related improvements, but it also changed the relative shares of 
Federal user fees paid by different vehicle classes. Ratios of user fee 
payments to highway cost responsibility for different vehicles (so-
called equity ratios) were affected by this change.
    The second change was passage of the Transportation Equity Act for 
the 21st Century (TEA-21) (P.L. 105-178). While this watershed 
legislation builds upon initiatives established in the Intermodal 
Surface Transportation Assistance Act of 1991 (ISTEA) (P.L. 102-240), 
it significantly increases overall surface transportation funding 
levels and has new initiatives to meet challenges of improving safety, 
enhancing the natural and human environment, and advancing America's 
economic growth and competitiveness. Changes in authorization levels 
for different program areas have affected the relative cost 
responsibility of different vehicle classes and ratios of user fee 
payments to cost responsibility for different vehicles. These changes 
are analyzed in this report.
    For ease of comparison, this report is organized similarly to the 
Summary Report of the 1997 Federal HCAS. The analysis year continues to 
be 2000, and the same vehicle classes, vehicle miles of travel, and 
other vehicle characteristics are used. This not only facilitates 
comparison with the earlier report, but is essential if results are to 
be directly useful for the Department's Comprehensive Truck Size and 
Weight (TS&W) Study which uses travel characteristics developed for the 
1997 Federal HCAS in its base case.
Summary of Findings
    Total social costs of air pollution associated with motor vehicle 
use are estimated to range from $30 billion to $349 billion per 
year.(1) Most of those costs are associated with premature death and 
illness caused by particulate matter, including both direct particulate 
emissions and the secondary formation of particulates from other 
emissions. The wide range of air pollution cost estimates is indicative 
of the many uncertainties surrounding costs of motor-vehicle-related 
air pollution.
    The 1997 HCAS discussed four main costs of highway use not borne 
directly by transportation agencies--crash costs, air pollution, 
congestion, and noise. Based on mid-range estimates, crash costs are 
the largest of those costs, accounting for about 75 percent of total 
costs for those four impacts. Congestion costs represent the next 
highest cost (14 percent), followed by air pollution (9 percent) and 
finally noise (1 percent). Most crash and congestion costs are borne 
directly by motorists, but impacts of air pollution and noise are not 
directly tied to an individual's use of the highway.
    As noted above, the Omnibus Budget Reconciliation Act of 1993 
imposed a 4.3 cents per gallon tax on transportation fuels to be used 
for deficit reduction. Proceeds of this tax were not considered to be 
highway user fees--they were deposited in the General Fund rather than 
the Highway Trust Fund, and were not available to finance highway, 
transit, or other transportation improvements. Since proceeds of the 
4.3 cents per gallon deficit reduction tax were not highway user fees, 
they were not included in the 1997 Federal Highway Cost Allocation 
Study.
    The Taxpayer Relief Act of 1997 directed that proceeds of the 4.3 
cents per gallon tax on highway motor fuels that had been dedicated for 
deficit reduction should be deposited in the Highway Trust Fund 
beginning October 1, 1997 and be available for transportation purposes. 
This made the 4.3 cents per gallon tax a highway user fee which should 
be included with other fuel tax revenues in highway cost allocation. 
The change affects the relative equity of the Federal highway user fee 
structure. The share of total Federal highway user revenues paid by 
heavy trucks declines, thereby reducing the share of highway cost 
responsibility that heavy trucks pay through user fees.
    In the 1997 HCAS combination trucks were found, on average, to pay 
90 percent of their Federal highway cost responsibility through user 
fees, but with changes in the fuel tax they now pay only 80 percent of 
their cost responsibility. The heaviest combinations, those over 80,000 
pounds, pay only half of their cost responsibility.
    Programmatic changes enacted in the recent TEA-21 are anticipated 
to have virtually no effect on user fee equity.
    The Department plans to update the 1997 HCAS before the next 
surface transportation reauthorization. Potential options to improve 
overall user fee equity will be examined in greater depth in that 
study.
Vehicle Travel Characteristics and Population by Different Vehicle 
        Classes
    Table 1 shows total 2000 vehicle miles of travel (VMT) by different 
groups of vehicles. Travel for single unit and combination truck 
classes is broken down by registered weight groups. Passenger vehicles 
account for about 93 percent of total VMT in the United States. Single 
unit trucks and combination trucks account for 3 and 4 percent of total 
travel, respectively. Over two-thirds of single unit truck travel is by 
vehicles registered below 25,000 pounds while among combination 
vehicles, 75 percent of travel is by vehicles registered between 75,000 
and 80,000 pounds.

                Table 1. Total 2000 Travel and Number of Vehicles by Class and Registered Weights
----------------------------------------------------------------------------------------------------------------
                                                               Vehicle Miles of Travel     Number of Vehicles
                                                                     (millions)        -------------------------
               Vehicle Class/Registered Weight               --------------------------
                                                                 Total       Percent       Total       Percent
----------------------------------------------------------------------------------------------------------------
                     Passenger Vehicles
Autos.......................................................    1,818,461         67.5  167,697,897         70.0
Pickups/Vans................................................      669,198         24.8   63,259,330         26.4
Buses.......................................................        7,397          0.2      754,509          0.3
    Total...................................................    2,495,056         92.6  231,711,736         96.7
                     Single Unit Trucks
>25,000 pounds..............................................       56,451          2.1    4,126,241          1.7
25,001--50,000 pounds.......................................       18,631          0.7    1,352,441          0.6
<50,000 pounds..............................................        8,018          0.3      491,745          0.2
    Total...................................................       83,100          3.1    5,970,431          2.5
                     Combination Trucks
>50,000 pounds..............................................        6,744          0.3      253,022          0.1
50,001--70,000 pounds.......................................       16,685          0.4      225,347          0.1
70,001--75,000 pounds.......................................        5,926          0.2       94,509          0.0
75,001--80,000 pounds.......................................       86,176          3.2    1,295,973          0.5
80,001--100,000 pounds......................................        3,879          0.1       64,365          0.0
<100,001 pounds.............................................        2,279          0.1       37,788          0.0
    Total...................................................      115,689          4.3    1,971,004          0.8
----------------------------------------------------------------------------------------------------------------

    In Chapter II of the main 1997 HCAS report, VMT, operating weight, 
and registered weight distributions for 20 different vehicle classes 
were presented. Vehicle classes include automobiles, pickups and vans, 
buses, three types of single unit trucks, six types of single trailer 
combinations, three types of truck-trailer combinations, four types of 
twin-trailer combinations, and a triple trailer combination. Truck 
travel and operating weight distributions on each of 12 highway 
functional classes are also estimated for each vehicle configuration. 
Data needs of the Department's Comprehensive TS&W Study were important 
considerations in selecting configurations to be included in the 1997 
Federal HCAS.
    Figure 1 shows VMT for different vehicle classes in rural and urban 
areas. Almost two-thirds of total automobile travel is in urban areas, 
a much higher percentage than for other vehicle classes. Over half of 
the annual travel by pickups, vans, buses, and single unit trucks is in 
urban areas, but only 40 percent of combination truck travel is in 
urban areas.





Federal-aid Highway Program Costs
    The distribution of Federal obligations by improvement type and 
highway functional class has a strong influence on the relative cost 
responsibility of different vehicle classes. Estimates of the 2000 
distribution of Highway Trust Fund (HTF) obligations by improvement 
type in the 1997 HCAS were based on the actual distribution of 
obligations during the 1993 to 1995 base period. For analysis purposes 
total 2000 obligations were assumed to equal total revenues to the HTF 
in Calendar Year 2000 which were estimated to be $27,174 million 
including $3,380 million for the Mass Transit Account (MTA) of the HTF.
    As noted above two laws passed since the 1997 HCAS have affected 
the level and distribution of Federal obligations for highway-related 
purposes. First, the Taxpayer Relief Act of 1997 transferred proceeds 
of 4.3 cents per gallon of Federal motor fuel taxes that had been 
dedicated for deficit reduction to the HTF, thereby increasing overall 
funds available for highway-related purposes. Second, TEA-21 
reauthorized surface transportation programs for 6 years, raising most 
program levels with some changes in the distribution of funds among the 
various programs. TEA-21 also guarantees that highway and transit 
program funding will be aligned with actual and projected HTF receipts. 
The most recent estimate of calendar year 2000 HTF receipts, including 
proceeds of the 4.3 cents per gallon that previously had been dedicated 
for deficit reduction, is $33,233 million.
    Table 2 compares the relative authorizations for major program 
areas under TEA-21 with those under ISTEA. In most cases the 
distribution of funds is quite similar. One notable exception is the 
elimination of a separate Interstate Construction program in TEA-21. 
All remaining work to complete the Interstate System was fully funded 
under prior legislation. Certain improvements to the Interstate System 
are eligible under the Interstate Maintenance program and Interstate 
System lane additions are eligible from National Highway System funds.

  Table 2. Comparison of TEA-21 and Major ISTEA Program Authorizations
------------------------------------------------------------------------
                                              TEA-21           ISTEA
              Program Area                   (percent)       (percent)
------------------------------------------------------------------------
Interstate Maintenance..................           13.8            13.8
Interstate Construction.................            0               5.9
National Highway System.................           16.5            17.1
Bridge..................................           11.8            13.1
Surface Transportation Program..........           19.2            19.4
Congestion Mitigation and Air Quality...            4.7             4.9
Minimum Allocation......................           13.7             9.3
Other...................................           20.3            16.5
    Total...............................          100.0           100.0
------------------------------------------------------------------------

    Translating changes in authorization levels for different programs 
into changes in the distribution of obligations by improvement type and 
highway functional class is difficult. TEA-21, like ISTEA, provides 
States considerable flexibility to shift funds among program 
categories. In this analysis, the distribution of funds by improvement 
type for each program area in 2000 is assumed to be the same as the 
distribution for that program area in 1997.
    Table 3 compares 2000 Federal obligations by improvement type 
estimated for the 1997 HCAS with revised estimates based on the TEA-21 
program composition. Assuming that funds from each program area are 
spent in the same manner as they were in 1997, the TEA-21 program 
composition would be expected to have slightly more capacity expansion, 
and slightly less system preservation than was estimated for the 1997 
HCAS based on the overall 1993-1995 distribution of obligations by 
improvement type.

                           Table 3. 2000 Distribution of Federal Highway Program Costs
                              Estimated in 1997 HCAS and Under TEA-21 ($ Millions)
----------------------------------------------------------------------------------------------------------------
                                                                             1997 HCAS              TEA-21
                 Category                        Improvement Type      -----------------------------------------
                                                                         Amount    Percent    Amount    Percent
----------------------------------------------------------------------------------------------------------------
New Capacity.............................  New Construction...........    $2,941      10.8     $2,879       8.7
                                           Reconstruction--Added Lanes      $937       3.4     $2,864       8.6
                                           Major Widening.............    $1,836       6.8     $2,007       6.0
    Total................................                                 $5,713      21.0     $7,750      23.3
System Preservation......................  3R Preservation............    $7,250      26.7     $7,934      23.9
                                           Minor Widening.............      $484       1.8       $651       2.0
                                           Bridge Replacement.........    $2,114       7.8     $2,480       7.5
                                           Major Bridge Rehabilitation    $1,198       4.4     $1,110       3.3
                                           Minor Bridge Rehabilitation      $445       1.6       $643       1.9
    Total................................                                $11,490      42.3    $12,819      38.6
System Enhancement.......................  Safety/TSM.................    $2,542       9.4     $3,112       9.4
                                           Environmentally Related....      $530       2.0     $1,064       3.2
                                           Other Projects.............    $1,113       4.1       $590       1.8
    Total................................                                 $4,184      15.4     $4,766      14.3
MTA......................................                                 $3,380      12.4     $4,597      13.8
Other....................................                                 $2,407       8.9     $3,302       9.9
    Total................................                                $27,175     100.0    $33,233     100.0
----------------------------------------------------------------------------------------------------------------

    Again, for analysis purposes, the distribution of obligations by 
highway functional class is assumed to be the same in 2000 as in the 
1993-1995 base period. Two-thirds of Federal obligations are on urban 
highways and one-third on rural highways. In both urban and rural areas 
more Federal moneys are obligated for improvements on higher order 
highway systems (Interstate and other principal arterial highways) than 
on lower order systems
    The distribution of program expenditures by highway type can 
significantly influence the relative cost responsibilities of different 
vehicle classes. The distribution of travel on different types of 
highways varies substantially by vehicle class, and other physical and 
operational characteristics of highways that can affect cost 
responsibility also vary by highway type.
Allocation of 2000 Federal Highway Program Costs
    In this analysis, procedures for allocating various highway 
improvement costs among vehicle classes are the same as used in the 
1997 HCAS. Table 4 summarizes the cost responsibility of different 
vehicles for anticipated obligations under the TEA-21 program 
structure, assuming that funds for each program element under TEA-21 
are obligated in the same way they were obligated under ISTEA.

 Table 4. 2000 Federal Cost Responsibility by Vehicle Class Under TEA-21
                            Program Structure
                              ($ Millions)
------------------------------------------------------------------------
                                     Total Program  Cents per  Shares of
 Vehicle Class/ Registered Weight        Costs         Mile      Total
------------------------------------------------------------------------
Autos.............................         $14,501       0.80      43.6
Pickups/Vans......................          $5,103       0.76      15.4
Buses.............................            $237       3.20       0.7
All Passenger Vehicles............         $19,841       0.80      59.7
        Single Unit Trucks
<25,000 pounds....................          $1,245       2.20       3.7
25,001--50,000 pounds.............          $1,049       5.46       3.2
>50,000 pounds....................          $1,344      18.12       4.0
    All Single Units..............          $3,638       4.38      10.9
        Combination Trucks
<50,000 pounds....................            $231       3.43       0.7
50,001--70,000 pounds.............            $557       5.21       1.7
70,001--75,000 pounds.............            $452       7.62       1.4
75,001--80,000 pounds.............          $7,458       8.65      22.4
80,001--100,000 pounds............            $594      15.32       1.8
>100,001 pounds...................            $462      20.28       1.4
    All Combinations..............          $9,754       8.43      29.4
    All Trucks....................         $13,392       6.74      40.3
    All Revenues..................         $33,233       1.23     100.0
------------------------------------------------------------------------

    Figure 2 compares shares of cost responsibility under the TEA-21 
program structure with cost responsibility estimated in the 1997 HCAS 
based upon the distribution of program costs during the 1994-1995 
period. The small differences in program structure between TEA-21 and 
ISTEA are not large enough to substantially affect the relative cost 
responsibilities of different vehicle classes. Passenger vehicles have 
a slightly higher share of cost responsibility under TEA-21 while 
combinations have a slightly lower share.




Highway User Fee Payments
    Highway user charges are fees upon owners and operators of motor 
vehicles for their use of public highways.
    Historically, the primary purpose for imposing highway user fees at 
both the Federal and State levels has been to raise revenues to finance 
highway improvement programs. This direct relationship between highway 
user fees and highway program funding is highlighted by the fact that 
the Federal Government and many States deposit large parts of their 
highway user fees in dedicated highway or transportation trust funds 
rather than in the general fund. The linkage between highway user fees 
and highway program financing is central to HCASs which seek to 
determine whether fees paid by each vehicle class cover costs 
occasioned by those vehicles.
    Current Federal highway user fees and rates are shown in Table 5. 
Federal highway user taxes include taxes on various highway fuels, an 
excise tax on the sale of heavy trucks, a tax on tires weighing over 40 
pounds, and a heavy vehicle use tax (HVUT) on trucks with registered 
weights over 55,000 pounds. Each of these taxes has been in place for 
many years, although rates and the specific equipment that is taxed 
have changed from time to time.

             Table 5. Current Federal Highway User Tax Rates
------------------------------------------------------------------------
            Current Tax                  Tax Rate Under Current Law
------------------------------------------------------------------------
               Fuel
Gasoline..........................  18.3 cents per gallon\1\
Diesel............................  24.3 cents per gallon\1\
Alternative Fuels.................  0--18.3 cents per gallon\1\
        Vehicle Excise Tax
Heavy Trucks >33,000 pounds,        12 percent of retail sales for new
 trailers >26,000pounds GVW.         vehicles (trucks, tractors, or
                                     trailers)
             Tire Tax
41 to 70 pounds...................  15 cents per pound over 40 pounds
71 to 90 pounds...................  $4.50 plus 30 cents per pound over
                                     70 pounds
Over 90 pounds....................  $10.50 plus 50 cents per pound over
                                     90 pounds
               HVUT
Annual tax on vehicles 55,000       $100 plus $22 per 1,000 pounds over
 pounds gross weight or more.        55,000 with an annual cap of $550
------------------------------------------------------------------------
\1\excludes 0.1 cents per gallon to Leaking Underground Storage Tank
  Fund

Federal User Fee Payments by Vehicle Class
    When the 1997 HCAS was conducted, 4.3 cents per gallon of Federal 
fuel tax was dedicated for deficit reduction and was not considered a 
highway user fee. Proceeds of the 4.3 cents per gallon are now 
deposited in the HTF to be used for purposes eligible under TEA-21, and 
are now considered highway user fees. This change affects the relative 
shares of highway user fees paid by different vehicle classes. Table 6 
shows Federal highway user revenues (HURs) projected to be paid by 
different vehicle classes in 2000 under the current user fee structure. 
Passenger vehicles, which account for 93 percent of total highway 
travel, pay 68 percent of total Federal highway user fees. Combination 
trucks, on the other hand, pay 23 percent of total highway user fees 
even though they travel less than 5 percent of total mileage. Among the 
truck classes, user fees vary substantially by vehicle weight. Single 
unit trucks registered at 50,000 pounds or more pay 2.2 times as much 
per mile in Federal user fees as single unit trucks registered at 
25,000 pounds or less. User fees paid by combination trucks do not vary 
as much with weight as for single unit trucks, but the variation is 
still substantial.

   Table 6. 2000 Federal User Fee Payments by Vehicle Class Under the
                  Current Federal User Charge Structure
                              ($ Millions)
------------------------------------------------------------------------
                                        Total User             Shares of
   Vehicle Class/ Registered Weight        Fee      Cents per    Total
                                         Payments      Mile    (percent)
------------------------------------------------------------------------
Autos................................      $14,819       0.81      44.6
Pickups/Vans.........................       $7,416       1.11      22.3
Buses................................          $50       0.67       0.1
All Passenger Vehicles...............      $22,285       0.89      67.1
Single Unit Trucks <25,000 pounds....       $1,853       3.28       5.6
25,001--50,000 pounds................         $746       3.88       2.2
>50,000 pounds.......................         $543       7.32       1.6
All Single Units.....................       $3,142       3.78       9.5
Combination Trucks <50,000 pounds....         $332       4.92       1.0
50,001--70,000 pounds................         $561       5.25       1.6
70,001--75,000 pounds................         $402       6.78       1.2
75,001--80,000 pounds................       $6,006       6.97      18.1
80,001--100,000 pounds...............         $300       7.74       0.9
>100,001 pounds......................         $205       9.01       0.6
    All Combinations.................       $7,806       6.75      23.5
    All Trucks.......................      $10,948       5.51      32.9
    All Revenues.....................      $33,233       1.23     100.0
------------------------------------------------------------------------

    Figure 3 summarizes the average Federal user fees paid per mile of 
travel by different vehicle classes.




    Figure 4 compares shares of Federal highway user fees paid by 
passenger vehicles, single unit trucks, and combination trucks under 
the current user fee structure with shares estimated in the 1997 HCAS 
when proceeds of the 4.3 cents per gallon were dedicated for deficit 
reduction and not considered highway user fees. The share of Federal 
user fees estimated to be contributed by passenger vehicles in 2000 has 
increased by almost 4 percentage points while the share of total user 
fees paid by combination vehicles decreased by almost the same amount. 
This difference arises because combination vehicles also pay other 
Federal user charges that have not changed since 1997 except for a 
minor technical change in the taxation of tires on new vehicles. The 
higher fuel taxes thus have a relatively smaller effect on total user 
fees paid by combination vehicles than they have on total fees paid by 
passenger vehicles.





2000 Federal Highway User Fee Equity Ratios
    The equity of highway user charges typically is measured in HCASs 
as the ratio of the shares of revenues contributed by each vehicle 
class to the shares of highway costs that vehicle class occasions. This 
ratio is often called a revenue/cost ratio or an ``equity ratio.'' As 
discussed in the 1997 HCAS, highway agency costs are different from the 
economic costs associated with the operation of different vehicle 
classes. Analyses of economic costs occasioned by each vehicle class, 
which include environmental, safety, and delay costs imposed on others 
as well as pavement, bridge, and other infrastructure costs, are 
important in considering the economic efficiency of highway user fees. 
However, HCASs traditionally have focused primarily on the equity of 
highway user fees as measured by the extent to which each vehicle class 
pays the share of highway agency costs for which it is responsible. 
Agency costs considered in HCASs do not reflect what transportation 
agencies should spend in various areas, but are estimates of how 
obligations actually are being distributed. The Department's Surface 
Transportation Conditions and Performance report provides overall 
estimates of investment requirements to meet system performance and 
condition objectives, although it does not suggest how much of those 
costs should be borne by Federal, State, and local transportation 
agencies.
    Table 7 shows estimated Federal equity ratios in 2000 under the 
current highway user charge structure and the TEA-21 program structure. 
Equity ratios estimated in the 1997 HCAS are shown for comparison. As a 
class, automobiles continue to pay about the same share of Federal 
highway user fees as their share of highway costs, and pickups and vans 
continue to pay substantially more than their share of highway costs. 
Differences in equity ratios between automobiles and other passenger 
vehicles are primarily attributable to the automobiles' better fuel 
economy (higher miles per gallon) which means they pay less fuel tax 
per mile of travel than pickups and vans.

   Table 7. Ratios of 2000 Federal User Charges to Allocated Costs by
                              Vehicle Class
------------------------------------------------------------------------
                                             1997 HCAS
     Vehicle Class/Registered Weight          Ratios      Updated Ratios
------------------------------------------------------------------------
Autos...................................            1.0             1.0
Pickups/Vans............................            1.4             1.5
Buses...................................            0.1             0.2
Passenger Vehicles......................            1.1             1.1
           Single Unit Trucks
<25,000 pounds..........................            1.5             1.5
25,001--50,000 pounds...................            0.7             0.7
> 50,001 pounds.........................            0.5             0.4
    Total Single Unit...................            0.9             0.9
           Combination Trucks
<50,000 pounds..........................            1.6             1.4
50,001--70,000 pounds...................            1.1             1.0
70,001--75,000 pounds...................            1.0             0.9
75,001--80,000 pounds...................            0.9             0.8
80,001--100,000 pounds..................            0.6             0.5
>100,001 pounds.........................            0.5             0.4
    Total Combinations..................            0.9             0.8
    Total All Vehicles..................            1.0             1.0
------------------------------------------------------------------------

    User fee equity for single unit and combination trucks is highly 
dependent on the weight of the vehicles. As a class single units 
continue to pay about 90 percent of their Federal highway cost 
responsibility under the new user fee and TEA-21 program structure. In 
the 1997 HCAS combination trucks as a group were estimated to pay 90 
percent of their highway cost responsibility in 2000, but under the new 
user fee and program structure, combinations will pay only about 80 
percent of their cost responsibility. This reduction in the equity 
ratio for combination trucks primarily arises because combination 
trucks will pay a smaller share of Federal user fees under the new user 
fee structure than they did under the former fee structure while their 
share of cost responsibility remains virtually the same. For both 
single unit and combination trucks, there continue to be large 
differences in equity ratios for vehicles in different weight groups.
Other Highway-Related Costs
    The 1997 HCAS included extensive discussions of highway-related 
costs that are not borne by transportation agencies, but by motorists 
or society at large. These costs include environmental, safety, 
congestion, and other costs associated with highway use. While 
transportation agencies do not bear these costs directly, their concern 
about such costs is evidenced by a broad range of regulatory and 
programmatic initiatives to reduce crashes, emissions, and other 
consequences of highway use that create costs for society. Significant 
progress has been made in reducing many of these social costs of 
highway use, but substantial costs remain. As discussed in the 1997 
HCAS, crashes, congestion, air pollution, and noise are generally 
acknowledged to be the most significant social costs that can be 
quantified.
    As noted in the Introduction to this Addendum, the 1997 HCAS did 
not include estimates of air pollution costs. Work on a major EPA study 
on Benefits and Costs of the Clean Air Act was still underway which was 
relevant to estimates of air pollution costs associated with motor 
vehicle use. The Department postponed estimating highway-related air 
pollution costs until that work was completed and the same methods 
could be used for the Department's highway cost allocation study.
    One point emphasized in the 1997 HCAS is the uncertainty 
surrounding estimates of most social costs of highway use. Differences 
between high and low cost estimates may vary by one or more orders of 
magnitude. Many factors contribute to this uncertainty including (1) 
the difficulty in isolating effects of highway-related factors from 
other factors that contribute to health and other social costs; (2) the 
site-specific nature of many social costs of highways; and (3) 
uncertainties in valuing costs of premature deaths attributable to 
highway crashes and motor vehicle emissions.
Highway-Related Air Pollution Costs
    Motor vehicles produce emissions that in sufficient pollutant 
concentrations can cause a variety of health and other impacts 
including shortness of breath, respiratory and other disease, death, 
structural deterioration, crop damage, and decreased visibility. Since 
1970, the Federal Clean Air Act (CAA) and 1977 and 1990 Clean Air Act 
Amendments (CAAA) have provided a framework for nationwide efforts to 
reduce motor vehicle and other sources of air pollution. Important 
provisions of those laws include establishment of National Ambient Air 
Quality Standards for key pollutants, requirements that States develop 
implementation plans for attaining those standards, and limits on 
allowable motor vehicle tailpipe emissions. The ISTEA and TEA-21 
complement the CAA by providing funding to implement balanced 
transportation programs that will reduce emissions.
    In 1997, EPA developed a report, The Benefits and Costs of the 
Clean Air Act, 1970-1990. This report reflects EPA's findings and not 
necessarily those of other agencies in the Administration. Other 
agency's concerns included, among other things, the methods used to 
estimate the number of premature deaths and illnesses avoided due to 
the CAA, and the methods used to value non-health related benefits. 
Part of these concerns arise from the no-control baseline EPA uses to 
estimate reductions that have been achieved in emissions since passage 
of the CAA. Mindful of other agencies concerns, this Addendum uses 
EPA's estimates as an illustrative bounding case example of the impact 
of motor vehicle emissions.
    Table 8, based on data in EPA's 1998 report, shows the estimated 
contribution of on-highway motor vehicles to total emissions for key 
air pollutants in 1990. The EPA estimates that in 1990 motor vehicles 
accounted for only 2 percent of total sulfur dioxide emissions and 11 
percent of total suspended particulate emissions. Conversely, motor 
vehicles accounted for 70 percent of total carbon monoxide and 2/3 of 
lead emissions.

              Table 8. Major Highway-Related Air Pollutants
------------------------------------------------------------------------
                                    Percent of Total 1990 Emissions from
             Pollutant                Highway Motor Vehicles (percent)
------------------------------------------------------------------------
Total Suspended Particulates......  11.1
Sulfur Dioxide....................  2.4
Nitrous Oxides....................  36.0
Volatile Organic Compounds........  37.1
Carbon Monoxide...................  70.4
Lead..............................  66.7
------------------------------------------------------------------------

    Despite the progress that has been made to date in reducing harmful 
motor vehicle emissions, air pollution remains a concern in many parts 
of the country. In its report, The Benefits and Costs of the Clean Air 
Act, 1970--1990, EPA estimates the economic benefits of air pollution 
reductions achieved under the CAA. Methods used by EPA in its 1998 
study are the primary bases of air pollution cost estimates in this 
report. As noted in the Introduction, costs of air pollution estimated 
in this Addendum are social and economic costs of air pollution, not 
the engineering costs to comply with standards or to mitigate adverse 
impacts as the term ``costs'' is often used in the environmental 
literature.
    Table 9 shows estimates of economic costs associated with highway-
related air pollution based upon data and methods used by EPA in its 
study. Almost all costs are attributable to mortality, chronic 
bronchitis, and other respiratory and heart diseases caused by 
inhalation of particulate matter, but some costs also arise from ozone, 
sulfur dioxide, nitrogen dioxide, and carbon monoxide. Other effects of 
air pollution including infant mortality, changes in pulmonary 
function, lung inflammation, and reduced crop yields are known to arise 
from air pollution but are not included in these costs because 
researchers have not yet quantified those effects. Future research 
should allow a more complete accounting of air pollution costs arising 
from motor vehicles and other sources.

               Table 9. Estimated Economic Costs of Motor Vehicle-Related Air Pollution in 2000\1\
----------------------------------------------------------------------------------------------------------------
                                                                             Costs of     Costs of     Costs of
                                                                           Rural Motor  Urban Motor   All Motor
                                                                             Vehicle      Vehicle      Vehicle
                 Pollutant                              Impact                Travel       Travel       Travel
                                                                              $1990        $1990        $1990
                                                                            (millions)   (millions)   (millions)
----------------------------------------------------------------------------------------------------------------
Particulate Matter........................  Mortality\2\.................       12,695       21,558       31,162
Particulate Matter........................  Non-fatal Illness............        3,683        6,232        9,183
Sulfur dioxide, nitrogen dioxide, carbon    Non-fatal Illness............            0           51           51
 monoxide.
Ozone.....................................  Non-fatal Illness............           28           16        47\3\
    Total.................................  16,406.......................       27,857    40,443\4\
----------------------------------------------------------------------------------------------------------------
\1\Costs for ``criteria'' pollutants only (does not include toxic pollutant costs). Excludes certain health-
  related costs and costs of reduced visibility, crop damage, and material damage not quantified by EPA.
\2\Mortality costs based on DOT's $2.7 million estimated cost of a premature death.
\3\ Does not include ozone mortality costs, which are highly uncertain.
\4\ Comparable estimate using EPA's value of life is $64,681.
Source: Abt Associates, 1998, pages 9-11.

    Even costs quantified in Table 9 are highly uncertain due to data 
and methodological limitations and should be viewed as indicative only 
of the order of magnitude of costs. Chemical processes that transform 
emissions into ozone, particulate matter, and other pollutants are very 
complex, as is the transport of pollutants from their source to where 
they ultimately affect human health. Sources of some pollutant types 
are not well understood, nor are some aspects of the health impacts due 
to motor vehicle emissions. Scientific data on relationships between 
air pollution and premature death also are weak in many cases. This 
Addendum does not fully discuss these limitations and uncertainties. 
Technical reports by Systems Applications International(2) and Abt 
Associates,(3) from which air pollution cost estimates shown in Table 9 
and subsequent tables are derived, discuss many of those factors and 
indicate areas where further research is needed. They also discuss the 
various empirical studies that have attempted to estimate economic 
costs for different pollutants and issues involved in extrapolating 
results of those case-specific studies to nationwide cost estimates.
    There is considerable debate about valuing economic costs of 
premature deaths associated with air pollution. This debate is 
important because costs associated with premature deaths from 
particulate matter account for over three-quarters of total air 
pollution-related costs.
    In policy and regulatory analyses, EPA uses a value of $4.8 million 
to represent the cost of a premature death. This value is the mean of 
estimates from 26 studies dating back to the mid 1970's that have 
attempted to place a value on the cost of premature deaths. Estimates 
from those studies range from $0.6 million to $13.5 million, reflecting 
the large uncertainties in trying to estimate the public's willingness 
to pay to avoid premature death.
    The Department of Transportation has adopted a value of $2.7 
million per premature death, based on a comprehensive 1991 study by the 
Urban Institute. While that study focused on the costs of premature 
deaths associated with highway crashes, it drew upon many of the same 
studies that EPA used, and the results apply to premature deaths 
attributable to factors other than highway crashes. Both DOT and EPA 
have devoted significant efforts in developing these cost estimates, 
and while their costs differ somewhat, they fall within a much broader 
range of costs that have been estimated by others.
    The EPA's study, The Benefits and Costs of the Clean Air Act, notes 
that the Science Advisory Board charged with reviewing the study 
recommended comparing cost estimates based upon EPA's traditional value 
of life estimates with costs using an alternative approach for valuing 
costs of air pollution-related deaths. That approach explicitly 
considers the number of years by which lives may be shortened as a 
result of exposure to air pollution. Under this life-years lost 
approach, costs of premature death are estimated to be about 55 percent 
of EPA's value of $4.8 million per premature death. This translates 
into an average value of about $2.6 million per premature death, which 
coincidentally, is very close to the value DOT uses for the cost of 
premature deaths. The EPA has additional research underway in this 
area.y Figure 5 compares total motor vehicle-related air pollution 
costs estimated using DOT's cost of premature death with costs 
estimated using EPA's value. As noted above, preliminary estimates 
using an alternative life-years lost approach would be slightly less 
than costs using the DOT cost estimates, but more work needs to be done 
to develop a consensus on the advisability and applicability of a life-
years approach to valuing costs of premature death associated with air 
pollution and to refine those cost estimates. It is also important to 
note that data and methods used by EPA that were the basis for these 
cost estimates continue to be improved.





    Air pollution costs attributable to motor vehicles were estimated 
by comparing levels of air pollution when all sources of pollution were 
present with air pollution when motor vehicle emissions were 
eliminated. Costs attributable to rural motor vehicle travel were 
estimated by eliminating all urban motor vehicle travel, and urban 
costs were estimated by eliminating rural travel. These methods were 
necessary to eliminate interactions between emissions in rural and 
urban areas that would make it impossible to estimate whether there are 
significant differences in costs associated with travel in rural and 
urban areas.
    About two-thirds of motor vehicle-related air pollution costs are 
attributable to urban travel and one-third to rural travel. As can be 
seen in Table 9, the sum of these costs for urban and rural travel 
individually is slightly greater than costs for all motor vehicle 
travel. This is explained by regional transport of both precursor 
emissions and air pollutants and the complex chemistry leading to the 
production of ozone and particulate matter. Figure 6 shows overall 
average air pollution costs per mile of travel in rural and urban 
areas. Average costs for rural travel are about 1.5 cents per mile 
compared to 1.75 cents per mile for urban travel. Average costs for all 
motor vehicle travel are about 1.5 cents per mile. Costs for all travel 
are lower than would be expected based on costs for urban and rural 
travel alone because, as noted above, total costs for all motor vehicle 
travel are less than the sum of costs of rural and urban travel when 
those costs are estimated individually.




    The average costs shown in Figure 6 mask large differences in 
highway-related air pollution costs in various parts of the country. 
They also do not reflect differences in costs associated with travel by 
different vehicle classes.
    While the uncertainty of cost estimates was emphasized in technical 
reports submitted by consultants for this study, no explicit range of 
high, medium, and low estimates of motor vehicle-related air pollution 
costs was developed. A recent study of air pollution costs attributable 
to motor vehicles by Mark Delucchi and Donald McCubbin estimated that 
costs range from 0.9 to 14 cents per mile.(4) This is a wide range, but 
it is consistent with ranges estimated for other social costs of 
highway use.
    A major source of variation in estimates of air pollution costs 
attributable to motor vehicles is whether or not road dust is included. 
The EPA does not classify road dust as a pollutant attributable to 
motor vehicles, but others have included road dust in cost estimates.
    Table 10 shows high, medium, and low estimates of the costs of air 
pollution attributable to motor vehicle use along with the costs of 
crashes, congestion, and noise that were included in the 1997 HCAS. The 
mid-range air pollution cost estimate is taken from costs shown in 
Table 9. The EPA did not develop ranges of motor-vehicle-related air 
pollution costs; high and low cost estimates shown in Table 10 are 
taken from McCubbin and Delucchi's estimates of total social costs of 
motor vehicle use. None of the air pollution cost estimates include 
costs associated with road dust stirred up by the passage of motor 
vehicles.

             Table 10. 2000 High, Mid-Range, and Low Estimates for Social Costs of Motor Vehicle Use
                                                  ($ Millions)
----------------------------------------------------------------------------------------------------------------
                                                                High            Mid-Range             Low
----------------------------------------------------------------------------------------------------------------
Congestion.............................................           $181,635            $61,761            $16,352
Crash Costs............................................           $839,463           $339,886           $120,580
Air Pollution..........................................           $349,100            $40,443            $30,300
Noise..................................................            $11,446             $4,336             $1,214
    Total..............................................         $1,533,344           $446,319           $170,246
----------------------------------------------------------------------------------------------------------------

    Crash costs represent the largest social cost of motor vehicle use 
shown in Table 10 across all cost ranges. The high estimate of air 
pollution costs ranks second among high cost estimates, but mid-range 
estimates of congestion costs are 50 percent higher than corresponding 
estimates of air pollution costs.
    For each of the impact areas shown in Table 10 the mid-range 
estimate is closer to the low than to the high estimate. This is 
another reflection of uncertainties surrounding economic costs of 
highway use. The high cost estimates often include costs which some 
analysts do not believe should be attributed to highway use, costs that 
are difficult to quantify, or costs for which only limited evidence 
exists. Also, the high range costs generally include the highest values 
that have been estimated for key cost components from among the various 
studies that have been done whereas mid-range costs typically use 
values that approximately reflect mean values estimated in other 
studies. Mid-range cost estimates rely on the soundest evidence 
available to date for each impact area, but are subject to change over 
time as new research results become available.
    Figure 7 compares highway agency costs with social costs of highway 
use. Social costs are broken into costs borne by highway users 
(congestion costs and most crash costs) and costs borne by non-users 
(air pollution, noise, and a small share of crash costs). While most 
social costs of highways included in Figure 7 are borne by highway 
users, the $90 billion borne by society in general is significant.





Air Pollution Costs Attributable to Different Vehicle Classes
    Table 11 shows percentages of different types of emissions 
attributable to the vehicle classes included in EPA models. These 
vehicle classes do not correspond well with vehicle classes used by the 
Department for highway cost allocation and truck size and weight 
analyses. In particular, most of the trucks with three or more axles 
are all grouped in the EPA class of heavy duty diesel vehicles. Thus, 
it is difficult to directly use the EPA models to estimate air 
pollution costs attributable to the different highway cost allocation 
study vehicle classes.

                          Table 11. Distribution of Various Emissions by Vehicle Class
                                                     Percent
----------------------------------------------------------------------------------------------------------------
                                            LD Gas  LD Gas               LD       LD       HD
                                   LD Gas   Trucks  Trucks   HD Gas    Diesel   Diesel   Diesel   Motor-   Total
                                  Vehicles     1       2    Vehicles  Vehicles  Trucks  Vehicles  cycles
----------------------------------------------------------------------------------------------------------------
SOA.............................       51       15      10        5         0        0       17        1      99
SOx.............................       45       15       8        3         0        0       29        0     100
NOx.............................       42       29       0        4         0        0       25        0     100
VOC.............................       60       30       0        5         0        0        5        0     100
PM10............................       26        7       4        3         0        0       59        0      99
PM, coarse......................       47       12       7        4         0        0       29        0      99
PM2.5...........................       19        6       3        3         0        0       68        0      99
Group 1.........................       50       29       0        4         0        0       16        0      99
Group 2.........................       50       28       0        4         0        0       17        0     100
Group 3.........................       50       28       1        4         0        0       17        0     100
----------------------------------------------------------------------------------------------------------------
LD Gas Vehicle--gas-powered automobile
LD Gas Truck 1--gas-powered trucks weighing 6,000 pounds or less (pickups, vans, etc.)
LD Gas Truck 2--gas powered trucks weighing between 6,001 and 8,500 pounds
HD Gas Vehicles--gas powered trucks and buses weighing more than 8,500 pounds
LD Diesel Vehicle--Diesel-powered automobiles
LD Diesel Trucks--diesel-powered trucks weighing 8,500 pounds or less
HD Diesel Vehicles--diesel-powered vehicles weighing more than 8,500
SOA--secondary organic aerosols
SOx--sulfur dioxide
NOx--nitrogen oxide
VOC--Volatile organic compounds
PM10--directly emitted particulate matter less than 10 microns
PM, coarse--directly emitted particulate matter between 10 and 2.5 microns
PM2.5--directly emitted particulate matter less than 2.5 microns
Group 1--VOC and NOx, the primary precursor emissions for ozone
Group 2--Group 1 plus PM2.5, SOx, and SOA, precursors for both ozone and PM formation
Group 3--Group 2 plus ammonia, a precursor for both ozone and PM formation

    Except for PM10 and PM2.5, automobiles 
account for the largest share of various motor vehicle emissions. 
Because of the complex chemical processes by which emissions are 
transformed into particulate matter, ozone, and other secondary 
pollutants, and variations in the transport of pollutants in different 
regions of the country, relative emissions attributable to different 
vehicle classes cannot be directly translated into relative air 
pollution costs without detailed air quality modeling that was beyond 
the scope of this project. For instance, while heavy trucks account for 
a large share of particulate emissions, they account for a smaller 
share of costs because significant portions of particulate matter are 
formed through chemical reactions involving other compounds emitted 
predominantly by light trucks and passenger vehicles.
    Four vehicle classes are responsible for 99 percent of all 
emissions: automobiles; pickups, vans, and sport utility vehicles; 
heavy duty gas vehicles; and heavy duty diesel vehicles. Other vehicle 
classes have much less VMT, and thus their total emissions are lower, 
although emissions per mile of travel would be comparable. The 
emissions modeling approach used in this study did not differentiate 
emissions more finely than the eight vehicle classes shown in Table 11. 
While the relative emissions shown in Table 11 do not directly 
correspond to the relative contribution to pollution and pollution-
related costs for different vehicle classes, they do indicate the 
relative order of magnitude of the contribution by different vehicle 
classes. Further work is underway to improve estimates of emissions by 
different vehicle classes under a variety of operating conditions. This 
work should improve the ability to estimate the relative contribution 
to air pollution costs by different vehicle classes.
    Table 12 uses the percentages from Table 11 to estimate total costs 
attributable to the four EPA vehicle classes that account for the 
majority of costs along with the average costs per mile of travel for 
each vehicle class. Costs are estimated by taking proportions of total 
precursor emissions for each vehicle class, based upon the Group 3 set 
of emissions shown in Table 11, and multiplying by total air pollution 
costs. Costs per mile are estimated by dividing total costs for each 
vehicle class by the VMT for that class. Passenger vehicles 
(automobiles, pickups and vans) account for about three-quarters of 
total estimated costs. Costs per mile for pickups and vans are closer 
to those of trucks than they are to costs per mile for automobiles 
because pickups and vans are not subject to the same tailpipe emissions 
standards as automobiles and because they get poorer fuel economy than 
automobiles.

 Table 12. Air Pollution Costs Attributable to Different Vehicle Classes
------------------------------------------------------------------------
                                    Total Estimated
          Vehicle Class               Cost ($1990      Cents Per Mile of
                                       millions)            Travel
------------------------------------------------------------------------
Automobiles......................            $20,343                 1.1
Pickups, Vans....................            $11,324                 2.6
Gasoline Vehicles > 8,500 pounds.             $1,699                 3.0
Diesel Vehicles > 8,500 pounds...             $6,794                 3.9
Overall..........................            $40,443                 1.5
------------------------------------------------------------------------

                     Marginal Costs of Highway Use
    Marginal costs of highway use reflect changes in total costs 
associated with an additional increment of travel. Marginal costs 
include incremental costs to the highway user (e.g., added vehicle 
operating cost and travel time), costs to public agencies (added use-
related rehabilitation and maintenance costs), and external costs such 
as air pollution and congestion costs imposed on others. Many marginal 
costs vary by either location of travel or time-of-day. For instance, 
incremental pavement deterioration associated with an extra mile of 
travel by particular vehicle classes depends on the design and 
condition of the pavement upon which they travel, temperature, and 
other local characteristics. Congestion costs associated with an 
additional mile of travel on low-volume rural Interstate highways are 
negligible, but costs on urban Interstate highways may be high, 
particularly during peak periods when traffic volumes are greatest.
    With the exception of their own travel time, vehicle operating 
costs, and perhaps risks of having a crash, highway users normally do 
not consider many of these marginal costs when deciding whether to make 
a trip. In general, economic efficiency would be enhanced if users had 
to pay those marginal costs they do not consider in trip-making 
decisions.
    Since many marginal costs vary according to when or where a trip is 
made, charges based on average costs will not necessarily promote 
improved economic efficiency. To achieve the greatest degree of 
efficiency, fees reflecting the marginal costs of trips made in various 
locations at various times of the day should be charged. Then, only 
trips whose benefits equal or exceed the full cost of the trip would be 
made.
    Table 13 shows estimates of marginal pavement, congestion, crash, 
air pollution, and noise costs in 2000 for selected vehicles operating 
under different conditions. Costs reflect typical or average 
conditions; in certain locations, costs could be expected to vary from 
values shown. The relative costs of pavement damage, congestion, 
crashes, air pollution, and noise for different vehicle classes 
operating in rural and urban areas are as important as the individual 
costs themselves.

   Table 13. 2000 Pavement, Congestion, Crash, Air Pollution, and Noise Costs for Illustrative Vehicles Under
                                               Specific Conditions
----------------------------------------------------------------------------------------------------------------
                                                                              Cents per Mile
                                                        --------------------------------------------------------
              Vehicle Class/Highway Class                                                 Air
                                                         Pavement  Congestion   Crash  Pollution   Noise   Total
----------------------------------------------------------------------------------------------------------------
Autos/Rural Interstate.................................        0       0.78      0.98      1.14     0.01    2.91
Autos/Urban Interstate.................................      0.1       7.70      1.19      1.33     0.09   10.41
140 kip 4-axle S.U. Truck/Rural Interstate.............      1.0       2.45      0.47      3.85     0.09    7.86
40 kip 4-axle S.U. Truck/Urban Interstate..............      3.1      24.48      0.86      4.49     1.50   34.43
60 kip 4-axle S.U. Truck/Rural Interstate..............      5.6       3.27      0.47      3.85     0.11    13.3
60 kip 4-axle S.U. Truck/Urban Interstate..............     18.1      32.64      0.86      4.49     1.68   57.77
60 kip 5-axle Comb/Rural Interstate....................      3.3       1.88      0.88      3.85     0.17   10.08
60 kip 5-axle Comb/Urban Interstate....................     10.5      18.39      1.15      4.49     2.75   37.28
80 kip 5-axle Comb/Rural Interstate....................     12.7       2.23      0.88      3.85     0.19   19.85
80 kip 5-axle Comb/Urban Interstate....................     40.9      20.06      1.15      4.49     3.04   69.64
----------------------------------------------------------------------------------------------------------------
NOTE: S.U. = Single Unit, Comb. = Combination; Air pollution costs are averages of costs of travel on all rural
  and urban highway classes, not just Interstate. Available data do not allow differences in air pollution costs
  for heavy truck classes to be distinguished.

    Pavement costs represent the contribution of a mile of travel by 
different vehicles to pavement deterioration and the costs of repairing 
the damage. Congestion costs reflect the value of added travel time due 
to additional small increments of traffic. Crash costs include medical 
costs, property damage, lost productivity, pain and suffering, and 
other costs associated with highway crashes. Air pollution costs are 
measured in terms of the cost of premature death, illness, and other 
effects of various highway-related emissions. Noise costs reflect 
changes in the value of adjacent properties caused by motor vehicle-
related noise.
    Marginal air pollution costs are particularly difficult to estimate 
because they are influenced by other sources of pollution in an area, 
climatic and atmospheric conditions, the complex chemistry of secondary 
pollutant formation, and other factors that vary over time and 
location. Not only do emissions per mile of travel vary depending on 
local conditions, but more importantly, contributions of those 
emissions to changes in pollutant concentrations and to health and 
other air pollution-related costs vary widely.
    Marginal air pollution costs were estimated for this study by first 
estimating differences in air pollution concentrations with and without 
highway traffic. Costs of the air pollution attributable to motor 
vehicle use were then estimated based on marginal costs of changes in 
pollutant concentrations estimated in other recent studies and used by 
EPA in its study, The Benefits and Costs of the Clean Air Act, 1970--
1990. Finally, per-mile costs were estimated by dividing total costs by 
VMT. While strictly speaking these are average rather than marginal 
costs with respect to VMT, they are derived from estimates of the 
marginal costs of changes in air pollution concentrations. Furthermore 
changes in air pollution concentrations with and without motor vehicle 
emissions were less than 10 percent at most locations where changes 
were estimated. Since resource constraints did not allow direct 
estimation of marginal air pollution costs of motor vehicle use, the 
average cost estimates are used to approximate marginal costs.
    Separate estimates were made of costs of rural and urban travel but 
those estimates do not show the large variations that occur in specific 
rural or urban locations. No separate estimates were made for travel on 
different highway functional classes. Costs for different vehicle 
classes are estimated simply on the basis of relative emissions. 
Considerable work remains to improve estimates of marginal air 
pollution costs by different vehicle classes.
    While marginal pavement, safety, congestion, and noise costs more 
closely represent true marginal costs than do marginal air pollution 
costs, they all represent average or typical marginal costs estimated 
for a broad cross section of Interstate highways. Costs at specific 
locations could vary considerably from costs shown, especially for 
noise costs which, like air pollution costs, are subject to many 
external factors.
    Variations in marginal costs among vehicles and locations are not 
uniform; they are highly dependent on the type of cost being 
considered. Pavement, congestion, air pollution, and noise costs are 
higher in urban areas than rural areas, but marginal crash costs are 
higher in rural areas, reflecting the higher fatality rates for travel 
in rural areas. Cost differences among vehicle classes also vary 
widely. The 80,000 pound 5-axle combination truck operating in urban 
areas, has marginal costs many times greater than those of autos 
operating in rural areas, but marginal costs for 60,000 pound 
combination trucks operating in rural areas are less than marginal 
costs of automobiles operating on congested urban Interstate highways.
    Figure 8 shows high and low ranges of air pollution, noise, 
congestion, and crash cost estimates along with best estimates (middle 
range) of those costs based upon the best research in each area. The 
large uncertainty surrounding these estimates suggests that caution 
should be exercised in making decisions that could significantly 
influence either user costs or highway investment based upon these 
social costs.





    Highway marginal costs cannot directly be separated into Federal 
and non-Federal costs. Costs result from travel on all highways and to 
one extent or another affect all segments of society and all geographic 
areas. All units of government working together have joint 
responsibilities to take appropriate steps to reduce these costs. These 
steps may include mitigating costs through regulatory means, making 
investment decisions that contribute toward reducing highway marginal 
costs, or using pricing mechanisms to more nearly reflect marginal 
costs in the prices that motorists pay for highway transportation.
    While highway marginal costs cannot be assigned to one level of 
government or another, there is an interest in how close current 
Federal user fees are to efficient fees. To compare cost allocations 
based on efficiency criteria with Federal user fee payments by 
different vehicles, marginal costs must be distributed among different 
levels of government. The 1982 Federal HCAS distributed marginal costs 
in proportion to the shares of total highway user revenues produced at 
each level of government on the grounds that this would leave the 
relative roles of each level of government for financing and charging 
for highways unchanged. The same approach is used in this study.
    Table 14 compares the estimated Federal shares of marginal costs 
from Table 13 to Federal highway cost responsibility estimated in the 
equity analysis and to Federal user fees paid by different vehicle 
classes. Comparing Federal user fees with the Federal share of marginal 
costs reflects the efficiency of the user fee structure while comparing 
user fees to program cost responsibility is a measure of equity. 
Marginal costs and program costs are estimated by different methods for 
completely different purposes and cannot be added together.

 Table 14. 2000 Comparison of Assumed Federal Share of Marginal Highway
           Costs to Federal Agency Costs and Federal User Fees
                            (cents per mile)
------------------------------------------------------------------------
                                                       Federal   Federal
        Vehicle Class/Highway Class         Marginal   Program    User
                                              Costs     Costs     Fees
------------------------------------------------------------------------
Autos/Rural Interstate....................       0.9       0.4       0.8
Autos/Urban Interstate....................       3.1       1.8       0.8
40 kip 4-axle S.U. Truck/Rural Interstate.       2.4       2.1      12.4
40 kip 4-axle S.U. Truck/Urban Interstate.      10.3       4.6      12.4
60 kip 4-axle S.U. Truck/Rural Interstate.       4.0       8.6      14.0
60 kip 4-axle S.U. Truck/Urban Interstate.      17.3      15.3      14.0
60 kip 5-axle Comb*/Rural Interstate......       3.0       3.3       6.9
60 kip 5-axle Comb*/Urban Interstate......      11.2       8.1       6.9
80 kip 5-axle Comb*/Rural Interstate......       5.9       9.5       7.4
80 kip 5-axle Comb*/Urban Interstate......      20.9      21.2       7.4
------------------------------------------------------------------------

    Federal program costs are greater than the estimated Federal share 
of marginal costs for rural travel by heavy single unit trucks and 
combinations, but less than marginal costs for automobiles and light 
single unit trucks. Marginal costs of congestion, noise, and safety are 
relatively low in rural areas, and overall agency cost responsibility 
in rural areas exceeds marginal costs for all but the lightest vehicle 
classes. In urban areas the opposite is true. Not only are costs of 
congestion, air pollution, and noise higher in urban than rural areas, 
but marginal pavement costs also are higher, reflecting among other 
things the higher construction costs in urban areas and the delay 
incurred by users when pavements are being rehabilitated. Federal user 
fees per mile of travel exceed marginal costs of rural travel for all 
vehicle classes except automobiles. Marginal costs of urban travel 
exceed Federal user fees per mile for all vehicle classes except the 
light single unit truck.
    There currently are no Federal, State, or local user fees imposed 
that directly reflect congestion, air pollution, noise, or other 
external costs of highway use. There is interest, however, among some 
State and local agencies in exploring the feasibility of variable or 
time-of-day pricing to help manage highway travel in certain corridors. 
For instance on State Route 91 in California, four additional lanes 
were constructed with private funds on which tolls are charged that 
vary by time of day. A project is underway in San Diego under the Value 
Pricing Pilot Program that has tolls which vary according to the level 
of congestion.
    Fees on ``gross emitters,'' the most polluting of vehicles that are 
responsible for large percentages of total pollutants, have been 
suggested as a way to charge the worst polluters for air pollution 
costs they impose, and general increases in fuel taxes have also been 
suggested to address air pollution costs. A gross emitter tax could 
directly reflect air pollution costs, but questions of equity and other 
implementation issues have prevented such a tax from being implemented 
to date. General fuel tax increases implemented at the local level 
would not be as sensitive to factors affecting air pollution as the 
gross emitter tax, but could reflect regional differences in air 
pollution costs.
    While there are opportunities at the local level to develop user 
fees that could reflect congestion, air pollution, and other external 
costs, implementing charges that could reflect the locational and 
temporal variability or most such costs would be difficult.
                        Summary and Conclusions
    Since the 1997 HCAS was completed, several changes affecting 
conclusions about the equity and economic efficiency of Federal highway 
user fees have occurred. First and most importantly, proceeds of 4.3 
cents per gallon of Federal fuel taxes have been shifted from the 
General Fund where they were dedicated to deficit reduction to the 
Highway Trust Fund where they may be used for highway-related purposes 
under the new TEA-21 legislation. Second, TEA-21 significantly 
increased total authorizations for highway, transit and related 
purposes and shifted the distribution of funding among different 
program areas. Third, additional information has been developed 
concerning air pollution-related costs of highway use which fills a 
large gap in estimates of social and marginal costs of highway travel.
    From an equity perspective, the most significant change is an 
increased spread in ratios of user fee payments to highway cost 
responsibility between lighter vehicles and heavier vehicles. Table 7 
showed that equity ratios for the heaviest single unit trucks and all 
the weight groups of combination trucks went down. Now only the very 
lightest combination trucks pay their share of Federal highway cost 
responsibility. The most common combination vehicles, those registered 
at weights between 75,000 and 80,000 pounds, now pay only 80 percent of 
their share of Federal highway costs and combinations registered 
between 80,000 and 100,000 pounds pay only half their share of Federal 
highway costs. Any future increase in Federal fuel taxes without 
corresponding increases in taxes on the heaviest trucks will further 
exacerbate the underpayment of Federal user fees by heavy trucks.
    Changes in program composition and funding levels between ISTEA and 
TEA-21 did not have a large effect on the relative cost responsibility 
of different vehicle classes. Much larger changes in relative program 
funding levels would be required to substantially affect cost 
responsibility, and the flexibility for States to shift funds from one 
program to another would temper even large changes in program 
composition.
    Economic costs of motor vehicle-related air pollution remain large, 
even though substantial progress has been made in abating emissions 
through a variety of initiatives. While average air pollution costs per 
mile of travel in rural areas are not much lower than average costs of 
urban travel--1.5 cents per mile in rural areas compared to 1.75 cents 
per mile in urban areas--care must be exercised in interpreting these 
results because they mask real differences in air pollution-related 
costs of motor vehicle use in different areas. Air pollution costs of 
travel in very rural areas away from population centers would be lower 
than the average rural costs shown in this report, and likewise, costs 
of travel in urban areas with the highest ambient air pollution levels 
would be higher than average costs of urban travel shown in this 
report. Air pollution is one of the most difficult social costs of 
highway use to evaluate from a policy perspective because effects vary 
geographically and spill over to other areas in ways that vary from 
region to region. More research will be needed to further refine 
estimates of marginal air pollution costs in various locations.
    The Department plans to update the 1997 HCAS before the next 
surface transportation reauthorization. Potential options to improve 
overall user fee equity will be examined in greater depth in that study 
and additional research to improve estimates of air pollution and other 
social costs of highway travel will be conducted.
    Footnotes
    1. McCubbin, Donald and Delucchi, Mark, ``The Annualized Social 
Cost of Motor-Vehicle Use in the U.S., 1990-91: Summary of Theory, 
Data, Methods, and Results.'' Institute of Transportation Studies, 
University of California, Davis. UCD-ITS-RR-96-3 (1), 1998, p.55.
    2. Douglas, Sharon G., et. al., Air-Pollution-Related Social Costs 
of On-Highway Motor Vehicles, Part 1: Air Quality Modeling, Systems 
Applications International, June 1998.
    3. Abt Associates, Air-Pollution-Related Social Costs of On-Highway 
Motor Vehicles, Part 2: Physical and Economic Valuation Modeling, June 
1998.
    4. McCubbin and Delucchi, 1997.
                               __________

         Attachment 2: Emissions Effects of Atlanta Speed Study

                               Memorandum
To: Southern Environmental Law Center
From: Brian Grady and Norm Marshall
Subject: Atlanta Non-Attainment Area Speed Study
Date: 20 July 2001
Introduction
    In February 2000, we were retained by the Southern Environmental 
Law Center (SELC) to review the 2001-2003 Transportation Improvement 
Program (TIP), the 2025 Regional Transportation Plan (RTP), and the 
Conformity Determination Report (CDR) prepared by the Atlanta Regional 
Commission (ARC). In our initial critique, we demonstrated that 
observed freeway speeds were much higher than the speeds in the ARC 
travel demand model using data from the Georgia Navigator Intelligent 
Transportation System (ITS). Furthermore, we demonstrated that the 
major discrepancy between observed and modeled freeway speeds resulted 
in a significant underestimation of mobile source nitrogen oxide (NOx) 
emissions.
    In October 2000, the Georgia Regional Transportation Authority 
(GRTA) commissioned a speed study to examine and update the parameters 
used in developing peak and off-peak speeds in the ARC regional travel 
demand model. The final draft of the study conducted by Wilbur Smith 
Associates (WSA) was released in January 2001. The findings of the 
Atlanta Non-Attainment Area Speed Study substantiate and validate our 
earlier findings and conclusions. Specifically, that observed freeway 
speeds in the Atlanta non-attainment area are higher than the freeway 
speeds modeled in the ARC travel demand model, and produce much higher 
NOx emissions than calculated in the conformity process. After 
correcting for this error, the NOx emissions exceed the allowable 
amount by a wide margin.
Speed Study Findings
    The Final Draft of the Atlanta Non-Attainment Area Speed Study was 
prepared by Wilbur Smith Associates on behalf of the Georgia Regional 
Transportation Authority. After analyzing the speed data collected for 
the region's freeways, three trends were evident when comparing the 
observed speeds against the modeled ARC speeds. These findings are 
presented on page 35 of the speed study.
    (With exception of the central business district (CBD) area, off 
peak observed weighted speeds are higher than the peak speeds and 
fairly constant across area types at close to 60 miles per hour (MPH).
    (The observed peak-period speeds vary considerably without a 
discernable pattern: from 31.9 MPH during the AM peak to 57.7 MPH 
during the PM peak in the CBD area and from 36.7 MPH in the Suburban 
area during the PM peak to 57.0 MPH in the Exurban/Rural area during 
the PM peak.
    (Observed speeds are consistently higher than modeled speeds (9 out 
of 12 averages are higher) and in some cases the difference is 
relatively large (5 averages are more than 10 MPH higher).
    Table 10.2.1 on page 35 of the speed study contains the observed 
weighted average speeds and weighted ARC modeled speeds for freeways. 
The same data is presented here in Table 1.

                                Table 1: Observed Weighted Average Freeway Speeds
----------------------------------------------------------------------------------------------------------------
                                                                                       Observed     Weighted ARC
                   Area Type                                   Period               Weighted Avg.  Modeled Speed
                                                                                     Speed (MPH)       (MPH)
----------------------------------------------------------------------------------------------------------------
CBD............................................  AM Peak..........................           31.9           21.1
                                                 Off Peak.........................           40.0           22.8
                                                 PM Peak..........................           57.7           20.7
Urban..........................................  AM Peak..........................           40.1           41.3
                                                 Off Peak.........................           59.8           50.2
                                                 PM Peak..........................           50.4           43.9
Suburban.......................................  AM Peak..........................           54.4           47.2
                                                 Off Peak.........................           59.9           43.9
                                                 PM Peak..........................           36.7           37.7
Exurban/Rural..................................  AM Peak..........................           40.9           53.5
                                                 Off Peak.........................           58.8           45.1
                                                 PM Peak..........................           57.0           51.9
----------------------------------------------------------------------------------------------------------------

    The authors of the speed study concluded the following about the 
Volume Delay Functions (VDF) and resulting model freeway speeds used in 
the ARC regional travel demand model:
    In conclusion, it appears that the existing shape of the existing 
ARC regional travel demand model VDF freeway curves is not supported by 
the observed speed data and additional samples are required at higher 
V/C ratios to better estimate the shape at the higher V/C ratios. 
Further with many observed speeds generally higher than what the VDF 
curve would estimate, it is likely that the overall freeway average 
speed is underestimated.
    We are in complete agreement with this conclusion, as we drew the 
same conclusion about the ARC model freeway speeds after examining data 
collected by the Georgia Navigator ITS. Prior to the speed study, the 
most comprehensive speed data available in the region were those 
collected by the Georgia Navigator ITS. In particular, there are 14 
Autoscope stations located on I-75 and I-85 that are judged by the 
Georgia Department of Transportation (GDOT) to be the most accurate in 
the system. These installations include advanced video equipment that 
measure speed within each travel lane continuously.
    Data for 1 weekday per month were obtained from GDOT for the 
previous 13 months (January 1999--January 2000), with data summarized 
for each of 24 hours by each lane. Average daily speeds were calculated 
from these summaries.1 Figure 1 on the next page shows these speeds by 
location compared to final adjusted travel speeds for the 2000 ARC 
model.
    The ARC dismissed our initial comments regarding the discrepancy 
between observed and modeled freeway speeds. ARC claimed we had relied 
on data from a sample that was not only small but also inaccurate. 
However, the data from the Georgia Navigator ITS and the findings in 
the speed study, which collected speed data for hundreds of roadway 
segments, tell the same story. The VDF freeway curves used in the ARC 
model yield speeds that are much lower than observed speeds.





Impact on Mobile Source Emissions
    As a short-term improvement, the study recommends the development 
of a post-processor to predict speeds based on data in the study for 
use in the State Implementation Plan and Conformity Determination. This 
post-processor would estimate speeds based on enhanced VDF curves and 
volume output from the ARC regional travel demand model. The authors of 
the study recognize the importance of post-processing the ARC model 
speeds because the MOBILE5b emission factor model is extremely 
sensitive to speed inputs.
    Despite recognizing the problem with ARC modeled freeway speeds, 
enhanced VDF curves were not generated by WSA to facilitate development 
of a post-processor. Citing insufficient data, new enhanced VDF curves 
were not developed. The speed study identifies a problem, but does not 
provide any practical means of fixing it. The study is therefore 
incomplete. This is particularly disturbing because the development of 
new VDF curves was an explicit part of GRTA's speed study project when 
the Request For Qualifications (RFQ) was issued.
    The discrepancy between observed and modeled freeway speeds has a 
significant impact on mobile source nitrogen oxide emissions. This fact 
may partially explain why the authors don't suggest implementing many 
of the recommended improvements until 2006 and beyond. To quantify the 
emission impacts from underestimation of freeway speeds, we have 
calculated 2003 nitrogen oxide emissions from freeways using both sets 
of speeds presented in Table 1 of this memorandum (Table 10.2.1 in the 
speed study). Table 2 contains NOx emissions from freeways using the 
observed weighted average speeds by time period and area type. Table 3 
contains NOx emissions from freeways using the weighted ARC modeled 
speeds by time period and area type.

                   Table 2: NOx Emissions From Freeways Using Observed Weighted Average Speeds
----------------------------------------------------------------------------------------------------------------
                                                                       Observed      2003
                                                                       Weighted    MOBILE5b
              Area                  Time Period      2003 ARC Vehicle    Avg.      Emission     Total Emissions
                                                          Miles          Speed      Factor          (grams)
                                                                         (MPH)   (grams/mile)
----------------------------------------------------------------------------------------------------------------
CBD............................  AM...............            230,407      31.9       1.595              367,498
                                 Off..............            245,594      40.0       1.631              400,564
                                 PM...............            782,192      57.7       2.236            1,748,982
Urban..........................  AM...............          1,639,888      40.1       1.631            2,674,657
                                 Off..............          1,851,089      59.8       2.363            4,374,122
                                 PM...............          5,105,091      50.4       1.815            9,265,740
Suburban.......................  AM...............          4,223,728      54.4       2.011            8,493,916
                                 Off..............          4,813,253      59.9       2.363           11,373,717
                                 PM...............         12,970,190      36.7       1.611           20,894,976
Exurban/rural..................  AM...............          3,436,841      40.9       1.639            5,632,983
                                 Off..............          3,946,154      58.8       2.299            9,072,207
                                 PM...............         10,424,177      57.0       2.177           22,693,433
Total Daily Emissions (tons/     .................  .................  ........  ............              106.9
 day).
----------------------------------------------------------------------------------------------------------------


                     Table 3: NOx Emissions From Freeways Using Weighted ARC Modeled Speeds
----------------------------------------------------------------------------------------------------------------
                                                                       Weighted      2003
                                                                          ARC      MOBILE5b
              Area                  Time Period      2003 ARC Vehicle   Modeled    Emission     Total Emissions
                                                          Miles          Speed      Factor          (grams)
                                                                         (MPH)   (grams/mile)
----------------------------------------------------------------------------------------------------------------
CBD............................  AM...............            230,407      21.1       1.630              375,563
                                 Off..............            245,594      22.8       1.616              396,880
                                 PM...............            782,192      20.7       1.630            1,274,973
Urban..........................  AM...............          1,639,888      41.3       1.639            2,687,776
                                 Off..............          1,851,089      50.2       1.815            3,359,726
                                 PM...............          5,105,091      43.9       1.670            8,525,502
Suburban.......................  AM...............          4,223,728      47.2       1.710            7,222,574
                                 Off..............          4,813,253      43.9       1.670            8,038,132
                                 PM...............         12,970,190      37.7       1.616           20,959,827
Exurban/rural..................  AM...............          3,436,841      53.5       2.011            6,911,487
                                 Off..............          3,946,154      45.1       1.682            6,637,430
                                 PM...............         10,424,177      51.9       1.909           19,899,754
Total Daily Emissions (tons/     .................  .................  ........  ............               95.1
 day).
----------------------------------------------------------------------------------------------------------------

    Total daily NOx emissions from freeways are estimated as 106.9 
tons/day when observed weighted average freeway speeds from the speed 
study are used in the emissions calculation. Total daily NOx emissions 
from freeways are only estimated as 95.1 tons/day when weighted ARC 
modeled freeway speeds are used in the emissions calculation. 
Therefore, by using incorrect freeway speeds which are less than actual 
observed speeds in the emissions analysis, NOx emissions are 
underestimated by 11.8 tons/day. This represents 11 percent of the 
total freeway emissions.
    The speed study also presented speed data for Class I, Class II and 
Class III Arterials as well as Class I Collectors. Observed weighted 
average and weighted ARC modeled speeds by time period and area type 
for these facilities were also tabulated. We conducted an emissions 
analysis for each of these facilities using the observed and modeled 
speeds as was done previously for freeways. Table 4 contains the 
results of this emissions analysis. Despite some inconsistencies 
between observed and modeled speeds on these facilities, the impact on 
emissions is slight given the nature of the NOx emission curve. The NOx 
curve is relatively flat between 20 and 40 MPH, so speed variations in 
this speed range do not produce drastic changes in total emissions.

              Table 4: NOx Emissions Analysis for Class I,II, III Arterials and Class I Collectors
----------------------------------------------------------------------------------------------------------------
                                                                Daily NOx       Daily NOx
                                                                Emissions       Emissions
                                                             Using Observed  Using Weighted       Difference
                       Facility Type                            Weighted       ARC Modeled   [Observed--Modeled]
                                                             Average Speeds   Speeds (tons/       (tons/day)
                                                               (tons/day)         day)
----------------------------------------------------------------------------------------------------------------
Class I Arterials..........................................           21.32           21.82              -0.51
Class II Arterials.........................................           20.44           20.51              -0.07
Class III Arterials........................................           29.45           29.43               0.02
Class I Collectors.........................................           26.92           27.74              -0.83
----------------------------------------------------------------------------------------------------------------

Impact on Conformity Determintation
    The ARC does not satisfy the 2003 SIP NOx budget when the correct 
freeway speeds are used in the emissions analysis. The year 2003 SIP 
budget without off-model adjustments is 245.88 tons/day. In the CDR, 
the ARC estimated 2003 NOx emissions are reported as 241.60 tons/day. 
However, we have shown that emissions are underestimated by 11.8 tons/
day because incorrect ARC model freeway speeds were used in the 
emissions analysis. The 2003 SIP budget is exceeded when this 
underestimation is considered. The conformity data is presented in 
Table 5 below.

                                         Table 5: ARC 2003 NOx Emissions
----------------------------------------------------------------------------------------------------------------
                                                                        New Projection
                 Year                     SIP Budget    ARC Projection   [ARC + 11.80]   New Projection < Budget
                                          (tons/day)      (tons/day)      (tons/day)
----------------------------------------------------------------------------------------------------------------
2003..................................          245.88          241.60          253.40  No
----------------------------------------------------------------------------------------------------------------

    The 2003 NOx emissions projection increases to 253.40 tons/day when 
the correct observed freeway speeds are used in the emissions analysis. 
This emission rate exceeds the 2003 NOx emissions budget established in 
the SIP by 7.52 tons/day.
Conclusion
    In February 2000, we were retained by the Southern Environmental 
Law Center (SELC) to review the 2001-2003 Transportation Improvement 
Program (TIP), the 2025 Regional Transportation Plan (RTP), and the 
Conformity Determination Report (CDR) prepared by the Atlanta Regional 
Commission (ARC). In our initial critique, we demonstrated that 
observed freeway speeds were much higher than the speeds in the ARC 
travel demand model using data from the Georgia Navigator Intelligent 
Transportation System (ITS). Furthermore, we demonstrated that the 
major discrepancy between observed and modeled freeway speeds resulted 
in a significant underestimation of mobile source nitrogen oxide 
emissions.
    In October 2000, the Georgia Regional Transportation Authority 
(GRTA) commissioned a speed study to examine and update the parameters 
used in developing peak and off-peak speeds in the ARC regional travel 
demand model. The final draft of the study conducted by Wilbur Smith 
Associates (WSA) was released in January 2001. The findings of the 
Atlanta Non-Attainment Area Speed Study substantiate and validate our 
earlier findings and conclusions. Specifically, that observed freeway 
speeds in the Atlanta non-attainment area are higher than the freeway 
speeds modeled in the ARC travel demand model.
    When the correct observed freeway speeds are used in the emissions 
analysis, 2003 NOx freeway emissions increase by 11.8 tons/day. This 
increase is significant because the 2003 SIP budget is exceeded when 
the additional freeway emissions are included in the emission 
projections. 2003 NOx emission projections increase to 253.40 tons/day, 
which exceeds the 245.88 tons/day budget established in the SIP. 
Accounting for the underestimation resulting from the use of incorrect 
freeway speeds, the ARC conformity determination is invalid.
                               __________

     Attachment 3: Relative Access to Jobs Declines Under Atlanta 
Transportation Improvement Program (TIP) Especially for People Without 
                                  Cars

 
                         Percent walkable employment within 40 minutes--walk to transit
----------------------------------------------------------------------------------------------------------------
                Year                    2000       2003       2005       2010       2015       2020       2025
----------------------------------------------------------------------------------------------------------------
          Household Income
Under $20,000......................      22.6       20.66      22.07      22.55      23.07      22.37
                                      I1120.97
$20-40,000.........................      15.03      13.54      13.15      14.08      14.71      15.86      15.9
$40-60,000.........................      11.1       10.48      10.31      10.63      11.61      12.53      12.46
Over $60,000.......................      10.04       9.87       9.79       9.76      11.27      11.79      11.17
All Incomes........................      15.28      14.18      13.93      14.46      15.37      16.2       15.88
----------------------------------------------------------------------------------------------------------------


 
                         Percent walkable employment within 40 minutes--drive to transit
----------------------------------------------------------------------------------------------------------------
                Year                    2000       2003       2005       2010       2015       2020       2025
----------------------------------------------------------------------------------------------------------------
          Household Income
Under $20,000......................      11.85      11.59      11.44      12.83      12.63      12.26      12.13
$20-40,000.........................      10.26       9.84       9.59      10.53      10.61      10.43      10.42
$40-60,000.........................       7.96       7.57       7.39       8.04       7.98       7.88       7.75
Over $60,000.......................       9.54       9.42       9.26      10.83      10.55      10.79      10.55
All Incomes........................       9.87       9.57       9.37      10.5       10.4       10.28      10.17
----------------------------------------------------------------------------------------------------------------


 
                         Percent walkable employment within 50 minutes--walk to transit
----------------------------------------------------------------------------------------------------------------
                Year                    2000       2003       2005       2010       2015       2020       2025
----------------------------------------------------------------------------------------------------------------
          Household Income
Under $20,000......................      33.78      31.72      31.17      32.88      34.39      35.11      34.82
$20-40,000.........................      24.2       21.64      20.96      22.3       23.53      25.39      25.92
$40-60,000.........................      18.6       17.09      16.74      16.97      18.65      20.29      20.4
Over $60,000.......................      16.75      16.34      16.19      15.84      18.19      19.19      18.99
All Incomes........................      24.3       22.35      21.91      22.47      24.4       25.57      25.71
----------------------------------------------------------------------------------------------------------------


 
                         Percent walkable employment within 50 minutes--drive to transit
----------------------------------------------------------------------------------------------------------------
                Year                    2000       2003       2005       2010       2015       2020       2025
----------------------------------------------------------------------------------------------------------------
          Household Income
Under $20,000......................      19.53      19.07      18.58      22.04      22.08      21.9       21.73
$20-40,000.........................      17.98      17.39      16.78      19.49      19.89      19.91      19.86
$40-60,000.........................      14.65      13.97      13.53      15.62      15.83      15.83      15.52
Over $60,000.......................      16.98      16.75      16.46      19.35      19.67      20.39      20.07
All Incomes........................      17.27      16.78      18.24      19.08      19.33      19.45      19.24
----------------------------------------------------------------------------------------------------------------


 
                         Percent walkable employment within 60 minutes--walk to transit
----------------------------------------------------------------------------------------------------------------
                Year                    2000       2003       2005       2010       2015       2020       2025
----------------------------------------------------------------------------------------------------------------
          Household Income
Under $20,000......................      45.88      41.56      42.08      43.89      46.12      48.11      47.57
$20-40,000.........................      35.09      30.35      30.48      31.97      33.74      37.04      37.61
$40-60,000.........................      27.98      24.61      24.87      24.9       27.42      30.44      31.07
Over $60,000.......................      24.97      23.57      24.02      23.21      26.79      29.02      29.11
All Incomes........................      34.66      30.8       31.16      31.59      34.15      36.86      37.05
----------------------------------------------------------------------------------------------------------------


 
                         Percent walkable employment within 60 minutes--drive to transit
----------------------------------------------------------------------------------------------------------------
                Year                    2000       2003       2005       2010       2015       2020       2025
----------------------------------------------------------------------------------------------------------------
          Household Income
Under $20,000......................      27.15      26.83      26.69      31.62      31.82      31.84      31.99
$20-40,000.........................      25.84      25.34      25.02      29.57      30         30.35      30.55
$40-60,000.........................      21.86      21.23      21.08      25.3       25.38      25.5       25.28
Over $60,000.......................      25.15      24.99      25.05      30.04      31.02      32         31.9
All Incomes........................      24.99      24.58      24.42      29.09      29.5       29.86      29.88
----------------------------------------------------------------------------------------------------------------


 
                         Percent walkable employment within 75 minutes--walk to transit
----------------------------------------------------------------------------------------------------------------
                Year                    2000       2003       2005       2010       2015       2020       2025
----------------------------------------------------------------------------------------------------------------
          Household Income
Under $20,000......................      62.17      57.86      57.72      59.17      62.22      65.12      64.93
$20-40,000.........................      51.38      46.48      46.21      47.39      50.35      54.97      55.75
$40-60,000.........................      43.08      39.33      39.45      38.77      43.03      47.88      48.6
Over $60,000.......................      38.85      37.97      38.35      36.29      42.12      46.48      46.99
All Incomes........................      50.18      46.31      46.32      46.1       50.12      54.34      54.81
----------------------------------------------------------------------------------------------------------------


 
                         Percent walkable employment within 75 minutes--drive to transit
----------------------------------------------------------------------------------------------------------------
                Year                    2000       2003       2005       2010       2015       2020       2025
----------------------------------------------------------------------------------------------------------------
          Household Income
Under $20,000......................      38.46      39.86      40.21      46.34      46.74      47.92      48.87
$20-40,000.........................      37.58      39.22      39.32      45.83      46.2       47.53      48.46
$40-60,000.........................      32.88      35         35.44      42.34      42         42.94      43.24
Over $60,000.......................      36.72      39.61      40.48      47.59      48.75      51.04      51.77
All Incomes........................      36.42      38.42      38.83      45.48      45.87      47.29      48.02
----------------------------------------------------------------------------------------------------------------

                               __________

    Attachment 4: Induced Demand and Regional Transportation Models:

   Summary of Recent Studies and Application to Evaluate a Regional 
                     Transportation Planning Model
                (By Norm Marshall, Smart Mobility, Inc.)
                   prepared for environmental defense
                               july 2002
    Transportation investments and policies have many impacts and these 
are often examined using regional transportation planning models. Among 
the key impacts is induced traffic, which can have a profound impact on 
air pollution, congestion, and transportation system performance. This 
paper summarizes recent studies of induced traffic and shows how 
induced traffic can be measured in a regional travel models to evaluate 
their adequacy to evaluate the likely future performance of regional 
transportation systems under different investment and policy scenarios.
    DeCorla-Souza and Cohen define ``induced demand'' as an: ``increase 
in daily vehicle miles of travel (VMT), with reference to a specific 
geographic context, resulting from expansion of highway capacity.'' 
This definition includes both short-term effects and long-term effects. 
The short-term effects include more trips, longer trips, more auto 
trips, and auto trips with lower occupancies. The long-term effects 
follow land use changes caused by expanded roadway capacity.
    Over the past several years, a series of national studies have been 
published quantifying the induced travel effect. The measure used in 
most studies is elasticity, a basic concept of economics. When the 
supply of a good or service increases, its price drops. When the price 
drops, consumption of the product increases. For the majority of 
Americans, the incremental cost of operating cars is low enough that 
the perceived cost is primarily travel time. An increase in lane miles 
of road capacity (supply) causes a near-term decrease in travel time 
(price), which in turn leads to an increase in vehicle miles traveled 
(consumption).
    Elasticity is calculated as the ratio of the change in consumption 
divided by the change in supply. For example, if a 10 percent increase 
in vehicle miles traveled is caused by a 10 percent increase in lane 
miles, the elasticity is:

                     10 percent / 10 percent = 1.0.

    Alternatively, if a 5 percent increase in vehicle miles traveled is 
caused by a 10 percent increase in lane miles, the elasticity is:

                     5 percent / 10 percent = 0.5.

    Research findings from five studies presented at recent 
Transportation Research Board Annual Meetings are directly comparable 
and are summarized in Table 7.

Table 7: Long-Term Regional Elasticity of Vehicle Miles Traveled to Lane
                                  Miles
------------------------------------------------------------------------
               Study                    Long-term regional elasticity
------------------------------------------------------------------------
Hansen \1\ \2\....................  0.9
Noland \3\........................  0.7--1.0
Fulton et. al.\4\.................  0.5--0.8
Noland and Cowart\5\..............  0.904
Marshall\6\.......................  0.76 arterials, 0.85 highways
Average of five studies (highways)  0.83
------------------------------------------------------------------------
\1\ Hansen, M. The Traffic Inducement Effect: Its Meaning and
  Measurement. In Transportation Research Circular Number 481 (Summary
  of Panel Session at 1997 Annual Meeting of the Transportation Research
  Board: Highway Capacity Expansion and Induced Travel--Evidence and
  Implications. TRB, National Research Council, Washington D.C.,
  February 1998, pp. 7-15.
\2\ Hansen, M. and Y. Huang. Road Supply in California. Transportation
  Research A, Vol. 31, No. 3, 1997, pp. 205-218.
\3\ Noland, R. Relationships Between Highway Capacity and Induced
  Vehicle Travel. TRB 78th Annual Meeting Preprint CD-ROM, TRB, National
  Research Council, Washington D.C., January 1999.
\4\ Fulton, Lewis M., Daniel J. Meszler, Robert B. Noland, and John V.
  Thomas. Statistical Analysis of Induced Travel Effects in the U.S. Mid-
  Atlantic Region. TRB 79th Annual Meeting Preprint CD-ROM, TRB,
  National Research Council, Washington D.C., January 2000.
\5\ Noland, Robert B. William A. Cowart. Analysis of Metropolitan
  Highway Capacity and the Growth in Vehicle Miles of Travel. RB 79th
  Annual Meeting Preprint CD-ROM, TRB, National Research Council,
  Washington D.C., January 2000.
\6\ Marshall, Norman L. Evidence of Induced Demand in the Texas
  Transportation Institute's Urban Roadway Congestion Study Data Set.
  TRB 79th Annual Meeting Preprint CD-ROM, TRB, National Research
  Council, Washington D.C., January 2000.

Analysis of Regional Travel Model Sensitivity to Induced Traffic
    To illustrate how regional travel model performance in measuring 
induced traffic can be evaluated, we examine the model used in 2001 by 
the Baltimore Metropolitan Council and compare it to a similar regional 
sketch model developed in early 2002 for the Vision 2030 initiative in 
Baltimore.
    To determine the sensitivity of the BMC model to induced travel 
demand effects, two separate model runs were performed using the BMC 
regional travel demand model. First, the model was run using the BMC 
2025 land use scenario and the 1996 highway network. The model was then 
run again using the BMC 2025 land use scenario with the 2025 highway 
network. By using the same land use inputs, we can determine the effect 
of the transportation capacity improvements in the 2025 highway 
network. Table 8 contains the results of the two BMC model runs.
    To determine the sensitivity of the sketch model to induced demand 
effects, two separate model runs were again performed this time using 
the sketch travel demand model. First, the model was run using the 2030 
land use inputs developed for the Vision 2030 Highway scenario and the 
1996 highway network. The model was then run again using the 2030 
Highway land use scenario with the 2025 highway network. Table 9 
contains the results of the two sketch model runs.

          Table 8: Induced Demand Sensitivity of the BMC Model
------------------------------------------------------------------------
                                     Vehicle Miles of
                                       Travel (VMT)     Lane Miles (LM)
------------------------------------------------------------------------
2025 BMC land use with 1996                19,323,453              8,514
 network..........................
2025 BMC land use with 2025                19,469,459              9,283
 network..........................
 percent Change...................       0.76 percent       9.03 percent
 percent Change VMT / percent                    0.08
 Change LM........................
------------------------------------------------------------------------


                             Table 9: Induced Demand Sensitivity of the Sketch Model
----------------------------------------------------------------------------------------------------------------
                                                                Vehicle Miles of Travel
                                                                         (VMT)               Lane Miles (LM)
----------------------------------------------------------------------------------------------------------------
2030 Highway Scenario land use with 1996 network..............               18,757,041                    8,514
2030 Highway Scenario land use with 2025 network..............               19,306,043                    9,283
 percent Change...............................................             2.93 percent             9.03 percent
 percent Change VMT / percent Change LM.......................                     0.32
----------------------------------------------------------------------------------------------------------------

    The elasticity of vehicle miles of travel with respect to lane 
miles for the BMC model is only 0.08. The elasticity of vehicle miles 
of travel with respect to lane miles for the improved sketch model is 
0.32. Although the sketch model does not capture induced demand to the 
same degree as the published research, the sketch model gives a much 
more realistic induced travel demand response than does the BMC travel 
demand model.
    This is important that induced demand is properly accounted within 
the Vision 2030 process, so that the benefits of new roadways are not 
overestimated. This is also critical in roadway planning, and in 
estimating air emissions.
    For further information, see, Smart Mobility, Inc., Baltimore 
Vision 2030: Sketch Travel Demand Model Adapted from the Baltimore 
Metropolitan Council Regional Travel Model, Baltimore Regional 
Partnership, Baltimore, Maryland, April 2002.
                               __________

   Attachment 5: Preliminary Toxicological Review of Roadway Traffic 
                               Pollution

       prepared for: joanne spalding, staff attorney, sierra club
        (Prepared By: Environmental Health & Engineering, Inc.)
                              May 11, 2001
1.0 EXECUTIVE SUMMARY
    Roadway traffic generates a complex mixture of particles and gases. 
In particular, diesel exhaust continues to be a major focus of research 
and public health concern, both in the United States and 
internationally, due to the large amounts of ultrafine particulate 
matter and known carcinogens such as benzene, formaldehyde, 1,3 
butadiene and polycyclic aromatic hydrocarbons including benzo(a)pyrene 
that are released. The constituents of roadway traffic emissions, 
either singularly or in combination, have demonstrated toxicological 
properties that are either known to cause or are suspected of causing a 
variety of health effects in individuals that are exposed to them.
    From an acute exposure standpoint, diesel exhaust is a strong 
irritant and may cause a variety of inflammation related symptoms 
including respiratory irritation, asthma-like reactions, eye 
irritation, headaches and nausea. The primary chronic health concerns 
include nonmalignant respiratory and cardiovascular disease, 
exacerbation or initiation of allergic hypersensitivity and lung 
cancer.
    An ever-growing body of research reported in the literature 
demonstrates excessive morbidity and mortality in populations that are 
in close proximity to heavily trafficked roadways. Our understanding of 
the magnitude of these adverse health impacts has increased as improved 
scientific methods for spatial and temporal resolution have refined the 
exposure estimates for roadway traffic emissions for nearby residents.
    Analysis of published data for traffic emission factors and the 
resulting exposure estimates demonstrates that uncontrolled expansion 
of roadways will significantly increase exposures to both fine 
particulate matter and air toxins by the population in the contiguous 
residential corridor. This is significant because several 
epidemiological studies have shown that levels of fine particulate 
matter typically found adjacent to heavily trafficked roadways are 
comparable to levels that can exacerbate both acute and chronic 
respiratory disease symptoms and cause premature death among sensitive 
populations. This finding applies to short-term exposures of a few 
hours to one or several days. With regard to air toxins, exposures 
experienced by roadway corridor residents are likely to equal and 
probably exceed the air toxins levels measured at monitoring sites 
located near heavily traveled highways and reported in the Multiple Air 
Toxics Emissions Study II Study. Risk estimates based on the levels 
reported in the Multiple Air Toxics Emissions Study II resulted in an 
unacceptably high cancer risk of approximately 1 in 1,000 to 1 in 650 
that was attributed to diesel exhaust and other motor vehicle 
emissions. The relative impact on other roadway corridor populations 
could be commensurate with the increased exposures to motor vehicle 
pollution that would result from their proximity to the large numbers 
of additional vehicles traveling the expanded highway.
    Many current environmental assessments have not properly accounted 
for the differential impact that could be imposed on the nearby the 
population adjacent to expanded highways. This analysis of available 
data demonstrates that a detailed program of pollutant monitoring and 
modeling that are specific for the planned expansion should be 
undertaken to properly quantify the potential adverse health impacts 
associated with projects of this type.
2.0 INTRODUCTION
    Roadway traffic generates a complex mixture of particles and gases. 
The constituents, either singly or in combination, have demonstrated 
toxicological properties. Some compounds are known to cause a variety 
of health effects and others are suspected of causing a variety of 
health effects in individuals exposed to them. Table 2.1 presents a 
list of compounds commonly released from motor vehicles and their 
primary expected adverse health effects. Many of these compounds are 
related to diesel exhaust while others are also associated with 
gasoline powered vehicles.

                                      Table 2.1 Selected Components of Diesel Exhaust and Potential Health Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                           Cancer Unit Risk
            Compound                  CAS Number          Carcinogen      Factor (per 1 mg/  Respiratory Effects     Neurological      Sensitizing Agent
                                                                                m\3\)                                   Effects
--------------------------------------------------------------------------------------------------------------------------------------------------------
Acetaldehyde....................            75-07-0  Yes................            2.2E-06  Yes................  No................  No
Acrolein........................           107-02-8  No.................                 NA  Yes................  No................  No
Anthracene......................           120-12-7  No.................                 NA  Yes................  Yes...............  Yes
Benzaldehyde....................           100-52-7  No.................                 NA  Yes................  Yes...............  Yes
Benzene.........................            71-43-2  Yes................    2.2 to 7.8 E-06  Yes................  Yes...............  No
Benzo(a)anthracene..............            56-55-3  No.................                 NA  NA.................  NA................  NA
Benzo(a)pyrene..................            50-32-8  Yes................         2.9E-5 (A)  No.................  No................  No
Benzo(b)fluoranthene............           205-99-2  Yes................         1.1E-4 (A)  NA.................  NA................  NA
Benzo(g,h,i)perylene............           191-24-2  NA.................                 NA  NA.................  NA................
Benzo(j)fluoranthene............           205-82-3  Yes................         1.1E-4 (A)  NA.................  NA................  NA
Benzo(k)fluoranthene............           207-08-9  Yes................         1.1E-4 (A)  NA.................  NA................  NA
1,3-Butadiene...................           106-99-0  Yes................            2.8E-04  Yes................  Yes...............  No
Cadmium.........................          7440-43-9  Yes................            1.8E-03  Yes................  No................  No
Chrysene........................           218-01-9  Yes................         1.1E-5 (A)  Yes................  No................  No
Crotonaldehyde..................           123-73-9  No.................                 NA  Yes................  No................  No
Diesel Particulate Matter.......                 NA  Yes................       3.0E-4 (A,B)  Yes................  No................  No
Ethyl benzene...................           100-41-4  No.................                 NA  NA.................  NA................  NA
Fluoranthene....................           206-44-0  No.................                 NA  NA.................  NA................  NA
Formaldehyde....................            50-00-0  Yes................            1.3E-05  Yes................  No................  Yes
Indeno(1,2,3-cd)pyrene..........           193-39-5  Yes................         1.1E-4 (A)  NA.................  NA................  NA
Lead compounds..................          7439-92-1  Yes................         1.2E-5 (A)  No.................  Yes...............  No
Manganese compounds.............          7439-96-5  No.................                 NA  Yes................  Yes...............  No
Methyl tert-butyl ether.........          1634-04-4  No.................                 NA  No.................  No................  No
Naphthalene.....................            91-20-3  No.................                 NA  Yes................  Yes...............  No
Nickel compounds................          7440-02-0  Yes................         2.6E-4 (A)  Yes................  Yes...............  Yes
1-Nitropyrene...................          5522-43-0  Yes................         1.1E-4 (A)  NA.................  NA................  NA
Nitrogen oxides (NOx)...........         10102-44-0  No.................                 NA  Yes................  No................  No
Phenanthrene....................            85-01-8  No.................                 NA  NA.................  NA................  NA
Phenol..........................           108-95-2  No.................                 NA  Yes................  Yes...............  No
Pyrene..........................           129-00-0  No.................                 NA  Yes................  No................  No
Toluene.........................           108-88-3  No.................                 NA  No.................  Yes...............  No
Xylenes (mixed).................          1330-20-7  No.................                 NA  No.................  Yes...............  No
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: All information, unless otherwise noted, is from U.S. Environmental Protection Agency. IRIS. Integrated Risk Information System. [Data base,
  online.] Cincinnati, OH: EPA. Available from: http://www.epa.gov/iris.
NA: Not available
A: From toxic air contaminant document, Office of Environmental Health Hazard Assessment, California, as cited in Air Toxics Hot Spots Program Risk
  Assessment Guidelines, Part II Technical Support Document for Describing Available Cancer Potency Factors. April 1999.
B: Listed as ``Reasonable Estimate'' by California Air Resources Board (Range = 1.3E-4 to 1.5E-3 [(mg/m3])

    Evidence from Pearson and colleagues (2000) shows an association 
between an elevated incidence of childhood leukemia and children's 
exposure to higher than regional urban background concentrations of 
motor vehicle emissions. Brunekreef and colleagues (1997) show that 
adverse health outcomes, including premature mortality and increased 
morbidity from increased respiratory and cardiovascular effects, are 
associated with the increase in ambient fine particulate matter, e.g., 
particles less than 2.5 microns in diameter (PM2.5) from 
roadway sources. The recent Multiple Air Toxics Emissions Study II 
(MATES II) performed by the South Coast Air Quality Management District 
for the Los Angeles air basin (SCAQMD 1999) also shows increases in 
cancer risk due to the presence of known carcinogens such as benzene, 
formaldehyde, 1,3 butadiene, benzo(a)pyrene and other chemical species 
found in diesel particulate matter. Furthermore, there is increasingly 
strong evidence that diesel exhaust may be a significant factor in 
initiating or exacerbating allergic hypersensitivity. Diesel exhaust is 
also a likely factor for increasing airway reactivity in those with 
asthma.
    A number of uncertainties are involved in determining the magnitude 
of health hazards associated with pollutants generated by motor 
vehicles. However, sufficient information is available from both human 
studies and animal studies showing adverse health effects, including 
cancer, respiratory disease, and premature death among populations 
exposed to motor vehicle emissions at levels found in the urban 
atmosphere. The magnitude of these effects will be determined by 
several factors, including the frequency and duration of exposure, 
health status, interactions with other pollutants, and the differential 
impact on those individuals that have ``hot spot'' exposures or those 
found in heavily traveled freeway corridors. This evidence demonstrates 
that populations exposed to air pollutants from motor vehicles in 
excess of average regional urban concentrations are likely to 
experience a significantly elevated risk of adverse health effects, and 
that such risks are well above the levels of public health concern.
    These factors argue for conduct of detailed, carefully considered 
analyses to ensure that an excessive exposure burden is not placed 
unjustly on a subset of the population.
3.0 CARCINOGENIC RISK
    Roadway traffic generates many pollutants categorized as known or 
suspected human carcinogens or considered as potential carcinogens. 
Table 3.1 summarizes the current categorization of diesel exhaust as a 
carcinogen of by a variety of State, Federal, and international 
organizations. These organizations are consistent in finding that 
experimental studies demonstrate that diesel exhaust is carcinogenic in 
rats and that the epidemiological data demonstrate that diesel exhaust, 
which is a mixture of many organic and inorganic compounds, is a 
potential or a probable human carcinogen. Table 3.2, developed from the 
MATES II Study (SCAQMD 1999), shows that diesel particulate is the 
overwhelming contributor to cancer risk in diesel exhaust.

                           Table 3.1 Regulatory Positions on Cancer and Diesel Exhaust
----------------------------------------------------------------------------------------------------------------
               Agency                      Animal Evidence           Human Evidence           Classification
----------------------------------------------------------------------------------------------------------------
NIOSH (1988)........................  Confirmatory............  Limited................  Potential carcinogen
IARC (1989).........................  Sufficient..............  Limited................  Probable human
                                                                                          carcinogen
WHO (1996)..........................  Adequate................  Inadequate.............  N/A
California EPA (1998)...............  Demonstrated              Causal association       Diesel PM designated
                                       carcinogenicity.          reasonable and likely.   toxic air contaminant
USEPA draft (1999)..................  Highly likely or likely.  Highly likely or likely  Under review
NIEHS (2000)........................  Consistent tumor          Reasonable.............  Reasonably anticipated
                                       development.                                       to be a human
                                                                                          carcinogen
----------------------------------------------------------------------------------------------------------------


                 Table 3.2 Unit Risk Factor (URF) Weighted Emissions from MATES II Draft Report
----------------------------------------------------------------------------------------------------------------
               Species                   Emissions (lbs/day)          URF (x10-6)         URF Weighted Emissions
----------------------------------------------------------------------------------------------------------------
 Diesel emissions other than ``diesel
            particulate''
Benzene..............................                      834                       29                   24,186
1,3-Butadiene........................                       79                      170                   13,430
Formaldehyde.........................                    6,136                        6                   36,816
Acetaldehyde.........................                    3,066                      2.7                    8,278
Cadmium..............................                     1.54                    4,200                    6,468
Lead.................................                     0.68                       12                        8
Nickel...............................                     0.36                      260                       94
Total................................                   89,280
   ``Diesel particulate'' emissions
Diesel Particulate...................                   22,890                      300                6,867,000
----------------------------------------------------------------------------------------------------------------

    The Diesel Exhaust Report by the Health Effects Institute (1995) 
reported that a 20 percent to 40 percent greater incidence in lung 
cancer was found in certain occupations, such as railroad workers and 
truck drivers, that involved repeated exposures to diesel exhaust. Of 
particular relevance is the study of exposure to diesel particulate in 
long haul and city truckers reported by Steenland et al. (1998) where 
an exposure-response relationship was found. The personal, 8-hour 
exposures of these truck drivers were found to be similar to the 
ambient exposures of the general population and the ``highway 
background'' exposure (Zaebst et al. 1991). The health implications of 
such exposures for the general population remain to be determined.
4.0 NON-CANCER HEALTH EFFECTS OF DIESEL EXHAUST
4.1 Respiratory Effects
    Several epidemiological studies published in peer reviewed journals 
by researchers both in the U.S. and Europe point to significant 
respiratory and cardiovascular health effects with short-term exposure 
to airborne particulate air pollution.
    Brunekreef and colleagues (1997, 1999) found reduced lung function 
and increased respiratory symptoms in children living near roadways and 
linked it to air pollutants from motor vehicle emissions, particularly 
diesel exhaust. The six communities they analyzed were near roadways 
that carried between 80,000 and 152,000 vehicles per day. The truck 
traffic density over a 24-hour period ranged from 8,000 to 
approximately 17,000. Their findings showed a greater association 
between decrements in lung function and truck traffic density than that 
with automobile traffic density. Furthermore, they found a strong 
association with exposure and symptoms in children who lived less than 
300 meters from the roadways.
    Measured concentrations of black smoke, which is used as an 
indicator of diesel exhaust particles, and nitrogen dioxide were 
strongly correlated with distance of the monitoring station from the 
roadway. They found that impaired lung function was closely associated 
with the concentration of black smoke and proximity to the highway.
    Several epidemiological studies (Dockery et al. 1993; Pope et al. 
1995; Zmirou et al. 1998; Pope and Dockery 1999) have shown that short-
term exposures to urban air pollution can play a significant role in 
both acute and chronic respiratory and cardiovascular disease. These 
studies show that episodes of particulate air pollution are associated 
with increased hospital admissions for patients with underlying heart 
disease. These effects have been shown to be significant at 
concentrations of PM2.5 that are likely to be routinely 
exceeded by emissions from motor vehicles within 300 meters of heavily 
trafficked roadways.
    Mar et al. (2000) found that elemental carbon was significantly 
associated with cardiovascular mortality in Phoenix, Arizona. They 
attributed the elemental carbon fraction primarily to diesel exhaust.
4.2 Allergenic Responses
    Components of diesel exhaust can act synergistically with 
bioaerosols, such as pollen, to initiate and increase the incidence of 
allergic airway disease in individuals (Diaz-Sanches et al. 1997). 
Diesel exhaust components at levels typically found in urban background 
hotspots can also exacerbate the onset of symptoms in an allergic 
individual (Ishizaki et al. 1987; Miyamoto 1997; Braun-Fahrlander et 
al. 1999).
4.3 Ambient Exposures
    Various studies have attempted to provide estimates for the 
contribution to fine particle mass concentrations made by diesel 
exhaust. Although direct comparison is hampered due to differences in 
analytical techniques and averaging times used, there is an 
overwhelming consistency in the trends observed, which adds further 
impetus for including a more careful evaluation of environmental 
impacts on populations located in close proximity to heavily trafficked 
roadways.
    Of particular concern is the impact so-called ``hot spots'' can 
have on exposure. Although ambient diesel concentrations in urban and 
suburban areas are generally reported to range from approximately 1 to 
5 ?g/m3, ``hotspots,'' such as heavily traveled roadways and bus stops 
with a high density of diesel vehicles, can have concentrations ranging 
from 11 to 46?g/m3. Table 4.1 is adapted from EPA's Draft Report 
(1999).

 Table 4.1 Ambient Diesel PM Concentrations Reported from Chemical Mass Balance Modeling (Adapted from EPA 1999)
----------------------------------------------------------------------------------------------------------------
                                                       Location/Exposure   Total PM2.5 (std    Diesel PM2.5 (std
             Author                    Location              Type            dev), mg/m\3\       dev), mg/m\3\
----------------------------------------------------------------------------------------------------------------
Schauer et al. 1996, Southern     West LA...........  Urban/Traffic.....  24.5 (2.0)........  4.4 (0.6)
 California.
                                  Pasadena..........  Urban/Traffic.....  28.2 (1.9)........  5.3 (0.7)
                                  Rubidoux..........  Suburban/Traffic..  42.1 (3.3)........  5.4 (0.5)
                                  Downtown LA.......  Urban/Traffic.....  32.5 (2.8)........  11.6 (1.2)
Chow et al. 1991................  Phoenix, AZ area..  Urban/Traffic.....  NA................  4-22a
California EPA 1998a............  15 Air basins.....  Rural-urban/        NA................  0.2-3.6\1\
                                                       Traffic.
Federal Highway Administration    Manhattan, NY.....  Urban/Bus Stop....  35.8-83.0.........  13.2-46.7\1\
 1997.
NFRAQS 1998.....................  Welby, CO.........  Urban/Traffic.....  16.7..............  1.7
                                  Brighton, CO......  Suburban/Traffic..  12.4..............  1.2
----------------------------------------------------------------------------------------------------------------
\1\PM10
NA Not available

    Other studies have shown that diesel PM in enclosed vehicles 
driving on Los Angeles roadways range from nearly 3 mg/m\3\ to 36 mg/
m\3\ (California EPA 1998b). Samples collected near the Long Beach 
Freeway (California EPA 1998a) indicate that diesel contributions range 
from daily averages of nearly 1 mg/m\3\ to 7.5 mg/m\3\.
    Brunekreef and colleagues (1997) found that adverse health effects 
were associated with diesel particulate levels near roadways in the 
Netherlands between 7 mg/m\3\ and 21 mg/m\3\ of diesel particulate 
matter (measured with black smoke). Such concentrations were measured 
at monitoring stations within 300 meters of roadways.
5.0 CONCLUSION
    The wide range of particulate matter concentrations, a large 
fraction of which can attributed to diesel exhaust, obtained in the 
studies referred above indicate adverse health effects can reasonably 
be anticipated among populations exposed to motor vehicle emissions. 
However, site specific analysis would be required to appropriately 
assess and quantify the expected health impacts for any specific 
exposed population. ``Hotspots'' such as heavily traveled roadways, bus 
stops and train stations, have an extraordinary impact on localized 
exposures. Utilizing data from studies such as Brunekreef and 
colleagues (1997) and modeling studies evaluated as part of this 
review, it is likely that a significantly increased risk of 
experiencing the adverse impacts associated with motor vehicle 
emissions would extend 300 to 400 meters from the roadway for 
populations exposed in that area for a significant period of time. 
These populations would include persons residing, attending school and 
working in such areas, and persons traveling for extended periods in 
highway corridors.
    In summary, both the epidemiological data and toxicological 
evidence reviewed indicate there would be a significantly increased 
risk of adverse health outcomes through increased carcinogenic risk and 
effects on the respiratory and cardiovascular systems among populations 
exposed to concentrations of motor vehicle emissions expected to be 
found in the vicinity of heavily traveled highways. The data support 
that under conditions typically reported in monitoring and modeling 
studies of motor vehicle emissions in the vicinity of heavily traveled 
highways, concentrations of diesel-related air pollutants alone are 
high enough to trigger unacceptable health risks. The risk of adverse 
health effects is further increased when concentrations of gasoline-
related air pollutants are added.
6.0 REFERENCES
Braun-Fahrlander CH, Wyler C, Kunzli N, Schindler C, Ackermann-Liebrich 
    U, Perruchoud A, Leuenberger, PH, Wuthrich B, SAPALDIA Team. 1999. 
    Exposure to motor vehicle traffic and allergic sensitization. 
    Epidemiology 10:S172. (Abstract).
Brunekreef B. 1999. Environmental diesel exhaust exposure and 
    respiratory health of children in the Netherlands. Presented at the 
    Health Effects Institute Diesel Workshop: Building a Research 
    Strategy to Improve Risk Assessment. Stone Mountain, GA, March 7-9, 
    1999.
Brunekreef B, Janssen NA, de Hartog J, Harssema H, Knape M, van Vliet 
    P. 1997. Air pollution from truck traffic and lung function in 
    children living near motorways. Epidemiology 8:298-303.
California EPA. 1998a. Report to the Air Resources Board on the 
    Proposed Identification of Diesel Exhaust as a Toxic Air 
    Contaminant. Appendix III, Part A: Exposure Assessment. April 1998.
California EPA. 1998b. Measuring Concentrations of Selected Air 
    Pollutants Inside California Vehicles. Final Report.
Chow JC, Watson JG, Richards LW, et al. 1991. The 1989-1990 Phoenix 
    PM10 Study. Volume II: Source Apportionment. Final 
    Report. DRI Document No. 8931.6F1, prepared for Arizona Department 
    of Environmental Air Quality, Phoenix, AZ by Desert Research 
    Institute, Reno, NV.
Diaz-Sanchez D, Tsien A, Flemming J, et al. 1997. Combined diesel 
    exhaust particulate and ragweed allergen markedly enhances human in 
    vivo nasal ragweed-specific IgE and skews cytokine production to a 
    T helper cell 2-type pattern. J Immunol 158:2406-2413.
Dockery DW, Pope CA, Xu X, et al. 1993. An association between air 
    pollution and mortality in six U.S. cities. N Engl J Med 329:1753-
    1759.
EPA. 1999 Nov. Health Assessment Document for Diesel Emissions. SAB 
    Review Draft. Washington: National Center for Environmental 
    Assessment. Available from http://www.epa.gov/ncea/diesel.htm.
Federal Highway Administration. 1997. Assessment of Highway Particulate 
    Impacts: Phase I tasks B and C. Field Sampling and Evaluation 
    Program. Prepared by E.H. Pechan & Assoc., Inc., Durham, NC.
[HEI] Health Effects Institute. 1995. Diesel Exhaust: A Critical 
    Analysis of Emissions, Exposure and Health Effects. A Special 
    Report of the Institute's Diesel Working Group. Cambridge, MA: 
    Health Effects Institute.
[IARC] International Agency for Research on Cancer. 1989. Diesel and 
    gasoline engine exhausts and some nitroarenes. In: Monographs on 
    the Evaluation of Carcinogenic Risks to Humans. Volume 46. Lyon, 
    France: World Health Organization, IARC.
IRIS. Integrated Risk Information System. [Data base, online.] 
    Cincinnati, OH: EPA. Available from: http://www.epa.gov/iris.
Ishizaki T, Koizumi K, Ikemori R, Ishiyama Y, Kushibiki E. 1987 April. 
    Studies of prevalence of Japanese cedar pollinosis among the 
    residents in a densely cultivated area. Annals of Allergy 58:265-
    270.
Mar TF, Norris GA, Koenig JQ, Larson TV. 2000 Apr. Associations between 
    air pollution and mortality in Phoenix, 1995-1997. Environmental 
    Health Perspectives 108(4):347-353.
Miyamoto T. 1997. Epidemiology of pollution-induced airway disease in 
    Japan. Allergy 52(suppl 38):30-34.
NFRAQS. 1998. Northern Front Range Air Quality Study. Colorado, January 
    1998, Volume I.
[NIEHS] National Institute of Environmental Health Sciences. 2000. 
    Report on Carcinogens Ninth Edition: Carcinogen Profiles 2000. 
    Prepared by Technology Planning and Management Corporation, Durham, 
    NC. U.S. Department of Health and Human Services.
[NIOSH] National Institute for Occupational Safety and Health. 1988. 
    Carcinogenic Effects of Exposure to Diesel Exhaust. NIOSH Current 
    Intelligence Bulletin 50. DHHS (NIOSH) Publication No. 88-116. 
    Atlanta: Centers for Disease Control.
Pearson RL, Wachtel H, Ebi KL. 2000 Feb. Distance-weighted traffic 
    density in proximity to a home is a risk factor for leukemia and 
    other childhood cancers. Journal of the Air & Waste Management 
    Association 50:175-180.
Pope CA, Dockery DW. 1999. Epidemiology of particle effects. In: Air 
    Pollution and Health. Holgate ST, Samet JM, Koren HS, Maynard RL, 
    eds. San Diego: Academic Press.
Pope CA, Thun MJ, Namboodiri MM, Dockery DW, Evans JS, Speizer FE, 
    Heath CW. 1995. Particulate air pollution as a predictor of 
    mortality in a prospective study of U.S. adults. American Journal 
    of Respiratory and Critical Care Medicine 151:669-674.
[SCAQMD] South Coast Air Quality Management District. 1999 November. 
    Multiple Air Toxics Exposure Study in the South Coast Air Basin: 
    MATES II. Draft Final Report. Diamond Bar, CA. Available from 
    http://www.aqmd.gov.
Schauer JJ, Rogge WF, Hildemann LM, et al. 1996. Source apportionment 
    of airborne particulate matter using organic compounds as tracers. 
    Atmos Environ 30(22):3837-3855.
Steenland K. Deddens J, Stayner L. 1998. Diesel exhaust and lung cancer 
    in the trucking industry: exposure-response analyses and risk 
    assessment. Am J Ind Med 34:220-228.
[WHO] World Health Organization. 1996. Diesel fuel and exhaust 
    emissions. Geneva, Switzerland: International Program on Chemical 
    Safety.
Zaebst DD, Clapp DE, Blade LM, Marlow DA, Steenland K, Hornung RW, 
    Scheutzle D, Butler J. 1991. Quantitative Determination of trucking 
    industry workers' exposures to diesel exhaust particules. Am Ind 
    Hyg Assoc J 52(12):529-541.
Zmirou D, Schwartz J, Saez M, Zanobetti A, et al. 1998. Time-series 
    analysis of air pollution and cause-specific mortality. 
    Epidemiology 9:495-503.
                               __________

 Attachment 6: Review of Exposure to Toxic Air Pollutants from Mobile 
   Sources and the Impact of Expansion of US 95 in Las Vegas, Nevada

Introduction
    An Environmental Impact Statement (EIS) has been prepared by the 
Nevada Department of Transportation for improvement and expansion of 
US-95 in Las Vegas. These improvements will include the widening of US 
95 to 10 lanes from Rainbow to I-15 (5 miles) and widening to 6 lanes 
from Craig to Rainbow (5 miles) plus other traffic expansion measures. 
The result will be to increase average annual vehicle trips in the 
widened area and facilitate additional traffic flows on adjoining 
highways and arterials. As a result vehicle travel in the US 95 
corridor near the I-15 interchange would be expected to increase from 
200,000 average annual daily vehicle trips (AADT) in 2000 to 230,300 by 
2020, and north of Summerlin the increase will be from 122,000 in 2000 
to 212,500 in 20209. The EIS provides a brief evaluation of the impact 
of additional traffic-generated carbon monoxide, but it does not deal 
with a wide range of other air pollutants emitted from motor vehicles. 
This omission includes the 21 air contaminants from motor vehicles that 
are classified by EPA as toxic or hazardous air pollutants10. These 
pollutants are listed in Table 1 below.
    The importance of these hazardous pollutants to public health has 
increasingly been recognized in recent literature as the result of 
comprehensive emission and exposure studies11, as well as by additional 
public health evidence reviewed by EPA as summarized in the Technical 
Support Document issued in support of the MSAT list published pursuant 
to 201(l) of the Clean Air Act, and in a report prepared on the US 95 
project by Dr. Jack McCarthy of Environmental Health and Engineering. 
Based on results in studies from major US cities, there is ample basis 
to conclude that the levels of exposure to air toxics from motor 
vehicles present a significant risk of adverse health effects in human 
populations. These adverse health risks should be thoroughly reviewed 
in a Supplemental EIS for the US 95 project. This conclusion is derived 
from the application of studies of other cities to the specific 
situation along US 95 in Las Vegas. An evaluation of the applicability 
of studies from Los Angeles and elsewhere follows.
        Table 1: List of toxic air emissions from motor vehicles
    Acetaldehyde
    Acrolein
    Arsenic compounds
    Benzene
    1,3-Butadiene
    Chromium
    Dioxins/ Furans
    Diesel Particulate Matter and Diesel Exhaust Organic Gases
    Ethyl benzene
    Formaldehyde
    n-Hexane
    Lead compounds
    Manganese compounds
    Mercury compounds
    Methyl tert-butyl ether MTBE
    Naphthalene
    Nickel compounds
    Polycyclic Organic Matter
    Styrene
    Toluene
    Xylenes

Estimation of Present and Future Motor Vehicle Air Toxic Levels
    The present exposure to air toxics from motor vehicles can be 
estimated for the Las Vegas area and for areas adjacent to major 
highways by extrapolation from the results of the Multiple Air Toxics 
Exposure Study (South Coast Air Quality Management District, 
2000)(``MATES II'') 12. The MATES II study showed that regional 
exposures to toxic air pollutants are high enough to cause a 
significant risk of cancer to exposed populations, that the risk is 
higher for populations exposed within 2 kilometers of major freeway 
corridors, and that mobile source emissions account for 90 percent of 
the cancer risk attributable to all sources of toxic air pollutants.
    The MATES II study did not estimate other adverse health outcomes 
in addition to cancer risk. The toxic air pollutants emitted by mobile 
sources are also associated with other adverse health effects in 
addition to cancer, including respiratory, cardiovascular and 
allergenic effects. These effects should also be characterized in a 
Supplementary EIS for the project.
    The MATES II study carried out by California's South Coast Air 
Quality Management District used an air dispersion model to estimate 
the regional concentration of air toxics emissions from motor vehicles 
and other sources in the Greater Los Angeles Basin. As part of the 
MATES II study, these air contaminants also were measured in the 
ambient air at 10 regional sites and 14 microscale sites in the Los 
Angeles Basin. Thirty one air toxics were considered, including the 
mobile source derived emissions considered most significant to human 
health, such as benzene, 1,3, butadiene, formaldehyde, acetaldehyde, 
polycyclic organic matter and diesel particulate matter (DPM). Most of 
these air toxics are carcinogens. The results of the MATES II study 
showed that the air quality model underestimated actual measured 
concentrations at most of the 10 regional monitoring sites, but showed 
consistently close correlations among predicted and measured values to 
validate the modeling results.
    The emission rates for the regional fleet of vehicles in the MATES 
II study was derived from the State of California EMFAC model and from 
air toxics speciation provided by the California Air Resources Board 
(CARB). The air dispersion model used the inventory of mobile source 
and industrial air toxics emissions for the Los Angeles area. The model 
was regional in scale and it produced estimates of the average 
concentrations in two kilometer square areas throughout the region. The 
model was able to distinguish between ambient concentrations derived 
from mobile sources and other sources.
    The conclusion of the study was that the aggregate cancer risk for 
all air toxics in the Los Angeles basin was 1,400 in a million (1 in 
710). The range of risk is between 1,120 in a million (1 in 890) and 
1,740 in a million (1 in 570). Of the total cancer risk 90 percent was 
contributed by emissions from all mobile sources and 50 percent by on-
road vehicles13. Therefore the cancer risk attributable to on-road 
vehicles is approximately 700 in a million (1 in 1400). The MATES II 
study also concludes that the differences in risk levels between sites 
within the Los Angeles Basin is primarily related to mobile sources and 
concentrations are especially high in proximity to major highway 
corridors.
    When the concentrations of the toxic air pollutants measured at the 
various monitoring sites are plotted on maps as given in the California 
MATES II study it becomes apparent that the highest concentrations of 
motor vehicle derived air toxics are concentrated along the major high 
traffic freeway corridors, such as US 101, I-10, I-405, I-110 and I-710 
These highways AADT levels are between approximately 100,000 and 
330,000 with AADT levels in the 200,000 range being most common in the 
central urban areas14. The AADT on impacted sections of US 95 in Las 
Vegas in 2000 was between 122,000 and 200.000 vehicles15. After 
widening, plus estimated growth in the corridor, the Regional 
Transportation Commission (RTC) projects that the AADT will range from 
212,500 to 230,30016 an average increase of approximately 38 percent. 
AADT levels in Las Vegas at present and after the expansion will fall 
within the range of AADTs found in the Los Angeles Basin that was the 
subject of the MATES II study.
    The percentage of diesel truck traffic of the total AADT on Las 
Vegas freeways, based on Nevada urban freeways data, is 7 percent and 
on urban interstate highways is 9 percent.17 This is close but slightly 
higher than the percentage of trucks on the major freeways and 
interstates of Los Angeles, which is 6 percent18.
    Based on comparable AADTs, diesel truck percentages and toxics air 
emission rates from the highway vehicle fleet in the Las Vegas area, 
comparable ambient air concentrations for toxic air pollutants in the 
US 95 corridor are to be expected after discounting the contribution of 
non-road mobile source emissions. Estimates of regional motor vehicle 
related air toxics concentrations for the Las Vegas area are given in 
Table 2.

Table 2: Estimated Air Toxics Exposure Concentrations from On-Road Motor
 Vehicle Derived Sources for the expanded section of US 95 in Las Vegas.
      Based on High Impact Highway Corridors in the MATES II Study
------------------------------------------------------------------------
                                                Ambient Concentration
                 Pollutant                   micrograms per cubic meter
------------------------------------------------------------------------
Benzene...................................                           4.4
1,3 Butadiene.............................                           1.7
Diesel Particulate........................                           3.1
------------------------------------------------------------------------

Assumptions and Reliability of the Exposure Estimates
    The exposure estimates discussed here are derived from the MATES II 
study in California. For a number of reasons, exposure estimates 
derived from the MATES II study will most likely underestimate maximum 
exposures in other locations. These include:
    1) The MATES II study uses regional computer models and estimates 
exposures to air toxics at average levels within two kilometer squares, 
not at hot spot locations. Therefore, the estimates are not worst case 
nor do they represent the exposure levels for residences close to major 
highways. Exposure levels close to major highways will be higher, and 
depending on distance, wind direction and other factors, may be 
considerably higher. Modeling conducted by Resource Systems Group for 
several highway projects shows that exposures to both gaseous and 
particulate pollution emitted from highways is much greater close to 
the highway. The results of the modeling showed that air toxics 
concentrations derived from motor vehicles on the highway were 
approximately ten times higher at 40 meters from the highway than at 
300 meters from the highway.
    2) These estimates represent only a limited number of motor vehicle 
air toxics. The total exposure for all motor vehicle air toxics, and 
the total cancer risk, is greater.
    3) The MATES II study is supported by monitoring data that shows 
the model tends to underestimate ambient exposure levels for air toxics 
by about 16 percent20.
    4) The MATES II study uses California motor vehicle air emission 
rates that in general, are lower for all vehicle types than the 
national emission rates that apply to the Las Vegas metropolitan area.
    5) Diesel particulate, which is the largest single risk factor from 
motor vehicles, is measured and defined in slightly different ways in 
modeling and monitoring studies cited, and in the epidemiological 
literature used to assess the impact on public health. Although there 
are differences of opinion among experts in the field as to the most 
appropriate measure of diesel PM, it seems most probable that because 
of the way diesel particulate is defined in the MATES II study, the 
result is that total air toxics exposure is, if anything, 
underestimated rather than overestimated.
    Overall the exposure estimates used in this report to estimate 
current cancer risk in the US 95 corridor are conservative, and likely 
underestimate actual exposures and the magnitude of the health hazard 
to nearby populations.
    In the future there may be reductions in air toxics emissions rates 
as increasingly more stringent air emissions standards are applied to 
motor vehicles. However, the emissions reduction strategies for heavy-
duty vehicles do not apply until 2007, are under judicial challenge, 
and are under review by the current Administration. If retained, they 
will not be implemented until late this decade and will not 
significantly reduce emissions from vehicles now on the road until 
those vehicles are replaced. Heavy-duty diesel trucks and buses may 
remain in use for 15 to 25 years with engine rebuilds.
    In the short to intermediate term there will also be improved 
traffic flows on US 95 during peak hours that will increase average 
speeds and reduce the level of some non toxic air emissions. However, 
there is not any clear evidence that increased vehicle speeds during 
peak hours will significantly reduce overall emissions of air toxics.
Conclusions
    Based on the data provided by the RTC and discussed above the 
proposed expansion of US 95 is projected to increase to AADT levels 38 
percent above 2000 levels. Because toxic air pollution is proportional 
to traffic levels we may expect a corresponding increase in air toxics 
levels in the areas close to the US 95 highway corridor. The US 95 
expansion would increase traffic levels to volumes comparable to those 
in the Los Angeles Basin that were the subject of the MATES II study.
    This brief evaluation demonstrates that the proposed expansion of 
the highway will significantly increase the exposure of the public to 
air toxics in the neighborhoods along the US 95 corridor. The present 
and future levels of air toxics are probably at least comparable to 
levels in parts of Los Angeles adjacent to major freeways. These levels 
are associated with elevated cancer risk and other health problems as 
described in the separate report of Dr. Jack McCarthy. The present EIS 
ignores these significant public health risks. Because these emissions 
have a significant impact on the human environment, a Supplemental EIS 
is required to evaluate the health risks in the corridor and identify 
alternatives that can mitigate the health risk attributable to vehicle 
travel in the corridor.





                               __________

 Attachment 8: American Public Health Association * Asthma and Allergy 
   Foundation of America * Children's Environmental Health Network * 
  Children's National Medical Center * Environmental Defense * Grace 
           Public Fund * Physicians for Social Responsibility

                                                     July 26, 2002.

The Honorable Norman Y. Mineta
Secretary, U.S. Department of Transportation
400 7th Street SW
Room 10200
Washington, DC 20590

Dear Secretary Mineta: We represent a diverse array of groups dedicated 
to supporting and improving public health. We are writing to request 
that the Administration's proposal for reauthorization of the 
Transportation Equity Act for the 21st Century (TEA-21) contain 
measures that protect that public's health from unintended consequences 
of transportation initiatives.
    A transportation system that encourages or supports increased use 
of personal automobiles can impair human health by a variety of means, 
including:
      Increased injuries and deaths from motor vehicle crashes 
(including pedestrians and bicyclists);
      Increased respiratory illness, infant mortality and other 
health damage connected with exposure to air pollutants;
      Impaired water quality related to runoff from paved land; 
and
      Decreased physical activity, contributing to the nation's 
epidemic of obesity and diabetes
    We therefore call on the Administration to take the following steps 
in their reauthorization proposal:
      Require new road projects to meet the same criteria and 
local funding match as required for new transit projects.
      Require health impact statements for all new 
transportation plans and major projects. These statements must address 
the potential impact of the proposed plan on public health, including 
fitness, community cancer risk, health effects related to air quality, 
and transportation-related injuries and fatalities, as well as 
consideration of disparate impacts on minorities.
      Oppose environmental streamlining, which threatens to 
promote failed policies of trying to build our way out of congestion. 
Instead, we should require integrated State, regional, and local 
transportation, natural resource, and growth plans.
      Defend requirements that all updates to 20-year 
transportation plans and short-term programs conform with Clean Air Act 
State Implementation Plans.
      Expand and strengthen the Congestion Mitigation Air 
Quality Program (CMAQ), which provides $1.3 billion a year for non-
highway widening projects that reduce pollution in non-attainment 
areas. Seek funding growth proportionate to the population of all newly 
designated non-attainment areas.
      Boost tax incentives for employers to offer employees 
tax-free transit benefits.
    Changes in how we manage and operate transportation can save money 
and lives, cut congestion, and improve environmental quality. But to 
achieve this we need better planning, better accountability for the 
effects of decisions, and fuller consideration of alternatives to 
building more and bigger highways. We strongly urge you to move this 
country in the direction of transportation systems that benefit, rather 
than harm, the health and well-being of our residents and communities. 
We look forward to working closely with you in this effort.
            Sincerely,
                                            Donald Hoppert,
                                American Public Health Association.

                                                 Jaqui Vok,
                          Asthma and Allergy Foundation of America.

                                             Daniel Swartz,
                           Children's Environmental Health Network.

                                    Benjamin Gitterman, MD,
                                Children's National Medical Center.

                                    John Balbus, MD, M.P.H.
                                              Environmental Defense

                                              Alice Slater,
                                                 GRACE Public Fund.

                              Robert K. Musil, Ph.D, M.P.H.
                              Physicians for Social Responsibility.
                               __________
Attachment 9: American Rivers * Environmental Defense * Friends of the 
 Earth * Izaak Walton League * National Environmental Trust * Natural 
  Resources Defense Council * Physicians for Social Responsibility * 
 Rails to Trails * Scenic America * Trust for Public Lands * Union of 
                          Concerned Scientists
                                                      July 26, 2002
The Honorable James M. Jeffords,
Chairman, Senate Environment and Public Works Committee,
Dirksen Senate Office Building,
Washington, DC 20510.

RE: Streamlining and TEA-21 Reauthorization

Dear Senator Jeffords: Reauthorization of the Transportation Equity Act 
for the 21st Century (TEA-21) is a key opportunity to promote 
transportation environmental stewardship, renewing the promise of the 
ISTEA reforms. We urge the Administration to pursue such opportunities 
and resist ``environmental streamlining'' proposals for highways, 
aviation, pipelines, and energy which threaten to impair core 
environmental laws such as the National Environmental Policy Act (NEPA) 
and clean air, clean water, parks, and historic resources protection 
statutes.
    Some States have begun to embrace environmental stewardship, forge 
partnerships with resource agencies and stakeholders, and use TEA-21's 
flexibility to support smart growth, resource protection, system 
management and incentives, and expanded travel choices as a core part 
of transportation plans and programs. Other States continue to pursue a 
failed strategy of trying to build their way out of congestion. Some 
scapegoat environmental laws for their own administrative failures, 
manifested in a lack of consensus on proposed projects; insufficient 
local matching funds; and projects delayed by inadequate consideration 
of alternatives, inadequate mitigation, avoidance of adverse impacts, 
and efforts to end-run Federal requirements.
    This has led to 'environmental streamlining' proposals with 
arbitrary review deadlines, time limits on judicial review of 
transportation decisions, limitations on the determination of purpose 
and need for transportation projects and lead agency designations, 
circumscribed public involvement, mandatory concurrent processing of 
reviews and permits, and the elimination rather than integration of the 
Major Investment Study requirements of ISTEA into NEPA and the planning 
process. We urge you to oppose such anti-environmental measures 
threatening core environmental laws that assure the public's right-to-
know about the effects of decisions before actions are taken.
    We urge your support for efforts to expedite transportation project 
delivery by improving integration of project reviews with a planning 
process designed to minimize adverse impacts; strengthen 
accountability; and consider opportunities for improved transportation 
system management and stewardship. Such approaches can produce timely 
consensus to build good projects that protect public health, curbing 
delays and conflict that arise when agencies advance harmful projects 
without broad public support.
    Transportation planning which considers communities and protected 
resources such as public parks, wildlife habitat and historic sites 
will produce better projects less likely to incur opposition and delay. 
Taking protected resources into account at the beginning, and planning 
accordingly will both protect resources and facilitate project 
approvals.
    TEA-3 should require coordination of transportation, environmental, 
resource and land use plans with effective public involvement and more 
funding for resource agencies for their early and continuous 
engagement. Transportation data and analysis must be improved for sound 
evaluation of secondary, induced and cumulative impacts and the effects 
of smart growth and transportation management alternatives on air 
quality, equity, and other goals. Many delays arise when agencies have 
failed to effectively consider impacts on specific populations or 
neighborhoods, or the effects of transportation infrastructure projects 
on land use, travel behavior and public health.
    Better classification of transportation projects for environmental 
review could cut delays. Some major highway widening projects evade 
environmental analysis while small, no-impact projects sometimes endure 
needless processing delays. The more rigorous New Starts review 
procedures applied to new transit projects should be equally applied to 
new highways. All federally funded projects should be planned and 
designed under the principles of context-sensitive highway design. 
Improved inter-city rail service and congestion pricing strategies 
should be considered as alternatives to new airport capacity.
    Health impact assessments should be made part of all transportation 
plans. We urge you to oppose weakening of transportation conformity, 
which assures transportation plans do not cause a failure of State air 
pollution control strategies. Public health would be threatened if 
plans and programs could be amended without considering air quality 
implications or if conformity applied only to short-term programs, 
rather than to both 20-year transportation plans and short-term 
programs. Conformity is spurring investments in transportation 
strategies and technologies that reduce air pollution and better 
interagency cooperation. A few areas like Atlanta have faced short-term 
limits on their flexibility to build new roads because their 
transportation plans conflicted with their air quality plans, 
motivating timely action for interagency cooperation. The $1.3 billion 
a year CMAQ program, which funds clean air programs, should be expanded 
by at least 50 percent, proportionate to the number of people living in 
new non-attainment areas.
    Finally, TEA-3 should also require regional transportation plans 
and programs to contribute to timely attainment of clean water goals, 
and require stormwater management strategies for all new transportation 
facilities in watersheds not meeting standards, and application of best 
retrofit technologies for any highway undergoing significant 
reconstruction.
    We would welcome the opportunity to meet with you during September 
to discuss these critical environmental issues with you. Felicia Lopez, 
Green Group Coordinator, will be in touch with your office in the near 
future to identify a convenient meeting time for you.
            Sincerely,
                                            Keith Laughlin,
                                        President, Rails to Trails.

                                               Will Rogers,
                              President, The Trust for Public Lands

                                                Howard Ris,
                          President, Union of Concerned Scientists.

                                               Meg Maguire,
                                         President, Scenic America.

                                                Fred Krupp,
                         Executive Director, Environmental Defense.

                                         Rebecca R. Wodder,
                                        President, American Rivers.

                                           Philip E. Clapp,
    President, National Environmental Trust.

                                             John H. Adams,
                      President, Natural Resources Defense Council.

                                         Brent Blackwelder,
                                   President, Friends of the Earth.

                                            Rober K, Musil,
          Executive Director, Physicians for Social Responsibility.

                                                Paul Hansen
                           Executive Director, Izaak Walton League.
                               __________
  Asthma and Allergy Foundation of America * Children's Environmental 
  Health Network * Children's National Medical Center * Environmental 
   Defense * Grace Public Fund * Physicians for Social Responsibility
                                                     July 24, 2002.
The Honorable Norman Y. Mineta,
Secretary, U.S. Department of Transportation
400 7th Street SW
Room 10200
Washington, DC 20590
Dear Secretary Mineta: We represent a diverse array of groups dedicated 
to supporting and improving public health. We are writing to request 
that the Administration's proposal for reauthorization of the 
Transportation Equity Act for the 2155 Century (TEA-21) contain 
measures that protect that public's health from unintended consequences 
of transportation initiatives.
    A transportation system that encourages or supports increased use 
of personal automobiles can impair hi man health by a variety of means, 
including:

      Increased injuries and deaths from motor vehicle crashes 
(including pedestrians and bicycle sts);
      Increased respiratory illness, infant mortality and other 
health damage connected with exposure to air pollutants;
      Impaired water quality related to runoff from paved land; 
and
      Decreased physical activity, contributing to the nation's 
epidemic of obesity and diabetes.

    We there ore call on the Administration to take the following steps 
in their reauthorization proposal:

      Require new road projects to meet the same criteria and 
local funding match as required for new transit projects.
      Require health impact statements for all new 
transportation plans and major projects. These statements must address 
the potential impact of the proposed plan on public health, including 
fitness, community cancer risk, health effects related to air quality, 
and transportation-related injuries and fatalities, as well as 
consideration of disparate impacts on minorities.
      Oppose environmental streamlining, which threatens to 
promote failed policies of trying to build our way out of congestion. 
Instead, we should require integrated State, regional, and local 
transportation, natural resource, and growth plans.
      Defend requirements that all updates to 20-year 
transportation plans and short-term programs conform with Clean Air Act 
State Implementation Plans.
      Expand and strengthen the Congestion Mitigation Air 
Quality Program (CMAQ), which provides $1.3 billion a year for non-
highway widening projects that reduce pollution in nonattainment areas. 
Seek funding growth proportionate to the population of all newly 
designated non-attainment areas.
      Boost tax incentives for employers to offer employees 
tax-free transit benefits.
    Changes in how we manage and operate transportation can save money 
and lives, cut congestion, and improve environmental quality. But to 
achieve this we need better planning, better accountability for the 
effects of decisions, and fuller consideration of alternatives to 
building more and bigger highways. We strongly urge you to move this 
country in the direction of transportation systems that benefit, rather 
than harm, the health and well-being of our residents and communities. 
We look forward to working closely with you in this effort.
            Sincerely,
                                                 Jaqui Vok,
                         Asthma and Allergy Foundation of America.4
                                             Daniel Swartz,
                           Children's Environmental Health Network.
                                    Benjamin Gitterman, MD,
                                Children's National Medical Center.
                                   John Balbus, MD, M.P.H.,
                                             Environmental Defense.
                                              Alice Slater,
                                                 GRACE Public Fund.
                             Robert K. Musil, Ph.D, M.P.H.,
                              Physicians for Social Responsibility.
                               __________





                               
                               
                               
                                 ______
                                 
  Responses of Michael Replogle to Additional Questions from Senator 
                                Jeffords
    Question 1. In general would you agree that conformity is spurring 
investments in transportation strategies and technologies that reduce 
air pollution and create better interagency cooperation?
    Response. Yes. Since the 1990 Clean Air Act Amendments, conformity 
has been a significant factor fostering local, regional, and national 
political support for cleaner fuels and vehicles and inspection and 
maintenance programs that have helped produce more timely progress 
toward attainment of healthful air quality. In that period, conformity 
has been the single greatest factor promoting interagency cooperation 
between transportation and air quality agencies at the State, local, 
and Federal levels. Prior to 1990, transportation agencies paid no 
attention to the air quality consequences of transportation investments 
and plans. But in recent years, many metropolitan areas have adopted 
changes to their transportation plans and programs to help reduce 
traffic growth and emissions. Consideration of air quality impacts of 
investments has become a routine matter in many metropolitan areas 
where pollution problems are more severe. In most regions with serious 
air quality problems, officials and staff of air agencies and 
transportation agencies routinely meet and work together to help foster 
effective program administration that delivers progress on both 
mobility and air quality goals.
    Atlanta's conformity problems led the Governor to create a new 
regional authority responsible for better planning and funding 
transportation, air quality, and growth management in Georgia's non-
attainment areas in an effort to fix a broken interagency cooperation 
process. While road builders have often raised the spectre of 
transportation conformity causing major disruptions to transportation 
programs, there have been no such disruptions. Even in Atlanta, where 
the longest conformity lapse of consequence to date took place, the 
region lost no transportation funding but instead redirected several 
hundred million dollars of funds from sprawl-inducing, pollution-
generating roads into projects that would reduce pollution and into 
safety and system improvements that would not increase emissions.
    After conformity analysis led Charlotte, North Carolina, to see 
that its transportation plan would lead to emission problems 20 years 
in the future, local officials developed, considered, and adopted a new 
2025 Transit Land/Use plan for Charlotte-Mecklenburg with a new rapid 
transit system to support the five major transportation and development 
corridors identified in the 1994 Centers and Corridors Plan as well as 
connections to key development hubs between these corridors. The plan 
seeks to concentrate jobs around stations, provide residential multi-
family housing at stations, and develop rail and bus rapid transit. 
Capital costs, plus operation, maintenance and other expenditures will 
cost $1.085 billion over 25 years and quantifiable benefits such as 
travel time savings and vehicle operating cost savings total $72 
million a year, generating a benefit cost ratio of 1.6. There are also 
numerous benefits of the plan that are not quantifiable such as 
improved access to jobs and revitalization of the core center. Funding 
for the plan will come from a combination of local, State, and Federal 
funding. Mecklenburg County Voters approved a half-cent local sales tax 
in 1998 to fund expansion of bus service and rapid transit improvements 
in major corridors. The requirement that the RTP conform 20 years into 
the future was a vital element in motivating this regional progress and 
action. Limiting conformity determinations to a 10-year time horizon--
as some propose--might reduce the incentive for other regions to take 
the kind of leadership initiatives seen in Charlotte.
    Conformity helped Denver develop cost-effective strategies to 
reduce particulate matter (PM) problems. Agencies began taking action 
against wood burning in the 1980's, but PM was still measuring 185 mg/
m\3\ compared to the NAAQS of 150 mg/m\3\. Conformity made 
transportation planning and air quality agencies look at other sources 
of PM. They found that street sanding and sweeping strategies was a 
very effective measure and implemented controls beyond what was 
federally mandated, reducing PM levels to 80 mg/m\3\. Conformity also 
provided an incentive for developing light rail in Denver and the Metro 
Vision 2020 Plan, which seeks to limit growth to a 700 square mile area 
with supportive transportation strategies. Denver also has a number of 
travel demand management (TDM) strategies in their long-range plan such 
as a Ride Arrangers program and a telework program. While Denver does 
not take credit for TDM system management in the 2025 conformity 
finding, the region recognizes TDM emission benefits as a safety margin 
in meeting their emissions budget.
    To deal with emissions problems recognized through the conformity 
process, many other regions have adopted transportation control 
measures (TCMs). These represent nearly 5 percent of total emission 
reductions, for example, in the San Joaquin region of California. The 
San Joaquin Council of Governments projects that TCMs, including 
rideshare, vanpool, and commuter rail, will deliver as much as a 10 
percent reduction in emissions by 2020.
    Conformity has also been valuable in helping to win adoption of new 
short-term emission reduction strategies in the metropolitan 
Washington, DC region. In July 2001, the DC metropolitan planning 
organization updated its modeling assumptions to reflect the growing 
use of sport utility vehicles (SUVs) and light trucks, which produce 
more pollution per mile driven than standard cars. As a result, they 
observed that that they could no longer add new road projects to their 
transportation improvement program (TIP) and regional transportation 
plan (RTP) and still conform with the NOx motor vehicle emission budget 
in their adopted SIP. Officials formed a task force to consider 
reopening the SIP to allow for more motor vehicle pollution by finding 
offsets from other emission sources or fixing the conformity problem by 
adopting added emission reduction measures. With adjustments for some 
refinements to their model estimates and for emission reducing measures 
already being implemented but not previously credited, the MPO found 
that the 8 tpd NOx excess emissions over budget was reduced to about 3 
tpd.
    Following further meetings and analysis, Maryland proposed a $42 
million package of transportation emission reduction strategies, 
including buying clean buses, improving pedestrian and bicycle access 
to transit, and supporting transit oriented development. Along with 
measures advanced by other jurisdictions, this package provides 
sufficient reductions to offset this emission budget shortfall and the 
region in July 2002 adopted them as part of a new TIP and RTP. If 
proposals made by some parties to lengthen the life of TIP conformity 
findings to 3 or 5 years had been in effect, this $42 million package 
of emission reduction measures would almost certainly not have been 
funded.

    Question 2. If Congress does make any changes in the conformity 
process as part of the next transportation bill, what would be your No. 
1 suggestion and please be specific?
    Response. Congress should make one change to the conformity process 
as part of the next transportation bill. It should adopt the bill 
introduced in the 106th Congress, 2d Session as H.R. 3686, the ``Road 
Back to Clean Air Act,'' by Rep. John Lewis and as S. 2088 by Senator 
Max Cleland. This bill would put into law the EPA and DOT guidance that 
helped get Atlanta more focused on solving the city's transportation 
and air quality problems. It would increase flexibility so other areas 
of the country could continue to receive Federal funds for transit, 
safety improvements, road rehabilitation, and other projects even 
during a lapse in the conformity of their transportation plans. Without 
this legislative change, because of the way that DOT has at times in 
the past administered conformity and planning requirements, regions in 
a conformity lapse can face difficulty adding air quality improving 
projects to their transportation spending plans unless those projects 
had been part of a previously conforming fiscally constrained TIP and 
regional transportation plan.
    The text of this bill follows:
                                 a bill
To amend the Clean Air Act and titles 23 and 49, United States Code, to 
   provide for continued authorization of funding of transportation 
          projects after a lapse in transportation conformity.
    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,
    Section 1. Continued Authorization of Funding of Transportation 
Projects After Lapse in Transportation Conformity
    Section 176(c)(2) of the Clean Air Act (42 U.S.C 7506(c)(2)) is 
amended by adding at the end the following:

``(E) Notwithstanding subparagraphs (C) and (D), any transportation 
    project identified for funding in a transportation plan and 
    transportation improvement program adopted under section 134 of 
    title 23 or sections 5303 through 5306 of title 49, United States 
    Code, shall remain eligible for funding under title 23 or chapter 
    53 of title 49, Unites States Code, as applicable, after the long-
    range transportation plan or transportation improvement program no 
    longer conforms as required by subparagraphs (2)(C)(i) or (2)(D), 
    if----
``(i) the long-range transportation plan and transportation program met 
    the requirements of subsection (c) at the time at which a project 
    agreement for the transportation project was approved under section 
    106 (a)(2) of title 23 United Sates Code, or the project was 
    otherwise approved for assistance under chapter 53 of title 49, 
    United States Code, as applicable; ``(ii) the transportation 
    project is a transportation control measure (as defined in section 
    93.101 of title 40 of the Code of Federal Regulation s (as in 
    effect on March 1, 1999); ``(iii) the transportation project 
    qualifies for an exemption from the requirement that the 
    transportation project come from a conforming metropolitan long 
    range transportation plan and transportation improvement program 
    under section 93.126 or 93.127 of title 40, Code of Federal 
    Regulations (as in effect on March 1, 1999); or ``(iv) the 
    transportation project is exempt from a prohibition on approval 
    under section 179(b)(1), except that this paragraph shall not apply 
    to a transportation project described in section 
    179(b)(1)(B)(iv).''
    Section 2. Amendment of Long-Range Transportation Plans and 
Transportation Improvement Programs Not Conforming to Applicable 
Implementation Plans.
(a)Transportation Plans--Section 134 of title 23, United States Code, 
    is amended by adding at the end of the following: ``(p) Amendments 
    to Plans and Programs Not Conforming to Applicable Implementation 
    Plans-Notwithstanding any other provisions of law, a long-range 
    transportation plan or transportation improvement program under 
    this section that no longer conforms to the applicable 
    implementation plan under section 176(c) of the Clean Air Act (42 
    U.S.C. 7506(c)) and part 93 of title 40, Code of Federal 
    Regulations (or a successor regulation), may be amended without a 
    demonstration of conformity if the amendment is solely fort he 
    purpose of adding transportation project--``(1) for which that 
    State submits a revision of the applicable implementation plan to 
    the Administrator of the Environmental Protection Agency requesting 
    approval of the project as a transportation control measure (as 
    defined in section 93.101 of title 40, Code of Federal Regulations 
    (as in effect on March 1, 1999); or ``(2) that qualifies for an 
    exemption from the requirement that the transportation project come 
    from a conforming metropolitan long-range transportation 
    improvement program under section 93.126 or 93.127 of title 40, 
    Code of Federal Regulations (as in effect on March 1, 1999)"
(b) Mass Transportation Plans--Section 5303 of title 49, United States 
    Code, is amended by adding at the end the following:

``(i) Amendments of Plans and Programs not Conforming to Applicable 
    Implementation Plans--Notwithstanding any other provision of law, a 
    long-range transportation plan under this section or a 
    transportation improvement program under section 5304 that no 
    longer conforms to the applicable implementation plan under section 
    176(c) of the Clean Air Act (42 U.S.C. 7506(c)) and part 93 of 
    title 40, Code of Federal Regulations (or a successor regulation), 
    may be amended without a demonstration of conformity if the 
    amendment is solely for the purpose of adding a transportation 
    project--``(1) for which the State submits to the Administrator of 
    the Environmental Protection Agency a request for approval as a 
    transportation control measure (as defined in section 93.101 of 
    title 40, Code of Federal Regulation s (as in effect on March 1, 
    1999)) under section 110 of the Clean Air Act (42 U.S.C. 7410); or 
    ``(2) that qualifies for an exemption from the requirement that the 
    transportation project come from a conforming metropolitan long-
    range transportation plan under and transportation improvement 
    program under section 93.126 and 93.127 of title 40, Code of 
    Federal Regulations (as in effect on March 1, 1999).''
                                 ______
                                 
  Responses of Michael Replogle to Additional Questions from Senator 
                               Voinovich
    Question 1. During the hearing, several witnesses talked about how 
the coordination of the frequency of submittals for the State 
Implementation Plan (SIP), the Transportation Plan, and the 
Transportation Improvement Program (TIP) is an important and necessary 
reform. Among other things, such a reform would lessen the confusion of 
those involved, reduce costs, and help States meet air quality goals. 
In your testimony, you reject any proposal to reduce the frequency of 
conformity analyses. Do you see value in better coordinating the 
transportation and air quality planning processes?
    Response. Environmental Defense and other environmental groups 
strongly support better coordination of transportation and air quality 
planning processes. However, we strongly object to proposals currently 
being put forward under the misleading name of ``streamlining.'' By 
extending deadlines and creating overly long gaps between conformity 
analyses, these proposals will threaten air quality, threaten public 
health and reduce information available to the public about the air 
they breathe.
    Equally important, these proposals won't make the system work 
better--they'll make the system more inefficient. They reduce 
incentives for agency coordination. Conformity works well when 
transportation and air quality experts work closely together on a 
routine basis, to plan and implement highway and transit investments. 
Conformity, and the current schedule of deadlines, gives these agencies 
a powerful incentive to work together. The deadlines are also spaced 
just far enough apart to allow problems to be identified early--before 
they become crises that threaten air quality targets.
    But reducing the frequency of required conformity analysis--
currently 2 years for TIPs and 3 years for regional transportation 
plans (RTPs)--is likely to reduce rather than enhance such 
coordination. Conformity analysis is rather like balancing one's 
checkbook. If done routinely and frequently, problems will be detected 
when they are small and correctable. If done infrequently, the costs of 
errors is likely to soar, as unrecorded transactions or errors go 
undetected, with their impacts compounded over time.
    If the minimum frequency of conformity determinations is set at 3 
or 5 years, this will likely be too far apart to detect and correct the 
rapid growth in VMT in fast-growing metropolitan areas. Across the 
country, this rapid growth is causing those areas to fail to attain on 
time. At a time when ou transportation investments are proving to 
threaten air quality and health, it makes no sense to relax deadlines.
    Instead of statutory changes, schedule coordination (if any is 
needed) should come from better interagency coordination, not through 
relaxing the frequency of accounting system checks and balances. With 
wider gaps between reporting deadlines, opportunities for abuses and 
poor accounting grow larger. Uncertainty about true air quality impacts 
and benefits would increase.
    Today, most metropolitan areas update their TIPs annually and redo 
their conformity analysis as they do so. Analysis of conformity as TIPs 
undergo changes to regionally significant projects provides 
opportunities for timely improvement of what have often proven to be 
out-of-date or previously incorrect model assumptions.
    Many regions, such as Washington, DC, have recently updated motor 
vehicle fleet data assumptions to reflect the growing use of SUVs and 
light trucks, which produce more pollution per mile traveled than light 
duty cars, with a resulting increase in the estimates of motor vehicle 
emissions in the attainment year. In the case of Washington, DC, this 
conformity re-analysis led to increased attention by transportation and 
air officials and staff to the need for improved interstate and 
interagency coordination and collaborative data collection to upgrade 
the regional inventories of motor vehicle pollution factors. It also 
led local and State officials to add $42 million in new emission-
reducing transportation projects to the region's TIP in July 2002 to 
offset the increased pollution observed through the conformity re-
analysis. This investment would not likely have occurred had the 2-year 
life of the TIP conformity finding been relaxed to 3 or 5 years. These 
investments will benefit not just air quality, but they will increase 
mobility in the region, increase access to jobs, foster better quality 
of life, and promote economic growth.
    Conformity helped catch this problem sooner rather than later, when 
it was still a manageable problem that could be addressed through 
transportation measures, without needing to reopen the SIP. Had the 
problem been left to fester, it is more likely that the region's 
officials would simply have said the problem was too big to manage, and 
sought to make it someone else's problem. In fact, fear of this kind of 
crisis is what may motivate concerns about conformity. But by having 
tight deadlines and careful coordination among agencies, the challenges 
can be addressed with incremental measures before they escalate to 
crisis. The beneficiaries of tight deadlines are the millions of 
children, elderly people, and other individuals who suffer respiratory 
distress, premature death, injury, and other impairments every year 
when Federal air quality health standards continue to be unmet. The 
beneficiaries of relaxed conformity deadlines are primarily polluting 
industries and other special interests that profit at our society's 
expense.
    In fact, States already have flexibility and discretion in the 
current system. The current tiered schedule for reappraising TIP and 
RTP conformity provides appropriate advance notice of conformity 
problems in a way to encourage timely solutions. For example, many 
regions first uncover conformity challenges when updating their TIPs to 
incorporate new projects. Updating these planning factors uncovers 
previous underestimates in regional vehicle emissions and allows timely 
corrective measures to be adopted--as they have been in Washington, DC, 
in the example described above.
    At times, this may create what some call a ``conformity lockdown,'' 
during which the current 2-year TIP conformity finding remains valid, 
but no new regionally significant transportation projects can be added 
to the TIP until the region adopts new emissions-reducing measures to 
offset the incremental increase. At this point, the increment of 
emissions imbalance is usually still relatively small and manageable, 
and measures can be taken reasonably easily to offset the impacts of 
the new projects. In essence, the system provides ``early warning'' 
that provides the time to adopt new emission reduction measures to 
ensure that the TIP stays in conformity.
    If the region fails to offset motor vehicle emissions that exceed 
the adopted SIP motor vehicle emission budget before the expiration of 
the 2-year TIP conformity finding, the region would likely enter a 
conformity lapse. In a lapse, there is yet another safety valve: the 
region can adopt an Interim TIP composed of projects with funding 
agreements, exempt projects, and transportation control measures drawn 
from the conforming long-range RTP, relying on its 3-year conformity 
finding. At any time, a State can choose to reopen its SIP to identify 
additional emission reduction measures from mobile or non-mobile 
sources to offset excess emissions from mobile sources that are in 
violation of the motor vehicle emission budget.
    In short, States have discretion at every stage to align the 
schedule for updating their transportation and air quality plans and 
where they choose to seek emission reductions. The system works and 
should be sustained. If any change is warranted, it would be toward 
more frequent reviews of SIPs--but not less.
    Better coordination of air quality and transportation planning 
should take several forms:

      Interim Milestone Reports. First, Congress should enhance 
this interagency coordination by ensuring that EPA adopts regulations 
to govern State submissions of SIP milestone compliance reports. These 
reports would track and report regional emissions every 3 years in 
nonattainment areas and ensure that remedial measures are implemented 
immediately when emission reduction targets are not met, as required by 
Clean Air Act Sections 182(c)(5) and (g). EPA has failed to issue these 
sorts of regulations, and that failure must be remedied. By ensuring 
that States meet this required 3 year cycle of SIP reappraisal, 
Congress could address the concerns of transportation agencies that 
SIPs are too infrequently updated, while transportation plans are 
subject to more frequent updates.
      Prompt Upgrade of Models. Second, transportation agencies 
should be required to promptly upgrade their computer models to 
effectively consider air quality, induced traffic, and fully up-to-date 
planning factors. Congress should provide EPA and DOT with a strong 
mandate to establish best-practice planning model standards and to 
require timely action by MPOs and other agencies to meet these 
standards for conformity and SIP planning. A recent report (U.S. 
General Accounting Office, Environmental Protection: Federal Incentives 
Could Help Promote Land Use That Protects Air and Water Quality, 
Washington, DC, October 2001, GAO-02-12, page 95) notes that, ``DOT and 
EPA efforts to improve travel-demand-forecasting models may help MPOs 
and communities determine the effects of transportation improvements on 
congestion and air quality. However . . . these efforts currently do 
not call for integrating land use or environmental components into the 
travel demand model . . . Without such integrated models, communities 
cannot consider the likely effects that their transportation decisions 
will have on land use, future growth and development, and air 
quality.'' U.S. GAO-02-12, op. cite, page 95.

    In regions where transportation models used for conformity and air 
quality planning have not been upgraded to integrate land use and 
environmental components, including full sensitivity to induced traffic 
and growth effects of transportation investments, urban design, and 
pricing policies, less frequent conformity analysis is likely to impair 
timely upgrading of analyses.

    Question 2. Do you think there are more cost effective options for 
achieving air quality improvements in the transportation sector than 
through the current program?
    Response. Transportation conformity is not an air quality 
improvement strategy in and of itself. It is a highly cost effective 
accounting mechanism that assures the integrity of adopted air quality 
attainment plans by preventing adoption of transportation plans and 
programs likely to cause pollution in excess of the levels determined 
to endanger public health. The Clean Air Act allows States great 
flexibility in determining how to achieve health-based air quality 
standards--whether through controls on stationary sources, area 
sources, or transportation sources, and whether through adoption of 
cleaner technologies, management and pricing strategies, or growth and 
demand management.
    Without a strong and well-enforced transportation conformity 
program, experience shows that transportation emissions tend to be 
underestimated, leading to the failure of air pollution control 
strategies. That failure--more than three decades after the 1970 Clean 
Air Act--continues to impose huge costs on our society, with the 
adverse health costs of motor vehicle air pollution estimated by US DOT 
in 2000 at $40 billion to $65 billion, which pales beside the $27 
billion in annual Federal transportation expenditures.
    Transportation conformity has played a significant behind-the-
scenes role fostering cost-effective air pollution improvements in the 
transportation sector, including adoption of cleaner vehicle and fuel 
standards by States and Federal agencies, adoption of inspection and 
maintenance programs, and reallocation of transportation investments 
from sprawl-inducing, pollution-generating roads into transit, walking, 
bicycling, and Smart Growth strategies that meet economic and social 
needs for mobility with less need for travel by single-occupant 
vehicles.
    EPA's own recent analysis shows that proposed air pollution 
reduction strategies and technology fixes alone are insufficient to 
deliver healthful air quality for all Americans over the next decade or 
even two (http://www.epa.gov/clearskies/maps.pdf). Thus, conformity is 
vital to assuring that motor vehicle emissions are properly accounted 
for as States and regions strive to achieve emission reductions from 
various sources and avoid having uncontrolled traffic growth undo 
progress toward healthful air quality.
                                 ______
                                 
  Responses of Michael Replogle to Additional Questions from Senator 
                                 Smith
    Question 1. You testified that before State SIP's had established 
motor vehicle emission budgets, the transportation agencies were forced 
to rely on complex and widely criticized transition rules. EPA and DOT 
may be proposing a return of these transition rules in new non-
attainment areas that will have a 1-year grace period to make a 
conformity determination. Would you agree that our air quality goals 
are better served by coordinating conformity with motor vehicle 
emissions budgets, rather than returning to these transition rules?
    Response. As designed by Congress in the 1990 Clean Air Act, 
conformity is intended to focus on comparing forecast motor vehicle 
emissions in a transportation plan and program with an adopted motor 
vehicle emission budget (MVEB) established in a SIP designed to enable 
a region to attain the National Ambient Air Quality Standards (NAAQS) 
by deadlines established by law. Where such MVEBs exist, they should be 
used as the fundamental yard-stick to measure conformity of 
transportation plans and programs with air quality plans.
    The problem we see with the ``build/no-build'' transition rule is 
principally in how it has been applied, and in the length of the 
transition to conformity against adopted SIP MVEBs, not in the 
underlying principal of the build/no-build transition rule. The build/
no-build rule, first issued by EPA and DOT in 1991, compares emissions 
in a base-case no-build future scenario vs. emissions in a build 
scenario, adding or subtracting the applicable transportation projects 
changes proposed in any given TIP or RTP amendment. This is a desirable 
and acceptable conformity test to use in the absence of an adopted SIP 
MVEB when the evaluation uses analysis methods that properly account 
for induced land use and traffic effects of transportation investments 
and policies. However, as applied in many regions, build/no-build 
analyses have assumed no induced land use change or shift in the time-
of-day of traffic caused by transportation system changes. Numerous 
peer-reviewed studies have demonstrated that induced traffic effects 
are profound and the addition of 10 percent more lane miles of roadways 
can be expected to induce an additional 6 to 10 percent vehicle miles 
traveled in a region in a few years time. If induced traffic is 
unaccounted for, the build/no-build analysis is invalid, and will 
underestimate motor vehicle emissions growth associated with major 
highway system expansions, working against the CAA statutory mandate 
that transportation plans and programs must contribute to timely 
attainment of the NAAQS.
    It is vital that areas expected to be designated as new non-
attainment areas should now begin to take steps to prepare to meet 
conformity analysis requirements. The TEA-21 Federal transportation law 
provides flexible funding to States and regions in the Surface 
Transportation Program and other funding categories that can be used 
for planning and data collection. Such funds should be used now to 
establish sound, up-to-date, local inventories of jobs, housing, 
highways, transit resources, and travel behavior, to develop locally 
applicable transportation planning models that meet best practice 
standards for appraising travel behavior and induced traffic, to code 
information on planned transportation investments and forecast job and 
housing growth expectations, and other information. Outside consultants 
should be retained to help cultivate local expertise to sustain these 
analysis systems, which have many cost-effective applications beyond 
conformity analysis in supporting sound capital program planning, 
traffic and transit operations planning, transportation equity 
analysis, growth management, cost-allocation evaluation, and other 
activities. The cost of establishing such planning and analysis systems 
is but a tiny fraction of the annual capital facilities investment 
costs of most States and regions, but can have a payoff far in excess 
of these costs by assuring more sound decisionmaking, investment 
planning, and identification of lower-cost and more optimal strategies 
for meeting local and national mobility, environmental, economic 
development, and equity goals. Establishing these planning and analysis 
tools in a metropolitan area can be accomplished in less than a year, 
but does require agency commitment and ongoing support.
    EPA and DOT should promptly issue long-promised additional model 
guidance and regulations to assure that non-attainment areas properly 
account for induce land use and traffic effects in conformity analysis 
and SIP transportation modeling.
    There are no valid reasons why any newly designated non-attainment 
area cannot establish the requisite transportation and emissions 
analysis systems well in advance of the expiration of the 1-year grace 
period following designation. Until adopted SIP MVEBs are available to 
provide a basis for conformity, the build/no-build test (with 
appropriate consideration of induced land use and traffic effects), 
along with the Reasonable Further Progress requirements of the CAA, 
should be the basis for evaluating conformity in non-attainment areas.

    Question 2. If I am interpreting your testimony correctly, you 
appear to suggest that one way to judge the success of conformity is by 
how much it redirects transportation spending away from new highway 
construction. In Northern Virginia, however, they have delayed over 
$800 million in highway projects generating a total of 2 tons reduction 
in emissions, or $400 million per ton reduced. By comparison, EPA's 
vehicle emission standards cost below $1600 per ton. Stopping new 
highways does not sound like a very cost-effective strategy to reduce 
emissions, wouldn't you agree?
    Response. I'm sorry, but you have misinterpreted my testimony and 
data and I must disagree with your assertion. I noted that a recent 
analysis by the Metropolitan Washington Transportation Planning Board 
showed that by deferring 100 lane miles of highway expansion projects 
in 2002--a 0.5 percent reduction in lane-miles of road capacity--
Virginia saves $800 million in capital costs while cutting NOx 
emissions by more than 1 percent, or nearly 2 tons per day, and 
reducing vehicle miles of traffic by 0.6 percent. This illustrates how 
the very expensive expansion of new highways typically produces a 
growth in air pollution emissions by spurring more traffic, rather than 
a reduction in emissions as often claimed by the road lobby. It 
illustrates how reducing expenditures on new roads is often the most 
cost-effective emission reduction strategy, because it avoids 
generating both costs and air pollution. By not building additional 
traffic, sprawl, and pollution-inducing highways, regions like Northern 
Virginia can avoid the need for additional expenditures of up to $1600 
per ton to reduce emissions because they can prevent the pollution from 
being emitted in the first place.
    A savings of nearly $400 million per ton of NOx reduction for 
cutting highway expansions is highly competitive when compared to 
alternative emission reduction costs of $1600 per ton for pollution-
control technology investments! More regions faced with missed 
deadlines for clean air attainment should be protecting public health 
and the taxpayer's wallet by redirecting public investments from road 
expansions into other more productive forms of investment, such as 
transit, the revitalization of walkable neighborhoods, education, 
affordable housing close to jobs, and public health services.

    Question 3. You have been an advocate of using land use and other 
``Smart Growth'' strategies to reduce air pollution. Yet, we all know 
that these strategies take a decade or more to change transportation 
patterns. How do you expect to generate substantial pollution 
reductions from these projects when the emission levels from these 
vehicles will be 95-99 percent cleaner than their 1970's counterparts?
    Response. Even with significantly cleaner cars and truck 
technologies, Smart Growth strategies offer the promise of avoiding--at 
essentially no cost--as much as one-quarter of the potential motor 
vehicle emissions in 2020, thus helping to achieve more timely 
attainment at less cost. If Smart Growth strategies are ignored and 
sprawl and highway building advance without any accountability for 
impacts on emissions, society will need to invest billions of dollars 
more in pollution abatement technologies to clean up mobile and non-
mobile sources so we can achieve healthful air quality.
    The amount of motor vehicle pollution emitted per mile driven has 
fallen by more than 90 percent since 1970, but today motor vehicles 
still account for a major share of pollution--from one forth to three 
fourths of the NOx and VOC emissions--in most non-attainment areas. 
Adopted or submitted SIPs show that in the attainment year and in 
future years going out as far as 2020, motor vehicle emissions are 
expected to continue to account for a large share of emissions in many 
metropolitan areas, as Graph 1 shows. For example, despite adoption of 
cleaner technologies, motor vehicles are estimated to account for 28 
percent of VOC and 39 percent of NOx emissions in Washington, DC (in 
2005), 31 percent of NOx emissions in Connecticut/NY (in 2007), 45 
percent of VOC and 61 percent of NOx emissions in Chicago/Illinois (in 
2007), 67 percent of NOx emissions for Portland, Maine (in 2012), 30 
percent of VOC and 39 percent of NOx emissions in Denver (in 2013), 79 
percent of CO emissions and 71 percent of PM emissions in Las Vegas (in 
2020), and 38 percent of VOC and 44 percent of NOx emissions in Salt 
Lake City (in 2020). And despite the fact that California leads the 
Nation in adopting cleaner vehicles and fuels, the Bay Area expects 
motor vehicles to contribute 42 percent of VOC emissions and 52 percent 
of NOx emissions (in 2006), and the South Coast non-attainment area 
expects motor vehicles to contribute 59 percent of PM emissions and 49 
percent of NOx emissions (in 2020).
    The magnitude of emission reductions needed to reach healthful air 
quality is considerably greater than that now identified through 
submitted and approved SIPs. EPA's recent posting of maps of estimated 
effects of the proposed ``Clean Skies'' initiative (http://www.epa.gov/
clearskies/maps.pdf) shows that adopted and proposed measures are 
together inadequate to bring many of the nation's largest metropolitan 
areas into full attainment of the NAAQS even by 2020. Significant 
further emission controls will be needed also to deal with hazardous 
air pollutants, greenhouse gas emissions, and other environmental 
pollution, even with the cleaner motor vehicles produced under the Tier 
II and heavy-duty diesel engine rules.
    A conservative estimate is that Smart Growth strategies have the 
potential to reduce traffic growth and emissions over the timeframe of 
20-year regional transportation plans by 15 to 25 percent compared to 
forecast trends in most metropolitan areas. Over the shorter timeframe 
of a 2-year TIP conformity cycle or the several years prior to reaching 
ozone attainment deadlines, many regions could accomplish reductions in 
traffic growth and related pollution well of several percent a year 
relative to trends with a concerted effort combining Smart Growth, 
pricing, and demand management strategies.
    The degree to which Smart Growth can affect emissions and traffic 
growth is closely related to the pace of job and housing growth in a 
community. In slow growth communities, the opportunities for Smart 
Growth to change travel patterns are modest compared to fast-growing 
communities. Smart Growth is very pro-growth in the areas where it is 
being implemented while seeking to discourage job and housing growth in 
other locations where people lack non-driving travel choices. Where 
fast growth is occurring, there tend to be more opportunities for 
growth to become smarter.
    The effectiveness of Smart Growth strategies in reducing traffic 
and pollution is also closely linked to how comprehensively these 
strategies are implemented. Effective Smart Growth means transit-
oriented (not just transit proximate) development that is attractive 
for walking and cycling, includes a vibrant mix of land uses for 
various income groups, and highly attractive non-automobile access to 
other parts of the metropolitan area. It includes pricing policies and 
incentives that favor transit, walking, bicycling, and alternatives to 
driving while curbing subsidies for driving. Even in slow growth areas, 
Smart Growth transportation pricing and urban design incentives, such 
as Commuter Choice programs where employers pay for transit benefits 
and offer cash-in-lieu-of-parking benefits can produce substantial 
shifts in travel behavior and pollution reductions in the span of a 
year or two, with concerted marketing, promotions, demonstrations, and 
incentives for rapid adoption of Smart Growth changes. Research and 
experience cited in my most recent testimony to the committee shows the 
magnitude of near-term travel behavior and emission changes that have 
been achieved in a number of communities with these sorts of 
strategies.

    Question 4. In your written testimony you state, ``Because of steep 
increases in the number of vehicle miles, cuts in the amount of 
pollutant emitted per mile, particularly for NOx, and small 
particulates, have been offset by growth in miles driven.'' While this 
has been true in the past, doesn't EPA's data clearly show that future 
vehicle emissions are decreasing, even as vehicle travel increases?
    Response. Since the 1970 Clean Air Act, increasingly stringent 
motor vehicle and fuel standards have significantly reduced vehicle 
emissions per mile. Federal light duty Tier 1 vehicle emission 
standards today allow only 4 percent as much VOC pollution per mile as 
vehicles emitted in 1969, and 10 percent as much NOx. Despite this 
sharp reduction, in 1999 motor vehicles still accounted for 29 percent 
of VOC and 34 percent of NOx emissions nationwide according to EPA. VOC 
emissions from highway vehicles declined 18 percent during the past 
decade, but NOx emissions increased by 19 percent during the same 
period. And as a 2002 TRB study, The CMAQ Program: Assessing 10 Years 
of Experience, noted (page 70), ``Although tailpipe emissions from 
highway vehicles are only a small share of directly emitted PM on a 
national basis, they account for a substantially higher proportion of 
longer-lived atmospheric concentrations of fine particles in urban 
areas, for example, up to 40 to 50 percent in the Denver and Los 
Angeles metropolitan areas.''
    With the full phase-in of Tier 2 standards beginning in 2009, light 
duty vehicle emission standards will allow only 22 percent as much VOC 
pollution per mile as Tier 1 standards, and 18 percent as much NOx. But 
the slow pace of motor vehicle fleet turnover means that the full 
benefits of these emission reductions will not take effect until 2020 
or later. In the meantime, unless regions adopt strategies to better 
manage travel demand, sprawl, and subsidies that encourage driving, 
motor vehicle travel will continue to grow and offset much of these 
emission reduction benefits. Between 1980 and 1999, vehicle miles 
traveled grew by 87 percent. If a similar pattern continues through 
2020, NOx and VOC emissions from motor vehicles will decline by 2020 by 
only little more than half. But much deeper reductions than this will 
be needed to achieve healthful air quality for all Americans. In other 
words, technology alone will not make the amount of driving irrelevant 
to considerations of pollution control in the foreseeable future.
    The recent adoption of more stringent motor vehicle emissions and 
fuel standards for light duty trucks and heavy-duty diesel engines will 
offer important additional contributions toward clean air. Nonetheless, 
progress toward timely attainment will for the next several decades be 
dependent on continued and improved measurement and monitoring of the 
amount and pattern of motor vehicle use, and greater efforts to avoid 
pollution by shaping motor vehicle use and travel behavior.

    Question 5. In your written testimony, you state, based on the 
MATES-II study, ``that 90 percent of the total cancer risk is 
attributable to toxic air pollutants emitted by mobile sources.'' But 
you fail to mention that 70 percent of that risk is from diesel 
emissions, and the EPA heavy duty diesel rule will substantially reduce 
these emissions. Moreover, you also fail to mention that the same study 
shows that cancer risk has been declining from 700 per million in 1990 
to 300 per million in 1997, which suggests progress is being made on 
non-diesel related toxic emissions. You suggest that less highway 
construction and more programs to reduce vehicle travel are needed to 
reduce these risks, yet isn't technology and better fuels the real 
answer to reduce most of these risks?
    Response. Less highway construction and improved programs to reduce 
vehicle travel should indeed be evaluated through the planning and 
project review process to appraise their capacity to avoid or mitigate 
adverse health risks caused by transportation related air toxics 
emissions. Travel demand and growth management strategies, pricing 
incentives, and other actions related to the operation, management, 
investment in transportation systems and related community systems can 
often provide very cost-effective approaches to reduce exposure of 
communities to air toxics and the cancer and other health risks 
associated with these exposures. Indeed, expansion of highways where 
unacceptably high air toxic exposure problems already exist will likely 
increase the scope of the problem by inducing traffic growth and 
exposures to air toxics. Cleaner technology and better fuels are not 
the only or best way to reduce most of these health risks, although 
these are an important part of the solution. While a reduction in 
cancer risk from 1990 to 1997 is documented in the MATES-II study, the 
cancer risk in 1997 is many times higher than the level at which EPA 
and FHWA are required to take actions to safeguard public health from 
such documented risks.
    Diesel emissions are indeed the largest source of toxic air 
pollutants emitted from mobile sources and the EPA heavy duty diesel 
rule will eventually reduce those emissions substantially. But because 
of the long-delayed timeframe for implementation of the heavy-duty 
diesel rule and the very long lifetime of diesel engine equipment, 
barring major new pollution control initiatives, it will take decades 
to achieve the substantial emission reductions required to protect 
public health from toxic air pollutants from these motor vehicles. 
While technology and fuels will do a lot to reduce these risks, public 
health will be best protected by a program that combines such 
initiatives with better strategies to manage the demand and use 
patterns of motor vehicles--both diesel and non-diesel--and to manage 
exposure of the public to these emissions. This must include 
consideration of how changes in transportation investments--such as 
highway expansions--will affect the amount of traffic emitting toxic 
air pollutants, and whether alternative investments might better 
satisfy mobility objectives while avoiding or mitigating these adverse 
health impacts. As the example in Washington, DC, cited above shows, 
reducing highway system expansions can--at least at times--produce both 
cost savings and substantial reductions in pollution. There are many 
ways to better manage the system to minimize air toxics while meeting 
mobility needs, including promotion of faster adoption of cleaner 
technologies and alternative transportation investment and management 
strategies. But FHWA is refusing to face core issues related to health 
impact assessment in its project approval and transportation plan and 
program approval process.
    The health risks from transportation related air toxics remaining 
after the emission reductions of the last decade far exceed Federal 
criteria for unacceptable health risks, and will continue to be 
unacceptably high even if further reductions in per-vehicle emissions 
are achieved in the foreseeable future. The future risks expected due 
to the traffic volume anticipated in many major highway corridors are 
not acceptable to the families who are exposed to toxic emissions. 
Furthermore, proper consideration of strategies that serve mobility 
needs without increasing single occupant vehicle travel can minimize 
these risks. FHWA has not given adequate consideration of these harmful 
health effects and the alternatives that could mitigate them in its 
process for reviewing and approving transportation plans, programs, 
highway funding agreements, and project environmental and design 
documentation.
    The National Environmental Policy Act (NEPA), 42 U.S.C. Sec.  4321 
et seq., requires a review of the harmful effects of exposure to these 
motor vehicle pollutants generated by highways. FHWA has violated both 
NEPA and the requirements imposed by 23 USC Sec. 109(a) and (h) and 23 
CFR Sec. 771.105 to assess and mitigate the adverse effects of air 
pollution from highway projects in a number of cases, such as the 
proposed widening of US 95 in Las Vegas.
    It is not acceptable to dismiss the substantial cancer risks that 
are exacerbated by highway expansions simply because cleaner 
technologies are likely to be introduced into the marketplace at some 
future time without considering the health impacts on several 
generations of children and adults who we know will be harmed by these 
effects in the decades prior to these cleaner technologies coming into 
wider use. The evidence of serious health risks is compelling. 
California's South Coast Air Quality Management District published a 
study entitled Multiple Air Toxics Exposure Study (MATES-II) in March 
2000. In February 2000, the Journal of the Air and Waste Management 
Association published a study entitled ``Distance Weighted Traffic 
Density in Proximity to Home is a Risk Factor for Leukemia and Other 
Childhood Cancers'' (JAWMA Study). But FHWA routinely fails to even 
attempt to estimate the concentrations of toxic vehicular emissions 
likely to result from vehicle travel in high volume traffic corridors 
proposed for major expansion, or to assess the health risks of public 
exposure to pollutant concentrations identified by these recent 
scientific studies as the source of elevated cancer risks and rates. 
Not performing such an assessment is arbitrary and capricious and 
inconsistent with NEPA.
    EPA has listed 21 toxic air contaminants from mobile sources, 
including diesel particulate and diesel exhaust organic gases. The EPA 
concluded that ``[t]he current EPA position is that diesel exhaust is a 
likely human lung carcinogen and that this cancer hazard exists for 
occupational and environmental levels of exposure.'' 65 Fed. Reg. 35, 
446 (June 2, 2000). The EPA premised this position on findings by the 
World Health Organization, National Institute for Occupational Safety 
and Health, and International Agency for Research on Cancer. Id. Other 
Federal health agencies have listed diesel emissions as containing 
carcinogens. The National Toxicology Program at NEIHS on May 15, 2000, 
2 months before your letter, listed diesel particulate as a ``known 
human carcinogen.'' EPA has published a list of ``Mobile Source Air 
Toxics (MSAT)'' which ``includes various volatile organic compounds 
(VOCs) and metals, as well as diesel particulate matter and diesel 
exhaust organic gases (collectively DPM + DEOG).'' 66 FR 17,229 (March 
29, 2001). This list clearly defines the hazardous air pollutants from 
motor vehicles that FHWA should consider in assessing the health 
effects of air toxic emissions from the major highway expansion 
projects.
    In refusing to prepare environmental analyses, FHWA has cited 
evidence that toxic emissions from individual automobiles and overall 
emissions in urban areas had declined from 1990-97. FHWA has failed to 
explain, however, why this decline justifies a refusal to consider the 
public health significance of ongoing cancer risks identified in 
studies that relied on monitored ambient concentrations of toxic 
contaminants near major highways and other information gathered after 
1997. Indeed, the toxic pollutant concentrations reported in MATES-II 
reflect lower per-vehicle emissions than are occurring in most States, 
because California vehicles are subject to stricter emission standards.
    FHWA's response to environmental critics does not address the 
information showing that the health risks remaining after the emission 
reductions of the last decade far exceed Federal criteria for 
unacceptable health risks, and will continue to be unacceptably high 
even if further reductions in per-vehicle emissions are achieved in the 
foreseeable future. The future risks expected due to the traffic volume 
anticipated in the US-95 Las Vegas corridor and many other areas of the 
Nation subject to highway expansion are not acceptable to the families 
who are exposed to toxic emissions. Furthermore, proper consideration 
of strategies that serve mobility needs without increasing single 
occupant vehicle travel can minimize these risks. Congress should 
reaffirm FHWA's obligation to consider as part of project reviews these 
harmful health effects and the alternatives that could mitigate them.
    Emissions per vehicle mile traveled are not relevant to assessing 
the magnitude of the public health risk associated with motor vehicle 
emissions. The key issue is total emissions from highway corridors and 
the impacts total emissions are expected to have on the health of 
nearby populations. When highway expansion increases the vehicle-
carrying capacity of the highway it induces additional traffic volumes, 
which in turn will contribute to increased total emissions from the 
highway and exposure to higher concentrations in the ambient air of 
hazardous pollutants in nearby neighborhoods. Risks to human health 
increase in proportion to human exposure to pollutants in the ambient 
air, not emissions per vehicle. These increased exposures create 
significant public health hazards that must be addressed in 
environmental reviews, the regional planning process, and the air 
quality conformity process.
    At least one reasonable estimate of the cancer risk attributable to 
diesel emissions is the estimate developed by the California 
environmental agencies presented in the MATES-II study. Even if a 
careful review of the evidence suggests a better estimate of the cancer 
risk is only one-half or one-quarter of the risk estimated by 
California, the risk would still be very high.
    Estimates that regional concentrations of criteria pollutants may 
improve are simply not relevant to assessing the likely public health 
impacts of toxic contaminants from motor vehicles. The regional 
modeling assessments performed to satisfy the ``conformity'' 
requirements of the CAA address only the direct emissions of CO, PM-10 
and ozone precursors from motor vehicles. These pollutants are subject 
to emissions limitations established by EPA for new motor vehicles, and 
are expected to decline in the future because future vehicles are 
required to meet more stringent emissions standards. But no such 
standards have been established for toxic air contaminants. There is no 
basis for assuming that comparable reductions will be achieved for 
toxic air contaminants. Even if emissions from future vehicles are 
reduced, that reduction would not obviate the need to assess future 
emissions levels and whether total emissions in a heavily trafficked 
corridor will cause or contribute to unacceptable health hazards.
    In considering whether technology cleanup vs. demand management and 
improved transportation system planning should be preferred strategies 
for avoiding or mitigating health impacts of transportation, it is 
vital to consider the health costs of highways. The Department of 
Transportation has estimated the national aggregate health costs of 
criteria air pollutants from highways at $40 to $68 billion per year. 
Table 9, Addendum to the 1997 Federal Highway Cost Allocation Study 
Final Report, U.S. Dep't of Transportation, Federal Highway 
Administration (May 2000). The methodology developed in the Addendum to 
the Highway Cost Allocation Study to estimate the costs of adverse 
health effects from air pollution provides a basis for estimating the 
adverse health effects, and costs, attributable to emissions from 
specific highway corridors. The Addendum assessed only the health 
effects attributable to pre-1997 criteria pollutants, and did not 
include the health effects attributable to toxic air contaminants 
emitted from motor vehicles. If FHWA intends to justify highway 
expansions by comparing the value of increased travel against the costs 
of providing that capacity, a fair assessment of the health costs to 
the community must be part of the calculus. In addition, that kind of 
cost-benefit calculus must be applied to both the highway option and 
reasonably available alternatives that can reduce or mitigate the 
adverse impacts on health.
    Recent studies have significantly improved understanding of the 
linkage between vehicle emissions and the risk and incidence of cancer 
among people living near major highways. The MATES-II and JAWMA studies 
demonstrate that projects like the US-95 expansion in Las Vegas will 
increase cancer risks among exposed populations, a highly significant 
impact on the human environment that warrants environmental impact 
review. The most important new information derived from these studies 
is 1) the magnitude of the cancer risk caused by motor vehicle 
emissions from a highway corridor of the size of the US-95 project, and 
2) the demonstrated increased incidence of cancer among children 
exposed to higher traffic volumes.
    It has been known for nearly two decades that motor vehicles emit 
toxic pollutants that include known or suspected carcinogens. What had 
not been firmly established by sound scientific research prior to the 
MATES-II results is that these pollutants reach concentrations in the 
ambient air in the vicinity of heavily traveled highways that present 
cancer risks of at least 1 in 1,000 to 1 in 650, i.e., levels far 
greater than the threshold for mitigation established by EPA's cancer 
risk policy and Federal agency policies generally.
    EPA's cancer risk policy requires that pollutants be reduced when 
risks exceed 1 in 10,000 for the maximally exposed individual. These 
high cancer risks for nearby residents, and even higher risks for those 
living adjacent to roadways, far exceed the risk levels adopted by EPA 
and Congress in setting national health standards, and are unacceptable 
to the residents of these neighborhoods. EPA has summarized the 
consensus cancer risk policy of Federal agencies as requiring careful 
assessment of measures to reduce cancer risks when the population risk 
is greater than 1 in 1 million.
    Where the entire U.S. population is exposed to a chemical 
classified as a probable human carcinogen, the agency consensus appears 
to be that risks less than 1 in 1 million generally can be found 
acceptable without consideration of other factors while risks greater 
than that level require further analysis as to their acceptability.
    56 Fed. Reg. 7757 (February 25, 1991). On the other hand, EPA and 
other Federal agencies have generally acted to reduce cancer risks 
greater than 1 in 10,000. Here, the evidence from MATES-II shows that 
communities near corridors such as US-95 with traffic volumes in excess 
of 220,000 vehicles per day will be exposed to cancer risks well above 
1 in 10,000.
    The MATES-II study derived its estimates of community cancer risks 
from ambient air monitoring of toxic pollutants in 12 residential 
neighborhoods during 1998 and 1999. MATES-II also included regional 
toxic emission data for the Los Angeles Basin and a computer modeling 
program to estimate exposures for areas of the region where monitors 
were not located. The conclusions of the MATES-II study are startling: 
the regional average risk of cancer for residents of the Basin is 1400 
in one million (1 cancer for each 714 residents), and 90 percent of 
this heightened cancer risk is attributable to air pollution from 
mobile sources. (MATES-II at ES-3).
    MATES-II determined that exposure to diesel particulate emissions 
and other toxics from mobile sources combine to cause 90 percent of the 
elevated risks. Id. at E-3. Areas with concentrated traffic suffered 
from increased risks of cancer above the regional average. Id. at ES-5. 
The study found that the highest cancer risk is in neighborhoods 
nearest highways where modeled risks were as high as 5800 in one 
million, meaning that one person out of 170 is likely to suffer cancer. 
Id. at Fig. 5-3a, p. 5-10.
    The JAWMA study of cancer rates in Denver, also published in 2000, 
is consistent with the MATES-II findings. That study focused on rates 
of childhood leukemia among children under 12 living very near highways 
(within 750 feet). The study found that children with leukemia were 12 
times more likely to live close to highways than children without 
leukemia, and concluded that a ``strong association'' exists between 
proximity to high traffic streets and childhood leukemia. JAWMA Study 
at 2. The study built on established research connecting childhood 
cancers to benzene and other volatile organic compounds found in 
automobile emissions. Id. Both the MATES-II and JAWMA studies have 
broad applicability. While MATES-II examined the L.A. Basin 
specifically, the general findings establish a clear link between 
automobile emissions and cancer risk. Even if the relative magnitude of 
emissions of cancer causing agents differs somewhat between locales, 
the underlying conclusion remains irrefutable: highways are the largest 
source of carcinogens emitted into the ambient air in the urban 
environments, and the pollutant concentrations are highest in 
neighborhoods near highways. The size of the cancer risk is 
proportional to daily traffic loads in the corridor. When traffic loads 
are known, approximations of ambient concentrations of mobile source 
toxics can be made for neighborhoods located next to highways in other 
States by comparing the daily traffic loads on those highways with the 
daily traffic loads on highways for which emissions are modeled in the 
MATES-II study.
    Except for diesel particulate, these risk estimates are derived 
from well-established risk factors that have been the subject of 
intensive scrutiny for many years. Although the MATES-II cancer risks 
are derived from risk factors adopted by the California environmental 
agencies, those factors do not differ significantly from those reported 
by EPA. See Integrated Risk Information System (EPA, Cincinnati, 
OH)[http://www.epa.gov/iris]. In addition, these risk estimates are not 
for the maximally exposed individual living adjacent to heavily 
traveled highway corridors, but rather for regional populations. Nearby 
neighborhood exposures are substantially higher, and may be as much as 
an order of magnitude higher for the maximally exposed individuals.
    With regard to diesel particulate, the cancer risks in MATES-II are 
estimated based on unit risk factors adopted by California, but not yet 
by EPA. ``The current EPA position is that diesel exhaust is a likely 
human lung carcinogen and that this cancer hazard exists for 
occupational and environmental levels of exposure.'' 65 FR 35,446 (June 
2, 2000). This characterization of DPM as a carcinogen is supported by 
the National Institute for Occupational Safety and Health (NIOSH), the 
International Agency for Research on Cancer, and the World Health 
Organization (WHO). Id. The National Toxicology Program at NEIHS on May 
15, 2000, also listed diesel particulate as a ``known human 
carcinogen.'' Although a risk factor for DPM has not yet been adopted 
by a Federal agency, more than enough data has been accumulated from 
numerous epidemiological studies to allow a risk factor to be 
determined for risk assessment purposes. Further, California's more 
stringent emissions standards mean that other jurisdictions, like Las 
Vegas, may suffer from higher concentrations of toxic emissions from 
mobile sources. The JAWMA study emphasized the relationship between 
proximity to highways and childhood cancers. As such, this study has 
broad application. Nothing in the study indicates that the areas 
examined were in any way exceptional. Based on the findings in the 
JAWMA study, one would predict higher rates of childhood leukemia among 
those living near major highways such as the expanded US-95 in Las 
Vegas. In response to this new information, Sierra Club and local civic 
and environmental interests have sought action by FHWA to assure a 
Supplemental Environmental Impact Study (SEIS) for the US-95 corridor 
expansion project in Las Vegas. Similar issues are presented in other 
corridors around the country where extremely high traffic volumes would 
be increased by road expansions in an area close to thousands of 
residents. But FHWA has refused to consider the issues being raised by 
environmental and health groups. These issues go to the underlying 
questions posed by Senator Smith--should such requests for analysis be 
dismissed because of cleaner technologies are expected to become 
available in coming years and because emissions are decreasing somewhat 
in some areas? And are facility investment and transportation system 
management strategies worth considering as control strategies related 
to these public health problems?
    A significant purpose of an EIS is the involvement and education of 
the public that the process entails. The United States Supreme Court 
has held that SEISs are necessary to ensure that this purpose is 
furthered. Marsh, 490 U.S. at 371 (1989). The cancer studies raise an 
issue that clearly warrants such public involvement. The US-95 
expansion may look dramatically different to residents alerted to the 
heretofore unconsidered link between highways and cancer. An SEIS would 
provide an opportunity to inform the public about the issue and the 
degree of risk involved. The public has an obvious, critical interest 
in providing input on this issue.
    Public involvement in the consideration of alternative modes of 
meeting travel demand in the US-95 corridor is critical. NEPA not only 
serves as a vehicle for informing the public of impacts, it also 
requires that alternatives be considered. Taken together with the 
requirement of 23 U.S.C. Sec. 109(h) to mitigate the adverse impacts of 
air pollution from highways, an SEIS should identify the alternatives 
that can mitigate or eliminate the cancer risk while at the same time 
meeting the mobility needs of people who live and work in the US-95 
corridor or other similar corridors around the U.S.
    Federal law requires assessment, reporting, and mitigation of 
health risks attributable to highway projects. FHWA's failure to assess 
the adverse health effects, the costs of these health effects, and the 
alternative transportation facilities and/or services that could 
prevent or minimize the adverse effects of the project violates NEPA, 
section 109 of the Federal transportation code and the Department of 
Transportation's (``DOT'') environmental regulation at 23 CFR 
Sec. 771.105.
    The United States Supreme Court has affirmed the position adopted 
by the Council on Environmental Quality (CEQ) that the purpose of the 
National Environmental Protection Act would be thwarted without an SEIS 
requirement. 40 C.F.R. Sec.  1502.9(c); Marsh v. Oregon Natural 
Resources Council, 490 U.S. 360, 370 (1989). Accordingly, CEQ 
regulations implementing NEPA impose a duty on Federal agencies to 
prepare an SEIS when ``[t]here are significant new circumstances or 
information relevant to environmental concerns and bearing on the 
proposed actions or its impacts.'' 40 C.F.R. Sec.  1502.9(c)(ii). As 
noted above, the CEQ defines ``significantly'' according to context and 
intensity. Context includes effects on society generally and the 
locality in particular, and intensity includes the magnitude of the 
impacts on public health and the nature of the risks. 40 C.F.R. Sec.  
1508.27.
    When deciding whether to prepare an SEIS, the agency must apply a 
``rule of reason,'' while taking a ``hard look'' at new information. 
Marsh, 490 U.S. at 373-74. In weighing the value of new information, 
the agency must make the decision according to the same NEPA guidelines 
governing the decision whether to prepare an EIS in the first instance. 
Id. If new information shows that the proposed action will affect the 
environment in ``a significant manner or to a significant extent not 
already considered, a supplemental EIS must be prepared.'' Id. When new 
scientific data raise environmental concerns that have not been 
addressed in a previous EIS, an SEIS is required. Portland Audubon 
Society v. Babbitt, 998 F.2d 705, 708 (9th Cir. 1993). New concerns 
that require an SEIS can be either quantitative or qualitative. 
Environmental Defense Fund. v. Marsh, 651 F.2d 983, 996 (5th Cir. 
1981).
    In addition to NEPA, Federal highway law requires the consideration 
of the adverse effects of air pollution prior to approval of the plans 
and specifications for a highway, 23 U.S.C Sec. 109(a), and the 
adoption of measures that ``eliminate or minimize'' the adverse effects 
of ``air pollution.'' 23 U.S.C. Sec. 109(h).
    In a case challenging DOT's approval of a highway project without 
assessing its impact on air pollution, the court in D.C. Federation of 
Civic Associations v. Volpe, 459 F.2d 1231 (D.C. Cir. 1971), held that 
23 U.S.C. Sec.  109(a) required such an analysis:
    We can find no basis in the statute's language or purpose for the 
conclusion that certain hazards are, as a matter of law, immaterial to 
the Secretary's evaluation of a project's safety. The District Court 
would surely agree that Congress did not intend to permit construction 
of a bridge in a situation, however rare, where air pollution would be 
a significant threat to safety. It does not follow, of course, that air 
pollution will be a significant hazard in all-or even any-highway 
projects. And the District Court apparently concluded that no 
extraordinary dangers are likely to arise from the Three Sisters 
Bridge. Still, the gathering and evaluation of evidence on potential 
pollution hazards is the responsibility of the Secretary of 
Transportation, and he undertook no study of the problem.
    DOT's approval of the highway bridge was remanded.
    Federal highway law goes beyond NEPA by requiring that the decision 
to approve a highway be----

``made in the best overall public interest taking into consideration 
    the need for fast, safe and efficient transportation, public 
    services, and the costs of eliminating or minimizing such adverse 
    effects and the following: (1) air, noise, and water pollution; (2) 
    destruction or disruption of man-made and natural resources, 
    aesthetic values, community cohesion and the availability of public 
    facilities and services; (3) adverse employment effects, and tax 
    and property value losses; (4) injurious displacement of people, 
    businesses and farms; and (5) disruption of desirable community and 
    regional growth. Such guidelines shall apply to all proposed 
    projects with respect to which plans, specifications, and estimates 
    are approved by the Secretary after the issuance of such 
    guidelines.''

    23 USC Sec. 109(h). At a minimum, this provision requires DOT to 
determine the costs of eliminating or minimizing the adverse health 
effects attributable to air pollution, and then requiring mitigation in 
the ``best overall public interest.''
    DOT's 1987 regulations implementing this requirement and NEPA 
provide that the analyses required by Sec. 109(a) and (h) are to be 
performed as part of the NEPA review of the project. 23 CFR Part 771. 
Thus because both Sec. 109(a) and (h) require an analysis of the 
adverse effects of air pollution and the costs of eliminating or 
minimizing such effects, a supplemental EIS is required.
    Section 109(h) also requires DOT to ``eliminate or minimize'' the 
adverse effects attributable to a new or expanded highway. This 
provision is implemented through DOT regulations in 23 CFR 
Sec. 771.105, but has not been applied by FHWA with regard to the 
adverse health affects associated with toxic and fine particle air 
pollutants emitted from this highway project. DOT's regulation adopts 
as--
    the policy of the [Federal Highway] Administration that:

    (b) Alternative courses of action be evaluated and decisions be 
made in the best overall public interest based upon a balanced 
consideration of the need for safe and efficient transportation; of the 
social, economic, and environmental impacts of the proposed 
transportation improvement; and of national, State, and local 
environmental protection goals.
    (c) Public involvement and a systematic interdisciplinary approach 
be essential parts of the development process for proposed actions.
    (d) Measures necessary to mitigate adverse impacts be incorporated 
into the action. Measures necessary to mitigate adverse impacts are 
eligible for Federal funding when the Administration determines that:
    (1) The impacts for which the mitigation is proposed actually 
result from the Administration action; and
    (2) The proposed mitigation represents a reasonable public 
expenditure after considering the impacts of the action and the 
benefits of the proposed mitigation measures. In making this 
determination, the Administration will consider, among other factors, 
the extent to which the proposed measures would assist in complying 
with a Federal statute, Executive Order, or Administration regulation 
or policy.

    On its face, paragraph (d) requires that measures necessary to 
mitigate the adverse health effects of hazardous air pollutants and 
fine particles be incorporated into the plans and specifications for 
the project. Subparagraphs (1) and (2) then establish criteria for 
determining whether the costs of mitigation are eligible for Federal 
funding. The rule does not contemplate the approval of a project that 
would have significant adverse effects on human health without 
requiring that those effects be mitigated. The project must either 
include measures to eliminate long-term human exposure to the levels of 
hazardous air contaminants that are associated with significant risks 
of adverse health effects, or alternatives must be developed that can 
prevent these adverse health effects. None of these requirements of 
DOT's rule have been addressed in the review of the US-95 project in 
Las Vegas.
    For all of the above reasons, less highway construction and more 
programs to reduce vehicle travel should indeed be evaluated through 
the planning and project review process to appraise their capacity to 
avoid or mitigate adverse health risks caused by transportation related 
air toxics emissions. While cleaner technology and better fuels are an 
important part of the solution, they are not the only way or 
necessarily the best way to reduce most of these risks.
    Proposals to streamline NEPA reviews through such actions as 
imposition of arbitrary deadlines for agency action, limits on public 
involvement, curbs on the engagement of resource agencies and the 
public in determinations of project purpose and need or available 
reasonable alternatives, limitations on judicial review of NEPA 
decisions threaten to reduce compliance with these important legal 
requirements and public health safeguards. We urge Congress to oppose 
such efforts as fundamental assaults on America's core environmental 
and public health laws.
                               __________
         Statement of the National Association of Home Builders
    Thank you for the opportunity to submit a statement for the record 
presenting the views of the National Association of Home Builders 
(NAHB) on the issue of transportation conformity and its impact on the 
home building industry.
    NAHB represents more than 205,000 member firms involved in home 
building, remodeling, multifamily construction, property management, 
housing finance, building product manufacturing and other aspects of 
residential and light commercial construction. The members of NAHB 
recognize the importance and value of a safe, easily accessible and 
reliable transportation system. Homeowners and potential homebuyers 
depend upon transportation systems to move them from their homes, to 
their places of employment, to shopping and to their schools. 
Homeowners also demand communities with clean air. The transportation 
conformity process creates the nexus between the need for safe, 
effective transportation with the desire for maintaining clean air. 
Unfortunately, the conformity process can be confusing, bureaucratic 
and burdensome. The transportation conformity program's goals and 
processes must be reevaluated and reforms need to be made. NAHB's 
members believe the building industry can play a constructive role in 
addressing this issue.
Background
    Transportation conformity is a requirement under the Clean Air Act 
(CAA) and the Transportation Equity Act for the 21st Century (TEA-21) 
that mandates States with impaired air quality to conduct air quality 
assessments prior to Federal approval, or the expenditure of Federal 
funds, for construction of any major transportation project that may 
have an impact on regional air quality (e.g., highway expansion, bridge 
construction, new freeway construction, or transit project). In short, 
it is a Federal requirement that local transportation plans must 
``conform'' to the State air quality plan.
    Transportation conformity applies to counties with impaired air 
quality--today there are approximately 107 areas (generally an area is 
a conglomeration of contingent counties in a metropolitan area, called 
a ``nonattainment'' area) in 34 States that the U.S. Environmental 
Protection Agency (EPA) has designated as having excessive amounts of 
ozone (smog), particulate matter (soot), carbon monoxide, and/or 
nitrogen dioxide. In addition, EPA is in the process of implementing 
new, more stringent standards for ozone and particulate matter. With 
the implementation of these new standards, the number of nonattainment 
areas considered to have impaired air quality and subject to 
transportation conformity requirements could double by 2007.
    Transportation conformity determinations are set up as an all-or-
nothing proposition. The projects in the local transportation plan are 
taken in the aggregate. If local planners are unable to show conformity 
of both a 20-year transportation plan and a 3-year transportation plan 
(including the funding to back the projects contained in those plans) 
with a the State air quality plan, the area experiences a ``conformity 
lapse.'' The result of a conformity lapse is that all Federal 
transportation funding for the area is cutoff until the transportation 
plans are approved. With Federal funding suspended due to a conformity 
lapse, badly needed transportation projects are delayed or even 
canceled, leaving the population of these areas with continued traffic 
congestion.
Impacts on the Home Building Industry
    By all measures, the housing industry, which accounts for 14 
percent of the nation's Gross Domestic Product, has been a bellwether 
during the recent difficult economic times. Fortunately, to date, 
transportation conformity requirements have not hindered the industry's 
ability to continue producing safe, affordable housing in most cities. 
The construction component (residential fixed investment) has 
outperformed the overall economy in four of the last five calendar 
quarters. In recent economic data for the first quarter of 2002, 
housing grew 14.6 percent while the economy grew 6.1 percent. Over the 
past year, low interest rates and strong underlying demographic demand 
has kept housing strong while the rest of the economy has struggled to 
regain its footing.
    The construction of 1,000 single family homes generates 2,448 jobs 
in construction and construction-related industries, approximately 
$79.4 million in wages and more than $42.5 million in Federal, State, 
and local revenues. The construction of 1,000 multifamily homes 
generates 1,030 jobs in construction and related industries, 
approximately $33.5 million in wages, and more than $17.8 million in 
Federal, State and local revenues and fees. NAHB members will construct 
approximately 80 percent of the almost 1.6 million new housing units 
projected for 2002.
    In 2001, forty-one of the largest 50 housing markets in the United 
States were either nonattainment or maintenance areas subject to 
transportation conformity requirements. As these population centers 
grow, the demand for affordable housing must be coupled with the need 
for a safe, efficient and modern transportation system. Unfortunately, 
driven by consumer demand, land developers and builders often plan 
their own projects according to local transportation and growth plans. 
Since many consumers factor transportation into their decisions about 
home location, delayed or canceled transportation projects change the 
demands of the homebuyer after development projects are planned or even 
completed. If a metropolitan area is unable to appropriately wade 
through the red-tape of the Federal conformity requirements so that it 
can keep transportation project funding flowing, previously approved 
transportation projects are halted, the congestion continues, and 
homebuyers are left idling in traffic.
    In 1999, a NAHB survey showed that 83 percent of the survey's 
respondents favored a detached single-family home in a suburban setting 
with a longer commute to work and farther distances to public 
transportation and shopping. Overwhelmingly, the survey showed that the 
greatest concern to respondents was traffic congestion. Respondents 
chose road widening (44 percent), new road construction (27 percent) 
and greater availability to public transportation (33 percent) as 
solutions to traffic problems. Though a substantial number of 
respondents advocated the use of public transportation, 92 percent 
owned automobiles and 85 percent said that they use them for commuting.
    The survey highlights the tradeoff Americans are willing to make: 
greater traffic congestion in return for the home of their own choice, 
in the setting of their own choice. Further, while Americans support 
public transportation, they rely on the automobile as their primary 
means of transportation and support transportation improvements to ease 
traffic congestion. It is clear that transportation, whether by 
automobile or by transit, is a vital component of the decisionmaking 
process for homebuyers. This point is not lost on home builders. Home 
builders depend on a safe, efficient, modern transportation system 
because it is an important selling point for the homebuyers they serve.
NAHB Activity
    NAHB began to focus on transportation conformity in 1999 when 
environmental advocates in Atlanta, Georgia decided that an effective 
way to influence local land use planning was to oppose transportation 
plans in court. Atlanta proved to be only the beginning of a larger 
strategy: hold a nonattainment metropolitan area's transportation plan 
hostage while seeking a settlement that favors their particular land 
use objectives. Throughout the county, environmental groups have 
petitioned Federal courts to have transportation plans frozen and then 
stricken by the court because they are ``flawed'' in some way. If a 
transportation plan is stricken, essentially there is no plan and, 
therefore, no conformity. Without conformity, Federal funding would be 
frozen until a ``better'' plan is approved.
    In response, NAHB formed a coalition with other transportation 
construction interests to intervene on a national level in 
transportation conformity lawsuits. NAHB has participated in 
transportation-related litigation in Sacramento, Atlanta, Baltimore, 
and Salt Lake City. NAHB is of the opinion that Congress did not intend 
for environmental groups to have standing to challenge transportation 
planning decisions under the Federal Aid to Highways Act and that the 
courts should not resort to picking and choosing specific 
transportation projects for a region. We believe that Congress 
envisioned a dynamic process where transportation documents are 
continuously reviewed and updated on a regular basis in an effort to 
account for new data, technology improvements, and shifts in 
transportation growth. The conformity process is not static, and by 
necessity, is dependent on estimates and predictions based on ever-
changing data and projections regarding future transportation trends. 
However, while this litigation continues in absence of clarification by 
Congress, it is imperative for parties with an economic interest or 
those parties who are reasonably affected by an ultimate decision have 
the opportunity to intervene in those lawsuits. Efforts to keep 
transportation planning flowing without court-selection of specific 
transportation projects were very successful in 2001, and these efforts 
continue through 2002.
    NAHB has also recognized that a conformity lapse can result from a 
poorly coordinated administrative process as much as any court 
decision. For example, Houston was days away from lapse in the summer 
of 2001, and San Francisco did experience a conformity lapse in early 
2002. Both of these areas became bogged down in underlying challenges 
to State air quality planning, such as modeling issues, that overlapped 
with upcoming deadlines for approval of transportation plans. It was 
not that the transportation plan itself was flawed, but that the air 
quality plan approval process was not synchronized with the 
transportation plan approval process. The transportation planning 
process itself can be unnecessarily burdensome on local planners, and 
changes should be made to the requirements to facilitate better air 
quality and transportation planning.
Concerns about the Current Transportation Conformity Requirements
    In reconsidering transportation conformity while reauthorizing TEA-
21, NAHB urges Congress to carefully weigh the air quality benefits 
gained by implementing the complicated transportation conformity 
requirements against the economic impacts of the current transportation 
conformity system. NAHB supports air quality planning aimed at reaching 
the goals of the CAA and understands the need for future motor vehicle 
emissions to be factored into transportation planning. As 
reauthorization progresses, Congress should consider whether 
transportation conformity is achieving its intended goals.
    NAHB would like to work with Congress to address what we see as the 
major problems with the transportation conformity process. Through 
several meetings and conversations with industry stakeholders and 
transportation and environmental officials, NAHB has identified several 
areas of concern:
      Under the current transportation conformity system, the 
introduction of ``new'' air or transportation data triggers the need 
for a new air quality plan and, in turn, a new conformity 
determination. Unfortunately, it is difficult to find a balance between 
introducing new air and transportation data into the system while still 
maximizing the time available to State and local transportation 
planners to make conformity determinations prior to statutory 
deadlines. Transportation planners are confused by current EPA and U.S. 
Department of Transportation (DOT) guidance about what procedures 
should be followed and which data should be used in planning.
      The Federal agencies have not concluded properly or 
consistently what kind of project can move forward during a 
transportation conformity lapse situation. As EPA and DOT attempt to 
interpret a court decision from 1999 that interprets the statute, once 
a project is approved by a local government and well on its way to 
becoming a reality, conformity lapse can leave a partially completed 
project unfinished.
      Organizations representing environmental interests are 
attempting to manipulate the judicial process to force Metropolitan 
Planning Organizations (MPOs) to adopt favored local transportation 
projects. Environmental groups have developed a legal strategy to 
challenge modeling, pollution estimates and emissions forecasts with 
which they disagree--even though these challenges should be made during 
the public participation phase of the planning process. 
Environmentalists are petitioning the courts to freeze and invalidate 
transportation plans and transportation projects such that an area 
could be thrown into conformity lapse if the case were successful. 
Abusing the court system in this manner enables environmental groups to 
hijack the collaborative stakeholder process that develops both the 
short and long-term transportation plans.
      The way that EPA implements its new 8-hour ozone and fine 
particulate matter standards will have significant impact on the 
transportation conformity process. As stated earlier, the number of 
nonattainment areas may double, limiting State and Federal resources. 
Further, the newly designated nonattainment areas will have little 
experience with the implementation of an already complicated conformity 
process.
    NAHB looks forward to working with Congress to seek solutions to 
these problems as reauthorization of TEA-21 continues.
    Thank you for allowing NAHB the opportunity to share its views on 
the transportation conformity process. NAHB applauds the efforts of the 
Senate Environment and Public Works Committee to tackle this difficult 
issue. We look forward to working with members of the committee on this 
issue and other issues of concern to the home building industry during 
the reauthorization of TEA-21.
                               __________
  American Association of State Highway and Transportation Officials 
                                (AASHTO)
                                                    August 9, 2002.

The Honorable James M. Jeffords,
Committee on Environment and Public Works,
U.S. Senate,
Washington, DC 20510.

Dear Mr. Chairman: I am writing on behalf of the American Association 
of State Highway and Transportation Officials (AASHTO), which 
represents the departments of transportation in the 50 States, the 
District of Columbia and Puerto Rico. We want to thank you and the 
members of your committee for convening a hearing on July 30, 2002 to 
address transportation and air quality issues.
    With the enactment of the Clean Air Act Amendments (CAAA) in 1990 
and the Intermodal Surface Transportation Efficiency Act (ISTEA) in 
1991, transportation planning and air quality planning became more 
closely linked through transportation conformity. The policy objective 
of the transportation conformity process is to coordinate air quality 
and transportation planning by ensuring that transportation plans are 
consistent with planning for attaining Federal air quality standards. 
The results have been positive--coordination between air quality and 
transportation planning has improved and cooperation between air 
quality and transportation planning officials has increased. The 
process has resulted in greater awareness of decisionmakers of the 
linkages between transportation and air quality and has encouraged 
broader involvement in transportation planning by stakeholders. We 
support and applaud these improvements.
    Nevertheless, after more than 10 years of experience, we believe 
the transportation conformity process is still not working as 
effectively as it could. For example, under the existing requirements, 
the transportation and air quality planning processes are still 
misaligned:
      Different Planning horizons: U.S. DOT's metropolitan 
planning regulations require that metropolitan transportation plans 
have a minimum of a 20-year planning horizon, while the Clean Air Act 
requires State Implementation Plans (SIPs) to cover a period that 
extends only to the attainment date, typically a five to 10 year 
period, resulting in a mismatch. The result is a defacto ``cap'' on 
future emissions through the end of the 20-year transportation plan 
period. Travel growth and associated emission increases can be offset 
only with transportation measures--new fuel and vehicle technologies 
that may be coming online cannot be considered. This puts the 
transportation sector at a distinct disadvantage and does not allow for 
analyses of potential measures from all sectors.

    Recommendation: Amend TEA-21 to require conformity determination on 
first 10 years of the transportation plan or the attainment date, 
whichever is later.
      Different Frequency Requirements for Transportation and 
Air Quality Plan Updates: Transportation plans and their conformity 
demonstrations must be updated every 3 years; TEA-21 requires TIPs to 
be updated every 2 years; and there is no requirement to update 
attainment SIPs once approved by EPA. Maintenance plans need to be 
updated after 8 years with a new 10-year plan developed.
    These requirements have created a situation where transportation 
plans are updated regularly while SIPs are updated only on a 
discretionary basis. Because transportation plans, TIPs and SIPs must 
use the latest planning assumptions each time they are updated, the 
assumptions in SIPs tend to be older than those in plans and TIPs, 
creating an inconsistency in the process. This is important, as these 
differences in assumptions are critical to projecting on-road mobile 
source emissions. A current example is Sacramento, California, where 
the most recent SIP was developed in 1994--eight years ago--while the 
transportation conformity analysis must use the most recent planning 
assumptions and data.

    Recommendation: Amend TEA-21 to require metropolitan plan updates 
every 5 years in nonattainment and maintenance areas, and reaffirm that 
TIPs must continue to be consistent with plans.
      Different Emission Estimating Techniques: The conformity 
rule requires that the latest planning assumptions and emissions models 
be used in transportation plans, TIPs, and SIPs when they are updated. 
Under these requirements, regional emissions analysis are being 
performed using the latest emissions model and are being compared 
against SIPs that frequently were developed using older models (see 
discussion above on different frequency for transportation and air 
quality plan updates). The result is an uneven comparison as different 
estimating techniques and parameters produce significantly different 
estimates of current and future emissions levels. For example, in 2002, 
EPA released MOBILE6 model. Non-attainment areas have 2 years to begin 
using the model for conformity determinations. There is no 
corresponding requirement that SIPs be updated using the new model.

    Recommendation: Amend TEA-21 to require that SIP budgets and 
conformity demonstrations be based on the same mobile-source emissions 
factors model and/or same vehicle fleet mix data.
      Different Lead Times for Sanctions and Conformity Lapses: 
If a conformity lapse occurs, consequences on the transportation plan 
and/or TIP are immediate. If there is a SIP failure, however, penalties 
are not invoked until at least 18 months after EPA sites an area with a 
SIP violation.

    Recommendation: Amend TEA-21 to align conformity lapse with highway 
sanctions time clocks.
      fter 20-years of maintenance, areas still need to meet 
conformity requirements: Conformity requirements currently apply to all 
nonattainment and maintenance areas. This means that even if an area 
has completed the 20-year maintenance period, if the 20th year is 
anytime within the transportation planning horizon, the area still must 
meet conformity requirements until the last year of the transportation 
plan (e.g., end of 20-year maintenance period 2006, transportation plan 
horizon 2025). This is increasingly becoming an issue as more areas are 
reaching the end of their 20-year maintenance period.

    Recommendation: Amend TEA-21 to clarify that conformity applies 
only during the maintenance period.
    In conclusion, we believe it would be useful and appropriate to 
consider process improvements that could enhance integration of 
transportation and air quality plans and strengthen the transportation-
air quality linkage. Moreover, we believe it is essential to consider 
and establish an orderly process for implementing the upcoming 
designation of more than 200 new areas for non-attainment under the 8-
hour ozone or PM2.5 air quality standards.
    Attached is a complete set of AASHTO's recommendations regarding 
transportation conformity that were approved by the Board of Directors 
on April 21, 2002. We respectfully request that this letter and the 
attachment be made a part of the official record of the Senate 
Environment and Public Works Committee's July 30, 2002 hearing on 
Transportation and Air Quality.
    AASHTO appreciates the opportunity to work with you and your 
committee, and looks forward to continuing to explore approaches with 
you for improving transportation and air quality planning coordination 
through the transportation conformity process.
            Respectfully yours,
                          John Horsley, Executive Director.











                         TEA-21 REAUTHORIZATION

                              ----------                              


                       MONDAY, SEPTEMBER 9, 2002

                                     U.S. Senate,  
      Committee on Commerce, Science, and Transportation,  
Subcommittee on Surface Transportation and Merchant Marine,

         Committee on Environment and Public Works,
Subcommittee on Transportation, Infrastructure, and Nuclear 
                                                    Safety,
                                                    Washington, DC.
    The subcommittees jointly met, pursuant to notice, at 2:38 
p.m. in room SR-253, Russell Senate Office Building, Senator 
Breaux [chairman of the Subcommittee on Surface Transportation 
and Merchant Marine] presiding.

                             FREIGHT ISSUES

    Present for the Committee on Commerce, Science, and 
Transportation: Senator Breaux.
    Present for the Committee on Environment and Public Works: 
Senators Reid, Jeffords, and Inhofe.

 OPENING STATEMENT OF HON. JOHN BREAUX, U.S. SENATOR FROM THE 
                       STATE OF LOUISIANA

    Senator Breaux. The committee will please come to order. I 
would like to welcome our colleagues from the Environment and 
Public Works Committee who are with us this afternoon for this 
very important hearing, particularly Senator Reid and Senator 
Inhofe and also Senator Jeffords and others who I know will be 
attending. This is a joint hearing of the Subcommittee on 
Surface Transportation and Merchant Marine and the Subcommittee 
on Transportation, Infrastructure, and Nuclear Safety. I also 
thank all of our witnesses for being with us.
    I would just make a brief comment to point out that one of 
our fastest-growing segments of our economy, and our gross 
domestic product for this country, is international trade. This 
segment of our economy is completely dependent on our 
transportation sectors and on the intermodal transportation of 
the goods that are engaged in commerce.
    Today we are going to look at what has become one of the 
backbones of our entire Nation's economy, the infrastructure 
for the intermodal transportation system of the United States. 
I think all of us who represent port areas are familiar with 
the importance of an intermodal, interconnected, transportation 
system, that without it we will not continue to be one of the 
great trading nations of the world.
    Intermodal containers, for instance, in the ocean shipping 
area, are increasing dramatically. It used to be that a ship 
that had 2,000 containers on it was considered one of the 
largest in the world. Today we have ships carrying 7,000-plus 
containers. If those containers were lined up one behind the 
other on rail cars, it could extend over 35 miles, just from 
the containers on one large container ship.
    So we want to look at the problems associated with 
intermodal transportation. I am delighted that our leader on 
the Democratic side, Senator Reid, who has been so active in 
these transportation measures from an appropriations standpoint 
and others, is with us to help with this hearing this 
afternoon. Senator Reid, any comments?

  OPENING STATEMENT OF HON. HARRY REID, U.S. SENATOR FROM THE 
                        STATE OF NEVADA

    Senator Reid. Thank you very much, Mr. Chairman. I am very 
happy that we have here with us the chairman of the full 
committee, Senator Jeffords, who has been so good at allowing 
us to do things on the committee. As chairman of this 
subcommittee, I appreciate his allowing us to do this joint 
hearing.
    Senator Breaux, you being from a State where you see these 
ships come in all the time, you are used to them. But for me, 
every time I go to a place where we have freight that comes by 
ship I am stunned how big these are. I cannot imagine a ship 
could stay afloat with 35 miles of railroad cars in it. It is 
just hard for me to comprehend that we have vessels that can do 
all of that.
    I am happy to co-chair this hearing with you, Senator 
Breaux. The subcommittee that you chair, Surface Transportation 
and Merchant Marine, is extremely important and, even for those 
of us who are not in ports, we all understand or should 
understand that solving America's freight and passenger 
transportation problems will require a comprehensive intermodal 
and flexible approach.
    Jurisdiction over surface transportation programs is 
divided between our committee and your committee. We have to do 
everything we can to coordinate our efforts. You and I have 
been around long enough that it is a question of what we can 
get done and do it as quickly as we can. Once we get something 
done, there is a lot of credit to pass out. We do nothing, and 
I think we'll get discredit for that.
    We need to work not only with our committees, but we have 
to work in Finance, Budget, and Appropriations. So we have to 
do a lot to set the policy agenda. We can do that. We cannot 
begin to address the significant problems facing our Nation's 
transportation system unless we have adequate funding. Each of 
these committees I have mentioned will be an important partner 
in our efforts to secure the additional funding and budget 
protection necessary to write a transportation bill that 
addresses our Nation's significant highway, transit, and rail 
infrastructure needs.
    Funding problems--today we will deal with freight 
transportation. Efficient transportation of freight is 
essential to our Nation's economic growth and global 
competitiveness. Nearly $10 trillion worth of freight is 
transported each year on our roads, railroads and waterways. We 
depend on our transportation system to get everything from food 
and other agricultural products to consumer goods to 
construction materials to coal to their destinations.
    Freight transportation will double in the next 20 years. 
This growth in freight will vastly outpace the growth of our 
road and rail system and it can simply overwhelm our 
transportation infrastructure. Already, bottlenecks exist at 
border crossings with Canada and Mexico and in metropolitan 
areas. The next transportation bill will have to address these 
capacity issues and improve access to intermodal facilities.
    In addition, we have to address operational issues that 
impact the reliability of our transportation system. 
Intelligent transportation systems will play a critical role.
    We are fortunate to have a number of distinguished 
witnesses today. I especially look forward to Katie Dusenberry, 
who chairs the Arizona State Transportation Board, to talk 
about the traffic bottleneck at Hoover Dam. As a result of the 
closure of Hoover Dam, we have had to divert traffic--2,100 
trucks a day now are detoured 23 miles or more.
    Senator Breaux, you have heard me talk about my home town 
of Searchlight. That is where they go, 2,300 trucks every day. 
It is dangerous. It is the busiest two-lane highway in Nevada 
and it is extremely dangerous and it is only going to get 
worse. This bridge is essential to freight movements on the 
Cana-Mex corridor and is a top priority for our entire region 
of the country.
    Senator Breaux, one of the things that we have to keep in 
mind also is if you look at a chart, on numbers, trucks haul 
most of the stuff and we want to do what we can to make sure 
that our highways get the attention they need. But it is kind 
of a misleading figure to look simply at numbers, because the 
trucks cannot haul most of the stuff until it gets to them and 
most of that comes with rail or through ocean traffic, barge 
traffic. So we have a lot to do to make sure that we better 
understand the freight system. If there were ever an area where 
we cannot be provincial, that is, we in Nevada have to care 
about Louisiana even though we do not have--in Las Vegas, four 
inches of rain a year. You get that much in a couple of hours--
we have to be concerned because if we are going to keep Las 
Vegas economically sound, we are going to have to figure a way 
to get the traffic from Long Beach, New Orleans, and other 
places.
    [The prepared statement of Senator Reid follows:]
  Statement of Hon. Harry Reid, U.S. Senator from the State of Nevada
    Welcome to today's hearing on freight transportation issues. I am 
pleased to co-chair this hearing with Senator Breaux and the Commerce 
Subcommittee on Surface Transportation and Merchant Marine he chairs. 
Solving America's freight and passenger transportation problems will 
require a comprehensive, intermodal, and flexible approach. 
Jurisdiction over surface transportation programs is divided between 
the Environment and Public Works Committee, the Banking Committee, and 
the Commerce Committee, and we will have to closely coordinate our 
efforts. This joint hearing is an important example of that 
cooperation, and I look forward to working closely with Senator Breaux 
and our other partners throughout the TEA-21 reauthorization process.
    In addition to working with the Commerce and Banking Committees on 
policy issues, I intend to work closely with the Finance, Budget, and 
Appropriations Committees on funding issues. While we have a lot of 
important policy work ahead of us, we cannot begin to address the 
significant problems facing our nation's surface transportation system 
without adequate funding. Each of these committees will be an important 
partner in our efforts to secure the additional funding and budget 
protection necessary to write a transportation bill that addresses our 
nation's significant highway, transit, and rail infrastructure needs.
    One particular funding need that we will address at our hearing 
today is freight transportation. The efficient transportation of 
freight is essential to our nation's economic growth and global 
competitiveness. Nearly 10 trillion dollars worth of freight is 
transported each year on our roads, railroads, and waterways. We depend 
on our transportation system to get everything--from food and other 
agricultural products to consumer goods to construction materials to 
coal--to its destination.
    Freight transportation is expected to double in the next 20 years, 
as the economy grows and international trade increases. This growth in 
freight traffic will vastly outpace the growth of our road and rail 
systems and threatens to overwhelm our transportation infrastructure.
    Already, key bottlenecks exist at road and rail connections to 
major U.S. seaports, at border crossings with Canada and Mexico, and in 
metropolitan areas where roads and rail infrastructures are stretched 
beyond their capacity.
    This next transportation bill will have to address these capacity 
issues and improve access to intermodal facilities if we are to keep 
our economy moving and maintain our leadership in international trade.
    In addition, we must address operational issues that impact the 
reliability of our transportation system. Intelligent Transportation 
Systems will play a crucial role in improving the reliability of our 
transportation infrastructure and ensuring the flow of up-to-the-minute 
information to users and managers.
    We are fortunate to have a number of distinguished witnesses with 
us today to provide our committees with insights into the freight 
challenges we face and, we hope, some proposed solutions to these 
problems.
    One witness I would like to particularly thank for making the trip 
to be here is Katie Dusenberry, who chairs the Arizona State 
Transportation Board. Ms. Dusenberry will be testifying on an issue 
that is of vital importance to my State and the entire Southwestern 
region--the closure of the Hoover Dam to truck traffic due to post-
September 11th security concerns.
    As a result of the closure of the Hoover Dam bridge to freight 
traffic, over 2,100 trucks per day are now detoured 23 miles or more. 
To address this problem, the States of Arizona and Nevada are working 
together, and with the Federal Government, to build a Hoover Dam Bypass 
Bridge. This bridge is essential to freight movements on the CANAMEX 
corridor and is a top priority for my State. The Department of Interior 
has identified the Hoover Dam bypass project as its No. 1 national 
security priority.
    I am pleased that Ms. Dusenberry has joined us to provide her 
expert testimony on this project.
    Again, thank you to all of our witnesses for your participation 
today. Our first panel will consist of Associate Deputy Transportation 
Secretary Jeffrey Shane, who is also the Director of the Office of 
Intermodalism, and Jay Etta Hecker from the U.S. General Accounting 
Office. Thank you for agreeing to be with us today and I look forward 
to your testimony.
    Senator Breaux. Thank you very much, Senator Reid.
    In order of appearance, I recognize the chairman of the 
full Environment and Public Works Committee, our friend Jim 
Jeffords.

 OPENING STATEMENT OF HON. JIM JEFFORDS, U.S. SENATOR FROM THE 
                        STATE OF VERMONT

    Senator Jeffords. Thank you. Senator, I appreciate all the 
work you have done along with Senator Reid in putting this 
hearing together. Coordinating two committees is not an easy 
task. It is so essential, and I applaud your efforts.
    Today's hearing lays important groundwork for the TEA-21 
reauthorization next year. The proper and efficient handling of 
freight is absolutely critical to the American economy. It is 
that simple. Without this, consumer prices would skyrocket, 
factories would have temporary shutdowns, businesses could not 
function, and families would even worry about food shortages in 
the land of plenty.
    I care about freight issues. They are important to me in 
Vermont and to every county and every State in the Union. 
Chairmen Reid and Breaux have highlighted some important facts. 
I will repeat one: The U.S. transportation system carried over 
15 billion tons of freight valued at over $10 trillion during 
1998. Trucks carry about 80 percent of that value.
    Now for the most critical point: The volume of freight that 
needs to be carried in the United States will more than double 
by the year 2020. Thus, the transportation bill for the next 
generation of Americans, which we are currently crafting and 
will pass next year, must address this issue in a positive 
manner.
    America needs to invest in vital intermodal freight 
infrastructure so that American businesses have competitive 
choices and more opportunities. For example, our international 
ports should offer multiple options, such as train and truck, 
to move incoming freight or to efficiently load ships with 
American products. Careful strategic investments near urban 
areas, factories, border crossings, ports or elsewhere can 
greatly help. Of course, I understand that regional needs vary, 
which is why the new law must embrace flexibility and local 
decisionmaking. For example, Vermont has a strong tradition of 
moving heavy freight by rail to the St. Lawrence Seaway. 
Freight moves through Vermont north to the Province of Quebec 
and south to the Eastern Seaboard. Vermont's granite and marble 
quarries, its dairy farms and its timber industries produce 
relatively heavy products, and its high-tech industries such as 
IBM produce high value but low weight products. Allowing 
flexibility, local decisionmaking, and competitive choices will 
provide for efficient intermodal freight movement.
    Those who ship and receive freight in America are concerned 
with efficiency and timeliness. We need intelligent freight 
systems in addition to intelligent transportation systems. The 
buyer's cry is: I want it on time and unbroken. Yet this week's 
New Yorker magazine, in an article entitled ``Stuck in 
Traffic,'' explains how congestion threatens efficiency on our 
highways. The article wonders if the world will end, not with a 
bang, but with a traffic jam.
    America has spent hundreds of billions of dollars building, 
improving, and repairing our massive highway transportation 
systems. I will push for a similar revitalization of our rail 
system. We need a modern rail equivalent to our highways.
    Rail will yield strong benefits throughout our Nation. 
First, movement of goods onto rail can usually reduce 
congestion on our roads and permit truck freight to move faster 
and safer. Second, it will make our highways last longer as the 
heavy freight is moved by rail. Truck shipments exert a 
tremendous toll on our Nation's highways.
    Third, more targeted, strategic, less costly investments 
can help move huge volumes of freight while offering businesses 
another viable option. For example, much of the truck traffic 
on Route 7 in Vermont could be handled by rail through 
precisely targeted strategic investments in rail corridors, 
instead of through expensive road-building projects. Each 
Senator in this room probably has similar examples for their 
States.
    In closing, let me again emphasize my interest in working 
with everyone in this room on these critical freight issues. I 
look forward to hearing the testimony here today. Thank you, 
Mr. Chairman.
    Senator Breaux. Thank you, Senator Jeffords. Senator 
Inhofe.

 OPENING STATEMENT OF HON. JAMES M. INHOFE, U.S. SENATOR FROM 
                     THE STATE OF OKLAHOMA

    Senator Inhofe. Thank you, Mr. Chairman. I think you are 
aware that this committee is having a scheduling conflict with 
Senator Armed Services. So I will not be able to stay.
    I did want to come down and express myself on a couple of 
things. The significance of a reliable freight transportation 
system is always imperative, although it is more so now in 
times of war. As the ranking member of the Transportation and 
Infrastructure Subcommittee, I now have the opportunity to work 
more closely on making sure that transportation needs are met.
    I believe there is still much that needs to be done in 
accomplishing our goals. I am pleased to be meeting today in 
conjunction with the Commerce Subcommittee and discussing the 
matters at hand. We face many challenges with our current 
transportation system concerning the consequences on our 
economy and our environment. While I understand the focus on 
improving our important border infrastructures to handle 
increasing traffic volumes in the future, my concern is 
committing to the enhanced safety and security of commercial 
vehicle operations at our borders.
    Mr. Chairman, when you and Senator Reid talked about the 
ports, a lot of people are not aware that Oklahoma is a port. 
We are the home of America's most inland port. So we have 
extensive operations there.
    I am certain it is possible to have a transportation system 
that is safe and secure, as well as efficient and productive. 
The past two reauthorization acts developed and promoted by 
this committee have been instrumental in stimulating surface 
transportation policy. As the committee considers 
reauthorization proposals, it is necessary to review whether 
changes need to be made. I would be interested to hear our 
witnesses. I believe it is necessary to define what program 
changes might need to be implemented in reauthorization to aid 
the improvement of intermodal connections surrounding ports, 
railheads, and other intermodal transfer facilities.
    Mr. Chairman, I ask unanimous consent to insert testimony 
for Mr. Jim Fisk of MagTube Incorporated and Charlotte Thorton 
on innovative approaches for freight transportation issues, if 
I might.
    Senator Breaux. Without objection, it will be made a part 
of the record.
    Senator Inhofe. Thank you, Mr. Chairman.
    [The prepared statement of Senator Inhofe follows:]
   Statement of Hon. James M. Inhofe, U.S. Senator from the State of 
                                Oklahoma
    Thank you Mr. Chairman. Today's hearing on freight and intermodal 
transportation is exceptionally important to me. A reliable freight 
transportation system is always imperative, although it is particularly 
important these days during times of war.
    As the ranking member of the Transportation and Infrastructure 
Subcommittee, I now have the opportunity to work more closely on making 
sure that transportation needs are meet. I believe there is still much 
that needs to be done in accomplishing our goals.
    We face many challenges with our current transportation system that 
causes concerning consequences on our economy and environment.
    While I understand the focus on improving our port and border 
infrastructures to handle increasing traffic volumes in the future, my 
concern is committing to the enhanced safety and security of commercial 
vehicle operations at our borders. I am certain it is possible to have 
a transportation system that is safe and secure, efficient and 
productive.
    A better understanding of freight demands and similar issues helps 
us to analyze the increasing demand for freight transportation, 
assessments of the implications of freight demands for the entire 
surface transportation system and improvements in freight efficiency 
and security.
    The past two reauthorization acts developed and promoted by this 
committee have been instrumental in stimulating surface transportation 
policy. As the committee considers reauthorization proposals, it is 
essential to review whether changes need to be made.
    I will be interested to hear if our witnesses believe it is 
necessary to define what program changes might need to be implemented 
in reauthorization to aid the improvement of intermodal connections 
surrounding ports, railheads and other intermodal transfer facilities 
near our ports and borders.
    Mr. Chairman, I ask for unanimous consent to insert testimony from 
Jim Fiske, from Magtube, Inc. and Charlotte Thorton on innovative 
approaches for freight transportation issues.
    Mr. Chairman, I look forward to today's hearing and want to welcome 
all of our witnesses.
    Senator Breaux. Thank you. We have that waterway all the 
way up to Oklahoma from Louisiana.
    Senator Inhofe. We do, we do.
    Senator Breaux. Thank you very much, colleagues.
    I would like to welcome and am pleased to have Mr. Jeffrey 
Shane, who is Deputy Secretary for Policy at the Department of 
Transportation, back before the committee; also, Ms. JayEtta 
Hecker, who is with the General Accounting Office and has just 
done an extensive report on some of these issues, particularly 
in the marine transportation area, to present testimony.
    Mr. Shane, Mr. Secretary, we have your testimony. We note 
it is an extensive document. If you could help us summarize it, 
we will proceed to questions. Ms. Hecker, the same for you.

 STATEMENT OF JEFFREY N. SHANE, ASSOCIATE DEPUTY SECRETARY AND 
DIRECTOR, OFFICE OF INTERMODALISM, UNITED STATES DEPARTMENT OF 
                         TRANSPORTATION

    Mr. Shane. Chairman Breaux, Chairman Reid, Chairman 
Jeffords, and Ranking Member Inhofe: Thank you very much for 
allowing me to represent Secretary Mineta today and testify on 
freight transportation intermodalism. These are issues that 
affect our economy, as we have just heard, in profound ways and 
both committees are to be commended for the leadership you have 
shown in this area.
    Mr. Chairman, you referred to my longer statement. I assume 
it will be placed in the record. I would appreciate that.
    Senator Breaux. Without objection, it will be.
    Mr. Shane. Thank you very much, and I will try to summarize 
within the time allotted.
    With the possible exception of our obligation to ensure for 
our citizens a safe and secure transportation system, DOT has 
no higher priority than facilitating the seamless 
transportation of goods throughout our country and in 
international trade flows. Congestion, bottlenecks, choke 
points, and all the consequences of insufficient capacity and 
inefficient intermodal connections impede that growth, raise 
costs to consumers, and impair our economic well being in ways 
that are simply too often overlooked.
    Ensuring smooth global supply chains has become of even 
greater importance as companies increasingly shift to just-in-
time manufacturing techniques, and ability to move freight and 
cargo quickly across the different modes of our transportation 
system serves as the linchpin of that manufacturing revolution.
    The growth of international trade, particularly as the 
world moves toward a far more liberal framework for trade, 
represents another key challenge to our transportation system. 
While we have included a wide range of trade and transportation 
statistics in the longer statement that I have submitted for 
the record, I would like to draw your attention again to just 
one, the one cited by both Chairman Reid and Chairman Jeffords: 
that the volume of shipments into and out of the United States 
is expected to double between now and 2020.
    It is essential that our ports and our airports and border 
entry points have the capacity to accommodate these increases, 
especially with the more aggressive security procedures that 
will have been put in place in response to September 11.
    ISTEA and TEA-21 have created a solid framework for 
addressing the transportation and logistics needs of our 
country. As we move forward with the reauthorization of TEA-21, 
however, one thing is clear. The demand on our Nation's 
transportation system is growing faster than supply. Statistics 
show that population growth combined with substantial increases 
in vehicle miles traveled and freight tonnage moved have 
resulted in rising levels of congestion on our Nation's 
highways, despite increased Federal investments under ISTEA and 
especially under TEA-21. Projected future growth in all of 
these areas will only worsen congestion without a strong 
commitment to make our infrastructure far more robust and far 
more efficient than it is today.
    Imagine, if you will, what travel on our highway system 
would be like today if our freight rail system were suddenly 
shut down. By the year 2010, you will not have to imagine it, 
because expected increases in truck traffic over current levels 
will be equal to the entire volume of freight that is carried 
on our Nation's rail system today. That is why Secretary Mineta 
believes that the administration and Congress have to work 
together to make increasing the efficiency of freight 
transportation a central feature of our surface transportation 
reauthorization legislation next year. Coordination between the 
modes and enhanced private involvement in the system are two 
themes that need to be emphasized in that effort because, 
although much has been accomplished over the last decade based 
on improvements put in place by ISTEA and TEA-21, the promise 
of intermodalism, more efficient movement of passengers and 
freight throughout all parts of our transportation system, and 
the potential for private sector participation in 
infrastructure expansion have yet to be fully realized.
    In conclusion, it is clear that the commercial movement of 
freight was successfully woven into a number of TEA-21's 
programs, especially in the areas of funding flexibility, 
border and corridor planning, and the application of new 
technologies. We will need to think carefully about all of 
these issues as we build on TEA-21 by enhancing existing 
programs and, where appropriate, developing new ideas to ensure 
that our freight transportation system can meet future 
challenges.
    As you know, earlier this year Secretary Mineta outlined a 
series of principles that will guide us through the 
reauthorization process. Using those principles as our base, we 
have been carefully examining proposals put forward by 
stakeholders as we develop our reauthorization proposal. For 
example, we will work with our partners in the States and in 
metropolitan planning organizations to achieve wider 
application of innovative financing programs.
    We will consider changes to the Borders and Corridors 
program that will encourage broader transportation planning and 
integrate infrastructure investments with national and 
international business developments. We will continue to apply 
innovative technologies through the ITS program and in 
collecting data on freight movements and trade flows, and we 
will work closely with the private sector to formulate 
innovative transportation solutions that develop new ways to 
utilize public-private partnerships that leverage scarce 
Federal funds.
    I am confident that, working together, the administration, 
Congress, and our stakeholders can expand our transportation 
infrastructure to ensure increased mobility, security, and 
prosperity for years to come.
    Thank you very much again for the opportunity to appear 
here today. I look forward to answering any questions you may 
have.
    Senator Breaux. Thank you, Mr. Secretary.
    Next, from the General Accounting Office, Ms. Hecker.

STATEMENT OF JAYETTA HECKER, DIRECTOR, PHYSICAL INFRASTRUCTURE 
         GROUP, UNITED STATES GENERAL ACCOUNTING OFFICE

    Ms. Hecker. Thank you, Mr. Chairman, Senator Reid, and 
Senator Jeffords. We are really honored to be here today. We, 
as you noted, are releasing the report on marine transportation 
financing and a framework for infrastructure investments today. 
But because of the focus on the freight issue, I will broaden 
my remarks to focus more on the broader context of freight 
issues.
    I will cover four areas: first, the background, which will 
include this review of the growth that people have talked 
about; the new data that we collected for you on expenditure 
and direct receipts from users of the different modes; some 
data on Customs fees that you particularly wanted us to gather; 
and finally, the framework for review of critical decision 
points in evaluating investments in transportation.
    The scope of our work, in addition to this work on 
maritime, is focused on a long body of work on capital 
budgeting, needs estimates, and, Federal highway R&D. We have 
work, not yet released, in response to requests from the 
Environment and Public Works Committee on mobility challenges, 
innovative finance, State capacity and project delivery. In 
addition, there is a wide range of expert studies that date 
back to 1994, a major commission on intermodal freight 
challenges, the TRB report, the intermodal freight connectors 
report, and many other technical reports.
    The background issue that I would just like to cover is 
really putting the issue on the table that you have all stated, 
and that is, the enormous increase in projected freight 
tonnage. According to the Federal Highway Administration's 
updated figures, freight tonnage by all modes will increase by 
41 percent in the next 10 years and 76 percent by 2020.
    [Chart.]
    This shows the different growth rates for the different 
modes. As can be seen in the chart, it is estimated that there 
will be a 43 percent increase in the 20-year period for freight 
transported by water, a 55 percent increase by rail and an 84 
percent increase by truck.
    Now, this really obscures the new challenges, because the 
key of intermodal transportation is really figuring out ways 
that the intersection and connections between these modes are 
addressed as well.
    [Chart.]
    The second point is the history of the funding approaches 
and receipts from the different modes. This chart depicts the 
average amounts collected and expended by mdoe for fiscal years 
19992001. As can be seen, the maritime users, or the 
expenditures in the maritime sector, are about $4 billion a 
year, with user assessments covering about $1 billion. The 
aviation expenditures are about $10 billion a year, with $11 
billion of user assessments and the highway area has about $25 
billion of expenditures, with the average for the same period 
being $34 billion in user assessments.
    The key difference here is that the marine system largely 
relies on general revenues, whereas the aviation and highway 
systems have historically relied almost exclusively on 
collections from users.
    [Chart.]
    I turn now quickly to the third area that you asked us to 
address and that is the amount of duties that are collected on 
imported goods transported by the different modes. This 
basically is in pie chart form and shows that a little over 75 
percent of the import fees are collected on goods that come in 
through the maritime sector. As you see, almost $4 billion 
comes in through aviation Customs fees and less than $1 billion 
comes over the land borders of Canada and Mexico.
    Now, what is important about the Customs duties is that 
clearly these are duties or taxes on the value of selected 
imported goods. This, of course, is a traditional source of 
revenue for the general fund. It is paid by importers of the 
taxed goods and varies based on where our trade agreements are 
and the type of commodity.
     Therefore, it is not really a good proxy as a tax on users 
of the marine system. Although we recognize there is a proposal 
and discussions to designate Customs duties for the marine 
transportation system, this is clearly a policy call by the 
Congress. However, some funds, actually about 30 percent of 
Customs fees, are already designated for specific uses by the 
Government, and that includes such areas as agriculture and 
food programs, migratory land conservation, aquatic resources, 
reforestation. So some of those duties are already earmarked.
    The other thing about the potential for designating Customs 
duties is that they really are not a new source of capital for 
the Federal Government. It is money that is already coming in, 
already accounted for, already spent, and therefore, the notion 
or the proposal that somehow you can draw on that would amount 
to a draw on the general fund of the U.S. Treasury.
     The fourth area--and I am sorry to see the yellow light go 
on because this is the most interesting contribution that we 
are trying to make--is a framework for developing national 
freight policy for consideration of transportation investment 
decisions. As you see, we basically outline four key steps: 
defining national goals, defining the roles of the different 
levels of Government, developing approaches and tools that 
promote cost-sharing and efficiency, and finally, evaluating 
performance.
    The key thing about the goals issue is that it needs to be 
intermodal and it has not been. This other whole issue of the 
so-called ``orphan'' status of the intermodal freight 
connectors. We still have a very stove-piped system and we need 
a conception of national goals for transportation that are 
integrated, intermodal, and freight-oriented.
    Another element about the goals involves developing 
Government commitment to performance and results. Therefore, 
another key indicator of the goals is having performance-
oriented measures for system performance and efficiency.
    Defining roles, as I said earlier, is about the relative 
roles of the different levels of Government. The role of MPOs 
is a key thing here. They have not really paid attention or 
placed priority on freight. It is rational on their part to do 
so because while they do not benefit, they bear most of the 
costs. So there are some structural issues about the relative 
roles of Government.
    The third area, on determining appropriate tools, really is 
driven by the roles issues. As you define the relative roles, 
you implement and effectuate those by using the appropriate 
tools that leverage Federal funding and promote accountability 
and efficiency. A key thing that I think several of you already 
alluded to is that in appropriate tools, we also have non-
investment and non-capital tools to improve the efficient use 
of the existing system. That would involve tools such as demand 
management and congestion pricing; technology improvements 
which include the ITS area that several of you mentioned; 
enhanced maintenance and rehabilitation, and improved 
management and operations.
    Quickly, the final area is basically evaluation. We need to 
understand how current policies work and we need to track the 
performance of proposed policies. The more it is framed as 
performance of the efficiency of the system, the more likely we 
will be able to determine whether we are really getting the 
improved efficiency in the performance of the transportation 
system instead of focusing on capital or completed projects. 
Evaluations allow us to determine the outcome we want to 
achieve.
    That concludes--I am sorry about the red light--my remarks. 
The key is that the freight intermodal focus is clearly a 
cornerstone of the next generation of transportation 
legislation.
    Senator Breaux. Thank you, Ms. Hecker and Mr. Secretary.
    I take it, Ms. Hecker, to start with you--and I want Mr. 
Shane to comment on it--the fact that you are proposing what 
you have labeled a framework for developing an effective 
Federal investment strategy indicates that in GAO's opinion we 
do not have that now?
    Ms. Hecker. We continue to have policies and legislation 
specific to different modes. Certainly the maritime legislation 
has never been integrated in a systematic way with highway 
authorization. Furthermore, the whole issue of freight has not 
been systematically examined. For example, our railroad 
policies and the effect of some of those policies on the 
freight infrastructure and the tradeoffs between different 
modes has not been systematically explored.
    So yes, I think there is real value in moving toward a more 
systematic view of transportation requirements.
    Senator Breaux. Mr. Secretary, we have an office over in 
DOT that is an Intermodal Office. Is that not what they should 
be doing?
    Mr. Shane. That is right, and as a matter of fact, Mr. 
Chairman, I head that office. So that I like to think that we 
are doing some of that.
    I do not disagree, however, with Ms. Hecker that there is 
certainly more room for further integration. We all know that. 
To some extent there is an element of stovepiping in the 
legislation that we have and that we continue to work on. But 
it would be unfair to characterize ISTEA, for example, the 
Intermodal Surface Transportation Efficiency Act, and the 
Transportation Efficiency Act for the Twenty First Century, 
TEA-21, as completely oblivious to the importance of further 
integration and intermodal planning.
    I think there has been an awful lot of that and there have 
been some very powerful results as a result. Programs like the 
CMAQ program, the congestion mitigation program, TIFIA, an 
assortment of other elements of TEA-21, have indeed funded more 
integrated approaches to transportation and encouraged 
intermodal planning at the State and local and regional level.
    So I am interested in what GAO has been doing and we would 
certainly look forward to consulting more and finding out, 
particularly as we move through the reauthorization process 
with Congress, where there might be further opportunities for 
improvement. But I do not think it is fair to characterize the 
system as totally stove-piped even today.
    Senator Breaux. Are you all working on the reauthorization 
from a conceptual standpoint as far as recommendations to the 
Congress?
    Mr. Shane. We are, Mr. Chairman, and I would go further and 
to say we are beyond the conceptual standpoint. We have been 
organized--we have got 200 people at the Department of 
Transportation organized into functional groups, cross-modal, 
cross-cutting, working with stakeholders in all elements of the 
transportation sector, working with each other, and thinking 
great thoughts, if I might say, about the future of these 
programs, such that by early next year, once we have gone 
through an exercise with OMB--as you know, that is always 
required as the administration puts a proposal together for the 
Congress--we hope to transmit a bill which will be, I think, 
hopefully, the center of gravity for Congress's deliberations 
over the reauthorization of TEA-21.
    Senator Breaux. Are we likely to see from those 
recommendations any type of thinking outside of the box, so to 
speak? Or are we talking about pretty much the same type of 
planning and recommendations that we have had in the past?
    Mr. Shane. I hope you are going to see some out-of-the-box 
thinking, Mr. Chairman. I have been impressed probably more 
than any other aspect of TEA-21 with the effectiveness of those 
parts of the program which have been able to leverage Federal 
money, that is to say to encourage private sector 
participation, to encourage State governments and other levels 
of Government to really step up to the plate in a more 
important way.
    In an era of scarce resources--I mean, the era of cheap 
money is all over and we all know that--it is critical that we 
find even more effective ways of doing that. Programs like 
TIFIA, the intermodal connectors program, a variety of others, 
have produced I think disproportionate gains for relatively 
small expenditures, and we need to pursue as many opportunities 
of that sort as we can going forward or we are simply not going 
to have the resources solely at the Federal level to really 
meet the demands that we all have acknowledged here this 
afternoon. Senator Breaux: My final question is in what 
timeframe are we likely to have a completed package of 
recommendations from a conceptual standpoint?
    Mr. Shane. Our intention, of course subject to OMB's 
process, but I cannot imagine that that is going to be an 
impediment because we have been working with OMB already, is to 
get the bill, the administration bill, to the Congress very 
shortly after it returns in January or February of next year.
    Senator Breaux. Senator Reid.
    Senator Reid. Would both of you give me your thoughts on 
what we can do when we reauthorize TEA-21 to get the most 
efficient use out of the transportation infrastructure? Not 
theory; I mean actual things that we can do.
    Ms. Hecker. I think the four areas that I mentioned in 
terms of focusing on operations and not just construction----
    Senator Reid. Give me specific things, because all this 
theory is good, but we have to do something specific.
    Ms. Hecker. ITS and the lack of integration of ITS is a 
specific example. We have not really taken full advantage of 
the technology to streamline the flow of traffic to have a 
single standard for ITS. There is a lot more research that is 
promising about the role of technology.
    The focus on operations is another area. It goes precisely 
to your point.
    Senator Reid. Tell me what you mean by that? ``Focus on 
operations,'' what does that mean?
    Ms. Hecker. The efficient performance and utilization of 
the existing system, that it is underutilized----
    Senator Reid. How do we legislate that?
    Ms. Hecker. Well, there has been a comprehensive study that 
I would rather defer to, that has talked about their permeating 
all aspects of the Federal relationship----
    Senator Reid. Ms. Hecker, the only reason I pin you down a 
little bit is it is easy to get all these theories, that we 
should evaluate performance, establish goals, develop 
approaches, but when it comes down to it, this subcommittee 
that I am responsible for, next year we have to do real 
specific things and we are not going to sit around and say, 
``We are going to evaluate these goals and evaluate 
performance.''
    We do not have the benefit of doing that and that is why we 
need experts like you and Mr. Shane to tell us specifically 
what we can do to make this new transportation bill meet the 
modern needs of this clogged transportation system we have.
    Ms. Hecker. Well, I think the programs that we talked 
about, the Border and Corridor programs and the connector 
programs, it shows that they have not received adequate 
attention. So some shift of either the funding available or the 
restrictions will be missing to bring attention to these 
intermodal links.
    Senator Reid. You have the time to think about some of the 
things that we should do. This is your opportunity to give us 
some specific ideas of things that we could do in the next 
bill.
    You have mentioned the intelligent transportation system, 
but be more specific. This does not mean we are going to follow 
everything that you are recommending, but at least it will give 
us some direction and insight as to what you think we could do 
to improve the intelligent transportation system.
    An example of that is the new Amber Alert that works so 
well. People really look up on those road signs to get some 
idea what is going on. So we will leave the record open for a 
couple weeks for you to give us some specific ideas as to what 
we can do to improve TEA-21.
    Senator Reid. Mr. Shane, do you have any ideas?
    Mr. Shane. Yes, Senator, I have a few ideas. I think what I 
said before is my main--one of my main ideas, the notion that 
we need to leverage our Federal funds much more effectively. 
That is not a theory; that is something that we need to find 
ways of doing along the lines that were explored in TEA-21, I 
think quite successfully. By leverage, I mean--if you look at 
the national highway system intermodal connectors, that is a 
tiny fraction of the mileage on the national highway system. 
Yet, according to the report that we submitted to Congress that 
was requested in TEA-21, in the year 2000 the physical quality 
of those portions of the national highway system is far 
inferior to the national highway system generally, and the 
consequences of that inferior quality have a disproportionate 
negative impact on the efficiency of our whole freight 
transportation system.
    So by attacking a tiny little fraction of the overall 
mileage on the national highway system through a program of 
that kind, we extract disproportionately huge benefits. It is 
that sort of opportunity that we need to pursue.
    I mentioned the CMAQ program. You have got real intermodal 
success stories coming out of CMAQ, including rail success 
stories, because States have been able to use that money in 
very creative ways. The TIFIA program, which is a loan 
guarantee program, it actually requires the expenditure----
    Senator Reid. I am very familiar with that.
    Mr. Shane [continuing]. Of relatively little money. Again, 
it stimulates private sector interest in infrastructure 
expansion in ways that we have not seen before. We need to find 
more ways to exploit tools like that.
    Finally--and I do not mean by any means, last or least; it 
is not the least; it may be the most important--the Corridors 
and Borders program. There is so much interest in trying to 
facilitate the movement of freight through regional planning, 
including sometimes very complicated assemblages of Government 
entities and private sector entities, in order to really 
streamline the flow of freight in our system, that if the 
Borders and Corridors program is not big enough we need to 
figure out ways of either making it bigger or making it more 
creative such that it has the effect.
    Senator Reid. It has not worked very well. In theory it 
should have worked better than it has worked. I think we have 
to do some things to change it, because I think theoretically 
it is a great program.
    Mr. Shane. I agree, and there is a huge amount of pent-up 
interest in it; and the results of solving that problem in the 
reauthorized program I think will be huge and of enormous 
benefit to the economy.
    Let me just add one last thing if I may, and that is that 
working with all of these programs one thing that continues to 
impress me--and I am not just talking about the surface 
transportation programs; I am talking about all of our 
programs--when the private sector comes in and wants to do 
business with us, whether it is to expand highway 
infrastructure or airport infrastructure or anything else, 
particularly if it is a program that actually makes some 
Federal money available, they find themselves in a Faustian 
bargain. Even when there is enormous interest in trying to 
build infrastructure in ways that will respond to the demands 
that we have in the system today, sometimes our procedures can 
be counterproductive.
    One of the things I would like to see us do in the 
reauthorization process--and I am not here to make any 
announcements of bright new ideas; these are in process now--is 
to find ways of really streamlining our own clearance process 
for these projects. I am talking about all of the 
transportation projects that are funded or stimulated in any 
way by the Federal level.
    If I may go on for a second, I can give you an example of 
the sort of thing I mean. We have a security program which has 
been a huge success. It actually began, Senator Jeffords, in 
Vermont, called Operation Safe Commerce--a public-private 
partnership emerging more or less spontaneously in order to 
test the security of container transportation in our system in 
international transportation.
    Nobody at the Federal level suggested it, nobody approved 
it. It just happened. Well, we began to think that it was a 
good idea and we set up an executive steering committee. In 
fact, I co-chair the executive steering committee with the 
Deputy Commissioner of Customs, Don Browning. It is an example 
of how much interest there is in Washington in something that 
really works.
    But now I am noticing something that worries me. Now that 
we have an executive steering committee, suddenly it has become 
a Government program. In a funny way, one of the worst things 
that happened was that they got an appropriation of $28 
million. Now we have to be really responsible. Now we have to 
have procedures and accountability and we have to have, you 
know, the Inspector General looking at things, and all of a 
sudden a spontaneous effort to set up a test bed for container 
security could, unless we are very careful--and I want to 
assure you that we are trying to be very careful--if we are not 
very careful, we will stymie it. It'll grind to a halt just by 
virtue of the fact that the Federal Government has now applied 
all of its usual procedures and safeguards and everything else.
    We need to get past that mentality in our transportation 
infrastructure programs or we will not meet the demand that our 
country will face in 2020 for sure.
    Senator Breaux. Senator Jeffords.
    Senator Jeffords. Well, thank you very much. I appreciate 
your testimony. Thank you for your comprehensive testimony, I 
should say. I look forward to working with you in the TEA-21 
reauthorization effort.
    Later in this hearing Mr. Huerta on behalf of the Coalition 
for America's Gateways and Trade Corridors will ask for funding 
of $2 billion annually for the Borders and Corridors program. 
You may have just referred to that. But Mr. Wickham of the 
American Trucking Associations will explain that the congestion 
at the 7 busiest border crossings costs the trucking industry 
about 2.6 million hours in delay time per year. Also, Mr. 
Larrabee of the Port Authority of New York and New Jersey will 
explain the estimate that trade in all types of cargo will not 
double, but triple, by the year 2020. Just this weekend, as I 
rode to New York I enjoyed a visit from Amtrak, letting us know 
how they feel about the importance of moving more and more of 
the cars off the highways and onto the railroads and to work in 
that direction.
    So we have a tremendous need here to understand exactly how 
all of this is going to happen. I hope that you are working in 
a way that you can assist us in finding the means and the ways 
that we can accommodate all these changes that are needed. It 
is going to be huge in the sense of the cost to be able to 
orderly transfer our transportation systems between the freight 
and airways and all of that, to do the best job we can do.
    So I just believe you will be doing that, but would like 
for you to tell me you will. Mr. Shane?
    Mr. Shane. I will, Senator.
    [Laughter.]
    Senator Jeffords. Thank you. I thought that might smooth 
things down a little bit.
    Also, Ms. Hecker, I appreciate the detailed report the GAO 
submitted to our two committees.
    You point out the need for significant improvements to our 
marine transportation system and note that the marine 
transportation system is generating billions of dollars of 
revenue. The report discusses aging infrastructure, changes in 
the shipping industry, and increased concerns about security.
    It has been said that the footnotes often contain either 
the most boring or the most intriguing points in the study. 
Footnote 12 of your report notes that under current law 30 
percent of the gross receipts from Customs duties, about $15 
billion per year, is reserved for agricultural and food 
programs. Your report further notes that congestion challenges 
often occur where transportation modes connect, such as in 
ports.
    You also note that if there is an enhanced Federal role, 
you recommend that the enhanced Federal participation 
supplement participation by others rather than just replacing 
it.
    Your report has drawn a picture for us, but you have not 
connected the dots, which indeed may be our job. But can you 
give us a rough estimate of the cost of addressing the aging 
infrastructure and the new security concerns?
    Ms. Hecker. I will try to answer directly, but the direct 
answer is, ``No, I cannot give you the number.'' We have 
actually done some of this work, and I think there was 
testimony before you, Senator Reid, on reviewing all of the 
estimates of the needs of the different modes. They cannot be 
added up. They are done with inconsistent assessments. Most of 
these assessments do not assume capacity constraints. 
Therefore, if they are not capacity-constrained, these 
assessments cannot tell you whether it can grow that much and 
many of these studies do focus on opportunities for more 
efficient management and utilization of the system.
    So there really is not a single estimate of the cost of 
addressing the aging infrastructure and security concerns. It 
is a comprehensive challenge of the whole performance of the 
system, that we need some initiatives to build, but we need 
efficient, leveraging financing methods that, as you said 
precisely, do not supplant or replace State, local, private 
funds, but supplement entice, and trigger additional 
expenditures by other parties. Then we need some of those 
efficiency-inducing operations.
    So there really is not a single number. I apologize; I like 
to answer questions directly, but the answer is no, there is 
not one single number.
    Senator Jeffords. Thank you.
    Thank you, Mr. Chairman.
    Senator Breaux. I would like to ask one final question on 
this. They tell me that 75 percent of goods that enter and exit 
the United States, imports and exports, by volume, and about 60 
percent I guess by value, come through the ports around the 
country. But to get to the ports, a lot of it is coming by 
truck, by rail, and what have you. So it really is all 
interrelated.
    The report from Ms. Hecker points out that about 80 percent 
of the funding for the ports comes from the general treasury; 
and the opposite is true, almost 100 percent of the aviation, 
trucks, and highways is really coming from user fees.
    The question is is the administration talking or looking at 
ways to increase the funding for the ports? The ports as I have 
traveled around the country are horribly congested. The trucks 
cannot get in, the railroads cannot. It is very difficult to 
coordinate because of the volume and the congestion at the 
ports. These are very expensive propositions.
    Is the administration looking at any different 
recommendations on how we raise the money for ports, which are 
going to affect rail and trucks as well?
    Mr. Shane. Yes, Mr. Chairman, we are. Captain Bill Shubert 
of the Maritime Administration has certainly been speaking with 
me and with Secretary Mineta at some length about the 
possibility of coming back to Congress with some proposals. 
Unfortunately, I cannot suggest any detailed programs right 
now, but I am hoping that in the not too distant future we will 
engage in a more specific discussion of that very important 
issue.
    Senator Breaux. I hope this discussion is going on, because 
if we have intermodalism each mode is being financed in a 
different fashion and yet they are all totally interrelated. To 
the extent that you can think outside of the box in trying to 
figure out ways that all of these fees can be coordinated for 
all methods of transportation, I think that that is going to be 
very, very helpful.
    The Customs duties for the ports are not going to the 
ports; they are going to the general treasury and they finance 
agriculture and other good things out of the general treasury. 
But I think that most of the users like to see the users' fees 
targeted to the services that they are getting. Now, if that 
happened we may have a little less funding out of the general 
treasury for the ports, if it is offset by user fees. But I 
think we really need some in-depth thinking about how we are 
going to be financing the intermodalism forms of 
transportation. I hope you would address that specifically.
    Senator Reid. Mr. Chairman, would you yield?
    Senator Breaux. Absolutely.
    Senator Reid. People go to the gas pump and that goes to 
highways. We get all kinds of user fees to take care of our 
airports. But as you say--and that money goes directly to the 
airports and to the highways, whereas the problem you have with 
ports, as you indicated, that money can be used for anything 
else.
    So I think we need some help on that.
    Senator Breaux. Then we have got the 4.3 cent gas tax and 
we know all the debate on that, with the railroads still, I 
take it, still, and barges as well, still paying it for deficit 
reduction; trucks, highways are not paying it. I mean, is there 
a consistency here or is there an inconsistency here?
    Do you envision any recommendation on that?
    Mr. Shane. All of this is being examined. I know this is a 
waffle, Mr. Chairman, but it is all being examined. We have to 
get on top of these issues, and I am hoping that we will come 
back to you very shortly.
    Senator Breaux. That is important, because I think what I 
am hearing from GAO is, when we are talking about trying to 
coordinate all of this, that it has to be better coordinated if 
we are going to have an intermodal transportation system. How 
we help finance it, how we address the problems associated with 
each one of them has to be interconnected. I think there is 
room for improvement in that particular regard, and that is 
what we hope we see in the new recommendations.
    Senator Reid. Mr. Chairman, the other problem we have is 
that typically, even though you say you think you have things 
worked out with the Office of Management and Budget, you do 
not, believe me. The problem we have is they are focused on a 
1-year plan. All they care about is what this year looks like. 
They do not care about what it looks like next year or the year 
after or the year after.
    We have got to pass a 5-year bill here. So we have to do 
something that takes into consideration more than 1 year. That 
is why the suggestion of Senator Breaux is so important. We 
need somebody to help us on this. Otherwise we are going to do 
some things that they really may not like. We could use some 
help. That is why I was so direct with Ms. Hecker. We need more 
than generalities and we need more than theories. We need some 
real specific things that we can do to make this 5-year program 
we are going to promote and pass next year one that is good for 
5 years.
    Mr. Shane. If I could just comment very briefly, the reason 
I said what I said about OMB was that typically----
    Senator Reid. Do not worry. We will cover for you.
    [Laughter.]
    Senator Breaux. We will not tell them you said it.
    Mr. Shane. I am not going to even go there.
    [Laughter.]
    Mr. Shane. Typically we have a procedure whereby the bill 
is submitted to OMB, it is all wrapped up tidily, and that will 
be sometime later in the fall, and then we find out what they 
think about it and then we have a big argument with them. What 
we determined to do this time at DOT was to actually give them 
a fairly detailed preview of the direction of some of our 
thinking, because we did not want to be surprised. We did not 
want to do a lot of work and then have it just ``offed'' by OMB 
at some late stage.
    They for their part were interested in knowing whether we 
really were doing something. So we had a reciprocal reason for 
wanting to meet. I have to say it was a very positive meeting. 
I think there was a lot of mutuality in terms of the way both 
OMB and DOT were looking at the importance of being creative 
about these programs going forward.
    So it is not a political statement when I say I think we 
will do OK with OMB. Funding levels are obviously going to be a 
struggle. They always are. That is the game. But in terms of 
the actual shape of the programs, the content, and thinking out 
of the box and that sort of thing, OMB is prepared to be quite 
creative and they have been quite cooperative.
    We would be prepared to even sit down with staff and 
provide the same kind of preview, so that you do not just 
receive a black box sometime early next year and open it and 
see for the first time what it is we have in mind. We really do 
want to work cooperatively and creatively as we move forward. 
That is the only process that is going to produce the kind of 
benefits we need.
    So I offer that and we are prepared to come up.
    Senator Breaux. And do not be afraid of new ideas.
    Gentlemen, thank you. Ms. Hecker, thank you very much. Both 
of you are excused.
    We would like to welcome up the next panel of witnesses and 
thank them for being with us: Ms. Katie Dusenberry, who is 
chairman of the Arizona Department of Transportation Board; Ms. 
Michael Wickham--Mr. Michael Wickham, chairman and CEO of 
Roadway Express; Mr. Ed Hamberger, who is President of the 
Association of American Railroads; Mr. Rick Larrabee, the 
Director of Port Commerce for the Port Authority of New York 
and New Jersey; Mr. Michael Huerta, Coalition for America's 
Gateways and Trade Corridors; and Mr. John D. Caruthers, who is 
chairman of the I-69 Mid-Continent Highway Coalition and one of 
my constituents from Shreveport.
    We thank all of you for being with us and are anxious to 
receive your testimony. Ms. Dusenberry, we have you listed 
first and we would love to hear from you first.

STATEMENT OF KATIE DUSENBERRY, CHAIRMAN, ARIZONA DEPARTMENT OF 
                      TRANSPORTATION BOARD

    Ms. Dusenberry. Good afternoon, Senator Reid, Senator 
Breaux, and the other members of the committee. Thank you for 
the opportunity to present to you the views of the Arizona 
Department of Transportation Board and the freight industry 
regarding the Hoover Dam Bypass Bridge.
    I am Katie Dusenberry, as you said, chairman of the Arizona 
Department of Transportation Board and chairman also of 
Arizona's CanaMex Task Force Subcommittee on Transportation. 
You probably are wondering why I am testifying before you in 
dealing with concerns of commercial vehicles. You see, I am in 
the trucking business. My husband, our son, and I own and 
operate a 78-year-old family owned trucking company with 
offices and warehouses in five Arizona cities. We employ over 
250 hardworking people and have almost 300 pieces of commercial 
vehicles. So I have a keen understanding of hauling issues.
    As has been mentioned before, the freight business is 
rapidly changing, from distribution of farm-to-market and 
domestic products to delivery of export and import goods to and 
from entry ports to consumers everywhere in our country and in 
the world. If you live in the city, everything you wear, 
everything you eat, even what you are sitting on, comes to you 
by truck.
    One of those important port-to-port transportation 
corridors is the CanaMex corridor which runs from Mexico City, 
Mexico, through five U.S. States and into Edmonton, Alberta, 
Canada. This is an essential north-south trade route for 
commercial vehicles and their products. The biggest functional 
failure in this north-south corridor is the restriction of 
commercial vehicles across Hoover Dam.
    This brings me to sharing with you the importance of 
completing full Federal funding for the Hoover Dam Bypass 
Bridge across the Colorado River. Prior to the terrorist 
attacks on September 11th, 2001, the only highway for freight 
and passenger vehicles to go between two large metropolitan 
areas, the cities of Phoenix, Arizona, and Las Vegas, Nevada, 
an important link in the CanaMex corridor, was to cross the 
Colorado River on a two-lane road, one in each direction, atop 
the Hoover Dam.
    This dam, built almost 60 years ago, reached its road 
capacity more than 10 years ago. Envision the steep grades of 
the approach roads, with their sharp hairpin turns, turns so 
sharp that freight trucks could not pass on the turns and would 
come to a complete stop before entering the turn to allow any 
oncoming truck to navigate that turn. Speeds on those approach 
roads ranged from 5 to 18 miles per hour. If accidents 
occurred, delays of 2 to 5 hours were very common, and one 
accident a few years ago resulted in an 18-hour delay. Cars and 
trucks would be backed up for miles.
    So planning for the bridge began long before September 11. 
But since then, commercial vehicles are restricted from 
crossing the dam. They are now diverted 23 miles at a cost of 
$30 million per year in fuel costs alone, to another inadequate 
river crossing, down a winding mountain road where some trucks 
in the last few months have lost control, resulting in serious 
accidents.
    The Hoover Dam crossing is the only highway in the country 
that has not been reopened to commercial traffic since 9-11. 
This is not surprising since the dam is a high security risk 
and any breach of the dam would flood more than 250,000 people 
and cutoff electric power to over 1.3 million in California, 
Nevada, and Arizona.
    The project to build the dam and its approaches in Nevada 
and Arizona will cost $234 million. Through commitments from 
the States of Nevada and Arizona, together with Federal moneys 
from the TEA-21 Borders and Corridors discretionary funds, we 
have pieced together $126 million. The environmental impact 
statement is finalized. The record of decision for the project 
approval is in hand. With the money we have, design and 
construction of the approach roads in Nevada and Arizona are 
under way.
    $108 million is needed to complete this nationally needed 
project. We are asking you to give this project your highest 
priority in discretionary funding to ensure full funding of 
this bypass bridge and meet our anticipated completion date of 
2007.
    Thank you for allowing me to testify this afternoon. If you 
have any questions I would be pleased to answer them.
    Senator Breaux. Thank you very much.
    Senator Reid.
    Senator Reid. Mr. Chairman, thank you.
    I am going to ask Ms. Dusenberry, have you ever been to 
Searchlight?
    Ms. Dusenberry. No.
    Senator Reid. You have never been to Searchlight, Nevada?
    Ms. Dusenberry. No.
    Senator Reid. Oh, boy.
    Ms. Dusenberry. Where is Searchlight, Nevada? I travel a 
lot in Arizona, but I am sorry I have not been to Searchlight.
    Senator Reid. Have you been to Laughlin?
    Ms. Dusenberry. Yes.
    Senator Reid. Just a few miles from Searchlight. You should 
get up there sometime.
    Ms. Dusenberry. I need to get up there.
    Senator Reid. Yes.
    Ms. Dusenberry. Do they have gambling--no.
    [Laughter.]
    Senator Reid. You realize that is where all the traffic is 
going, is through Searchlight?
    Ms. Dusenberry. Ah, the traffic now, the truck traffic now.
    Senator Reid. Mr. Chairman, I have a series of questions 
that I would like to submit to each of these witnesses. I would 
ask if they within a couple weeks would get back to us with 
responses to those questions. Is that OK with you?
    Senator Breaux. Without objection. I know that Senator 
Reid, because of his other duties, is going to have to be 
departing before perhaps everyone finishes. But that would be 
totally acceptable. He has worked very hard on getting these 
witnesses here and I know he is going to look forward to your 
responses.
    Senator Reid. Thanks, Mr. Chairman.
    Senator Breaux. With that, our next, Mr. Wickham.

 STATEMENT OF MICHAEL W. WICKHAM, CHAIRMAN AND CHIEF EXECUTIVE 
OFFICER, ROADWAY EXPRESS, INC., ON BEHALF OF AMERICAN TRUCKING 
                          ASSOCIATIONS

    Mr. Wickham. Chairman Reid, Chairman Breaux, thank you for 
the opportunity to testify on behalf of the American Trucking 
Association and Roadway Corporation. Having spent my entire 
career at Roadway, I am most proud of the fact that we continue 
to improve our safety record year after year, mile after mile, 
and today our trucks and drivers are the safest on the road.
    When moving freight, whether modally or intermodally, 
safety is the No. 1 priority. The trucking industry, ATA, and 
Roadway believe the one thing that we can and must do to 
improve the efficient movement of freight is to refocus our 
traffic laws to prevent excessive speeding. Excessive speed 
simply is a factor in nearly one-third of all fatal accidents 
and more than one-fifth of accidents involving trucks. We ask 
Congress to provide specific funding for speed enforcement for 
both truckers and motorists and section 402 and the MCSAPS 
program.
    Trucks move 67 percent of the freight tonnage, 86 percent 
measured by value. This is freight that moves by trucks alone. 
It does not touch any other mode. While the intermodal movement 
of freight can and does play an important part and should be 
encouraged, the potential for rail intermodal transportation to 
slow the growth of truck traffic is limited by market forces 
beyond the control of Congress, the States, and to some extent 
the modes themselves. Today, just 1.2 percent of the freight 
moves in rail intermodal shipments. Despite anticipated growth 
in this sector, which will exceed trucking growth, by 2014 rail 
intermodal shipments will capture only 1.5 percent of the 
freight market, while trucking's market share as measured by 
tonnage will expand to 69 percent.
    It is not constructive to assume that the business 
logistics trends of the past half century, which have made 
trucks the dominant mover of freight, will somehow reverse 
themselves and that our Nation's reliance on trucks will 
subside. Congress should focus its attention and resources 
where they are needed most and will pay the greatest dividends 
for our country, and that is on improving the efficiency of the 
highway system and the productivity of the trucking industry.
    Efficient highways have allowed trucks to deliver freight 
on time. This has allowed manufacturers to substantially reduce 
their inventories through the use of just-in-time logistics, 
saving the U.S. economy hundreds of billions of dollars and 
creating thousands of jobs. Unfortunately, congested and 
unreliable highways threaten to reverse these gains. Congress 
should not allow the performance of critical highway corridors 
to continue to deteriorate, nor should highway money be further 
diverted under the false notion that investing in other modes 
will negate the need for highway investments.
    The national highway system carries 75 percent of all truck 
traffic. Yet 40 percent of travel on urban national highway 
system routes takes place under such congested conditions that 
even a minor incident can cause severe traffic disruptions. We 
strongly urge Congress to make improving the national highway 
system its priority during highway reauthorization through 
significantly higher dedicated funding. Congress should also 
consider innovative ideas such as the construction of voluntary 
truck-only highways.
    Improving the national highway system connections to 
intermodal terminals is of primary concern to all freight 
modes, including the trucking industry. They should receive 
dedicated funding. However, if we focus our attention on the 
2,000 miles of connector highways and ignore the 160,000 miles 
of other national highway system highways that tie the 
intermodal facilities together, the efforts at the ports and 
points will be pointless.
    ATA supports the expansion of the Borders and Corridors 
program. Along with representatives of other freight modes, we 
are a member of the Coalition for America's Gateways and Trade 
Corridors and we associate ourselves with the Coalition's 
remarks. We hope that Congress will ensure that in the future 
the program focuses on the most critical corridors and border 
crossings and that funding eligibility is not expanded.
    While infrastructure improvements are essential, we 
recognize that highway capacity expansion cannot itself solve 
all of our problems. Nor is there sufficient funding available 
to address our many needs. Fortunately, there are ways to 
improve the freight system's efficiency beyond adding highway 
capacity. Congress can take a significant step by granting 
States the authority they need to reform their truck size and 
weight regulation. Using fewer trucks to move goods would 
reduce congestion significantly and would improve important 
safety, air quality, and economic benefits and lower pavement 
costs.
    Congress and the States should achieve--could achieve for 
free what they would otherwise have to invest billions of 
dollars in expanding transportation capacity to accomplish. 
Missing or ignoring such opportunities would be shortsighted.
    I realize that there are misgivings about the safety 
implications of reforming size and weight regulations. However, 
the best available evidence indicates that increasing trucks' 
capacity can actually produce safer highways. A DOT study found 
that triples and other longer combinations have an accident 
rate which is half that of other trucks.
    This evidence reflects our company's own experience with 
triples. Since 1990, Roadway triples have been involved in 
exactly one fatality. That is one fatality over 155 million 
miles of travel. Triples are the safest trucks in our fleet by 
far and there is no practical or scientific basis for the 
Federal law that restricts States from determining where they 
should operate.
    Neither ATA nor any of us in the industry is interested in 
seeing these trucks operate except where they can be run safely 
and where their operation does not produce additional 
infrastructure costs. ATA strongly recommends that Congress 
look to the recently completed TRB study on truck size and 
weight as a guide toward responsible implementation of size and 
weight reform. Next year Congress has the opportunity to decide 
whether the American people will share the road with a safer, 
more productive truck or a lot more trucks. That choice is 
critical.
    Thank you for the opportunity to share the industry's 
ideas.
    Senator Breaux. Thank you, Mr. Wickham.
    From the railroads' perspective, Mr. Hamberger.

STATEMENT OF EDWARD R. HAMBERGER, PRESIDENT AND CHIEF EXECUTIVE 
           OFFICER, ASSOCIATION OF AMERICAN RAILROADS

    Mr. Hamberger. Thank you, Mr. Chairman, for the opportunity 
to be here today. I am particularly pleased to participate in 
this unprecedented joint committee hearing. I think it is 
appropriate that the committees recognize the importance to 
coordinate transportation public policy, much as carriers 
coordinate the transportation of America's goods outside of the 
Beltway.
    Rail intermodal freight transportation has been the fastest 
growing segment of traffic for the U.S. freight rail industry 
over the past 2 decades, growing from 3.1 million trailers and 
containers in 1980 to nearly 9 million in 2001. It now accounts 
for approximately 20 percent of revenue for class 1 carriers 
and moves seamlessly throughout the North American rail 
network.
    There are numerous reasons why rail intermodal 
transportation has become such a vital part of the U.S. and 
indeed North American freight transportation mix. One, it saves 
shippers and customers money by combining the door to door 
convenience of trucks with the long haul efficiency and cost 
effectiveness of rail.
    Two, it saves fuel. In fact, on average a railroad can 
carry a single ton of freight 400 miles on one gallon of fuel, 
the equivalent of Baltimore to Boston.
    Rail intermodal improves air quality. According to the EPA, 
for every ton-mile, a typical locomotive emits roughly three 
times less nitrogen oxide and particulate matter than a typical 
truck.
    Four, rail intermodal reduces highway congestion. An 
intermodal train can take approximately 280 trucks from the 
highways or the equivalent of 1,100 automobiles.
    We have heard a lot about the increased demand that is 
going to be out there for freight transportation, and clearly 
to meet that demand freight railroads will have to invest 
heavily in projects that increase efficiency and capacity. 
Railroads are incredibly capital-intensive, as you know, Mr. 
Chairman. In the year 2000, railroads put almost 18 percent of 
their revenues into capital expenditures, more than four times 
as much as the average for manufacturing.
    In terms that Congress often deals with, if that had been 
translated into a per-gallon excise tax it would have equaled 
$2.05 for every gallon of fuel burned by the industry 
reinvested back into that industry, our industry, the freight 
railroads.
    Unlike my good friend Jeff Shane, let me not waffle, Mr. 
Chairman. We need that 4.3 cents back. It is $170 million a 
year, $2 billion since it was enacted, that would go back into 
the industry and back into the infrastructure.
    We have joined the Freight Stakeholders Coalition and in my 
testimony we have outlined nine specific recommendations. Let 
me just highlight four of those: one, dedicate funds for the 
NHS connectors to the intermodal freight facilities.
    Two, develop ways to increase available funds without new 
user fees and taxes, through innovative financing options. We 
have identified two of those. One would be to institute tax 
incentives and tax-exempt financing for companies that invest 
in intermodal freight infrastructure. Examples of qualified 
assets would include track and roadbed located on intermodal 
corridors and intermodal transfer facilities and related 
equipment. The second option would allow the funding of rail 
infrastructure through tax-exempt indebtedness, which would 
include track, bridges, tunnels, terminal facilities, signals, 
and computer systems.
    Let me just digress for 1 second because I cannot let Mr. 
Wickham's statement go unanswered when he said that it would 
not cost the Government anything to increase the size and 
weight of trucks. You realize, of course, that the Secretary, 
the Department of Transportation, has issued a report that 
indicates that at 80,000 pounds trucks pay approximately 60 
percent of the damage that they do to roads and bridges. At 
100,000 pounds that number falls below 50 percent. So indeed it 
is not at no cost at all and in fact it would merely exacerbate 
the already uneven playing field on which we find ourselves 
competing.
    Three, significantly increase funds for an expanded 
corridor, border, and gateway program. We belong to Mr. 
Huerta's coalition and he will talk about that.
    Four, increase funding and promote the use of the CMAQ 
program to reduce congestion and improve air quality.
    In addition to the Freight Stakeholders Coalition agenda 
items, we have two additional others: one which we discussed at 
length with the Environment and Public Works Committee some 
time ago, to increase funding of the section 130 grade crossing 
program and clarify that the funds may be used for maintenance; 
and two, expand the rail rehabilitation and financing program 
and remove the restrictive program requirements. This committee 
has already endorsed that by a vote of 17 to 3.
    As you mentioned in your opening comments, Mr. Chairman, 
our Nation's global supremacy is derived in large part from a 
transportation system that is second to none. Freight railroads 
are an indispensable part of that system. We are confident that 
we can continue to play a major role in meeting our Nation's 
future transportation needs. As you know, we move 40 percent of 
the Nation's goods by ton-mile right now.
    But for those needs to be met efficiently, it is imperative 
that the intermodal push initiated by ISTEA and TEA-21 be 
developed further. We look forward to working with both these 
committees, others in Congress and others in the private sector 
to see that this can occur.
    Thank you.
    Senator Breaux. Thank you, Mr. Hamberger.
    Next we have Admiral Larrabee. I am particularly glad to 
have you with us today, Admiral. I know that a year ago 
tomorrow you were in the World Trade Center in obviously 
extreme difficult circumstances and situation. We are very 
delighted to have you with us today and look forward to hearing 
your testimony.

  STATEMENT OF RICK LARRABEE, DIRECTOR OF PORT COMMERCE, PORT 
              AUTHORITY OF NEW YORK AND NEW JERSEY

    Mr. Larrabee. Thank you, Mr. Chairman. Mr. Chairman, thank 
you for the invitation to be here today to testify on matters 
of intermodal transportation and port access. The work of your 
committees demonstrates the importance of considering how 
separate modes of transportation operate as part of a total 
system. My hope is that this hearing will heighten your 
interest in this subject, further your understanding of how the 
efficient movement of intermodal cargo is a matter of national 
interest, and convince you that improvements in the Federal 
policy and the level of assistance are warranted.
    The Port Authority of New York and New Jersey is a bi-State 
public authority whose mission on behalf of the States is to 
identify and meet the critical transportation infrastructure 
needs of our region and provide access to the rest of the 
Nation and to the world. We operate the region's major aviation 
and marine facilities, as well as PATH, the commuter transit 
system, ferry and bus terminals, the interstate tunnels and 
bridges, and other facilities.
    Our airports are responsible for roughly 20 percent of all 
U.S. international cargo, which, combined with domestic cargo, 
totaled nearly 2.9 million tons in 2000 and a value of $150 
billion.
    The seaport serves 35 percent of the U.S. population and 
over 200 nations. The terminals in New York and New Jersey 
handled over 3 million containers last year and $80 billion of 
general bulk and breakbulk cargo moved through the port in 
2001. Another 1 million containers arrive in our region via 
rail from the West Coast.
    Meanwhile, 250 million vehicles traveled annually over our 
bridges and through our tunnels and 2.5 million buses used our 
two bus terminals in New York City.
    These statistics attest to the vitality of the trade and 
the economic activity of the Nation and our region. But it also 
hints at a major challenge we and other regions face: to make 
sure American gateways and freight corridors have the capacity 
to keep up with the growth in trade and a larger economy. To be 
clear, this is not a case of ``build it and they will come.'' 
It is a matter of build it because the cargo is already coming. 
In fact, it is already here, resulting in even greater 
congestion.
    Addressing these challenges will require investing in the 
infrastructure and adjusting policies to foster smart solutions 
for long terms. Partnerships are coming together locally and 
regionally to support projects and we need a strong Federal 
partner to accelerate these activities.
    The Port Authority is coordinating with the States of New 
York and New Jersey and is in the process of developing 
specific recommendations for future legislation. Therefore, I 
will devote the remainder of my statement to some general 
observations for your consideration. These are in no particular 
order.
    First, we and other ports greatly appreciate the attention 
that Congress and the administration are giving the maritime 
transportation system. It is our hope that the Federal 
Government will act affirmatively on identifying MTS 
infrastructure requirements.
    Second, congestion can be found throughout the country, but 
it is especially severe in major gateways and metropolitan 
areas that are essential elements of the Nation's economic 
infrastructure and security. These areas, including the New 
York-New Jersey region, deserve special attention and face 
unique challenges to upgrade aging facilities, new, modern 
standards to accommodate larger and heavier container freight 
movements.
    Third, expanding capacity should not mean that trucking 
alone will have to bear the brunt of the growth. Clearly, 
trucking will be an essential part of the transport strategy in 
the decades to come, carrying more and more freight, but in our 
region and others trucking and the highways on which they 
depend are not expected to have the capacity to handle the 
growing population and anticipated doubling and tripling of 
domestic and international cargo. Therefore, a greater share of 
our future transportation needs needs to be addressed by other 
modes, which leads me to my fourth point.
    Your committee should consider to foster the development of 
other modes to accelerate increased demand. Rail certainly is 
one part of the answer. We are building three new intermodal 
rail yards at our maritime terminals in order to dramatically 
expand our capacity to move containers on rail. In addition, 
the Port Authority is working with the railroads and public 
agencies to identify specific rail regional projects that will 
improve line and terminal capacity.
    Another answer can be found off our shores. We are 
undertaking a program to encourage intermodal cargo to move by 
water wherever possible. There is tremendous underutilization 
of capacity on the water that can bring new capacity to 
intermodal transportation along major corridors with less 
investment. It is not the solution, but if examined for 
associated capital, energy, and environmental costs, it can be 
part of a solution with Federal support.
    Fifth, innovations approved by Congress in TEA-21, such as 
Congestion Mitigation Air Quality and national corridor 
planning and development programs, were very worthwhile policy 
steps to take. These innovative programs could be improved and 
expanded even further, especially to add to the capacity of 
major gateways.
    Sixth, investments in freight movements could also benefit 
passenger services. These include TEA-21 projects intended to 
divert freight from heavily traveled automobile routes to 
dedicated freight corridors, whether on land or water. We have 
undertaken a comprehensive look at how intermodal freight 
improvements can be strategically planned and implemented to 
stitch together freight corridors. Already underway is a 
project to bring intermodal rail to Howland Hook Marine 
Terminal on Staten Island, a significant step to improving 
direct rail service to New York City.
    Another project referred to is the Port Authority's Port 
Inland Distribution Network, PIDN, which would mitigate against 
growing congestion at marine terminals and highways by 
transshipping cargo via railroads and barges destined for 
Northeast locations. There is a strong interest in PIDN among 
Northeast States as alternatives to congested corridors like I-
95.
    Federal interest and support could help such initiatives 
demonstrate how water transportation can manage part of the 
freight growth. Flexibility in Federal programs can be a way to 
support these initiatives.
    Last, the use of intelligent technology has proved very 
worthwhile in our region for managing the flow of our busy 
highways and crossings.
    I think your committee can benefit greatly by the 
thoughtful attention that has been given to these issues by my 
counterparts here today as well as in Government and the 
private sector, including a number of transportation and 
freight-related associations identified in my written 
testimony. Federal freight transportation policy is still in 
its adolescent stage, which means there is great opportunity 
for improvement to meet the challenges I have described.
    Thank you again for allowing the Port Authority of New York 
and New Jersey to participate.
    Senator Breaux. Thank you very much, Admiral.
    Mr. Michael Huerta.

   STATEMENT OF MICHAEL P. HUERTA, SENIOR VICE PRESIDENT AND 
MANAGING DIRECTOR, ACS STATE AND LOCAL SOLUTIONS, ON BEHALF OF 
    THE COALITION FOR AMERICA'S GATEWAYS AND TRADE CORRIDORS

    Mr. Huerta. Good afternoon, Chairman Breaux. It is my 
pleasure to be with you today to review our Nation's freight 
transportation system and needs. I would like to briefly 
summarize my formal statement and would welcome the opportunity 
to respond to any questions that you might have.
    As you know, my name is Michael Huerta. I am a Senior Vice 
President and Managing Director of ACS State and Local 
Solutions. ACS is a premier provider of business process and 
information technology outsourcing solutions to world-class 
commercial and Government clients. We provide travelers with 
time and money-saving transportation technologies, including 
the operation on behalf of several agencies of EasyPass, the 
electronic toll collection system in the Northeast, which is 
actually fully interoperable from Maryland to Massachusetts, 
and the PrePass waste station preclearance system at more than 
200 locations in 24 States coast to coast.
    From 1993 to 1997, I served as Associate Deputy Secretary 
of Transportation and was the Director of the Office of 
Intermodalism.
    I appear today on behalf of the 23 groups that comprise the 
Coalition of America's Gateways and Trade Corridors. The 
coalition's sole interest is to encourage adequate Federal 
investment in our Nation's intermodal freight infrastructure. 
Our members include motor carriers, railroads, ports, and 
freight corridors--in short, the men and women that move 
America's freight.
    International trade is the key to America's economic 
future. The imports and exports that fuel our economy are 
doubling every 10 years and freight traffic within the U.S. 
borders will increase 100 percent by 2020. You have heard from 
all the witnesses about the tremendous growth in international 
trade. Any way you cut it, freight transportation is growing 
dramatically.
    This growth in freight is good for all of us, in fact very 
good. Rapidly accelerating trade, combined with domestic 
growth, have created a $10 trillion U.S. commodity flow that 
produced millions of new job opportunities and a higher 
standard of living for Americans.
    However, these benefits will only last as long as we can 
keep the freight moving. As part of the reauthorization 
process, we must rethink the portion of TEA-21 that was devoted 
to freight-related projects. The facts are the current port and 
trade corridor system is at the present time very pressed to 
accommodate the traffic we have today. That infrastructure is 
failing. Intermodal connectors currently have up to twice as 
many engineering deficiencies and pavement deterioration issues 
as the national highway system routes, and at the same time 
demands on intermodal connectors are expected to double by 
2020.
    Recognizing the growing freight needs, as part of TEA-21 
Congress established the National Corridor Planning and 
Development Program and the Coordinated Border Infrastructure 
Program, commonly referred to as the Borders and Corridors 
programs. The legislation also provided $140 million annually 
for these programs combined.
    Unfortunately, the current Borders and Corridors programs 
have fallen short of the intended goals for two reasons. First, 
the programs were funded at levels far less than necessary to 
meet freight transportation and intermodal connector needs. As 
witness to that, since the beginning of the programs, requests 
from the States and metropolitan planning organizations have 
exceeded Federal funds available by a ratio of 15 to 1.
    Second, the Borders and Corridors programs have been 
extensively earmarked in the annual appropriations process, 
frequently allocating funds to projects that may or may not 
have been those with the greatest national significance to the 
movement of freight.
    With respect to the reauthorization of TEA-21, the 
coalition strongly recommends that the programs be continued, 
but bolstered to ensure that the original goals are met. The 
coalition respectfully commends several recommendations to the 
committee for your consideration.
    First, to meet the high level of demand, funding for the 
Borders and Corridors programs must be increased and increased 
dramatically. The coalition believes that a minimum of $2 
billion is needed annually. The distribution of funds should be 
freight-specific. There should be a qualification threshold 
based on freight volumes and freight-related congestion to 
ensure that the limited dollars that are received reach the 
corridors, the borders, and the gateways of the greatest 
significance to trade.
    Third, the designation of entities eligible should be 
expanded to include other public and quasi-public organizations 
that may not today be qualified to receive funds under the 
program.
    Fourth, the Borders and Corridors program should be 
redefined to address the needs of all trade gateways, not only 
the land corridors and gateway-connected trade corridors. Many 
gateways that handle huge volumes of freight are not eligible 
for funding because they may not be at so-called borders. For 
example, we do not think of Illinois as being a border State, 
but one-third of the Nation's freight passes through Chicago 
and it is the largest intermodal hub in the Nation. Similarly, 
inland ports are also important gateways that enable the 
efficient movement of goods throughout the entire country.
    The designated high priority corridors available for 
funding under the Borders and Corridors programs need to be 
reexamined to ensure freight-intensive areas can apply for 
funding. Currently there are many important projects in need of 
funding that do not fall in one of the 43 priority corridors 
designated under TEA-21. In conclusion, I would like to say 
that America's freight is America's future. We must keep the 
infrastructure that underpins the movement of freight strong. 
That means additional Federal investment. Every dollar invested 
in the highway system yields $5.70 in economic benefits to the 
Nation, but at the same time investment in the freight 
infrastructure is also critical for national defense. Ports and 
their connectors have always been the point of embarkation for 
defense material and this role is even more important in the 
wake of the terrorist attacks of a year ago.
    Thank you for the opportunity to offer the coalition's 
views and I look forward to responding to your questions.
    Senator Breaux. Thank you very much, Mr. Huerta.
    Next we will hear from my friend John Caruthers, who is 
chairman of the I-69 Highway Coalition. I kind of use the names 
``Caruthers'' and ``I-69'' interchangeably now. It is like you 
are one and the same thing. So we are delighted to have you 
with us, John, and pleased to receive your testimony.

    STATEMENT OF JOHN D. CARUTHERS, JR., CHAIRMAN, I-69 MID-
                  CONTINENT HIGHWAY COALITION

    Mr. Caruthers. Thank you, Mr. Chairman, and thank you for 
the compliment, and thank you for the opportunity to discuss 
with you the importance of I-69 to the efficient movement of 
the Nation's freight.
    I-69 when finished will span the Nation's heartland from 
the Canadian border to the Mexican border, traversing 9 
States--Michigan, Illinois, Indiana, Kentucky, Tennessee, 
Mississippi, Arkansas, Louisiana, and Texas. Two sections of 
this system are already existing and open to traffic. The first 
one starts at Port Huron, Michigan, on the Canadian border and 
extends to Indianapolis. The second, Interstate 94, extends 
from Port Huron southwest to Detroit and west to Chicago.
    The rest of I-69 is under development, from Indianapolis 
south to Memphis, Tennessee; Shreveport; Bossier City, 
Louisiana; and Houston, Texas; to the Lower Rio Grande Valley 
and Laredo at the Mexican border. Completion of I-69 will not 
require an entirely new facility. In some areas it will link 
existing interstates or upgrade and link other existing 
highways. Work is under way along the entire I-69 corridor.
    While I-69 traverses 9 States, it is important to the 
Nation as a whole. Trade has shifted, particularly since NAFTA, 
from an east-west to a north-south trend. Canada and Mexico are 
now our two largest trading partners. Last year, 2001, 80 
percent of the U.S. trade with Mexico and 67 percent of U.S. 
trade with Canada went by truck and I-69 corridor accounted for 
63 percent of the Nation's truck-borne trade with both Canada 
and Mexico.
    The Michigan border points of Detroit and Port Huron 
account for 48 percent of our truck-borne trade with Canada and 
the Texas border between Laredo and the Lower Rio Grande, 
Brownsville and McAllen, accounts for over 49 percent of our 
truck-borne trade with Mexico.
    Looking at freight flows nationwide, not just with Canada 
and Mexico, approximately half of the total freight shipped in 
the United States in 1997, over 5 billion tons, passed through, 
originated, or terminated in the I-69 corridor. Freight is 
entering and leaving the I-69 corridor by truck, rail, air, and 
water. 17 of the Nation's top 25 seaports are in this corridor. 
13 inland waterway ports and 15 of the Nation's top 25 air 
cargo airports are directly served by I-69.
    Every major eastern and western rail carrier and both 
Canadian carriers have terminal operations on the I-69 
corridor. There are truck-rail intermodal facilities in every 
major city along the corridor. I-69's port of Houston leads the 
Nation in foreign waterborne tonnage, and container traffic in 
the Gulf of Mexico ports served by I-69 is growing faster than 
the national average or faster than traffic at Atlantic or 
Pacific ports.
    Trade entering I-69 from all modes of transportation is 
growing faster than in the rest of the Nation. Trade tonnage 
moving through I-69 points of entry from 1990 to 1999, 
including land, sea, and air, grew 18.3 percent, or more than 
twice as fast as the national average of 8.3 percent.
    A Federal Highway Administration study suggests that the 
recent growth in freight traffic will continue through the year 
2020. The vast majority of the new growth will be in the 
trucking industry, with the dominant movement on the Southwest 
to Northeast direction, a movement ideally suited for the I-69 
corridor.
    Yet there is no direct interstate-level highway from 
Indianapolis to the Mexican border. When the interstate system 
was initially designed, it was laid out generally east-west, 
reflecting the demographics, trade patterns, and defense needs 
at the time. When the interstate was completed in 1995, some of 
the newer north-south sections like I-69 were left unfinished. 
The premise of the Corridors and Borders program was the 
recognition that within the 160,000 mile National Highway 
System there were unfinished corridors essential to the 
Nation's trade and economic growth that needed to be completed 
and merited a separate program. The program, however was only 
funded at $140 million a year nationwide and many of the 
projects that qualified or were earmarked for funding were of 
local, not national, interest.
    Despite insufficient funding, the I-69 corridor made such 
significant progress that all of I-69 can go to construction 
during the period of the TEA-21 reauthorization. Much of it can 
be completed if dedicated funds are available to do so.
    Having built the interstate system, we cannot rest on our 
laurels. We must invest our resources in those unfinished 
corridors that serve today's and tomorrow's 21st century trade 
flows, such as I-69. There are a number of mechanisms to 
accomplish this: limiting the Borders and Corridors program to 
major trade corridors and increasing its funding, dedicating 
program funds to complete unfinished interstate links, or 
funding freight corridors. Any of these options would work, 
whether alone or in combination.
    The point is we must recognize the need for and build the 
infrastructure to serve our Nation's freight flows. The traffic 
is there. The intermodal connections, rail, water, and air, are 
also there. The trade is surging at Houston, Detroit, and 
Laredo. Yet the interstate-level facility to transport these 
products safely, efficiently, and economically, I-69, remains 
unfinished.
    Thank you very much.
    Senator Breaux. Perfect timing, John. Thank you very much, 
and thank all of the witnesses for being here. I think the 
discussion today has been good. It is going to give a lot of 
our professional staff some ideas and thoughts as we approach 
the reauthorization of TEA-21.
    Obviously, I heard my questions to the Assistant Secretary 
to start thinking outside the box about what we need to be 
doing in these areas. I realize that in the private sector it 
is awfully difficult to bring about a great deal of cooperation 
because all of you--not all of you at the table, but railroads 
and truckers and ocean-bearing traffic and aviation--are all 
financially competitors. So it is hard for you to sit down and 
figure out what is good for the whole country when you have a 
responsibility to your independent modes of transportation, 
with railroads and the trucking industry and aviation industry 
and ocean-bearing traffic for the ports.
    Mr. Huerta, in the coalition that you have, how difficult 
is it to get these various competitive modes to sit down and 
say, all right, what are we going to do to make it work? I 
mean, we have got congestion at the ports. We do not have 
enough railroads coming into the ports, we cannot get enough 
trucks in to pick up the containers. We are going to double the 
amount of containers coming in and going out in the foreseeable 
future.
    How difficult is it to try and bring about cooperation? 
What needs to be done in that area? I am sure each one of these 
segments would like to do it all by themselves, and that is not 
going to happen. So how do we get them to work together to come 
up with some recommendations that can make sense for the 
Congress?
    Mr. Huerta. Mr. Chairman, one thing that we hear in our 
coalition meetings and that I think you heard today is that 
there is unanimity among all the modes of surface 
transportation that we are not doing enough about freight 
transportation. The discussions that we have had at the 
coalition focus on the fact that, while there are many ways 
that you can fund freight programs under the current categories 
through which the surface program is reauthorized, generally it 
is very hard to build the level of support for freight 
programs, because they may extend beyond the borders of a 
particular State or a particular metropolitan area.
    These are national needs that are out there and when you 
are looking at something from the point of view of a particular 
region, it is sometimes hard to put that national lens on and 
look at the world that way. What you have heard from all of us 
is that international trade is extremely important, the growth 
of the economy domestically is extremely important, and moving 
the freight through the system is going to be essential in the 
coming years.
    So we all agree on things like the Borders and Corridors 
program. It was a terrific concept. It has worked very well. 
There just is not enough money.
    Likewise, there are many other ways that you can get 
freight projects identified. What we would like to see is how 
do you give them the priority. We are looking for more than 
just, yeah, you can spend money on a freight project. We would 
actually like to see some funds designated for freight 
projects. Senator Breaux: Address a question that is a concern 
to me about the congestion at the ports of our Nation. We have 
got 75 percent of the traffic by volume either going out or 
coming into ports internationally, and of course NAFTA has 
brought a lot more by trucks through Canada and through Mexico. 
But that traffic coming in and out of the ports which are so 
congested is going to be coming by rail, it is going to be 
coming by trucks, and if we do not have a system in these ports 
to make it work better, we are just going to have some ports 
that are so congested you are not going to get railroads coming 
in or trucks coming in or anything going in and out, in the 
timeframe that we need it, to be effective and to be efficient 
in the world community.
    So I mean, tell me a little bit about what they did to the 
Alameda corridor? Is that helpful in looking at possible 
solutions, what they were doing out there?
    Mr. Huerta. It is helpful and it in fact has been used as a 
model for many other port access projects around the country. 
But let us step back and look at Alameda in terms of what it 
involved. The project had something like a 13-year history 
before it actually got into construction and it was an 
extremely complicated thing to try to move through the 
traditional funding process.
    Ultimately, it was funded through a combination of user 
fees and local funds that were generated by the two port 
authorities in Los Angeles and Long Beach. Then the Federal 
portion, the largest piece of the Federal portion, was actually 
a Federal loan. But we did not have the authority to do that 
project when the loan idea was first proposed. It required 
special legislation that was enacted by Congress as part of the 
national highway system designation.
    That success at Alameda, though, became the model for the 
TIFIA program, which works for large infrastructure projects 
such as this, where there is a user fee that can perhaps repay 
the costs of the loan and other funds that might be in place. 
However, a loan program is not going to work all the time. 
There are major corridor and access projects at rail terminals, 
at trucking terminals, and at ports around the country that 
might not be able to support a user fee, and that does not make 
them any less important in terms of elevating their profile for 
funding.
    But they have the added complexity that a port access 
project, for example, in the State of Washington or in the 
State of New York, benefits people far into the interior of the 
country. Under the current planning and funding framework, it 
really falls to the State or the metropolitan area where that 
project is located to lead that project through the overall 
funding mechanism and to make it a priority in that region.
    What we need is a way for these big mega-projects to assume 
the national profile that they really have, such that they are 
not the responsibility of a single State or a single 
metropolitan area to carry them out and fund them.
    Senator Breaux. Maybe, Admiral, you can get in on this. But 
if we have needs at all of the ports--and I am talking about 
ports, but I am really talking about making it more efficient 
for railroads to serve ports, for the trucking industry to 
serve the ports, as well as the ships taking the goods and 
services in and the containers in and out of the ports to 
operate more efficiently.
    So give me some discussion on the concept of port user 
fees. I know there is all this, all right, we are going to be 
noncompetitive if we have to have user fees. Well, user fees 
are paid by the ultimate consumers of the product. I have 
always had the concept that if they are the same across the 
board no one has an unfair advantage, if everybody is paying 
the same user fee that is dedicated for port development and 
infrastructure in those seaports around the country.
    Is that concept a viable concept as a means of getting 
extra funds for fixing the ports and eliminating some of the 
congestion, or is it a bad idea? We have got to find out where 
we have the money and it is not going to be easy and somebody 
is going to be unhappy. Talking about taxes, they are unhappy. 
Talking about fuel taxes, they are unhappy. Talking about user 
fees, they are unhappy. Do we need more money? Yes.
    Admiral
    [Laughter.]
    Senator Breaux. The shippers are behind you.
    Mr. Larrabee. There are a lot of people behind me, Senator.
    I do not know. To me it goes back to I think the testimony 
given for GAO today, and that is what are our real needs, what 
are the benefits that we can look at, and then I think the 
question of where do we get our funding. For us, as we spend--
in my particular port over the next 3 years, we will spend 
nearly $2 billion on improving channels, on improving 
terminals, and on improving rail infrastructure. We are going 
to spend about $290 million just to create a greater capacity 
to handle cargo by rail. We think that in the next 10 years we 
can shift, at least in our port, what now constitutes about 14 
percent of our cargo going out by rail to about 24 percent. We 
can shift barge traffic by from 2 percent to about 21 percent. 
I am not suggesting that we are going to change the fact that 
trucks are still going to be a predominant feature in our 
region, but the notion that there is great public benefit by 
looking at this system in a smarter way to me has value, and I 
think the issue of who pays for it can be a lot easier when you 
have figured out a better way to handle this.
    The issue of who pays for this right now, of course, and 
things like the harbor maintenance tax, there is a great deal 
of controversy over that and I do not know that you can get 
anybody to agree on a rational approach. That is a decision the 
Federal Government is going to have to make.
    Senator Breaux. We cannot even decide whether it is a fee 
or a tax.
    What about the concept of moving some of the traffic in the 
ports to staging areas away from the ports? I mean, most of our 
ports are right in the urbanized areas. The port of New Orleans 
is right downtown. The port of Houston is right downtown. Your 
ports in New Jersey and New York are right in the middle of the 
greatest urban area probably in the world. Los Angeles, they 
all have it.
    We all have the same problem, which is the port is right in 
the middle of urbanized areas. That was fine 100 years ago, but 
today how do you get the trains in, how do you get the trucks 
in, how do you handle all that volume going right down in the 
middle of an urbanized area in order to pick it up or to take 
it there? It does not work anymore.
    So the concept by some is to move, I guess, the staging 
area further away from the actual port facility in an urbanized 
area, so you can get the stuff to an area and put it on the 
rails and put it on the trucks, instead of having to do it 
right in the middle of New Orleans or right in the middle of 
New York City, for instance. Does that make any sense?
    Mr. Larrabee. We have over the last couple of years looked 
at where all of our freight goes. I can tell you by zip code 
where every container that comes into the port ultimately is 
destined for. We know that about 90 percent of the cargo that 
goes outside the immediate New York-New Jersey region goes to 
one of 7 or 8 load centers, places like Albany, New York, and 
Buffalo, New York, places like Camden, New Jersey, and 
Providence, Rhode Island. Once we have identified the fact that 
a lot of that cargo goes to those places, the next thing we 
have looked at is how do you get it there in a more efficient 
way. Dedicated rail and dedicated barge service has become the 
way that we have begun to look at it. We think that we can move 
cargo more efficiently, at a cheaper price, in about the same 
amount of time, with a greater degree of reliability, by using 
dedicated rail and barge.
    As I suggested before, we think we can improve the 
intermodal split from what now is an 85 to 87 percent truck-
only operation to something that closely approaches 50 percent 
by truck and the rest by other modes. That is an approach that 
is gaining interest in all the Northeast States. It reduces 
traffic and congestion and air quality problems. It reduces 
maintenance on the roads, and in our mind is going to 
dramatically increase the productivity of the Port of New York 
and New Jersey.
    Senator Breaux. Mr. Wickham, let me have your comments and 
thoughts about that? I am not suggesting this is a way of 
lessening traffic overall, but only in the immediate vicinity 
of the downtown urban ports around the country, to have a 
staging area, I would take it, where trucks would come in away 
from the actual port sites. Do these ideas have any merit or 
what are your thoughts?
    Mr. Wickham. I think they do. That freight ends up on a 
truck sooner or later anyway. When it goes to Albany, the 
container is unstuffed and it becomes a trucking shipment at 
that time.
    When I look at the national transportation system that we 
have, I think some of the fights that modes have over 
productivity are silly, because at the end of the day the whole 
system is more productive if every element of the system is as 
productive as it can be safely. So some of the debate that goes 
on I think does not serve any good purpose.
    I think the way to look at this system is to maximize the 
productivity of every participant in the transportation system. 
That takes away the need for more capacity in a lot of cases. 
Productivity is capacity. So that concept that you are talking 
about, consolidating farther away from the port to reduce the 
transportation out of the port, does not bother me at all.
    Senator Breaux. I am glad to hear you say that. It seems to 
me--I am just thinking offhand, which is what I normally do--is 
the fact that these ports around the country are trying to 
build all these staging areas where you come in with your 
trucks, and it is like--how you do it I will never understand. 
You have got this big yard of containers and the trucks are 
coming in, picking them up, taking them out, and trying to do 
all of this in the middle of a city.
    It seems to me that if you had a dedicated rail line 
leaving that port facility and just running these container 
cars out further away from the port outside the city, and then 
having their trucks come in, because all these containers 
cannot go to every little town and destination in America by 
rail because they are not there. But you could have the 
dedicated rail line taking it outside of the port to a central 
staging area where the trucks could come in.
    It seems to me that that certainly helps the congestion and 
makes it more efficient as far as the ports are concerned.
    Mr. Wickham. Well, it is one of the reasons that you have 
as many containers in Chicago as you do. They originated in 
Alameda and came through on a rail leg to be distributed in the 
Midwest. That I think is maximizing the efficiency of the whole 
system.
    Senator Breaux. I was interested in your comments, Mr. 
Wickham, on safety and speed and also the recommendations on 
the States having greater authority again on the size and 
weights. All of these are arguments we have been through on 
will continue, and I appreciate your recommendations on those 
areas.
    On speed, I thought in the old days all the trucks had 
Governors on them that would restrict the amount of speed. They 
do not do that anymore, or do they?
    Mr. Wickham. Oh, yes, we do. Our fleet does. Most big 
fleets do. But my point was not just the truck speed; it is the 
automobile speed as well. The statistics indicated that in a 
large percentage of the accidents involving trucks the other 
vehicle was speeding. We want to see very strict enforcement of 
speed for cars and trucks, because I think that is the lowest-
hanging fruit we have in the safety area right now.
    Senator Breaux. Well, those are things that we are going to 
be discussing, I know, in the reauthorization and they are good 
suggestions.
    Mr. Hamberger, on the question about rails in the ports, I 
take it, am I correct, that the cost of the rails serving the 
ports is a port cost, not a railroad cost? And if you are 
building something to do business, should not the rails be 
picking up the costs of the equipment?
    Mr. Hamberger. I am not precisely sure what you are asking. 
It is my understanding that the intermodal yards that are 
built, for example just 18 miles outside of L.A., are those 
built, maintained, and run by the railroad companies. I know 
that each of our members has spent hundreds of millions of 
dollars in the last 2 years building intermodal yards, in some 
cases, establishing partnerships with ports on facility 
improvements. Two of them right outside of Chicago, both UP and 
BN-SF; down in Georgia, Norfolk Southern. I know they have done 
some work in Harrisburg to take intermodal shipments from New 
York-New Jersey as well.
    Senator Breaux. Admiral, is that your understanding about 
who bears the costs of the rails within the port system? Is 
that the port or is that the railroads?
    Mr. Larrabee. Senator, typically the formula that I am 
familiar with is that the port builds the intermodal rail 
facility inside the port. But as you build capacity in a port 
like New York and New Jersey, you have to look down that system 
to make sure that you are not creating a bottleneck someplace 
else.
    So we have been working very closely with all of our 
railroads to make sure that as we build the capacity in the 
Port of New York and New Jersey that their systems are able to 
handle that increase in activity. So I think that there is a 
balance as you get further away from the port.
    Senator Breaux. So the current system, I take it, from a 
port perspective is working all right as far as the intermodal 
railroads? I mean, you would like the railroads to pick it all 
up, I am sure.
    Mr. Larrabee. My agency is unique in that we are required 
to be financially self-sufficient. So when I propose a project 
like ``ExpressRail,'' which will grow our rail capacity in one 
terminal from about 25,000 lifts to a million lifts in the next 
5 years, I have got to find a way to get a return on that 
investment. And I will charge a user fee or a tariff for those 
movements. We have used that formula very successfully.
    Senator Breaux. Do you have the authority to do that as the 
port?
    Mr. Larrabee. Yes. We have bonding authority that covers 
all of our lines, and that is where all of our capital money 
comes from, paid back to investors. But I have got a 
responsibility as a business line to make sure that that money 
is recovered.
    Senator Breaux. Ms. Dusenberry, thank you. I know that 
Senator Reid was very much wanting to hear what you had to say 
and was very aware of the project that you spoke to. With 
regard to that project, what does Congress need to do to help 
in getting it implemented? Is it a funding question or is it--
what is it?
    Ms. Dusenberry. It is a very definite funding question. The 
shortfall in the amount of funds we have been able to 
accumulate is $108 million and we feel this needs to come in a 
stream from the Federal Government, either a stream that we can 
borrow against, or one lump sum would be very nice if you 
wanted to give it to us in one lump sum.
    Senator Breaux. But I take it your people say that under 
the existing highway formulas that you do not get adequate 
funding to do the type of project that you suggested?
    Ms. Dusenberry. That is true. Both Nevada and Arizona have 
contributed $20 million, each State, toward this project out of 
our regular flow of HRF funds that come into our State, and we 
feel from this point on that it is a Federal highway, it is on 
Federal land, it is going to be run by FHWA, and we feel our 
contribution cannot be any more.
    Senator Breaux. Well, I think you have made a good point. I 
think Senator Reid has been a big supporter of this project. My 
only suggestion is that I think you ought to go visit 
Searchlight, Nevada.
    Ms. Dusenberry. I will need to go to Searchlight.
    Senator Breaux. If you could just drive through 
Searchlight, I think it would make----
    Ms. Dusenberry. I think I can drive through it very 
quickly.
    Senator Breaux. Oh, yes, it will not take a lot of time.
    [Laughter.]
    Ms. Dusenberry. We would like to invite you to the 
groundbreaking of our bypass bridge approaches.
    Senator Breaux. Well, I would like to come.
    Ms. Dusenberry. On October 21st, if you can. It is going to 
be on the top of Hoover Dam, so you can see what the congestion 
is.
    Senator Breaux. I will go there right after----
    Ms. Dusenberry. We will go to Searchlight.
    Senator Breaux. I will go there right after I go to the I-
69 groundbreaking.
    [Laughter.]
    Senator Breaux. Mr. Caruthers, thanks, John, for being with 
us. I've never seen--I have been in this business almost 30 
years this month and I do not think I have ever seen a 
coalition nationally on a project like this that you have been 
able to put together. I think that is what really has made it 
successful, because it has really involved not just one State, 
but all the States along the route, and that is not easy 
because everybody has different ideas about how to do it. But 
it has been really important.
    I guess one of the things that--I do not know why, but when 
we built the interstates back starting in the Fifties it really 
was an east-west bias, was it not? We were building highways 
east and west, but north-south sort of to a large port of the 
country really got left out.
    How much more important is that north-south highway now 
since NAFTA was passed? It seems like you talked about we have 
had huge numbers of increase in amount of trade from Canada and 
from Mexico going north-south.
    Mr. Caruthers. That is right. I believe I mentioned that 
Louisiana exports to Mexico have tripled. Texas has doubled. 
Truck-borne freight I am talking about, travel, now. Even as 
far north as Indiana--and for example, Illinois' trade exports 
to Mexico by truck have tripled. Their trade with Canada has 
doubled. So this is going on in every State in the I-69 
corridor.
    Senator Breaux. Mr. Wickham, how important is that type of 
a corridor? It seems to me when you are going north-south 
through the central part of the country you are really on--you 
do not have a lot of interstates that you can travel over.
    Mr. Wickham. That is correct, and it is becoming more 
important. You can obviously see the east-west bias. I think it 
was done for the defense reasons, that the highway system was 
put in place. But it is apparent that the north-south direction 
was lacking and it is becoming more and more important.
    We have subsidiaries in Canada and in Mexico and we can 
connect ourselves operationally and information systems-wise, 
but the crossings become problematic and then transportation 
north and south after you make the crossing is a little more 
difficult than it is east and west. But it is obviously 
becoming more and more important because of NAFTA and the 
growth.
    Senator Breaux. Thank you.
    Mr. Caruthers, what is the most important priority that we 
should be doing from a congressional standpoint? I guess maybe 
the reauthorization for I-69. Where are we in terms of--what 
are the priorities now? Where are we now?
    Mr. Caruthers. Well, it seems to me--and I am thinking like 
you, from off the cuff right now--the freight bottlenecks are 
at the borders and in the corridors, and the Borders and 
Corridors program seems to me to be the simple structure 
already in effect that needs only one thing, and that is 
funding.
    Senator Breaux. I-69, if we had more funding in it, would 
be able to benefit directly from that.
    Mr. Caruthers. That is right. That is right. We can finish 
it almost within the TEA-21 reauthorization of 6 years if the 
funding is provided.
    Senator Breaux. Ms. Dusenberry, you had a comment?
    Ms. Dusenberry. I mentioned in my testimony that the Hoover 
Dam Bypass Bridge was a part of the CanaMex corridor. Mexico is 
a--the western part of Mexico, west of the Sierra Nevada 
mountains, which are hard to traverse across in Mexico, is the 
largest producer of produce that comes into the United States. 
That border crossing--those border crossings in Arizona are 
extremely important.
    We are working on a study now, we are calling it ``The 
CyperPort,'' in Nogales, Arizona, where we are looking at 
electronically serving all of the trucking so there is no paper 
exchanged. We are working on a uniform bill of lading so that 
the trucking across the border can run paperless and seamless 
across the border.
    We hope that this technology that we are developing will 
transfer to other border crossings, both in Canada--Canada has 
been interested in what we are doing--in Canada and the other 
Mexican ports when we get this seamless system developed.
    Senator Breaux. Well, I think the committee has had some 
good ideas and some good suggestions. I think it is good that 
we were able to start talking about this before the fact. We 
have TEA-21 coming up, but I think with Senator Reid and 
Senator Jeffords and Senator Inhofe all wanted, and our staffs, 
to get some discussion now so we get these ideas being thought 
about as to what we need to be doing. I think that your points 
are all well taken.
    Admiral, good luck to you and all the people at the port 
for the rest of the week. I know it is a particularly trying 
time, but we appreciate your service and being with us today.
    With that, the committees will stand adjourned.
    Whereupon, at 4:37 p.m., the hearing was adjourned.]
    [Additional statements submitted for the record follow:]
  Statement of Hon. Jeffrey N. Shane, Associate Deputy Secretary and 
  Director, Office of Intermodalism, U.S. Department of Transportation
    Chairman Breaux, Chairman Reid, Ranking Members Smith and Inhofe, 
and members of the committee: Thank you for inviting me to testify 
today on the topic of ``Freight and Intermodalism.'' I would like to 
commend your committees for their continued leadership on these 
important issues and in supporting our efforts to ensure the seamless 
transportation of goods throughout our country. I believe that ISTEA 
and TEA-21 have created a solid framework for addressing the 
transportation and logistics policy issues currently facing our Nation, 
and the lessons we have learned will serve as important guideposts 
during the upcoming reauthorization debate.
    Demands on our nation's transportation system are growing faster 
than supply. While statistics show that since 1970 our population has 
grown 40 percent and vehicle miles traveled have doubled, the Federal 
Highway Administration's Highway Statistics Manual indicates that our 
highway physical infrastructure has increased by only 6 percent during 
that timeframe. In fact, according to the Texas Transportation 
Institute, the costs associated with congestion in the 68 urban areas 
they studied totaled $67.5 billion for 2000, including 3.6 billion 
hours of extra travel time and 5.7 billion gallons of fuel burned by 
vehicles sitting in traffic. Even after the significant investments in 
surface transportation infrastructure under ISTEA and TEA-21, our 
transportation system is still experiencing rising levels of congestion 
that adversely impacts the free movement of freight on our nation's 
roadways.
    In 1998 (the latest year for which data are available), the U.S. 
transportation system carried nearly 4 trillion ton-miles of freight 
valued at over $9 trillion. Of this, shipments totaling $7.8 trillion 
were primarily domestic movements, with an additional $1 trillion 
representing international merchandise. By the year 2020, forecasts 
predict that the U.S. transportation system will handle cargo valued at 
over $28 trillion, of which $24 trillion will be domestic movements and 
over $4 trillion will pass through our nation's gateways.
    Truck shipments accounted for 71 percent of total tonnage and 83 
percent of the value of U.S. shipments based on the 1998 data. Trucks 
also make the vast majority of local deliveries, although the industry 
also carries large volumes of freight between regional and national 
markets. Water and rail also carry significant shares of total U.S. 
tonnage, but much smaller shares when measured on a value basis. Air 
cargo shipments, on the other hand, moved less than 1 percent of total 
tonnage but carried 12 percent of the value of freight shipments during 
1998.
    To put these figures into a broader context and provide a better 
sense of the challenges we must face, the increase in the volume of 
freight being shipped on our nation's highways will, by the year 2010, 
equal the total volume of freight currently carried on our entire rail 
system in the average year.
    One of Congress' principal goals in establishing a unified, Federal 
Department of Transportation (DOT) in 1967 was to facilitate 
coordinated transportation services across all modes while encouraging 
these services to be provided by private enterprise whenever possible. 
Another goal was to ensure that the connections between and among the 
transportation modes function smoothly while facilitating international 
trade and economic development. The Department provides a common 
framework that meets the various needs of our highway, marine, aviation 
and rail systems by ensuring greater coordination among programs 
affecting different modes of transportation while increasing the 
connectivity of these modes.
    The landmark Intermodal Surface Transportation Efficiency Act of 
1991 (ISTEA) increased funding flexibility and emphasized intermodal 
planning. The financial reforms of the Transportation Equity Act for 
the 21st Century (TEA-21) gave States and local governments vastly 
greater resources and the flexibility with which to implement the 
intermodal solutions fostered by ISTEA. Together, they have laid a 
sound framework for future Federal surface transportation programs and 
the intermodal strategies needed to leverage and improve system 
management and utilization.
    Although much has been done over the past decade, the promise of 
intermodalism--the efficient movement of freight and passengers through 
all modes of our transportation system--has not yet been fully 
realized. As bottlenecks grow and system congestion worsens, the 
Department increasingly will be asked to facilitate projects that 
enhance freight transportation efficiency. Also, in the aftermath of 9/
11 participants in the transportation system have been called upon to 
integrate security measures into their operations, and the Department 
has initiated several programs to encourage that integration. For the 
freight industry, this will require strong private sector involvement 
with the Federal Government empowered to foster cooperation across all 
modes through new public/private partnerships.
Freight Movement and International Trade
    Understanding future freight activity, both foreign and domestic, 
is important for matching infrastructure supply to demand and for 
assessing investment and operational strategies. The U.S. economy 
depends upon a wide variety of products that move within State 
boundaries, through interstate commerce, and to and from various parts 
to the world. Using data from its Freight Analysis Framework (FAF), the 
Department has developed information on current and projected freight 
flows, including a forecast of activity through the year 2020.
    FAF projects annual domestic freight volumes will nearly double 
between 1998 and 2020, increasing from 13.4 billion tons to over 22.5 
billion, which raises the question of which modes will carry these new 
shipments. The FAF forecast assumes that growth in freight activity 
will be captured largely by increases in air and truck shipments. 
Domestic air cargo tonnages are projected to double, although its share 
of total tonnage would remain fairly small. Movements by truck are 
expected to almost double over the 1998 to 2020 period, capturing a 
larger share of total traffic. Finally, while both rail and domestic 
water shipments are projected to increase, their volumes are not 
expected to grow as dramatically over the forecast period, mainly 
because of slower demand growth in many of the key commodities carried 
by these modes.
    Since the 1970's, international trade has emerged as a major 
component of the U.S. economy, as imports of consumer goods, petroleum, 
and manufactured products have increased along with exports of raw 
materials, agricultural products, and manufactured goods. This trend 
toward increased international trade is expected to continue, as 
suggested by DRI/WEFA's projection that over 30 percent of the U.S. 
economy will be tied to international trade in goods and services by 
the year 2020, up from 23 percent in 1998.
    This projected growth in trade has led to concerns over congestion 
at U.S. ports, airports, and borders entry points. International trade, 
expressed in tons, is forecasted to grow at an annual rate of 2.8 
percent and more than double by 2020. While increases are expected for 
all regions of the world, the largest growth will likely come in our 
trade with Mexico, Canada, Asia and South America. Cargo trade with our 
NAFTA partners moves primarily by truck and/or rail, and most 
international shipments of water and air cargo are transferred to or 
from trucks, rail cars or barges after arriving in the United States or 
before heading to export markets. Given the importance of trade to our 
nation's economy, identifying ways to more efficiently move freight 
across our borders will be critical in the years ahead.
NHS Intermodal Connectors
    The condition of the existing transportation system and its 
connections directly affects the efficient movement of cargo. When 
Congress created the National Highway System (NHS), it recognized the 
need to provide adequate highway access to intermodal freight 
terminals. Intermodal passenger terminals are generally well served by 
NHS connectors but infrastructure connecting freight terminals to 
primary NHS routes is often in need of improvement.
    NHS connectors are typically short, averaging less than two miles 
in length, and are usually local, county or city streets that have 
lower design standards than mainline NHS routes. They typically serve 
heavy truck volumes moving between intermodal freight terminals and 
mainline NHS routes, primarily in major metropolitan areas. Despite the 
fact that connectors are less than 1 percent of total NHS mileage, they 
are the ``front door'' to the freight community for a broad array of 
intermodal transport services and options.
    TEA-21 directed the Secretary of Transportation to conduct a review 
of the NHS connectors that serve intermodal freight terminals and 
submit a report to Congress. The objectives of the review were to: (1) 
evaluate the condition of NHS connector highway infrastructure to major 
intermodal freight terminals; (2) review improvements and investments 
made or programmed for these connectors; and (3) identify impediments 
and options to making improvements to the intermodal freight 
connectors.
    The findings of our report to Congress, dated July 2000, are 
especially relevant as we consider reauthorization of TEA-21:

      Intermodal connectors that primarily serve freight 
terminals have significant mileage with pavement deficiencies and 
generally exhibit inferior physical and operational performance than 
other similar NHS facilities;
      An analysis of investment practices shows a general lack 
of awareness and coordination for freight improvements within the State 
departments of transportation and metropolitan planning organizations 
(MPO) planning and programming process; and
      Given the pressing needs for passenger-related projects 
and the fact that many of the benefits from an increased freight 
investment are received outside of the investing jurisdiction, there is 
little incentive for local investment in freight projects.

    The ability to recognize and effectively address connector needs 
within the context of our overall intermodal freight system are 
important elements in preserving and promoting the substantial 
productivity gains we have witnessed as a result of better supply chain 
management.
Multi-State and Cross-Border Transportation Planning
    End-to-end movements of commercial freight must be viewed within 
the context of a transportation system that is not bounded by State or 
international borders. A regional perspective and decisionmaking 
capability is required to provide effective coordination for the 
infrastructure planning and investments that support these commercial 
activities. Recognizing that the health of their economies depends upon 
efficient movement of goods along regional transportation system 
segments that often lie beyond their immediate responsibility, several 
State and Provincial Departments of Transportation have joined together 
to promote regional transportation consortia. The following examples 
illustrate this coordinated and complementary approach to regional 
transportation planning and infrastructure development:
      I-95 Corridor Coalition (I-95CC): The geographic region 
represented by the I-95CC consists of 12 States (ME, VT, NH, MA, CT, 
RI, NY, NJ, PA, DE, MD, VA) and the District of Columbia. With a 
population of just over 67 million people, it is home to nearly a 
quarter of the nation's inhabitants and a quarter of the nation's jobs, 
but contains only 6 percent of the landmass of the Nation. The 
population density of the region makes efficient goods movements both 
essential and extremely challenging in this largely urbanized 
environment. DOT representatives from the 12 States and the District of 
Columbia have developed an intermodal strategic plan for the I-95CC 
that is addressing freight transportation needs within the context of 
the region's social, economic, and environmental goals.
      Gulf/Rivers Intermodal Partnership (G/RIP): In a 
cooperative effort of seven southeastern and Gulf State departments of 
transportation, regional planning entities and four public port 
authorities, G/RIP works to improve waterside/landside infrastructure 
investments through education programs for public planners. The 
partnership uses the region's ports as classrooms in addition to 
periodic forums with senior regional public and private sector 
policymakers to discuss topical infrastructure issues.
      International Mobility and Trade Corridor (IMTC): The 
IMTC is a coalition of over 60 U.S. and Canadian business and 
government entities whose mission is to identify and pursue 
improvements to cross-border mobility in the ``Cascade Gateway'', which 
includes four land border crossings between British Columbia and 
Washington State. Two-way trade at the Blaine, WA, border crossing 
alone was valued at more than $35 million per day in 2000. Congestion 
and processing delays at the Blaine border crossing result in over $40 
million in additional operating costs annually--losses that exceed 1 
day's revenue generated by this commercial traffic. IMTC-sponsored 
projects are funded through bi-national financial partnerships at 
Federal, regional, and local levels.
TEA-21's Record
    congressional support for the commercial movement of freight was 
woven into many parts of TEA-21, helping to strengthen the nation's 
transportation system through: enhanced stability and flexibility of 
funding; the borders and corridors programs; and increased application 
of new information technologies.
Stability and Flexibility of Funding
    TEA-21 revolutionized transportation funding through its budgetary 
firewalls and innovative financing provisions as well as by providing 
record amounts for surface transportation programs. The budgetary 
firewalls that were introduced created confidence among grantees 
regarding program funding. As a result, States and localities have 
relied upon these assurances and increased their funding levels to 
match or even exceed Federal commitments made in TEA-21. The Department 
sees its role as one of exercising leadership in convening public and 
private sector parties to undertake innovative financing of major 
transportation projects.
    One of the most impressive intermodal success stories is the 
Alameda Corridor freight project. The Alameda Corridor is a multi-modal 
project that uses a mix of private funds and public programs, including 
a $400 million loan from the Department of Transportation, to improve 
rail and highway access and to reduce traffic delays in the critically 
important area of the Ports of Los Angeles and Long Beach. The recently 
completed $2.4 billion project, which opened for revenue service on 
April 15, 2002--on time and within budget--will have far-reaching 
economic benefits that extend well beyond Southern California.
    The funding flexibility created under ISTEA and continued in TEA-21 
allows States and communities to tailor their transportation choices to 
meet their unique needs. It enables State and local decisionmakers to 
consider all transportation options and their impacts on traffic 
congestion, air pollution, urban sprawl, economic development, and 
quality of life.
    TEA-21's innovative credit program has further augmented both the 
highway and transit programs. The Transportation Infrastructure Finance 
and Innovation Act (TIFIA) has provided almost $3.6 billion in Federal 
credit assistance to 11 projects of national significance, representing 
$15 billion in infrastructure improvements. These loans, loan 
guarantees, and lines of credit for highway, transit, rail, and 
intermodal projects have encouraged private investment to strengthen 
transportation infrastructure.
    Despite these successes, there are still areas where we can 
improve. For example, while freight transportation projects are often 
regional or multi-State in scope, funding is typically distributed 
through States and localities. Also, conventional financing programs 
have provided funding for a wide variety of projects focused on 
individual modes of transportation, but when dealing with major 
intermodal projects these programs have often proven insufficient. 
Finally, because TEA-21's programs are oriented toward the public 
sector, it can be difficult to truly incorporate the needs of private 
sector transportation carriers and shippers in the planning process.
The Borders & Corridors Program
    TEA-21 established the National Corridor Planning and Development 
and Coordinated Border Infrastructure Program (also known as the 
``Borders and Corridors'' program). Both programs are financed by one 
funding source, which is authorized at $140 million annually from 
fiscal year 1999-2003. Due to the obligation limitation provisions of 
TEA-21, awards the first 3 years averaged about $123 million, but based 
on the law's RABA provisions and congressional direction awards for the 
fourth year (FY 2002) will be nearly $480 million.
    congressional designation (or ``earmarking'') of projects in the 
Borders and Corridors program increased from 0 percent in fiscal year 
1999 to about 50 percent in fiscal year 2000 and 65 percent in fiscal 
year 2001. Given this trend and the cost of preparing full 
applications, in May 2001 the FHWA solicited 'Intent to Apply' for 
fiscal year 2002 in place of full applications with a provision that 
full applications would only be requested if warranted based on that 
year's DOT Appropriations Act. When Congress designated 100 percent of 
the funding for fiscal year 2002, FHWA did not solicit full 
applications and instead requested abbreviated applications for 
projects designated by Congress. As a result, congressional earmarking 
has prevented the Department from taking a strategic approach and using 
the program to facilitate trade through targeted transportation 
investments that maximize system efficiency.
    Awards under the Borders and Corridors program have been as 
follows:
                        FY 1999--$123.1 million
                        FY 2000--$121.8 million
                        FY 2001--$123.6 million
                        FY 2002--$478.0 million
    For some projects construction is nearly complete or underway. One 
project that has essentially been completed is near the World Trade 
Bridge between Laredo, Texas and Nuevo Laredo, Mexico. Before this 
bridge was opened, traffic queues up to 4 miles long were common on an 
existing bridge and traffic was grid locked for several miles along I-
35. Subsequent to its opening, trucks were diverted to the new bridge 
leaving the existing bridge to serve autos, buses and pedestrians. The 
gridlock has now disappeared and travel time has been reduced 
dramatically for trucks, autos and pedestrians while improving safety 
and creating jobs.
    Some construction projects currently underway that are likely to be 
completed in the next 2 or 3 years include the FAST (Freight Action 
Strategies) corridor in Washington State and the Bridge of the Americas 
and the Paso del Norte Bridge between El Paso, Texas and Ciudad Juarez, 
Mexico. In the FAST project, replacing a number of highway/rail grade 
crossings with grade separations will improve safety, relieve 
congestion and improve operation of the water ports and the rail lines. 
In El Paso, a modest expenditure (about $3 million for each bridge) 
will improve physical inspection capacity on each bridge by as much as 
40 percent.
    Other projects are at least three or more years from completion 
including such important bottleneck relief projects as: the Ambassador 
Bridge Gateway in Detroit, Michigan; the SR 905 connector to the border 
crossing south of San Diego, California; and the Hoover Dam Bypass 
between Arizona and Nevada. Finally, the future I-69 between Michigan 
and the Texas lower Rio Grande Valley, which is more of a new access 
and economic development project, is probably more than a decade from 
completion.
Application of New Information Technologies
    Any seamless transportation system--present or future--relies 
heavily on information technology. The same information revolution that 
has swept through the private sector and increased our nation's 
productivity must also be applied to our transportation systems. 
``Smarter'' systems have the potential to dramatically reduce the 
barriers and costs that currently limit the ability of passengers and 
freight carriers to operate across modes. They also will help us to 
ensure safer and more secure freight transportation networks.
    TEA-21 authorized a total of $603 million for Intelligent 
Transportation Systems (ITS) research for fiscal years 1998 through 
2003, which has funded important research projects that support freight 
movements by focusing on system optimization and more effective use of 
existing infrastructure. These efforts also facilitate the integration 
of the operational aspects of all of our transportation systems, while 
system construction projects address their physical connectivity. 
Intermodal freight is a major emphasis of DOT's ITS efforts, and the 
Department is currently conducting several ITS operational tests 
designed to improve the efficiency and security of the inter-modal 
movement of freight.
    For example, the Chicago O'Hare cargo project uses a ``smart card'' 
and biometric identifiers to identify the shipment, vehicle and driver 
during transportation from the shipper to and through the air cargo 
terminal. Another project, Cargo-Mate, has particular applicability to 
port and container security, in addition to enhancing the efficiency of 
freight movement. This system is designed to perform real-time 
processing of asset and cargo transactions, provide for the 
surveillance of cargo movement to and from ports, and provide an 
integrated incident and emergency response capability.
    In a cooperative venture between Washington State and British 
Columbia, under the auspices of the International Mobility and Trade 
Corridor (IMTC), electronic cargo seals are being deployed to 
demonstrate the use of low cost disposable technology to track cargo 
movements and monitor the security of containerized freight. This test 
will examine the use of a Congestion Notification System to improve 
truck access to the Port of Tacoma. When these and related projects are 
completed and the technologies deployed, the IMTC will have the first 
fully operational bi-national electronic commercial vehicle operations 
(CVO) border crossing system in North America.
    The Department also is participating in the International Trade 
Data System (ITDS), which will create a single Federal data base for 
all international trade and transportation transactions. Expected to 
become operational in FY2004 at the nation's busiest land borders, and 
at all land, sea and air ports of entry by 2006, ITDS will extend the 
benefits of customs modernization across the entire Federal Government. 
The ITDS and Customs' Automated Commercial Environment (ACE) are being 
jointly developed so that taxpayers and Federal agencies will have a 
single system for processing international trade and transportation 
information that will also serve as an important tool in facilitating 
the transport of cargo.
    Continued Federal, State and local investment in the development of 
new transportation technology has the potential to yield enormous 
operational benefits and give transportation professionals much greater 
capacity to manage increasingly complex systems.
Security Issues
    The events of 9/11 have made us all realize that transportation 
planning must also make the security of freight shipments a top 
priority, in addition to the system's safety and efficiency. As freight 
moves from one mode to another, from ship to rail to truck for example, 
we must ensure that these modes and the public are protected from 
terrorist attacks. The Transportation Security Administration (TSA) now 
oversees transportation security across all modes, with the most 
prominent of course being the new requirements for aviation. However, 
TSA is also concentrating on sea, rail and land shipments and the links 
between these modes when assessing possible security threats. 
Intermodal connectivity is critical for national security, and TSA is 
coordinating with the other modes in DOT, other Federal agencies, and 
industry to achieve the highest possible security levels for the 
transport of goods.
    Operation Safe Commerce (OSC) is an innovative public-private 
partnership dedicated to enhancing security throughout international 
and domestic supply chains while facilitating the efficient movement of 
legitimate commerce. The overall objective is to provide valid 
recommendations and workable solutions to legislators, regulatory 
agencies, the International Maritime Organization and the World Customs 
Organization on how best to address the critical issue of international 
cargo security. I serve as co-chairman of the Executive Steering 
Committee that directs the OSC initiative along with the Deputy 
Commissioner of the U.S. Customs Service, and have been very pleased 
with the substantial progress we have made so far.
    A recently completed initial pilot test applied available 
technology to analyze the supply chain security of a shipment from 
Eastern Europe to New Hampshire by equipping a cargo container with 
onboard tracking, sensor and container door seals. This shipment was 
monitored as it was transported through numerous countries, and the 
jurisdictions of several Customs administrations, using various 
transportation modes. I11OSC proposes to develop and test security 
practices to govern the packing, loading and movement of cargo 
throughout several international supply chains. This effort will seek 
to prototype various solution sets in order to test combinations of 
physical, technological and logistical security practices that will 
best secure domestic and international supply chains.
    Operation Safe Commerce will attempt to do this by addressing three 
key components to secure supply chain management. First, it will 
demonstrate what is needed to ensure that a shipper exerts reasonable 
care and due diligence in properly packing, securing and manifesting 
the contents of a shipment of goods. Second, it will demonstrate 
various methods to ensure that the electronic documentation 
accompanying a cargo shipment is complete, accurate and secure from 
unauthorized access. Third, it will test supply chain security 
procedures and practices, and implement enhanced manifest data elements 
and container sealing procedures, to determine which applications of 
information and technology are most effective in securing international 
and domestic shipments.
    Operation Safe Commerce will serve as a technology and business 
practice ``laboratory'' to vet innovate solution sets that support the 
objectives of other Federal initiatives such as the Department of 
Transportation Container Working Group, the U.S. Customs Container 
Security Initiative and Customs--Trade Partnership Against Terrorism, 
and the Department's Intelligent Transportation System and the Borders 
and Corridors Programs.
    These efforts will continue once TSA and the United States Coast 
Guard transfer their missions and functions to the proposed Department 
of Homeland Security. Secretary Mineta fully supports these efforts to 
improve our Nation's homeland security, and if approved by Congress the 
Secretary has pledged to fully cooperate with the new Department to 
ensure that security over all modes of transportation is enhanced.
Building on TEA-21
    As we consider the reauthorization of TEA-21, we continue to face 
many of the same challenges that confronted the authors of ISTEA and 
TEA-21. Applying an intermodal approach to these challenges enables us 
to extract the maximum amount of capacity from our existing 
infrastructure through creative programs and wise investments.
    Accordingly, intermodalism plays a large role in the core 
principles and values that motivate the Department's preparation for 
TEA-21's reauthorization. We will seek to do the following:

      Preserve funding flexibility to allow the broadest 
application of funds to transportation solutions, as identified by 
States and local communities.
      Strengthen the efficiency and integration of the Nation's 
system of goods movement by improving international gateways and points 
of intermodal connection.
      Focus more on the management and performance of the 
system as a whole rather than on ``inputs'' or functional components.
      Develop the data and analyses critical to sound 
transportation decisionmaking.
      Foster the development and deployment of technology, to 
support intermodal freight security, productivity, and safety.
      Expand and improve innovative financing programs, in 
order to encourage greater private sector investment in the 
transportation system, and examining other means to augment existing 
trust funds and revenue streams.

    Supporting the efficiency of commercial freight transportation 
continues to be a cornerstone of the Department's vision for America's 
transportation system. ISTEA and TEA-21 legislation gave us many tools 
to bring this vision to reality, and our experience has given us new 
ideas for programs that will get us even closer to our goal of a 
seamless transportation network. Greater investments in transportation 
infrastructure and wider use of information technology will certainly 
be required to achieve this goal.
    The Department looks forward to working with our partners in State 
DOTs, metropolitan planning organizations, and private industry to 
apply innovative funding strategies such as TIFIA and State 
Infrastructure Banks to develop large-scale projects that might 
otherwise be beyond the financial means of the individual stakeholders.
    We will also consider possible changes to the Borders and Corridors 
Program that would encourage broader transportation planning on the 
basis of economic regions and export markets to ensure that our 
infrastructure investments are truly integrated with regional and 
national business developments.
    Private industry has made it clear to the Department that reliable 
information on product shipments is of critical importance to them. If 
our transportation system is to provide adequate levels of service for 
the freight industry and their customers, we must continue to apply 
innovative technologies through the ITS Program and collect information 
on commodity movements to provide a firm foundation for transportation 
planning.
    The Department will also work with the private sector to formulate 
innovative approaches to providing transportation solutions and develop 
the professional capacity to apply these solutions to the challenges 
that confront us. We will consider new ways to develop public-private 
partnerships that can leverage public infrastructure investments and 
ensure that the private sector is more engaged in our planning 
processes.
    I am confident that working together, the Administration, Congress, 
States and localities, and the private sector can preserve, enhance, 
and establish surface transportation programs that will result in 
increased mobility, security and prosperity, as well as more 
transportation choices for all Americans.
    Mr. Chairman and members of the committee, thank you again for the 
opportunity to testify before you today. I look forward to responding 
to any questions you may have.
                                 ______
                                 
Responses by Jeffrey N. Shane to Additional Questions from Senator Reid
    Question 1. Freight transportation is expected to double in the 
next 20 years. This increase in freight traffic will occur at the same 
time that congestion on our roads is already at levels many of us 
consider unacceptable. Clearly capacity issues have to be at the top of 
our list as we begin to reauthorize our surface transportation 
programs. However, in addition to building new physical capacity, we 
will need to seek ways to squeeze more out of our existing 
transportation infrastructure through intelligent transportation 
systems, better operations, and perhaps a more efficient mix of 
transportation choices. For example, to move passengers and freight 
from congested roads to rail. Please give your thoughts on what we can 
do when we reauthorize TEA-21 to get the most efficient use out of our 
transportation infrastructure.
    Response. Improving intermodal freight efficiency will involve both 
public agencies and private freight companies. In particular, we must 
focus on:
    (1) improvements to the NHS freight connectors, providing for 
greater opportunities to use truck/water and truck/rail options to move 
freight in and out of terminals;
    (2) greater deployment of Intelligent Transportation Systems to 
improve system operations and to ensure intermodal conveyance of 
critical freight information for efficiency and security-this should 
include not only an ITS backbone for information exchange between the 
roadside and vehicles, but should also include other transport modes, 
and agencies involved in trade facilitation and security;
    (3) continued development of international standards for cargo 
security, to enable efficient and secure trade among NAFTA partners, 
and with other international trading partners;
    (4) enhanced use of innovative finance to leverage additional 
investment for freight transportation improvements; and
    (5) additional emphasis on intermodalism to make better use of all 
modes for freight transport.

    Question 2. We clearly have significant freight transportation 
needs across our Nation. How do we determine what our freight 
priorities should be? Do we have sufficient information to determine 
which freight corridors, border crossings, port, intermodal facilities 
and connector should be our top funding priorities? Where is our 
freight infrastructure least efficient and where is the growth expected 
to occur?
    Response. Since 2000, the Department has engaged in a comprehensive 
effort to (1) improve our understanding of freight flows; (2) define 
and analyze trends that might affect the demand, supply, and 
distribution of future freight transport requirements; and (3) work 
with State and local governments, other Federal agencies, and the 
private sector to define public policy strategies to enhance the 
planning, finance, and operation of the Nation's intermodal freight 
network. As part of this effort, we continue to work with major trade 
associations and governmental organizations to devise strategies that 
appropriately address freight efficiency, along with the national 
objectives of safety, security, and environmental awareness.
    As part of this effort, we have developed the Freight Analysis 
Framework (FAF), a multimodal analytical system that enables us to map 
domestic and international freight movements and, when linked with 
transport network information systems, to match and compare systems 
demands with supply, both under current conditions and under future 
scenarios. When combined with other information systems developed to 
track maritime and rail movements and cross border freight flows, the 
FAF provides a powerful data/analytical system to determine the 
relative importance of corridors, gateways and border crossings, and 
regional freight movements.
    The FAF, validated by extensive meetings with State and local 
officials and the private sector, suggests that major freight transport 
challenges form around: (1) major trade transport gateways, including 
certain maritime ports of entry, land crossings with Canada and Mexico, 
and significant trade hubs; (2) long distance multistate and 
international trade corridors; and (3) State and local freight 
concerns. Future trade forecasts suggest that volumes will increase at 
all major gateways and along trade corridors. This growth is likely to 
vary by region, however, as population and economic growth continues to 
shift and international trading patterns change in response to 
variations in market conditions.
    Domestic freight demand is expected to increase by approximately 67 
percent from 1998-2020 while international freight is expected to 
increase by approximately 85 percent. For example, US-Canada trade is 
expected to double over that time period, and US-Mexico trade is 
expected to increase by more than 200 percent. These increases in trade 
will require an emphasis on gateways, hubs, border crossings, and long 
distance trade corridors as we prepare to reauthorize our nation's 
surface transportation programs next year.
    The FAF, in combination with stakeholder documentation of need, can 
be used to quantify the relative magnitude of growth along major 
corridors, and has been used extensively as we define the Department's 
surface transportation reauthorization initiatives. Mapping current and 
future freight flows is a valuable first step in defining the geography 
and magnitude of freight movement but is not, in itself, sufficient to 
define where our resources and attention should be focused. When 
overlaid on system condition information, however, the combination of 
demand and supply provides valuable insight into the freight 
bottlenecks that we need to address in this reauthorization package.
    With freight transportation primarily the responsibility of the 
private sector, Federal transportation policies offering near term 
solutions to these problems are limited in their effectiveness. Longer 
term, federally led strategies to identify and deal with these 
problems, however, can have significant effects on future efficiencies. 
Advanced Federal policies and programs to strengthen intermodal 
capacity at gateways and along major trade corridors can result in 
important improvements to the Nation's trade transport network.
    As we look to the future, we are evaluating institutional, 
financial, and technology enhancements that would enable State and 
local governments, in partnership with the Federal Government, to 
identify bottlenecks, establish priorities, and develop comprehensive 
funding strategies to mitigate the freight bottlenecks that can 
threaten our economic well-being if they are not properly addressed.

    Question 3. The Borders and Corridors Program has not worked very 
well. One improvement we should consider is to revise this program to 
encourage public-private partnerships through a greater emphasis on 
innovative finance and other creative incentives. How else can we 
improve the Borders and Corridors program to target the highest 
priority freight corridors and intermodal facilities.
    Response. It is difficult to judge exactly how well the National 
Corridor Planning and Development and Coordinated Border Infrastructure 
(NCPD/CBI) discretionary grant program, as set forth under the 
Transportation Equity Act for the 21st Century (TEA-21), has performed. 
This is due, in part, to the fact that projects funded under the 
program have increasingly been earmarked during the appropriations 
process rather than selected through a competitive application process 
as originally intended by Congress. From fiscal year 1999 to fiscal 
year 2002, over two thirds of all NCPD/CBI funds went to projects 
identified in appropriation act report language (the percentage was 100 
percent in fiscal year 2002), thereby severely limiting the Department 
of Transportation's ability to administer these programs in a strategic 
way. Moreover, the amounts made available often are not sufficient to 
fund an entire project, further limiting the program's usefulness in 
enhancing our nation's primary border crossings and trade corridors.
    With respect to your suggestion ``to encourage public-private 
partnerships through a greater emphasis on innovative finance and other 
creative incentives'', the Department agrees that a greater emphasis on 
innovative finance should be a part of any future program.
    The Department also agrees that projects should ``target the 
highest priority freight corridors and intermodal facilities.'' One way 
to accomplish this is to emphasize the importance of having proposed 
projects be consistent with the continuing, cooperative, and 
comprehensive transportation planning process required by sections 134 
and 135 of title 23 United States Code.

    Question 4. One way to squeeze more capacity out of existing 
infrastructure is through more rapid deployment of ITS and an increased 
focus on the operations and management of regional transportation 
systems. How much potential do ITS initiatives have for improving the 
efficiency of freight operations and what can we do to promote the 
development of a freight-friendly ITS infrastructure?
    Response. Freight oriented ITS provides a direct benefit by linking 
improvements in systems operations to supply chain logistics and 
domestic and international cargo security. Following 9/11, various 
Federal agencies have developed cooperative agendas designed to promote 
more secure domestic and international cargo movement, combining the 
resources of ITS with trade facilitation functions (Customs, INS, USDA, 
etc.), and our international trade partners. Cooperative efforts with 
the private sector, through the Intermodal Freight Technology Working 
Group (IFTWG) have identified opportunities, currently deployed and 
under evaluation, to use ITS to enhance ``end to end'' supply chains. 
Programs like Operation Safe Commerce and the Container Working Group 
are identifying best practices in technology deployment, standards, and 
interoperability, and the lessons being learned will provide valuable 
guidance on the use of ITS to better integrate improvements in safety, 
security, and freight productivity.
    ITS and systems operations strategies have enormous potential to 
effect capacity improvements and enhance freight flow. Whether the ITS 
initiative is focused on passenger movement or transportation more 
generally, freight movement can be enhanced. For example, advanced 
traveler information systems or incident management systems provide for 
better system utilization through improvements in real time information 
and the management of recurring and non-recurring types of delay. While 
passenger transportation clearly benefits from such ITS initiatives, 
trucking--both long distance shipments through metropolitan areas and 
local runs handling pick up and deliveries, also benefit from improved 
network utilization.
    Advanced technology through the expanded use of ITS is widely 
regarded, both within government and by the private sector, as perhaps 
the most cost-effective strategy to improve both trade transport 
efficiency and security.

    Question 5. What can we do to promote better regional freight 
planning and how do we ensure that planning agencies take a 
comprehensive, intermodal approach to infrastructure planning and 
development? In particular, when it comes to freight, how do we bring 
the private sector into the public planning process?
    Response. Traditionally, the metropolitan planning process has 
primarily focused on the movement of passengers, with the movement of 
freight generally treated as secondary. The general public typically 
views freight as a necessary evil, with people complaining about 
waiting at rail crossings or sharing roads with trucks and public 
agencies complaining about the damage trucks cause to a region's 
roadways. While existing Federal regulations stipulate that freight is 
to be considered in local transportation planning, relatively few 
regions have successfully implemented freight projects through 
traditional planning approaches.
    Development of a better regional freight planning process requires 
both a mutual understanding of public and private sector perspectives 
and outreach by State and local transportation planners to the freight 
industry. Freight operators generally believe that the transportation 
planning process is too slow to address their short-term, bottom-line 
needs, and therefore not worth their time and effort. Local 
transportation planners can help overcome this perception by soliciting 
the involvement of local freight operators in planning operational 
changes as part of Congestion Management System (CMS) initiatives. They 
can also do so through timely implementation of small, non-
controversial improvements like turning radii or signal timing at key 
intersections identified by local freight operators.
    In addition, there is a need to provide strategic data, analysis, 
and information for decisionmakers in both the public and private 
sectors. In this regard, the work of the Freight Analysis Framework 
(FAF) serves as a bridge between the two groups. The private sector, 
which may be unwilling to share detailed commodity information or 
operational strategies, can use the FAF to highlight the need for 
increased focus on freight, while the public sector can use the FAF to 
understand the growth of freight movements and its potential impact on 
both the local economy and its infrastructure. Maps generated using the 
FAF have been very useful in redirecting the discussion from an ``Us 
versus Them'' mentality to a ``We'' based on a shared perception of the 
need to improve freight productivity.
                                 ______
                                 
  Responses by Jeffrey N. Shane to Additional Questions from Senator 
                                Jeffords
    Question 1. Mr. Shane, in your testimony you mention a project 
involving the monitoring of containers from overseas as they travel to, 
and in, the United States.
    I assume that this relates to putting electronic devices which can 
be tracked by satellite onto sealed containers coming into the U.S. 
either by water, rail, or on trucks. These devices could be placed on 
the containers overseas or in other countries, or at entry into the 
United States after inspection of the contents. Under this approach a 
container packed anywhere in the world and certified safe at that point 
can be tracked and delivered to a consignee in the U.S. with assurance 
it has not been tampered with enroute.
    The objective is to have a ``real-time solution'' that can be 
monitored in the appropriate marine, rail, or other intermodal 
terminal. At first, this approach could be integrated into an overall 
regional approach where marine and rail terminals are interconnected 
and where appropriate governmental agencies such as Customs can also be 
connected. As other regions come on line this could expand to national 
coverage. These devices could be built into the locking device and 
could also indicate whether the container was opened prior to intended 
delivery.
    From a security standpoint the idea is, if an emergency situation 
arises, that law enforcement would be able to obtain a history of how 
containers were moved within the U.S., or to be able to locate a 
particular container in the U.S. In addition, this information could be 
very useful to the shipper and the intended recipient if there were 
unexpected delays.
    Would you explain your views on this approach? What would be the 
cost and lead time necessary to implement this concept to all 
containers entering or leaving the U.S.?
    Response. DOT has co-chaired with U.S. Customs two significant 
efforts to address the vulnerability posed by marine containers and 
other freight, also pulling together the expertise of other 
governmental and private sector stakeholders. Most notably have been 
our joint efforts on the Container Working Group (CWG) and Operation 
Safe Commerce (OSC), two important efforts that support the President's 
National Strategy for Homeland Security.
    The Container Working Group has been an ongoing effort since 
December 2001. The working group explored the problem of improving 
container security through solutions offered by business practices, 
security technology, information technology, and international 
activities. They produced a report with a number of recommendations in 
March, and they continue to pursue these recommendations. Key to these 
efforts will be the continued development of Intelligent Transportation 
Systems, the International Trade Data System, the U.S. Customs 
Automated Commercial Environment (ACE) System, and the implementation 
of G-7/WCO standardized messages and data sets.
    Operation Safe Commerce will complement the CWG by testing 
technology or process solutions offered by the private sector to 
improve supply chain security. OSC was initiated by a test of off-the-
shelf technology to seal, track, and monitor a single container shipped 
from Slovakia to New Hampshire This is the test I mentioned during my 
testimony. It would be premature to assume, however, that this approach 
is the best answer since we haven't yet embarked upon the more 
comprehensive set of OSC tests that we hope to fund in the coming 
months.
    We intend to continue rapid progress on both the CWG and OSC, and 
wherever possible, encourage multi-use systems that improve service 
quality for the transportation system as well as security and safety.
    The costs for developing and implementing a secure container regime 
have yet to be determined given that we must first test what does or 
doesn't work in real operating environments. By encouraging the private 
sector to test out solution sets for container security through the OSC 
initiative, we will be able to identify what in fact works and what is 
cost effective to the government and the industry. Accordingly, the 
lead-time must be viewed as a series of incremental steps over a period 
of time as we incorporate security proven solutions into the world 
fleet of over 14 million containers in active use today.

    Question 2. Since 9/11 there have been numerous studies and 
articles that have been written on the lack of knowledge we have on the 
contents and travel paths of goods in our country. Do you see this as a 
problem that needs to be rectified? What can be done to make sure, at 
the very least, hazardous materials are being tracked?
    Response. Judicious application of emerging technology for certain 
high-risk hazardous materials, including technology designed to track 
and monitor shipments, can be an important security tool. Indeed, we 
have encouraged hazardous materials shippers and transporters to 
investigate the use of tracking or monitoring systems for enhancing 
hazardous materials transportation security.
    In a Security Advisory published in the Federal Register on 
February 14, 2002, DOT's Research and Special Programs Administration 
(RSPA) identified a number of actions that persons involved in the 
transportation of hazardous materials could take to enhance security 
and recommended actions commensurate with the level of threat posed by 
the specific hazardous material being transported. To improve en route 
security, RSPA recommended that shippers and carriers consider 
utilizing advanced technology to track or protect shipments en route to 
their destinations. Such tracking technology could include satellite 
tracking or surveillance systems or could be as simple as frequent 
checks with drivers by cell phone to ensure everything is in order.
    In a May 2, 2002 NPRM RSPA proposed that shippers and carriers 
develop and implement security plans for certain high-risk shipments of 
hazardous materials. The security plan would be based on a risk 
assessment performed by the shipper or carrier to identify security 
risks and develop appropriate measures to reduce or eliminate risk. As 
proposed, a security plan must include measures to improve en route 
security, and such measures could include shipment tracking or 
monitoring systems. In addition, we proposed revisions to current 
shipping documentation requirements to assist law enforcement personnel 
to promptly ascertain the legitimacy of hazardous materials shipments 
during routine or random roadside inspections and to identify 
suspicious or questionable situations where additional investigation 
may be necessary.
    On July 16, 2002, RSPA and DOT's Federal Motor Carrier Safety 
Administration (FMCSA) issued a joint ANPRM inviting comments on the 
feasibility of specific security enhancements and the potential costs 
and benefits of deploying such enhancements. Security measures being 
considered include: escorts, vehicle tracking and monitoring systems, 
remote vehicle shut-offs, direct short-range communications, and 
notifications to State and local authorities.
    Finally, DOT has also undertaken an operational evaluation of 
cutting-edge communications and tracking technology, electronic seals, 
and biometric identification to evaluate their potential for enhancing 
security.
    If we find tracking or other methods to be effective, we will 
consider initiating appropriate regulatory actions.

    Question 3. Has the Department undertaken, or do you know of any 
studies that could be provided to the committee that discuss the 
benefits of improving rail corridors to freight movement?
    Response. There has been growing interest in the possibility of 
alleviating regional transportation problems by improving rail 
corridors and eliminating critical rail bottlenecks.
      AASHTO has prepared a ``Freight Bottom Line'' report that 
considers the national implications of such an approach and finds that 
the benefits of public sector investment in rail corridors could be 
substantial. The report should be available from AASHTO soon.
      The city of Chicago, all the major railroads and several 
other groups are developing a plan to alleviate rail congestion in 
Chicago while also reducing highway congestion due to blocked grade 
crossings. This study is expected to identify a number of critical 
projects that will establish several high volume corridors through 
Chicago.
      The Mid-Atlantic Rail Operations Study identified a $6.2 
billion program of public and private investments to address choke 
points limiting the capacity of the rail system between Virginia and 
New York.
      The State of Virginia has done a study of the potential 
for upgrading the rail lines that parallel I-81 to alleviate the need 
to rebuild and expand that highway that is now very congested with 
trucks. In cooperation with the Federal Railroad Administration and the 
State of Tennessee, that study is being expanded to consider marketing 
issues so as to better estimate the service requirements and diversion 
potential from a rail improvement program.
    Question 4. We have heard that the Department does not have 
sufficient personnel to effectively handle important issues of the 
freight community. I would be willing to work with DOT on this 
important matter. How can Congress assist the Department in ensuring 
that the mission and personnel of DOT are suited not only to providing 
mobility to the general public but to the freight community as well?
    Response. The Department is committed to ensuring that freight has 
a ``voice'' in policy deliberations, legislative initiatives, and in 
resource commitments. Congress can further assist the Department in 
effectively handling issues important to the freight community by 
acting on the Administration's request to establish an Under Secretary 
of Transportation Policy position as part of an overall restructuring 
of the Department's policy apparatus. Within this new and elevated 
structure, we would be able to combine and enhance resources to ensure 
that freight issues are accorded their rightful attention and 
visibility, and are addressed on an even par with passenger issues.
                               __________
Statement of JayEtta Hecker, Director, Physical Infrastructure Issues, 
                       General Accounting Office
    Mr. Chairmen and members: We are pleased to be here today to 
discuss challenges in defining the Federal role with respect to freight 
transportation issues. There are concerns that the projected increases 
in freight tonnage for all transportation modes will place pressures on 
the marine, aviation, and highway transportation systems. As a result, 
there is growing awareness of the need to view various transportation 
modes, and freight movement in particular, from an integrated 
standpoint, particularly for the purposes of developing and 
implementing a Federal investment strategy and considering alternative 
funding approaches. An intermodal perspective appears especially 
important as the Nation reacts to the increased security needs for 
transportation networks and as it plans for better, more efficient 
transportation for the future. At your request, we have done work 
focusing on the marine component of the national transportation system.
    My testimony today, which is based on our report\1\ that is being 
issued today, addresses three topics: (1) the Federal funding 
approaches used for the marine transportation system as compared with 
the aviation and highway systems, (2) the amount of customs duties on 
imported goods shipped through the marine, aviation, and highway 
systems, and (3) a framework to assist the Congress as it considers 
future Federal investment decisions. Our recently completed work on 
marine transportation is based on our analysis of data collected from 
15 Federal agencies that expended revenue on the various transportation 
systems and/or collected funds from users of the systems during fiscal 
years 1999 through 2001. We also collected data from the U.S. Customs 
Service on the amount of duty collected on commodities imported by the 
various transportation modes. We applied the estimates developed by the 
U.S. Census Bureau on the percent of collections attributable to water, 
sea, and land transportation modes to total customs duties collected by 
the U.S. Customs Service during fiscal years 1999 through 2001. To 
develop a framework to assist the Congress in making decisions about 
the Federal role in financing the marine transportation system, we 
built on prior GAO work on Federal investment approaches and managerial 
best practices and interviewed U.S. Army Corps of Engineers and 
Department of Transportation officials. See appendix I for a more 
detailed explanation of our scope and methodology.
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     \1\U.S. General Accounting Office, Marine Transportation: Federal 
Financing and a Framework for Infrastructure Investments, GAO-02-1033 
(Washington, DC.: Sept. 9, 2002).
---------------------------------------------------------------------------
    In summary:

      The Federal approach for funding the marine 
transportation system relies heavily on general revenues, while the 
approach for funding the aviation and highway systems relies almost 
exclusively on collections from users of the systems. During fiscal 
years 1999 through 2001, funding for about 80 percent of the average 
$3.9 billion expended each year on the marine transportation system 
came from the U.S. Treasury's general fund. During the same period, 
nearly all of the $10 billion in Federal funds expended each year for 
the aviation system and the $25 billion in Federal funds expended each 
year for the highway system came from revenues generated by users of 
those two systems.
      During fiscal years 1999 through 2001, customs duties on 
imported goods transported through the transportation systems averaged 
$15 billion each year for the marine transportation system, $4 billion 
each year for the aviation system, and $900 million each year for the 
highway system. Customs duties are taxes on the value of imported goods 
and have traditionally been viewed as revenues to be used for the 
support of the general activities of the Federal Government. Unlike the 
collections based on the use of the highway and aviation systems, 
customs duties are paid by the importers of the taxed goods. Revenues 
from these duties are deposited into the U.S. Treasury's general fund, 
and the majority of these revenues are used for the general support of 
Federal activities. To help finance improvements to the marine 
transportation system, some maritime stakeholders, such as port 
authorities, have suggested earmarking a portion of revenues generated 
from customs duties. Some customs duties are currently earmarked for 
specific purposes, such as agriculture and food programs. However, in 
that case, a portion of the duties on imports must be used to encourage 
the export and the domestic consumption of farm products and to 
reestablish farmers' purchasing power--that is, for assisting markets 
that are arguably adversely affected by the importation of goods. 
Further earmarking of customs duties for new spending would have 
significant budget ramifications in an already constrained Federal 
budget environment.
      Diverse industry stakeholders believe that substantial 
new investments in the maritime infrastructure may be required from 
public and private sources because of an aging infrastructure, changes 
in the shipping industry, and increased concerns about security.\2\ A 
systematic framework would be helpful to decisionmakers as they 
consider the Federal Government's purpose and role in providing funding 
for the system and as they develop a sound investment approach to guide 
Federal participation. In examining Federal investment approaches 
across many national activities, we have identified four key components 
of such a framework--establishing national goals, defining the Federal 
role, determining appropriate funding tools, and evaluating 
performance--could potentially be applied to all transportation 
systems.
---------------------------------------------------------------------------
     \2\We did not systematically evaluate the claims regarding new 
infrastructure investments. Recent work has recognized the as yet 
undefined financial requirements for enhancing the security of ports. 
See U.S. General Accounting Office, Port Security: Nation Faces 
Formidable Challenges in Making New Initiatives Successful, GAO-02-993T 
(Washington, DC.: Aug. 5, 2002).
---------------------------------------------------------------------------
      The first component--establishing national goals for the 
system--requires an in-depth understanding of the needs of the system 
and the relationship of the system to other transportation modes. For 
example, the efficient movement of freight often involves using several 
different transportation modes, making investment decisions, and 
developing coherent freight policies would logically need to occur 
while focusing on the entire transportation system rather than a single 
mode.
      The second component--clearly defining the Federal role 
relative to other stakeholders--is important to help facilitate the 
planning and implementation of improvements across modes and to better 
ensure that Federal participation supplements and enhances 
participation by others, rather than simply replacing their 
participation.
      A third component--determining the funding tools and 
other approaches that will maximize the impact of any Federal 
investment--is important to help expand the capacity to leverage 
funding resources and to promote shared responsibilities. For example, 
in the $2.4 billion Alameda Corridor Program, State and local 
stakeholders had both a financial incentive to relieve congestion and 
the commitment and ability to bring financial resources to bear.
      The final component ensures that a process is in place 
for evaluating performance and accountability periodically so that 
defined goals, roles, and approaches can be reexamined and modified, as 
necessary.
Background
    The nation's surface transportation systems facilitate mobility 
through an extensive network of infrastructure and operators, as well 
as through the vehicles and vessels that permit passengers and freight 
to move within the system. Maintaining the systems is critical to 
sustaining America's economic growth. This is especially important 
given that projected increases in freight tonnage will likely place 
pressures on these systems. According to the Federal Highway 
Administration, domestic and international freight tonnage across all 
surface modes will increase 41 percent, from 14.4 billion tons in 1998 
to 20.3 billion tons in 2010. According to the forecasts, by 2010, 15.6 
billion tons are projected to move by truck, a 44 percent increase; 3 
billion tons by rail, a 32 percent increase; and 1.5 billion tons by 
water, a 27 percent increase.\3\ Some freight may be moved by more than 
one mode before reaching its destination, such as moving by ship for 
one segment of the trip, then by truck to its final destination.
---------------------------------------------------------------------------
     \3\The Federal Highway Administration's maritime freight 
projections do not include international trade of bulk products and 
some inland domestic bulk shipments.
---------------------------------------------------------------------------
    Over 95 percent of the U.S. overseas freight tonnage is shipped by 
sea. The United States accounts for 1 billion metric tons, or nearly 20 
percent of the world's oceanborne trade. As the world's leading 
maritime trading nation, the United States depends on a vast marine 
transportation system. In addition to the economic role it plays, the 
system also has an important role in national defense; serves as an 
alternative transportation mode to roads and rails; and provides 
recreational value through boating, fishing, and cruises.
    Traditionally, Federal participation in the maritime industry has 
been directed mainly at projects related to ``waterside'' issues, such 
as keeping navigation channels open by dredging, icebreaking, or 
improving the system of locks and dams; maintaining navigational aids 
such as lighthouses or radio systems; and monitoring the movement of 
ships in and out of the nation's coastal waters. Federal participation 
has generally not extended to ``landside'' projects related to ports' 
capabilities, such as building terminals or piers and purchasing cranes 
or other equipment to unload cargo.\4\
---------------------------------------------------------------------------
     \4\One exception has been intermodal connections, such as rail or 
highway connections. The Federal Government has traditionally 
participated in funding such projects.
---------------------------------------------------------------------------
    These traditional areas of Federal assistance are under pressure, 
according to a congressionally mandated report issued by the Department 
of Transportation in 1999,\5\ which cites calls to modernize aging 
structures and dredge channels to new depths to accommodate larger 
ships. Since this report, and in the aftermath of September 11, the 
funding focus has further expanded to include greater emphasis on port 
security. Many of the security improvements will require costly outlays 
for infrastructure, technology, and personnel. For example, when the 
Congress recently made $92.3 million in Federal funding available for 
port security as part of a supplemental appropriations bill,\6\ the 
Transportation Security Administration received grant applications 
totaling almost $700 million.\7\
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     \5\U.S. Department of Transportation, An Assessment of the U.S. 
Marine Transportation System: A Report to Congress (Washington, DC.: 
September 1999). GAO did not verify the accuracy of the information 
contained in this report.
     \6\Although $93.3 million was made available in the supplemental 
appropriations bill, $1 million was authorized for administrative 
expenses. As of June 17, 2002, 77 grants for 144 ports security 
projects were awarded.
     \7\The Transportation Security Administration, the Coast Guard, 
and the Maritime Administration reviewed applications under the Port 
Security Grants Program, which is based on the seaport security 
provisions contained in the Department of Defense and Emergency 
Supplemental Appropriations for Recovery from and Response to Terrorist 
Attacks on the United States Act of 2002 (Pub. L. No. 107-117, H.R. 
Conference Report 107-350). An additional $105 million was appropriated 
for the Port Security Grant Program as part of another supplemental 
appropriation act passed August 2, 2002 (Pub. L. No. 107-206).
---------------------------------------------------------------------------
    With growing system demands and increased security concerns, some 
stakeholders have suggested a different source of funding for the 
marine transportation system. For example, U.S. public port authorities 
have advocated increased Federal funding for harbor dredging. 
Currently, funding for such maintenance is derived from a fee on 
passengers and the value of imported and domestic cargo loaded and 
unloaded in U.S. ports. Ports and shippers would like to see funding 
for maintenance dredging come from the general fund instead, and there 
was legislation introduced in 1999 to do so.\8\ Regarding funding for 
security, ports are seeking substantial Federal assistance to enhance 
security in the aftermath of the events of September 11. In other work 
we have conducted on port security,\9\ port and private-sector 
officials have said that they believe combating terrorism is the 
Federal Government's responsibility and that, if additional security is 
needed, the Federal Government should provide or pay for it.
---------------------------------------------------------------------------
     \8\H.R. 1260 was introduced, but not enacted, in the 106th 
Congress to repeal the Harbor Maintenance Tax and return to funding the 
costs of operating and maintaining Federal navigation channels from 
general revenues.
     \9\U.S. General Accounting office, Port Security: Nation Faces 
Formidable Challenges in Making New Initiatives Successful, GAO-02-993T 
(Washington, DC.: Aug. 5, 2002).
---------------------------------------------------------------------------
Federal Approach to Financing the Marine Transportation System as 
        Compared with the Aviation and Highway Systems
    Unlike the funding approach used for the aviation and highway 
transportation systems, which are primarily funded by collections from 
users of the systems, the commercial marine transportation system 
relies heavily on general tax revenue. For all three transportation 
systems, most of the revenue collected from users of the systems was 
deposited into trust fund accounts. Figure 1 summarizes the expenditure 
and assessment comparisons across the three transportation systems.
    During fiscal years 1999 through 2001, Federal agencies expended an 
average of $3.9 billion each year on the marine transportation system 
with about 80 percent of the funding coming from the general revenues. 
During the same period, Federal agencies expended an average of $10 
billion each year on the aviation system and $25 billion each year on 
the highway system. The vast majority of the funding for these 
expenditures came from trust fund accounts. (See app. II.):
    Federal agencies collected revenue from assessments on users of all 
three transportation systems during fiscal years 1999 through 2001.\10\ 
Collections from assessments on system users during this period 
amounted to an average of $1 billion each year from marine 
transportation system users, $11 billion each year from aviation system 
users, and $34 billion each year from highway system users. Most of the 
collections for the three systems were deposited into trust funds that 
support the marine, aviation, and highway transportation systems.\11\ 
(See app. III.) Trust funds that support the marine transportation 
system include the Harbor Maintenance Trust Fund and the Inland 
Waterways Trust Fund. Trust funds that support the aviation and highway 
transportation systems include the Airport and Airway Trust Fund and 
the Highway Trust Fund.
---------------------------------------------------------------------------
     \10\Such assessments include both user fees and excise taxes. User 
fees are charged to users for goods or services provided by, or 
activities regulated by, the Federal Government. User fees generally 
apply to activities that provide benefits to identifiable recipients 
and are normally related to the cost of the goods or services provided. 
They may be paid into the general fund or, under specific statutory 
authority, may be made available to an agency carrying out the 
activity. User fees may also be collected through a tax such as an 
excise tax. Since these collections result from the government's 
sovereign powers, the proceeds are generally recorded as budget 
receipts, not as offsetting collections. Excise taxes can also be 
dedicated to specific programs and agencies.
     \11\Collections are deposited into the U.S. Treasury and can be 
used for the general support of Federal activities or may be earmarked 
by law for specific purposes and credited to a trust fund. A Federal 
trust fund is an accounting mechanism used to link earmarked receipts 
with the expenditures of those receipts. It is designated in law as a 
``trust'' fund.
---------------------------------------------------------------------------
Comparison by Transportation Modes of the Amount of Customs Duties 
        Collected
    The Federal Government assesses customs duties on goods imported 
into the United States and the majority of these collections are 
deposited into the U.S. Treasury's general fund to be used for the 
support of Federal activities. As can be seen in figure 2, the amounts 
from customs duties levied on imported goods carried through the marine 
transportation system are more than triple the combined amounts 
collected from customs duties levied on the goods carried through the 
aviation and highway systems. During fiscal years 1999 through 2001, 
customs duties on imported goods shipped through the transportation 
systems averaged $15.2 billion each year for the marine transportation 
system, $3.7 billion for the aviation system, and $928 million for the 
highway system. (See app. IV for details on customs duty collections by 
year.):
    Some maritime stakeholders, particularly port owners and operators, 
have proposed using a portion of the customs duties for infrastructure 
improvements to the marine transportation system. They point out that 
the marine transportation system is generating billions of dollars in 
revenue, and some of these funds should be returned to maintain and 
enhance the system. However, unlike transportation excise taxes, 
customs duties are taxes on the value of imported goods paid by 
importers and ultimately their consumers--not on the users of the 
system--and have traditionally been viewed as revenues to be used for 
the support of the general activities of the Federal Government.
    Notwithstanding the general trend, a portion of revenues from 
customs duties are currently earmarked for agriculture and food 
programs, migratory bird conservation, aquatic resources, and 
reforestation.\12\ It should be noted, however, that in these cases, 
some relationship exists between the goods being taxed and the uses for 
which the taxes are earmarked. Designating a portion of the remaining 
customs fees for maritime uses would not represent a new source of 
capital for the Federal Government, but rather it would be a draw on 
the general fund of the U.S. Treasury. This could lead to additional 
deficit financing, unless other spending were cut or taxes were 
increased.
---------------------------------------------------------------------------
     \12\Under Section 612c of Title 7, 30 percent of the gross 
receipts from customs duties are designated for agricultural and food 
programs. Pursuant to 16 U.S.C. 3912, all duties on guns and 
ammunitions are credited to the Migratory Bird Conservation Fund and 
pursuant to 26 U.S.C. 9504, duties on fishing tackle and yachts and 
pleasure craft are credited to the Sports Fish Restoration Account of 
the Aquatic Resources Trust Fund. In addition, tariffs from wood and 
certain wood products are credited to the Reforestation Trust Fund up 
to a total of $30 million (16 U.S.C. 1606(a)).
---------------------------------------------------------------------------
Systematic Framework Could Help Guide Decisions When Making Investment 
        Choices for the Marine Transportation System
    Some maritime industry stakeholders have suggested that substantial 
new investments in the maritime infrastructure by Federal, State, and 
local governments and by the private sector may be required because of 
an aging infrastructure, changes in the shipping industry, and 
increased concerns about security.\13\ These growing and varied demands 
for increased investments in the maritime transportation system 
heighten the need for a clear understanding about the Federal 
Government's purpose and role in providing funding for the system and 
for a sound investment approach to guide Federal participation. In 
examining Federal investment approaches across many national 
activities, we have found that issues such as these are best addressed 
through a systematic framework. As shown in figure 2, this framework 
has the following four components that potentially could be applied to 
all transportation systems:
---------------------------------------------------------------------------
     \13\We did not systematically evaluate these claims regarding new 
infrastructure investments. Recent work has recognized the as yet 
undefined financial requirements for enhancing the security of ports. 
See U.S. General Accounting Office, Port Security: Nation Faces 
Formidable Challenges in Making New Initiatives Successful, GAO-02-993T 
(Washington, DC.: Aug. 5, 2002).
---------------------------------------------------------------------------
      Set national goals for the system. These goals, which 
would establish what Federal participation in the system is designed to 
accomplish, should be specific and measurable.
      Define clearly what the Federal role should be relative 
to other stakeholders. This step is important to help ensure that 
Federal participation supplements and enhances participation by others, 
rather than simply replacing their participation.
      Determine which funding tools and other approaches, such 
as alternatives to investment in new infrastructure, will maximize the 
impact of any Federal investment. This step can help expand the 
capacity to leverage funding resources and promote shared 
responsibilities.
      Ensure that a process is in place for evaluating 
performance periodically so that defined goals, roles, and approaches 
can be reexamined and modified, as necessary.
Establish National Goals to Guide Federal Participation
    An initial decision for Congress when evaluating Federal 
investments concerns the goals of the marine transportation system. 
Clearly defined national goals can serve as a basis for guiding Federal 
participation by charting a clear direction, establishing priorities 
among competing issues, specifying the desired results, and laying the 
foundation for such other decisions as determining how assistance will 
be provided. At the Federal level, measuring results for Federal 
programs has been a longstanding objective of the Congress. The 
Government Performance and Results Act of 1993\14\ has become the 
primary legislative framework through which agencies are required to 
set strategic and annual goals that are based on national goals, 
measure performance, and report on the degree to which goals are met 
and on what actions are needed to achieve or modify goals that have not 
been met. Establishing clear goals and performance measures for the 
marine transportation system is critical to ensuring both a successful 
and a fiscally responsible effort.
---------------------------------------------------------------------------
     \14\Pub. L. No. 103-62.
---------------------------------------------------------------------------
    Before national goals for the system can be established, however, 
an in-depth understanding of the relationship of the system to other 
transportation modes is required. Transportation experts highlight the 
need to view the system in the context of the entire transportation 
system in addressing congestion, mobility, and other challenges and, 
ultimately, investment decisions. For example, congestion challenges 
often occur where modes connect or should connect, such as ports where 
freight is transferred from one mode to another. The connections 
require coordination of more than one mode of transportation and 
cooperation among multiple transportation providers and planners. A 
systemwide approach to transportation planning and funding, as opposed 
to focus on a single mode or type of travel, could improve the focus on 
outcomes related to customer or community needs.
    Meaningful goal setting also requires a comprehensive understanding 
of the scope and extent of issues and priorities facing the marine 
transportation system. However, there are clear signs that certain key 
issues and priorities are not yet understood well enough to establish 
meaningful goals for the system. For example, a comprehensive analysis 
of the issues and problems facing the marine transportation system has 
not yet been completed.\15\ In setting goals for investment decisions, 
leading organizations usually perform comprehensive needs assessments 
to obtain a clear understanding of the extent and scope of their 
issues, problems, and needs and, ultimately, to identify resources 
needed. These assessments should be results-oriented in that they 
determine what is needed to obtain specific outcomes rather than what 
is needed to maintain or expand existing capital stock.\16\ Developing 
such information is important for ensuring that goals are framed in an 
adequate context. The call by many ports for Federal assistance in 
dredging channels or harbors to 50 feet is an example. Dredging to 50 
feet allows a port to accommodate the largest of the container ships 
currently being constructed and placed in service. However, developing 
the capacity to serve such ships is no guarantee that companies with 
such ships will actually choose to use a port. Every port's desire to 
be competitive by having a 50-foot channel could thus lead to a 
situation in which the Nation as a whole has an overcapacity for 
accommodating larger ships. The result, at least for the excess 
capacity, would signal an inefficient use of Federal resources that 
might have been put to better use in other ways.
---------------------------------------------------------------------------
     \15\The 1999 marine transportation system report identified a 
number of issues and problems facing the marine transportation system. 
These included increased dredging requirements to accommodate larger 
container ships, aging and limited capacity of lock and dam systems on 
inland waterways, and congestion due to ineffective intermodal 
connections. In January 2000, the Secretary of Transportation chartered 
the Marine Transportation System National Advisory Council to help 
implement the recommendations contained in a report issued by the 
Department of Transportation entitled An Assessment of the U.S. Marine 
Transportation System: A Report to Congress. An interagency committee 
was also established to facilitate implementation of the 
recommendations in the report. Recognizing the need to thoroughly 
analyze the issues and problems facing the marine transportation 
system, the interagency committee is in the process of seeking contract 
support for a comprehensive analysis assessing the future needs and 
funding of the marine transportation system.
     \16\U.S. General Accounting Office, U.S. Infrastructure: Funding 
Trends and Federal Agencies' Investment Estimates, GAO-01-986T 
(Washington, DC.: July 23, 2001).
---------------------------------------------------------------------------
Define the Federal Role Relative to Other Stakeholders
    Establishing the roles of the Federal, State, and local governments 
and private entities will help to ensure that goals can be achieved. 
The Federal Government is only one of many stakeholders in the marine 
transportation system. While these various stakeholders may all be able 
to share a general vision of the system, they are likely to diverge in 
the priorities and emphasis they place on specific goals. For example, 
the Federal Government, with its national point of view, is in a much 
different position than a local port intensely involved in head-to-head 
competition with other ports for the business of shipping companies or 
other businesses. For a port, its own infrastructure is paramount, 
while the Federal Government's perspective is focused on the national 
and broader public interest.
    Since there are so many stakeholders involved with the marine 
transportation system, achieving national goals for the system hinges 
on the ability of the Federal Government to forge effective 
partnerships with nonFederal entities. Decision makers have to balance 
national goals with the unique needs and interests of all nonFederal 
stakeholders in order to leverage the resources and capabilities that 
reside within State and local governments and the private sector. 
Future partnering among key maritime stakeholders may take on a 
different form as transportation planners begin focusing across 
transportation modes in making investment decisions instead of making 
investment decisions for each mode separately. The Alameda Corridor 
Program in the Los Angeles area provides an example of how effective 
partnering allowed the capabilities of the various stakeholders to be 
more fully utilized. Called the Alameda Corridor because of the street 
it parallels, the program created a 20-mile, $2.4 billion railroad 
express line connecting the ports of Los Angeles and Long Beach to the 
transcontinental rail network east of downtown Los Angeles. The express 
line eliminates approximately 200 street-level railroad crossings, 
relieving congestion and improving freight mobility for cargo. This 
project made substantial use of local stakeholders' ability to raise 
funds. While the Federal Government participated in the cost, its share 
was only about 20 percent of the total cost, most of which was in the 
form of a loan rather than a grant.
    Just as partnerships offer opportunities, they also pose risks 
based upon the different interests reflected by each stakeholder. While 
gaining the opportunity to leverage the resources and capabilities of 
partners, each of these nonFederal entities has goals and priorities 
that are independent of the Federal Government. For the Federal 
Government, there is concern that State and local governments may not 
share the same priorities for use of the Federal funds. This may result 
in nonFederal entities replacing or ``supplanting'' their previous 
levels of commitment in areas with new Federal resources. For example, 
in the area of port security, there is a significant funding need at 
the local level for overtime pay for police and security guards. Given 
the degree of need, if more Federal funding was made available, local 
interests might push to apply Federal funding in this way, thereby 
transferring a previously local function to the Federal arena. In 
moving toward Federal coverage of basic public services, the Congress 
and Federal officials would be substantially expanding the Federal 
role.
Develop Funding Tools and Other Approaches That Maximize the Federal 
        Return
    When evaluating Federal investments, a careful choice of the 
approaches and funding tools that would best leverage Federal funds in 
meeting identified goals should be made. A well-designed funding 
approach can help encourage investment by other stakeholders and 
maximize the application of limited Federal dollars. An important step 
in selecting the appropriate approach is to effectively harness the 
financial capabilities of local, State, and private stakeholders. The 
Alameda Corridor Program is a good example. In this program, State and 
local stakeholders had both a financial incentive to relieve congestion 
and the commitment and ability to bring financial resources to bear. 
Some other ports may not have the same level of financial incentives or 
capabilities to undertake projects largely on their own. For example, 
in studying the extent to which Florida ports were able to implement a 
set of security requirements imposed by the State, we found that some 
ports were able to draw on more financial resources than others, based 
on such factors as size, economic climate, and funding base.\17\ While 
such information would be valuable in crafting Federal assistance, it 
currently is largely unavailable. Relatively little is known about the 
extent of State, local, and private-sector funding resources across the 
country.
---------------------------------------------------------------------------
     \17\U.S. General Accounting Office, Port Security: Nation Faces 
Formidable Challenges in Making New Initiatives Successful, GAO-02-993T 
(Washington, DC.: Aug. 5, 2002).
---------------------------------------------------------------------------
    The Federal Government has a variety of funding tools potentially 
available for use such as grants, direct loans, loan guarantees, tax 
expenditures, and user fees. Through cost sharing and other 
arrangements, the Federal Government can use these approaches to help 
ensure that Federal funds supplement--and not supplant--funds from 
other stakeholders. For example, an effective use of funding tools, 
with appropriate nonFederal matches and incentives, can be valuable in 
implementing a national strategy to support Federal port investments, 
without putting the government in the position of choosing winners or 
losers.
    Federal approaches can take other forms besides those that relate 
specifically to making funding available. These following approaches 
allow increased output without making major capital investments:

      Demand management. Demand management is designed to 
reduce travel at the most congested times and on the most congested 
routes. One demand management strategy involves requiring users to pay 
more to use congested parts of the system during such periods, with the 
idea that the charge will provide an incentive for some users to shift 
their use to a less congested time or to less congested routes or 
transportation modes. On inland waterways, for example, congestion 
pricing for locks---that is, charging a toll during congested periods 
to reflect the additional cost of delay that a vessel imposes on other 
vessels--might be a way to space out demand on the system. Many 
economists generally believe that such surcharges or tolls enhance 
economic efficiency by making operators take into account the external 
costs they impose on others in deciding when, where, and how to travel.
      Technology improvements. Instead of making extensive 
modifications to infrastructure such as locks and dams, it may be 
possible to apply Federal investments to technology that makes the 
existing system more efficient. For example, technological improvements 
may be able to help barges on the inland waterways navigate locks in 
inclement weather, thereby reducing delays on the inland waterway 
system.
      Maintenance and rehabilitation. Enhancing capacity of 
existing infrastructure through increased maintenance and 
rehabilitation is an important supplement to, and sometimes a 
substitute for, building new infrastructure. Maintenance and 
rehabilitation can improve the speed and reliability of passenger and 
freight travel, thereby optimizing capital investments.
    Management and operation improvements. Better management and 
operation of existing infrastructure may allow the existing 
transportation system to accommodate additional travel without having 
to add new infrastructure. For example, the U.S. Army Corps of 
Engineers is investigating the possibility of automating the operation 
of locks and dams on the inland waterways to reduce congestion at 
bottlenecks.
Examining Outcomes to Determine the Effectiveness of Investments
    Regardless of the tools selected, results should be evaluated and 
lessons learned should be incorporated into the decisionmaking process. 
Evaluating the effectiveness of existing or proposed Federal investment 
programs could provide decisionmakers with valuable information for 
determining whether intended benefits have been achieved and whether 
goals, responsibilities, and approaches should be modified. Such 
evaluations are also useful for better ensuring accountability and 
providing incentives for achieving results.
    Leading organizations that we have studied have stressed the 
importance of developing performance measures and linking investment 
decisions and their expected outcomes to overall strategic goals and 
objectives.\18\ Hypothetically, for example, one goal for the marine 
transportation system might be to increase throughput (that is, the 
volume of cargo) that can be transported through a particular lock and 
dam system on the nation's inland waterways. A performance measure to 
gauge the results of an investment for this goal might be the increased 
use (such as number of barges passing through per hour) that results 
from this investment and the economic benefits associated with that 
increase.
---------------------------------------------------------------------------
     \18\U.S. General Accounting Office, Executive Guide: Leading 
Practices in Capital Decision-Making, GAO/AIMD-99-32 (Washington, DC.: 
Dec. 1998).
---------------------------------------------------------------------------
    In summary, Mr. Chairmen, the projected increases in freight 
tonnage will likely place pressures on the nation's surface 
transportation systems. Maintaining these systems is critical to 
sustaining America's economic growth. Therefore, there is a need to 
view various transportation modes from an integrated standpoint, 
particularly for the purposes of developing and implementing a Federal 
investment strategy and alternative funding approaches. In such an 
effort, the framework of goals, roles, tools, and evaluation can be 
particularly helpful--not only for marine transportation funding, but 
for other modes as well.
    Mr. Chairmen, this concludes my testimony. I will be happy to 
respond to any questions you or other members may have.
                                 ______
                                 
                   Appendix I: Scope and Methodology
    To determine the amount of Federal expenditures to support the 
commercial marine,\19\ aviation, and highway transportation systems and 
the amount of collections from Federal assessments on the users of 
these systems for fiscal years 1999, 2000, and 2001, we reviewed prior 
GAO reports and other relevant documents, and interviewed officials 
from the Office of Management and Budget and various industry 
representatives. On the basis of this determination, we contacted 15 
Federal agencies and asked them to provide information on the 
expenditures\20\ and collections\21\ that were specific to the 
transportation systems, relying on each agency to identify expenditures 
and collections related to activities that support the transportation 
systems. In addition, we also received data from the U.S. Customs 
Service on the amount of duty collected on commodities imported by the 
transportation modes. The U.S. Customs Service provided estimates, 
developed by the U.S. Census Bureau, on the percent of collections that 
were attributable to water, sea, and land transportation modes. We 
applied these percentages to the total customs duties collected for 
fiscal years 1999, 2000, and 2001 provided by the U.S. Customs Service 
to compute the amount of total customs duties collected by the marine, 
aviation, and highway transportation systems each year.
---------------------------------------------------------------------------
     \19\Noncommercial activities, to include Coast Guard missions such 
as search and rescue and drug and migrant interdiction, as well as 
recreational activities, were excluded from our review as our focus was 
on the commercial marine transportation system.
     \20\For the purposes of this report, expenditures are outlays to 
pay Federal obligations identified by the agency for each fiscal year 
to support these systems, but may include payments for obligations 
incurred in previous fiscal years.
     \21\Assessment collections are fees and taxes paid by users of a 
system that were identified by the agencies and may include revenues 
credited to Federal funds, offsetting collections, and offsetting 
revenue.
---------------------------------------------------------------------------
    We performed limited reasonableness tests on the data by comparing 
the data with the actual trust fund outlays contained in the budget of 
the U.S. Government for fiscal years 2001, 2002, and 2003. Although we 
had each agency validate the data provided, we did not verify agency 
expenditures and collections.
    To identify initial considerations that could help the Congress in 
addressing whether to change the scope or nature of Federal investments 
in the marine transportation system, we conducted a review of prior GAO 
reports and other relevant studies to identify managerial best 
practices in establishing strategic plans and Federal investment 
approaches. We also interviewed U.S. Army Corps of Engineers and 
Department of Transportation officials to obtain information on the 
current state of the commercial marine transportation system, the 
ability of the system to keep pace with growing demand, and activities 
that are under way to assess the condition and capacity of the 
infrastructure. Our work was carried out from January 2002 to September 
2002 in accordance with generally accepted government auditing 
standards.
                                 ______
                                 
    Appendix II: Expenditures for the Marine, Aviation, and Highway 
   Transportation Systems by Source of Funds (Fiscal Years 1999-2001)
    Federal agencies spent an average of $3.9 billion annually on the 
marine transportation system, $10 billion annually on the aviation 
system, and $25 billion annually on the highway system. Whereas the 
primary source of funding for the marine transportation system is 
general tax revenues, the vast majority of Federal funding invested in 
both the aviation and highway systems came from assessments on users of 
the systems. During the 3-year period, general revenues were the 
funding source for 80 percent of the expenditures for the marine 
transportation system. In contrast, assessments on system users were 
the funding source for 88 percent of the amount spent on the aviation 
system and nearly 100 percent of the amount spent on the highway 
system.

    Table 1: Total Expenditures for the Marine, Aviation, and Highway
 Transportation Systems Summarized by the Source of Funds (Fiscal Years
                               1999--2001)
                           dollars in millions
------------------------------------------------------------------------
        Sources of funds            1999      2000      2001     Average
------------------------------------------------------------------------
  Marine Transportation System
General revenues................    $3,250    $2,994    $3,117    $3,120
Revenue from system users\1\....       467       902       876       748
                                 ---------------------------------------
    Total Marine Transportation     $3,717    $3,896    $3,993    $3,868
     System.....................
 
 Aviation Transportation System
General revenues................      $969    $1,007    $1,070    $1,015
Revenue from system users\1\....     8,410     9,438     9,963     9,270
                                 ---------------------------------------
    Total Aviation                  $9,379   $10,445   $11,033   $10,285
     Transportation System......
 
  Highway Transportation System
General revenues................       $90       $68      $116       $91
Revenue from system users\1\....    22,730    25,031    27,231    24,997
                                 ---------------------------------------
    Total Highway Transportation   $22,820   $25,099   $27,347   $25,088
     System.....................
------------------------------------------------------------------------
Note: Figures are nominal and have not been adjusted for inflation.
\1\Includes trust fund and reimbursable agency accounts.
Source: GAO analysis of data provided by agencies that expended funds

                                 ______
                                 
   Appendix III: Distribution of Amounts Collected from Users of the 
            Transportation Systems (Fiscal Years 1999-2001)
    Federal agencies collected an average of $1 billion annually from 
users of the marine transportation system, $11.1 billion annually from 
users of the aviation system, and $33.7 billion annually from users of 
the highway system. For all three transportation systems, most of the 
collections were deposited into trust fund accounts. During the 3-year 
period, 85 percent of the amounts collected from marine transportation 
system users, 94 percent of the amounts collected from aviation system 
users, and nearly 100 percent of the amounts collected from highway 
system users were deposited into trust fund accounts.

      Table 2: Amounts Collected from Marine, Aviation, and Highway
    Transportation System Users and Accounts Receiving the Collection
                        (Fiscal Years 1999--2001)
                           dollars in millions
------------------------------------------------------------------------
         Source of funds            1999      2000      2001     Average
------------------------------------------------------------------------
  Marine Transportation System
General fund....................       $93       $97       $99       $96
Trust fund accounts.............       741       857       891       830
Reimbursable agency acounts.....        41        51        54        49
                                 ---------------------------------------
    Total Marine Transportation       $875    $1,005    $1,044      $975
     System.....................
 
 Aviation Transportation System
General fund....................      $421      $437      $466      $441
Trust fund accounts.............    11,663     9,860     9,581    10,368
Reimbursable agency acounts.....       236       255       265       252
                                 ---------------------------------------
    Total Aviation                 $12,320   $10,552   $10,312   $11,061
     Transportation System......
 
  Highway Transportation System
General revenues................        $1        $2        $2        $2
Trust fund accounts.............    32,255    35,134    33,683    33,691
Reimbursable agency acounts.....        24        24        22        23
                                 ---------------------------------------
    Total Highway Transportation   $32,280   $35,160   $33,707   $33,716
     System.....................
------------------------------------------------------------------------
Note: Figures are nominal and have not been adjusted for inflation.
Source: GAO analysis of data provided by agencies that expended funds

   Appendix IV: Amount Collected From Customs Duties on Commodities 
   Transported on the Transportation Systems (Fiscal Years 1999-2001)
    Unlike the fees and taxes on users that are earmarked to support 
the transportation systems, customs duties are not an assessment on the 
system; rather, duties are assessed on imported goods transported by 
the systems. The majority of customs duties collected are deposited in 
the U.S. Treasury's general fund for the general support of Federal 
activities.\22\ On average, the Customs Service reported $19.8 billion 
collected annually for commodities imported by the transportation 
modes, with nearly 80 percent collected from the marine system.
---------------------------------------------------------------------------
     \22\Under Section 612 of Title 7, about 30 percent of the gross 
receipts from customs duties are designated for agricultural and food 
programs. In addition, pursuant to 16 U.S.C. 3912, all duties on guns 
and ammunitions go to the Migratory Bird Conservation Fund and pursuant 
to 26 U.S.C. 9504, duties on fishing tackle and yachts and pleasure 
craft go to the Sports Fish Restoration account of the Aquatic 
Resources Trust Fund. Also, tariffs from wood and certain wood products 
are transferred to the Reforestation Trust Fund up to a total of $30 
million (16 U.S.C. 1606(a)).

  Table 3: Amount of Customs Duties Collected for Commodities Transported on the Marine, Aviation, and Highway
                             Transportation Systems, Fiscal Years 1999 through 2001
                                               dollars in millions
----------------------------------------------------------------------------------------------------------------
                                                      1999               2000          2001
            Transportation System             ------------------------------------------------ Percent   Average
                                                Amount   Percent   Amount   Percent   Amount             Amount
----------------------------------------------------------------------------------------------------------------
Marine.......................................   $14,310       75   $15,624       76   $15,637       79   $15,190
Aviation.....................................     3,577       19     4,053       20     3,371       17     3,667
Highway\1\...................................     1,168        6       880        4       735        4       928
    Total custom duties collected............   $19,055  .......   $20,557  .......   $19,743  .......   $19,785
----------------------------------------------------------------------------------------------------------------
Note: Figures are nominal and have not been adjusted for inflation.
\1\Includes amounts collected by rail.
Source: GAO computations based on data provided by the U.S. Customs Service.

                                 ______
                                 
 Responses by JayEtta Hecker to Additional Questions from Senator Reid
    Question. In your statement, you emphasize the importance of a more 
system-wide approach to Federal transportation programs-and in 
particular, focus on promoting intermodal approaches to meeting the 
rapidly growing requirements for freight infrastructure. You also 
proposed use of a framework to assist in refining Federal 
transportation policies focusing on national goals, defining roles of 
the many public and private stakeholders, selecting appropriate 
government tools to best leverage Federal resources, and evaluating 
performance of programs and policies. Can you discuss how this 
framework might assist the Congress in defining and developing a 
coherent national freight policy-and challenges and options that should 
be considered during the forthcoming reauthorization of the 
Transportation Equity Act for the 21st Century (TEA-21)?
    Response. Moving toward a coherent national freight policy requires 
solutions that cut across modes and better prepare the Nation for the 
ever-expanding growth of international trade. Responding to that 
challenge requires evaluating the performance of existing legislation 
and programs in promoting an efficient intermodal freight 
transportation industry, establishing the promotion of an efficient 
intermodal freight industry as a national goal, defining the Federal 
role relative to other stakeholders, and developing funding tools and 
other approaches that maximize the return on the Federal investment. An 
elaboration of each component of this framework follows:
Evaluation of Performance of Existing Legislative Framework and 
        Programs in Promoting an Efficient Intermodal Freight 
        Transportation Industry
    Evaluating the results of Federal investment programs and 
incorporating lessons learned into the decisionmaking process could 
provide decisionmakers with valuable information for determining 
whether intended benefits have been achieved and whether goals, 
responsibilities, and approaches should be modified. Such evaluations 
are also useful for better ensuring accountability and providing 
incentives for achieving results. For example, one goal for the marine 
transportation system might be to increase throughput (the volume of 
cargo) that can be transported through a particular lock and dam system 
on the nation's inland waterways. A performance measure to gauge the 
results of an investment for this goal might be the increased capacity 
that results from this investment and the economic benefits associated 
with that increase. Assessing progress in achieving this goal is, 
therefore, dependent on carrying out analyses of accurate and complete 
data.
Establishing Promotion of an Efficient Intermodal Freight Industry as a 
        National Goal to Guide Federal Participation
    There appears to be substantial consensus that promoting an 
efficient intermodal freight industry should be a central national goal 
for reauthorization of the core transportation legislation. The 
challenge is how to make such language more integral to the future 
structure and performance of transportation programs. One shift would 
be to consider articulation of a national goal related to freight/
intermodal transportation in performance terms--and to structure 
revised or new programs around specific performance goals.
    Clearly, in setting national goals and defining outcomes, the 
explicit focus would be on a system-wide, rather than mode-specific 
approach to transportation planning and funding and could include a 
focus on outcomes that users--both freight and passengers, both 
intercity and local--desire from the transportation system.\1\ The key 
for achieving the goals, regardless of how detailed, is to align the 
goal with the roles of the various stakeholders and the funding 
approaches selected. For example, a performance oriented funding system 
could be developed in which the Federal Government would first define 
certain national interests of the transportation system--such as 
identifying freight corridors of importance to the national economy--
then set national performance standards for those systems that States 
and localities must meet. Federal funds would be distributed to those 
entities that are addressing national interests and established 
standards. Any Federal funds remaining after meeting the performance 
standards could then be used for whatever transportation purpose the 
State or locality deems most appropriate to achieve State or local 
mobility goals.
---------------------------------------------------------------------------
     \1\U.S. General Accounting Office, Surface and Maritime 
Transportation: Developing Strategies for Enhancing Mobility: A 
National Challenge, GAO-02-775, (Washington, DC: Aug. 2002).
---------------------------------------------------------------------------
    Another feature of performance goals could include a focus on 
congestion, which is increasingly affecting travel times and the 
reliability of transportation systems. In the aggregate, congestion 
results in thousands of hours of delay every day, which can translate 
into costs such as lost productivity and increased fuel consumption. In 
addition, a decrease in travel reliability imposes costs on the 
traveler in terms of raising the cost of moving goods resulting in 
higher prices for consumers. While there is some evidence that freight 
transportation costs related to managing business operations have 
decreased as a percentage of gross national product (indicating that 
producers and manufacturers adjust to transportation supply by 
switching modes or altering delivery schedules to avoid delays and 
resulting cost increases), these adaptations by businesses represent 
economic inefficiencies that can be very costly. Increasing congestion 
can cause businesses to avoid a substantial number of trips that might 
result in a corresponding loss of the benefits of those trips.
    National goals for the transportation system could also recognize 
that the concept of capacity is broader than just the physical 
characteristics of the transportation network (e.g., the number of 
lane-miles of road or locks on a waterway). The capacity of 
transportation systems is also determined by how well they are managed 
and operated. Evidence has mounted that congestion on highways was in 
part due to poor management of traffic flows on the connectors between 
highways and poor management in clearing roads that are blocked due to 
accidents, inclement weather, or construction. For example, in the 75 
metropolitan areas studied by the Texas Transportation Institute, 54 
percent of annual vehicle delays in 2000 were due to incidents such as 
breakdowns or crashes. In addition, the Oak Ridge National Laboratory 
reported that, nationwide, significant delays are caused by work zones 
on highways; poorly timed traffic signals; and snow, ice, and fog.\2\
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     \2\S.M. Chin, O. Franzede, D.L. Greene, H.L. Hwang, and R. Gibson, 
Temporary Losses of Capacity Study and Impacts on Performance, Report 
No. ORNL/TM-2002/3 (Oak Ridge, TN: Oak Ridge National Laboratory, May 
2002).
---------------------------------------------------------------------------
    Another dimension of sound and efficient transportation systems 
that could be defined in national goals is the recognition of full 
life-cycle costs and benefits of various transportation programs, and 
building that concept into system-wide transportation planning and 
funding. Cost-benefit frameworks that transportation agencies currently 
use to evaluate various transportation projects could be more 
comprehensive in considering a wider array of social and economic costs 
and benefits, recognizing transportation systems' links to each other 
and to other social and financial systems. A model worthy of 
exploration is the Federal Transit Administration New Starts Program, 
where projects compete nationally, and are all scored not only for 
their projected transportation benefits but also for their 
effectiveness in assuring provisions are made to cover the long term 
operational costs of the system.
Defining the Federal Role Relative to Other Stakeholders
    A central challenge of developing and refining national 
transportation policies and programs, particularly relative to freight 
transportation, is the intersection of public and private interests. A 
specific role issue surrounding development and refinement of a 
national freight transportation policy is the Federal vs. the State and 
local role in selecting and prioritizing freight projects. The 
structure of the core highway and transit programs since passage of the 
Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) is to 
delegate decisionmaking and project prioritization to States and 
metropolitan planning organizations (MPOs). Because control of 
transportation investment decisions has been delegated to State and 
local governments, freight projects funded through programs such as the 
Congestion Mitigation and Air Quality Program (CMAQ), the National 
Highway System (NHS), and the Surface Transportation Program (STP) have 
to be identified as priorities within the State and MPO planning 
processes. In contrast, Federal discretionary grant programs such as 
the National Corridor Planning and Development and Coordinated Border 
Infrastructure programs (Borders and Corridors programs) provides funds 
over and above the annual State highway apportionment. Therefore, to 
address the role issues, congressional action could be guided by 
assessment of the relative strengths and weaknesses of programs that 
require freight projects to be identified as priorities within the 
State and MPO-led planning processes (CMAQ, NHS, and STP) relative to 
the experience with programs funded with resources over and above the 
regular formula allocations to the States (Borders and Corridors 
programs).
    The diverse proposals put forth by various freight interests range 
from expanding eligibility and funding of any or all of these existing 
programs to numerous proposals for new freight set-aside programs. 
Thus, a central decision point for the Congress in defining a national 
freight policy is determination of the extent to which incentives can 
be refined sufficiently to enable local transportation planning to 
reflect national interests and priorities for intermodal freight needs 
or whether a directly federally administered program holds greater 
promise to efficiently meet the critical needs of this key segment of 
the transportation industry.
Developing Funding Tools and Other Approaches That Maximize the Return 
        on the Federal Investment
    Our recent mobility report on strategies for enhancing mobility 
identified the need for using a full range of tools to achieve desired 
mobility outcomes, providing more financing options, and developing 
additional revenue sources.\3\ While new construction may hold some 
promise to ease congestion in certain bottlenecks, it is not always a 
viable solution due to cost, land, regulatory, or administrative 
constraints. Thus, balanced attention and priority needs to be given to 
using noncapital alternatives to meet capital investment needs. In 
December 1998, GAO reported that leading private sector and public 
organizations consider just such alternatives in their capital 
decisionmaking process.\4\ These alternatives can include (1) improving 
the management and operation of the existing system by increasing 
corrective and preventative maintenance and rehabilitation and (2) 
managing or reducing travel demand through pricing incentives. For 
example, capacity can be enhanced by performing needed maintenance on 
existing transportation systems to improve the speed and reliability of 
passenger as well as freight travel. In addition, investing in 
Intelligent Transportation Systems--technologies that enhance the 
safety, efficiency, and effectiveness of the transportation network--
can serve as another way of increasing capacity and mobility without 
making major capital investments.\5\ Finally, instituting tolls or fees 
during peak travel times may lead people to schedule recreational trips 
or move freight during less congested times or by alternate routes.
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     \3\U.S. General Accounting Office, Surface and Maritime 
Transportation: Developing Strategies for Enhancing Mobility: A 
National Challenge, GAO-02-775, (Washington, DC: Aug. 2002).
     \4\U.S. General Accounting Office, Executive Guide: Leading 
Practices in Capital Decision-Making, GAO/AIMD-99-32, (Washington, DC: 
Dec. 1998).
     \5\Intelligent transportation systems include technologies that 
improve traffic flow by adjusting traffic flow on highways; 
facilitating traffic flow at toll plazas; alerting emergency management 
services to the locations of crashes; increasing the efficiency of 
transit fare payment systems; and other actions.
---------------------------------------------------------------------------
    Regarding financing, the current system of financing surface and 
maritime transportation projects limits options for addressing mobility 
challenges. Separate funding for each mode at the Federal, State, and 
local level can make it difficult to consider possible efficient and 
effective ways for enhancing mobility. Providing more flexibility in 
funding across modes could help address this limitation. Transportation 
experts have also expressed concern that ``earmarking'' or designation 
by the Congress of Federal funds for particular transportation projects 
bypasses traditional planning processes used to identify the highest 
priority projects, thus potentially limiting transportation agencies' 
options for addressing the most severe mobility challenges. Bypassing 
transportation planning processes can also result in logical 
connections or interconnections between projects being overlooked.
    The public sector could expand support for alternative financing 
mechanisms to access new sources of capital and stimulate additional 
investment in surface and maritime transportation infrastructure. These 
mechanisms include both newly emerging and existing financing 
techniques such as providing credit assistance to State and local 
governments for capital projects and using tax policy to provide 
incentives to the private sector for investing in surface and maritime 
transportation infrastructure. However, these mechanisms currently 
provide only a small portion of the total funding that is needed for 
capital investment and are not, by themselves, a major strategy for 
addressing mobility challenges. Furthermore some of these mechanisms, 
such as Grant Anticipation Revenue Vehicles, could create difficulties 
for State and local agencies to address future transportation problems, 
because agencies would be reliant on future Federal revenues to repay 
the bonds.\6\
---------------------------------------------------------------------------
     \6\U.S. General Accounting Office, Transportation Infrastructure: 
Alternative Financing Mechanisms for Surface Transportation, GAO-02-
1126T, (Washington, DC: Sept. 25, 2002). In addition, a broad review of 
the performance of Innovative Finance alternatives has recently been 
released by a FHWA contractor. See Performance Review of U.S. DOT 
Innovative Finance Initiatives, Cambridge Systematics, Inc., July 2002.
---------------------------------------------------------------------------
    Finally, a key issue is how Federal revenues are raised and what 
level of funding is targeted. New or increased taxes or other fees 
imposed on the freight sector, while never an attractive option, could 
also help fund mobility improvements. For example, one way to raise 
revenue for funding mobility improvements would be to increase taxes on 
heavy trucks that move freight. According to FHWA, heavy trucks 
(weighing over 55,000 pounds) cause a disproportionate amount of damage 
to the nation's highways and have not paid a corresponding share for 
the cost of pavement damage they cause.
    Better aligning sources of revenues or user fees with actual use 
and damage, including contributions to congestion and pollution, hold 
promise to not only provide a source of revenue, but to promote more 
efficient use of congested infrastructure. Congestion is in part due to 
inefficient pricing of the infrastructure because users--whether they 
are drivers on a highway or barge operators moving through a lock--do 
not pay the full costs they impose on the system and on other users for 
their use of the system. If travelers and freight carriers had to pay a 
higher cost for using transportation systems during peak periods to 
reflect the full costs they impose, they would have an incentive to 
avoid or reschedule some trips and to load vehicles more fully, 
resulting in less congestion.
                                 ______
                                 
 Responses of JayEtta Hecker to Additional Questions from Senator Reid 
                          and Senator Jeffords
    Question 1. Freight transportation is expected to double in the 
next 20 years. This increase in freight traffic will occur at the same 
time that congestion on our roads is already at levels many of us 
consider unacceptable. Clearly, capacity issues have to be at the top 
of our list as we begin to reauthorize our surface transportation 
programs. However, in addition to building new physical capacity, we 
will need to seek ways to squeeze more out of our existing 
transportation infrastructure through intelligent transportation 
systems, better operations, and perhaps a more efficient mix of 
transportation choices. Please give your thoughts on what we can do 
when we reauthorize Transportation Equity Act for the 21st Century 
(TEA-21) to get the most efficient use out of our transportation 
infrastructure.
    Response. Our recent work on surface and maritime transportation 
mobility provides insight on several strategies that offer promise for 
enhancing the efficiency of the transportation infrastructure and 
addressing mobility challenges, especially growing congestion.\7\ We 
developed these strategies based upon expert opinion drawn from two 
panels of surface and maritime transportation experts that we convened 
in April 2002. These strategies include:
---------------------------------------------------------------------------
     \7\See U.S. General Accounting Office, Surface and Maritime 
Transportation: Developing Strategies for Enhancing Mobility: A 
National Challenge, GAO-02-775 (Washington, DC: Aug. 30, 2002) and U.S. 
General Accounting Office, Surface and Maritime Transportation: 
Challenges and Strategies for Enhancing Mobility, GAO-02-1132T 
(Washington, DC: Sept. 30, 2002).
---------------------------------------------------------------------------
    Strategy 1: Encourage the development of transportation planning 
and funding systems that focus on the entire surface and maritime 
transportation system rather than on specific modes or types of travel 
to achieve desired mobility outcomes. Some examples of alternative 
planning and funding systems include the following:

      Performance-oriented funding system. The Federal 
Government would define certain national interests of the 
transportation system, set national performance standards for those 
systems, and distribute Federal funds to entities that address national 
interests and meet the performance standards.
      Federal financial reward-based system. Federal support 
would reward those States or localities that apply Federal money to 
gain efficiencies in their transportation systems, or tie 
transportation projects to land use and other local policies to achieve 
community and environmental goals, as well as mobility goals.
      System with different Federal matching criteria for 
different types of expenditures that might reflect Federal priorities. 
For example, if infrastructure preservation became a higher national 
priority than building new capacity, matching requirements could be 
changed to a 50 percent Federal share for building new physical 
capacity and an 80 percent Federal share for preservation.
      System in which State and local governments pay for a 
larger share of transportation projects, which might provide them with 
incentives to invest in more cost-effective projects. Reducing the 
Federal match for projects in all modes may give States and localities 
more fiscal responsibility for projects they are planning. If cost 
savings resulted, these entities might have more funds available to 
address other mobility challenges. Making Federal matching requirements 
equal for all modes may avoid creating incentives to pursue projects in 
one mode that might be less effective than projects in other modes.

    Strategy 2: Use a full range of techniques to achieve desired 
mobility outcomes. The techniques that offer promise for achieving more 
efficient use of the transportation infrastructure are as follows:

      Increase infrastructure maintenance and rehabilitation. 
An emphasis on enhancing capacity from existing infrastructure through 
increased corrective and preventive maintenance and rehabilitation is 
an important supplement to, and sometimes a substitute for, building 
new infrastructure. Maintaining and rehabilitating transportation 
systems can improve the speed and reliability of passenger and freight 
travel, thereby optimizing capital investments.
      Improve management and operations. Better management and 
operation of existing surface and maritime transportation 
infrastructure is another technique for enhancing mobility because it 
may allow the existing transportation system to accommodate additional 
travel without having to add new infrastructure. For example, the Texas 
Transportation Institute reported that coordinating traffic signal 
timing with changing traffic conditions could improve flow on congested 
roadways. Shifting the focus of transportation planning from building 
capital facilities to an ``operations mindset'' may require a cultural 
shift in many transportation institutions, particularly in the public 
sector, so that the organizational structure, hierarchy, and rewards 
and incentives are all focused on improving transportation management 
and operations.\8\
---------------------------------------------------------------------------
     \8\Joseph M. Sussman, ``Transitions in the World of 
Transportation: A Systems View,'' Transportation Quarterly 56 (2002): 
21-22.
---------------------------------------------------------------------------
      Increase investment in technology. Increasing public 
sector investment in Intelligent Transportation System (ITS) 
technologies that are designed to enhance the safety, efficiency, and 
effectiveness of the transportation network, can serve as a way of 
increasing capacity and mobility without making major capital 
investments. ITS includes technologies that improve traffic flow by 
adjusting signals, facilitating traffic flow at toll plazas, alerting 
emergency management services to the locations of crashes, increasing 
the efficiency of transit fare payment systems, and other actions. 
Other technological improvements include increasing information 
available to users of the transportation system to help people avoid 
congested areas and to improve customer satisfaction with the system.
      Use demand management techniques. Another approach to 
reducing congestion without making major capital investments is to use 
demand management techniques to reduce the number of vehicles traveling 
at the most congested times and on the most congested routes. One type 
of demand management for travel on public roads is to make greater use 
of pricing incentives. In particular, some economists have proposed 
using congestion pricing that involves charging surcharges or tolls to 
drivers who choose to travel during peak periods when their use of the 
roads increases congestion. These surcharges might help reduce 
congestion by providing incentives for travelers to share rides, use 
transit, travel at less congested (generally off-peak) times and on 
less congested routes, or make other adjustments. The surcharges may 
also lead businesses to move freight during less congested times or by 
alternate routes. At the same time, congestion pricing generates more 
revenues that can be targeted to alleviating congestion in those 
specific corridors. In addition to pricing incentives, other demand 
management techniques that encourage ride-sharing through carpools and 
vanpools may also be useful in reducing congestion. We note, however, 
that demand management techniques on roads, particularly those 
involving pricing, often provoke strong political opposition and raise 
equity issues that arise from the potentially regressive nature of 
these charges (i.e., the surcharges constitute a larger portion of the 
earnings of lower income households and therefore impose a greater 
financial burden on them).

    Strategy 3: Provide more options for financing mobility 
improvements and consider additional sources of revenue. There are 
three potential elements to this strategy, as follows:
      Increase funding flexibility. The current system of 
financing surface and maritime transportation projects limits options 
for addressing mobility challenges. For example, separate funding for 
each mode at the Federal, State, and local level can make it difficult 
to consider possible efficient and effective ways for enhancing 
mobility. Providing more flexibility in funding across modes could help 
address this limitation.
      Expand support for alternative financing mechanisms. The 
public sector could also expand its financial support for alternative 
financing mechanisms to access new sources of capital and stimulate 
additional investment in surface and maritime transportation 
infrastructure. These mechanisms include both newly emerging and 
existing financing techniques such as providing credit assistance to 
State and local governments for capital projects and using tax policy 
to provide incentives to the private sector for investing in surface 
and maritime transportation infrastructure.\9\ These mechanisms 
currently provide a small portion of the total funding that is needed 
for capital investment and some of them could create future funding 
difficulties for State and local agencies because they involve greater 
borrowing from the private sector.
---------------------------------------------------------------------------
     \9\See U.S. General Accounting Office, Transportation 
Infrastructure: Alternative Financing Mechanisms for Surface 
Transportation, GAO1-02-1126T (Washington, DC: Sept. 25, 2002).
---------------------------------------------------------------------------
      Consider new revenue sources. A possible future shortage 
of revenues may limit efforts to address mobility challenges, according 
to many of the panelists that we consulted. For example, some panelists 
said that because of the increasing use of alternative fuels, revenues 
from the gas tax are expected to decrease, possibly limiting funds 
available to finance future transportation projects. One method of 
raising revenue is for counties and other regional authorities to 
impose sales taxes for funding transportation projects. A number of 
counties have already passed such taxes and more are being considered 
nationwide. However, several panelists expressed concerns that this 
method might not be the best option for addressing mobility challenges 
because (1) moving away from transportation user charges to sales taxes 
that are not directly tied to the use of transportation systems weakens 
the ties between transportation planning and finance and (2) counties 
and other taxing authorities may be able to bypass traditional State 
and metropolitan planning processes because sales taxes provide them 
with their owns funding sources for transportation.
    New or increased taxes or other fees imposed on the freight sector 
could also help fund mobility improvements, for example, by increasing 
taxes on freight trucking. The Joint Committee on Taxation estimated 
that raising the ceiling on the tax paid by heavy vehicles to $1,900 
could generate about $100 million per year.\10\ Another revenue raising 
method would be to dedicate more of the revenues from taxes on 
alternative fuels, such as gasohol, to the Highway Trust Fund rather 
than to Treasury's general fund, as currently happens. However, this 
would decrease the amount of funds available for other Federal 
programs. Finally, pricing strategies, mentioned earlier in this 
statement as a technique to reduce congestion, are also possible 
additional sources of revenue for transportation purposes.
---------------------------------------------------------------------------
     \10\See U.S. General Accounting Office, Highway Financing: Factors 
Affecting Highway Trust Fund Revenues, GAO-02-667T (Washington, DC: May 
9, 2002).

    Question 2. We clearly have significant freight transportation 
needs across our Nation. How do we determine what our freight 
priorities should be? Do we have sufficient information to determine 
which freight corridors, border crossings, ports, intermodal 
facilities, and connectors should be our top funding priorities? Where 
is our freight infrastructure least efficient and where is the growth 
expected to occur?
    Response. GAO has not performed work in this area. Therefore, we 
are unable to directly address your questions concerning the nation's 
freight priorities. We believe, however, that the Federal programs 
established in core transportation legislation should be evaluated to 
determine the extent to which these programs are enhancing freight 
transportation. As such, we are currently working with your staffs to 
undertake such work.
    It would be prudent to evaluate the results of Federal programs to 
determine if programs are enhancing freight transportation. There 
appears to be substantial consensus that the reliability and 
effectiveness of the nation's freight transportation system is being 
constrained because of increasing demand and capacity limitations. 
Projected increases in the volume of freight being transported over the 
nation's transportation infrastructure and changes in the freight 
industry, such as just-in-time delivery and e-commerce, are placing new 
demands on the transportation system by requiring more freight to be 
shipped more frequently over the system. Furthermore, capacity and 
mobility limitations of the existing infrastructure-such as the need 
for deeper harbor channels to accommodate bigger ships, terminal 
capacity/expansion limitations, congestion on intermodal connectors, 
and aging and limited low-capacity locks on our nation's rivers-could 
potentially pose threats to our ability to move goods efficiently. 
While system stakeholders have maintained that demand and capacity 
limitations have not received the attention necessary to meet projected 
needs, these issues have not been evaluated on a system-wide basis.
    Although the Intermodal Surface Transportation Efficiency Act 
(ISTEA) and TEA-21 allowed transportation planners to consider freight 
transportation requirements when developing transportation plans and 
making investment decisions, freight carriers and users have questioned 
whether the mandate set forth in core transportation legislation has 
been successful. Because control of transportation investment decisions 
has been delegated to State and local governments, freight projects 
funded through most of the programs have to be identified as priorities 
within the State and metropolitan planning organization (MPO) planning 
processes. States and MPOs, however, must weigh the need for freight 
transportation projects against priorities for other transportation 
projects. Furthermore, freight systems are global in scope whereas the 
perspective of State and local planners is limited to the area over 
which they have jurisdiction.
    In our recent report on maritime finance,\11\ we provide a 
framework for national infrastructure investment. The first component 
of this framework calls for evaluating results and incorporating 
lessons learned into the decisionmaking process. We are currently 
working with your staffs to evaluate many of these freight 
transportation issues.
---------------------------------------------------------------------------
     \11\U.S. General Accounting Office, Marine Transportation: Federal 
Financing and a Framework for Infrastructure Investments, GAO-02-1033, 
(Washington, DC: Sept. 9, 2002).

    Question 3. The Borders and Corridors programs have not worked very 
well. One improvement we should consider is to revise this program to 
encourage public-private partnerships through a greater emphasis on 
innovative finance and other creative incentives. How else can we 
improve the Borders and Corridors programs to target the highest 
priority freight corridors and intermodal facilities?
    Response. In your question, you raised concern that the Borders and 
Corridors programs have not worked well and inquired about approaches 
(other than innovative finance and incentives) that might improve the 
programs. Absent an evaluation of the programs, we are not able to take 
a position on whether the programs have been successful in advancing 
freight projects. We can, however, provide information on noncapital 
alternatives to meet capital investment needs based on our recent work 
on surface and maritime transportation mobility.\12\
---------------------------------------------------------------------------
     \12\U.S. General Accounting Office, Surface and Maritime 
Transportation: Developing Strategies for Enhancing Mobility: A 
National Challenge, GAO-02-775, (Washington, DC: Aug. 30, 2002).
---------------------------------------------------------------------------
    According to a report issued by the Federal Highway Administration 
(FHWA),\13\ since States and MPOs must balance competing priorities for 
scarce transportation funding, the project prioritization process 
established in ISTEA and TEA-21 may serve to detract focus from freight 
projects within the State and MPO decisionmaking process. A common 
complaint of freight carriers and users of the system is that freight 
issues cannot compete with other politically popular projects, such as 
passenger projects. The Borders and Corridors programs, established in 
TEA-21, addressed this difficulty by providing funds over and above the 
annual State highway apportionment.
---------------------------------------------------------------------------
     \13\Federal Highway Administration, Freight Financing Options for 
National Freight Productivity, (Washington, DC: Apr. 2001).
---------------------------------------------------------------------------
    The FHWA report also notes that although the programs have been a 
good source of funding for freight projects, the programs have 
purportedly been oversubscribed and much of the program funds have been 
earmarked for non-freight projects. The apparent demand for funds under 
these programs suggests that there is a need for such programs. As 
previously noted, we are not able to take a position on whether the 
programs have been successful. We can, however, provide strategies that 
could be considered when developing the legislative reauthorization 
package.
    In our recent mobility report on strategies for enhancing mobility, 
we identified the need for using a full range of tools to achieve 
desired program outcomes. While new construction may hold some promise 
to ease congestion in certain bottlenecks, it is not always a viable 
solution due to cost, land, regulatory, or administrative constraints. 
Therefore, noncapital alternatives to meet capital investment needs 
should also be considered. These alternatives can include improving the 
management and operation of the existing system through corrective and 
preventative maintenance and rehabilitation and/or managing or reducing 
travel demand through pricing incentives. Another alternative we 
proposed in our mobility report involves instituting tolls or fees 
during peak travel times which may lead people to schedule recreational 
trips or move freight during less congested times or be alternate 
routes.
    Question 4: One way to squeeze more capacity out of existing 
infrastructure is through more rapid deployment of Intelligent 
Transportation Systems and an increased focus on the operations and 
management of regional transportation systems. How much potential do 
Intelligent Transportation System initiatives have for improving the 
efficiency of freight operations and what can we do to promote the 
development of a freight-friendly ITS infrastructure?
    Response. We have not done any recent work to evaluate Intelligent 
Transportation Systems (ITS) initiatives or to identify strategies for 
promoting ``freight-friendly'' ITS infrastructure. As noted in our 
response to question 1, however, our recent work on strategies for 
addressing mobility provides information about Intelligent 
Transportation Systems (ITS). The Department of Transportation's ITS 
program applies proven and emerging technologies-drawn from computer 
hardware and software systems, telecommunications, navigation, and 
other systems-to surface transportation. In fiscal year 2001, nearly 50 
percent of FHWA's $387.2 million research and technology budget was 
allocated to intelligent transportation systems.\14\ A number of 
intelligent transportation systems offer promise for improving the 
efficiency of freight transportation. For example, highway-rail 
intersection systems are being developed to coordinate traffic signal 
operations and train movement and notify drivers of approaching trains 
using in-vehicle warning systems. Also, commercial vehicle intelligent 
transportation systems are being developed that will apply technologies 
to improve the safety and productivity of commercial vehicles and 
drivers, reduce commercial vehicles' operations costs, and facilitate 
regulatory processes for the trucking industry and government agencies.
---------------------------------------------------------------------------
     \14\U.S. General Accounting Office, Highway Research: Systematic 
Selection and Evaluation Processes Needed for Research Program, GAO-02-
573 (Washington, DC: May 24, 2002).

    Question 5. What can we do to promote better regional freight 
planning and how do we ensure that planning agencies take a 
comprehensive, intermodal approach to infrastructure planning and 
development? In particular, when it comes to freight, how do we bring 
the private sector into the public planning process?
    Response. GAO has not reviewed the freight planning process. We are 
therefore unable to proffer suggestions on how the process can be 
improved. At this time, we are planning to undertake work that would 
allow us to more fully address this question.
    We can provide the following observations based on our recent work 
on surface and maritime transportation mobility and expert panels we 
convened to discuss major transportation issues:
      Planning with a regional focus. Experts participating in 
a conference we sponsored on June 14, 2001 to discuss major 
transportation issues raised concerns about integrating freight needs 
into transportation planning and investment decisions.\15\ Conference 
speakers supported more planning with a regional focus-with 
participation by Federal, State, and local entities-to make better use 
of Federal transportation assistance.
---------------------------------------------------------------------------
     \15\U.S. General Accounting Office, Physical Infrastructure: 
Crosscutting Issues Planning Conference Report, GAO-02-139, 
(Washington, DC: Oct. 1, 2001).
---------------------------------------------------------------------------
      Modal limitations. Experts participating in a conference 
we sponsored on January 26, 1999 noted that freight stakeholders must 
become full partners in making transportation policy so that surface 
transportation investments are linked to freight needs.\16\ 
Facilitating freight users' and suppliers' involvement in 
transportation policy will enhance the nation's ability to move freight 
seamlessly across different transportation systems. In addition, 
manufacturers and freight companies regard the Department of 
Transportation's ``stovepipe'' organization as a major obstacle to 
working with the Federal Government. They find it difficult to discuss 
intermodal projects or emerging issues with a single DOT agency that is 
responsible only for highway or maritime issues.
---------------------------------------------------------------------------
     \16\U.S. General Accounting Office, Surface Transportation: Moving 
into the 21st Century, GAO/RCED-99-176, (Washington, DC: May 1, 1999).
---------------------------------------------------------------------------
      Knowledge/expertise. The January 26, 1999 conference 
participants also noted that the public sector must better understand 
the needs and problems of moving freight nationally and regionally. 
State transportation departments and MPOs, however, may not have 
sufficient expertise, or in some cases, authority to effectively 
identify and implement mobility improvements across modes or types of 
travel.\17\
---------------------------------------------------------------------------
     \17\U.S. General Accounting Office, Surface and Maritime 
Transportation: Developing Strategies for Enhancing Mobility: A 
National Challenge, GAO-02-775 (Washington, DC: Aug. 30, 2002).
---------------------------------------------------------------------------
      Research. The January 26, 1999 participants noted that 
Federal policymakers should renew their commitment to funding 
nationally important research. While TEA-21 substantially increased 
States' research funding, it considerably reduced funds for Federal 
research. State research programs focus on short-term practical 
problems whereas Federal research focuses on long-term and high-risk 
research, intermodal problems, and transportation policies.
      Best practices. In our recently issued mobility report, 
experts offered the Alameda Corridor as an example of successful 
cooperation and coordination of freight needs. The Alameda Corridor is 
designed to improve cargo movement from California's ports of Los 
Angeles and Long Beach to the rest of the country. Its planning, 
financing, and building required cooperation among private railroads, 
the local port authorities, the cities of Los Angeles and Long Beach, 
community groups along the corridor, the State of California, and the 
Federal Government.

    Question 6 (from Senator Jeffords). I have a hypothesis that if 
more was done to provide strategic investment in rail infrastructure, 
we could reduce congestion on our highways and improve the quality air 
we breathe. For instance, in Chicago, it is my understanding that a 
majority of the truck traffic in the metro area is a result of cargo 
being off loaded from one rail line and being shipped to another part 
of town to be loaded on another train to continue its journey. If 
funding were made available for improving rail-to-rail connections in 
the Chicago area, what kind of effect would consolidating rail yards 
and rail lines in the Chicago area have on truck traffic on the highway 
system?
    Response. GAO has not conducted work on rail-to-rail connections in 
the Chicago area and therefore, we are unable to comment on the effect 
consolidating rail yards and lines in the Chicago area would have on 
truck traffic.
                               __________
    Statement of Katie Dusenberry, Chairman, Arizona Department of 
                          Transportation Board
    Good morning Mr. Chairman and members of the committee. Thank you 
for the opportunity to present to you today the views of the Arizona 
Department of Transportation Board regarding the Hoover Dam Bypass 
Project and the impact on commercial trucking.
    For the record, my name is Katie Dusenberry, and I am the chairman 
of the Arizona Department of Transportation Board. The Board is 
responsible for a variety of transportation activities prescribed by 
Arizona statute.
Introduction
    Over the past 10 years, there has been a significant growth in 
freight due to improvements in manufacturing processes and new 
technologies. This growth, while important for economic vitality, 
stresses our trade gateways and corridors. U.S. DOT has estimated that 
freight traffic will double over the next 20 years making the condition 
of these trade corridors even more critical. Our economic growth and 
ability to maintain a competitive edge in international markets depends 
on the condition and capacity of these trade corridors to accommodate 
the ever increasing freight traffic.
History
    U.S. Highway 93 is part of the major transportation network in the 
western United States and is the primary, direct north-south connecting 
highway linking two major metropolitan cities, Phoenix, Arizona and Las 
Vegas, Nevada, in two of the fastest growing States in the United 
States. U.S. 93 is one of the highway segments that makes up the route 
from Mexico City, Mexico to Edmonton, Canada known as the CANAMEX 
Corridor. This corridor was formally designated as a high-priority 
trade corridor by the National Highway System Designation Act of 1995. 
The Corridor runs from Mexico City to I-19 in Nogales to Tucson, I-10 
from Tucson to Phoenix, US 93 in the vicinity of Phoenix to the Nevada 
Border, US 93 from Arizona to Las Vegas and I-15 from Las Vegas through 
Montana to Edmonton, Canada.
    The CANAMEX Corridor represents an opportunity for economic 
development that facilitates trade and encourages economic growth 
throughout the region. The interest in developing this Corridor is to 
facilitate transportation distribution, commerce and tourism. A 
preliminary study of the potential positive economic impact if the 
CANAMEX Corridor is fully developed suggests over a 30 year period:

      Economic development (value added) of $1.2 billion;
      Economic efficiencies of $509 million;
      Approximately 1,900 new permanent jobs.

    These figures reflect completion of a number of projects within the 
Corridor including the Hoover Dam Bypass project.
    Prior to the terrorist attacks on 9/11/01, the direct route for all 
traffic, including commercial trucks, to reach either Arizona or Nevada 
was a road across the top of Hoover Dam consisting of two lanes of 
traffic, one in each direction. The approach from Arizona to the Hoover 
Dam consists of approximately 1.2 miles of roadway and from Nevada, 2.2 
miles of roadway. On the approach to Hoover Dam from both Arizona and 
Nevada, steep grades, hairpin turns, and inadequate sight distance are 
encountered by freight and passenger traffic reducing speeds to between 
8 to 18 MPH. Commercial trucks are often too large to pass each other 
on the extreme hairpin curves and must come to a complete stop. On both 
the Arizona and Nevada approaches, the grades are greater than 6 
percent. The existing 6.3 miles north and south of the Dam requires an 
average of 16.5 minutes to cross due to the nature of the road and the 
traffic on the Dam itself. To remedy the inadequacy of this route, the 
Federal Highway Administration (FHWA) in cooperation with the States of 
Arizona and Nevada and other affected Federal and State agencies has 
taken a leadership role in developing plans to construct a new bridge 
to cross the Colorado River in the vicinity of Hoover Dam. This bridge 
is entirely on Federal property and therefore should be largely a 
Federal financial responsibility.
    Since 9/11/01, the road across the Hoover Dam has been closed to 
commercial trucking and over 2,100 trucks per day are now detoured to 
other highways. Commercial truck traffic must now route through 
Laughlin, an additional 23 miles or I-40 an additional 70 miles, adding 
dozens of travel miles to each trip. This creates a negative financial 
impact of $30 million per year, based on only the additional mileage, 
which is ultimately passed on to the consumer. The detours currently 
being used by commercial trucks are not designed to handle this traffic 
volume and weight. The Hoover Dam crossing is the only major highway in 
the Nation with ongoing restrictions as a result of the terrorist 
attack.
Purpose of Project
    The purpose of the project, a joint effort among Arizona, Nevada 
and the Federal Government is to significantly reduce traffic on the 
road atop the Hoover Dam and will accomplish the following objectives:

      Remove a major bottleneck to interstate and international 
commerce and travel by reducing traffic congestion and accidents in 
this segment of the major commercial route.
      Separate tourist and commercial traffic to reduce 
congestion.
      Improve efficiency and reduce cost to the shippers of 
freight by reducing travel time.
      Replace an inadequate federally owned highway river 
crossing, first constructed over 60 years ago, with a new bridge that 
meets current roadway design criteria and improves both vehicle and 
truck capacity on U.S. 93 in the area of the Dam.
      Minimize the potential for pedestrian--vehicle accidents 
on the Dam crest and on the Nevada and Arizona approaches.
      Protect the Hoover Dam, visitors, employees, equipment, 
and power generation capabilities and Colorado River waters while 
enhancing the visitors' experience at Hoover Dam.

    The FHWA recommended the Sugarloaf alignment as the best location 
to construct the bridge. This location is approximately 1,500 feet 
downstream from Hoover Dam. This site requires constructing 2.2 miles 
of highway approach in Nevada and approximately 1.2 miles of highway 
approach in Arizona and a 2,000-foot long bridge.
Travel Times
    The current travel time across the top of the Hoover Dam averages 
16.5 minutes up to 60 minutes during peak hours. The proposed bypass 
bridge and approaches would reduce the travel time to only 6 minutes.
    When accidents occur on and near the Dam, significant traffic 
backups of over ten to 15 miles result. Since there are no alternative 
routes to which traffic can shift, this results in delays ranging from 
two to 5 hours for motorists. There have been incidents of up to 18 
hours delay.
Accident Statistics
    The number of tourists traveling to the Lake Mead Recreational Area 
and Hoover Dam was 1.03 million in 1997 and was projected to increase 
to 1.6 million in 1999. Since 1964 more than 500 accidents have 
occurred in the 3.4 mile stretch of highway on or near the Hoover Dam. 
Commercial trucks were involved in 96 of these accidents. Forty-three 
accidents between 1985 and 1991 involved one or more personal injuries, 
including two fatalities. In each accident, the cause was partially 
attributable to sharp curves, narrow highway widths, insufficient 
shoulder widths, poor sight distance and slow travel speeds. Especially 
in regards to freight traffic, the previous configuration of putting 
trucks across the Hoover Dam with two-lane traffic, steep approaches, 
sharp curves at the entrances and heavy pedestrian traffic, the Hoover 
Dam was a serious accident location.
    One mile of the Hoover Dam road reflects a much higher accident 
rate than the three-mile adjoining segments. The half-mile segments of 
US 93 approaching the Dam have an accident rate of 3.97 per million 
vehicle miles traveled. That rate is over three times the Nevada 
average of 1.15 per million vehicle miles traveled for rural principal 
arterial routes.
    Traffic on the road across the Hoover Dam was 5,500 vehicles per 
day in 1993 and currently is 11,500 vehicles per day. 18 percent to 20 
percent was truck traffic prior to 9/11/01. Future traffic is projected 
to be 21,000 in 2017 and 26,000 in 2027. As the average annual daily 
traffic across the Dam continues to increase, the number of accidents 
is increasing accordingly as congestion on the Dam also increases.
Security
    Since Hoover Dam holds the waters of Lake Mead, the largest water 
reservoir in the Nation, the U.S. Department of Interior has identified 
the Hoover Dam Bypass Project as its No. 1 national security priority. 
The massive Dam provides vital flood control for more than a quarter 
million people living in the Colorado River region and generates four 
billion kilowatt-hours of energy for 1.3 million people in the tri-
State regions of California, Arizona and Nevada.
Project Status
      Hoover Dam Bypass Project received its record of decision 
for project approval in April 2001. The Environmental Impact Statement 
has been finalized.
      This project is the No. 1 priority of the States of 
Arizona and Nevada. Only an additional $108 million is needed to ensure 
full funding for this project.
      The design is over 95 percent complete for the Arizona 
approach. Nevada's approach is 60 percent complete. The bridge design 
is 30 percent complete.

                                 Funding
------------------------------------------------------------------------
                                                         Current
------------------------------------------------------------------------
Nevada & Arizona State funds...................              $40,000,000
Federal Funds previously committed.............              $86,000,000
Additional Federal Funding needed..............             $108,000,000
    Total Project Budget.......................             $234,000,000
------------------------------------------------------------------------

    We are requesting $108 million to complete the Hoover Dam Bypass 
Project. Because there are no complex interchanges and only one small 
area of roadway on either side of the bridge to construct, we are 
confident that the bridge as designed will be completed within the 
entire project budget of $234 million dollars. The bridge's design 
ensures that it will accommodate anticipated traffic volumes including 
increased freight that will be generated due to the north-south trade 
from Mexico to Canada well into the future.
GARVEE Bonds/Innovative Financing
    Because of the great need to construct the Hoover Dam Bypass, Grant 
Anticipation Revenue Vehicles (GARVEEs) are being considered as a 
mechanism to provide immediate funds to complete the construction of 
the Hoover Dam Bypass through the issuing of bonds. Even though bond 
financing incurs interest and other debt-related costs, delaying the 
project would create greater costs such as inflation, lost driver time, 
freight delays, and wasted fuel. Both Arizona and Nevada are interested 
in pursuing this as an option to allow construction to begin 
immediately, while allowing Federal funding to occur over time. This 
allows for completion of the Hoover Dam Bypass by mid 2007 and thereby, 
providing a safe and efficient route for commercial trucking.
Conclusion
    Mr. Chairman and members of the committee, we urge you to consider 
providing an additional $108 million dollars to fully fund the Hoover 
Dam Bypass. The bypass project is vital to the efficient movement of 
commercial freight and will substantially reduce the additional miles 
and travel times that commercial trucks are currently experiencing. 
This project is also a critical part of the development of the CANAMEX 
Corridor which runs from Mexico to Canada and will provide economic 
growth and safer transportation by increasing commercial freight, 
commerce and tourism.
                               __________
Statement of Michael W. Wickham, Chairman and CEO, Roadway Corporation, 
              for the American Trucking Associations, Inc.
    Chairmen Reid and Breaux, Senators Inhofe and Smith, members of the 
subcommittees, thank you for the opportunity to express the trucking 
industry's perspectives regarding freight transportation. I am Michael 
Wickham, Chairman of the Board and Chief Executive Officer of Roadway 
Corporation. Roadway is headquartered in Akron, OH. The company was 
founded in 1930, and today we are one of the Nation's leading providers 
of less-than-truckload (LTL) freight transportation services. Roadway 
provides seamless service between all 50 States, Canada, Mexico, and 
Puerto Rico, with international freight services for 140 countries. We 
have subsidiaries in Canada and Mexico, and we operate 379 terminals 
throughout North America. Roadway employs more than 26,000 people. 
Roadway's Mexican and Canadian operations connect our neighbors with 96 
percent of the U.S. population through seamless cross-border operations 
and services. In addition, Roadway ships over three billion pounds of 
truckload freight annually. Through Roadway Air, our company provides 
time-definite air freight delivery services.
    I am appearing before the subcommittees today on behalf of the 
American Trucking Associations, Inc. (ATA) and Roadway Corporation. ATA 
is the national trade association of the trucking industry. We are a 
federation of affiliated State trucking associations, conferences, and 
other organizations that together include more than 37,000 motor-
carrier members, representing every type and class of motor carrier in 
the country. We represent an industry that employs nearly ten million 
people, providing one out of every 14 civilian jobs. While we are a 
highly diverse industry, we all agree that a good highway system is 
crucial to our Nation's economy, to the safety of all drivers, and to 
our bottom line. This includes the more than 3 million truck drivers 
who travel over 400 billion miles per year to deliver to Americans 86 
percent of their transported food, clothing, finished products, raw 
materials, and other items.\1\
---------------------------------------------------------------------------
     \1\87.3 percent by revenue. American Trucking Associations, U.S. 
Freight Transportation Forecast to 2013, 2002.
---------------------------------------------------------------------------
    American industrial and commercial enterprises are able to compete 
more effectively in the global marketplace due to the benefits of safe 
and efficient trucking. Truck transportation is the most flexible mode 
for freight shipment, providing door-to-door service to every city, 
manufacturing plant, warehouse, retail store and home in the country. 
For many people and businesses located in towns and cities across the 
United States, trucking services are the only available means to ship 
goods. Trucks are the only providers of goods to 75 percent of American 
communities. Five percent of the Nation's GDP is created by truck 
transportation. Actions that affect the trucking industry's ability to 
move its annual 8.9 billion tons of freight have significant 
consequences for the ability of every American to do their job well and 
to enjoy a high quality of life.
    building on success: making our nation's highways safer for all 
                               motorists
    Having spent my entire career in the trucking industry, I am most 
proud of the fact that we continue to improve our safety record, year 
after year, mile after mile. Safety must be paramount in our 
consideration of future reauthorization programs and policies. ATA 
takes safety concerns very seriously. Our industry has strongly 
promoted many safety improvements that have made trucking safer today 
than it has ever been in the past. Between 1985 and 2000, the fatal 
accident rate involving trucks has fallen 44 percent. Furthermore, 
research by the AAA Foundation, and a study done by the University of 
Michigan at the request of the USDOT, found that in about three-
quarters of accidents involving a passenger vehicle and a truck, the 
actions of the truck driver were not a factor leading to the 
accident.\2\In fact, today's truck driver is the safest driver--
passenger or commercial--in our Nation's recorded history.
---------------------------------------------------------------------------
     \2\``Driver-Related Factors in Crashes Between Large Trucks and 
Passenger Vehicles,'' Federal Highway Administration, April 1999; 
``Identifying Unsafe Driver Actions that Lead to Fatal Car-Truck 
Crashes,'' AAA Foundation, April 2002.
---------------------------------------------------------------------------
    Even though the trucking industry is taking proactive steps to 
improve our safety record, ATA is very concerned about America's 
overall highway safety experience. Each year, more than 40,000 people 
lose their lives as a result of a traffic accident. This is an 
unacceptable loss of life and an economic tragedy. As Secretary of 
Transportation Norman Mineta announced earlier this year, the economic 
impact of motor vehicle crashes is over $230 billion per year. This 
represents an annual economic loss of $820 for every American. 
Investing additional resources in projects and programs that improve 
highway safety produces more than human benefits; it has positive 
economic consequences as well. However, we should also spend our money 
wisely, directing precious resources toward those activities that will 
produce the greatest safety benefit, based on sound scientific 
evaluation of the causes of crashes and appropriate remedies.
    It is clear that truck safety has improved over the last 20 years. 
An interesting question, however, is ``What has caused the 
improvement?'' This is a tough question to answer for both industry and 
government officials. It's fairly clear that some programs that have 
been implemented in the last 10 to 20 years have contributed to the 
overall positive picture. The industry-supported Federal-State truck 
safety inspection grant program (known as the Motor Carrier Safety 
Assistance Program or MCSAP) has had an impact by improving trucks' 
condition; the Commercial Driver's License (CDL) program has 
contributed by raising the bar for driver entry into the industry; and 
the implementation of voluntary drug testing by the industry and a 
mandatory Federal drug and alcohol testing program have also 
contributed in a positive way. It is very likely that the increase in 
seat belt use by truck drivers and other motorists have also had a 
positive impact. Many other industry and government initiatives are 
likely to have had some benefit as well. The point here, however, is 
that we still need to have a better understanding of what has worked 
and why. Additionally, we still do not understand thoroughly how and 
why truck crashes occur.
    Section 224 of the Motor Carrier Safety Improvement Act of 1999 
(MCSIA, P.L. 106-159) required the Secretary of Transportation to 
conduct a comprehensive study to determine the causes of, and 
contributing factors to, crashes involving large trucks and buses. The 
primary purpose of this study requirement was to have a comprehensive 
analysis and report that would yield information to help FMCSA and the 
States identify activities and safety measures that would likely lead 
to significant reductions in the frequency, severity and rate per mile 
traveled of crashes involving large trucks and buses. ATA fully 
supported this study concept during the truck safety debate in 1999 
that resulted in the passage of MCSIA.
    FMCSA initiated this study in 2000 with the assistance of the 
National Highway Traffic Safety Administration (NHTSA), and the State 
agencies involved in commercial vehicle safety efforts. The study will 
not be complete until the end of 2003 at the earliest. However, a FMCSA 
official recently confirmed that preliminary information suggests that 
driver actions--both passenger and commercial--appear to be a more 
significant factor in accident causation than previously thought, and 
that enforcement resources may have to be redirected to reflect these 
findings.\3\
---------------------------------------------------------------------------
     \3\``FMCSA Crash Data Analyst Says Study May Alter Inspections,'' 
Transport Topics, Aug. 26, 2002, p. 2.
---------------------------------------------------------------------------
    Other studies and data confirm these preliminary findings.\4\ 
Congress and the U.S. DOT have traditionally taken different approaches 
to improving traffic safety versus truck safety. NHTSA's traffic safety 
programs have included education and outreach, traffic enforcement 
programs aimed at changing driver behavior, and crash data analysis. 
FMCSA's truck safety programs, on the other hand, have focused on 
increasing the number of regulatory requirements on drivers and 
carriers, enforced through on-road safety inspections and facility 
compliance audits. Since so much of truck safety is rooted in overall 
traffic safety, Congress should seriously consider much more of a 
traffic safety approach to improving truck safety.
---------------------------------------------------------------------------
     \4\``Driver-Related Factors in Crashes Between Large Trucks and 
Passenger Vehicles,'' Federal Highway Administration, April 1999; 
``Identifying Unsafe Driver Actions that Lead to Fatal Car-Truck 
Crashes,'' AAA Foundation, April 2002.
---------------------------------------------------------------------------
    Earlier this year, ATA's President and CEO, William Canary, 
challenged our State and Federal partners to seriously address one of 
the most pervasive and dangerous violations of the law that drivers 
encounter every day--speeding. FMCSA reports that speeding (exceeding 
the speed limit or driving too fast for conditions) was a contributing 
factor in 22 percent of fatal crashes involving a truck in 2000. Since 
the majority of fatal truck crashes are multi-vehicle crashes involving 
one or more passenger vehicles, this 22 percent figure includes 
speeding on the part of the truck driver, or speeding on the part of 
the other driver, or speeding by both parties. Also, according to a 
recent FMCSA study, driving at an unsafe speed was the second most 
frequent unsafe driving act committed by passenger vehicles in the 
vicinity of large trucks. Following too closely was the most frequently 
cited unsafe driving act by motorists.
    Additionally, NHTSA reports that speeding was a contributing factor 
in 29 percent of all fatal crashes in 2000. This means that more than 
12,000 people lost their lives in 2000 in part due to speed-related 
crashes. This is simply unacceptable. The time has come to combat 
excessive speeding. There are four words that every motorist and every 
commercial vehicle driver needs to remember when they buckle up and 
take the wheel of their vehicle: Safe Speeds Save Lives!
    The Section 402 Highway Safety Grant Program administered by the 
NHTSA supports many outreach and enforcement programs, including the 
priority programs to encourage the proper use of occupant protection 
devices and reduce drug and alcohol impaired driving. While these 
programs clearly deserve a high priority for NHTSA, ATA is concerned 
that strong, visible speed enforcement may not be getting the focus, 
attention and funding it deserves by NHTSA.
    Additionally, the Motor Carrier Safety Assistance Program (MCSAP) 
administered by FMCSA focuses on priority truck and bus safety 
initiatives that, for the most part, do not address speeding truck and 
bus drivers, or other motorists. The MCSAP program, a generally 
successful truck and bus safety inspection program, is simply not 
putting enough emphasis on traffic enforcement activities. Strong speed 
enforcement aimed at commercial vehicle drivers, as well as other 
motorists with which commercial drivers share the road, needs to take 
on a much greater role in the MCSAP program. In fact, there is 
currently an artificial constraint that keeps the amount of speed 
enforcement activity in the MCSAP program small. FMCSA's regulations 
require that all speed enforcement stops (as well as all other types of 
traffic enforcement stops) of trucks include an appropriate North 
American Standard Inspection of the truck or the driver, or both, for 
the activity to be eligible for MCSAP funding. This inspection 
requirement, found at 49 C.F.R. 350.111, is unnecessary and 
unwarranted. Additionally, since speeding and other unsafe driving 
behaviors of non-commercial drivers play an even greater role in truck-
involved crashes than do the actions of the commercial driver, the 
MCSAP program must include traffic enforcement efforts aimed at unsafe 
motorist behavior.
    ATA recommends that Congress authorize additional funding for the 
Section 402 Highway Safety Grant Program administered by NHTSA, and the 
MCSAP truck safety grant program administered by FMCSA, specifically 
for increased traffic and speed enforcement efforts in the upcoming 
highway reauthorization. ATA further recommends that Congress make it 
clear in legislative language that MCSAP funding may be used for State 
speed enforcement efforts aimed at both commercial and non-commercial 
drivers, and that speed enforcement activities aimed at commercial 
drivers do not have to be linked to a North American Standard 
Inspection. Additional funding, additional emphasis, and greater 
Federal leadership is needed on this issue to reduce the speed of all 
drivers on our highways and to save lives.
    ATA is also a firm believer in the life-saving benefits of seat 
belts. ATA recommends that Congress continue to support and fully fund 
the occupant protection programs of NHTSA, including the ongoing 'Click 
It or Ticket' grant program.
      improving the safety and efficiency of intermodal equipment
    Mr. Chairman, while we try to cooperate with our intermodal 
partners in many areas, and will do so during this reauthorization 
cycle, there is one area on which we disagree, and I am afraid that the 
footdragging by Federal agencies and by many in the rail and ocean 
carrier industries to work with us to resolve the ``roadability'' issue 
is having serious safety and economic impacts. Since the advent of 
containerized shipping in the 1970's, a serious safety loophole has 
crept into the Federal Motor Carrier Safety Regulations (F.M.C.S.R.s).
    As containerized intermodal freight has evolved over the decades, 
the Federal safety regulations have not kept pace. As a result, 750,000 
intermodal chassis are operating in a safety loophole. These frame-like 
trailers are used exclusively to haul intermodal containers, and are 
interchanged between steamship lines, railroads, and motor carriers. 
The chassis are also classified as commercial motor vehicles by the 
USDOT. However, they evade USDOT safety oversight.
    The F.M.C.S.R.s fundamentally assume that motor carriers have daily 
management control over all commercial motor vehicles they take onto 
public roadways. Based on that assumption, the regulations read, 
``Every motor carrier shall systematically inspect, repair, and 
maintain . . . all motor vehicles subject to its control.''\5\
---------------------------------------------------------------------------
     \5\49 CFR Part 396.3. Inspection, repair, and maintenance
---------------------------------------------------------------------------
    USDOT's interpretation of systematic maintenance is,``. . . a 
regular or scheduled program to keep vehicles in a safe operating 
condition.''\6\It explains that the agency does not specify maintenance 
intervals, leaving that decision to motor carriers, based on fleet and 
vehicle considerations. So how does USDOT know if a motor carrier is 
failing to ``keep vehicles in a safe operating condition?'' When 
roadside safety inspections, typically conducted by State police, drive 
a motor carrier's SAFESTAT (violation) numbers above a certain 
threshold, the agency and State police send an envoy to the motor 
carrier's place of business to audit the maintenance and employee 
training records, inspect the carrier's equipment, etc.
---------------------------------------------------------------------------
     \6\Regulatory Guidance to the Federal Motor Carrier Safety 
Regulations, at 49 CFR 396.3; emphasis added.
---------------------------------------------------------------------------
    While railroads and foreign-owned steamship lines (collectively 
called ``providers'') own or lease the intermodal chassis,\7\ and 
control its daily disposition, they claim not to be motor carriers, 
thus not technically responsible for the condition of their equipment 
under Federal safety regulations. However, they do affix the annual 
inspection sticker on their equipment, which constitutes an act of 
certification that the equipment was inspected in detail at least once 
a year. Providers conduct the annual inspection pursuant to the 
F.M.C.S.R.s, but many do not conduct systematic maintenance on the same 
equipment, which is likewise mandated by the F.M.C.S.R.s. In fact, 
providers are generally unaware of the existence of the Federal 
systematic maintenance requirement. This explains the poor condition of 
intermodal chassis and points to USDOT's failure to close their own 
regulatory loophole to hold the controlling party accountable for the 
safety compliance of their own chassis.
---------------------------------------------------------------------------
     \7\While this is the general practice, some ports have different 
arrangements.
---------------------------------------------------------------------------
    SAFESTAT is the USDOT's computer analysis of their data base 
containing motor-carriers' accumulated violations. They use it to judge 
how safely a motor carrier maintains the commercial vehicles under its 
control. By contrast, it is impossible to assess providers' adequacy in 
performing systematic maintenance because USDOT resists including them 
in the SAFESTAT program. Ironically, USDOT says the reason it has not 
moved forward to close the intermodal equipment safety loophole is 
because they do not have the data to indicate a problem with the 
providers' chassis!
    A new study\8\ conducted jointly by the Federal Motor Carrier 
Safety Administration and the University of Maryland at College Park 
provides support to ATA's position on the Roadability issue. This study 
looked at 11 sectors of the trucking industry, one of which was 
intermodal operations. Researchers used nine safety performance 
measurements and other data managed by the USDOT to analyze the safety 
performance of each sector. One significant finding is that intermodal 
trucking operations were found to be average or better-than-average in 
six of the nine measurements. However, in the two measurements relating 
to vehicle condition, and the one relating to accidents, the intermodal 
sector ranked poorly. Specifically, among the 11 sectors, intermodal 
operations ranked last for vehicle safety condition, second-to-last 
(tenth) for accumulating vehicle out-of-service violations, and ninth 
for reportable accidents. Thus, the latest research findings from FMCSA 
confirm what intermodal trucking executives have been saying for years 
( that the equipment controlled by steamship lines and railroads, and 
subsequently provided to motor carriers for brief periods of time, are 
not maintained by those controlling parties as required by the Federal 
Motor Carrier Safety Regulations.
---------------------------------------------------------------------------
     \8\Motor-Carrier Industry Profile Study Evaluating Safety 
Performance by Motor Carrier Industry Segment: by Thomas P. Keane of 
the Federal Motor Carrier Safety Administration (USDOT); Dr. Thomas 
Corsi of the University of Maryland, College Park, and Kristine N. 
Braaten of Econometrics, inc, April 1, 2002. This study was published 
in the Proceedings of the International Truck and Bus Safety Research 
and Policy Symposium on April 3-5, 2002 in Knoxville, TN, an event 
hosted by the Center for Transportation Research at the University of 
Tennessee.
---------------------------------------------------------------------------
    In summarizing the roadability issue, providers claim they are not 
motor carriers, thus they are not responsible for maintenance of their 
chassis. Providers say the motor carriers are responsible. The motor 
carriers point out that they do not control the providers' equipment; 
they neither own it, lease it, control its maintenance treatment, 
conduct annual or periodic inspections on it, nor do they control its 
daily disposition. The regulations reasonably require truckers to 
maintain only the equipment they actually control. In the meantime, 
USDOT has acknowledged that it has jurisdiction over the issue, but has 
failed to place safety responsibility. That places the 750,000 chassis 
squarely in a safety loophole, which the USDOT has yet to close.
    Enforcement needs to be redirected from the motor carriers, who are 
powerless to include interchanged intermodal equipment in their 
periodic maintenance programs, and placed on the parties who decide 
every day whether to repair a chassis, or hand it off to a motor 
carrier without the benefit of this USDOT-mandated maintenance benefit. 
Therefore, ATA is recommending that Congress pass legislation which 
forces the USDOT to equitably enforce laws designed to ensure the safe 
condition of all regulated equipment, including intermodal chassis.
    the national highway system: the backbone of america's freight 
                         transportation system
    Trucks move 67 percent of freight tonnage, 86 percent measured by 
value.\9\ This is freight that moves by truck alone; it does not touch 
another mode. Truck freight is a vital component of America's economy. 
Trucks are the only providers of goods to 75 percent of American 
communities. For every $20 spent on freight transportation, $17 will 
accrue to trucks.\10\ This pre-eminence is likely to grow. According to 
the Federal Highway Administration (FHWA) the demand for freight 
transportation services will increase by 87 percent by 2020.\11\ The 
trucking industry will be asked to transport nearly 2.7 billion more 
tons of freight in 2014 than we carry today.\12\ This increase of 2.7 
billion tons alone is more than 500 million tons greater than the total 
volume of freight that the railroads will carry in 2014 (See Appendix 
A). To accommodate this higher demand level, the number of trucks will 
increase over the next 12 years by 31 percent, adding 1.9 million more 
trucks to the road, over 157,000 trucks each year. The largest 
increase, 58 percent, will be among smaller trucks, which tend to 
operate mostly in urban areas and are not subject to competition from 
other modes. Overall, truck vehicle miles traveled (VMT) will increase 
by 36 percent, or 60 billion miles, by 2013.\13\ Thus, more trucks will 
be traveling more miles on a highway system that will see very little 
capacity expansion over the next dozen years.
---------------------------------------------------------------------------
     \9\American Trucking Associations, U.S. Freight Transportation 
Forecast to 2013, 2001.
     \10\Ibid.
     \11\Federal Highway Administration, National Freight Trends/
Issues, System Flows, and Policy Implications, 2000.
     \12\Based on unpublished data from ATA's Economics and Statistics 
Group.
     \13\American Trucking Associations, U.S. Freight Transportation 
Forecast to 2013, 2001.
---------------------------------------------------------------------------
    This is not a sustainable trend, and it should not be allowed to 
continue. While the growth in truck demand is inevitable, limiting 
highway capacity growth is not. Congress has the ability to ensure that 
the growth in highway capacity matches the growth in vehicle travel.
    The intermodal movement of freight can play an important role and 
should be encouraged. Roadway relies heavily on the railroads for a 
large portion of our long-distance movements. Last year, one-quarter of 
my company's delivery miles were on a train. This saved Roadway nearly 
24,000,000 gallons in fuel use. However, we believe that we have 
reached the limit of our railroad utilization potential.
    The ability of rail intermodal transportation to slow the growth of 
truck traffic is limited by market forces beyond the control of 
Congress, the States and, to some extent, the modes themselves. Today, 
just 1.2 percent of freight moves in a rail intermodal shipment.\14\ 
Despite anticipated growth in this sector that will exceed trucking 
growth, by 2014 rail intermodal shipments will capture just 1.5 percent 
of the freight market, while trucking's market share, as measured by 
tonnage, will expand to 69 percent.\15\
---------------------------------------------------------------------------
     \14\Ibid.
     \15\Based on unpublished data from ATA's Economics and Statistics 
Group.
---------------------------------------------------------------------------
    It is not constructive to assume that the business logistics trends 
of the past half-century which have made trucks the dominant mover of 
freight will somehow reverse themselves, and that our Nation's reliance 
on trucks will subside. Congress should focus its attention and 
resources where they are needed most and will pay the greatest 
dividends for our country--on improving the efficiency of the highway 
system and the productivity of the trucking industry. Although the past 
two reauthorization acts developed and promoted by these subcommittees 
have been instrumental in revitalizing Federal surface transportation 
policy, there is still a distance to go, with some longstanding 
obstacles and some new challenges to face.
    One of these challenges is basic highway infrastructure. At a time 
when many stakeholders, including those appearing at this hearing, have 
legitimate concerns about the future of intermodal connectivity, 
alternative transportation, and transportation enhancements, there 
often is a loss of focus on the original purpose of Federal involvement 
in surface transportation: namely, to help the States build and 
maintain a national system of highways. As the subcommittees consider 
their reauthorization proposals, it is imperative to review whether 
this goal is still being met. According to the Department of 
Transportation's 1999 Conditions and Performance report, even with the 
high levels of funding authorized by the Transportation Equity Act for 
the 21st Century (TEA-21), there is still a shortfall in Federal 
funding of over $25 billion each year just to maintain current 
conditions on our highways and bridges. While it is inconceivable under 
current economic conditions to consider completely eliminating the 
shortfall during this upcoming reauthorization cycle, serious thought 
must be given to reducing the shortfall.
    As America's economy becomes even more dependent on trucks, so too 
will the economy be affected by the impacts of congestion on the 
trucking industry's ability to meet shippers' needs. While 
manufacturers and distributors demand ever more speed and reliability 
from the trucking industry, our ability to meet those demands are being 
challenged by growing highway congestion.
    For businesses whose livelihoods depend on road transportation, 
these costs are particularly heavy. No industry is as negatively 
affected by congestion as trucking. It used to be possible for truckers 
to schedule their deliveries through congested urban areas at off-peak 
times. However, increasingly, such times do not exist. Current 
congestion levels are now compelling revisions to the language of 
congestion itself. It is no longer proper to discuss the ``rush hour,'' 
when it lasts for 3 hours, twice a day. On the Interstate System, for 
example, more than half of peak-hour travel on urban Interstates occurs 
under congested conditions.\16\ Under such circumstances, it is 
becoming almost nonsensical to employ terms such as ``peak'' and ``non-
peak.'' In years past, it was possible to schedule deliveries outside 
of the rush hour window; increasingly, that is no longer possible.
---------------------------------------------------------------------------
     \16\Federal Highway Administration and Federal Transit 
Administration, 1999 Status of the Nation's Highways, Bridges, and 
Transit: Conditions and Performance, May 2, 2000.
---------------------------------------------------------------------------
    Our highway capacity was perhaps adequate for our Nation's economic 
and social functioning a generation ago, but today it is increasingly 
stressed. Over the past 30 years, the nation's population has risen by 
32 percent, truck registrations have risen by 45 percent, truck 
vehicle-miles traveled (VMT) has risen by 145 percent, but road mileage 
has only increased by 6 percent.\17\ This has led to unprecedented 
levels of congestion across the country.
---------------------------------------------------------------------------
     \17\Federal Highway Administration, Highway Statistics, 1999.
---------------------------------------------------------------------------
    Through new innovations such as just-in-time delivery, the trucking 
industry has played a vital role in improving U.S. productivity. This 
would have been difficult, if not impossible, to achieve without an 
efficient network of good roads that connect markets, centers of 
industry, and multi-modal transportation facilities. These productivity 
improvements let U.S. industry sell more goods and services at lower 
prices, both at home and abroad. As a result, more people can be 
employed at higher wages. Since salary increases are firmly tied to the 
increase in the amount of goods and services each worker produces, 
living standards are improved. In addition, these real wage increases 
result in elevated tax revenues. However, if congestion cannot be 
effectively managed, it will be difficult for industries to meet these 
foreign and domestic challenges. The resulting productivity losses will 
take a severe human toll as stiff competition from abroad wipes out 
existing jobs and reduces the ability of our economy to create new jobs 
for a rapidly expanding population.
    The National Highway System (NHS), which carries 75 percent of the 
Nation's truck traffic, is the backbone of the trucking industry. Yet 
it is also critical to the efficient movement of rail, waterborne and 
air freight. No matter how efficient these other modes become on an 
individual basis, their speed and reliability will ultimately be 
limited by the efficiency of the trucks that they rely on for part of 
their intermodal movements.
    Unfortunately, the performance of the NHS has deteriorated to the 
point where nearly half of urban Interstate miles are congested during 
peak periods. Forty percent of travel on urban NHS routes takes place 
under such congested conditions that even a minor incident can cause 
severe traffic flow disruptions and extensive queuing.\18\ Average 
annual investment requirements just to maintain conditions on NHS 
highways and bridges were $26.8 billion in 1997.\19\ The actual capital 
outlay was $22.5 billion, a $4.3 billion, or 19.1 percent shortfall. 
This was despite the fact that the 160,000-mile NHS carries 40 percent 
of all traffic and 75 percent of truck traffic.\20\ Continued funding 
shortfalls will only harm road and bridge conditions, further 
exacerbating congestion levels. We urge Congress to reevaluate the 
current distribution of Federal highway funds during the next 
reauthorization period and consider whether a greater emphasis should 
be placed on the NHS.
---------------------------------------------------------------------------
     \18\Federal Highway Administration and Federal Transit 
Administration, 1999 Status of the Nation's Highways, Bridges, and 
Transit: Conditions and Performance, May 2, 2000.
     \19\Ibid.
     \20\Ibid.
---------------------------------------------------------------------------
    We are also extremely concerned about the condition of the Nation's 
bridges. According to a recent study by The Road Information Program 
(TRIP), approximately one in four of the country's major, heavily 
traveled bridges is deficient and in need of repair or replacement.\21\ 
However, some States have conditions that are much worse than the 
national average indicates. Thirty-four percent of bridges that are 20 
feet or longer in Louisiana are either structurally deficient or 
functionally obsolete. Oklahoma has the highest percentage of deficient 
bridges in the country. Approximately one-third of the State's bridges 
20 feet or longer are in need of immediate repair or replacement 
because of deterioration or because they no longer meet current design 
standards. However, the worst news is reserved for Oregon, where more 
than 350 bridges will have to be replaced in the near future and 
several major truck routes, including sections of the State's 
Interstate Highway System, have been load-posted. Additional Federal 
funds must be dedicated to the Bridge Program to prevent this type of 
situation from permeating throughout the country.
---------------------------------------------------------------------------
     \21\``Showing Their Age: The Nation's Bridges at 40.'' The Road 
Information Program, May 2002.
---------------------------------------------------------------------------
    Perhaps nowhere are the effects of many years of neglect and under-
funding of the NHS more pronounced than with the situation facing NHS 
intermodal connectors. In its report to Congress,\22\ the U.S. 
Department of Transportation found that connectors to ports were found 
to have twice the percentage of mileage with pavement deficiencies when 
compared to non-Interstate NHS routes. Furthermore, DOT found 
significant physical and geometric deficiencies that made it difficult 
for trucks to move safely and efficiently between the NHS and 
intermodal terminals. DOT identified 616 intermodal freight terminals 
in the United States. This includes 253 truck-and-port terminals, 203 
truck-and-rail terminals, and 99 truck-and-air terminals.
---------------------------------------------------------------------------
     \22\NHS Intermodal Freight Connectors, A Report to Congress; 
Prepared by the U.S. Department of Transportation, July 2000.
---------------------------------------------------------------------------
    It is useful to understand just how important these intermodal 
intersections are to the U.S. economy. Any product that is produced in 
the United States must access the global marketplace in the most cost-
efficient manner possible. The producer or manufacturer is the party 
that decides how to receive or ship freight. They make their decisions 
based on many factors, including just-in-time delivery factors, 
reliability of delivery times, security, freight value-to-weight 
ratios, and cost. Shippers also avail themselves of the inherent 
virtues of each mode of freight carriage. The only way they can take 
advantage of these efficiencies and values is if the interfacing 
mechanisms that join the different freight modes is adequate for the 
transfer. Many times, this is not the case.
    Improving intermodal connections also benefits communities, 
surrounding ports, railheads, and other Intermodal transfer facilities. 
In many situations, improving connectors will separate commercial 
vehicles from surface traffic that passes through congested 
neighborhoods. Often, these neighborhoods are clean-air non-attainment 
areas, and improved intermodal connectors would likely produce more 
efficient trucking operations, which will in turn result in fewer 
emissions.
    ATA encourages Congress to set aside funding for improvement of 
intermodal connectors and to make innovative financing options more 
available for addressing connector deficiencies. This should include 
lowering the threshold for TIFIA funding eligibility. We further urge 
Congress to make changes to the State and metropolitan planning 
processes to ensure that projects which benefit freight on a regional 
and national scale receive greater consideration. Project selection 
should be determined by the U.S. DOT in cooperation with the freight 
community, State DOTs and other stakeholders.
    It is important to keep in mind, however, that as critical as 
improving intermodal connections is, if the overall highway system is 
allowed to deteriorate, investing in connectors will be for nought. The 
2,000 miles of connector roads will only be as efficient as the 160,000 
miles of NHS highways that bind intermodal terminals and other points 
of loading and offloading together.
    Congress should also consider more creative ways of financing 
highway improvements and adding highway capacity. New innovative 
techniques would allow States to leverage existing funds. In addition, 
we support the spending down of the current cash balance in the Highway 
Trust Fund (HTF) to fiscally responsible levels; crediting the Highway 
Account with gasohol tax revenues that currently go into the General 
Fund; ending the gasohol subsidy or crediting the HTF from the General 
Fund for the cost of the subsidy; crediting interest on HTF balances; 
and eliminating fuel tax evasion.
    Some have suggested that fuel taxes should be increased to pay for 
growing demand. For nearly 50 years, the trucking industry has 
supported the concept of a user-supported system. However, the 
relationship between those who provide financial support for the system 
and those who determine how the money is spent must be a two-way 
street. Over our objections, Congress has continuously expanded highway 
program eligibility to include projects that provide few or no benefits 
to highway users (e.g. bicycle paths, light rail). Therefore, we cannot 
and will not invest additional moneys in a highway program whose value 
to our industry is slowly diminishing. Furthermore, any discussion 
about trucks paying additional fees to meet their full cost 
responsibility must be preceded by an acknowledgment that our industry 
has been prohibited by the Federal Government from operating our 
safest, most pavement-friendly vehicles, and that such prohibition is 
an obstacle to the industry's ability to meet our full cost 
responsibility.
    ATA applauds the efforts of Senators Ernest Hollings and John 
McCain to eliminate the TEA 21 toll pilot program. ATA is opposed to 
any attempts to toll existing non-toll highways. However, we would not 
oppose toll financing that delivered an economic benefit to the 
trucking industry and did not restrict our use of existing roads. For 
example, we believe that Congress should consider supporting the 
construction of truck-only highways. While we will evaluate each 
project on its merit, any congressional proposal should include all of 
the following constraints:

      The project should add capacity;
      Use of the lanes should be voluntary;
      If the highway is tolled, trucks should receive a rebate 
on Federal and State fuel taxes paid for using the facility;
      The facility should allow for the use of more productive 
trucks; and
      The facility should have a safe design.
                     improving freight productivity
    An effective approach to saving lives, relieving congestion and 
improving air quality is to reduce the number of trucks on American 
roads. Given a fixed amount of freight for America's trucks to move, 
the only way to reduce the number of trucks is to improve the 
productivity of the trucks themselves, and of their drivers. This is 
analogous to carpooling--it increases capacity without increasing the 
road lane-miles. To improve truck productivity, Federal size and weight 
regulations must be reformed.
    Federal law currently limits States' ability to control size and 
weight on their own highways. The limits imposed are lower than those 
mandated by other nations' governments, including our northern and 
southern neighbors, who are major trade partners and business 
competitors. This creates an economic disadvantage for American 
businesses and it causes additional costs and administrative problems 
when it comes to moving international freight, including intermodal 
containers.
    There has been no legislative relief to these laws in 20 years, 
despite considerable improvements in truck safety and better driver 
training. Decades of experience and volumes of research indicate that 
more productive vehicles can be safely operated without a detrimental 
effect on safety or the condition of highways and bridges.\23\
---------------------------------------------------------------------------
     \23\See for example Transportation Research Board, Truck Weight 
Limits--Issues and Options, 1990, and New Trucks for Greater 
Productivity and Less Road Wear, 1990.
---------------------------------------------------------------------------
    At the request of Congress, the Transportation Research Board (TRB) 
recently issued a new report on the impacts of Federal truck size and 
weight regulations.\24\ Among the report's conclusions was that the 
largely static and inflexible system of Federal regulation that 
currently exists``. . . discourages private-and public-sector 
innovation aimed at improving highway efficiency and reducing the costs 
of truck traffic . . . ,'' including costs related to accidents 
involving trucks.\25\
---------------------------------------------------------------------------
     \24\Transportation Research Board Special Report 267, Regulation 
of Weights, Lengths and Widths of Commercial Vehicles, 2002.
     \25\Ibid., p. 5-1.
---------------------------------------------------------------------------
    In a nutshell, the TRB report concludes that States should be given 
greater authority, with strong Federal oversight, to make decisions 
with regard to the size and weight limits of trucks on highways under 
their jurisdiction. This reflects ATA's own policy. TRB further 
recommends that Federal regulatory oversight of weight limits should 
not be extended to the NHS, as H.R. 3132, the Safe Highways and 
Infrastructure Preservation Act (SHIPA) seeks to do.\26\
---------------------------------------------------------------------------
     \26\Ibid., p. 5-16.
---------------------------------------------------------------------------
    There is no doubt that continuing or further restricting current 
Federal size and weight limits will cost lives. While it would not make 
sense from a safety or economic standpoint to allow larger or heavier 
trucks to operate on every highway or in every State, Congress cannot 
continue to ignore the growing body of evidence that supports the fact 
that opportunities to prevent accidents through size and weight reform 
are available. Those States that identify these opportunities should be 
allowed to take advantage of them.
    Allowing the expanded operation of more productive trucks would 
have two safety benefits. First, carriers would need fewer trucks to 
haul a given amount of freight, reducing accident exposure. Second, 
studies have consistently found that certain trucks with greater 
carrying capacity have a much better safety record than trucks that are 
in common use today. A study sponsored by the Federal Highway 
Administration found that the accident rate for longer combination 
vehicles (LCVs) is half that of other trucks.\27\
---------------------------------------------------------------------------
     \27\Scientex. Accident Rates For Longer Combination Vehicles, 
1996.
---------------------------------------------------------------------------
    A recent Canadian study found that LCVs have an accident rate that 
is five times lower than the rate for tractor-semitrailers.\28\ This 
study also found that during the 10-year period after LCVs were 
authorized to operate on a large scale in Alberta Province, the number 
of registered trucks dropped by 19 percent, even though the economy 
grew and non-truck vehicle registrations grew by 23 percent. The report 
concluded that increased truck productivity due to expanded LCV use was 
the most likely reason for this reduction in truck registrations.
---------------------------------------------------------------------------
     \28\Woodrooffe and Assoc. Longer Combination Vehicle Safety 
Performance in Alberta 1995 to 1998, March 2001.
---------------------------------------------------------------------------
    In Nevada last year, just .02 percent of vehicles involved in an 
accident were triples.\29\ Of the more than 36,000 accidents in 
Montana, including 1,326 accidents involving trucks, just one accident 
involved a triple. The year before, there were two triples accidents in 
Montana, in 1999 there was one, and in 1998 there were none.\30\ In 
Colorado, of the 4,226 accidents involving trucks in 2000, just nine 
involved triples; none of the triples accidents involved a 
fatality.\31\
---------------------------------------------------------------------------
     \29\Nevada Department of Transportation.
     \30\Montana Department of Transportation.
     \31\Colorado State Patrol.
---------------------------------------------------------------------------
    This data reflects Roadway Corporation's experience with triple-
trailer trucks. Since 1990, Roadway triples have been involved in 
exactly one fatal accident. That is one fatal accident in over 155 
million miles of travel. Last year, there were just five accidents 
involving Roadway triples, one accident every 2.5 million miles. By 
comparison, on average, all vehicles nationwide are involved in an 
accident every 430,000 miles.\32\ Triples are by far the safest trucks 
in our fleet and among the safest vehicles on the highway.
---------------------------------------------------------------------------
     \32\``Traffic Safety Facts 2000,'' National Highway Traffic Safety 
Administration.
---------------------------------------------------------------------------
    Furthermore, Congress and the States can avoid large investments in 
pavement maintenance and rehabilitation, as well as capacity expansion, 
by allowing States to make common-sense changes to their size and 
weight regulations. Gross weight can increase exponentially and not 
cause additional pavement damage so long as axle-weight is controlled. 
This is why, for example, a turnpike double that weighs 126,000 pounds 
causes half the damage of an 80,000 pound tractor-semitrailer on a ton-
mile basis. In addition, if trucks are able to ship the same amount of 
freight in fewer trucks, the need for capacity expansion could be 
avoided, fuel use and emissions could be lowered, and costs to American 
manufacturers and consumers could come down.
    The Federal restrictions on States that limit their ability to 
determine what types of trucks are allowed to operate on State-owned--
and controlled highways have no basis in science or logic and can no 
longer be justified. Our opponents on this issue continually attempt to 
represent the industry's ultimate goal as unfettered access to the 
highway system by more productive trucks. Such a position would be 
completely illogical, and it thoroughly misrepresents the industry's 
position. It would be foolish for the trucking industry to disregard 
the infrastructure and safety impacts of putting trucks on highways 
that they were not meant to handle or in traffic conditions that are 
unsuitable. Ultimately, the trucking industry itself would pay the 
price in terms of higher user fees, weight-posted bridges, higher 
insurance premiums and tighter government regulation. We are not asking 
Congress to increase truck sizes and weights. We are simply asking 
Congress to give States the ability to determine the safest and most 
cost-effective regulatory regime for their own highway systems.
                 improving the freight planning process
    ATA believes that the current planning process does not effectively 
address the movement of freight. The Federal Government has effectively 
devolved its responsibility for ensuring a safe and efficient highway 
system to State and local governments. While this has allowed planning 
agencies to address the unique demands of local transportation needs, 
and to respond more effectively to citizens' concerns, it has also 
resulted in a parochial system of transportation planning and 
programming that essentially ignores freight needs. MPOs, for example, 
may ignore a deficient connector road that links a seaport or rail-head 
to the Interstate Highway System because the project's benefits are not 
believed to be as beneficial as other local projects. However, most of 
the benefits of the project may accrue beyond the geographic scope of 
the State or local planning agencies' analyses.
    We do not blame these agencies for failing to include these far-
reaching benefits in their analyses; they simply do not have the 
resources or expertise necessary to do so. The Federal Government is 
the only governmental entity with the expertise, resources and standing 
to identify freight projects of national significance. We urge Congress 
to give FHWA the necessary tools and direction that allow the agency to 
ensure that crucial freight bottlenecks are dealt with quickly and 
effectively.
   freight stakeholders: working together to ensure future economic 
                            competitiveness
    ATA has joined with representatives of our modal freight partners 
and our customers in promoting a joint agenda designed to facilitate 
the efficient movement of freight. A joint statement is attached at 
Appendix B. The joint statement may be the most extensive united effort 
by the freight transportation community ever at the Federal level, and 
this points to both the growing interdependence of freight modes and 
the seriousness with which we regard Congress' decisions in the next 
reauthorization bill. In brief, the freight community is requesting 
additional investment in freight projects, including intermodal 
connectors, and in border crossings and corridors with significant 
freight traffic; the creation of a national freight industry advisory 
group to assist in the freight planning process; additional money for 
freight research and professional development; creation of new or 
expanded innovative financing options for funding freight projects; and 
more emphasis on funding freight projects that reduce congestion and 
improve air quality under the Congestion Mitigation and Air Quality 
Improvement (CMAQ) program.
    We have also joined with our freight partners to secure additional 
funding for the Borders and Corridors programs that were created in TEA 
21. The Coalition for America's Gateways and Trade Corridors, of which 
ATA is a founding member, is calling for a significant increase in 
funding for these crucial programs. We are concerned about the 
significant earmarking that has undermined the effectiveness of these 
programs. However, we believe that the original intent of the 
programs--to ensure that the infrastructure necessary to accommodate 
current and future freight needs, due in part to massive trade 
expansion--is still valid. We strongly urge Congress to extend the 
Borders and Corridors programs during TEA-21 reauthorization, and to 
make the programmatic and financial changes that are necessary to 
ensure the future mobility of America's freight transportation system. 
In addition, we urge Congress to refrain from expanding the eligibility 
of the program beyond its current parameters.
           improving the efficiency of nafta-related freight
    Trade volumes between the United States and its two North American 
Free Trade Agreement (NAFTA) partners have reached record levels: For 
2000, U.S.-Mexico trade reached $248 billion, while U.S-Canada trade 
amounted to $408 billion. The growth in NAFTA trade is especially 
impressive if one considers that in 1993, the year before NAFTA was 
implemented, U.S.-Mexico trade stood at just $81 billion, while trade 
with Canada was valued at $211 billion. The movement of imports and 
exports across our international land borders depends on an efficient 
and effective transportation system.
    Unfortunately, the development of physical and human resources at 
U.S. international land borders has not kept pace with the growth in 
NAFTA trade. Congestion at U.S. ports of entry is the norm, and 
considering the heightened security that will continue into the 
foreseeable future due to the September 11 attacks, these problems have 
been compounded. This creates inefficiencies in the movement of cargo 
among the North American trading partners, straining the present-day 
capacity of human resources and facilities at U.S. land borders. 
Because trucks haul more than 80 percent of the U.S.-Mexico freight 
bill and more than 70 percent of the U.S.-Canada freight bill, they are 
critical to the success of NAFTA and its attendant economic benefits. 
Delays result in additional freight transportation costs, and threaten 
to diminish NAFTA's promise.
    Data from a Federal Highway Administration (FHWA) analysis of the 
seven busiest border crossings (which account for 60 percent of truck 
crossings) reveal that congestion at these ports of entry cost the 
industry about 2.6 million hours in delay time per year, at a financial 
cost of at least $88 million.\33\ In addition, trucks waste about 2.6 
million gallons of fuel annually, with a resulting environmental impact 
of 23,000 tons of carbon dioxide and more than 300 tons of nitrous 
oxides. Congress should ensure that adequate resources are dedicated to 
the development of infrastructure and human resources along the U.S. 
borders with Canada and Mexico in order to meet the challenges 
associated with rapidly increasing trade growth among the three 
countries.
---------------------------------------------------------------------------
     \33\``Commercial Vehicle Travel Time and Delay at U.S. Border 
Crossings,'' Federal Highway Administration, Office of Freight 
Management and Operations, June 2002.
---------------------------------------------------------------------------
    Some examples of where Federal resources could be applied include:

      Funding for the construction of truck inspection 
facilities, and for hiring truck inspectors, both at the Federal and 
State level, to inspect trucks entering the United States from Mexico.
      Construction of ports of entry solely for commercial 
traffic on the U.S. northern and southern borders.
      Planning and development of quality access roads between 
ports of entry and the National Highway System.

    In addition, ATA has actively supported the funding and development 
of the Automated Commercial Environment (ACE) and the International 
Trade Data System (ITDS) to make cross-border movements of cargo, 
vehicles and drivers more efficient and secure.
    We ask the subcommittees to look at technologies under development 
that can facilitate enforcement efforts while at the same time expedite 
the movement of freight across our borders. One such system being 
designed presently by U.S. Customs, with input from the trade 
community, is the Automated Commercial Environment, or ``ACE.''
    In 1993, along with legislation implementing the NAFTA, Congress 
passed the Customs Modernization Act, or ``Mod Act,'' establishing a 
new operating environment for U.S. Customs and the international trade 
community. Concepts such as ``informed compliance,'' ``shared 
responsibility,'' and ``reasonable care'' imposed greater obligations 
on U.S. Customs to provide improved information concerning the 
responsibilities and rights of the trade community. At the same time, 
the legislation mandated U.S. Customs to develop a new automated 
customs processing system to replace the antiquated and overburdened 
Automated Customs System (ACS). Nearly 10 years after the passage of 
the Mod Act, ACE is still in its nascent stage, but it is finally under 
significant development, and its full deployment is expected within the 
next three to 4 years. The present head of U.S. Customs, Commissioner 
Robert Bonner, has recognized the importance of developing such a 
system to give Customs greater tools to improve its information 
collection and improve the efficiency with which it processes millions 
of transactions every year.
    Mr. Chairman, it is important that Congress continue to provide 
adequate funding for the full development and implementation of the ACE 
system. In order to defend our Nation from potential future terrorist 
attacks, and at the same time process the legitimate commercial goods 
so important to our Nation's economy, we must provide our border 
enforcement agencies the necessary tools and resources to fulfill their 
duties and responsibilities. It is also critical that no new user fees 
be imposed for the future development of ACE, especially if the current 
Merchandise Processing Fee (MPF), which raises about $900 million each 
year and is slated to end in 2003, is earmarked for some other 
budgetary purpose. If the MPF is supposed to be for Customs commercial 
processing, then this fee should be used for nothing but for improving 
Customs commercial operations.
    Mr. Chairman, ATA supports the implementation of NAFTA's trucking 
provisions in order to improve the efficiency with which cross-border 
operations take place between the U.S. and Mexico. ATA is also a strong 
advocate for ensuring that all carriers operating in the U.S.--
Canadian, Mexican or U.S. carriers--meet all U.S. safety and 
environmental standards, as well as all financial operational 
responsibilities.
    Furthermore, implementing NAFTA's trucking provisions would enhance 
the security of cross-border trucking operations by simplifying the 
movement of trailers across our common borders. In a report to Congress 
issued in 1997 by the White House on U.S.-Mexico anti-drug cooperation, 
the U.S. Customs Service wrote:
    The high congestion of truck traffic entering the United States is, 
in part, a result of restrictions imposed by both the United States and 
Mexico on crossborder motor carrier operation . . . over 50 percent of 
commercial trucks enter the United States empty, contributing to border 
congestion and increasing the inspection burden for border agencies.
    NAFTA's trucking provisions allow for carriers throughout North 
America to improve their ability to make cross-border trucking more 
efficient, effective, safer, and more secure.
    It is also important that we work with our counterparts in Canada 
and Mexico to improve harmonization of border operations and 
infrastructure development to establish technology and mechanisms to 
facilitate and expedite the gathering, sharing, and exchange of 
information and data to clear cargo and people crossing our land 
borders efficiently and securely. We must continue to find solutions 
that improve the processing of the legitimate flows of people and 
cargo, while simultaneously improving our security through stronger 
relationships between the trade community and law enforcement agencies 
at our borders.
         ensuring the secure and efficient movement of freight
    In our efforts to protect the country from the terrorist threat, 
strategic planning for this new type of war must take into account 
three critical principles with respect to the trucking industry.
    First, the timely communication of threat related information is 
the single most important short-term objective that must be met. In 
order for trucking companies to properly deploy our security resources 
and instruct our drivers on the proper steps needed to protect 
themselves, the public and our customers' goods, we need detailed 
communications so that we can understand and appreciate the threat, 
evaluate our company's exposure and act in time to avoid becoming 
victims of terrorism.
    Second, our professional drivers, dispatchers, managers and 
supervisors are the most critical elements in protecting trucks from 
becoming the objects of, or the mechanism for, terrorist attacks. 
Drivers have control of our equipment 90 percent of the time, and 
therefore they are the most vulnerable to terrorism. We have an 
obligation to train our 3.2 million professional drivers to recognize 
terrorist operational acts, report these acts to the proper 
authorities, and react appropriately. The trucking industry needs 
Federal help to complete this effort in no more than 3 years.
    Third, productivity is the lynchpin of America's global economic 
competitiveness. In our efforts to conduct our war on terrorism, we 
must give equal attention to the preservation of our abilities as 
transportation enterprises to creatively and efficiently move the goods 
and instruments of commerce where needed, when needed. Any new 
regulatory framework must adhere to the core principal of ``the green 
light is on'' for trucks unless there is a substantial, direct and 
immediate threat that would justify slowing or restricting commercial 
flows.
    Thank you for the opportunity to offer our thoughts regarding the 
upcoming reauthorization of the Federal surface transportation 
legislation. We look forward to working with the subcommittees to 
improve the safety and mobility of our Nation's freight transportation 
system.
                                 ______
                                 
                               APPENDIX B
           Freight Stakeholders Tea-21 Reauthorization Agenda
    1. Protect the integrity of the Highway Trust Fund. Reauthorize the 
firewalls provided for in TEA-21 to ensure that the funds collected are 
used for their dedicated purpose and not for deficit reduction.
    2. Dedicate funds for NHS highway connectors to intermodal freight 
facilities. The NHS Intermodal Freight Connectors report that was sent 
to Congress documents the fact that these road segments are in worse 
condition and receive less funding than other NHS routes. Targeted 
investment in these ``last mile'' segments would reap significant 
economic benefits compared to the associated costs.
    3. Form a national freight industry advisory group pursuant to the 
Federal Advisory Committee Act to provide industry input to USDOT. The 
advisory group should be funded and staffed, and it should consist of 
freight transportation providers from all modes as well as shippers and 
State and local planning organizations. Despite the best efforts of the 
agency to function as ``One DOT,'' there is still not enough of a 
focused voice for freight. An Advisory Group would meet the need for 
regular and professional interaction between USDOT and the diverse 
freight industry, and could help identify critical freight bottlenecks 
in the national freight transportation system.
    4. Create a Freight Cooperative Research Program. Increasingly, 
industry issues are public issues that would benefit from a dedicated, 
funded research effort led by an industry-based steering/oversight 
group, such as the one described above, to ensure useful research 
results to benefit the freight transportation system as a whole. One 
option would be to dedicate a portion of the States SP&R dollars to 
freight issues. Freight data issues would fall under this program as 
well.
    5. Expand freight planning expertise at the State and local levels. 
Given the importance of freight mobility to the national economy, 
States and MPO's should be provided additional funds for expert staff 
positions dedicated to freight issues (commensurate to the volumes of 
freight moving in and through their areas).
    6. Develop ways to increase available funds without new user fees 
and taxes by creating a toolbox of innovative financing options 
specifically aimed at freight capacity improvements and enhancements. 
Options could include (1) lowering of the threshold for TIFIA funding 
eligibility (2) development of tax incentives, and (3) expansion of the 
State infrastructure banks (SIBs).
    7. Significantly increase funds for an expanded corridor/border and 
gateway program. This would build on the highly popular but under-
funded ``Corridors and Borders Program'' (Sections 1118 and 1119), but 
adds the important concept of gateways. The funding should be freight 
specific, and there should be a qualification threshold (based on 
volumes) so that dollars get directed at high volume corridors/borders/
gateways rather than wish-list projects.
    8. Streamline environmental permitting for freight projects. 
Multiple and often duplicative Federal laws and regulations delay 
environmental review of transportation projects. Language in TEA-21 
directing Federal agencies to streamline the review process for highway 
projects has not been effective and other measures to simplify the 
review process for all freight projects should be considered.
    9. Increase funding and promote use of the Congestion Mitigation 
and Air Quality Improvement Program for freight projects that reduce 
congestion and improve air quality. CMAQ was designed to fund projects 
that will help reduce transportation-related emissions. Although CMAQ 
has supported some freight projects, it has been used primarily to 
address passenger needs. CMAQ funding should be dedicated to projects 
that can be shown to reduce congestion or improve air quality. Total 
funding for CMAQ should be increased and the use of CMAQ funds for 
freight projects should be clarified and strongly encouraged.
                           American Association of Port Authorities
                Contact: Mary Beth Long or Jean Godwin 703-684-5700

                                     American Trucking Associations
                                  Contact: Darrin Roth 703-838-1900

                                  Association of American Railroads
                           Contact: Jennifer Macdonald 202-639-2533

               Coalition for America's Gateways and Trade Corridors
                                Contact: Leslie Blakey 202-828-9100

                            Intermodal Association of North America
                                   Contact: Joni Casey 301-982-3400

                              National Association of Manufacturers
                                Contact: Larry Fineran 202-637-3174

                          National Industrial Transportation League
                                   Contact: Kathy Luhn 703-524-5011

                                           U.S. Chamber of Commerce
                                  Contact: Ed Mortimer 202-463-5451

                                             World Shipping Council
                                   Contact: Lars Kjaer 202-589-1234
                                 ______
                                 
 Responses by Michael W. Wickham to Additional Questions from Senator 
                                  Reid
    Question 1. In your testimony you state that the value of the 
highway program to your industry is diminishing because of ``expanded 
highway program eligibility to include projects that provide few 
benefits to highway users.'' I find that statement astonishing. Do you 
really believe that highway programs that encourage nontraditional 
solutions to traffic congestion like HOV lanes, intelligent 
transportation systems, and transit are of no benefit to highway users? 
Every person who commutes on transit, takes the train, or shares a ride 
with a friend, means one less car clogging our roads. No one benefits 
from transit use more than those of us who drive on our roads every 
day. Are you saying that because States have the flexibility to spend 
highway funds on non-construction programs that you do not believe the 
highway program has value to your industry?
    Response. ATA believes strongly in a Federal highway program that 
is funded by highway users for the benefit of highway users. Highway 
maintenance and capacity expansion are critical components of a highway 
program that promotes a safe and efficient surface transportation 
system. However, as your question suggests, we must also look beyond 
these traditional methods and seek out more innovative ways of 
improving the condition and performance of our highways.
    You mentioned Intelligent Transportation Systems (ITS), for 
example. ATA supports eligibility of ITS under the highway program. ITS 
can be an effective means of communicating system problems, which 
allows traffic agencies to respond more quickly and gives motorists the 
information they need to avoid these problems. States, in partnership 
with the trucking industry, use ITS to more effectively target their 
truck inspections, improving the efficiency of responsible carriers and 
enhancing highway safety. In addition, under certain circumstances, HOV 
lanes can be an effective tool for relieving congestion and improving 
air quality, and ATA does not oppose their eligibility under the 
highway program.
    However, an increasingly larger share of Federal highway revenues 
is being used for projects whose effectiveness at curbing congestion 
and saving lives is questionable. For example, while transit can 
effectively relieve congestion in some areas, in most of the cities 
where rail transit systems have recently been established, it will not 
be an effective strategy for addressing the growing traffic that 
plagues our urban areas. It is important to recognize that transit 
demand is very concentrated. One-half of the national ridership is in 
New York and Chicago and 76 percent is in seven metropolitan areas. In 
urban areas, transit accounts for just 2-3 percent of all trips. Even 
if transit ridership were to double in the next 10 years--an ambitious 
goal since ridership actually declined over the previous decade--
because highway use would also rise, transit's share of trips would 
only grow to 3-3.5 percent. Transit is largely beneficial for commutes 
to and from work. However, commutes now make up less than 20 percent of 
all trips, and less than one out of three trips during rush hours are 
trips between home and work.
    According to a study by the Texas Transportation Institute, areas 
that were more active in adding roadway capacity to respond to 
increased travel were able to slow the increase of regional traffic 
congestion. However, not all highway projects need add more traffic 
lanes or new highways to achieve substantial improvements. According to 
one study, improving conditions at the 167 worst traffic bottlenecks 
around the country would reduce travel times by an average of 38 
minutes per day, result in 287,000 fewer accidents, including 1,150 
fewer fatalities, reduce carbon monoxide emissions by 45 percent, smog-
forming emissions by 44 percent and carbon dioxide emissions by 71 
percent at those sites. Unfortunately, a lack of resources, in part 
because of the diversion of highway funds to non-highway projects that 
are less effective, is preventing States from making these crucial 
investments.
    We have concerns with other eligible activities, such as those 
under the CMAQ and enhancements programs. While some would argue that 
these programs divert relatively few resources from the highway 
program, the impact of this diversion is actually quite large. For 
example, we find it difficult to understand how it is in the national 
interest to invest more than twice as much Federal money on bicycle 
paths than on truck safety programs.
    ATA does not oppose using highway user fee revenues for 
nontraditional programs. We oppose the use of this money on programs 
that have been shown to be ineffective at reducing congestion and 
improving highway safety. We believe that in the face of limited 
resources, the Federal Government should make strategic investments 
that deliver the most cost-effective results.

    Question 2. In your testimony, you argue for reduced Federal 
restrictions on truck size and weight. You make many safety claims that 
are refuted by a recent U.S. Department of Transportation study on 
truck size and weight, which estimated that multi-trailer trucks have 
an 11 percent higher fatality crash rate than single trailer trucks. 
While I differ with your conclusions on safety, I will not dwell on 
that issue here. However, I will ask you to address the conclusion of 
the Department of Transportation study that allowing bigger trucks on 
our roads would result in bridge capital costs of over.$50 billion and 
well over $200 billion in additional costs due to delay from bridge 
construction and repairs.
    Response. It should first be noted that the U.S. DOT's 
Comprehensive Truck Size and Weight Study to which you refer was 
roundly criticized by the academic community, State departments of 
transportation, the trucking industry, and others. In fact, AASHTO 
passed a resolution (attached) calling on the Department to delay 
release of the report until its many deficiencies could be addressed; 
unfortunately, the uncorrected report was released anyway. Therefore, 
'we would caution Congress against using the Study as a basis for 
making policy decisions.
    Specifically, to the multi-trailer truck accident rate that 
appeared in the Study. Some have used this analysis to argue that 
longer combination vehicles (LCVs) are less safe than single-trailer 
trucks. In fact, because about 80 percent of the vehicle miles traveled 
by multi-trailer trucks are by non-LCVs, the statistic cannot be 
applied to this class of vehicle. Nonetheless, we cannot allow DOT's 
study to stand unchallenged. Almost all previous evaluations of the 
multi-trailer trucks that make up the bulk of vehicles that comprise 
DOT's research found that these vehicles were either as safe or safer 
than single trailer trucks. The most comprehensive evaluation of the 
safety of twin trailer trucks to date is a 1986 study by the 
Transportation Research Board (TRB Special Report. 211). That study 
concluded that, ``overall, twins clearly appear to be about as safe a 
method of hauling freight as the tractor-semitrailers they replace.''
    DOT did, in fact, contract with an independent consultant to 
complete a study on the safety experience of LCVs versus other, more 
common, trucks (Accident Rates for Longer Combination Vehicles. FHWA, 
October 1996). This study found that LCVs, including triples and heavy 
doubles, had an accident rate which was half that of the trucks they 
would replace. The study also concluded that truck configuration, not 
highway environment or driver factors, was the reason for this finding.
    This statistic is reflected by other research. For example, Alberta 
Province found that LCVs had the lowest accident rate of all vehicles 
on their highways, including passenger vehicles. In fact, single-
trailer trucks had an accident rate five times higher than LCVs. States 
have also found that LCVs are extremely safe. In Nevada, for example, 
triples were involved in just .02 percent of all accidents in 2000; 
none were fatal.
    LCVs have been in operation for more than 50 years. Today, they 
operate on rural roads in the west, eastern turnpikes and in large 
urban areas, in nearly half the States. No State has ever rescinded 
their operating authority, for the simple reason that LCVs contribute 
to a much safer and a much more efficient highway system.
    Regarding the bridge costs cited in the DOT study. Of all the 
criticisms leveled against the study, those regarding bridge costs were 
probably the most severe. DOT assumes that any bridge not rated to 
carry the loads modeled by the study would automatically be replaced. 
This simply does not happen in the real world. In practice, States 
would choose to either replace or strengthen the affected bridges, or 
to load-post them.
    As part of its research, the panel that conducted the most recent 
TRB truck size and weight study (TRB Special Report 267) obtained from 
DOT a list of highway structures in California identified by the bridge 
analysis method used in the study as requiring replacement if a 
specified type of larger truck were to come into use. Four were 
selected for analysis. Each of the four structures exceeds the 
threshold overstress criterion applied in the DOT study under the 
assumed loading by just a few percent, and therefore the DOT study 
would assume that all four bridges would have to be replaced given the 
heavier loads. The four structures were examined by engineers of the 
State DOT, who reported to the committee that, following its normal 
practices, the State would not replace, strengthen, or restrict the use 
of any of the four structures if heavier tractor-semitrailers within 
the range analyzed in the DOT 2000 study came into use.
    This is not to say that increasing the weight of trucks will not 
produce additional bridge costs, or that some interchanges may not have 
to be rebuilt to accommodate longer trucks. However, these are one-time 
investments whose costs pale in comparison with the tremendous savings 
associated with less pavement damage, less pollution, fewer accidents 
and greater economic productivity if size and weight laws were 
reformed.

    Question 3. You argue that allowing longer combination vehicles 
will reduce the number of trucks on our roads. Isn't the real impact 
likely to be a shift of freight from rails to our already overburdened 
road infrastructure?
    Response. While evaluations of increases in truck productivity all 
predict some shift of freight from rail to truck, the magnitude of this 
shift is generally considered to be very low. A 1990 TRB study (TRB 
Special Report 225) found that under various scenarios where truck 
productivity increased, rail diversion would range from 2.2 to 6.6 
percent, and all scenarios resulted in overall truck VMT reductions. 
Furthermore, it is very likely that the shift of freight from existing 
trucks to other, more productive trucks, will result in a net reduction 
in both the number of trucks on the road and truck miles, even when 
rail diversion is factored in. For example, the previously referenced 
Alberta study found that over the 11-year period following the 
introduction of higher weight trucks to the province, the number of 
registered trucks dropped by 19 percent, even though non-truck 
registrations grew by 23 percent and the economy expanded.
    The fact is that trucks and trains compete for very little 
business. Even with a productivity increase that makes truck 
transportation more attractive to rail shippers, the fact that freight 
railroads enjoy very large profit margins on most routes means that the 
railroads simply have to lower their rates slightly to keep this 
business. Herein lies the real reason for rail opposition to trucking 
productivity gains. This competition is a positive factor for shippers, 
who will realize lower shipping costs, and consumers, who will see 
lower retail prices. The most likely market for truck-rail competition 
is in the rail intermodal segment. Rail carload shipments are simply 
too price-sensitive for trucks to compete effectively in this market 
segment. Even if trucks were somehow able to draw 100 percent of all 
rail intermodal business, however, this would increase annual truck 
volumes by less than one-fifth of 1 percent nationwide (Freight 
Transportation Forecast . . . To 2013, DRI-WEFA, 2001).
    According to the FHWA, truck volumes will nearly double by 2020 and 
trucks' market share will expand from 71 percent in 1998 to 75 percent 
in 2020. This growth is inevitable, but a doubling of the number of 
trucks needed to accommodate this growth is not inevitable. Increasing 
trucking productivity through sensible size and weight reform will slow 
the growth of trucks and reduce their societal impacts.
                                 ______
                                 
  Response by Michael W. Wickham to Additional Question from Senator 
                                Jeffords
    Question 1. Mr. Hamberger of the Association of American Railroads 
notes that railroads are three or more times more fuel efficient as 
trucks. He points out that the :EPA estimates that for every ton-mile, 
a typical locomotive emits roughly three times fewer nitrogen oxides 
and particulate matter than the typical truck. He also points out that 
``rail competitive trucks, which are the heaviest, highest mileage 
operators among all trucks, do not come close to fully paying for the 
damage they cause to our highway system.''
    Response. As noted above, the potential for shifting freight from 
truck to rail, or vice versa, is extremely limited, and significant 
growth in truck traffic is inevitable. Therefore, any comparison of 
modal impacts becomes an academic exercise. Nonetheless, we are pleased 
to have the opportunity to respond to Mr. Hamberger's statements.
    According to new data produced under contract to the FHWA, in 2000, 
trucks' ton-miles were double that of rail. Therefore, if Mr. 
Hamberger's statement that trucks produce three times more emissions 
per ton-mile than railroads is correct, then trucks would have to emit 
six times more total NOx and PM than railroads. In fact, according to 
the EPA, trucks' total emissions of NOx and PM were just 2.7 times 
greater than the total emissions for rail. Therefore, on a ton-mile 
basis, trucks produce only about 1.35 times as much NOx and PM as 
locomotives.
    However, this does not tell the whole story. When measuring 
emissions on a ton-mile basis, what is left out is the fact that the 
commodities hauled by trucks are comprised of a far greater proportion 
of high-volume, low-weight freight than the commodities hauled by 
railroads, which haul mostly low-volume, heavier freight. Therefore, 
expressing trucks' volumes in terms of weight instead of area 
understates the amount of freight trucks are actually carrying, 
resulting in a disproportionately high amount of freight being assigned 
to railroads. This produces an emissions level which favors railroads.
    Furthermore, rail moves are almost always more circuitous than 
truck moves. Therefore, if one considers the environmental impact of 
shifting freight from truck to rail, the impact of this longer route 
must be considered. If there is an increase in distance of greater than 
35 percent, then the environmental benefits of shifting the freight to 
rail are wiped out by this factor alone.
    Also to be considered is the fact that if there is to be a truck to 
rail shift, this will likely occur as an intermodal movement. 
Therefore, the environmental impacts of the truck deliveries on both 
ends of the rail movement must be considered. These are not 
inconsequential impacts. The average truck drayage move is roughly 90 
to 120 miles long, typically with a significant urban component. The 
trucks involved are generally older--and therefore more polluting--than 
the typical trucks involved in long-distance movements.
    The issue of whether railroads pollute less than trucks is not that 
simple, and it should not be automatically assumed that a rail move 
produces less pollution than a truck move. In fact, FHWA has rejected 
States' requests for using CMAQ money on freight rail projects because 
they found that shifting freight from truck to rail would actually have 
a negative environmental impact.
    One other point should be made. Trucks contribute approximately $35 
billion in Federal and State highway user fees each year, which are 
used, in part, to offset the societal costs of the pollution that they 
produce. The railroads, on the other hand, pay just $170 million in 
user fees, and these revenues are not tied to societal costs produced 
by the railroad industry. There is little doubt that these revenues do 
not approach the health costs associated with pollution emitted by 
locomotives.
    This brings us to the second part of the question, which refers to 
trucking industry cost allocation. It is interesting that Mr. Hamberger 
attacks trucks for paying too little for their infrastructure and 
societal costs when his own industry fails to pay a single penny to 
compensate for the safety, environmental and congestion societal 
impacts of rail operations. (NOTE: While the question refers only to 
infrastructure costs, other societal impacts are now included in cost 
allocation studies. In addition, while the railroads do pay a tax on 
diesel, unlike highway user fees, there is no tie between these fees 
and the costs imposed by the railroads which are borne by the public.)
    While the FHWA Cost Allocation Study found that certain trucks do 
not pay their cost equity, there are several factors that contributed 
to this conclusion and that must be examined. First, there were several 
problems with the study which produced erroneous results. This is not 
to deny that there are trucks in operation which do not pay their fair 
share. However, it should also be noted that the study found that 
certain classes of trucks paid more than their fair share. It would be 
virtually impossible to achieve a perfect balance. While such an effort 
should be made, it must be recognized that results will always change 
depending on the assumptions and data used, which are constantly 
evolving. Therefore, there will always be some vehicles that will be 
found to not pay their allocated share of the costs.
    Mr. Hamberger complains that ``rail competitive trucks'' do not pay 
for the damage they do to highways without defining what a rail 
competitive truck is. Since the railroads and the ``safety groups'' 
they associate themselves with regularly criticize triple-trailer 
trucks, we assume that these are among the class to which Mr. Hamberger 
refers. However, it is widely recognized that the markets served by 
triples are generally not rail-competitive.
    When looking at the factors which result in a determination that a 
truck is not paying its cost equity, an objective analysis must lead 
one to the conclusion that this finding was made because of Federal 
restrictions on truck size and weight, not despite the restrictions. As 
the recent TRB study (TRB 267) found,. significant opportunities exist 
for States to reduce their infrastructure and societal costs if they 
are given flexibility to reform their size and weight limits. It is the 
Federal regulatory system that prevents carriers from putting trucks on 
the road that are more infrastructure-friendly and safer. For example, 
many States allow the operation of heavier trucks on non-Interstate 
highways, but are prevented from granting these trucks access to the 
Interstates by Federal law. If they were to use the Interstates rather 
than lower-order roads, the infrastructure, safety, congestion and 
environmental costs resulting from these trucks' operation would be 
lower, and thus the trucks would come closer to achieving cost equity.
    There are two ways to address the cost inequities of certain 
trucks. Congress and/or the States can increase the taxes imposed on 
these trucks, thus lowering the competitiveness of critical U.S. 
industries and increasing consumer prices. Alternatively, Congress can 
give the States the opportunity to improve their size and weight 
regulations, thus potentially changing the current vehicle fleet to one 
that is safer, less polluting, more productive and that produces lower 
infrastructure costs. The former choice benefits the railroads at the 
expense of the rest of the Nation. The latter would result in slightly 
lower railroad profitability, but the overall benefits to the Nation 
could be very significant.
                               __________
    Statement of Edward R. Hamberger, President and Chief Executive 
               Officer, Association of American Railroads
    On behalf of the members of the Association of American Railroads 
(AAR), thank you for this opportunity to discuss key issues relating to 
our nation's freight transportation capabilities as a result of the 
remarkable growth of international trade.
    Since Colonial times, the growth and vitality of our economy has 
been closely tied to the development of trade. The railroads' role in 
the settlement and development of the United States is well known, and 
yet the efficiency of our ports, international border crossings, and 
inland transportation systems is just as critical today. We must take 
steps to insure that our freight transportation system will be able to 
handle what is certain to be a huge increase in international trade 
volume in the years ahead. Today, I will focus on ways that our nation 
can combine the advantages of various transportation modes to reduce 
costs, save energy, better protect the environment, and increase 
transportation efficiency--thereby enhancing our productivity and 
international competitiveness.
                          international trade
    International trade is becoming the lifeblood of both the world and 
U.S. economy, and has been a major driving force behind world economic 
growth over the past decade. From 1990 to 2000, global GDP increased at 
an average annual rate of 2.0 percent, but the volume of world 
merchandise trade increased during the same period at an average annual 
rate of 7 percent--more than three times as much. In the case of the 
United States, which is the world's single largest exporting and 
importing nation by a significant margin, GDP over the same period 
increased at an annual average rate of 3.2 percent, while the volume of 
merchandise exports increased at an average annual rate of 6.5 percent 
and imports increased at an annual rate of 8.5 percent.\1\
---------------------------------------------------------------------------
     \1\ World Trade Organization, International Trade Statistics 2001, 
Table I.1, p. 19, available at www.wto.org/english/res--e/statis--e/
its2001--e/its01--toc--e.htm).
---------------------------------------------------------------------------
    The importance of international trade relative to U.S. economic 
output has also risen dramatically. In 1975, U.S. exports plus imports 
was equal to less than 16 percent of GDP, but by 2000 that figure had 
risen to more than 26 percent.\2\ Manufacturers and agricultural 
producers in the United States depend upon foreign trade to reach 
markets for their products, and consumers have enjoyed both a richer 
variety of products and lower prices as a result of trade 
opportunities. According to the Office of the U.S. Trade 
Representative, U.S. exports alone support more than 12 million 
American jobs, including one in five jobs in the manufacturing 
sector.\3\
---------------------------------------------------------------------------
     \2\Economic Report of the President, February 2002, p. 253.
     \3\Office of U.S. Trade Representative, Benefits of Trade: 
Information on the Globalization Debate, September 19, 2001 available 
at www.ustr.gov/new/benefits.html.
---------------------------------------------------------------------------
    In 2001, the value of U.S. international merchandise trade was $1.9 
trillion. According to figures from the Maritime Administration, United 
States ports handled over 1.1 billion tons of foreign trade in 2001. 
The liner sector, consisting mostly of containerized shipments, 
accounted for 68 percent of the value of this trade.\4\ More than 20 
million loaded containers were imported or exported through our 
nation's ports in 2001, with the ports of Los Angeles and Long Beach 
ranked number 1 and 2, respectively--each handling over 3.3 million 
loaded containers. Additional intermodal traffic flows across our 
borders with Canada and Mexico. Our ports and border crossings also 
handle significant volumes of bulk commodities, including grain, coal, 
non-metallic minerals, forest products, and petroleum products. 
Railroads serve U.S. ports on the Atlantic, Pacific, and Gulf coasts 
and the Great Lakes, and provide through service to and from Canada and 
Mexico at more than 30 border crossings. Railroads handled 
approximately 5.2 million international containers in 2000, which 
represented about one-half of their total intermodal traffic.\5\
---------------------------------------------------------------------------
     \4\ See ``U.S. Foreign Waterborne Transportation Statistics,'' 
U.S. Maritime Administration press release, March 28, 2002, available 
at www.marad.dot.gov/statistics/usfwts/PR2001/PRDEC2001.htm.
     \5\Intermodal Association of North America, Year 2002 Industry 
Statistics--Overview; American Association of Port Authorities; and 
Association of American Railroads data and analysis.
---------------------------------------------------------------------------
    U.S. trade with Canada (long our largest trading partner) and 
Mexico (now our No. 2 trade partner) has grown rapidly following the 
lowering of trade barriers under the North American Free Trade 
Agreement of 1993. Together, Canada and Mexico account for 
approximately one-third of U.S. foreign merchandise trade.\6\ The value 
of this North American trade had increased by 85 percent from 1994 to 
2000, before declining slightly in 2001 largely following the September 
11 terrorist attack. The freight railroads of Canada, Mexico, and the 
United States, which form a seamless, integrated network that provides 
the world's most efficient, lowest-cost rail service, have achieved 
major increases in their trans-border traffic--up 22 percent by value 
between Canada and the United States and up 72 percent between Mexico 
and the United States just from 1997 to 2000.\7\
---------------------------------------------------------------------------
     \6\U.S. Department of Transportation, Bureau of Transportation 
Statistics, Transportation Statistics Annual Report 2000, BTS01-02, 
Washington, DC. 2001, p. 161.
     \7\AAR analysis of U.S. Bureau of Transportation Statistics 
transborder trade data.
---------------------------------------------------------------------------
    Our seaports, airports, and land border crossings--the gateways 
that connect us to the rest of the world through commerce--are clearly 
critical to the economic well being of our Nation. Moreover, more 
efficient modern container ships carrying 6,000 or more TEUs\8\ are 
increasingly being used, up from the 4,500-TEU standard that has been 
dominant up to now. These larger ships will place increasing demands on 
port and landside facilities.
---------------------------------------------------------------------------
     \8\Twenty-foot equivalent units.
---------------------------------------------------------------------------
    Existing congestion at these facilities must not be permitted to 
worsen. Moreover, as the Federal Highway Administration documented in a 
recent study,\9\ funding for intermodal connectors--public roads 
averaging less than two miles in length that lead to/from major 
intermodal terminals--has not been adequate under the Transportation 
Equity Act for the 21st Century (TEA-21) and these critical components 
of the freight transportation system suffer many deficiencies. 
According to the FHWA, ``States and MPOs often see freight as a low 
priority when compared with the pressing needs of passenger travel. NHS 
connectors are ``orphans'' in the traditional State and MPO planning 
processes.'' We must make the investments needed to improve our ability 
to handle international traffic efficiently, while limiting impacts on 
surrounding communities in terms of congestion, noise, and air 
pollution.
---------------------------------------------------------------------------
     \9\U.S. Federal Highway Administration, NHS Intermodal Freight 
Connectors, July 2000, p. 4.
---------------------------------------------------------------------------
             growing importance of rail intermodal service
    U.S. freight railroads move just about everything--from lumber to 
vegetables, from coal to orange juice, from grain to automobiles, from 
chemicals to scrap iron--and connect businesses with each other across 
the country and with markets overseas. America's freight railroads 
carry more than 40 percent of the nation's intercity freight (measured 
in ton-miles); about 70 percent of vehicles from domestic 
manufacturers; 67 percent of the nation's coal to coal-fired power 
plants (coal generates more than half the nation's electricity); and 
massive amounts of grain, chemicals, forest products, ores, and other 
commodities. They also contribute billions of dollars to the economy 
through wages, purchases, and taxes.
    Intermodal rail freight transport--the movement of cargo in 
trailers or containers by rail in combination with at least one other 
mode of transportation--has been the fastest growing major segment of 
traffic for the U.S. freight railroad industry over the past decade. 
Indeed, while volumes of non-intermodal rail traffic for 2002 to date 
are below those of last year for the same period as a result of the 
weak economy, U.S. rail intermodal traffic through August 2002 is 5.1 
percent above the 2001 level, including increases of between 7.4 
percent and 9.4 percent each month from April through August. U.S. 
intermodal traffic has grown from 3.1 million trailers and containers 
in 1980 to nearly 9.0 million in 2001. It now accounts for 
approximately 20 percent of revenue for Class I carriers and is vying 
for the No. 1 ranking among all rail commodities. Approximately half of 
U.S. intermodal traffic is either U.S. exports and imports, and 
intermodal traffic moves throughout the North American rail network.
    There are several reasons why intermodal transport has become such 
a vital part of the U.S. freight transportation mix:
1. Convenience and lower cost
    Intermodal combines the door-to-door convenience of trucks with the 
long-haul efficiency and cost-effectiveness of rail. As a result, 
railroads, trucking companies, international steamship lines, 
intermodal marketing companies, and others engage in productive 
partnerships to combine the best characteristics of all modes.
2. Fuel efficiency
    Railroads are the mode of choice in terms of fuel efficiency. 
According to studies sponsored by the U.S. Department of Transportation 
(U.S. DOT) and others, railroads are three or more times as fuel 
efficient as trucks. Fuel efficiency means reduced emissions and 
reduced dependence on foreign oil.
3. Improved air quality
    The Environmental Protection Agency estimates that for every ton-
mile, a typical locomotive emits roughly three times fewer nitrogen 
oxides and particulates than a typical truck. Other studies suggest 
that locomotives have a much greater environmental advantage relative 
to trucks, depending upon the pollutant measured.
4. Reduced traffic congestion
    An intermodal train can take approximately 280 trucks from the 
highways. Since a single combination truck requires the same highway 
capacity as approximately four automobiles, a single intermodal train 
can mean the equivalent of more than 1,100 fewer cars on the highway. 
According to the Texas Transportation Institute's (TTI) 2002 Urban 
Mobility Study, the aggregate cost of highway traffic congestion in 
just the 75 urban areas the institute studied is $67.4 billion, 
representing the cost of 3.6 billion hours of extra travel time and 5.7 
billion gallons of fuel wasted while sitting in traffic. Since 1982, 
according to TTI, the cost of congestion has risen by approximately 400 
percent in inflation-adjusted terms. Rail intermodal service is a 
highly effective way to reduce the staggering costs of highway 
congestion and the associated pressure to build costly new highways.
5. Innovative technology, specialized equipment, and tailored services
    Doublestack trains--with specialized rail cars that can accommodate 
one container atop another--are now in widespread use. RoadRailers look 
like conventional trailers, but come equipped with both rubber tires 
and detachable steel wheels so they can ride directly on the rails or 
on a highway. By using specialized equipment, railroads are targeting 
midand short-distance hauls, in addition to traditional long-haul 
markets. Rail service offerings include the use of flat cars in 
dedicated trains operating on a fixed schedule that are specially 
designed to quickly load, unload and carry standard, non-reinforced 
highway trailers without damage to the goods or the trailers 
themselves.
    The market for intermodal freight is extremely competitive, and 
U.S. freight railroads must continue to make major investments so that 
they can further enhance their cost efficiency and meet customer 
service requirements that are continually becoming more stringent.
    Railroads are incredibly capital intensive, and each year freight 
railroads must invest heavily to maintain and improve their 
infrastructure and equipment, that, together, comprise a national 
system that is the envy of the world. In 2000, Class I railroads 
directed 17.8 percent of their revenue to capital expenditures; the 
comparable figure for the U.S. manufacturing sector as a whole was just 
3.7 percent. Indeed, since 1980 when the Staggers Rail Act partially 
deregulated the rail industry, major U.S. railroads have spent more 
than $290 billion for this purpose--an average of more than $13 billion 
per year over this extended period. Much of this spending is either 
directly attributable to intermodal service (e.g., the construction or 
expansion of intermodal hubs, raising underpass clearances to allow for 
doublestack trains) or indirectly related to intermodal traffic (e.g., 
capacity expansion and enhanced signaling systems to allow faster, more 
frequent trains of all types throughout the rail network).
    In addition to making necessary infrastructure improvements, 
railroads have responded to customer needs by instituting a series of 
operational improvements and service initiatives. Some of these 
initiatives involve the improved use of information technology. For 
example, most major railroads now offer comprehensive Internet-based 
car ordering, car tracing, pricing, and billing capabilities. Railroads 
have also increasingly entered into productive partnerships with other 
carriers. These alliances expand the focus for a particular railroad 
beyond the interchange point, encompassing the total movement and 
providing customers with seamless service--giving rail customers more 
value for their transportation dollar.
    Since the Staggers Act, freight railroads have improved earnings, 
but as a group they still do not come close to earning their cost of 
capital. In 2001, the rail industry's cost of capital (as determined by 
the Surface Transportation Board (STB), an independent regulatory 
agency within the U.S. DOT) was 10.2 percent, compared with a return on 
investment (ROI) of 6.9 percent, as determined by the STB. Rail 
profitability is consistently in the bottom quartile of all industries.
    This cannot continue forever, and this fact explains why--
notwithstanding the tremendous gains railroads have made in intermodal 
and other service offerings in recent years, and the massive 
investments they have made--the future strength and vitality of our 
nation's rail system requires that earnings be aligned with investment 
needs.
    Especially over the past couple of years, freight railroads have 
become increasingly constrained in how much capital they can devote to 
infrastructure. Rail stockholders and outside capital providers are 
becoming ever more focused on the railroad financial performance, and 
now increasingly insist that railroads demonstrate a compelling case 
for further investments. This financial discipline is necessary and 
appropriate in a market economy, but it discourages railroad 
investments that would yield significant public benefits (e.g., 
congestion mitigation, emissions relief, enhanced mobility, enhanced 
safety, economic efficiency), but only limited direct railroad 
benefits. As profit-driven private entities, freight railroads simply 
cannot afford to make investments, including investments in intermodal 
projects and facilities, that yield primarily public benefits.
    Unless this issue is addressed head on, it will worsen in the years 
ahead as pressure on our nation's freight rail network intensifies. The 
U.S. DOT expects freight traffic to nearly double in the next 20 years. 
Rail customers will continue to demand improved service levels. With 
highway congestion consuming a growing share of our nation's economic 
output, and with the need to reduce emissions, conserve fuel, and 
promote safety on the rise, the need for railroads to provide relief 
will increase.
Surface Transportation Reauthorization
    TEA-21 expanded the reliance on an intermodal approach to 
transportation planning that was the focus of the landmark Intermodal 
Surface Transportation Efficiency Act of 1991 (ISTEA). Today, we are 
seeing the benefits that can be gained by taking this comprehensive 
approach.
    As planning for the reauthorization of TEA-21 proceeds apace, the 
AAR is pleased to be an active participant in the Freight Stakeholders 
Coalition, an organization comprised of diverse freight interests that 
work cooperatively to promote policies benefiting freight 
transportation. Besides the AAR, members of the Freight Stakeholders 
Coalition include the American Association of Port Authorities, the 
American Trucking Associations, the Coalition for America's Gateways 
and Trade Corridors, the Intermodal Association of North America, the 
National Association of Manufacturers, the National Industrial 
Transportation League, the U.S. Chamber of Commerce, and the World 
Shipping Council.
    The Freight Stakeholders Coalition has unified behind a nine-point 
agenda designed to promote sound, effective transportation solutions. 
The agenda includes:
1. Protect the integrity of the Highway Trust Fund
    Reauthorization of the firewalls provided for in TEA-21 would 
ensure that the funds collected in the HTF would be used for dedicated 
transportation purposes and not for deficit reduction or general 
government operations.
2. Dedicate funds for National Highway System (NHS) highway connectors 
        to intermodal freight facilities
    NHS intermodal freight connectors provide for a broad array of 
intermodal transport services and options. The FHWA has identified 517 
NHS freight terminals (253 ocean and river ports, 203 truck/rail 
terminals, and 61 pipeline/truck terminals). These 517 freight 
terminals, augmented by 99 major freight airports, connect to the 
mainline NHS via more than 1,200 miles of NHS connectors. Typically, 
connectors are located in older, industrialized and mixed land use 
areas that are subject to physical constraints and environmental 
considerations.
    TEA-21 directed the FHWA to review the condition of connectors and 
potential investments to improve their condition. In a June 2000 report 
to Congress, FHWA found that the connectors have significantly poorer 
physical and operational characteristics, and are underfunded when 
compared with all NHS mileage. Such conditions on these ``last mile'' 
segments can slow freight movement, damage goods in transit, and 
decrease efficiency and safety. U.S. DOT estimates show that the cost 
of improving connectors to an adequate level of service over the 2002-
2020 timeframe is $3.5 to $4.0 billion.
3. Establish a national freight industry advisory group to provide 
        input to the U.S. DOT
    The advisory group should be funded and staffed, and should consist 
of freight transportation providers from all modes as well as shippers 
and State and local planning organizations. There is not a sufficiently 
focused Federal voice for freight; an advisory group would meet the 
need for regular and professional interaction between the department 
and the diverse freight industry, and could help identify critical 
freight bottlenecks in the national freight transportation system.
4. Create and fund a Freight Cooperative Research Program
    More accurate and timely data on freight movements would allow 
State and local governments to plan transportation infrastructure 
improvements that more closely match actual transportation needs. To 
this end, a dedicated, funded research effort led by an industry-based 
steering/oversight group would allow for the collection and 
dissemination of more timely, complete, and detailed commodity flow and 
other types of freight data and better planning tools for freight 
planning professionals and others.
5. Expand freight planning expertise at the State and local levels
    Unfortunately, transportation planning typically focuses almost 
exclusively on highway and transit projects, with scant attention paid 
to freight (including freight rail). To address this deficiency, 
planning organizations should be strongly encouraged to consider 
freight transportation needs, including railroad projects and 
intermodal projects, more fully in their planning. Given the importance 
of freight mobility to the national economy, States and metropolitan 
planning organization (MPOs) should be provided additional funds for 
expert staff positions dedicated to freight issues, commensurate to the 
volumes of freight moving in and through their areas.
6. Develop ways to increase available funds without new user fees and 
        taxes by creating a toolbox of innovative financing options 
        specifically aimed at freight capacity improvements and 
        enhancements
    New capital investment in critical freight transportation 
infrastructure leads to major public benefits including higher 
productivity, enhanced global competitiveness, and a higher standard of 
living for our Nation. With freight traffic now forecast to double 
within the next 20 years, the United States must expand its limited 
transportation infrastructure dollars by leveraging additional public 
and private sources of funding. This will require innovative approaches 
to maximize transportation-related investments.
    Two financing options in which freight railroads are most 
interested are discussed below.
    The first option calls for tax incentives and tax exempt financing 
to companies that make investments in intermodal freight 
infrastructure. This option would provide targeted income tax benefits 
(investment tax credits, expensing in lieu of capitalization, 
accelerated depreciation, and/or tax-exempt financing) to companies for 
investments made in qualifying assets to improve the efficiency or 
increase the capacity of the national intermodal freight transportation 
system. Qualifying assets would include track and roadbed located on 
intermodal corridors, intermodal transfer facilities, freight handling 
machinery and equipment at intermodal transfer facilities, and 
intermodal information infrastructure. Under this option, the tax 
benefits would accrue to any company that made such investments, not 
just railroads. Such a program would recognize the huge societal 
benefits derived from an expansion of intermodal transportation 
solutions.
    The second option calls for allowing the funding of rail 
infrastructure through the issuance of tax-exempt indebtedness. Under 
this option, holders of ``Qualified Railroad Indebtedness (QRI)'' would 
qualify for an income tax exclusion for interest earned on the QRI. QRI 
would be any type of indebtedness, regardless of the form, issued to 
fund the acquisition, construction, improvement, maintenance, or repair 
of ``Qualified Railroad Property'' (QRP). QRP, in turn, would be any 
expenditure for the acquisition or maintenance of depreciable property, 
such as track, bridges, tunnels, grading, wharves and docks, terminal 
facilities, signals, computer systems, and public improvements either 
used or to be used in the railroad's trade or business. The tax 
benefits would flow directly to the holders of the indebtedness in the 
form of income tax exclusion for interest earned, and indirectly to 
railroads in the form of lower capital costs.
7. Significantly increase funds for an expanded corridor/border and 
        gateway program
    This proposal would build on the highly popular but underfunded 
``Corridors and Borders Program,'' but adds the important concept of 
gateways. The funding should be freight specific, and there should be a 
qualification threshold (based on volumes) so that dollars get directed 
at high volume corridors/borders/gateways rather than wish-list 
projects. The AAR is a member of the Coalition for America's Gateways 
and Trade Corridors, which is leading the effort among freight 
interests to expand funding for this important program.
8. Streamline environmental permitting for freight projects
    Multiple and often duplicative Federal laws and regulations delay 
environmental review of transportation projects. Language in TEA-21 
directing Federal agencies to streamline the review process for highway 
projects has not been effective. Consequently, other measures to 
simplify the review process for all freight projects should be 
considered.
9. Increase funding and promote the use of the Congestion Mitigation 
        and Air Quality Improvement Program (CMAQ) for freight projects 
        that reduce congestion and improve air quality
    CMAQ was designed to fund projects that will help reduce 
transportation-related emissions. Although CMAQ has supported some 
freight projects, it has been used primarily to address passenger 
needs. CMAQ funding should be dedicated to projects that can be shown 
to reduce congestion or improve air quality. Total funding for CMAQ 
should be increased and the use of CMAQ funds for freight projects 
should be clarified and strongly encouraged.
    In addition to the Freight Stakeholder Coalition proposals outlined 
above, the railroad industry proposes additional measures which we 
believe will enhance the ability of our nation's transportation 
providers to function effectively. Like the proposals from the Freight 
Stakeholder Coalition, the rail proposals expand further the emphasis 
on intermodalism that was fundamental to the original TEA-21 
legislation. The rail proposals include the following:
1. Increase funding for the Section 130 grade crossing program and 
        clarify that funds can be spent on maintenance activities
    The most critical safety problems faced by railroads are collisions 
at highway-rail grade crossings and incidents involving trespassers on 
railroad rights-of-way. Both of these problems generally arise from 
factors that are largely outside of railroad control. In 2001, these 
two categories accounted for 96 percent of rail-related fatalities.
    Due largely to railroads' and others' efforts to close grade 
crossings and to educate the public about the dangers of grade 
crossings, in conjunction with the Section 130 Federal grade crossing 
program, the number of collisions, injuries, and fatalities at highway-
rail grade crossings has fallen steadily over the years. From 1980 to 
2001, the number of grade crossing collisions was reduced 70 percent, 
injuries declined by 70 percent, and fatalities were down 49 percent. 
Despite these impressive declines, far too many grade crossing 
accidents occur each year.
    The Section 130 Program provides Federal funds to States and local 
governments to eliminate or reduce hazards at highway-rail grade 
crossings on public highways. Current funding, under a set-aside to the 
Surface Transportation Program of TEA-21, is approximately $155 million 
per year. The vast majority of Section 130 funds have been spent on the 
installation of new active warning devices such as lights and gates, 
upgrading existing devices, and replacing or improving grade crossing 
surfaces.
    The high cost of current active warning devices--approximately 
$150,000, on average, per installation--has limited the number of 
crossings at which they have been installed. Research into improved 
low-cost grade crossing warning systems is underway, but increased 
Federal funding for highway-rail crossing hazard abatement would permit 
additional crossings to be protected immediately.
    The Section 130 program is an important element of the HTF. Grade 
crossing warning devices are highway traffic control devices, there to 
protect the motoring public, not trains.
    Increasing Section 130 funding and clarifying that such funds can 
be spent on grade crossing maintenance projects would allow additional 
crossings to be protected and further enhance highway safety.
2. Expand the Railroad Rehabilitation and Improvement Financing (RRIF) 
        Program and remove restrictive program requirements
    The Railroad Rehabilitation and Improvement Financing (RRIF) 
program provides low-interest loans and loan guarantees (not direct 
Federal grants) to help finance railroad capital investments. As 
authorized by TEA-21, RRIF authorizes up to $3.5 billion in direct 
loans and loan guarantees, of which at least $1 billion is reserved for 
small railroad projects. It is administered by the Federal Railroad 
Administration. Due largely to an exceedingly long delay in the release 
of implementing regulations and overly restrictive regulatory 
requirements (especially lender of last resort and collateral 
requirements), to date very few RRIF loans have been approved.
    Railroads seek a major expansion of the RRIF program, and an easing 
of regulatory barriers to its use, in order to help railroads of all 
sizes--both freight and passenger--to continue to provide safe and 
efficient transportation service. Pending legislation (S. 1530--``RAIL-
21'', H.R. 2950--``RIDE-21'', and S. 1991 ``The National Defense Rail 
Act'') would increase to $35 billion the amount of loans and loan 
guarantees available through the RRIF program. These proposals would 
also countermand unnecessary existing regulatory barriers pertaining to 
lender of last resort provisions and collateral requirements.
             opposition to truck size and weight increases
    Notwithstanding the broad agreement detailed above among the 
freight railroads and other transportation modes on many issues 
relating to our national transportation needs and capabilities, there 
are some limited areas of disagreement among the modes. One such area 
concerns truck sizes and weights. Recently, proposals to allow larger 
and heavier trucks on our nation's highways have been offered. The rail 
industry strongly opposes these efforts.
    Under current Federal law, trucks operating on the 46,000-mile U.S. 
Interstate Highway System can have a gross vehicle weight of no more 
than 80,000 pounds, and the use of longer combination vehicles (LCV--a 
tractor and two or more trailers or semi-trailers longer than 28 feet 
each) is limited to 14 Western States that allowed such trucks before 
1991. These limits were frozen by Congress in the 1991 ISTEA 
legislation, largely in response to concerns about the safety of longer 
and heavier trucks. Since then, various interests have proposed that 
the weight limit be increased (for example, to 97,000 pounds) and that 
the use of LCVs be permitted on all or parts of the U.S. interstate 
highway network. Since 1991, all attempts to thaw the Federal freeze 
have been rejected by Congress.
    Increased truck size and weight (TS&W) limits would, according to 
the U.S. Department of Transportation, have a disastrous effect on 
freight railroads. Railroad revenues would decline by $2.9 billion to 
as much as $6.7 billion per year. Contribution to railroad fixed and 
common costs would fall by $2.1 billion to $3.1 billion per year. As 
the contribution to fixed costs declined, less funding would be 
available for current and future investments, and so fewer such 
investments would be made. The reduction in investment would directly 
translate into reduced capacity, lower efficiency, degradation of 
service, a reduced ability to handle freight, and, eventually, further 
disinvestment. Remaining shippers on the rail network would face higher 
rates, reduced service, or both. Social costs associated with diversion 
of rail traffic to truck--more highway accidents, pollution, greenhouse 
gases, congestion, energy consumption, noise--would rise, and the cycle 
would continue in a vicious circle. This outcome is certainly not in 
the best interest of our Nation.
    A primary basis for the rail industry's opposition to larger and 
heavier trucks is the unfair dichotomy between costs paid and costs 
incurred among the modes. Rail-competitive trucks, which are the 
heaviest, highest mileage operators among all trucks, do not come close 
to fully paying for the damage they cause to the highway system. The 
U.S. DOT's recent comprehensive Highway Cost Allocation Study concluded 
that combination trucks weighing 80,000 to 100,000 pounds pay an 
estimated 50 percent of their cost responsibility, and trucks weighing 
over 100,000 pounds would pay only 40 percent of their cost 
responsibility. Rail-competitive trucks already underpay by billions of 
dollars per year, representing an enormous competitive hurdle that 
railroads must overcome. Liberalizing TS&W limits would only exacerbate 
the existing inequity.
    A committee of the Transportation Research Board (TRB), an arm of 
the National Research Council, which in turn is part of the National 
Academy of Sciences, recently released a report on the truck size and 
weight issue. The report was Special Report 267: Regulation of Weights, 
Lengths and Widths of Commercial Motor Vehicles. The report recommends 
an immediate thaw in the TS&W freeze via the introduction of 90,000-
pound single trailer trucks and a 50 percent increase in the weight of 
double trailer combination vehicles (while also boosting the size of 
the vehicles). These dramatic changes would be followed by further TS&W 
increases and the authorization of LCVs through ``pilot programs'' 
overseen by a proposed new government agency. The TRB report calls for 
much of the regulatory authority associated with TS&W to be transferred 
from the Federal Government to the States.
    The TRB report has many shortcomings that undermine its usefulness 
in the debate over TS&W, as detailed in Dr. Gerard McCullough's August 
2002 evaluation of the report, undertaken for the AAR and included here 
as Attachment 1. As Professor McCullough\10\ explains, the TRB report 
starts with the faulty premise that there is widespread 
``dissatisfaction'' with existing TS&W limits, when, in fact, existing 
limits represent an equilibrium wherein the needs of truckers and truck 
shippers are balanced against the safety concerns of motorists and the 
national goal of maintaining a healthy overall freight transportation 
system. Professor McCullough notes that the TRB report contains no new 
quantitative analysis. For example, the report is critical of the way 
previous studies calculated bridge damage costs due to changes in TS&W, 
but does not provide an estimate of what it views as the correct costs. 
Instead, the report says that the correct analysis has not been done 
yet. In other words, the TRB report admits it does not know what the 
effect would be of a TS&W thaw on bridge costs, but it nevertheless 
recommends a thaw.
---------------------------------------------------------------------------
     \10\Dr. McCullough is Associate Professor of Applied Economics, 
University of Minnesota, St. Paul, MN, and Senior Consultant, Charles 
River Associates, Boston, MA. He is former Director of the Center for 
Transportation Studies at Minnesota and former Deputy Director of the 
Center for Transportation Studies at the Massachusetts Institute of 
Technology (MIT). He has been a consultant on transportation to the 
World Bank and the Federal Highway Administration (FHWA) and various 
private organizations. He was a Special Assistant at the U.S. 
Department of Transportation from 1977-1980. His Ph.D. is from MIT.
---------------------------------------------------------------------------
    Professor McCullough stresses that an efficient freight market is 
one in which the users absorb the full marginal costs that they impose. 
Unfortunately, the TRB offers no specific proposal by which the 
substantial current truck underpayment for the pavement damage they 
inflict would be ameliorated. These underpayments would sharply 
increase as gross vehicle weight increased, making existing inequities 
even worse. Finally, as the TRB report admits, serious questions exist 
regarding the safety implications of increasing TS&W limits. Yet the 
TRB calls for addressing this issue by instituting a ``pilot program'' 
that would essentially force unknowing and likely unwilling highway 
users to participate in an experiment to determine the safety 
implications of changes in TS&W.
    As noted above, increasing the size of trucks without insuring full 
cost recovery would greatly exacerbate the problems caused by large 
trucks. It is interesting to note that under a recent proposal by the 
Reason Foundation, a Los Angeles ``free market'' think tank, truck-only 
tollways would be built on highway median strips. Under Reason's 
proposal, LCVs and heavier trucks would be allowed on the truck 
tollways, but the roads would be completely user-financed. Railroads 
are pleased that the Reason proposal explicitly endorses what the 
railroads have long maintained--that heavy trucks should pay their own 
way.\11\ Every year that goes by means that motorists pay billions of 
dollars in subsidies, while heavy trucks continue to avoid their cost 
responsibility.
---------------------------------------------------------------------------
     \11\While a detailed analysis of the Reason proposal is beyond the 
scope of this testimony, it should be noted that while railroads 
support the requirement that trucks fully repay the cost of the damage 
they cause to the highway system, care should be taken to insure that 
all costs--such as right-of-way acquisition, property taxes, truck 
staging areas, etc.--be fully recovered. For example, the publicly 
owned median should not just be given to the private sector motor 
carrier industry without their having to pay for it. Railroads repaid 
the Federal Government several times over for the value of the land 
grants they received from the Federal Government. A 1943 study by the 
Board of Investigation and Research concluded that the value of 
compensation provided by railroads to the Federal Government has 
``fully counter-balanced these aids which were conferred many years 
ago.'' A 1977 study by the U.S. Department of Transportation concluded 
that``. . . the Federal Government has been a net beneficiary of its 
railway aid programs,'' having been more than fully reimbursed for its 
land, with interest.
---------------------------------------------------------------------------
                commuter and intercity passenger access
    Another important issue that could significantly affect the freight 
railroads' ability to provide the quality of service that today's 
freight shippers require to remain competitive in the global 
marketplace is the increasing demand for both intercity and commuter 
rail service.
    Rail passenger service can play an important role in alleviating 
highway and airport congestion, decreasing dependence on foreign oil, 
reducing pollution, and enhancing mobility and safety. Freight 
railroads have demonstrated their willingness to work cooperatively 
with Congress, Amtrak, commuter railroads, the States, and local 
jurisdictions to insure that the public's transportation needs can be 
met in the most efficient possible manner. Currently, freight railroads 
host commuter operations in cities around the Nation, operate commuter 
trains under contract to local authorities in several cities, and own 
97 percent of the mileage over which Amtrak operates. Moreover, at 
least 29 cities are proposing to establish new or expanded commuter 
rail operations, and the U.S. Department of Transportation has 
designated 11 corridors for the introduction of high speed passenger 
rail systems across the country.
    Freight railroads once provided all of our nation's rail passenger 
service, but large and growing deficits following World War II led them 
to exit the business. Existing rail passenger service is supported 
primarily by the public through Federal, State, or local government 
programs. While passenger railroading is important to our country, it 
pales in comparison to the importance of freight railroading. Our 
privately owned freight railroad system is a vital and strategic 
national asset--moving more freight, more efficiently, and at lower 
rates than anywhere else in the world, according to Lou Thompson, the 
World Bank's Railways Advisor. The safe, efficient, and cost-effective 
transportation service that freight railroads provide is critical to 
the domestic efficiency and global competitiveness of our Nation.
    Therefore, we must find the most effective way to provide the 
passenger services that America needs, but without burdening the 
freight rail system--operationally, financially, or in any other way. 
Congress should resist calls to legislate mandated passenger access to 
freight-owned track, as proposed in H.R. 2654 in the current Congress. 
Access by passenger railroads to facilities owned by private freight 
railroads must be negotiated on a case-by-case basis by the parties, 
without government interference.
    Freight railroads have developed a series of principles regarding 
the future of intercity passenger rail service. Our principles call for 
future rail passenger public policy to acknowledge the extreme capital 
intensity of railroading and to ensure that railroads' investment needs 
can be met. Policies which add to freight railroads' already enormous 
investment burden, such as further saddling them with the support of 
passenger rail infrastructure needs, or which reduce their ability to 
provide the quality of service needed by their freight customers, must 
be avoided. To do otherwise would undercut our nation's freight rail 
capabilities and be counterproductive in addressing our country's 
congestion, environmental, safety, and economic concerns.
                 security of our nation's rail network
    Finally, I would like to touch on the issue of security. This issue 
is relevant to this hearing because of the tension between the free 
flow of commerce and the assurance that our transportation systems are 
adequately protected from terrorist threats. Congress should strike a 
proper balance between protecting our country's transportation assets 
and its citizens, and providing for the free flow of goods and 
promoting our international competitiveness.
    Following the terrorist attacks on September 11, 2001, railroads 
took numerous proactive steps to increase the security of our nation's 
rail network. Railroads immediately began developing a comprehensive 
Terrorism Risk Analysis and Security Management Plan. The industry 
formed a security task force composed of railroad representatives with 
expertise in areas such as operations, legal issues, railroad police 
activities, hazardous materials transportation, and information 
technology. Outside consultants with expertise in intelligence and 
counter-terrorism were retained to provide advice on best practices.
    The task force created five Critical Action Teams addressing 
hazardous materials, operations security, infrastructure, information 
technology and communications, and military liaison. The task force 
undertook a comprehensive risk analysis which identified critical 
assets, vulnerabilities, and threats, and assessed the overall risk to 
people, national security, and the nation's economy. The task force 
then identified more than 50 countermeasures. The Terrorism Risk 
Analysis and Security Management Plan, which is now in effect, utilizes 
all this information and establishes four different alert levels, with 
implementation of specific countermeasures dependent on the alert level 
in effect.
    The plan also provides for the establishment of a Railway Alert 
Network (RAN), a 24-hours-aday, 7-days-a-week communications center 
operated by the AAR. Through the RAN, railroads share information with 
the intelligence community. In addition, the RAN provides a means for 
instituting appropriate alert levels and beginning to take the 
appropriate countermeasures.
    The AAR also operates the Surface Transportation Information 
Sharing and Analysis Center (ST-ISAC). Presidential Decision Directive 
63 called for the creation of private sector ISACs to protect the 
nation's critical infrastructure from attack. The ST-ISAC, formed at 
the request of the U.S. DOT, collects, analyzes, and distributes 
security information from worldwide resources to protect vital 
information technology systems from attack. The ST-ISAC also operates 
24-hours-a-day, 7-days-a-week.
                               conclusion
    Our nation's global economic supremacy is derived in large part 
from a transportation system that is second-to-none. Freight railroads 
are an indispensable element of that system. Going forward, we must 
ensure that our freight transportation capabilities will meet the 
increasing demands placed upon it. We are confident that the rail 
industry can play a major role in meeting this challenge. However, our 
nation's ability to provide transportation alternatives that promote 
mobility, economic efficiency, and environmental responsibility depends 
critically on the further development of the intermodal approach 
initiated by ISTEA and TEA-21 in which the full capabilities of each 
mode can be fully realized. No less important to freight railroads is 
the rejection of public policies that would unnecessarily and unfairly 
restrict their capability to deliver their maximum value to the U.S. 
economy.
                              Attachment 1
                             [August 2002]
    Evaluation of Transportation Research Board Special Report 267: 
 Regulation of Weights, Lengths and Widths of Commercial Motor Vehicles
                    (By Gerard J. McCullough, Ph.D.)
    Dr. McCullough is Associate Professor of Applied Economics, 
University of Minnesota, St. Paul, MN, and Senior Consultant, Charles 
River Associates, Boston, MA. He is former Director of the Center for 
Transportation Studies at Minnesota and former Deputy Director of the 
Center for Transportation Studies at the Massachusetts Institute of 
Technology (MIT). He has been a consultant on transportation to the 
World Bank and the Federal Highway Administration (FHWA) and various 
private organizations. He was a Special Assistant at the U.S. 
Department of Transportation from 1977-1980. His Ph.D. is from MIT.
                           executive summary
    The purpose of this memorandum is to provide an evaluation of the 
Transportation Research Board's (TRB) Special Report 267: Regulation of 
Weights, Lengths and Widths of Commercial Motor Vehicles (hereafter, 
``the Report''), which was released on May 16, 2002. The Report was 
produced by the TRB Committee for the Study of the Regulation of 
Weights, Lengths and Widths of Commercial Motor Vehicles (``the 
committee'').
    The Report contains a series of conclusions and recommendations 
regarding TS&W regulation in the United States. It concludes that 
``opportunities exist for improving the efficiency of the highway 
system through reform of Federal truck size and weight regulations'' 
(p. ES-1) and finds that ``changes in truck size and weight regulations 
. . . offer the greatest potential to improve the functioning of the 
[highway] system'' (p. ES-2). The Report recognizes that ``it is 
essential to examine the safety consequences of size and weight 
regulation'' (p. ES-3), but cautions ``it is not possible to predict 
the outcomes of regulatory changes with high confidence'' (p. ES-3).
    To facilitate the liberalization of TS&W limits, the Report 
recommends a revised regulatory regime that would involve Federal 
supervision of State-set limits with evaluation provided by an 
independent Commercial Traffic Effects Institute (CTEI). The committee 
calls for pilot studies to evaluate the consequences of changes in TS&W 
regulations, and recommends that States be allowed to issue permits for 
the operation of longer and heavier trucks once the CTEI is established 
and able to monitor and evaluate their performance.
    The Report adopts a too-narrow analytical perspective that 
significantly limits its usefulness in establishing national 
transportation policy. The report starts with the questionable 
assumption that there is widespread dissatisfaction with existing 
Federal truck size and weight regulations, when, in fact, the current 
system represents a balancing of the needs of truckers and truck 
shippers against the needs of motorists and the national goal of 
maintaining a healthy overall freight transportation system. In 
addition, it also fails to recognize:
      The need for an analysis of total freight supply and 
demand, including the role of shipper logistics costs.
      That changes in TS&W limits affect the capacity of the 
highway freight network and this in turn affects the performance of 
railroad and other freight networks (and their shippers).
      That the goal of TS&W regulation--after safety--should be 
to improve the overall efficiency of the national freight market, not 
just to reduce direct trucking costs.
      That an efficient freight market is one in which the 
users absorb the full marginal costs that they impose.
    There is no analytical basis, either in the Report or in earlier 
TS&W studies evaluated by the committee, for many of the Report's most 
important conclusions and recommendations. For example, the committee's 
recommendations for immediate changes in TS&W (subject to the creation 
of a CTEI) are not consistent with its own finding that the effects of 
such changes are uncertain. Nor is there any legal or economic analysis 
of why an independent CTEI would be more effective, or more 
appropriate, than the Federal DOT in determining the need for, and 
evaluating the performance of, TS&W regulations. There is also no 
analysis from an experimental design perspective of how the committee's 
pilot studies would demonstrate the effects of changes in TS&W limits, 
or an explanation of the potentially serious ethical issues a pilot 
program might entail.
    Perhaps most importantly, the Report does not evaluate the effects 
of changes in TS&W limits on the overall freight transportation market. 
Unfortunately, this decision causes it to omit certain points which are 
essential to a thorough evaluation of TS&W regulations. These include:
      Significant diversion of freight tonnage off the rail and 
barge networks and onto the highway network.
      Significant increases in the social cost--accidents, 
pollution, greenhouse gases, congestion, energy consumption, and 
noise--of moving this freight.
      Potential increases in the rates paid by freight shippers 
who remain on the rail network.
      Potential disinvestment by railroads, reduced intermodal 
and other service offerings by railroads, and secondary diversion of 
more freight onto the highway system.
    The Report has some strengths. It recognizes the uncertainty that 
exists regarding the benefits and full costs of changes in TS&W limits; 
the need to better understand nuisance-related and stress-related costs 
from mixed auto and truck traffic, and the potential benefit of 
separating auto and truck.; the potential role of cost-based user fees 
in managing infrastructure and mitigating negative effects of trucks; 
and the importance of regulatory institutions and enforcement 
mechanisms.
    Overall, because of its shortcomings, the Report provides extremely 
limited usefulness to policymakers interested in evaluating TS&W 
regulations. Previous studies relating to TS&W issues, produced by the 
U.S. Department of Transportation and other TRB committees, do a more 
satisfactory job of including all pertinent factors in their analyses.
                             i. background
    The current U.S. truck fleet comprises about 8 million vehicles, 
about a fourth of which are combination trucks. Most combination trucks 
are large, with about 70 percent having registered maximum gross 
vehicle weights (GVW) over 75,000 pounds. The number of trucks on the 
road is small by comparison to private passenger vehicles, but because 
on average trucks are driven more frequently, their share of vehicle 
miles traveled (VMT) is disproportionate to their numbers. However, 
combination trucks still make up only about 5 percent of total VMT, as 
shown in Table 1.

                   Table 1. Total Vehicles and Vehicle Miles Traveled by Vehicle Class (2000)
----------------------------------------------------------------------------------------------------------------
                                                                                         Percent of
                                                                            Total VMT      Total      Percent of
                                                                            (millions)    Vehicles    Total VMT
----------------------------------------------------------------------------------------------------------------
 Autos................................................        137,967,488    1,612,393         61.1         58.6
                                                                                            percent      percent
Pickups/Vans..........................................         79,084,979      924,018         35.0         33.6
                                                                                            percent      percent
Buses.................................................            746,125        7,601  0.3 percent  0.3 percent
Single Unit Trucks....................................          5,926,030       70,583  2.6 percent  2.6 percent
Combination Trucks....................................          2,096,619      135,208  0.9 percent  4.9 percent
    Total.............................................        225,821,241    2,749,803        100.0        100.0
----------------------------------------------------------------------------------------------------------------
Note: Autos category includes motorcycles.
Source: Federal Highway Administration, Highway Statistics 2000, Table VM-1.

    Despite their relatively small numbers, trucks have an important 
and significant impact on the U.S. highway system. Trucks are 
disproportionately involved in fatal traffic accidents\1\ and are a 
major factor in urban traffic congestion and noise pollution.\2\ Trucks 
also produce significant emissions and because of the their weight, 
produce much greater wear on pavement than do private passenger 
vehicles.\3\
---------------------------------------------------------------------------
     \1\According to the Federal Motor Carrier Safety Administration, 
large trucks are involved in 9 percent of fatal accidents and 78 
percent the victims in truck-related fatal accidents are occupants of 
the other vehicles. See Large Truck Crash Profile: The 1998 National 
Picture, Tables 1 and 4.
     \2\The Federal Highway Administration has found that a combination 
truck imposes the congestion costs equivalent to 2.5 to 15 automobiles, 
depending upon the highway's grade and speed, the weight-to-power ratio 
of the truck, and the vehicle length, and that the most common semi-
trailer trucks impose more than 30 times as much noise pollution costs 
as autos. See Federal Highway Administration, 1997 Federal Highway Cost 
Allocation Study Final Report, August 1997, Table V-26.
     \3\Pavement wear increases exponentially with vehicle weight, such 
that 80,000-pound trucks on urban interstates impose marginal pavement 
costs per mile that are more than 400 times greater than automobiles. 
See Federal Highway Administration, 1997 Federal Highway Cost 
Allocation Study Final Report, August 1997, Table ES-6.
---------------------------------------------------------------------------
    Since the creation of the Interstate Highway System, trucking has 
become an increasingly important component of the U.S. freight market. 
Trucks now carry about 29 percent of total intercity freight volume in 
terms of ton-miles in the United States versus the 41 percent carried 
by railroads. In terms of revenue, trucking is even more significant--
intercity trucking now represents 81 percent of all intercity 
expenditures for freight transportation in the United States, as shown 
in Table 2

   Table 2. Freight Transportation Outlays by Type of Transport--2000
------------------------------------------------------------------------
                                       Millions of
               Mode                      dollars        Percent of total
------------------------------------------------------------------------
Rail..............................             36,454        9.0 percent
Truck-intercity...................            328,632       80.7 percent
Water.............................              3,501        0.9 percent
Oil pipeline......................              9,467        2.3 percent
Air carrier.......................             19,800        4.9 percent
Other.............................              9,111        2.2 percent
Total.............................            407,119      100.0 percent
------------------------------------------------------------------------
Source: Eno Transportation Foundation, Inc., Transportation in America
  2001.

Existing TS&W Regulation
    The dimensions and weights of commercial vehicles are regulated at 
both the Federal and State levels. Federal laws regulate both maximum 
permissible gross vehicle weights and maximum axle weights, and the 
width, length, and number of trailers. A summary of current Federal 
TS&W regulations is provided in Table 3.
    All States have laws governing the weights and dimensions of 
trucks. All but seven States apply some modification of the Federal 
regulations on a limited basis through permits, exemptions, and 
``grandfather rights.'' Altogether, regulations in the 50 States and 
the District of Columbia represent over 40 different combinations of 
single axle, tandem axle, bridge formula, gross vehicle weight, and 
interstate/non-interstate specifications.\4\
---------------------------------------------------------------------------
     \4\ A complete inventory of current State size and weight limits, 
as well as a thorough discussion of the nature, extent, and present 
status of grandfather rights is provided in U.S. Department of 
Transportation, Comprehensive Truck Size and Weight Study, Volume II 
Issues and Background, 2000, pp II-8--II-24.

                      Table 3. Summary of Current Federal Truck Size and Weight Regulations
----------------------------------------------------------------------------------------------------------------
                                               Criteria                Applicability               Limit
----------------------------------------------------------------------------------------------------------------
Weight.............................  Single Axle limit on         Interstate System.....  20,000 lbs.
                                      Interstate System.
                                     Tandem Axle limit on         Interstate System.....  34,000 lbs.
                                      Interstate System.
                                     Total gross vehicle weight.  Interstate System.....  80,000 lbs.
                                     Gross weight on any group    Interstate System.....  500(LN/(N-1)+12N+36)
                                      of two or more consecutive
                                      axles (bridge formula).
Size...............................  Vehicle width..............  National Network......  102 inches
                                     Semi-trailer length........  National Network......  48 feet (minimum)
                                     Twin trailer length........  National Network......  28 feet (minimum)
----------------------------------------------------------------------------------------------------------------
Notes: National Network refers to a network of roads designated by the Secretary of Transportation pursuant to
  the Surface Transportation Assistance Act of 1982. It includes virtually all Interstates and some other
  highways and totals more than 200,000 miles. For Bridge Formula W = overall gross weight on any group of two
  or more consecutive axles to the nearest 500 lbs., LN = distance in feet between the extreme of any two or
  more consecutive axles, and N = number of axles in the group.
Source: U.S. DOT, Comprehensive Truck Size and Weight Study, Volume I Summary Report, p. 3.

    Federal TS&W regulation has its origin in the creation of the 
Interstate Highway System in 1956. The passage of the regulations was 
motivated by the significant role of the Federal Government in funding 
90percent of the construction of the system. The Federal weight limits 
were originally set at 73,280 pounds, 18,000 pounds, and 32,000 pounds 
for gross vehicle weight, single axle weight, and tandem axle weight, 
respectively, but were increased to those shown in Table 3 in 1975.
    In 1982, the Federal role in TS&W regulation was increased through 
the passage of the Surface Transportation Assistance Act (STAA), which 
required States to adopt Federal weight limits on Interstate highways 
and allow single 48-foot trailers and twin 28-foot trailers on a 
``National Network'' designated by the Secretary of Transportation in 
consultation with the States. This network consists of virtually the 
entire Interstate system plus another 156,000 miles of highways.
    The Intermodal Surface Transportation Efficiency Act of 1991 
(ISTEA) prohibited the States from expanding either the number of 
routes on which Longer Combination Vehicles (LCVs) could be operated or 
the maximum weights and dimensions allowed for these vehicles.\5\ This 
regulation has come to be known as the ``LCV freeze'' and in 1998 it 
was extended by the Transportation Equity Act for the 21st Century.
---------------------------------------------------------------------------
     \5\Longer combination vehicles (LCVs) refers to multi-trailer 
combinations longer than the standard twin 28-foot trailer combination 
vehicle (the so-called STAA double). The LCVs include seven-axle 
``Rocky Mountain'' doubles, eight-axle ``B-Train'' doubles, nine-axle 
``turnpike doubles'', and seven-axle tripletrailer combinations.
---------------------------------------------------------------------------
    The study of TS&W issues by the Federal Government predates its 
involvement in funding of the highway system. The first major study was 
completed in 1941 by the Interstate Commerce Commission.\6\ A major 
impetus for these studies has been the claim that higher size and 
weight limits increase the efficiency of the freight markets. The main 
findings of previous TS&W studies, especially those that are relevant 
to conclusions and recommendations in TRB Special Report 267, are 
reviewed in Appendix A1.
---------------------------------------------------------------------------
     \6\ Interstate Commerce Commission, Federal Regulation of the 
Sizes and Weight of Motor Vehicles; Letter from the chairman, 
Interstate Commerce Commission, 77th Congress, 1st Session, House 
Document No. 354, August 14, 1941.
---------------------------------------------------------------------------
                 ii. overview of trb special report 267
    The Transportation Equity Act for the 21st Century (TEA-21) 
contained a provision specifically requiring the Secretary of 
Transportation to request that TRB conduct a TS&W study. The charge 
given in the act is quite general in scope, specifying only``. . . a 
study regarding the weights, lengths, and widths of commercial motor 
vehicles operating on Federal-aid highways . . .'' and that the study 
provide policy recommendations.\7\
---------------------------------------------------------------------------
     \7\P.L. 105-178, Section 1213, Subsection (i).
---------------------------------------------------------------------------
    The law requires TRB to consult with the U.S. Department of 
Transportation, States, the motor carrier industry, freight shippers, 
highway safety groups, air quality and natural resource management 
groups, and commercial motor vehicle driver representatives. It 
requires TRB to consult with ``other appropriate entities,'' although 
it does not specify what these entities might be. It also requires TRB 
to consider and evaluate the impact of its recommendations on the 
economy, the environment, safety, and service to communities.
    The Committee for the Study of the Regulation of Weights, Lengths 
and Widths of Commercial Motor Vehicles was formed in 1998, and its 
original purpose was to review certain aspects of the U.S. DOT's TS&W 
study. As it happens, TRB had already begun planning for a TS&W study 
before TEA-21, and so the committee was reassigned to this task when 
the law was passed. The committee consisted of 13 members representing 
State transportation officials, professional researchers, and 
academics, overwhelmingly in the field of civil engineering, with a 
small representation from economics. A summary list of the members and 
their respective affiliations is provided in Appendix A2.
    As part of the process of conducting the study, the committee 
solicited comments from outside parties on the issue of changes to TS&W 
regulations. Of the 46 organizations receiving letters, 25 provided 
comments in response. The full list of organizations contacted is shown 
in Appendix A3.
    The committee's request for comments included the following three 
specific questions:
    1. What revisions to Federal law and regulations regarding 
commercial vehicle weights, lengths, and widths should the committee 
consider?
    2. What factors should it take into account in evaluating possible 
revisions?
    3. Should the committee recommend revisions to Federal law and 
regulations?
    Responses to the three questions were quite varied. In response to 
Question 2, four respondents explicitly stated that the committee 
should not consider the issue of modal competitiveness or the diversion 
of freight from the railroads in evaluating possible TS&W revisions. 
Three of these were trucking industry interests.\8\ The other was the 
National Industrial Transportation League.
---------------------------------------------------------------------------
     \8\The American Trucking Associations, the Distribution & LTL 
Carriers Association, and the National Automobile Transporters 
Association.
---------------------------------------------------------------------------
    The basic conclusion in Special Report 267 is that increased TS&W 
limits have the ``greatest potential'' to improve highway freight 
efficiency, but that their full effects (including safety effects) are 
uncertain and that there is a ``substantial probability'' that there 
will be safety ramifications. To facilitate the liberalization of TS&W 
limits, the Report proposes a revised regulatory regime that would 
involve Federal supervision of State-set limits with evaluation 
provided by an independent Commercial Traffic Effects Institute (CTEI). 
The Report suggests that the States should not be able to begin 
liberalizing the regulations until the CTEI is established and is able 
to conduct careful assessments. A full list of the Report's conclusions 
and recommendations is in Table 4.

   Table 4. Conclusions and Recommendations of TRB Special Report 267
------------------------------------------------------------------------
            Conclusions                        Recommendations
------------------------------------------------------------------------
1. Opportunities exist for           1. Create a Commercial Traffic
 improving the efficiency of the      Effects Institute
 highway system through reform of
 Federal truck size and weight
 regulations. Such reform may
 entail allowing larger trucks to
 operate.
2. Appropriate objectives for        2. Evaluate the consequences of
 Federal truck size and weight        changes in truck size and weight
 regulations are to facilitate safe   regulations through pilot studies
 and efficient freight
 transportation and interstate
 commerce, to establish highway
 design parameters, and to manage
 consumption of public
 infrastructure assets.
3. Changes in truck size and weight  3. Allow certain immediate changes
 regulations made in coordination     in Federal regulations
 with complimentary changes in the
 management of the highway system
 offer the greatest potential to
 improve the functioning system.
4. The methods used in past studies  4. Allow certain Longer Combination
 have not produced satisfactory       Vehicles (LCVs)
 estimates of the effect of changes
 in truck weights on bridge costs.
5. It is not possible to predict     5. Routes and roads to which
 the outcomes of regulatory changes   Federal standards should apply
 with high confidence.
6. It is essential to examine the    6. Conduct research on enforcement,
 safety consequences of size and      environment and safety effects,
 weight regulation. Research and      bridge costs, freight markets,
 monitoring needed to understand      driver stress, and dedicated truck
 the relationship of truck            infrastructure.
 characteristics and truck
 regulations to safety and other
 highway costs are not being
 conducted today.
7. Although violations of size and
 weight regulations may be an
 expensive problem, monitoring of
 compliance with the regulations is
 too unsystematic to allow the
 costs involved to be estimated.
------------------------------------------------------------------------

     iii. evaluation of trb special report 267 general observations
    The most detailed analysis in the Report (pp. 2-17 to 2-29) focuses 
on new probabilistic techniques for assessing bridge costs. The actual 
analysis of freight market efficiencies--the raison d'Etre for the 
Report--is limited to a few bullet-points on pages 2-12 and 2-13. There 
is some discussion on pages 2-36 to 2-39 of the relationship between 
freight markets and land use--a topic some would regard as very 
important--but the Report elects not to weigh these effects: 
``Predicting and evaluating the effect of changes in size and weight 
regulation on land use would be extremely difficult'' (p.2-39).
    The Report does recognize the uncertainty that exists regarding 
TS&W issues. The Executive Summary cautions: ``Throughout its work, the 
committee found that a lack of information about the costs and benefits 
of truck transportation and the impacts of the size and weight 
regulations hindered its effort to provide useful policy advice'' (p. 
ES-1). In a more detailed summary of these uncertainties (p. 2-11), the 
Report concludes that pavement impacts and traffic impacts are well 
enough understood to facilitate regulatory change, but that there is 
inadequate knowledge of safety effects, bridge costs, changes in the 
volume of truck traffic, motorist stress and discomfort, and 
administrative feasibility. Not all would accept the claim that the 
infrastructure and traffic effects are well known.\9\
---------------------------------------------------------------------------
     \9\The committee appears to be less than certain about its 
knowledge of traffic effects. It recognizes (pp. 236) that the methods 
used to estimate congestion and pollution costs involve 
``oversimplified treatment on the complex interactions between trucks 
and other vehicles in the traffic stream. Changing the traffic volume, 
dimensions, and acceleration abilities of trucks will change how 
motorists drive around them, affecting other vehicles' patterns of 
acceleration and braking.'' The committee also acknowledges (pp. 233 to 
2-34) that the predicted effects on traffic flow depend critically on 
freight diversion forecasts, (which the Report discounts).
---------------------------------------------------------------------------
    The Report also acknowledges the potential importance of motorist 
comfort and distress to TS&W. The Report does not devote an extensive 
amount of time to discussing the issue, but it does acknowledge that 
research should be conducted to determine whether these effects are 
``real costs that should be considered in evaluations of highway 
regulations'' (p. 5-18).\10\ The Report also mentions the potential 
benefits to be gained from separating truck and auto traffic by 
constructing separate highway and bridge facilities for trucks. Road 
Work, the 1989 Brookings Institution study of the U.S. highway system 
by Small, Winston, and Evans developed this idea that there may be 
``diseconomies of scope'' that result from combining cars and trucks on 
the same system.''\11\ The Report acknowledges that separate truck 
facilities could help to accommodate the growth in freight demand, 
though it does not discuss the financing of these facilities.\12\
---------------------------------------------------------------------------
     \10\The Report makes the methodological suggestion that the only 
way to evaluate the economic value of driver stress is to observe 
changes in traveler behavior where automobile drivers chose different 
routes to avoid big trucks. To see the limitations of this method, 
consider a case with which the committee members might be familiar--the 
installation of Traveler Information Systems on public transportation 
systems. The economic value of these systems, which let travelers know 
in real time when the next bus or train is arriving, is not measured 
solely by the number of travelers who divert from highway to transit. 
The valuation should include some measure of the usefulness of 
information provided existing users.
     \11\Small, K., Winston, W., and Evans, C., Road Work: A New 
Highway Pricing & Investment Policy, Washington DC: The Brookings 
Institution, p. 102.
     \12\The Report also acknowledges here that ``other modes'' (p.5-
18) will be part of the solution.
---------------------------------------------------------------------------
    Finally, the TRB Report recognizes the potential role that cost-
based user fees could play in managing the utilization of highways and 
bridges and mitigating the negative effects of trucks. Though the 
Report's discussion is mostly limited to cases where the imposition of 
fees would facilitate the implementation of higher TS&W limits (p. 3-
28), the general endorsement of highway pricing is a policy advance. 
This is coupled with the important recognition that the design of 
regulatory institutions and enforcement mechanisms as well as standards 
are important elements of the regulatory process.
    A major shortcoming of the Report is that it fails to provide any 
real analysis of supply and demand in the freight market, even though 
the explicit aim of the Report is to increase the efficiency of this 
market. The economic theory upon which the Report is based is 
uncomplicated: ``The regulations have important economic consequences 
because trucking accounts for four-fifths of expenditures on freight 
transportation in the United States, and trucking costs are influenced 
by truck size and weight.''
    The DOT Comprehensive Truck Size and Weight Study does not 
necessarily contradict this theory, but it does provide a more thorough 
picture of the freight market to provide a basis for careful policy 
decisions. For example, the U.S. DOT study points out in Chapter IV 
that overall logistics costs--not truck or rail rates--are the factors 
that determine freight market decisions. It notes that savings in 
inventory carrying costs are about equally important as reductions in 
(truck and rail) transportation costs in increasing the efficiency of 
freight markets. The U.S. DOT study also spends a considerable amount 
of time analyzing the impact of TS&W regulations on the freight 
railroad industry (Volume III, Chapters II, III, IV, XI). These impacts 
are important because they have direct bearing on the overall 
efficiency of the freight market.
    The notion of freight market efficiency developed in Special Report 
267 is too narrow to be useful in a discussion of national 
transportation policy. The sole focus of the Report is on the movement 
by truck from Point A to Point B at the lowest direct expense to some 
motor carriers and shippers. An efficient national freight market is an 
intermodal system of air, water, highway, rail and shipper activities 
which take full advantage of linked networks of transport assets. 
Moreover, (as the TRB itself recognized in Special Report 246\13\) an 
efficient freight market is one in which the users absorb the full 
marginal costs that they impose.
---------------------------------------------------------------------------
     \13\ TRB Special Report 246, Paying Our Way: Estimating Marginal 
Social Costs of Freight Transportation, 1996, Table ES-1, p. 8.
---------------------------------------------------------------------------
    Using this metric, Special Report 246 found rail operations to be 
two-to-five times more efficient than truck operations on a corridor-
by-corridor basis. This suggests that higher TS&W limits, which would 
divert freight from the rail network onto the highway network, would 
increase social costs and decrease efficiency. One could argue that the 
reduction in private costs to truckers and truck shippers could 
partially offset this effect, but a national policy report should make 
that argument explicitly.
  point-by-point evaluation of report conclusions and recommendations
    This section provides a point-by-point evaluation of the TRB 
Report's conclusions and recommendations. A serious shortcoming of the 
Report is its failure to establish an analytical basis for the 
recommendations which it makes. There is no analytical justification, 
for example, either in earlier TS&W studies or the Report itself, for 
its novel regulatory proposal--Federal ``supervision'' of State TS&W 
permitting with oversight provided by an independent Commercial Traffic 
Effects Institute (CTEI). Nor is there an analysis from an experimental 
design perspective of how the Report's pilot studies would demonstrate 
the effects of changes in TS&W. Other recommendations for immediate 
change that the Report makes appear to be inconsistent with its own 
finding that the effects of increased TS&W limits are uncertain. The 
Report does suggest that States should not be able to begin 
liberalizing the regulations until the CTEI is established and is able 
to conduct careful assessments.
A. Conclusions of the TRB Report
    Conclusion 1: Opportunities exist for improving the efficiency of 
the highway system through reform of Federal TS&W regulations. Such 
reform may entail allowing larger trucks to operate.
    The proper focus of TS&W policy should not be solely on lowering 
the private costs of trucking firms and/or some freight shippers, but 
on minimizing the public costs (infrastructure, safety, pollution, 
energy consumption, congestion) of truck transportation and ensuring 
the overall efficiency of the national freight market. An efficient 
market is one in which the users absorb the full marginal costs that 
they impose.
    It is wrong for the Report to conclude--without a more careful 
analysis--that there is a direct relationship between increases in TS&W 
limits and increases in freight market efficiency. The data for such 
analyses were available to the committee in TRB Special Report 246, in 
a 1998 DOT-sponsored study by David J. Forkenbrock of the University
    of Iowa entitled External Costs of Truck and Rail Freight 
Transportation, in the DOT's 2000 Comprehensive Truck Size and Weight 
Study, and in the 2000 Addendum to the 1997 Federal Highway Cost 
Allocation Study.
    According to the 2000 Addendum to the 1997 Federal Highway Cost 
Allocation Study, heavy trucks in the 75,000-80,000 pound range cover 
only 80 percent of the infrastructure costs they impose, and heavy 
trucks in the 80,000-100,000 pound range cover 50 percent.\14\ The full 
marginal social cost of bigger trucks--much of it not recovered--is on 
the order of $0.20 to $0.70 per mile.\15\
---------------------------------------------------------------------------
     \14\ Federal Highway Administration, 2000 Addendum to the 1997 
Federal Highway Cost Allocation Study Final Report, Table 7.
     \15\ Ibid., Table 13.
---------------------------------------------------------------------------
    Table 5 summarizes the relevant results of the TRB's own Special 
Report 246, comparing the efficiency of two representative freight 
movements by rail and by 5-axle tractor semitrailer:
      Case 1 compares the full costs of a grain movement from 
Walnut Grove, MN to Winona, MN, a distance of about 200 miles. Case 1A 
summarizes the full costs of a direct truck move using local roads. 
Case 1B analyzes the truck costs by Interstate. Case 1C is a combined 
truck/rail movement.
      Case 3 compares the full costs of a container movement 
from Los Angeles, CA to Chicago, IL, a distance of about 2,000 miles. 
Case 3A is a truck movement by Interstate. Case 3B involves truck and 
container railcar.
    In both corridors, the rail movements are more energy-efficient and 
labor-efficient and impose lower social costs. The modes are 
competitive largely because of public subsidies to trucking and the 
high valuation that shippers place on the flexibility and speed of the 
truck mode.

                             Table 5. Efficiency Comparisons: Truck versus Rail ($)
----------------------------------------------------------------------------------------------------------------
                                                                Case 1A   Case 1B   Case 1C   Case 3A    Case 3B
----------------------------------------------------------------------------------------------------------------
                    Marginal External Cost
Congestion...................................................      8.94      6.25      0.00     295.81      0.75
Accidents....................................................     46.04     26.11      9.19      89.43     77.72
Air Pollution................................................      6.54      6.75      1.43      63.65     34.83
Energy Security..............................................      3.10      3.63      0.39      16.64      5.36
Noise........................................................      2.31      0.00      0.78      20.68     12.65
Marginal cost of public infrastructure.......................     38.63     61.02      0.00     141.47      1.81
                                                              --------------------------------------------------
    Total....................................................    105.57    103.77     11.78     627.67    133.12
Less: User fees ($/truckload)................................     51.16     59.90      0.65     285.14     10.50
Equals: Net subsidy ($/truckload)............................     54.41     43.87     11.13     342.53    122.62
Carrier's average cost ($/truckload).........................    454.16    442.73    124.87    2469.06   1049.44
----------------------------------------------------------------------------------------------------------------
Source: TRB Special Report 246, Tables 4-2, 4-3, and 4-4.

    The implication is that the liberalization of TS&W might improve 
the efficiency of the highway system, but in so doing it would also add 
external costs (negative impacts on other transportation modes, and 
increased costs to some transport users) that would not be recovered. 
Thus, total freight transport efficiency would be harmed.
    Conclusion 2: Appropriate objectives for Federal TS&W regulations 
are to facilitate safe and efficient freight transportation and 
interstate commerce, to establish highway design parameters, and to 
manage consumption of public infrastructure assets.
    The Report recognizes here that the goal of TS&W regulation is not 
to improve the efficiency of the ``highway system,'' but to balance the 
public costs of truck travel against the efficiency of the freight 
transportation market. However, the committee does not follow its own 
admonition, because the focus throughout the Report is overwhelmingly 
on lowering the private costs of trucking.
    A more balanced statement of goals is in the DOT's National Freight 
Transportation Policy Statement (January 1997), which guided the 
Comprehensive Truck Size and Weight Study. These goals include:
      Ensure a safe transportation system;
      Promote economic growth by removing unwise or unnecessary 
regulation and through the efficient pricing of publicly financed 
transportation infrastructure;
      Protect the environment and conserve energy;
      Provide funding and a planning framework that establishes 
priorities for allocation of Federal resources to cost-effective 
infrastructure investments that support broad National goals;
      Promote effective and equitable joint utilization of 
transportation infrastructure for freight and passenger service.
    Notice the emphasis on safety, transportation infrastructure (not 
just highways), environment, and effective and fair use of all of the 
nation's transportation assets. It is worth noting, also, that when the 
DOT conducted its Comprehensive Truck Size and Weight Study, direction 
was provided by a Policy Oversight Group which included officials from 
FHWA, the Federal Railroad Administration, and the Maritime 
Administration. In addition, a Multimodal Advisory Group was 
established to provide technical assistance.
    It is surprising that a national panel of transportation experts 
would view this broad set of goals and multimodal working structure as 
a ``shortcoming'' (p. 2-1), and yet that is the conclusion of the TRB 
Special Report 267. The Report claims that a fundamental problem with 
the 2000 study and earlier studies is that ``analyses have not started 
with clear definitions of the objective of regulation'' (p. 2-1) which 
should be ``asking how the size and weight regulations can be used as a 
part of a strategy for increasing the benefits of the highway system'' 
(p. 2-3). What the Report means by ``increasing the benefits'' is 
liberalizing the TS&W limits.
    Conclusion 3: Changes in TS&W regulations made in coordination with 
complimentary changes in the management of the highway system offer the 
greatest potential to improve the functioning of the system.
    The Report provides no analytic basis for its conclusion that 
changes in TS&W have ``the greatest potential'' to improve the 
functioning of the freight market or the efficiency of the highway 
system. There is no analysis of the role of logistics costs, for 
example, or of the impact of deregulation, computerization, 
containerization, and advanced communications on freight productivity. 
Nor is there a complete analysis of the role that prices could play in 
making highways more efficient.
    The Report's failure to consider logistics contrasts with the U.S. 
DOT's Comprehensive Truck Size and Weight Study, which recognizes that 
the freight market properly understood is a $600 billion activity (p. 
IV-12). The DOT study estimates that business logistics costs declined 
by about $65 billion during the 1980's, but that a large portion of 
that savings ($30 billion) was attributable to reductions in inventory 
carrying costs. The other $35 billion of savings was attributed to 
reductions in transportation costs for all modes including truck, rail, 
water, pipeline and air.
    With respect to the highway system, Special Report 246 concludes 
that the best way to guarantee improvement for all users of the system 
would be to charge the right prices. Quoting the earlier committee:
    It is desirable that shippers and carriers pay the full social cost 
of their freight operations--that is, that the special taxes and fees 
paid by the shipper or carrier for each shipment of freight be enough 
to offset the cost to the government of the shipment and the external 
costs that the shipment imposes on others. If the shipper and carrier 
do pay the full cost of each freight shipment, then they will be more 
likely to use transportation services responsibly and efficiently.\16\
---------------------------------------------------------------------------
     \16\TRB Special Report 246, Paying Our Way: Estimating Marginal 
Social Costs of Freight Transportation, 1996, p. 1.
---------------------------------------------------------------------------
    TRB Special Report 267 also recognizes the potential role that 
cost-based user fees could play in managing the utilization of the 
highway system, but the focus is on applying these fees to larger-
permit trucks in order to ``facilitate'' the implementation of higher 
TS&W limits (p. 3-28). There are technical problems with such a fee 
scheme that are discussed below under Recommendation 3. The more 
general problem is that the pricing described in this Report would do 
little to reduce the truck-related stresses that motorists feel, the 
safety risks they face, or the cross-subsidies they pay for 
infrastructure.
    Conclusion 4: The methods used in past studies have not produced 
satisfactory estimates of the effect of changes in truck weights on 
bridge costs.
    In its Comprehensive Truck Size and Weight Study, the U.S. DOT 
estimates that nationwide legalization of six-axle 97,000-pound single 
trucks would reduce shipper costs by 5.1 percent, but increase bridge 
costs by 33.1 percent. Similarly, nationwide operation of LCVs would 
decrease shipper costs by 11.4 percent, but increase bridge costs by 
34.4 percent. Large expenditures for bridges--$53 billion in capital 
costs and $266 billion in user delay costs--would offset the efficiency 
gain to truckers and truck shippers.
    The reason for this large estimate is that heavier singles and LCVs 
would overstress bridges beyond their design limits and force them to 
be replaced. The DOT recognizes that it probably overestimates bridge 
costs since ``some bridges could be strengthened and replacement of 
bridges on highways with low volumes of the damaging vehicles would not 
have to be improved at all.''\17\
---------------------------------------------------------------------------
     \17\U.S. Department of Transportation, Comprehensive Truck Size 
and Weight Study, Volume I Summary Report, 2000, p. ES-20.
---------------------------------------------------------------------------
    The TRB Report puts considerable emphasis on the fact that a risk-
based analysis would reduce the projected cost of bridge replacement.
    Very high estimates of bridge costs from liberalized regulations 
are inconsistent with the experience of jurisdictions--in particular 
Michigan and Ontario--that have opened their roads to use by trucks 
much heavier than the Federal weight limits without experiencing costs 
of the magnitude estimated. Most important, the DOT estimates ignore 
the great potential for lower-cost methods of maintaining bridge safety 
that the States are increasingly capable of applying because of the 
widespread adoption of bridge management systems (p. 2-29).
    The Report recognizes that a proper, risk-based analysis has not 
yet been conducted. It does not fully acknowledge the difficulties that 
might be involved in such an analysis or the possibilities for upward 
revision of the DOT estimates. The Report is skeptical of the DOT's 
ability to predict regulatory outcomes in markets governed by supply 
and demand (see Conclusion 5 below), but confident of its ability to 
predict the behavior of State highway agencies and the legislative 
committees that fund these agencies.
    Also, as the Report notes on p. 2-19, the U.S. DOT study omits 
fatigue costs attributed to larger vehicles markets which State 
engineers feel are underestimated. And, as the Report notes on p. 2-21, 
there are alternative rating systems for judging how much a bridge can 
be loaded and the choice of the higher rating system would revise the 
DOT estimate upward. The methods used in the past may not have produced 
satisfactory estimates, but they have not necessarily produced 
exaggerated estimates, as the Report claims.
    Conclusion 5: It is not possible to predict the outcomes of 
regulatory changes with high confidence.
    It is true that there is uncertainty involved in the prediction of 
regulatory outcomes. However, economists have made considerable 
progress in the empirical analysis of various network industries, and 
these results have been used extensively to improve the regulatory 
framework and the functioning of the economy. An example which a TRB 
panel should have been aware of is railroad deregulation in 1980. The 
regulatory changes accompanying rail deregulation were supported by 
extensive economic studies before the fact, and have been validated by 
subsequent analyses. One might point to similar work in most other 
network industries--airlines, electricity, telecom, gas, water, 
etc.\18\
---------------------------------------------------------------------------
     \18\Economists involved in these reforms are aware of the mistakes 
that have been made and of the limitations of such analyses, but no one 
has concluded that the analysis efforts are irrelevant. For a critical 
overview of these developments see Michael A. Crew and Paul R. 
Kleindorfer, ``Regulatory Economics: Twenty years of Progress?'' pp. 5-
22, in a special issue of the Journal of Regulatory Economics, 21(1), 
January 2002.
---------------------------------------------------------------------------
    It is one thing to conclude, as the Report does (p. 2-6), that a 
1986 TRB committee was not able to predict the exact length (53 ft) of 
the trailers that the trucking industry would adopt in response to a 
change in statutory language, or (p. 2-6) that a 1970's Canadian study 
did not anticipate the variety of specialized trucks that would evolve 
as a result of new provincial weight limits. It is another thing to 
decide--as the committee apparently does--that it could disregard the 
work in the Comprehensive Truck Size and Weight Study aimed at 
forecasting the effects of TS&W changes on the intercity freight 
markets.
    Those effects can be quite striking. The illustrative TS&W 
scenarios analyzed in the DOT study show that bigger trucks would 
divert between 4.0 percent and 19.6 percent of annual rail traffic 
(measured in car-miles) onto the highway system (Table ES-12). This 
means between 1.02 billion car-miles and 5.0 billion car-miles would be 
converted into highway trailer-miles each year. It also means a 
projected loss of railroad contribution to fixed costs ranging from 
38.2 percent to 55.8 percent. This is money that would no longer be 
available to the railroads to cover the fixed costs of their operations 
and sustain investment.
    The problem that the DOT report recognizes is that railroad fixed 
costs are high, so the losses would have to be recovered (to some 
extent) in the form of higher prices to remaining rail shippers. In 
other words, a reduction in costs to some highway shippers must lead to 
an increase in rates for some rail shippers. In response to trucks 
cutting rates, railroads in many cases would have to lower their rates 
to stay competitive or else lose the traffic. Losing traffic means that 
remaining shippers must bear the burden of providing fixed costs, and 
so on, and you get a vicious circle. The TRB committee, with a mandate 
to consider overall economic efficiency, should have recognized this.
    Conclusion 6: It is essential to examine the safety consequences of 
TS&W regulation.
    In its Comprehensive Truck Size and Weight Study, the U.S. DOT 
concludes that safety must be the primary goal of TS&W policy along 
with ``the considerable public concern about mixing larger trucks with 
passenger cars on our highways.''\19\
---------------------------------------------------------------------------
     \19\ US Department of Transportation, Comprehensive Truck Size and 
Weight Study, p. V-1.
---------------------------------------------------------------------------
    Collisions between medium to heavy trucks and other, smaller 
vehicles (principally passenger cars and light trucks and minivans) can 
be particularly lethal to the occupants of the smaller vehicles, 
principally because of the difference in weight (mass) between the two 
vehicles, and for head-on collisions, the high vehicle closing speeds 
typically involved. In total, collisions with medium to heavy trucks 
account for 22 percent of all passenger car and light truck/van 
occupant fatalities sustained in collisions with other motor vehicles. 
(p. V-2)
    The DOT study acknowledges that it is difficult to use statistical 
inference to establish a relationship between TS&W limits and highway 
safety. Longer combination vehicles account for less than 2 percent of 
annual truck VMT, while 5-axle single trailers comprise 65.4 percent. 
It is difficult to develop robust estimates for vehicles larger than 
the typical vehicle in use. Also, the crash rates for larger vehicles 
now operating in highly controlled situations may not be transferable 
to other operating situations. The DOT's approach, therefore, is to 
focus on the systematic components of truck safety, comparing physical 
differences in vehicles and equipment, driver performance, and 
operating environment in standard versus larger trucks.
    The TRB Report recognizes the lack of conclusive information about 
the relationship between truck size and weight and truck safety. It 
also recognizes that this kind of information is critically important 
in formulating potential changes to TS&W regulation. The approach that 
the Report proposes is different from the DOT's and raises serious 
questions. According to the Report, pilot studies would solve the 
information problem by facilitating ``direct observation of the primary 
impact of interest'' (p. 5-9) which would be frequency and severity of 
accidents. This amounts to the use of unknowing or unwilling human 
subjects (motorists) in large-scale (or lengthy) safety experiments.
    The most successful past studies of the relative accident rates of 
trucks of differing dimensions have used data obtained from truck 
operators that include records of large numbers of trips made by 
different kinds of trucks operating between the same origins and 
destinations . . . In pilot studies involving a small number of 
vehicles, it would not be possible within a reasonable time span to 
measure small differences in relative accident risks. (pp. 5-9, 5-20)
    The pilot studies are endorsed despite the DOT's findings that 
combination trucks are more susceptible to rollover than conventional 
trucks and induce greater driver fatigue, as well as repeated 
substantiation that the public is strongly opposed to longer, heavier 
trucks and, therefore, would likely not wish to be party to a ``pilot 
study'' to examine the safety effects of TS&W changes.\20\
---------------------------------------------------------------------------
     \20\Ibid., p. I-22 and V-11.
---------------------------------------------------------------------------
    Conclusion 7: Monitoring of compliance with TS&W regulations is too 
unsystematic to allow the costs (of violations) to be estimated.
    This is an important observation, and the report rightly points out 
the need to better quantify the nature and extent of violations in 
order to inform the process of TS&W regulation. The Report identifies a 
number of techniques as being promising for improving enforcement, 
especially more widespread use of automated, information technology 
based systems.
B. TRB Report Recommendations
Recommendation 1: Establish an independent Commercial Traffic Effects 
        Institute to monitor and evaluate TS&W changes
    The Report stresses that the design of regulatory institutions and 
enforcement mechanisms, as well as performance standards, are important 
elements of the TS&W regulatory process. This is an important 
contribution, but the Report offers no legal, economic or 
administrative analysis of why a Commercial Traffic Effects Institute 
(CTEI) would provide more effective regulation than the DOT--especially 
in an area where there are significant public concerns.
    The primary justification for CTEI is that ``under present 
practices Federal size and weight policy has been deadlocked for more 
than a decade, in spite of general dissatisfaction with the 
regulation'' (p. 5-5). In fact, it is debatable that there is 
widespread dissatisfaction with the existing TS&W regulations, at least 
as far as it concerns liberalization, among the general driving public. 
The Report recognizes that the DOT's recent analysis of TS&W issues was 
``comprehensive'' (p. 5-6), and that the DOT has the authority to 
regulate truck safety (p. 3-4), but it concludes that the way to end 
the ``deadlock'' is to establish a separate agency (p. 5-6).
    The CTEI would be an ``independent public organization,'' financed 
from the Highway Trust Fund, and governed by a congressionally 
appointed board of Federal, State and industry representatives. The 
CTEI's professional staff of engineers, statisticians and economists 
would work on pilot studies and other research funded by government or 
the private sector. Here is how it might work, according to the Report:
    For example, a group of carriers in one industry segment or one 
region might have a particular interest in having research or a pilot 
study conducted on a vehicle or operating practice they believed would 
be of value to them. In such a circumstance, the carriers should be 
expected to contribute a major portion of the costs of the evaluations. 
Legislation would be needed to provide the proper legal form for such 
contributions. (p. 3-5)
    The Report predicts that under such arrangements the Institute 
``would come to be seen by industry, State governments, and others as a 
means to implement ideas about more efficient highway management and 
truck regulation'' (p. 3-4). This seems accurate, but it is not clear 
that the public interest would be protected.
Recommendation 2: Evaluate the Consequences of Changes in TS&W 
        Regulations Through Pilot Studies
    While the concept of pilot studies is, in principle, not 
inappropriate for research of this nature, the specific proposal put 
forth in the TRB report is problematic at best. As described by the 
Report, the pilot program would expose ordinary travelers to bigger/
heavier experimental trucks in traffic if the CTEI determined, based on 
all available information, that the pilot could be conducted without 
harm to safety (p. 5-10).
    One might consider pharmaceuticals as a model for the evaluation of 
innovations with the potential to both produce public harm and benefit, 
but what is proposed here is not really analogous to pharmaceutical 
regulation. In that industry, it takes about 13 years to develop one 
new drug, and the process is characterized by systematic, sequential 
incremental testing of the product for 7-8 years before it is tried on 
any humans. When human testing begins, extensive tests are initially 
conducted on healthy human volunteers just to ensure the product does 
no harm. Critical to the process is extensive monitoring in a 
controlled environment. Moreover, safety is always first--before a new 
drug is even tested for efficacy it is tested to ensure that it does no 
harm to human beings. Clearly, any public policy innovation that could 
potentially harm the public needs should be examined in a similar risk-
averse, safety-based framework.
    Nor is it clear that the pilot studies recommended by the committee 
would establish the ``consequences'' of TS&W changes. The DOT study 
recognizes how difficult it is to use statistical inference to 
establish a relationship between TS&W limits and highway safety. One 
reason is that the current use of such vehicles is highly controlled so 
that the results would not generalize to different operating 
conditions. The same caveat would apply to pilot studies.
    Another troublesome aspect of this recommendation is that it gives 
individual States responsibilities for making decisions that affect the 
overall efficiency of the national freight network. Increases in TS&W 
limits lower the per-ton operating costs of long-haul trucks and this 
has an immediate effect on rail traffic-about one-third of which (on a 
ton-mile basis) is competitive with long-haul trucks. Because the rail 
and highway networks are interrelated--and because the rail network has 
high fixed costs-all shippers are affected.
    The Report fails to recognize that there is a difference between 
the optimal management of highway pavement and bridge structures and 
optimal regulation of a complex national freight network. It may make 
sense for the United States to further ``devolve'' responsibility for 
the management of pavement and bridge assets to State highway agencies 
(or regional agencies, or regulated private firms), but it is wrong to 
confuse the management of infrastructure with the regulation of 
national freight operations.
Recommendation 3: Authorize the States to participate in a federally 
        supervised permit program allowing for a) six-axle tractor 
        semi-trailers with maximum weight of 90,000 pounds, and b) 
        double-trailer configurations with each trailer up to 33 feet 
        long
    The committee has been careful in its recommendations regarding 
changes to existing TS&W limits. The maximum gross vehicle weight of 
90,000 pounds for six axle semitrailers, for example, is just below the 
threshold estimated to cause negative bridge impacts, according to the 
DOT study.\21\ Because axle weights are not increased, such a limit 
would (according to the DOT study) not necessarily cause increased 
pavement damage. However, the current bridge formula would allow 33-
foot double-trailer configurations with weights up to 120,000 pounds on 
a nine-axle vehicle, 115,000 pounds on eight axles, or 110,000 pounds 
on only seven axles. A seven-axle vehicle at 110,000 pounds may not be 
as damaging to bridges as a 120,000-lb. nine-axle vehicle of the same 
length, but it certainly does more pavement damage. Notwithstanding the 
issue of infrastructure impacts, questions still exist regarding the 
safety implications of increasing TS&W limits, even in this limited 
fashion. The TRB report describes the lack of statistically reliable 
evidence both concerning the relationship between truck weight and 
accident involvement, and regarding the relationship between truck 
weight and the probability that an accident will result in a fatality 
(pp. 2-44 to 2-45).
---------------------------------------------------------------------------
     \21\The 90,000-pound GVW six-axle semitrailer is examined as part 
of ``North American Trade scenario.'' See U.S. DOT, op. cit., Volume 
III, Table VI-I.
---------------------------------------------------------------------------
    In addition, the Report recognizes that nuisance-related and 
stress-related costs from mixed auto and truck traffic should be 
considered in the evaluation of any TS&W policy. In focus groups 
conducted as part of the U.S. DOT study, a vast majority of automobile 
drivers said they opposed changes in TS&W regulations.\22\ Truck 
drivers in the survey groups also questioned the need for change. Truck 
sizes and weights are a serious issue for the public, and this must be 
an important consideration in any public policy decision.
---------------------------------------------------------------------------
     \22\ U.S. DOT, Volume II, pp. V-17-V-18.
---------------------------------------------------------------------------
    The Report recommends that ``fees related to costs be adopted to 
accompany the proposed new size and weight limits'' (p. 3-27), but it 
does not appear that these would cover the marginal costs of pilot 
programs. The Report does not explicitly endorse the pricing of all 
truck traffic (which would be logical) but only the pricing of 
experimental permit trucks to cover their ``added costs''. The report 
recognizes (p. 3-28) that the ``added costs might be proportional to 
the volume of permit traffic up to some traffic level but increase at 
an accelerating rate at higher volumes.'' As truck traffic increases, 
in other words, the marginal cost of the permit trucks would be 
increasing. But this implies that increases in conventional truck 
traffic would also increase the marginal cost of permit trucks, and 
vice versa. Under the plan that the report describes, increase in 
marginal costs of existing trucks would not be covered.
Recommendation 4: Allow the States to conduct pilot studies involving 
        any longer combination vehicles as long as the pilot study is 
        judged safe by the CTEI
    In addition to proposing the allowance of the 33-foot doubles 
described in Recommendation 3, this recommendation suggests that States 
be allowed to conduct pilot studies with any configuration of LCVs, so 
long as they are judged safe by CTEI.
    The open-ended nature of this aspect of this recommendation raises 
two important questions:
    1. What types of LCVs are likely to be proposed for pilot studies?
    2. How broad would the scope of these pilots be?
    With regard to the first question, the DOT study indicates that the 
economics of the industry are such that if longer combination vehicles 
were allowed to operate nationwide, they would become the dominant 
configuration, eventually constituting the majority of US truck 
VMT.\23\ In this context, the second question becomes critical.
---------------------------------------------------------------------------
     \23\U.S. DOT, Comprehensive Truck Size and Weight Study, Volume 
III Scenario Analysis, 2000, pp. IV 32--IV-33.
---------------------------------------------------------------------------
    Here the DOT study concludes that ``(e)ven if Federal law did not 
require States to allow larger or heavier vehicles, some States fear 
that if neighboring States allow LCVs, they will face irresistible 
pressure to also allow LCVs to keep their businesses competitive.''\24\ 
This raises the possibility that, even within the carefully designed 
pilot studies advocated by the committee, larger LCVs could eventually 
dominate the intercity freight market.
---------------------------------------------------------------------------
     \24\U.S. DOT, op. cit., Volume I Summary Report, p. 40.
---------------------------------------------------------------------------
    A majority of automobile drivers oppose these vehicles. LCVs are 
less stable than conventional tractor-trailers, and the effects they 
would have on congestion and pollution are uncertain. LCVs would have a 
significant effect on the overall viability of railroad operations 
across their service offerings as described in the discussion under 
Conclusion 5.
Recommendation 5: Do not extend Federal TS&W regulations to the non-
        Interstate portion of the National Highway System
    The committee reports a recommendation that there is no 
justification for extending Federal weight regulation to the non-
Interstate portion of the National Highway System. There is no 
discussion of this issue in the body of the Report and the committee's 
congressional mandate is to analyze the regulations ``on Federal-aid 
highways to which Federal regulations apply on the date of enactment of 
this Act.''\25\ The recommendation appears to be aimed at HR3132, the 
``Safe Highway and Infrastructure Preservation Act'', which would 
extend the current Federal TS&W limits beyond the 44,000 miles 
Interstate system to the entire National Highway System of nearly 
157,000 miles.
---------------------------------------------------------------------------
     \25\PL 105-178, Section 1213.
---------------------------------------------------------------------------
    The recommendation is not inconsistent with the idea proposed in 
the Report that there should be a ``redefinition'' of Federal and State 
TS&W regulatory responsibilities. The Report describes that 
redefinition as follows:
    The Federal Government would have diminished involvement in 
defining numerical dimensional limits on the Interstates and other 
Federal-aid highways, since the States would have more discretion with 
respect to limits on these roads. However, the Federal Government would 
take on greater responsibility for ensuring that State rules governing 
the use of vehicles on Federal-aid highways were contributing to 
meeting national objectives. (p. 3-21)
    The Institute (Recommendation 1) would play a key role here, 
providing ``monitoring, oversight and research'' (p. 3-21), and the 
Federal Government would focus on performance standards: ``States could 
propose solutions to problems, and the Federal Government would have to 
assess whether the proposals met qualitative objectives'' (p. 322).
    The Report does not identify these qualitative objectives. It also 
does not recognize that changes in TS&W limits change the capacity of 
the highway freight network, and this affects the overall efficiency of 
the national freight network. Because the rail and highway networks are 
interrelated, all shippers (and all motorists) are affected. State 
agencies may well provide optimal management of highway and bridge 
assets but this does not mean that they can optimally regulate the 
performance of the national freight network.
Recommendation 6: Specific TS&W topics requiring research include 
        enforcement effectiveness, air quality effects, truck 
        characteristics and crash involvement, risk-based bridge costs, 
        freight market behavior, driver stress, and truck-only 
        facilities
    The report makes a good case that there are several key areas in 
which more information would improve TS&W policy.
    The recommendation for more freight transportation market research 
should consider not only the relationship between truck costs and truck 
traffic, but should examine the broader context of total logistics 
costs and shipper preferences across modes. Advanced and well-accepted 
market research techniques now exist that would, within a carefully 
designed program of research, allow the estimation of models that 
quantify shippers' relative valuation of the most important freight 
service characteristics. These models could then be used to forecast 
the likely impacts of service changes across the freight industry. This 
work could build on the DOT (2000) study.
    The proposed research into the nuisance costs of mixed auto and 
truck traffic is also an important recommendation, particularly given 
that the report rightly points out that these costs may be independent 
of actual accident rates. But the conclusion that such costs should 
only be considered in policymaking if they lead to observable changes 
in driver behavior is wrong. The stress or anxiety associated with 
driving with large trucks may impose costs on drivers that are real, 
but for a variety of reasons do not cause changes in behavior. Research 
into the adoption of advanced information technology in the public
    transit sector, for example, has demonstrated that travelers may 
value useful information for its ability to reduce stress and 
uncertainty, but may not necessarily change their travel patterns as a 
result of having access to it. Modern market research techniques could 
similarly be used to estimate and clarify drivers' valuations 
concerning the stress associated with truck traffic.
                   Appendix A1. Previous TS&W Studies
DOT (1981) An Investigation of Truck Size and Weight Limits
    This study was conducted in response to a congressional directive 
that the U.S. DOT examine the appropriateness of uniform TS&W standards 
throughout the United States. It examined the range of benefits and 
costs to the U.S. economy and society, as well as to specific groups, 
that would result from alternative changes in TS&W regulations. Five 
categories of changes were considered, including grandfather clause 
elimination, barrier elimination, uniformity, rollback to pre-1974 
limits, and increases in limits.
    The study found that transport cost savings from increased truck 
productivity could exceed the increase in highway and bridge 
maintenance costs and increased accident costs that would accompany the 
introduction of higher TS&W limits. At the same time, however, it found 
that additional infrastructure investments would be required to 
accommodate such increases, and that it was uncertain as to whether or 
not funding would be available for these investments. If these 
investments were not made, the study found that the negative impacts of 
TS&W changes could be much greater. The study estimated that diversion 
from rail would be small under the specific scenarios examined, but did 
not attempt to estimate the resulting effect on the railroad industry.
TRB (1986) Special Report 211: Twin Trailer Trucks
    The purpose of this study was to examine the potential impact of 
new rules adopted in the 1982 STAA, with a particular focus on safety. 
It found that twins were probably less safe than semis, but that little 
change in accidents should be expected because it was assumed that 
truck VMT would decline overall. On the other hand, it concluded that 
twins were expected to produce 90 percent more wear on asphalt pavement 
and 20 percent more wear on concrete pavement than the semis they would 
replace. This study did not independently estimate the diversion of 
freight traffic from rail to trucks using twin trailers, but traffic 
forecasts used in the study assumed that any such diversion would be 
very small. This assumption was based on the prediction that LTL 
carriers would be the primary users of twins, and that rail was not a 
good substitute for LTL truck service.
TRB (1990) Special Report 227: New Trucks for Greater Productivity and 
        Less Road Wear: An Evaluation of the Turner Proposal
    The purpose of this study was to evaluate a proposal to reduce road 
wear and increase truck productivity. Known as the Turner Proposal, the 
concept was to increase allowable truck lengths and gross vehicle 
weights but at the same time decrease allowable axle weights. The study 
evaluated the impact of ``Turner Trucks'' in terms of productivity, 
safety, traffic, bridges and pavement. It examined both nationwide and 
less-thannationwide adoption scenarios.
    For nationwide adoption, it found that that savings to carriers or 
shippers switching to Turner trucks would average 12 percent of 
linehaul operating costs, and the aggregate cost savings would be 
1.4percent of total truck freight shipping. Approximately 4percent of 
rail ton-miles would be diverted, causing rail to lose 5percent of its 
gross revenue. Some of the designs proposed were predicted to have 
negative safety or traffic effects, but the study predicted that total 
truck VMT would decrease. The study found that bridge costs would be 
increased markedly, but that pavement wear would be reduced, such that 
under nationwide adoption the net effect would be a savings in total 
infrastructure costs. Under less than nationwide adoption, however, the 
study found that bridge costs could exceed reductions in pavement 
costs. Overall, the study found that the Turner proposal would produce 
benefits and recommended that States consider its adoption under 
certain circumstances.
DOT (1997) Federal Highway Cost Allocation Study
    As part of its role in administering the Federal-aid highway 
system, the Federal Highway Administration has from time to time 
undertaken analyses aimed at estimating the costs imposed on the 
various parts of the system by different classes of vehicles. The total 
costs of building and maintaining the system are generally known, but 
the purpose of these studies is to allocate the costs among users. 
Known as Highway Cost Allocation Studies (HCAS), these analyses are 
major efforts requiring significant data collection and analysis, and 
have therefore been relatively infrequent. The most recent was 
conducted in 1997, the first HCAS since 1982.
    The 1997 HCAS provides the most up-to-date estimates available of 
the relative costs imposed on the system by cars and trucks. A specific 
objective of the study was to determine how changes in the Federal 
highway program and the user fees that support it have affected the 
equity of the user fee structure. The study also estimated the 
responsibility of different vehicle classes for the external costs 
associated with highway use, an important addition not included in the 
1982 report. In addition to estimating marginal pavement and bridge 
costs imposed by each class of vehicle, therefore, the study estimated 
per mile congestion and noise costs. An addendum to the report 
published in 2000 provided estimates of per mile air pollution costs by 
vehicle class. The study found that combination trucks with registered 
weights over 75,000 pounds (about 70 percent of all combination trucks 
as shown in Table A-1) are not paying their fair share of highway 
costs. Trucks with registered weights of over 80,000 pounds are on 
average paying only 50 percent or less of the infrastructure costs they 
impose.\26\
---------------------------------------------------------------------------
     \26\Federal Highway Administration, 1997 Federal Highway Cost 
Allocation Study Summary Report, Table 7.
---------------------------------------------------------------------------
    The study was closely coordinated with the Comprehensive Truck Size 
and Weight Study then being conducted by the U.S. DOT, in order to 
provide a consistent set of assumptions and methods for estimating the 
differential impacts on the highway system by vehicle class. The DOT 
study is described below.
DOT (2000) Comprehensive Truck Size and Weight Study
    This study was intended to be a comprehensive examination of the 
issues related to TS&W regulations and the potential impacts of 
changing them. The aim of the study was not to promote a specific 
policy objective, which is noted in the TRB Report.\27\ Rather the aim 
of the study was``. . . to develop an information base and set of 
analytical tools upon which to evaluate alternative TS&W options.''\28\ 
The study is comprehensive in many respects. For example, it attempts 
to make``. . . a significant improvement in the analysis of diversion 
from other modes by explicitly considering inventory and other 
logistics costs that shippers evaluate in making real-world 
transportation decisions.''\29\ The study recognizes the role of TRB in 
evaluating changes to TS&W regulations, with the assumption being that 
the TRB committee charged with examining TS&W issues would internalize 
the results of the DOT study.\30\
---------------------------------------------------------------------------
     \27\Transportation Research Board, TRB Special Report 267, pp. 2-
3.
     \28\U.S. Department of Transportation, Comprehensive Truck Size 
and Weight Study, Volume I Summary Report, 2000, p.4.
     \29\U.S. DOT, op. cit., p. 6.
     \30\U.S. DOT, op. cit., p. ES-11.
---------------------------------------------------------------------------
        Appendix A2. List of committee Members and Affiliations

 
----------------------------------------------------------------------------------------------------------------
                     Member                                                Affiliation
----------------------------------------------------------------------------------------------------------------
James W. Poirot, Chair.........................  Chairman Emeritus CH2M HILL, Mukilteo, WA
Kenneth D. Boyer...............................  Professor, Department of Economics, Michigan State University
Robert G. Dulla................................  Senior Partner, Sierra Research Inc., Sacramento, CA
Nicholas J. Garber.............................  Professor and Chairman, Department of Civil Engineering,
                                                  University of Virginia
Thomas D. Gillespie............................  Research Scientist and Adjunct Professor, University of
                                                  Michigan
Ezra Hauer.....................................  Professor, Department of Civil Engineering, University of
                                                  Toronto
James H. Kopf..................................  Deputy Executive Director and Chief Engineer, Mississippi
                                                  Department of Transportation
Sue McNeil.....................................  Director, Urban Transportation Center, University of Illinois,
                                                  Chicago
Eugene E. Ofstead..............................  Assistant Commissioner of Transportation Research and
                                                  Investment Management, Minnesota Department of Transportation
                                                  (Retired)
John R. Pearson................................  Program Director, Council of Deputy Ministers Responsible for
                                                  Transportation and Highway Safety, Ottawa, Ontario
F. Gerald Rawling..............................  Director of Operations Analysis, Chicago Area Transportation
                                                  Study
James E. Roberts...............................  Chief Deputy Director, California Department of Transportation,
                                                  (Retired)
John S. Strong.................................  Professor of Finance and Economics, School of Business
                                                  Administration, College of William and Mary
C. Michael Walton..............................  Ernest H. Cockrell Centennial Chair in Engineering, Department
                                                  of Civil Engineering, University of Texas at Austin
----------------------------------------------------------------------------------------------------------------
Source: Transportation Research Board, TRB Special Report 267.

   Appendix A3. Organizations Contacted by the Committee for Comments

 
------------------------------------------------------------------------
             Responded                         Did Not Respond
------------------------------------------------------------------------
 
American Bus Association...........  Association of Waste Hazardous
                                      Materials Transportation
American Trucking Associations.....  National Private Truck Council
Distribution & LTL Carriers          American Road and Transportation
 Association.                         Builders Association
Motor Freight Carriers Association.  Associated General Contractors of
                                      America
National Automobile Transporters     International Brotherhood of
 Association.                         Teamsters, AFL-CIO
National Solid Wastes Management     JB Hunt Transport
 Association.
Western Highway Institute..........  Schneider National Carriers
Owner-Operator Independent Drivers   United Parcel Service
 Association, Inc.
Truck Manufacturers Association....  Freightliner Corporation
Truck Trailer Manufacturers          Intermodal Association of North
 Association.                         America
Federal Express Company............  National Small Shipments Traffic
                                      Conference
Motor Coach Industries, Inc........  Advocates for Highway and Auto
                                      Safety
National Industrial Transportation   Surface Transportation Policy
 League.                              Project
Association of American Railroads..  Minnesota Department of
                                      Transportation
American Automobile Association....  New Jersey Department of
                                      Transportation
Coalition Against Bigger Trucks....  New York State Department of
                                      Transportation
Insurance Institute for Highway      American Association of Port
 Safety.                              Authorities
Connecticut Department of            American Assoc. of State Highway
 Transportation.                      and Trans. Officials
Florida Department of                Commercial Vehicle Safety Alliance
 Transportation.
Georgia Department of                International Bridge, Tunnel and
 Transportation.                      Turnpike Association
Idaho Department of Transportation.  National Governors Association
Indiana Department of
 Transportation.
Michigan Department of
 Transportation.
New York Department of
 Transportation.
Texas Department of Transportation.
------------------------------------------------------------------------
Source: Transportation Research Board, TRB Special Report 267, pp. C-21
  and C-22.

                                 ______
                                 
 Responses of Edward R. Hamberger to Additional Questions from Senator 
                                  Reid
    Question. Some of the figures we have seen indicate that much of 
the growth in freight will be carried on trucks. However, as you 
mention in your statement, one way to reduce wear and tear and 
congestion on our roads is to move more people and freight by rail. 
Since our road infrastructure will be hard pressed to accommodate the 
expected increase in truck traffic, how can we make rail more 
competitive and ensure the most efficient division between freight 
carried by trucks and freight on our rails? Keep in mind that we also 
will need to move more people by rail in the future, not just freight.
    Response. If freight railroads are to continue to provide safe and 
efficient transportation service that enhances our nation's economic 
health and global competitiveness, and if they are to play a meaningful 
future role in relieving congestion, reducing emissions and energy 
consumption, and improving safety, a number of steps should be taken 
that remove public policy obstacles and focus public policy choices on 
rail infrastructure.
    First, there should be a more pronounced reliance on public-private 
financing partnerships for railroad infrastructure improvement 
projects, especially for projects that provide significant public 
benefits or meet public needs, such as congestion mitigation, emissions 
relief, enhanced mobility, and enhanced safety. As outlined in my 
September 9th testimony, the TEA-21 reauthorization process should 
include modifications to several transportation infrastructure programs 
and Federal tax policies to allow freight railroads and other 
transportation providers to meet vital public transportation needs more 
efficiently and effectively.
    Second, Congress and rail regulators should resist calls to 
reregulate the rail industry. While it is beyond the scope here to 
explain in detail why railroad reregulation is such a counterproductive 
notion, the essential point is that regulatory restrictions that impede 
railroads' ability to generate sufficient returns would severely 
compromise their ability both to generate investment funds internally 
and to attract the outside capital needed to sustain--much less 
increase--their operations over the long term. Ultimately, if railroads 
are reregulated, the only realistic alternative to wholesale 
disinvestment of our nation's rail network would be for the government 
to step in and subsidize railroads on a massive scale.
    Third, a number of Federal laws and regulations that inhibit 
railroads by treating them less favorably than other modes should be 
addressed.
    For example, under existing truck size and weight limits, rail-
competitive trucks cover far less than the costs of the damage they 
cause to our highways. The shortfall is made up through billions of 
dollars in subsidies from other highway users to truckers. Equity 
demands that truckers bear this expense themselves. To make matters 
worse, various interests have proposed that the existing truck weight 
limit be increased (for example, to 97,000 pounds) and the use of 
longer combination vehicles be expanded. Attempts to expand existing 
truck size and weight limits should be resisted because such expansion 
would exacerbate existing inequities while severely harming the rail 
industry. A recent U.S. DOT study found that, depending on the 
scenario, increased truck sizes and weights would result in a decline 
in rail revenue of between $2.9 billion and $6.7 billion, a decline in 
the contribution to railroad fixed costs of between $2.1 billion and 
$3.1 billion, and a decline in railroad return on equity of 32 to 46 
percent. Such declines would decimate the rail industry's ability to 
invest in its infrastructure, add significantly to highway wear and 
tear, increase highway congestion, and diminish highway safety.
    Another example of a modal inequity concerns Federal research and 
development. The ``21st Century Truck Initiative'' is a public-private 
research partnership involving many of the nation's largest heavy-duty 
engine and truck companies and several Federal agencies designed to 
lead to prototype engines that double existing fuel economy for long-
haul trucks and significantly reduce truck emissions. Currently, there 
is no similar program for locomotives. To correct this inequity, 
Congress should establish a public-private partnership involving 
Federal agencies, railroads, and rail suppliers designed to increase 
the fuel efficiency of, and reduce emissions from, locomotives.
    Taxes constitute a third area in which modal inequities hinder 
railroads. Public policy should ensure that tax laws do not distort 
market forces by giving one mode a distinct competitive advantage over 
other modes. Thus, existing tax laws which disadvantage railroads 
relative to trucks and other modes should be modified.
    For example, the 4.3 cents per gallon ``deficit reduction'' fuel 
tax paid by railroads but not paid by trucks should be repealed. 
Likewise, railroad disadvantages created by existing capital recovery 
provisions should be addressed. Currently, for income tax purposes 
railroads must capitalize and depreciate, over a period of years, the 
costs incurred in building their infrastructure. In addition, railroads 
must capitalize many of the costs of repairing and maintaining their 
infrastructure. In contrast, the fuel taxes paid by trucking companies 
(used for both new capital expenditures and highway repair and 
maintenance) are expenses which can be deducted immediately. This 
disparity in treatment of infrastructure spending for income tax 
purposes results in a 9 percentage point penalty for railroads on their 
capitalized infrastructure investments. It is a significant issue for 
freight railroads because railroads are enormously capital intensive: 
in 2000, railroad capital spending was equal to 17.8 percent of 
revenue, compared with 3.7 percent for U.S. manufacturing as a whole. 
Railroads also pay hundreds of millions of dollars per year in property 
taxes on their right-of-way, an expense their trucking competitors do 
not pay.
    Finally, as your question reminds us, freight railroads also face 
significant and increasing demands for use of their infrastructure for 
passenger operations. Freight railroads agree that passenger rail can, 
under the right circumstances, play a role in alleviating highway and 
airport congestion, decreasing dependence on foreign oil, reducing 
pollution, and enhancing mobility and safety. However, the importance 
of passenger railroading to our country pales in comparison to the 
importance of freight railroading. Therefore, we must find the most 
effective way to provide the passenger services that America needs, but 
without burdening the freight rail system--operationally, financially, 
or in any other way. The goals of reducing pollution and highway 
congestion can be realized only if we ensure that passenger trains 
don't interfere with freight service.
    To this end, Congress should resist calls to legislate mandated 
passenger access to freight-owned track. Access by passenger railroads 
to facilities owned by private freight railroads must be negotiated on 
a case-by-case basis by the parties, without government interference. 
For their part, freight railroads will continue to work cooperatively 
to help passenger railroading succeed where it is practicable, but it 
is not the responsibility of our nation's privately owned freight 
railroads to subsidize passenger service. Once policymakers agree on 
the nature and scope of passenger railroading in this country, they 
must be willing to commit public funds on a long-term basis 
commensurate with that determination. To do otherwise would undercut 
our nation's freight rail capabilities and be counterproductive in 
addressing our country's congestion, environmental, safety, and 
economic concerns.
                                 ______
                                 
  Response of Edward R. Hamberger to Additional Question from Senator 
                                Jeffords
    Question. Mr. Hamberger, I appreciate your detailed and thorough 
recommendations regarding TEA21 reauthorization. Would you please 
expand upon the legislative changes-as opposed to the regulatory 
changes-you are seeking to the Railroad Rehabilitation and Improvement 
Financing Program?
    Response. AAR is seeking legislative changes to the Railroad 
Rehabilitation and Improvement Financing (RRIF) program that would 
ensure that the applicant for a loan or loan guarantee would not have 
to (1) provide collateral; or (2) demonstrate that it has sought other 
financial assistance under the program (i.e., lender of last resort 
provision). S. 1530, the ``Railroad Advancement and Infrastructure Law 
of the 21st Century,'' or RAIL-21, and a related House measure both 
include these important legislative changes. S. 1530, which has ten 
Senate cosponsors, is pending in the Senate Committee on Commerce, 
Science, and Transportation.
                               __________
Statement of Rick Larabee, Director of Port Commerce, Port Authority of 
                        New York and New Jersey
    Chairman Reid and Chairman Breaux, thank you for the invitation to 
appear before this panel on the matter of intermodal transportation and 
port access. I am pleased that you chose to conduct a joint hearing of 
your two committees. After all, the subject is intermodal 
transportation. Your collective effort demonstrates that it is 
important to consider how separate modes of transportation operate as a 
part of a total system. Congress showed great wisdom in acknowledging 
the role of intermodalism in modern transportation and commerce with 
the enactment of ISTEA and then TEA-21. Federal policy and support 
should continue to evolve to foster the productivity and efficiencies 
that can be achieved through addressing national transportation needs 
as a system of connecting and complimentary modes.
    As a region that has major port facilities and the nation's largest 
consumer market we especially feel the impact of the economic 
globalization on a major gateway and its infrastructure. My hope is 
that this hearing will heighten your interest in the subject, further 
your understanding of how the efficient movement of intermodal cargo is 
a matter of national interest, and convince you that improvements in 
Federal policy and the level of assistance are warranted.
    For the record, the Port Authority of New York & New Jersey is a 
bistate public authority created in 1921 by our States with the consent 
of Congress. The Port Authority's mission on behalf of the States is to 
identify and meet the critical transportation infrastructure needs of 
the bistate region and provide access to the rest of the Nation and to 
the world. The Port Authority's jurisdiction includes the region's 
major aviation and marine terminal facilities as well as the PATH 
commuter transit system, ferry and bus terminals, the interstate 
tunnels and bridges and other facilities. And appropriate to the 
subject of this hearing, intermodal transportation was born at Port 
Newark and, soon after, the first U.S. container port was developed on 
Newark Bay.
    Our operations and projects help move people on air, land and water 
to the workplace, home and distant places. The region is the most 
densely populated in the United States and the largest international 
gateway on the Atlantic. As such, people and freight heavily populate 
the highways, rail systems and marine terminals as foreign commerce and 
domestic markets are served in just-in-time fashion. And while you have 
asked me to focus my remarks on port access I should observe that our 
region and gateway is as modally diverse as can be, making access and 
mobility issues that much more complex. Within a one mile radius of our 
busiest marine terminals is one of the nation's largest air cargo 
facilities, the northeast corridor rail line serving passengers and 
freight, interstate highways, and other roads and rail lines in 
addition to the warehouses, rail yards and businesses that support 
national and regional commerce. Similar multi-modal views can be seen 
elsewhere in the bistate area.
    Our airports are responsible for roughly 22 percent of all US 
international cargo, which, combined with domestic cargo, totaled 
nearly 2.95 million tons in 2000 at a value of $150 billion. The 
seaport serves 35 percent of the U.S. population and 200 nations. The 
terminals in New York and New Jersey handled over 3 million container 
units (as measured in Twenty-foot Equivalent Units) last year and $80 
billion of general, bulk and breakbulk cargo moved through the port in 
2001. At one container terminal alone over 5,000 trucks go through the 
gates every day. Our on-dock rail terminal handled 200,000 containers 
per year and is near capacity. And lest you think that our port is the 
exclusive gateway for our region's consumers and manufacturers, another 
750,000 TEUs arrive in our region via rail from the West Coast. 
Meanwhile, traveling annually over our bridges and through our tunnels 
are approximately 250 million vehicles while 2.5 million buses use our 
two terminals in New York City.
    Those statistics attest to the vitality of the trade and economic 
activity that is at work every day. But it also hints at a major 
challenge we and other regions face.
    That challenge is to make sure that American gateways and freight 
corridors have the capacity to keep up with the growth in trade and the 
larger economy. To be clear, this is not a case of build it and they 
will come. It is a matter of . . . build it because the cargo is 
coming. In fact it is already here resulting in ever-greater congestion 
7 days a week. And whether you are talking about commuter routes, air 
cargo or port access finding new capacity is a present day issue that 
will only worsen unless actions are taken on a Federal, State and local 
level to improve efficiencies and expand capacity.
    To help you better understand the challenge we face, I would like 
to paint a present-day intermodal picture for you:

      The New York/New Jersey metropolitan region is a severe 
nonattainment area for ozone (NOx and VOCs).
      Approximately 87 percent of ocean borne cargo leaves or 
arrives at the Port of New York-New Jersey in a truck. Almost all of 
the remainder travel on rail.
      At a growth rate of 4 percent a year, estimates show 
trade in all types of cargo doubling in our port in little over 10 
years. Nationally, trade will double by 2020.
      Demand for consumer goods is driving continued growth in 
intermodal trade, which is expected to rise at rates exceeding 4 
percent annually. In the past recent years actual growth in general 
cargo at the port has averaged 6 percent. Container traffic is expected 
to quadruple by 2020.
      Five thousand commercial cargo ships called in the port 
in 2001.
      While regional population totals are expected to advance 
slowly at about 0.3 percent per year to 2020, even this modest growth 
rate will result in an absolute increase of nearly one million people 
to the population base creating a greater demand for consumer goods and 
placing further strains on an aging transportation infrastructure.
      Commercial and retail development initiatives along with 
growing public demand for access to limited waterfront areas are 
increasing traffic and land pressure on marine terminals, rail yards, 
and air cargo operations.
      Distribution facilities are migrating to more affordable 
locations on the region's periphery and in other States further 
straining our roadway systems and degrading our air quality as trucks 
must travel greater distances to deliver commodities to consumers in 
our urban center.
      Our region's highways are at or near capacity. Shortfalls 
in the rail freight line and yard capacity necessary to accommodate 
commodity flows are increasing. Competition for capacity on the road 
and rail systems between commuters and goods movement is fierce.
      Trucks move 90 percent of the region's freight (and 87 
percent of the port's intermodal cargo), though they represent about 10 
percent of the vehicles on the region's highways and about 7 percent at 
the Port Authority tunnel and bridge crossings. Freight trains comprise 
an even smaller proportion of the region's railroad activity, often 
confined to limited operating times in deference to extensive commuter 
rail schedules.
      The eight active intermodal rail yards that serve the 
entire region handle more than 1,000,000 lifts per year and are close 
to capacity.
      In addition to being among the busiest in the Nation, our 
airports contend with freight access problems, especially J.F.K. 
International where trucks and passenger vehicles vie for space on the 
main access route.

    Addressing these challenges will require investing in 
infrastructure and adjusting policies to foster logistically and 
environmentally smart solutions for the long term. Partnerships are 
coming together locally and regionally to support projects and we need 
a strong Federal partner to accelerate these activities. Such 
partnerships have proven to be successful, exemplified best by the 
Alameda Corridor project undertaken by our West Coast friends. The 
public and private sectors, including Federal and State governments, 
joined in planning and building the Alameda Corridor. And Federal 
support was crucial to the project being financially feasible.
    It is heartening that the U.S. Department of Transportation-the 
Federal Highway Administration, Maritime Administration and the 
Secretary's intermodal staff, in particular-and the freight community 
have devoted recent years to studying freight and intermodal 
transportation issues. FHWA maps vividly illustrate what the future 
holds for our country as international and domestic freight volumes 
grow at the gateways, borders and along trade corridors. The Maritime 
Administration's survey of port access problems and recent report of 
its findings is important work as was the discovery that port access 
and other intermodal linkages are among the lowest federally funded 
transportation projects.
    The Port Authority, in coordination with the States of New York and 
New Jersey, is in the process of developing specific recommendations 
for future legislation. Therefore I will devote the remainder of this 
statement to some general observations for your consideration. These 
are in no particular order.
    First, we and other ports greatly appreciate the attention that 
your committees are giving to the maritime transportation system (MTS). 
For a country that from its earliest days has depended upon maritime 
transportation to build and sustain a Nation the MTS is the least 
visible and federally supported transportation system in the country. 
That is why we are grateful that that the Bush Administration continued 
the MTS initiative. Consideration is now being given to identifying MTS 
infrastructure requirements and it is our hope that the Federal 
Government will act affirmatively on that information.
    Second, congestion and other bottlenecks to efficient 
transportation can be found throughout the country, but it is 
especially severe in major gateways and metropolitan areas that are 
essential elements of the nation's economic infrastructure and 
security. As such, those areas, including the New York-New Jersey 
region, deserve special attention. An older and densely developed area 
like ours, with roadways, ramps and bridges designed for early 20th 
century conditions have a special challenge to upgrade facilities to 
standardized lane widths and weight limits that can accommodate the 
larger and heavier containerized freight movements.
    Third, the significant growth in freight movement that is projected 
for this country will have to be accommodated efficiently or the Nation 
will suffer the consequences. However, in the Northeast and other 
heavily traveled areas building new capacity to meet the needs of 
commerce should not mean that trucking will alone have to bear the 
brunt of that growth. Clearly trucking will be an essential part of the 
transport strategy in the decades to come, carrying more and more 
freight. But in our region trucking and the highways on which they 
depend are not expected to have the capacity to handle a growing 
population and the anticipated doubling and tripling of domestic and 
international cargo. Can many more lanes be added to the region's 
interstates or to major corridors like I-95, even in the Washington 
area? And can that be done while maintaining Federal and State clean 
air objectives? It is evident to us that if we are to avoid 
debilitating congestion at the port and on the region's highways 
adjustments will be needed in the modal sharing of intermodal cargo. 
That leads me to my fourth point.
    Even as Congress continues to support the enhancement of highway 
capacity in the United States your committees should consider how to 
foster the development of other modes to accommodate increasing demand. 
Rail certainly is one part of the answer. We are building three new 
intermodal rail yards at our marine terminals in order to dramatically 
expand our capacity to move containers on rail. In addition, the Port 
Authority is working with the railroads and public agencies to identify 
specific regional rail projects that will improve line and terminal 
capacity.
    Another answer can be found off our shores. We are undertaking a 
program to encourage intermodal cargo to move by water where possible. 
That is made possible in part by the costs of congestion, which have 
made traditionally long distance modes more competitive over shorter 
hauls. There is tremendous underutilized capacity on the water. And 
while moving containers on barges can satisfy the market in the 
Northeast I think that Congress can look into the future and see how 
fast vessel technology can bring new capacity to intermodal 
transportation along major corridors. It is not the solution but if 
examined for its associated capital, energy and environmental costs it 
can be part of the solution with Federal support.
    Fifth, innovations approved by Congress in TEA-21, such as the 
Congestion Mitigation Air Quality (CMAQ) and National Corridor Planning 
and Development programs, were very worthwhile policy steps to take. 
CMAQ helps regions such as ours make sound transportation choices that 
are consistent with clean air objectives. The corridor program 
recognized that special conditions in need of special attention exist 
at the borders and elsewhere. Those innovations were worthwhile 
directions to take and they could be improved and expanded even 
further, especially to add to the capacity of major gateways and 
corridors.
    Sixth, while this hearing is concerned with the movement of 
freight, it is important to note how attention to freight can achieve 
improvements for passengers. I think especially of projects intended to 
divert freight from heavily traveled automobile routes to dedicated 
freight corridors, whether on land or water. Area transportation 
agencies have intermodal corridor projects in varying stages. Some were 
authorized for study in TEA-21, such as the New Jersey intermodal 
corridor and the cross-harbor rail freight tunnel projects. Port 
Authority staff have undertaken a comprehensive look at how intermodal 
freight improvements, primarily linkages between existing roads and 
rail lines, can be strategically planned and implemented to stitch 
together freight corridors. Already underway is a Port Authority 
project to link the Howland Hook Marine Terminal on Staten Island to 
the Chemical Coast Line in New Jersey. That, combined with the 
improvements that we have made with the State and City at Howland Hook, 
will bring intermodal rail access to a fast growing area of the port. 
It is a significant step in improving direct rail service to New York 
City. Another project, referred to earlier, is the Port Authority's 
Port Inland Distribution Network (PIDN), which is in the early stages 
of implementation. PIDN is intended to mitigate against growing 
congestion at the marine terminals and on the highways by transshipping 
via railroads and barges those inbound containers destined for 
Northeastern locations. The strong level of interest that Northeastern 
State departments of transportation are showing in PIDN is an indicator 
of how transportation planners are eager to find alternatives to 
congested corridors like I-95. An equally strong level of interest on 
the part of the Federal Government could help such initiatives 
demonstrate how water transportation can manage part of the freight 
growth. Flexibility in Federal programs can be a way to support such 
initiatives.
    Lastly, the use of intelligent technology has proven very 
worthwhile in our region for managing the flow of our busy highways and 
crossings. Continuing and enhanced Federal support in this area would 
be welcome including expanding the integrated use of technology to 
expedite, track and more efficiently manage freight movements in 
congested metropolitan areas. It could also provide a double benefit of 
added security for cargo shipments.
    Senators, the Port Authority of New York and New Jersey and other 
agencies of the region know we must dramatically strengthen intermodal 
service options. My department's twenty-year goal is to reduce port 
reliance on trucking from 87 percent of modal market share to 57 
percent by strongly growing water borne and rail market shares. Our 
capital plan reflects this with its support for dock and near dock rail 
extensions, port terminal highway improvements and PIDN developments. 
To do so we need to improve connections to local intermodal service 
facilities at or near the port with connector highway improvements as 
contemplated by the NJDOT International Intermodal Corridor Program and 
its portway element. New York City and New York State are taking a 
similar tact with plans for rail access, car float and intermodal rail 
improvements in the City and Long Island.
    In closing I should note that a lot of good work is being done by 
organizations represented at this hearing and others who are not here. 
The American Association of Port Authorities, the American Trucking 
Association, the Association of American Railroads, and the Coalition 
for America's Gateways and Corridors have joined with others in the 
freight community to develop a common platform to address freight 
mobility in future Federal policy. The Coastwise Coalition has worked 
to identify the potential for the maritime sector to accommodate some 
of the future demand for freight transportation. I think your 
committees can benefit greatly by the thoughtful attention that has 
been given to these issues by my counterparts in government and the 
private sector. Federal freight transportation policy is still in its 
adolescent stage, which means there is great opportunity for 
improvement to meet the challenges I have described.
    Thank you again for inviting the Port Authority to participate in 
this hearing. I welcome any questions you may have.
                                 ______
                                 
Responses by Rick Larrabee to Additional Written Questions from Senator 
                                  Reid
    Question 1.Mr. Larrabee, you argue in your testimony that at the 
same time Congress continues to support the enhancement of highway 
capacity, we should consider how to foster the development of other 
modes to accommodate increasing demand. What specific steps do you 
recommend Congress take to lighten the load on our highways and ensure 
that other modes share more equally in moving freight through our 
nation?
    Response. The points below will suggest ways that Federal programs 
can enhance the ability of waterborne systems to serve as an 
alternative to highway use recognizing that water transportation is the 
nation's least used mode. One of the reasons why water (and rail) modes 
do not handle larger volumes of domestic freight is that Federal policy 
has done such a good job in developing and expanding our interstate 
road system--understandably so--but it has not paid enough attention to 
the contributions that non-highway modes can make. The highway focus 
has worked well over the years but costly capacity constraints, 
resulting from the strong and continuing growth in commercial truck 
vehicle miles traveled (VMT), have become a glaring issue. Other modes 
should be examined for their potential to relieve truck volume related 
pressures. Federal policy has not been focused on the overall benefits 
to the highway program that could result from greater Federal support 
to alternative modal development such as less highway congestion, less 
wear and tear on the infrastructure, less pressure to add new highway 
capacity, as well as the general quality of life improvements (i.e.--
safety, security, and environmental). ISTEA, through the creation of 
the Congestion Mitigation Air Quality (CMAQ) program, allowed funding 
of intermodal freight programs that advanced its ``clean air'' policy 
purpose. CMAQ funding for non-highway projects, such as the locally 
successful Red Hook, Brooklyn to Port Newark Barge, has demonstrated 
that waterborne services can help reduce truck VMT in congested areas 
and mitigate negative environmental impacts. By encouraging additional 
programs that support multi-modal systems development, the committee 
can broaden the means available to simultaneously create freight system 
efficiency and provide highway congestion relief.
    Here in the Northeast, Interstate 95 is not just a vital highway 
route to North--South travel between some of the nation's largest urban 
areas; it is the spine of a multimodal transportation corridor. Air, 
rail and waterborne systems join this essential highway element to 
create a network for personal and commercial mobility. Just as 
Northeast rail corridor operations provide relief and alternatives to 
highway and aviation systems, waterborne improvements can bring 
increased mobility and shipper choice in the freight realm. Congress 
should not wait for congestion to build to the point where gridlock 
finally occurs and forces a change to other modes--only then 
discovering that the alternative modes are not fully prepared to 
respond. Federal policy should begin now to support a transition toward 
modal equilibrium that our economy and society will require in the not 
so distant future. That equilibrium will certainly have trucking as its 
most essential element, but the increased cargo burden that growth will 
bring should be shared by the others.
    Following are proposals that I recommend:

Harbor Maintenance Tax Application Reform
    Obstacles to the expansion of domestic barge and short sea 
operations should be removed. One such obstacle is a provision within 
the Harbor Maintenance Tax (HMT) that creates an economic penalty on 
inherently domestic freight movements. If a container of imported cargo 
enters the US at the Port of New York and New Jersey, for example, it 
is assessed a fee for the maintenance of Federal channels. If that same 
cargo is off-loaded to a barge and now moves between two US ports 
(i.e.--Port Newark--Elizabeth and the Port of Boston), the HMT requires 
that the fee by paid again by the shipper after the goods are 
discharged in Boston.
            Recommendation:
    Eliminate the provision in the HMT that allows for double 
collection of the tax on domestic moves--especially the transshipped 
cargo. This change will provide a modest but important cost reduction 
that will make the waterborne alternative more attractive as a service 
choice. It would also eliminate an unfair ``double hit'' tax policy 
that puts the ad valorem tax on the same cargo twice. Based on fiscal 
year 1999 figures (the latest we have), the tax on all domestic cargo 
accounts (bulk and non-bulk) raised less than $50 million of the over 
$500 million that was collected that year. And the portion paid by 
containerized general cargo likely is a small fraction of the total 
domestic collection. Voiding the tax application on that cargo seems to 
be a cost-effective way to encourage consideration of the waterborne 
mode.
Freight Congestion Relief Grants And Corridor Improvement Funding 
        Targeted To Non-Highway Modes
    The startup costs associated with new services are a barrier to the 
introduction of waterborne alternatives to the truck-only movement of 
freight. The carriers who could provide such services need to be given 
the opportunity to demonstrate their effectiveness if we are ever to 
create congestion relief in critical multi-modal freight corridors. 
There are major but not insurmountable challenges to the initiation of 
domestic movements of containerized freight by water. Water carriers 
(like railroads) have to absorb additional costs of transferring 
containers at points where transfers to local truck pick up and 
delivery take place. Economies of scale advantages can only be realized 
by these intermodal services once they have operated long enough to 
build a market presence which attracts substantial volumes of general 
freight. Historically, shippers and ocean carriers have been slow to 
change their domestic transfer service patterns even when there is good 
reason to do so. Without some type of external funding assistance to 
give alternative modes, especially domestic water service operators, a 
chance to prove themselves, little progress can be made in shifting 
freight movements.
    The Port Authority is developing a barge and rail Port Inland 
Distribution Network (PIDN) as an alternative to truck-only container 
distribution in an eight-State market area 75 miles or more distant 
from Port of New York and New Jersey facilities. Our analysis shows 
that most of the potential routes can be operationally self-sustaining 
within 5 or 10 years and that there are substantial public benefits 
from reduced congestion, air quality improvements and increased 
economic development opportunities at feeder port locations from such a 
system. Moreover, the cost of operational support on a per route basis 
over this time is generally modest (i.e.--less than ten million 
dollars). PIDN barge service between the Port of New York and New 
Jersey and the Port of Albany may begin as early as this December. Some 
Federal funds, notably CMAQ moneys, will be utilized to help give the 
barge service its start. Unfortunately, CMAQ grants for waterborne 
programs compete with other worthwhile CMAQ programs and this puts a 
practical limit on dollars available. Moreover, CMAQ has a narrow focus 
on air quality improvements in non-attainment areas and only allows for 
2 years of operational support. It does not fully recognize the impact 
modal alternatives can have on general highway system congestion 
relief, safety, security or public investment cost effectiveness in 
multi-modal corridor service and development.
    A major barrier to new modal development, even where it enjoys 
strong local and State support, is the fact that intermodal service 
development requires multi-State support. Oftentimes, the benefits 
cross State lines while the major development costs are centered at the 
service hub and regional port. Thus benefits can reach well beyond 
these few locations but the sharing of the costs does not. Federal 
assistance supporting the delivery of broadly distributed benefits 
would seem ideal to overcome developmental barriers created by MPO 
boundaries and State lines. The Federal aid would, however, require 
expeditious Federal approval, based on State and local support, rather 
than the bottom's up MPO-through-the-State process that makes CMAQ and 
many other Federal programs difficult to apply even where it may be the 
intent of Congress to do so.
            Recommendation:
    New programs, more focused on congestion relief and other public 
benefits that would occur from the introduction of new intermodal or 
multi-modal services in congested corridors, are needed. One way to 
meet this need would be to set criteria to measure the contribution 
that the waterborne alternatives can make to multi-modal freight 
corridor congestion relief. If those criteria were satisfied, highway 
funds could be made available to introduce and sustain regional efforts 
to establish new systems. To deal with startup challenges, multi-year 
operational and capital assistance should be included. A greater 
Federal role to facilitate the application and funding review process 
for multi-State/multi-MPO applications is essential. An expanded CMAQ 
program is one way to support such projects in their initial years. A 
better approach is to create a freight specific CMAQ-like congestion 
relief program, open to alternative intermodal systems that can 
demonstrate highway congestion relief.

    Question 2. We hear a lot of positive feedback about the Alameda 
Corridor project and how Federal funds were able to leverage private 
sector, State and local funds for a project that benefited the port, 
the trucking companies, and the railroads. How useful is the Alameda 
Corridor model and can it be replicated elsewhere with some Federal 
assistance?
    Response. The Alameda Corridor project is an ideal model for 
strategically planning, coordinating, and funding the development of 
multi-jurisdictional corridors which optimize the movement of freight 
between and among key maritime, highway, rail and aviation gateways.
    The Port Authority of New York & New Jersey has already begun to 
expand upon the Alameda ``model'' in our development of a multi-State 
``Northeast Intermodal Transportation Corridor'' (NITC) program. While 
still in its infancy, the basic tenet of NITC is that it will, with 
Federal assistance, encourage States from Maine to Maryland to approach 
the planning and development of their respective freight infrastructure 
programs in a coordinated, systematic manner consistent with TEA-21's 
``National Corridor Planning and Development Program'' requirements for 
the development of corridors of national significance.
    Corridor programs such as Alameda offer the potential for: 1) 
removing cargo from the general passenger traffic flows thereby 
simultaneously reducing the cost to move those goods and enhancing 
public safety; 2) rationalizing container distribution; 3) improving 
air quality; 4) enhancing security; 5) fostering the utilization of 
``brownfields'' for warehousing and goods distribution activity; and 6) 
stimulating local economies. Given the potential benefits, it is clear 
that Federal policy needs to do more to promote logistically and 
environmentally sound long-term solutions to the movement of the 
nations freight.
                               __________
  Statement of Michael P. Huerta, Senior Vice President and Managing 
 Director, ACS State & Local Solutions, on Behalf of the Coalition for 
                 America's Gateways and Trade Corridors
The Coalition
    The Coalition for America's Gateways and Trade Corridors is an 
intermodal organization comprised of more than 22 groups. The 
Coalition's sole interest is to encourage adequate Federal investment 
in our nation's intermodal freight infrastructure and technology to 
ensure safe, efficient and cost effective goods movement.
Borders and Corridors Programs Overview
    Recognizing the unprecedented demands international trade is 
placing on our nation's transportation infrastructure, and bringing a 
clearer focus on needed freight transportation and intermodal connector 
projects, Congress established the National Corridor Planning and 
Development Program (NCPD) and the Coordinated Border Infrastructure 
Program (CBI) often referred to as the Borders and Corridors Program. 
Section 1118 and 1119 of the Transportation Equity Act for the 21st 
Century (TEA-21) provided $140 million annually through a discretionary 
grant program administered by the Federal Highway Administration's 
(FHWA) Office of Freight Management & Operations to fund planning, 
development, construction and operation of projects that serve border 
regions near Mexico and Canada and high priority corridors throughout 
the United States.
    The Coalition believes that current Borders and Corridors Programs 
have fallen short of the intended goals when these programs were 
established for two reasons.
    First, the programs included in the TEA-21 Conference Report were 
funded at levels far less than necessary to meet freight transportation 
and intermodal connector needs. As witness to that, since the beginning 
of the programs, funding requests from States and Metropolitan Planning 
Organizations (MPOs) have exceeded available funds by a ratio of 15:1.
    Second, programs were extensively earmarked in the annual 
appropriations process. In fact, in the transportation appropriations 
bill for fiscal year 1902 these programs were earmarked for specific 
projects at more than twice the authorized funding level, causing the 
FHWA to decline taking grant applications for that year. As a result, 
funds have not always been allocated to projects with the greatest 
national significance to the movement of freight.
Reauthorization
    With respect to the reauthorization of TEA-21, the Coalition 
strongly recommends the programs be continued, but bolstered to ensure 
the original goals are met. With respect to modification, the Coalition 
respectfully commends several recommendations to the committee for 
consideration.

      To meet the high level of demand, funding for the Borders 
and Corridors Program must be increased to not less than $ 2 billion 
annually.
      The distribution of funds should be freight specific, and 
there should be a qualification threshold based on freight volumes and 
freight-related congestion to ensure limited dollars reach high-volume 
corridors/borders/gateways.
      Under current law, only States or MPOs are eligible to 
apply for funding under the Borders and Corridors Programs. It is 
recommended that the designation of entities eligible to apply for 
Program funding be expanded to include other public and quasi-public 
organizations.
      The programs should be redefined to address the needs of 
all trade gateways, not only land borders, and gateway connected trade 
corridors. Many gateways that handle high volumes of freight are not 
eligible for funding because they may not be ``borders.'' For example, 
while Illinois is not a ``border State,'' one-third of the nation's 
freight passes through Chicago and it is the largest intermodal hub in 
the Nation. Similarly, inland ports are also important gateways that 
enable the efficient movement of goods throughout the country.
      The designated ``high priority'' corridors eligible for 
funding under the Corridors Program need to be reexamined to ensure 
freight intensive areas can apply for funding. Currently, there are 
many important projects in need of funding that do not fall in one of 
the 43 priority corridors designated under TEA-21. Highest priority 
should be given to corridors that move goods to and from trade 
gateways.
Overall Needs
    International trade is the key to America's economic future. 
Imports and exports, which fuel our economy, are doubling every 10 
years. At the same time, freight traffic within the United States' 
borders will increase 100 percent by 2020. In 1970, foreign trade was 
10.8 percent of U.S. gross domestic product (GDP). By 2000, it grew to 
more than 26 percent of the GDP.
    This growth trend is expected to continue in all modes of 
transportation. In the next 20 years, foreign trade moving through 
American ports is expected to increase by 187 percent, while 
containerized cargo will experience an explosive 350 percent increase. 
In response to the overwhelming growth in trade, truck traffic will 
increase by 200 billion vehicle miles and rail freight shipments are 
projected to grow by 1 billion tons.
    Rapidly accelerating trade combined with domestic growth have 
created a $10 trillion U.S. commodity flow that produced millions of 
new job opportunities and a higher standard of living for Americans.
    These benefits will only last as long as we keep the freight 
moving.
    While so far freight carriers have done a good job keeping goods 
moving, in coming years, better, smarter and more truck, rail and 
intermodal gateway infrastructure will be needed to keep the traffic 
from stalling in gridlock. Even today, congestion and heavy volume 
often impede access to major freight terminals. Near dock rail capacity 
requires significant expansion and capital investment.
    Unfortunately, too small a portion of TEA-21 is devoted to freight-
related intermodal projects. Meanwhile, intermodal connectors currently 
have up to twice as many engineering deficiencies and pavement 
deteriorations as National Highway System non-Interstate routes. While 
the current port and trade corridor system is pressed to accommodate 
the current traffic levels, demands on it are expected to double by 
2020.
    The large burden placed on our freight transportation system has 
only been exacerbated by increased security concerns since September 
11. Intermodal freight infrastructure is critical to national defense. 
Thirty-eight thousand miles of the interconnected civilian rail 
system--vital for carrying heavy, oversized equipment and weapons 
systems--links some 170 strategic defense installations to seaports for 
military deployment.
    Ports and their connectors have always been the point of 
embarkation for defense materiel, and this role is even more important 
as our global strategy emphasizes flexible response. Highway connectors 
play a vital role in the rapid mobilization of personnel and materiel 
toward points of deployment.
Value of Investment/Cost of Neglect
    Investing in transportation yields economic paybacks for all 
corners of the country. Every dollar invested in the highway system 
yields $5.70 in economic benefits to the Nation. U.S. freight railroads 
contribute over $14 billion a year to the economy in wages and benefits 
to about 200,000 employees and billions in purchases from supplies. 
And, U.S. ports generate 13 million jobs, contribute $743 billion to 
the GDP and supply $200 billion in Federal, State and local taxes.
    Ignoring these problems will cost our Nation in numerous ways. 
Growing freight congestion puts our economic growth in peril by 
creating costly delays for manufacturing, putting a drag on job 
creation and undermining our ability to compete in the increasingly 
important global market. Highway congestion alone costs the U.S economy 
$78 billion annually, while also contributing to air pollution and 
other environmental concerns. In addition, delays at canal locks 
nationwide totally some 550,000 hours annually, representing an 
estimated $385 million in increased operating cost borne by shippers, 
carriers and, ultimately, consumers.
    As you are all probably aware, the Alameda Corridor recently opened 
in Southern California. We believe this public-private project 
exemplifies the type needed throughout the country. While at first 
glance this may seem to be only a rail project, it will also facilitate 
more efficient truck, ship and rail movement. The benefits from moving 
freight in and out of our nation's busiest ports faster will not only 
be felt in Southern California, but will stretch across the rest of the 
country. The goods that move through the ports of Long Beach and Los 
Angeles represent $97.3 billion in U.S. trade, support 2,121,500 jobs 
nationwide and deliver $4.51 billion in State and local taxes 
throughout the country.
    There are many other projects, similar to the Alameda Corridor that 
still need funding. Here are a few of examples drawn from our members:

      The Port of Pittsburgh will need up to $30 million for 
rail, road and port improvements.
      To facilitate goods movement San Bernardino County, 
California needs $383.3 million and Riverside County, California needs 
$926.7 million.
      For infrastructure improvements Washington State needs 
$183.8 million.
      The Gateways Cities Council of Governments in California 
alone needs $4 billion for improvements for goods movement and freight 
related congestion.

    These are just a few examples of tremendous need for intermodal 
infrastructure improvements.
Recommendation Detail
    In response to these problems, the Coalition for America's Gateways 
and Trade Corridors is asking Congress to:
1. Increase Funding for Freight Mobility
    Funding needs for freight mobility are large, and will be met in a 
variety of ways. It is estimated that some 25 percent of the general 
highway expenditures go to the benefit of freight movement. Special 
programs to encourage public-private partnerships will be a key element 
as well. Given the need for major, targeted investments that meet 
national needs, but are built by regional, State and local entities, 
there needs to be a targeted program to encourage and support these 
projects.
    A minimum of $2 billion per year for the Borders and Corridors 
Programs is required immediately to support designated programs for 
freight technology and infrastructure, such as intermodal connectors. 
This amount could productively be doubled as projects move out of 
design and into construction in the next reauthorization period.
    Since the beginning of the program, funding requests from States 
and MPOs have exceeded available funds by a ratio of 15:1. Much of this 
funding has gone to the planning, design and engineering of future 
projects. There is clearly large unmet demand for funding and a growing 
backlog of projects that are ``ready to go.'' The U.S. Department of 
Transportation projects that the volume of freight movements in the 
U.S. will double over the next 20 years. As a result, demands for 
infrastructure project funding will increase ever further.
2. Utilize Creative Funding Approaches
    To provide the level of funding required, Congress should actively 
explore a variety of funding approaches including the possibility of 
utilizing general funds. Available funds under the current Borders and 
Corridors Programs should be increased to support freight-related 
intermodal projects, especially projects that aim to reduce greenhouse 
gases.
    Attention should also be focused on restructuring and expanding 
Federal loan and loan guarantee mechanisms to provide grants and long-
term credit for intermodal and intermodal connector projects. The 
program should create incentives for State and local actions taken in 
support of freight movement projects that are designated under a 
national program.
3. Establish Freight Mobility as a Central Element in National 
        Transportation Policy and a Key Factor in State and Local 
        Planning
    Establishing and maintaining freight mobility as a high national 
priority must be articulated and reinforced in a variety of ways. 
Through public pronouncements and policy documents both Congress and 
the Administration need continually to underscore the importance of 
freight transportation and the urgency of increasing the capacity and 
efficiency of our national system.
    The Coalition is a member of the Freight Stakeholders Coalition and 
supports the principles outlined in testimony presented by that 
organization, which not only call for greater funding but also better 
freight data and planning.
    Freight mobility needs to be given higher priority as an element in 
State and local transportation planning. Strong relationships exist 
between the Departments of Transportation and Defense, but these 
relationships need updating to align them with today's priorities.
    Congress should create a National Council on Freight Mobility 
(including community mitigation) with strong representation from both 
shippers and carriers, as well as affected communities and other 
stakeholders, to advise the Secretary of Transportation.
    The Council would provide advice and counsel on:

      Overall freight infrastructure expansion strategy
      Developing trends and technology in freight movement
      Determining public interest in freight infrastructure 
projects
                               __________
 Responses of Michael Huerta to Additional Questions from Senator Reid
    Question 1. Mr. Larrabee argues in his testimony that at the same 
time Congress continues to support the enhancement of highway capacity, 
we should consider how to foster the development of other modes to 
accommodate increasing demand. What specific steps do you recommend 
Congress take to lighten the load on our highways and ensure that other 
modes share more equally in moving freight through our nation?
    Response. The Coalition believes competition in the marketplace is 
the best way to decide questions regarding the distribution of freight 
among modes to be decided. However, much can be done to improve the 
overall efficiency of our nation's transportation system.
    For example, the Coalition believes too small a portion of TEA-21 
is devoted to freight-related intermodal projects. Intermodal 
connectors currently have up to twice the engineering deficiencies and 
pavement deterioration than National Highway System non-Interstates 
routes. Also, while the current gateway and trade corridor system is 
pressed to accommodate the current traffic levels, demands on them are 
expected to double by 2020. Seamless transfer of goods between the 
modes will help meet that demand.
    The large burden placed on our freight transportation system has 
only been exacerbated by increased security concerns since September 
11. Intermodal freight infrastructure is critical to national defense. 
Thirty-eight thousand-miles of the interconnected civilian rail 
system--vital for carrying heavy, oversized equipment and weapons 
systems--links some 170 strategic defense installations to seaports for 
military deployment.
    Ports and their connectors have always been the point of 
embarkation for defense materiel, and this role is even more important 
as our global strategy emphasizes flexible response. Connectors play a 
vital role in the rapid mobilization of personnel and materiel toward 
points of deployment.
    Accordingly, The Coalition recommends that a larger portion of 
Federal transportation efforts target intermodal connectors and other 
infrastructure that improve our nations ability to move goods to and 
from our international gateways.

    Question 2. We hear a lot of positive feedback about the Alameda 
Corridor project and how Federal funds were able to leverage private 
sector, State and local funds for a project that benefited the port, 
the trucking companies, and the railroads. How useful is the Alameda 
Corridor model and can it be replicated elsewhere with some Federal 
assistance?
    Response. The Alameda Corridor is a great example of how focused 
Federal funds can leverage the involvement of other governments and the 
private sector in transportation improvement projects.
    We believe this public-private project exemplifies the type needed 
throughout the country. While at first glance this may seem to be only 
a rail project, it will also facilitate more efficient truck, ship and 
rail movement. The benefits from moving freight in and out of our 
nation's busiest ports faster will not only be felt in Southern 
California, but will stretch across the rest of the country. The goods 
that move through the ports of Long Beach and Los Angeles represent 
$97.3 billion in U.S. trade, support 2,121,500 jobs nationwide and 
deliver $4.51 billion in State and local taxes throughout the country.
    There are many other projects, similar to the Alameda Corridor that 
still need funding. Here are a few of examples drawn from our members:

      The Port of Pittsburgh will need up to $30 million for 
rail, road and port improvements.
      The Alameda Corridor East, San Gabriel Valley, and OnTrac 
Corridors in California need $2.5 billion for infrastructure 
improvements.
      To facilitate goods movement San Bernardino County needs 
$383.3 million and Riverside County needs $926.7 million.
      For infrastructure improvements Washington State needs 
$183.8 million.
      The Gateways Cities Council of Governments alone needs $4 
billion for improvements for goods movement and freight related 
congestion.

    In each of these projects, Federal funds will galvanize together 
the assets of local governments with private sector transportation 
providers in a manner similar to that which occurred with the Alameda 
Corridor project. I should note, however, that the Federal assistance 
the Alameda Corridor project received was primarily in the form of a 
loan. While this worked for that specific project, it will not work in 
every case and Congress should look at both grant and loan funds to 
facilitate projects such as those described above.

    Question 3. Many people believe that the Borders and Corridors 
Programs has not been able to successfully address many key freight 
issues. One improvement I believe we should consider is to revise this 
program to encourage public-private partnerships through a greater 
emphasis on innovative finance and other creative incentives. How else 
can we improve the Borders and Corridors Programs to target the highest 
priority freight corridors and intermodal facilities?
    Response. One significant step that can be taken is to establish 
freight mobility as a central element in national transportation policy 
and a key factor in State and local planning.
    Establishing and maintaining freight mobility as a high national 
priority must be articulated and reinforced in a variety of ways. 
Through public pronouncements and policy documents both Congress and 
the Administration need continually to underscore the importance of 
freight transportation and the urgency of increasing the capacity and 
efficiency of our national system.
    The Coalition is a member of the Freight Stakeholder Coalition and 
supports the principles outlined in testimony presented by that 
organization which not only calls for greater funding but also better 
freight data and planning.
    Freight mobility needs to be given higher priority as an element in 
State and local transportation planning. Strong relationships exist 
between the Departments of Transportation and Defense, but these 
relationships need updating to align them with today's priorities.
    To advise the Secretary of Transportation, Congress should create a 
National Council on Freight Mobility (including community mitigation) 
with strong representation from both shippers and carriers, as well as 
affected communities and other stakeholders.
    The Council would provide advice and counsel on:

      Overall freight infrastructure expansion strategy;
      Developing trends and technology in freight movement;
      Determining public interest in freight infrastructure 
projects;

    With respect to the Borders and Corridors program funds:

      The distribution of funds should be freight specific, and 
there should be a qualification threshold based on freight volumes and 
freight-related congestion to ensure limited dollars reach high-volume 
corridors/borders/gateways.
      Entity eligibility should be clarified and broadened to 
other public and quasi-public organization, such as multi-
jurisdictional authorities.
      The programs should be redefined to address the needs of 
all trade gateways, not only land borders, and gateway connected trade 
corridors. Many gateways that handle high volumes of freight are not 
eligible for funding because they may not be ``borders.'' For example, 
while Illinois is not a ``border State,'' one-third of the nation's 
freight passes through Chicago and it is the largest intermodal hub in 
the Nation. Similarly, inland ports are also important gateways that 
enable the efficient movement of goods throughout the country.
      The designated ``high priority'' corridors eligible for 
funding under the Corridors Program need to be reexamined to ensure 
freight intensive areas can apply for funding. Currently, there are 
many important projects in need of funding that do not fall in one of 
the 43 priority corridors designated under TEA-21. Highest priority 
should be given to corridors that move goods to and from trade 
gateways.
                                 ______
                                 
    Responses of Michael Huerta to Additional Question from Senator 
                                Jeffords
    Question 1. Mr. Huerta, you recommend that a minimum of $2 billion 
per year be provided for the Borders and Corridors Programs, and that 
the $2 billion should be doubled in future years. You also recommend 
that the Congress expand Federal loan and loan guarantee mechanisms for 
such projects. Would you please expand upon how this $4 billion in 
annual funding could be used to meet your estimated demand for funding.
    Response. The Coalition's recommendation is that funding for the 
Borders and Corridors Program must be increased to not less than $ 2 
billion annually. With respect to how funds can be most productively 
used the Coalition offers the following recommendations:

      The distribution of funds should be freight specific, and 
there should be a qualification threshold based on freight volumes and 
freight-related congestion to ensure limited dollars reach high-volume 
corridors/borders/gateways.
      Entity eligibility should be clarified and broadened to 
other public and quasi-public organization, such as multi-
jurisdictional authorities.
      The programs should be redefined to address the needs of 
all trade gateways, not only land borders, and gateway connected trade 
corridors. Many gateways that handle high volumes of freight are not 
eligible for funding because they may not be ``borders.'' For example, 
while Illinois is not a ``border State,'' one-third of the nation's 
freight passes through Chicago and it is the largest intermodal hub in 
the Nation. Similarly, inland ports are also important gateways that 
enable the efficient movement of goods throughout the country.
      The designated ``high priority'' corridors eligible for 
funding under the Corridors Program need to be reexamined to ensure 
freight intensive areas can apply for funding. Currently, there are 
many important projects in need of funding that do not fall in one of 
the 43 priority corridors designated under TEA-21. Highest priority 
should be given to corridors that move goods to and from trade 
gateways.
                               __________
   Statement of John D. Caruthers, Jr., Chairman, I-69 Mid-Continent 
                           Highway Coalition
    Messrs. Chairmen and members of the subcommittees, it is a pleasure 
to come before you today to discuss the importance of the completion of 
Interstate I-69 to the efficient movement of the nation's freight.
    When completed, I-69 will span the nation's heartland, connecting 
Canada and Mexico through the States of Michigan, Illinois, Indiana, 
Kentucky, Tennessee, Mississippi, Arkansas, Louisiana and Texas. 
Designated as congressional High Priority Corridors 18 and 20 in the 
Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) and as 
Interstate Route I-69 in the Transportation Equity Act for the 21st 
Century (TEA-21), the I-69 Corridor traverses over 150 counties and 
hundreds of municipalities, directly serving over 25 million people. 
The I-69 Mid-Continent Highway Coalition is comprised of cities, 
counties, States, business, labor and civic organizations all along the 
I-69 Corridor. It reflects the economic diversity of this vast region, 
including the agriculture, mining, timber, energy, transportation, 
chemical, electronic and industrial sectors-current and future users of 
the I-69 Corridor.
    Two sections of the Corridor 18 system--Interstate 69 from Port 
Huron, Michigan at the Canadian border to Indianapolis, Indiana and 
Interstate 94 from Port Huron southwest to the Ambassador Bridge in 
Detroit and west to Chicago, Illinois--are existing-open-to-traffic 
Interstates. The rest of Corridor 18, as well as Corridor 20, is under 
development. From Indianapolis south I-69 connects Evansville, Indiana, 
Memphis, Tennessee, Mississippi, Arkansas, Shreveport/Bossier City, 
Louisiana and Houston, Texas to the Lower Rio Grande Valley at the 
Mexican border. Corridor 20 extends along US 59 from Laredo, Texas at 
the Mexican border through Houston to Texarkana, Texas. A portion of 
Corridor 20 overlaps Corridor 18. Together, Corridors 18 and 20 
comprise I-69.
    The I-69 Corridor 18 and 20 system spans over 2600 miles. About 
2000 miles from Indianapolis to the Mexican border remain to be 
completed. Completion of I-69 will not require an entirely new facility 
from Indianapolis to the Mexican border. In some areas it will link 
existing Interstates or highways at Interstate standards. In other 
areas it will require upgrading and linking existing non-Interstate 
highways and, in others, new construction.
    Work is underway along the entire I-69 corridor. Feasibility 
studies have been completed and have shown that both Corridors 18 and 
20 have positive cost benefit ratios returning $1.57 and $1.68 
respectively for every dollar invested. Location and environmental 
studies are in progress and some sections are in design, preliminary 
engineering and construction. The entire corridor will be ready to go 
to construction and, in fact, much of it can be completed in the 
upcoming TEA-21 reauthorization, if funds are available.
    While I-69 traverses nine States, it is important to the Nation as 
a whole; for efficient movement of freight, for trade, intermodal 
connectivity and economic development. Trade has shifted, particularly 
after the passage of the North American Free Trade Agreement (NAFTA), 
from east-west to north-south. Canada and Mexico are now the United 
States' major trading partners. U.S. Mexican trade has more than 
doubled since the passage of NAFTA in 1993. U.S. imports from Mexico 
were up 175 percent from 1993 to 1999. U.S. exports to Mexico rose 109 
percent over the same period and trade with Canada increased 73 
percent. In 2001, 80 percent of U.S. trade with Mexico and 67 percent 
of U.S. trade with Canada went by truck. The I-69 Corridor accounts for 
over 63 percent of the nation's truckborne trade with Canada and 
Mexico. It has the nation's busiest border crossings on both the 
Canadian and Mexican borders. The Michigan border points of Detroit and 
Port Huron account for 48 percent of the nation's truckborne trade with 
Canada and the Texas border between Laredo and the Lower Rio Grande 
Valley accounts for over 49 percent of the nation's truckborne trade 
with Mexico.
    Examining the impact of NAFTA trade on just the I-69 States 
represented at this joint subcommittee hearing, in my own State of 
Louisiana truckborne exports and imports to Canada and Mexico grew 47 
percent from 1995 to 2000, from $856 million to $1.26 billion. The 
largest increase in freight traffic has been in truckborne exports to 
Mexico which have tripled since 1995. Truckborne exports from 
Mississippi to Mexico have grown 105 percent since 1995 and truckborne 
imports have grown 74 percent. Total truckborne trade between 
Mississippi and Canada and Mexico increased from $984 million to $1.415 
billion, or 44 percent between 1995 and 2002. Truckborne trade between 
Illinois and Canada rose 49 percent from $10.76 billion to $16 billion. 
Truckborne trade between Illinois and Mexico rose 138 percent from $1.9 
billion to $4.6 billion. The value of truckborne trade between Texas 
and Mexico and Canada has increased from $35.6 billion to $72.2 billion 
since 1995, 103 percent over 5 years. The largest increase has been in 
truckborne exports from Texas to Mexico. Michigan and Texas are our 
nation's two largest trading partners with other countries in North 
America, accounting for $175 billion in value carried by all modes of 
surface transportation in 2000. Texas' North American trade is the 
equivalent of the combined North American trade activity of California, 
Pennsylvania and North Carolina.
    ooking at freight flows nationwide, not just with Canada and 
Mexico, approximately half of the total freight shipped in the United 
States in 1997--over five billion tons--passed through, originated or 
terminated in the I-69 Corridor States. Freight is entering and leaving 
the I-69 Corridor by truck, rail, air and water. Seventeen of the 
nation's top 25 seaports are directly connected to I-69 and 13 inland 
waterway ports serve I-69 cities. Fifteen of the nation's top 25 air 
cargo airports are readily accessible to I-69. There are 96 rail 
terminals within 150 miles of the Interstate 69 Corridor. Every major 
eastern and western rail carrier and both Canadian carriers have 
terminal operations on the I-69 Corridor. There are truck rail 
intermodal facilities in every major city along the I-69 Corridor.
    The I-69 Port of Houston leads the Nation in foreign waterborne 
tonnage. The Port of Houston handled 128.8 million tons of foreign 
cargo volume in 2000, 23 percent more than the foreign freight traffic 
handled at any other port in the United States. The foreign trade cargo 
volume handled at the Port of Houston in 2000 was the equivalent of the 
foreign cargo volume at the Ports of Long Beach, Los Angeles, Portland 
and Seattle combined. It was also the equivalent of the 2000 foreign 
cargo volume at the Ports of New York/New Jersey, Hampton Roads, 
Charleston, and Miami combined. With the exception of the Port of South 
Louisiana, which is also directly accessible to I-69, the Port of 
Houston handled more total trade tonnage (imports and exports) in 2000 
than any other port in the United States. The Port of Houston has 150 
trucking lines and two railroads operating intermodal service.
    While the Port of Louisiana is ranked third in the world in total 
tonnage, with 194 million metric tons of cargo volume, and the Port of 
Houston is ranked eighth in the world in tonnage with 144 million 
metric tons, container traffic is also growing. Container traffic in 
Gulf of Mexico ports served by I-69 is growing faster than the national 
average or than traffic at Atlantic or Pacific ports. Between 1990 and 
2000 Gulf port container traffic increased by 105 percent as compared 
to the national average of 99 percent. Container traffic in the Port of 
Houston grew 113 percent.
    The I-69 freight corridor also serves the nation's inland 
waterways. The I-69 Port of Memphis is the second largest inland port 
in the country. The location of a foreign trade zone, it generates $1.5 
billion in economic activity annually. The Port handled 18.3 million 
tons of domestic trade cargo volume in 2000. More than 275 trucking 
lines operate regular intermodal services in the Port of Memphis. In 
the city of Memphis, one of the top ten distribution centers in the 
United States, all modes of transportation converge and link to I-69. 
Federal Express operates its main hub in Memphis. The company's 
delivery of nine million packages a day includes a high percentage of 
intermodal movements between truck and air. Every major eastern and 
western rail carrier has a terminal in this I-69 gateway.
    Trade entering I-69 from all modes of transportation is growing 
faster than in the rest of the Nation. The trade tonnage moving through 
the U.S.' top 50 entry points--including land, sea and air--grew 8.3 
percent from 1990 to 1999. Trade tonnage moving through I-69 points of 
entry grew 18.3 percent, or more than twice as fast as the national 
average.
    A Federal Highway Administration (FHWA) study, ``Freight Analysis 
Framework'' 2000, suggests that the recent growth in freight traffic 
will continue through the year 2020. The study estimates that total 
domestic freight traffic will increase by approximately 87 percent over 
the next 20 years and that international trade will increase over 107 
percent. The vast majority of the new growth will be in the trucking 
industry with trucks expected to handle 68 percent of the increased 
tonnage, 82 percent of the increased value and 62 percent of the 
increased ton-miles. The FHWA Freight Analysis shows that the majority 
of the expected growth in truck shipments will continue to be in the 
central, eastern and southern United States, with a dominant movement 
in the southwest to northeast direction--a movement ideally suited for 
the I-69 Corridor.
    Yet the I-69 Corridor has not been completed and there is no direct 
Interstate level highway from Indianapolis to the Mexican border. 
Completion of I-69 will significantly enhance safety and efficiency 
along this key international trade route. I-69 will reduce travel time, 
fuel consumption and costs over the existing circuitous route. It is an 
essential intermodal link for trade and commodity flow. Completion of 
the Corridor 18 portion of I-69 alone is also projected to save 3100 
lives, avoid 158,000 injuries and 409,000 property damage accidents.
    In addition to its national and international trade benefits, I-69 
will stimulate economic growth. I-69 traverses some of the nation's 
most impoverished regions. There are over 9.1 million people living 
below the poverty level in the I-69 Corridor States. In six of the 
Corridor States the population in poverty exceeds the U.S. average. 
There are 13 empowerment zones, enhanced enterprise communities and 
enterprise communities along the Corridor, including two rural 
empowerment zones--Mid-Delta and Lower Rio Grande Valley. Construction 
of I-69 will provide economic growth. The Corridor 18 Feasibility Study 
estimated that, in the Houston to Indianapolis segment alone, I-69 will 
create 27,000 jobs, add $11 billion in wages and produce $19 billion in 
value added through 2025.
    When the Interstate system was initially designed in the 1940's and 
50's, it was laid out generally east to west, reflecting the 
demographics, trade patterns and defense needs of the time. Trade has 
shifted, particularly after the passage of the North American Free 
Trade Agreement (NAFTA), from east-west to north-south. However, when 
the Interstate was declared completed in 1995, some of the newer north-
south sections like I-69 were left dangling and unfinished. The promise 
of the National Corridor Planning and Development and Coordinated 
Border Infrastructure programs in TEA-21, of which the I-69 Mid-
Continent Highway Coalition was a major proponent, was the recognition 
that within the 160,000 mile National Highway System there were some 
remaining, unfinished corridors of significance to the Nation as a 
whole, serving national objectives of trade and economic growth, that 
still needed to be completed and merited a separate program with 
dedicated funding to do so. Unfortunately, the program was only funded 
at $140 million a year nationwide and many of the projects that 
qualified or were earmarked for funding were of local, not national 
interest. Despite insufficient funding diluted among projects that are 
not nationally significant, the I-69 Corridor made significant 
progress. Since the inception of TEA-21, I-69 has received over $245 
million from the National Corridor Planning and Development and the 
Coordinated Border Infrastructure programs and directly from the 
Highway Trust Fund. Funds have also been provided for specific segments 
in ISTEA, TEA-21 and appropriations. States have also invested 
substantial amounts of their own funds.
    The Corridor has moved ahead so significantly that all of I-69 can 
go to construction in the period of TEA-21 reauthorization and much of 
it can be completed--if dedicated funds are available to do so. The 
last estimated cost of completing the unfinished portion of I-69 was 
$8.3 billion, with the Federal share at $6.6 billion.
    Having built the Interstate system, which served us well for the 
latter half of the twentieth century, we cannot rest on our laurels. We 
must invest our resources in those unfinished corridors that serve 
today's and tomorrow's 20 first century trade flows such as I-69. There 
are a number of mechanisms to accomplish this; limiting the Corridors 
and Borders program to major trade corridors and increasing its 
funding, dedicating program funds to complete unfinished Interstate 
links or funding freight corridors. Any of these programmatic options 
would work--whether alone or in combination. The point is that we must 
recognize the need for and build the infrastructure to serve our 
nation's freight flows. The traffic is there. The intermodal 
connections--rail, water, and air--are there. The trade is surging at 
Houston, Detroit and Laredo. The maquiladoras in the Lower Rio Grande 
Valley of Texas are manufacturing automobile parts, electronics, 
computers, batteries and plastic, glass and rubber components and 
transporting them by truck for final assembly in manufacturing 
facilities in Michigan, Indiana, Illinois and Ohio. Corn from Indiana 
is being trucked to the Lower Rio Grande Valley to be used as corn 
syrup in soft drinks, fruit juices and candy produced in maquiladoras 
and shipped worldwide. Cotton is going by truck from Mississippi to be 
made into clothing apparel in South Texas. Foreign exports from the 
Port of Houston are going by truck to Chicago and Indianapolis. Yet the 
Interstate level facility to transport these products safely, 
efficiently and economically--I-69 remains unfinished.
Interstate 69--High Priority Corridors 18 and 20
      Designated as congressional High Priority Corridors 18 
and 20 in the Intermodal Surface Transportation Efficiency Act of 1991 
(ISTEA) and as Interstate Route I-69 in the Transportation Equity Act 
for the 21st Century (TEA-21), the I-69 Corridor traverses over 150 
counties and hundreds of municipalities, directly serving over 25 
million people. When completed, I-69 will span the nation's heartland, 
connecting Canada and Mexico through the States of Michigan, Illinois, 
Indiana, Kentucky, Tennessee, Mississippi, Arkansas, Louisiana and 
Texas.
      Two sections of the Corridor 18 system--Interstate 69 
from Port Huron, Michigan at the Canadian border to Indianapolis, 
Indiana and Interstate 94 from Port Huron southwest to the Ambassador 
Bridge in Detroit and west to Chicago, Illinois--are existing-open-to-
traffic Interstates. The rest of Corridor 18, as well as Corridor 20, 
is under development. From Indianapolis south I-69 connects Evansville, 
Indiana, Memphis, Tennessee, Mississippi, Arkansas, Shreveport/Bossier 
City, Louisiana and Houston, Texas to the Lower Rio Grande Valley at 
the Mexican border. Corridor 20 extends along US 59 from Laredo, Texas 
at the Mexican border through Houston to Texarkana, Texas. A portion of 
Corridor 20 overlaps Corridor 18. Together, Corridors 18 and 20 
comprise I-69.
      When the Interstate system was initially designed, it was 
laid out generally east to west, reflecting the demographics, trade 
patterns and defense needs of the time. Trade has shifted, particularly 
after the passage of the North American Free Trade Agreement (NAFTA), 
from east-west to north-south. U.S. Mexican trade has more than doubled 
since the passage of NAFTA in 1993. U.S. imports from Mexico were up 
175 percent from 1993 to 1999. U.S. exports to Mexico rose 109 percent 
over the same period and trade with Canada increased 73 percent. The I-
69 Corridor accounts for over 63 percent of the nation's trade with 
Canada and Mexico. It has the nation's busiest border crossings on both 
the Canadian and Mexican borders, accounting for 48 percent of the 
nation's trade with Canada and over 49 percent of the nation's trade 
with Mexico.
      Yet there is no direct Interstate level highway from 
Indianapolis to the Mexican border. Completion of I-69 will 
significantly enhance safety and efficiency along this key 
international trade route. Completion of the Corridor 18 portion of I-
69 alone is projected to save 3100 lives, avoid 158,000 injuries and 
409,000 property damage accidents. I-69 will reduce travel time, fuel 
consumption and costs over the existing circuitous route. It is an 
essential intermodal link for trade and commodity flow. Seventeen of 
the nation's top 25 seaports are directly connected to I-69 and 15 of 
the nation's top 25 air cargo airports are readily accessible to I-69.
      In addition to its national and international trade 
benefits, I-69 will stimulate economic growth. I-69 traverses some of 
the nation's most impoverished regions. There are over 9.1 million 
people living below the poverty level in the I-69 Corridor States. In 
six of the Corridor States the population in poverty exceeds the U.S. 
average. There are 13 empowerment zones, enhanced enterprise 
communities and enterprise communities along the Corridor, including 
two rural empowerment zones--Mid-Delta and Lower Rio Grande Valley. 
Construction of I-69 will provide economic growth. The Corridor 18 
Feasibility Study estimated that, in the Houston to Indianapolis 
segment alone, I-69 will create 27,000 jobs, add $11 billion in wages 
and produce $19 billion in value added through 2025.
      The I-69 Corridor 18 and 20 system spans over 2600 miles. 
About 2000 miles from Indianapolis to the Mexican border remain to be 
completed. The last estimated cost of completing the unfinished portion 
of I-69 was $8.3 billion, with the Federal share at $6.6 billion. 
Completion of I-69 will not require an entirely new facility from 
Indianapolis to the Mexican border. In some areas it will link existing 
Interstates or highways at Interstate standards. In other areas it will 
require upgrading and linking existing non-Interstate highways and in 
others new construction.
      ISTEA provided $4.05 million for Corridor 18 Feasibility 
and Special Issues Studies, the identification of Sections of 
Independent Utility (SIUs) and Special Environmental Studies. The State 
of Texas paid for the Corridor 20 Feasibility Study and other location 
studies out of State only funds. Since the inception of TEA-21, 
Corridors 18 and 20 have received over $245 million from the National 
Corridor Planning and Development and the Coordinated Border 
Infrastructure programs and directly from the Highway Trust Fund. Funds 
also have been provided for specific segments in appropriations, ISTEA 
and TEA-21 and States have invested their own funds.
      Work is underway along the entire I-69 corridor. 
Feasibility studies have shown that both Corridors 18 and 20 have 
positive cost benefit ratios returning $1.57 and $1.68 respectively for 
every dollar invested. Location and environmental studies are in 
progress and some sections are in design, preliminary engineering and 
construction. The entire corridor will be ready to go to construction 
and, in fact, much of it can be completed in the upcoming TEA-21 
reauthorization, if funds are available.
      The Corridors and Borders program is only authorized at 
$140 million per year and there has been over $2 billion in demand for 
funding each year. While I-69 is truly a national/international 
Corridor, there are many projects that have received funding under the 
Corridor program that only serve one State or region.
      Completion of I-69 will require funding dedicated to I-69 
and other corridors that are truly international in scope and service. 
I-69 is the nation's preeminent national/international Corridor. It is 
one of the nation's few unfinished Interstates that remained when the 
Interstate program was terminated in 1995. It is also one of a handful 
of high priority corridors that are designated as future Interstates 
under Section 1105(e)(5)(A) of ISTEA.
      The I-69 Mid-Continent Highway Coalition has been the 
primary advocate for I-69 before Congress and the executive branch. The 
Coalition spearheaded the creation of the National Corridor Planning 
and Development and Coordinated Border Infrastructure programs in the 
Transportation Equity Act for the 21st Century and has consistently 
advocated funding for I-69 in annual appropriations and at the 
Department of Transportation. The Coalition is a dues paying 
organization of cities, counties, states, business, labor and civic 
organizations all along the I-69 Corridor. Supporters include over 45 
Chambers of Commerce representing over 13,050 businesses. The I-69 Mid-
Continent Highway Coalition reflects the economic diversity of this 
vast region, including the agriculture, mining, timber, energy, 
transportation, chemical, electronic and industrial sectors-current and 
future users of the I-69 Corridor.
                               __________
      Statement of Jim Fiske, Chairman, Magtube, Inc., Goleta, CA
    I am Jim Fiske, Founder and Chairman of Magtube, Inc. of Goleta, 
California. We are a venture funded-company developing a new freight 
transportation system that promises faster service, higher security, 
far better energy efficiency, cleaner operation, and lower cost than 
any existing mode. Thank-you for giving me this opportunity to present 
information that I think could have a significant impact on the 
transportation planning that is so crucial to the economic future of 
this country.
    As I'm sure the committee is aware, the American transportation 
industry is vast, encompassing nearly 11 percent of the GNP. According 
to the Bureau of Transportation Statistics, one out of every 10 U.S. 
jobs is directly or indirectly related to transportation. Some industry 
experts say the figure is closer to one out of five when all inventory, 
logistics, and related corporate functions are included. This industry, 
and the American population, is now facing severe problems, not the 
least of which is increasing congestion. For example, according to the 
Southern California Association of Governments (SCAG) the average speed 
for a 24-hour weekday period on the greater Los Angeles highway and 
arterial system is about 38 miles per hour. During the morning peak 
period in some of the heaviest corridors the average travel speed is 
less than 20 miles per hour. And Los Angeles is far from alone. In 
general, demand for transport rises faster than population or average 
incomes. Roughly 20 percent of U.S. urban areas are experiencing 
extreme congestion, and the percentage is growing.
    The capacity of our highways is clearly being strained to the 
limit, and yet the Department of Transportation projects that highway 
demand will only grow. Between the years 2000 and 2025 the number of 
passenger vehicles is forecast to grow from 219 to 262 million, while 
intercity ton-miles of freight carried by truck grows by 88 percent. 
City, State, and Federal agencies have earmarked huge sums of money to 
deal with this growth. The SCAG Regional Transportation Plan alone 
includes $15 billion for highway and arterial improvement projects 
including mixed-flow lanes, interchanges, truck climbing lanes, truck 
lanes and grade crossings. But even if this plan is completed SCAG 
projects that Southern California congestion delays could increase more 
than 100 percent by 2025. Some statistics project that a freeway trip 
taking 1 hour under normal conditions today will take 3 hours and 10 
minutes in 2020.
    What are we to do? Government and industry experts are straining to 
provide improvements but most industry analysts seem to believe that 
increasing congestion, safety concerns, and environmental damage is 
inevitable--``an inescapable part of modern urban life worldwide''. I 
am here to tell you that nothing could be further from the truth. The 
``Electro-Mechanical Revolution'' is far from over.
    The immensity of the transportation industry aggravates its 
problems and makes them difficult to deal with, but it also creates a 
huge potential market for cost effective solutions.
    I think there is a common misconception that the passenger 
transport business is much larger than the freight business, and as a 
result far more attention has been focused on improving the 
infrastructure and technology required to move people than that 
required to move freight. If this continues, we run the risk of missing 
a major opportunity. In reality, the freight component of the industry 
is both larger than the passenger component and far easier to improve. 
Furthermore, by improving the freight component we will greatly reduce 
the strain on the passenger component of the industry. But railroad, 
truck and air transport are all mature technologies with fundamental 
barriers to improvement. Significant improvement in speed, cost, and 
quality of service requires a totally new approach that circumvents 
existing problems.
    One possibility frequently overlooked is the pipeline. More than 
1.4 million miles of gas and petroleum transmission and distribution 
pipeline are in service in America. The technology is highly developed, 
well understood, and extremely cost effective. Transporting a ton of 
oil by pipeline is nearly 5 times cheaper than shipping a ton of 
freight by rail, 50 times cheaper than truck, and 170 times cheaper 
than air. Pipelines are also the safest transport mode and the least 
disruptive to the environment. But pipelines have two major limitations 
that prevent their application to general freight--their transport 
speed is very low (oil travels at roughly 4 miles per hour), and they 
only carry fluids.
    Another possibility is Maglev, or magnetic levitation, which uses 
magnetic forces to provide both lift and propulsion. Studies sponsored 
by U.S. Government agencies in the early 1990's compiled a long list of 
potentially beneficial attributes, including high speed, faster trips, 
low energy consumption, low operating costs, high reliability, low wear 
and maintenance, petroleum independence, low pollution, excellent 
system control, high capacity, safety, convenience, modest land 
requirements, and low noise. But they also revealed that capital costs 
exceeding $35 million per mile for maglev systems would result in a 
very low return on investment, making them commercially infeasible. 
Since the 1970's Germany and Japan have invested billions of dollars in 
maglev development. Neither has constructed an operational system. Only 
the Chinese government, which has purchased the German Transrapid 
design for a short installation in Shanghai, has been willing to foot 
the bill for an operational system. Barring a major cost breakthrough, 
maglev systems will never be constructed by private business alone.
    We have found that cost breakthrough.
    Engineers constantly improve operational equipment, so it's no 
surprise that their first impulse after discovering maglev technology 
was to apply it to an existing transport mode, namely railroad. Over 
time maglev became synonymous with trains. ``Maglev Train'' has become 
a single concept. This is a huge oversight. Trains are the wrong 
metaphor. Maglev is a powerful technology crippled by its association 
with the wrong application. Using maglev simply to improve a train is 
rather like using jet engines to propel a barge.
    If maglev technology is applied to pipelines, however, particularly 
freight pipelines, the result is revolutionary. This combination allows 
smaller vehicle size, narrower rights-of-way, lower complexity, reduced 
initial investment, lower energy costs, higher acceleration, higher 
speed, shorter headway, and higher system capacity. These capabilities 
reinforce each other to create a new synergy. Costs plummet, 
performance skyrockets, and the available market increases. Unlike 
maglev passenger trains, a system of maglev freight pipelines has the 
potential for a high return on investment.
    Magtube is creating just such a system. We have discovered a new 
maglev technique, for which we have patents pending, with fundamental 
advantages over previous designs. We are implementing it now. At this 
moment our first full-size maglev vehicle is floating over its track 
just outside Santa Barbara, California. Our goal is to create a new 
transportation paradigm, a arrangement of maglev pipelines or 
``Magtubes'' we call the Magnetic Levitation Freight Transportation 
Network, or more simply, the Mag Net(. This network will provide a 
level of speed, safety, security, efficiency, and cost-effectiveness 
not currently possible for mail, priority packages, perishables, and 
freight of all types. Transit times will be measured in minutes or 
hours instead of days. Think of it as an ``Internet for Freight.'' The 
Mag Net will streamline vital transportation corridors to reduce 
congestion, transit times, and costs while improving reliability. 
Construction costs will be a fraction of conventional Maglev, high 
speed rail, or highway expansion. Shipping costs will be lower than air 
freight, truck or railroad. The potential for high return on investment 
will permit private ownership, decreasing highway damage and congestion 
at no direct cost to the Federal Government. The same design can be 
used around the globe, providing even greater benefits for countries 
with poorly developed transport.
    We are currently planning the construction of pipelines a bit over 
six feet in diameter with a projected cost in the vicinity of $5 
million per mile. Our vehicles are sized to handle standard freight 
pallets for easy interchange with other modes. They will have the 
capability to move a one-ton payload at up to 500 miles per hour or 
more through an evacuated tube while providing an energy efficiency 
equivalent to more than 1000 miles per gallon of gasoline. Magtubes 
will have very high capacity when fully utilized -10,000 tons per hour 
or more should be readily achievable for a single pipe. This compares 
to a capacity of 7000 to 18000 tons per lane per hour for heavy trucks 
on an uncongested highway. Truck lanes planned for the Los Angeles area 
are projected to cost over $50 million per lane mile.
    The Mag Net's extreme energy efficiency provides a potential energy 
savings exceeding 8 billion gallons of diesel fuel per year in the U.S. 
alone, with a 72 million metric ton decrease in CO2 emissions. The 
carbon monoxide, nitrogen oxides, particulates, sulfur dioxide, 
volatile organic compounds and noise normally emitted by truck and air 
freight carriers would likewise be eliminated. With our vehicles 
traveling through underground tubes, totally isolated from passenger 
traffic, they will provide a level of safety never before seen in a 
transportation system.
    The Mag Net will also provide an unprecedented level of security.
    America's current freight system is barely able to handle the 
immense traffic flow required for free trade, even with minimal 
security. But the events of 9/11 have created a frightening dilemma--
while cursory inspection of imports is no longer acceptable, thorough 
screening seems impossible without bringing trade to a halt. Government 
and industry are struggling to find ways to efficiently move freight 
across borders while ensuring detection of explosives, chemical 
weapons, biotoxins, nuclear materials and other contraband. At present 
officials search only 2 percent of the 11 million freight containers 
arriving here each year. The solutions that have been proposed, such as 
they are, provide stop-gap measures at best. They will require huge 
expenditures and attempt to maximize security primarily by focusing it 
on a small fraction of shipments. Most trade goods will continue to 
cross borders without inspection, as they do now, or will encounter 
severe delays--or both.
    Magtube vehicles, on the other hand, will travel silently out of 
sight, protected by a vacuum, a steel tube, and several feet of earth. 
Untouchable. With computer control their precise location will always 
be known to Magtube and our security partners--and no one else. Small, 
standardized shipping containers will provide compatibility with other 
shipping modes and easy access for inspection or machine scanning. 
Automated searches for contraband will be fast and cheap with minimal 
delays. Nuclear, biologic, and/or chemical sensors can be installed in 
each vehicle for enhanced detection capability. Freight can be 
inspected either at its source or at a facility far from any border, 
then sent to a border crossing with complete assurance that it will 
remain under constant supervision until it reaches its destination. 
Whether their cargo is tissue paper or spent nuclear fuel rods, our 
vehicles will bypass highways, railroads, border inspection stations, 
and all other sources of congestion or concern. If one link of the Mag 
Net is shut down its normal traffic will simply be rerouted through 
other links.
    We are currently in the final stages of constructing a laboratory 
demonstration of a full-scale vehicle and track. In 2003 we plan to 
begin construction of a second-generation vehicle and a high-speed test 
track. At the same time we're exploring options for commercial pilot 
projects--actual revenue-producing freight transport installations--
with organizations such as SCAG, other transportation groups in 
California, New York and Michigan, and the Department of 
Transportation. Our goal is to be ready to begin the construction of 
pilot projects in the 2004-2005 timeframe. The most attractive sites 
for these installations will be those areas with the worst problems, 
such as clean air non-attainment areas, border bottlenecks, and 
severely congested cities.
    We do not expect or want the Mag Net to be publicly funded. We are 
in business to design, build, and operate the Mag Net for profit. But 
there are several things the Federal Government could do to accelerate 
system startup and expansion. (1) Congress could make freight maglev 
installations explicitly eligible for DOT's Transportation 
Infrastructure Finance and Innovation Act (TIFIA) to provide Federal 
credit assistance such as direct loans, loan guarantees and lines of 
credit. Additionally with much of the focus of next year's TEA-21 
reauthorization on the Congestion Mitigation and Air Quality (CMAQ) 
program, we would respectfully that it be clarified that technologies 
such as ours, be eligible, where appropriate and necessary, for CMAQ 
funding for those areas of the country in air quality non-attainment 
and maintenance areas. (2) Congress could help provide access to or 
assistance in acquiring rights-of-way for such installations adjacent 
to Federal aid highways. (3) Congress could make freight maglev part of 
any proposed freight component in the next highway authorization. (4) 
Congress could provide assistance with Federal agencies in identifying 
pilot projects and planning border crossing installations to improve 
freight flow and security. (5) Congress could assist us in our 
discussions with multiple Federal agencies and with our cross-border 
trading partners, Canada and Mexico.
    Major breakthroughs in transportation technology are exceedingly 
rare--the railroad, the automobile, the airplane--but they have far-
reaching consequences. In 1942 German submarines sank most of our oil 
tankers along the Gulf and East Coasts. In response we built the 
government-financed War Emergency Pipeline, the first large-diameter 
long-distance oil pipeline, and soon discovered it had immense economic 
and operational advantages. In that case it took a World War to 
overcome inertia and jumpstart a better method of transportation. We 
are now facing another crisis, a battle against increasing congestion, 
major threats to security, stagnating travel, slower goods movement, 
and increasingly severe environmental impact. We can win this war--
without constraining the free movement of goods and people. Indeed, we 
now have a clear path to a level of mobility previously considered 
science fiction. The ``Network Economy'' need not be limited to the 
exchange of information. If we build the Mag Net and move freight 
transport below ground everybody wins--shippers, carriers, the 
government, and the public. This committee and the Congress can help us 
do it.
    Again, my thanks to the committee for allowing me to present this 
testimony. My associates and I are available at your convenience should 
you care to discuss the information I have presented, or any issue 
dealing with freight transportation and security.

                      Energy Efficiency Comparison
------------------------------------------------------------------------
                                                                  Ton-
                                                                 miles/
                                           Speed    BTU/ ton-     Gal.
                  Mode                     (mph)       mile      (diesel
                                                                 equiv.
                                                                   *)
------------------------------------------------------------------------
Railroad...............................        65          368       377
Long-haul truck........................        65         1151       120
Truck (avg)............................        65         2793       150
747-400F...............................       500       10,800      12.5
Air Freight (avg)......................       500       20,000         7
Mag Tube (est.)........................       200           48      2890
Mag Tube (est.)........................       300           49      2831
Mag Tube (est.)........................       400           60      2312
Mag Tube (est.)........................       500           81      1712
------------------------------------------------------------------------
*138,700 btu/gal

                               __________
 Statement of the Los Angeles County Economic Development Corporation 
                                (LAEDC)
    Mr. Chairman and members of the subcommittees, the Los Angeles 
County Economic Development Corporation (LAEDC), a private nonprofit, 
501(c)3, is pleased to present this overview of goods movement in 
Southern California. We appreciate the opportunity to offer this 
statement as part of legislative hearing record being developed by the 
U.S. Senate in preparation for the reauthorization of TEA-21. We 
greatly appreciate the interest and focus of the respective full 
committees in the issues surrounding TEA-21. In addition, we are very 
appreciative of the leadership demonstrated by Senator Barbara Boxer 
and Senator Diane Feinstein and the great economic and environmental 
benefits TEA-21 has brought to California's transportation system.
    This statement is based from four public policy and transportation 
studies: the Southern California Freight Management Case Study 
(enclosed); the Alameda Corridor East Train Study (enclosed); the 60-
Mile Circle (available at www.laedc.org the week of September 16th); 
and the forthcoming On-Trac Corridor Trade Impact Study, 2002. Together 
these studies, coordinated by the LAEDC, paint a remarkable picture of 
a region with a rapidly growing population, burgeoning international 
and domestic trade, and a looming trade transportation capacity crisis 
that has both local and national implications. Southern California is 
America's gateway to the Pacific Rim, and our nation's international 
trade is growing rapidly. Yet, Southern California's infrastructure is 
inadequate to handle this rising tide of trade, and the region will 
need Federal assistance and creative solutions to finance the required 
improvements.
    Today we would like to briefly introduce you to the region, 
describe its key population and trade trends, and summarize the 
region's infrastructure capacity shortfalls.
Regional Overview
    Southern California, the five-county region comprised of Los 
Angeles, Orange, Riverside, San Bernardino and Ventura Counties, 
operates on a scale normally associated with States and even countries. 
At 17 million people and growing, more people live in Southern 
California than in all of Florida, currently the fourth most populous 
State in the union. Despite its reputation for making movies and little 
else, Southern California employs more than a million people in 
manufacturing. Powered by core strengths in aircraft, biomedical 
technology, business services, food, furniture, metal fabrication, 
motion pictures and television production, textiles and apparel and 
tourism, the region produces over $600 billion in goods and services 
annually. This places the region's gross domestic product tenth in the 
world among countries, just behind Canada and Brazil and ahead of 
Mexico, Spain, India, South Korea and Australia. Home to almost 200 
different nationalities and cultures, Southern California is one of the 
most diverse places on earth. The region is one of the top tourist 
destinations in the country, and thanks to its combination of wealth, 
size and reputation for trend setting, comprises one of the world's 
most important consumer markets.
Regional Trends and Resulting Capacity Shortages
    Population and trade growth are the two key trends affecting the 
region. The five-county Southern California region will add more than 5 
million people between 2000 and 2020. This is roughly equivalent to the 
combined populations of the Cities of Los Angeles and San Diego, or 
twice the population of Chicago. Much of the growth will be internally 
generated: In addition to having the largest population base among the 
50 States, California also has one of the highest rates of natural 
increase (births minus deaths as a share of total population). Internal 
population growth will be supplemented by immigration. California has 
the highest rate of net international migration of any State, helping 
make Los Angeles a modern Ellis Island.
    Two shocking implications of this growth: First, at current rates 
of automobile ownership, five million more people will add about 2.7 
million private vehicles to the region's already congested freeways. 
Second, just to maintain the status quo, population growth of more than 
five million people will require adding twice the infrastructure and 
services that exist in present-day Chicago. For every school in 
Chicago, Southern California will need to build two.
    In terms of trade, Southern California has emerged as a leading 
global trade and transshipment center because of its massive internal 
market, heavy investment in world-class trade infrastructure, and its 
new role as the distribution center for U.S.-Pacific Rim trade. The 
massive internal market draws trade both for final consumption and for 
inputs in valued-added products ranging from shirts that are labeled 
and placed on hangers to parts that are used in manufacturing. These 
two factors help to pull in still more trade, and drive up the 
percentage of international cargo that makes its first stop in Southern 
California. With so much cargo destined here in the first place, it 
makes sense for shippers to use the region as a distribution center for 
the rest of the United States. This role is confirmed by data from the 
Los Angeles Customs District, which recorded almost one-quarter 
trillion ($230 billion) dollars in trade for year 2000.
    The $230 billion in trade is an underestimate since it is 
merchandise trade only, therefore excluding some of the region's core 
strengths such as motion pictures, tourism, and financial services. The 
number is also low because it is based on port of entry only, thereby 
excluding the region's NAFTA trade with Canada and Mexico, which 
travels primarily by truck and rail and thus is counted in border areas 
such as San Diego, Laredo and Detroit. Even still, the value of 
merchandise trade at the L.A. Customs District is expected to almost 
triple to $661 billion, 2000-2020. We'd like to quickly describe the 
growth trends and capacity issues for the region's ports, railroads, 
freeways and airports.
    Ports--The Ports of Los Angeles and Long Beach are the busiest in 
the Nation, together handling one-third of all container traffic in the 
United States and an astonishing 65 percent of all container traffic on 
the West Coast. With a combined container throughput of 9.5 million 
Twenty-Foot Equivalent Units (TEU) in 2000, they were the third busiest 
container facility in the world, behind only Singapore and Hong Kong.
    The long-term trend in container traffic at the ports has seen 
steady growth, though the pace has slowed in recent months. As recently 
as 1998, the Alameda Corridor Transportation Authority (ACTA) 
conservatively forecast year 2000 container traffic of 5.6 million TEUs 
(twenty-foot equivalent units). The actual total was 9.5 million TEUs; 
no one, including the ports, anticipated that container traffic would 
grow so fast.
    Container traffic on the Alameda Corridor East (see geographic map 
in Rail Corridors section) is now expected to almost double by 2010, 
and then double again to 32 million TEUs by 2025. For perspective, 
consider that a single large ship typically carries 6,000 TEUs. That is 
enough containers, placed end to end, to build a wall of boxes more 
than 20 miles long. The forecast growth may seem incredible, but if 
anything, it is probably conservative. Indeed, for the past 10 years, 
traffic levels have consistently surpassed previous estimates.
    Rail Corridors--Driven by the rising tide of trade flowing through 
the ports, easterly bound rail traffic is expected to rise dramatically 
over the next twenty-five years. The newly constructed Alameda 
Corridor--a 20-mile, high-speed, completely grade-separated train route 
connecting international trade via the ports and the rail yards just 
east of downtown Los Angeles--will handle some of the international 
increases. Yet the Alameda Corridor is only the first link of a massive 
regional mainline rail corridor network. Domestic and international 
trade at the two rail yards east of downtown is the starting points of 
the Alameda Corridor East. This eastbound corridor carries about three 
times the cargo of the recently completed Alameda Corridor because the 
intermodal rail yards receive more international goods by truck from 
the ports and even more domestic or locally produced goods for movement 
to the rest of the United States. The short answer is that Alameda 
Corridor East carries about 23 percent of the United States waterborne 
international trade and is the only corridor in Southern California 
that carries both domestic and international goods through the region 
to and from the rest of the United States.
Alameda Corridor East
            (Union Pacific and Burlington Northern Santa Fe Mainlines)
    As seen in the above graphic, the two rail corridors connect the 
downtown rail yards with the transcontinental rail network: the Alameda 
Corridor East (San Gabriel Valley Corridor), via the Union Pacific (UP) 
tracks through the San Gabriel Valley into San Bernardino and Riverside 
Counties, and the Alameda Corridor East (OnTrac Corridor), which 
follows the Burlington Northern Santa Fe (BNSF) mainline through 
densely populated northern Orange County into Riverside and San 
Bernardino Counties. Freight and commuter trains also share the tracks 
of both corridors, further complicating efficient mobility. The OnTrac 
Corridor, going through the city of Placentia, carries 50 percent of 
all eastbound rail cargo and is the only rail artery used by the United 
Parcel Service to move cargo to Midwest and East Coast destinations. 
OnTrac Corridor train traffic will rise 210 percent, 2000-2025, while 
the San Gabriel Valley Corridors train traffic will increase 236 
percent over the same period. Rail traffic on these routes, at more 
than one train every 10 minutes, will easily surpass current capacity, 
barring major improvements, in the next 3-5 years. Intermodal lift 
capacity in the region--the facilities that transfer containers between 
trucks and trains--is greatly constrained. Demand for intermodal lifts 
is expected to exceed capacity within the next 5 years. Simply put, in 
just a few years, a shortage of intermodal capacity and additional 
passenger trains will mean more trucks on the already congested 
freeways. At the same time, additional freight trains will translate 
into more cars on the freeway. Without additional capacity it is a no-
win situation for local commuters, the other 49 States, and the U.S. 
Treasury. Local commuters will be impacted because they will reach 
unbearable congestion. The other forty-nine will see job growth slow 
because Southern California consumers will see more difficulty 
receiving goods through eastbound rail corridors, and the U.S. Treasury 
because the customs revenues collected on imported international 
goods--an unbelievable 1 percent of all U.S. Treasury revenues comes 
from customs duties--will likely slow or decrease due to inefficient 
freight mobility in Southern California. Currently about half of those 
customs revenues are collected on goods going through Southern 
California's transportation systems.
    Freeway System--On the freeways, the number of vehicle miles 
traveled in Southern California has been rising faster than population 
growth. ``Rush hour'' has become an oxymoron in Los Angeles. The peak 
travel period has crept up to 6 hours per day, during which the average 
travel speed drops to 35 miles per hour. The Texas Transportation 
Institute annually surveys road congestion in metropolitan areas across 
the U.S., and Los Angeles has had the worst congestion every year since 
1982. The latest survey reveals 85 percent of all lane miles are 
congested, with almost half classified as ``extremely congested.'' As a 
result, on a per capita basis, the region wastes more hours (56) 
annually stuck in traffic than anywhere else in the country.
    Some freeways handle up to 40,000 trucks daily, and with heavy 
truck traffic expected to rise 65 percent, 1995-2020, they may soon 
handle up to 80,000 truck trips daily. Owing to their size and 
operating characteristics, trucks use a much greater share of freeway 
capacity than their numbers might suggest. Already, heavy trucks use 45 
to 60 percent of capacity on certain freeways, most notably the I-710. 
Since trucks move 81 percent of all tonnage originating in Southern 
California (according to the 1997 Commodity Flow Survey), increasing 
freight flows will mean more trucks on the freeways.
    Airports--Southern California's economy is increasingly dependent 
on airports. Many of the region's leading industries--from tourism to 
manufacturing to biotechnology--depend on air travel and air cargo. 
Even businesses that don't rely on air cargo directly benefit from the 
enhanced business connections and opportunities made possible by direct 
flights to and from our key overseas trading partners. The region's 
exports increasingly travel by plane. In 1995, 54 percent of regionally 
produced exports (by value) were shipped by air, and the percentage is 
higher today. Indeed, LAX handles more exports by dollar value each 
year than the Ports of Los Angeles and Long Beach combined.
    LAX is already extremely busy. In 2000, LAX was the third busiest 
passenger airport in the world, after Atlanta (ATL) and Chicago (ORD). 
Similarly, LAX was the third busiest cargo airport in the world behind 
only FedEx-hub Memphis (MEM) and Hong Kong (HKG). Although air demand 
dipped following the September 11, 2001 tragedy, the impact on long-
term air travel trends is expected to be slight. Air traffic demand has 
been skyrocketing, outpacing population growth. Estimates from the 
Southern California Association of Governments (SCAG) suggest air 
passenger demand will almost double from 82 million annual passengers 
(MAP) in 1998 to 157 MAP in 2020. Air cargo volume is expected to 
triple from 2.8 million annual tons in 1999 to 8.9 million tons in 
2020. Preliminary, post-9/11 revisions suggest these levels will be 
reached two to 3 years later than previously estimated, with passenger 
growth delayed more than cargo. Overall, the region faces a capacity 
crisis; particularly now that it seems certain that an airport will not 
be built at El Toro in Orange County.
    Congestion is a problem across all modes of transportation. The 
region will struggle to accommodate future freight operations; 10-15 
year lead times for financing and constructing upgrades to 
infrastructure are almost guaranteed; current intermodal facilities at 
local ports and rail yards will reach capacity within 5 years; and 
without major investments, the rail lines east of downtown Los Angeles 
will be so congested the rail network will effectively cease to 
function. These problems will be exacerbated by congestion on the 
roads. Air cargo facilities, for example, rely on trucks to feed 
shipments to the airport and deliver airfreight to its final 
destination, yet traffic is terribly congested in the vicinity of LAX. 
Congestion threatens both domestic and international trade moving 
through the region, and the quality of life for people who live there.
National Implications
    Southern California's trade transportation infrastructure should be 
of great concern to the rest of the United States because the region's 
global gateways and trade corridors act as conduits for two-way 
domestic and international surface trade between Pacific Rim nations 
and every region of the United States. Let's take a quick look at the 
OnTrac Corridor Trade Impact Study (2002) for two-way domestic and 
international surface trade during the year 2000 between California and 
regions of the United States.
    The international trade figure for each region represents the two-
way trade between other regions of the United States and overseas 
customers and suppliers that travel via the UP and BNSF train routes 
that comprise the Alameda Corridor East. The domestic trade numbers 
represent commerce between California and other States. Roughly half of 
the domestic trade between California and other States will originate 
or be consumed in Southern California (based on Southern California's 
share of the State's GDP). International trade diversion to other ports 
of entry is cost prohibitive since half of all international goods 
would still need to be delivered to Southern California. This means 
that over 20 percent of all U.S. waterborne trade is consumed locally 
in Southern California, or 45 percent of all customs revenue that is 
generated in the United States goes through Southern California, or .5 
percent of all the revenues of the United States Treasury is collected 
via customs duties on products imported through Southern California 
each year.
    The Northwest States (WA, OR, MT, ID and WY) received and sent 
international trade via the Alameda Corridor East in 2000 valued at 
$2.2 billion dollars. Domestic trade between the Northwest and 
California for the same year was $60.4 billion. For the Great Plains 
States (ND, SD, NE, KS, MN, IA and MO), the comparable figures were 
$8.6 billion and $42.4 billion. The numbers for the Great Lakes States 
(IL, WI, MI, IN, KY, OH and WV) were $25.0 billion and $69.4 billion. 
For the Atlantic Seaboard (CT, DE, ME, MD, MA, NH, NJ, NY, PA, RI, VT 
and VA), the figures were $34.4 billion in international and $74.6 
billion in domestic trade. In the Southeast (AR, AL, GA, FL, LA, NC, 
SC, TN and MS), the numbers were $16.0 billion international and $71.7 
billion domestic. For Texas and Oklahoma, the numbers were $12.1 
billion international and $54.2 billion domestic. And finally, for the 
Southwest States (CA, NV, AZ, UT, CO and NM), international trade 
moving through the Alameda Corridor East rail routes was valued at 
$98.0 billion and domestic trade with California was worth $80.3 
billion. The Southwest was the only region where the international 
trade was larger than the domestic only because California's 
international trade is included, but California's domestic trade with 
itself (worth $1.3 trillion in 2000) is not included in the $80 billion 
regional total.
    All these billions of dollars in domestic and international trade 
represent the value in two-way trade to other regions of the country 
and highlight the importance of efficient movement of goods through 
Southern California for the entire country. The domestic surface trade 
between California and the other States, worth tens of billions of 
dollars annually, dwarfs the enormous international trade flows. 
California consumers represent one of the largest markets for goods 
produced by other U.S. States. Thus, investing national funds in 
efficient transportation networks in California is actually in other 
States' interest. For example, Montana sells Californians about $1.5 
billion of domestic products each year and receives about $10 million 
of international trade through Southern California ports and corridors. 
Iowa, on the other hand, sells Californians about $5 billion worth of 
products each year and only buys about $300 million of Californian 
products in return. So, a lot of jobs depend on Southern California's 
appetite for products and all the Federal money spent on trade 
transportation infrastructure in Southern California will ensure that 
the goods produced in other States continue to reach their California 
customers in a timely way; may reduce warehousing cost through 
logistics strategies like ``just-in-time'' delivery; and will speed 
goods to and from overseas to destinations throughout the United 
States.
Reauthorization of TEA-21 and Freight Policy
    During the deliberations by your respective subcommittees regarding 
the reauthorization of TEA-21, we urge that you give strong 
consideration to the following proposals for Federal action to enhance 
the efficient movement of goods and freight on the nation's 
transportation system:
    1) Freight movement should be considered a major policy focus and 
high priority in the TEA-3 legislation;
    2) A dedicated category of Federal funding should be established to 
support freight related transportation infrastructure. Particular 
support should be given to trade corridor improvements, similar to the 
Alameda Corridor East extension program in Southern California, and 
other similar global gateways throughout the country. In addition, 
support should be given to the implementation of intermodal connectors, 
including connectors designed to improve ground access at international 
airports;
    3) Increased funding flexibility should be extended to existing 
TEA-21 funding categories, including CMAQ, providing access to freight 
related infrastructure, including rail grade-crossing and lowering 
improvements;
    4) Consideration should be given to new and innovative funding 
sources, including direct user-based fees, similar to the financing 
arrangement used for the Alameda Corridor project. Another concept we 
urge you to review is the earmarking of the incremental growth in 
custom revenues going through the nation's corridors and global 
gateways. These added funds should be targeted to support unfunded 
infrastructure improvements in communities that are directly related to 
the growth of two-way domestic and international trade;
    5) New policies and provisions, including changes in Federal tax 
policy to encourage public private transportation partnerships, 
including an enhanced role for Class I railroads serving the nation's 
most severely congested corridors; and
    6) Establish an Office of Freight Policy and Implementation in the 
Office of the Secretary of Transportation. One option would be to 
expand the current responsibilities of the Office of Intermodalism, and 
place the management responsibility with the Under Secretary of 
Transportation.
    Mr. Chairman, thank you for the opportunity to submit this 
statement for the legislative record associated with the 
reauthorization of TEA-21.
                               __________
   Statement of Hon. James P. McGovern, U.S. Representative from the 
                     Commonwealth of Massachusetts
    Mr. Chairman, thank you for the opportunity to testify before the 
subcommittee today. I commend you and the members for holding this TEA-
21 reauthorization hearing on truck safety. It is, as we all know, a 
critically important issue.
    Mr. Chairman, I appear before the sub-committee this afternoon 
because I believe strongly that any serious and substantive discussion 
regarding truck safety begins and ends with the subject of truck size 
and weight. That is because truck safety is largely a function of truck 
size and weight. We know this, not only from recent studies and 
reports, but from our shared common experience as well.
    Too many of us, too often, have been unsettled while driving 
alongside or behind huge triple trailer trucks and other longer 
combination vehicles known as LCVs. These trucks can be more than 100 
feet in length and can sway three to four feet into adjacent lanes of 
traffic, even on a windless day. In some instances, a truck veering 
sharply can cause a ``crack the whip'' effect, where the wheels on one 
side of the rear trailer are actually lifted off the ground. These 
life-threatening occurrences are altogether too frequent to be 
dismissed as dramatized anecdotal evidence. In fact, the research 
suggests the danger posed by such trucks is very real.
    The US Department of Transportation's 2000 Comprehensive Truck Size 
and Weight Study confirmed that multi-trailer trucks are especially 
dangerous. According to the DOT study, if the current restrictions on 
LCVs were removed, they would likely have a fatal crash rate of at 
least 11 percent higher than single trailer trucks.
    An earlier report prepared for the Association of American 
Railroads suggested that LCVs are actually 66 percent more likely to be 
involved in a fatal crash. Similar studies have found that heavier 
trucks take more time and distance to stop and merge into traffic, 
thereby increasing the likelihood of crashes. Not surprisingly, these 
same studies have found that increasing truck weight increases the risk 
of rollover crashes and enhances the risk that collisions between 
trucks and cars will be fatal for the occupants of the car.
    Now, I recognize and appreciate that the Transportation Research 
Board's (TRB) recent report on truck size and weight finds much of the 
research I have just cited as inconclusive. And while I congratulate 
the TRB for their contribution to this policy discussion, I must tell 
you that I am more than a little troubled by their recommendation that 
we should instead experiment with bigger trucks on America's roads and 
bridges. I can assure you my constituents do not care to be guinea pigs 
in that experiment.
    Mr. Chairman, just as our common experience informs our opinion on 
this issue, so must common sense dictate the solution. I am pleased to 
be joined by nearly 75 of my colleagues in bi-partisan support of H.R. 
3132, the Safe Highways and Infrastructure Preservation Act. This IS 
common sense legislation that will maintain the reasonable limits that 
currently exist on truck size and weight on our Interstate System and 
extend those same limits to the National Highway System. It does not 
roll back truck size and weight, but rather closes loopholes in the 
current law that have resulted in a proliferation of overweight trucks. 
Ultimately, this legislation will both save lives AND protect the 
nation's multi-billion dollar investment in our highway infrastructure.
    Mr. Chairman, the fiscal considerations attendant to this issue 
must also not be minimized. According to the Federal Highway 
Administration's 1999 Status Report on the Nation's Surface 
Transportation System, it will take $1.13 trillion over the next 20 
years simply to maintain our roads and bridges. But, as we are all 
keenly aware, there is a backlog on road and bridge maintenance. Nearly 
30 percent of our nation's bridges--and 50 percent of the bridges in my 
home state of Massachusetts--are structurally deficient or functionally 
obsolete. Now, we also know that as truck weight increases, the amount 
of pavement damage increases exponentially. In fact, according to the 
DOT's 2000 Comprehensive Truck Size and Weight Study I referenced 
earlier, bigger trucks would add more than $300 billion in costs to our 
transportation spending.
    Mr. Chairman, as Congress prepares to consider the reauthorization 
of its major transportation spending bill, I am hopeful that the Safe 
Highways and Infrastructure Preservation Act will be adopted in some 
form or fashion.
    The legislation makes sense, the timing is right and above all 
else, the American public must be protected from the danger of still 
bigger trucks.
    Thank you very much.












                       REAUTHORIZATION OF TEA-21

                              ----------                              


                      THURSDAY, SEPTEMBER 19, 2002

                                       U.S. Senate,
                 Committee on Environment and Public Works,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:35 a.m. in room 
406, Senate Dirksen Building, Hon. James Jeffords [chairman of 
the committee] presiding.

             PROJECT DELIVERY AND ENVIRONMENTAL STEWARDSHIP

    Present: Senators Jeffords, Baucus, Bond, Carper, Corzine, 
Crapo, Voinovich, Warner and Wyden.

OPENING STATEMENT OF HON. JAMES M. JEFFORDS, U.S. SENATOR FROM 
                      THE STATE OF VERMONT

    Senator Jeffords. The hearing will come to order.
    Late yesterday, President Bush issued an Executive Order on 
environmental stewardship in transportation, the exact topic of 
this hearing. I read the order. I am willing to give the 
Administration the benefit of the doubt on this enhanced 
Federal coordination. The value of the value of the order 
depends on how it is carried, so I am willing to reserve 
judgment.
    I will be asking a number of questions about this order, 
and I expect that other Senators will be doing the same. I want 
to point out to the reporters in the audience that the 
Executive Order is only a portion of the real story today. The 
men and women testifying today will be discussing successes 
that are already being made in improving transportation 
projects, while protecting and enhancing the environment.
    The real focus of today's hearing is about understanding 
the multitude of factors that can affect the development and 
construction of a major transportation project. Transportation 
projects not only provide mobility, they bring about benefits 
for families, communities and the environment. GAO will tell us 
that there can be up to 200 steps in four broad categories of 
completing a major transportation project. But it is more 
complicated than that. Charlie Hales, representing Portland, 
views this process as, quote, ``governing with the consent of 
the governed.'' He also says that Portland's experience is that 
the best way to deliver quality projects is to go through the 
planning process right the first time, and only once. This 
approach is sometimes referred to as the environmental 
stewardship. The goal of environmental stewardship should be to 
identify and meaningfully address project conflicts at the 
beginning of the planning process, not at the eleventh hour 
through litigation. The keys to better up-front planning 
include earlier involvement by the stakeholders, more resources 
to facilitate that involvement, and a better information base. 
Project stewardship will assure that we get the most out of 
every dollar spent. Let us not forget that these major projects 
are not just about building infrastructure, but also involve 
protecting and enhancing the natural and human environment. 
Thus, this hearing today is about how to get it right the first 
time, which can save billions and even more lives.
    I want to be sure that our discussion today is placed in 
the proper context. For instance, I was surprised to learn that 
only 3 percent of federally funded transportation projects even 
require an environmental impact statement. These very few major 
projects can take between nine and 19 years to complete, but 
most projects require far less time. It is also important to 
remember that when delay does occur, it can be caused by events 
throughout the delivery process, by right-of-way challenges, 
utility relocation problems, remitting, weather delays, and 
construction change orders. As we look to improve the 
timeliness of the project delivery, we will also see 
deficiencies in each stage. I am concerned as well about 
quality, cost-effectiveness, and honesty in project delivery. 
That is why I have asked the DOT Inspector General to testify 
today about the importance of these aspects of good project 
stewardship, keeping graft and corruption away from those huge 
construction contracts. But I know that most of our attention 
has been focused on environmental process. I agree with the 
very recent FHWA report that says that we must get beyond 
environmental process bottlenecks and focus on practical 
solutions through integrated concurrent planning and public 
input. In 1999, as a part of the last reauthorization, Congress 
directed the Secretary of USDOT to develop a coordinated 
environmental review process in conjunction with other Federal 
resource agencies. Today, representatives of the USDOT and the 
USEPA will report on their progress in meeting that mandate.
    Perhaps most notably today, we will hear from practitioners 
from around the country reporting on their efforts to improve 
both the efficiency and effectiveness of the planning and 
environmental process. I am pleased to welcome Emily Wadhams, 
the Historic Preservation Officer from my home State of 
Vermont, who has helped pioneer cooperative efforts with our 
transportation agency.
    I am also happy to welcome Carol Murray from my neighboring 
State and the home of the Ranking Member, Bob Smith. Carol is a 
Transportation Commissioner in New Hampshire and has led an 
innovative effort in the State to expand Interstate 93.
    We are also joined today by witnesses from Florida, 
Portland, Oregon, and from a representative of the Nation's 
consulting engineers.
    Throughout our reauthorization process, we will have asked 
our witnesses about lessons learned over the past 10 years, and 
about changing conditions that confront us in the future. We 
have then asked the key question, How should we refine our 
program based on these lessons learned and those changing 
conditions? Today's hearing will continue this approach.
    Let me now introduce our witnesses. Emil Frankel is the 
Assistant Secretary for Transportation Policy at the U.S. 
Department of Transportation. Thank you for joining us today. I 
am pleased to have you with us. We also have John Peter Suarez, 
the Assistant Administrator of Enforcement and Compliance 
Assurance of the U.S. Environmental Protection Agency. Also 
from USDOT is Kenneth Mead, Inspector General of the U.S. 
Department of Transportation. Ken advises the Secretary of 
Transportation and the Congress on the best practices and 
deficiencies found, and recommends ways to strengthen the 
management of DOT's programs and operations. Thank you for 
being here today, Ken. Also Kate Siggerud is here today with 
us. Kate is the Acting Director of the Physical Infrastructure 
Issues for GAO. For the past several years, Kate has directed 
GAO's reviews of Federal aid highway program issues, which 
includes the interaction between transportation and the 
environment. New Hampshire Department of Transportation 
Commissioner Carol Murray--thank you again for being with us 
today.
    [The document referred to follows:]
                            the white house
                                                 September 18, 2002
     executive order--environmental stewardship and transportation 
                     infrastructure project reviews
    By the authority vested in me as President by the Constitution and 
the laws of the United States of America, and to enhance environmental 
stewardship and streamline the environmental review and development of 
transportation infrastructure projects, it is hereby ordered as 
follows:
    Section 1. Policy. The development and implementation of 
transportation infrastructure projects in an efficient and 
environmentally sound manner is essential to the well-being of the 
American people and a strong American economy. Executive departments 
and agencies (agencies) shall take appropriate actions, to the extent 
consistent with applicable law and available resources, to promote 
environmental stewardship in the Nation's transportation system and 
expedite environmental reviews of high-priority transportation 
infrastructure projects.
    Sec. 2. Actions. (a) For transportation infrastructure projects, 
agencies shall, in support of the Department of Transportation, 
formulate and implement administrative, policy, and procedural 
mechanisms that enable each agency required by law to conduct 
environmental reviews (reviews) with respect to such projects to ensure 
completion of such reviews in a timely and environmentally responsible 
manner.
    (b) In furtherance of the policy set forth in section 1 of this 
order, the Secretary of Transportation, in coordination with agencies 
as appropriate, shall advance environmental stewardship through 
cooperative actions with project sponsors to promote protection and 
enhancement of the natural and human environment in the planning, 
development, operation, and maintenance of transportation facilities 
and services.
    (c) The Secretary of Transportation shall designate for the 
purposes of this order a list of high-priority transportation 
infrastructure projects that should receive expedited agency reviews 
and shall amend such list from time to time as the Secretary deems 
appropriate. For projects on the Secretary's list, agencies shall to 
the maximum extent practicable expedite their reviews for relevant 
permits or other approvals, and take related actions as necessary, 
consistent with available resources and applicable laws, including 
those relating to safety, public health, and environmental protection.
    Sec. 3. Interagency Task Force. (a) Establishment. There is 
established, within the Department of Transportation for administrative 
purposes, the interagency ``Transportation Infrastructure Streamlining 
Task Force'' (Task Force) to: (i) monitor and assist agencies in their 
efforts to expedite a review of transportation infrastructure projects 
and issue permits or similar actions, as necessary; (ii) review 
projects, at least quarterly, on the list of priority projects pursuant 
to section 2(c) of this order; and (iii) identify and promote policies 
that can effectively streamline the process more required to provide 
approvals for transportation infrastructure projects, in compliance 
with applicable law, while maintaining safety, public health, and 
environmental protection.
    (b) Membership and Operation. The Task Force shall promote 
interagency cooperation and the establishment of appropriate mechanisms 
to coordinate Federal, State, tribal, and local agency consultation, 
review, approval, and permitting of transportation infrastructure 
projects. The Task Force shall consist exclusively of the following 
officers of the United States: the Secretary of Agriculture, Secretary 
of Commerce, Secretary of Transportation (who shall chair the Task 
Force), Secretary of the Interior, Secretary of Defense, Administrator 
of the Environmental Protection Agency, Chairman of the Advisory 
Council on Historic Preservation, and Chairman of the Council on 
Environmental Quality. A member of the Task Force may designate, to 
perform the Task Force functions of the member, any person who is part 
of the member's department, agency, or office and who is either an 
officer of the United States appointed by the President with the advice 
and consent of the Senate or a member of the Senior Executive Service. 
The Task Force shall report to the President through the Chairman of 
the Council on Environmental Quality.
    Sec. 4. Report. At least once each year, the Task Force shall 
submit to the President a report that: (a) Describes the results of the 
coordinated and expedited reviews on a project-by-project basis, and 
identifies those procedures and actions that proved to be most useful 
and appropriate in coordinating and expediting the review of the 
projects.
    (b) Identifies substantive and procedural requirements of Federal, 
State, tribal, and local laws, regulations, and Executive Orders that 
are inconsistent with, duplicative of, or are structured so as to 
restrict their efficient implementation with other applicable 
requirements.
    (c) Makes recommendations regarding those additional actions that 
could be taken to: (i) address the coordination and expediting of 
reviews of transportation infrastructure projects by simplifying and 
harmonizing applicable substantive and procedural requirements; and 
(ii) elevate and resolve controversies among Federal, State, tribal, 
and local agencies related to the review or impacts of transportation 
infrastructure projects in a timely manner.
    (d) Provides any other recommendations that would, in the judgment 
of the Task Force, advance the policy set forth in section 1 of this 
order. Sec. 5. Preservation of Authority. Nothing in this order shall 
be construed to impair or otherwise affect the functions of the 
Director of the Office of Management and Budget relating to budget, 
administrative, and legislative proposals.
    Sec. 6. Judicial Review. This order is intended only to improve the 
internal management of the Federal Government and is not intended to, 
and does not, create any right or benefit, substantive or procedural, 
enforceable at law or equity by a party against the United States, its 
departments, agencies, instrumentalities or entities, its officers or 
employees, or any other person.
                                            George W. Bush,
                               The White House, September 18, 2002.
    I now turn to Kit Bond. Do you have a statement?

  OPENING STATEMENT OF HON. CHRISTOPHER S. BOND, U.S. SENATOR 
                   FROM THE STATE OF MISSOURI

    Senator Bond. Thank you, Mr. Chairman.
    I was hoping I would get to say something. We have some 
views on this. This hearing is very important to examine the 
progress made on environmental streamlining under TEA-21. As 
the Department of Transportation itself says, environmentally 
responsible transportation improvements, delivered on time and 
within budget, is a simple vision that all too often evades the 
USDOT and its partners. Every one of us in this room knows the 
importance and role that transportation plays in our everyday 
lives, especially in our economy. Our economic stability and 
progress is tied directly to transportation. As my dear friend 
and colleague from Virginia, Senator Warner, often said, this 
is a one-world market. Our country's transportation 
infrastructure makes it so.
    My home State of Missouri has always been a leader in this 
area. In 1808, the King's Highway from St. Louis to southwest 
Missouri became the first legally designated road west of the 
Mississippi. In 1929, Missouri was the first State to protect 
and earmark funds for highway purposes. The first stretch of 
Interstate on which work actually began anywhere in the country 
was Interstate 70 in St. Charles, Missouri.
    Missouri is at the geographic center of the U.S., and 
serves as a confluence not only of our Nation's highway 
systems, but also for our Nation's two greatest waterways, the 
Mississippi and the Missouri. With the second largest third 
rail hubs and the second largest inland port in the United 
States, Missouri products travel to all 50 States and all 
reaches of the globe. So we care a lot about transportation.
    We also care a great deal about the environment. I have 
fought long and hard as Governor and now in the Senate to 
increase the amount of money we spend in Missouri and across 
the Nation on cleaning on waste water and making water safe to 
drink. I hope next year we will come to a consensus on further 
air pollution reductions from electric power utilities.
    We cannot give away our environmental gains achieved over 
the last 30 years to transportation projects needlessly hurting 
the environment. I share the historic trust belief that 
environmental reviews are an essential element in 
transportation development. I also agree with the American 
Association of State Highway Transportation Officials that, 
quote, ``Environmental stewardship begins not with new laws and 
regulations, but with a commitment by transportation agencies 
themselves to make environmental protection and environmental 
enhancement an integral part of their mission,'' close quotes.
    But with that commitment, how far can we get under the 
current laws and regulations? According to FHWA, it typically 
takes nine to 19 years to plan, gain approval and construct a 
new major federally funded highway project that has significant 
environmental impact. Frankly, that is far too long. Now, some 
would say that the environmental portion is a minority of that 
time period. That just hides the fact that the average length 
of time to process environmental documents for major projects 
is still over 5 years. Some may be proud that the average is 
now 5 years and 2 months instead of 5 years and 10 months, but 
that does not cut the mustard. Five years is just too long.
    Part of the problem is groups who use well-meaning 
environmental reviews for nothing but delay. Testifying before 
this committee, the Executive Director of the Surface 
Transportation Policy Project admitted that, quote, ``In the 
struggle between the proponents and opponents of a 
controversial project, the best an opponent can hope to do is 
to delay things until the proponents change their minds or tire 
of the fight. That is the only option they have, so they use 
it,'' close quotes.
    Sometimes these advocates of delays are actually aided by 
governments themselves. Attempts by DOT in the last 
Administration failed to implement the intent of Congress in 
TEA-21. Their regulatory proposals were riddled with new 
requirements that could easily mushroom into new major causes 
of delay, cost-overruns and litigation. They also left many 
existing problems unaddressed, resulting in missed 
opportunities to achieve needed reforms.
    Many States are trying to implement innovative new programs 
to streamline environmental and historic preservation reviews. 
I was particularly impressed by the example of Vermont, the 
home State of our chairman. We will hear testimony today that 
Vermont delegated sign-off authority under Section 106 of the 
National Historic Preservation Act to the State agency of 
transportation itself. Maybe we should consider going national 
with the Vermont model. Do you think we could delegate sign-off 
for environmental reviews to the Department of Transportation? 
Somehow, I believe there may be some objections.
    But all kidding aside, we still have a long way to go in 
realizing our vision of environmentally responsible 
transportation improvements delivered on time and within 
budget. Memorandums of understanding, either well-meaning, but 
toothless tools, calling for agencies to do nothing more than 
play nicely, are insufficient. I commend President Bush for his 
leadership in issuing the Executive Order already mentioned by 
the chairman, on environmental streamlining. Putting the weight 
and authority of the President behind the need to deliver 
environmentally sensitive transportation projects on time, on 
budget and in compliance, is a great step.
    We know, however, that Administrations come and go. The 
next Administration may not share the same commitment to our 
Nation's transportation infrastructure. So I think we need to 
institutionalize improvements and we should consider doing so 
in legislation.
    We need to take a serious look at some of the proposals 
which might strengthen the overall NEPA decisionmaking process 
and eliminate inefficiencies in this system. Some of the 
suggestions I have heard to date include putting a final end to 
the major investment study requirement and recognizing the 
innovations occurring at State and local levels; two, possibly 
designating USDOT or State DOTs as lead agencies in these NEPA 
processes for surface transportation projects; or three, 
establishing default deadlines for agency and public comments, 
with allowances for alternative deadlines or extensions; and 
four, the possibility of providing clear guidance on how to 
define a project's purpose and needs statement in a NEPA 
document. These are extremely important issues for the 
environment, for transportation, and for our economy and for 
our future. I look forward to working with my colleagues on all 
of these issues.
    I thank the chairman.
    Senator Jeffords. Thank you.
    Senator Wyden?

  OPENING STATEMENT OF HON. RON WYDEN, U.S. SENATOR FROM THE 
                        STATE OF OREGON

    Senator Wyden. Thank you, Mr. Chairman.
    I would like to take just a minute and talk about the 
history of how this came into being, because maybe it will be 
helpful to us as we try to finally turn this around and get 
this done.
    The last time ISTEA came up, Senator Bob Graham and Senator 
Chafee and I met for many, many months with transportation 
officials, with environmentalists, with developers, and we said 
look, here is the problem. When it comes to major 
transportation projects, those projects in effect go on two 
tracks. Over here is the development side; over here is the 
environmental side. And what has happened, as Senator Bond 
correctly lays out, is you go all the way down the line and you 
are basically pretty much done on the development side, and 
then somebody comes in with a NEPA objections or something at 
the very end, slam the brakes on, and then everything falls 
apart.
    So what we proposed in the last ISTEA legislation is that 
instead of going down those two separate tracks, just ignoring 
one or the other, the two tracks were supposed to work 
together. The idea was that every step of the way, the two 
tracks would be linked and there would be constant 
communication from transportation, the development community 
and the environmental community. Conceptually, it sounds fairly 
straightforward. It sounded straightforward then. It still 
sounds straightforward today. Unfortunately, what we have seen, 
and Senator Bond again is right. Vermont is a very good model. 
Portland, Oregon is a very good model where we have had years 
of exactly this kind of communication under the leadership of 
our former Commissioner Charlie Hales and others. Somehow, it 
cannot be writ large here in Washington, DC.
    I am prepared to say, and I think I can speak for Senator 
Graham on this, that if this does not get done right now, we 
are going to come back and legislative it again in the next 
version of ISTEA. I am prepared, as long as I've got any breath 
in this body, to stay at it administratively to try to get it 
right. If it doesn't get done right, then we will have to look 
at it once again legislatively. But I would just hope that we 
would say that the fundamental premise, instead of having these 
two separate tracks that never get linked, and the only time 
they communicate is when there is a blow-up at the end, which 
causes the delays that Senator Bond is correct to describe, 
that we change that process and that we essentially say that 
every step of the way there has got to be the kind of 
communication that prevents these kinds of delays.
    So Mr. Chairman, I am only going to be able to stay a 
little bit because we have got a markup in the Commerce 
Committee. But I know a lot of colleagues care a lot about 
this. There is a lot of history and this should not be 
bureaucratic water torture. People in this country want the 
proverbial win-win. They want transportation projects. They 
want them done in line with sensible environmental rules. What 
we have gotten as a result of this process is in effect a lose-
lose. We do not get the transportation projects, nor do we get 
the important environmental work that needs to be done. I guess 
if we have to legislative a Vermont or Portland, Oregon model, 
we can look at doing that the next time around, but I hope it 
will not come to that, and this can finally get done right 
administratively.
    I thank you for the time this morning.
    Senator Jeffords. I thank the Senator from Oregon.
    Senator Crapo?

 OPENING STATEMENT OF HON. MICHAEL D. CRAPO, U.S. SENATOR FROM 
                       THE STATE OF IDAHO

    Senator Crapo. Thank you, Mr. Chairman.
    I do have an opening statement, but I would defer to 
Senator Baucus if he wanted to go first. Senator, would you 
prefer to go first?
    Senator Baucus. Well, Senator, that is fine. You are here. 
go ahead.
    Senator Crapo. OK. Thank you.
    The reason I made that offer is because Senator Baucus and 
I have a common interest in this issue as well, and we are 
working together on some legislation that we intend to 
introduce I believe in the next few weeks that will deal with 
this issue that we are talking about. It is going to focus on 
reducing delays in the highway projects and the transit 
projects under the NEPA Act.
    The basic approach that we are talking about is going to be 
one of, as the Senator from Oregon has indicated, ensuring 
prompt and effective coordination among the Federal agencies on 
this two-track approach, with reasonable deadlines and 
completion of reviews, and with authority for the States to 
assume some of the responsibilities of the Department of 
Transportation in certain circumstances, which would facilitate 
a lot of the kinds of successes that I believe other Senators 
here have been talking about.
    I will not make my opening statement lengthy because 
frankly Senator Bond and Senator Wyden and the chairman in 
their statements have already well laid-out the case for why I 
believe and Senator Baucus and I are working together, that we 
need to have legislative solutions. In fact, some of the ideas 
that have already been tossed out may need to be added in as we 
work together to address this.
    My goal is to advance a common sense approach that will 
both strengthen our transportation system and make sure that we 
support our environmental laws and achieve their objectives. I 
doubt there is a member in this chamber who has not heard 
concerns about the transportation projects, and I doubt there 
is a member in this chamber who does not believe that we can do 
much better than we are now doing in terms of accomplishing 
both effective transportation systems and meeting the needs of 
our environmental protection. The delays that we see add to the 
cost of the projects, deny the public the benefit of the 
projects, and frankly I do not think add anything to our 
ability to improve and strengthen our achievement of 
environmental objectives.
    I am concerned that the situation has reached the point 
where frustration over unwarranted delays in the development of 
needed transportation projects are going to undermine public 
support for environmental review requirements. We must move 
forward and not allow that unhealthy situation to develop.
    I look forward to learning from our witnesses today how 
they would approach these issues. I am very open-minded about 
how we need to deal with it, but I am convinced that we need to 
take action now; that we simply cannot see the kinds of delays 
that we have faced continue.
    Reauthorization of TEA-21 will be our opportunity to act, 
and I would like to see us specifically legislate as we deal 
with this streamlining issue. We can eliminate unnecessary 
delays. We have got to be firm and we have got to be focused, 
and we have got to demand that the delays end.
    Thank you, Mr. Chairman.
    Senator Jeffords. Thank you.
    Senator Baucus?

  OPENING STATEMENT OF HON. MAX BAUCUS, U.S. SENATOR FROM THE 
                        STATE OF MONTANA

    Senator Baucus. Thank you, Mr. Chairman. I was privileged 
to be one of the authors of TEA-21. I helped write sections 
1308 and 1309. These are the sections, as you know, that direct 
the Secretary of Transportation to find ways to expedite the 
project approval process and get construction underway faster. 
I remember working with Senators Warner, Graham, Wyden and the 
late John Chafee, former chairman of this committee, and the 
member of the House to come to a compromise on the 
environmental streamlining provisions included in TEA-21.
    At the time, I had heard from many Departments of 
Transportation, particularly mine in the State of Montana, 
about how cumbersome a process it is to come to completion on a 
highway project. Everyone who worked on TEA-21, both the House 
and the Senate, wanted to include a direction to USDOT to 
streamline the planning and project development processes for 
the States. So we did. We were very clear. The environment and 
the environmental reviews should not get short shrift, but we 
needed to find a way to make it easier to get a project done, 
eliminate unnecessary delays, move faster, and with as little 
paperwork as possible.
    I cannot overemphasize that the planning and environmental 
provisions of TEA-21 need to be implemented in a way that will 
streamline and expedite, not complicate the process of 
delivering transportation projects. These projects that we are 
trying to expedite provide good-paying jobs for every State. 
Contracts must be let in a timely manner.
    That is why Congress directed the USDOT to include certain 
elements in the regulations on environmental streamlining. We 
included concept to be incorporated, like concurrent 
environmental reviews by agencies and reasonable deadlines for 
the agency to follow when completing the reviews. Certainly, we 
did not legislate an easy task for USDOT. Trying to coordinate 
so many separate agencies is, as is often said around, like 
trying to herd cats. The whole concept of environmental 
streamlining is to make the permit and approval process work 
more smoothly and effectively, while still ensuring protection 
of the environment--one of the more difficult challenges of 
TEA-21.
     So we waited for the rules. We waited to hear from DOT, 
patiently. And we waited. After 2 years after the passage of 
TEA-21, we finally got them. I have to tell you, Mr. Chairman, 
I was very disappointed when those rules came out in May of 
2000. They hit very far from the mark, and in fact they made 
things worse. There were a greater complication than were they 
an assistance to States. They made the jobs much, much more 
difficult. They were supposed to answer questions, but those 
proposed rules raised even more questions because they were 
vague where they needed to be precise.
    These proposed rules would make it much harder, if not 
impossible, to come to a decision. It would have been even more 
difficult for States to deliver their programs. Contracts would 
not get let and jobs would be lost.
    So the DOT solicited comments, which I understand were 
overwhelmingly negative, and went back to the drawing board, 
and we never heard from them again. Even when a new President 
took over, a new Administration, no new rules. We are exactly 
where we were in 1998. As for sections 1308 and 1309, nothing 
has been done to implement them. It is just as cumbersome today 
to bring a highway project to completion.
    This committee has held three hearings on this subject of 
environmental streamlining since the passage of TEA-21 in 1998. 
This is the fourth. I understand that late yesterday, the 
President signed an Executive Order calling for a handful of 
projects to be supervised by the heads of USDOT and CEQ. The 
highest levels would personally make sure that there were 
timely environmental reviews. That would have been a good start 
in 1998, but I must say it is a bit late. We are on the verge 
of reauthorization of TEA-21. This time, I would like us to 
take specific legislative action. I would like to see us 
specifically legislative environmental streamlining--no waiting 
for regulations or more Executive Orders. Congress needs to be 
clear about what they need to see and put it into law.
    To that end, along with Senators Crapo and others, I plan 
to introduce a proposal on environmental streamlining. It will 
be part of a series of bills that we are introducing on highway 
reauthorization. This bill will address three issues. First, 
the USDOT needs to be the lead agency on at least two 
requirements--purpose and need for a project, and scope of 
alternatives; not just one of the agencies, but the lead 
agency. This will make sure that any stalemates, at least more 
sure that any stalemates are resolved more quickly.
    Second, we should allow States to take over the role of 
USDOT if they can meet certain requirements and if they choose 
to take on that role. This will help eliminate another step of 
bureaucracy. And last, we must ensure that resource agencies 
act in a timely manner. When it comes time for an agency like 
Fish and Wildlife to assess the extent of damage, if any, to a 
wetlands, or the Army Corps of Engineers to issue a permit, 
these agencies should not be able to take years to make those 
decisions. We need to legislate specific time limits, and I 
mean legislate. I have great deference for those who say let 
the administrators come up with administrative decision, but 
frankly my patience has run out. I don't think we can wait any 
longer. We have to legislate time limits, because otherwise, my 
fear is the agencies will come up with something that is as 
complicated as the last effort. They will no get the job done.
    In my view, these three matters are not meant to be a 
comprehensive streamlining, but I believe they will be a big 
help and a good start, and the bill we will introduce will be a 
solid beginning to Congress setting some specific guidelines 
for expediting the planning and the environmental review 
process.
    Once again, I want to reiterate, I want to make sure that 
environmental laws and policies are obeyed to the letter, but 
there has got to be a faster, easier way to do the work that 
needs to be done on our surface transportation system, while 
continuing to protect the environment.
    Thank you, Mr. Chairman.
    [The prepared statement of Senator Baucus follows:]
  Statement of Hon. Max Baucus, U.S. Senator from the State of Montana
    Thank you Mr. Chairman. I appreciate your interest in this issue 
and look forward to working under your leadership as we try to resolve 
these problems. I was privileged to be one of the authors of TEA-21. I 
helped write sections 1308 and 1309. These are the sections that direct 
the Secretary of Transportation to find ways to expedite the project 
approval process and get construction underway faster.
    I remember working with Senators Warner, Graham, Wyden and Chafee 
and with the House members to come to a compromise on the environmental 
streamlining provisions included in TEA-21. At the time, I had heard 
from my Department of Transportation and from others about how 
cumbersome a process it is to come to completion on a highway project. 
Everyone who worked on TEA 21 both the House and Senate, wanted to 
include a direction to the USDOT to streamline the planning and project 
development processes for the States.
    We were very clear--The environment and the environmental reviews 
should NOT get short shrift! But, we needed to find a way to make it 
easier to get a project done, eliminate unnecessary delays, move faster 
and with as little paperwork as possible.
    I cannot over-emphasize that the planning and environmental 
provisions of TEA-21 need to be implemented in a way that will 
streamline and expedite, not complicate, the process of delivering 
transportation projects. These projects that we're trying to expedite 
provide good paying jobs for the folks in Montana and for every State. 
Contracts must be let in a timely manner. That is why Congress directed 
the USDOT to include certain elements in their regulations on 
environmental streamlining.
    We included concepts to be incorporated--like concurrent 
environmental reviews by agencies and reasonable deadlines for the 
agencies to follow when completing their reviews. Certainly we did not 
legislate an easy task to the USDOT. Trying to coordinate so many 
separate agencies is like trying to herd cats.
    The whole concept of environmental streamlining--that is, to make 
the permit and approval process work more smoothly and effectively, 
while still ensuring protection of the environment--is one of the more-
difficult challenges of TEA-21.
    So I waited for the rules to come out. And waited. And 2 years 
after the passage of TEA-21 I finally got them. I have to tell you Mr. 
Chairman. I'm was very disappointed when those rules came out in May of 
2000. I believe those regulations hit very far from the mark. Those 
regulations were supposed to help the State DOTS get their jobs done 
better and more efficiently not make their jobs harder. They were 
supposed to answer questions-but what is contained in those documents 
raises even more questions than before because they were vague where 
they needed to be precise.
    Those proposed rules would make it even harder, if not impossible 
to come to a decision. It would have been even more difficult for 
States to deliver their programs. Contracts wouldn't get let and jobs 
would be lost. So the DOT solicited comments--which I understand were 
overwhelmingly negative--and went back to the drawing board and we 
never heard from them again. Even when a new President took over. New 
administration. No new rules. And today we have nothing. We're exactly 
where we were in 1998. As for sections 1308 and 1309. Nothing has been 
done to implement them. Its just as cumbersome today to bring a highway 
project to completion.
    This committee has held three hearings on the subject of 
environmental streamlining since the passage of TEA-21 in 1998. This is 
the fourth. I understand that late yesterday the President signed an 
Executive Order calling for a handful of projects to be supervised by 
the heads of USDOT and CEQ. The highest levels would personally make 
sure that there were timely environmental reviews.
    That would have been a good start in 1998. But, its too little too 
late. W e are on the verge of reauthorization of TEA-21. This time, I 
would like to see us specifically legislate environmental streamlining. 
No waiting for regulations or more executive orders. Congress needs to 
be clear about what they want to see and put it into law.
    To that end, along with Senator Crapo and others, I plan to 
introduce a proposal on environmental streamlining. It will be part of 
a series of bills that we are introducing on highway reauthorization.
    This bill will address three issues. First, the US DOT needs to be 
the lead agency on at least two requirements-"Purpose and Need'' for a 
project and ``Scope of Alternatives.'' This will make sure that any 
stalemates are resolved quickly. Second, we should allow States to take 
over the role of the USDOT if they can meet certain requirements and if 
they choose to take on that role. This will eliminate another step of 
bureaucracy. Last, we must ensure that resource agencies act in a 
timely manner. When it comes time for an agency like Fish and Wildlife 
to assess the extent of damage (if any) to a wetlands or the Army Corps 
Engineers to issue a permit, these agencies shouldn't be able to take 
years to make these decisions.
    We need to legislate specific time limits for them to follow. No 
answer at all is not acceptable. It is unacceptable for agencies to sit 
on their decision for years. We can't make them issue the permit and we 
don't want to, but we can make them make a decision in a timely manner.
    The rest of the world works on deadlines. They can too. These three 
things will help to expedite the planning and NEPA processes.
    These three things are not meant to be comprehensive streamlining, 
but I believe that they will be a big help and a great start. The bill 
we will introduce will be a solid beginning to Congress setting some 
specific guidelines for expediting the planning and environmental 
review processes.
    Once again, I want to reiterate that I want to make sure that 
environmental laws and policies are obeyed to the letter. But, there's 
got to be a faster, easier way to do the work that needs to be done on 
our surface transportation system, while continuing to protect the 
environment. I believe our bill will be a means to those ends.
    Thank you Mr. Chairman.
    Senator Jeffords. Senator Voinovich?

  OPENING STATEMENT OF HON. GEORGE V. VOINOVICH, U.S. SENATOR 
                     FROM THE STATE OF OHIO

    Senator Voinovich. Thank you, Mr. Chairman for conducting 
this hearing on project delivery and environmental stewardship.
    I think I have a unique perspective on this issue, as a 
former Governor and Mayor. In particular as Governor, I first 
witnessed the frustration of many State agencies because they 
were required to complete a myriad of federally required tasks 
on every project they initiated. My experience with the process 
led me to hold two hearings on project delivery and 
streamlining when I was chairman of the Subcommittee on 
Transportation and Infrastructure.
    Now, I am concerned that the amount of time it takes to 
develop and complete large construction projects has gotten 
even worse, and my colleagues have mentioned that. Ten years 
ago, one Ohio group produced a chart entitled, ``So you want to 
build a highway.'' It showed that--they called it the 8-year 
hitch that was required to develop a road project, and that is 
before construction even begins. On average, major 
transportation projects now take 13 years or more to get 
through the planning process, environmental reviews, designed, 
right-of-way acquisition. On those major projects, development 
of environmental impact takes on an average more than 5 years 
to complete, although we have seen some things around the 
country where they have been able to streamline it by just 
coming together in a task force.
    Environmental review is a good policy, but there are more 
efficient ways to get it done. As chairman of the National 
Governors Association, I was involved in negotiating TEA-21 and 
lobbying for a streamlined project delivery process. Congress 
recognized the States' frustration and enacted an environmental 
streamlining provision, and Senator Baucus you made reference 
to it, 1308, 1309.
    After arriving in the Senate in 1999, I called two 
subcommittee hearings on implementation on environmental 
streamlining as contained in TEA-21. We stressed the importance 
of implementing it. A year after those hearings and nearly 2 
years after the passage of TEA-21, the Department of 
Transportation finally published its proposed regulations for 
implementation. As you know, every group in the country that 
had anything to do with it said, rather than complying with the 
intent of 1308 and 1309, it did just the opposite and it made 
the process even more complicated than what it was before. 
Other groups such as the Association of Metropolitan Planning, 
American Society of Civil Engineers, the American Road and 
Transportation Association--all requested that the rules be 
substantially rewritten.
    At that time, I joined Senator Smith to introduce a bill, 
in the year 2000, that would have required the Administration 
to revise and re-propose the rules, and Senator Baucus and 
Senator Crapo, I am very interested in your legislation. 
Frankly, I think that--and I am not going to read the rest of 
the statement--but I think that the time has come when we have 
to act. I am pleased that the Administration has an Executive 
Order, and they get it, but the fact is, if we really want to 
get something done on this, we ought to sit down with the 
Administration, these people here that are here at the table, 
figure out what it takes in order to get this job done. We have 
enough models out there. My goodness, we have had benchmark 
models all over the country about what it takes in order to get 
the job done. They have done it consistent with good 
environmental issues, and figure out what it is that we need to 
do, and get the law passed. I would hope, Mr. Chairman, that we 
do not wait for the reauthorization of TEA-21. Why don't we get 
this issue out of the way now, and not go back and revisit it 
and have it part of the overall TEA-21 legislation? Get it off 
the table. We are going to have enough other stuff to talk 
about on TEA-21, that we are going to be debating about. Let's 
get this one off the table and get on with it, because we have 
waited too long.
    Thank you.
    [The prepared statement of Senator Voinovich follows:]
 Statement of Hon. George V. Voinovich, U.S. Senator from the State of 
                                  Ohio
    Thank you, Mr. Chairman, for conducting this hearing on project 
delivery and environmental stewardship. I have a unique perspective on 
this important issue due to my background as a former Governor and 
mayor. In particular, as Governor, I witnessed first-hand the 
frustration of many State agencies because they were required to 
complete a myriad of federally required tasks on every project they 
initiated.
    My experience with this process led me to hold two hearings on 
project delivery and streamlining when I was chairman of the 
Subcommittee on Transportation and Infrastructure. Now, as the current 
ranking member of the Clean Air Subcommittee, which has jurisdiction 
over NEPA, I am concerned that the amount of time it takes to develop 
and complete large construction projects has gotten even worse. Ten 
years ago, one Ohio group produced a chart entitled ``So You Want to 
Build a Highway?'' that showed an ``eight-year hitch'' required to 
develop a road project--and that's before construction even begins.
    On average, major transportation projects now take 13 years or more 
to get through the planning process, environmental reviews, design, and 
right-of-way acquisition. On those major projects, development of an 
Environmental Impact Statement (EIS) takes, on average, more than 5 
years to complete. Surely, there is room for improvement.
    Environmental review is good public policy, and I know there are 
more efficient ways to ensure adequate and timely delivery of 
construction projects and still carefully assess environmental 
concerns.
    As chairman of the National Governors Association, I was involved 
in negotiating TEA-21 and lobbying for a streamlined project delivery 
process. Congress recognized the States' frustration and enacted an 
environmental streamlining provision in TEA-21.
    After arriving in the Senate in 1999, I called two subcommittee 
hearings on implementation of environmental streamlining as contained 
in Section 1309 of TEA-21. At those hearings, I stressed the importance 
of implementing Section 1309 in a way that will streamline and 
expedite, not complicate the process of delivering transportation 
projects.
    A year after these hearings and nearly 2 years after the passage of 
TEA-21, the Department of Transportation finally published it proposed 
regulations for the implementation of Section 1309 in May 2000. Many of 
us were disappointed with the length of time it took to develop these 
rules and with their content.
    Unfortunately, the proposed rules were inconsistent with 
congressional intent and would have done little, if anything, to 
streamline and expedite the States' ability to meet their 
transportation needs. In fact, the American Association of State and 
Highway Transportation Officials, representing our customers--the State 
departments of transportation--and said that the proposal was 
``completely at odds'' with congressional intent.
    Other groups, such as the Association of Metropolitan Planning 
Organizations, American Society of Civil Engineers, and the American 
Road and Transportation Builders Association all requested that the 
proposed rules be substantially rewritten. They were really a great 
disappointment. That is why I joined Senator Smith to introduce a bill 
in October 2000 that would have required the administration to revise 
and re-propose the rules.
    Mr. Chairman, we are about to enter the last year of TEA-21, and we 
still do not have rules to implement the environmental streamlining 
provision of the law. I regret that we may have wasted an opportunity 
to realize the benefits of an expedited environmental review process 
that we envisioned 5 years ago.
    Meeting our nation's transportation needs is too important for us 
to wait until the next highway authorization bill before we get serious 
about streamlining. That is why we should do whatever is humanly 
possible to implement the environmental streamlining provision of TEA-
21. Otherwise, I believe we will end up waiting several more years 
before we can see any substantial progress in reducing unnecessary 
delays on transportation projects.
    In 1999, the Federal Highway Administration signed a Memorandum of 
Understanding with six other Federal agencies and established a pilot 
program on environmental streamlining. I am eager to hear from the 
Department of Transportation as to whether the MOU or the pilot program 
has had an impact on reducing project delays. Most importantly, I would 
like to know why the Department has not issued a new rule on 
environmental streamlining and whether it intends to do so before TEA-
21 expires next year.
    However, last night the President did announce an Executive Order 
on Environmental Stewardship and Transportation Infrastructure Project 
Reviews. Although it's not a new rule, I appreciate the 
Administration's recognition of the continued importance of 
environmental streamlining to improving our nation's transportation 
system. I look forward to hearing from today's witnesses about this 
Executive Order and how effective it may be in improving project 
delivery.
    Again, thank you, Mr. Chairman, for holding this hearing. I join 
you in welcoming each of the witnesses who have come to testify. I look 
forward to their testimony and to their answers to any questions that 
may follow.
    Senator Jeffords. Now, I turn to our witnesses. Our first 
witness is the Honorable Emil Frankel, Assistant Secretary for 
Transportation Policy, U.S. Department of Transportation, 
Washington, DC. Please proceed.

    STATEMENT OF HON. EMIL FRANKEL, ASSISTANT SECRETARY FOR 
    TRANSPORTATION POLICY, U.S. DEPARTMENT OF TRANSPORTATION

    Mr. Frankel. Mr. Chairman, members of the committee, thank 
you for the opportunity to discuss the issues of transportation 
project delivery and environmental stewardship, and thank you 
for your opening statements.
    Ensuring that important transportation projects are 
completed as quickly as possible, while protecting the 
environment, is one of the top priorities for all of us at the 
Department of Transportation, as I know it is to members of 
this committee, as reflected in the opening remarks. Many 
factors impact the timing of a project's completion, from 
planning to environmental review to construction. Issues 
confronted on one project will often vary substantially from 
those in another seemingly similar project. Unfortunately, the 
nature and complexity of the issues mean that blanket solutions 
have proved very elusive.
    That is not to say that progress cannot be made. The 
Federal Government's role in creating project delays is 
frequently minor, although occasionally it is not. In light of 
these circumstances, President Bush yesterday issued an 
Executive Order to enhance environmental stewardship and 
improve transportation infrastructure project reviews. 
Concurrent with the President's Executive Order, the Secretary 
of Transportation has withdrawn draft rules proposed by the 
Department of Transportation in May, 2000 that deal with 
planning and environmental streamlining for transportation 
projects.
    The Executive Order is responsive, we believe, to the 
purposes of section 1309 of the Transportation Equity Act for 
the 21st Century. It lends the weight of the White House to 
bring together Federal agencies to coordinate and accelerate 
reviews of important transportation projects. The order does 
not bypass or alter in any way NEPA or any other environmental 
statute. President Bush has instructed his cabinet to form a 
review team chaired by Secretary Mineta to coordinate the 
environmental review of specific high-impact transportation 
projects. In addition, by working closely with Governors and 
transportation leaders, we hope to identify effective 
procedures for routinely expediting consideration of 
environmentally sound transportation projects nationwide.
    The Secretary will develop a list of specific streamlining 
projects to tackle immediately. We will seek project 
nominations from Governors, from local authorities, such as 
airport directors and MPOs and other transportation agencies. 
Working with State and Federal agencies, we expect to help cut 
through red tape and promote effective strategies for taking 
time out of the decisionmaking process. While we will start 
with a few projects, the intent is that this is a rolling list. 
That is, projects are dealt with that other projects will be 
substituted for. So it is not just a few projects. The 
Department will be contacting affected stakeholders soon to 
develop criteria for selecting projects into established 
deadlines for project nominations.
    In its simplest terms, environmental stewardship and 
streamlining consists of cooperatively establishing realistic 
project development timeframes among the transportation and 
environmental agencies, and then working together to adhere to 
those timeframes. Because major transportation projects are 
affected by dozens of Federal, State and local environmental 
requirements, administered by a multitude of agencies, improved 
interagency cooperation is critical to the success of 
environmental streamlining.
    Long before the issuance of this Executive Order, the 
Department has targeted the intersection of transportation and 
environment as an area of importance. The Executive Order 
follows other administrative actions taken by the Department 
and the resource agencies, I might say, to enhance coordinated 
project review. In February, as noted, the Department of 
Transportation submitted a report to Congress that summarized 
many of the steps the Federal Highway Administration had taken 
to enhance environmental streamlining. That was in compliance 
with a request and a report. From 1999 to 2001, the median time 
for completing environmental review for the small number of 
projects requiring EIS decreased by 1 year. This year, the 
Federal Highway Administration has set internal goals to 
continue to decrease the review time for all projects requiring 
rigorous environmental analysis. This would be accomplished 
through negotiated project timeframes with each State 
Department of Transportation and Federal Highway Administration 
division office, in consultation with review agencies.
    All 50 States have adopted initiatives for streamlining 
that clarify, amend or reinvent the project development 
process. Twenty-four States have focused their process redesign 
efforts on integrating planning and NEPA activities. Using TEA-
21 authority, 34 States have agreed to provide personnel to 
State and Federal environmental agencies for the purposes of 
expediting reviews. Twenty-nine States have adopted agreements 
to merge the NEPA process in the Clean Water Act permitting 
process administered by the Corps of Engineers. And Federal 
Highway Administration is working with the Corps to modernize 
merger agreements already in place and foster new ones.
    Aside from the environmental issues, as this hearing 
emphasizes, other problems can delay the completion of a 
project. Many of the procedures relating to construction 
bidding and procurement that influence the initiation and 
development of projects are a function of State, not Federal, 
law. Nonetheless, Federal law should be permissive, should 
promote innovation at the State level, and we are examining, as 
I know you are, a relevant statutory framework in the context 
of the reauthorization proposal which we will be making to the 
Congress early next year.
    I am pleased that the Inspector General of the Department 
is here, and we welcome his comments and have had conversations 
with him about the issue of oversight, which the chairman has 
emphasized in his opening remarks. You cannot have a complete 
conversation about project delivery without talking about DOT's 
oversight role. And although TEA-21 directed extensive 
delegation of approval authorities to the States, for most 
Federal aid projects the Federal Highway Administration's 
oversight role and FTAs on larger projects was enhanced. TEA-21 
requires that projects with an estimated cost of $1 billion or 
more submit an annual finance plan. In reauthorization, we will 
be looking for ways to further enhance the management of 
projects.
    In conclusion, Mr. Chairman, the upcoming reauthorization 
bill will be the next step in a long process that began with 
TEA-21 and ISTEA before it. By further fostering the efficient 
and effective coordination and collaboration of numerous 
Federal Departments and agencies to enhance environmental 
reviews, TEA-21 and the just-issued Executive Order should 
provide an excellent framework from which to take that step. It 
is not, I emphasize, the Executive Order is certainly not the 
end of the road. It is just another step in a process of 
enhancing this review process.
    We will continue to examine other administrative actions 
and legislative proposals, as I know the committee will, to 
further enhance this process, while being respectful of the 
environmental stewardship.
    Mr. Chairman, I request that my written statement be 
included in the record of this hearing. Thank you again for the 
opportunity to testify before you today, and I look forward to 
responding to any questions.
    Senator Jeffords. Your statement will be included in the 
record.
    Mr. Suarez?

 STATEMENT OF HON. JOHN PETER SUAREZ, ASSISTANT ADMINISTRATOR, 
    OFFICE OF ENFORCEMENT, COMPLIANCE, AND ASSURANCE, U.S. 
                ENVIRONMENTAL PROTECTION AGENCY

    Mr. Suarez. Thank you, Mr. Chairman. Members of the 
committee, good morning.
    As you know, I am the Assistant Administrator for the 
Office of Enforcement and Compliance Assurance at the EPA. I 
want to thank you for inviting me to appear before you today to 
discuss project delivery and environmental stewardship under 
TEA-21. I am pleased to be here, and I look forward to a 
productive relationship with this committee, and I thank you. 
It is my first time up, and I am enjoying my appearance.
    Senator Jeffords. I look forward to working with you.
    Mr. Suarez. Thank you, Mr. Chairman.
    As you consider reauthorization of TEA-21 legislation, I 
understand the committee is particularly interested in EPA's 
contribution to the environmental streamlining called for in 
section 1309. As you know, the Office of Enforcement and 
Compliance Assurance is responsible for EPA's NEPA program, and 
my remarks today will focus on how EPA has attempted to 
incorporate the provisions of section 1309 into our NEPA 
program.
    EPA embraces the streamlining provisions of section 1309. 
We are committed to working with our Federal and State partners 
to better serve the American people with faster, yet 
environmentally sound transportation decisions. We are bringing 
our special expertise to bear earlier in the transportation 
decisionmaking process to improve the quality of analysis and 
to ensure that the environment is protected, and also to speed 
project approvals.
    Quality and expedient analysis are being accomplished 
through strategic staffing. An example of this includes the 
hiring of a manager with Federal Highway Administration 
experience for EPA's regional NEPA office in California. In 
several key States, we are able to provide more timely and 
sustained assistance on State priority projects thanks to the 
additional personnel funded by section 1309. We are working 
closer than ever with Federal highway and State DOTs entering 
into formal agreements which ensure early involvement and 
technical assistance for future individual projects. Early 
involvement reduces delays at the later stages of project 
review resulting from interagency agreements. FHWA statistics, 
as Mr. Frankel has just mentioned, show that 1 year has been 
shaved off the median time to process environmental documents 
for major projects since the passage of TEA-21.
    For example, Interstate Highway 69, a proposed 1,600-mile 
across-America highway from Mexico to our border with Canada is 
a good example of how EPA is using its efforts to expedite a 
specific national priority project. Three EPA regions are 
coordinating with the FHWA and seven State DOTs to identify and 
resolve environmental issues at the earliest possible stage. 
The EPA regions are also providing technical assistance to the 
State DOTs with geographic mapping of sensitive resources to 
improve and streamline the environmental impact analyses. In 
fact, Arkansas estimates that in one recent case, use of the 
geographic information system analysis, or GIS, and early 
coordination cut in half the time needed to complete the NEPA 
process.
    Within a year of TEA-21's enactment, EPA had expanded the 
model process developed with the mid-Atlantic States, FHWA, and 
our other Federal and State partners to streamline the 
environmental review of transportation projects. The mid-
Atlantic transportation and environmental process, also known 
as the MATE process, resulted in a formal agreement that 
commits all parties to a timely, cost-effective and 
environmentally sound transportation project development plan. 
In addition to the MATE process in the mid-Atlantic, other EPA 
regional offices have signed a variety of streamlining 
agreements tailored to the needs of individual States. For 
example, last year EPA and the California DOT signed an 
agreement for the review of California's priority 
transportation projects. In Oregon, EPA and the State have 
formally agreed to implement a specific process for resource 
agency involvement in streamlining. Also, after the Washington 
State legislature passed its Environmental Permit Streamlining 
Act last year, EPA became an active partner in developing and 
implementing streamlining processes in that State. 
Additionally, EPA is serving as a cooperating agency with the 
Kansas DOT on the U.S. Highway 59 project and on the I-70 
second-tier studies in Missouri. EPA and the Minnesota DOT are 
working under an MOU to streamline the approval process for the 
169 Trunk Highway.
    Our strong relationship with the States is exemplified by 
our participation in streamlining discussions at many of the 
American Association of State Highway and Transportation 
Officials Planning and Environmental Committee meetings. This 
first-hand discussion by my staff with AASHTO members is a 
direct result of Congress' emphasis on streamlining. EPA is 
also participating in the development of AASHTO's Center for 
Environmental Excellence. This Center holds great potential for 
sharing expertise across agency and State boundaries on a 
quick-turnaround basis.
    An encouraging sign that EPA has noticed since the passage 
of TEA-21 is a growing endorsement of environmental stewardship 
by the State DOTs. Half of our State DOT partners are formally 
supporting AASHTO's Environmental Stewardship Demonstration 
Program. New York State, for example, has found that by 
mulching land adjacent to highways, the State saves mowing 
costs by preventing stream damage from runoff. The more we can 
build environmental considerations into all aspects of 
transportation planning and delivery, the better we will serve 
the American public by providing environmentally sound 
transportation solutions.
    EPA, as you know, participates in FHWA's Streamlining 
Committee. We continue to encourage our regional offices, where 
most NEPA reviews are done, to work with their States to obtain 
funding for positions and technical support, which in turn is 
resulting in expedited attention to State priority 
transportation projects. EPA is also working with FHWA in its 
effort to develop training for Federal agencies and State DOTs 
on Alternative Dispute Resolution. This training, expected to 
start next spring, will ensure that disagreements during the 
project review process can be identified and swiftly resolved.
    In conclusion, I would like to endorse the critical role 
that NEPA plays in coordinating environmental requirements. 
NEPA has served the American public well for 30 years by 
providing full disclosure of the impacts of major Federal 
actions, and requiring examination of alternative ways to 
achieve a project's purpose. EPA is committed to streamlining 
as the way to make NEPA even more effective through a more 
efficient and timely process.
    I thank you for the opportunity to testify. I look forward 
to working with you and continuing to promote streamlining and 
stewardship, and I will be happy to answer any questions.
    Senator Jeffords. Thank you.
    Mr. Mead?

  STATEMENT OF HON. KENNETH M. MEAD, INSPECTOR GENERAL, U.S. 
                  DEPARTMENT OF TRANSPORTATION

    Mr. Mead. Thank you, Mr. Chairman.
    Much of the discussion thus far has focused on responsible 
environmental streamlining. I very much appreciate the invite 
today because I like to focus on the broader subject of project 
delivery, and a series of specific steps that the Congress can 
take in the coming reauthorization to strengthen management and 
oversight, facilitate delivery of projects to taxpayers, 
approximately on budget, on schedule, and free from fraud and 
waste.
    My testimony is based on audit reports we have done on 
about 18 major highway and transit projects across the Nation, 
as well as significant criminal investigations that we have 
undertaken with the Department of Justice. Whether 
transportation dollars are lost to cost overruns, schedule 
slippage or even outright fraud, the result is that fewer 
resources remain for transportation projects. The dollars are 
going to be tighter this time around, as you know, but the 
demand for infrastructure investment is going to be at least as 
great as it was last time.
    Mr. Chairman, the combined Federal, State and local 
investment during the 6 years of TEA-21 is likely to exceed 
$500 billion. That is more than $225 million at a burn rate per 
day. A lot of money goes to large projects. These so-called 
``megaprojects'' are projects of national significance. To give 
you a frame of reference, there are 35 active or planned 
highway projects that will cost about $71 billion. The 
Department has requested funding for 34 new-start transit 
projects that are valued at about $21 billion. Increasing the 
efficiency with which that $500 billion I mentioned is spent by 
just 1 percent would free up an additional $5 billion, which is 
enough to pay for four of the Nation's active largest highway 
projects.
    The projects have become more complex in the last couple of 
decades. I don't have any panacea for all of the problems, and 
there is no cookie cutter approach from what we see in our 
work. But project managers nowadays are consistently faced with 
such factors as having to maintain traffic flow and commerce, 
while building in dense urban areas and meeting the 
environmental and historic preservation requirements--
considerations that two or three decades ago, when we launched 
the Interstate, really were not quite that pronounced.
    The financing of projects has changed. It has become a much 
more difficult proposition involving complex financing 
techniques like structured bonding, innovative financing, and 
private equity investments.
    From what we see, the Federal Highway Administration has 
taken some steps to strengthen the stewardship and oversight, 
and adapt to today's environment, but it still has a very heavy 
emphasis on engineering issues and detailed contract change-
order level reviews and approvals. Historically, the Federal 
Highway Administration has given much less attention to 
identifying systemic problems with project management or other 
major project drivers of today, like project financing, 
controlling project level costs, schedule performance, and 
maintaining accountability over funds. Because they have not 
implemented a higher level focus on oversight, it sometimes has 
missed the larger issues.
    For example, on Boston's Central Artery project, the 
Federal Highway Administration approved literally thousands of 
design changes to the project and contract amendments--about 
16,000, I think--but missed a $1.4 billion cost overrun. 
Likewise, when Congress asked the Federal Highway 
Administration to identify projects costing $10 million or 
more, that had increased by 25 percent, the information system 
that we have at the Department is not sophisticated enough to 
respond to that question.
    In this reauthorization, we think that Congress ought to 
consider delegating to the States more of the detailed 
contract-level approval actions and refocusing FHWA's 
oversight. Specifically, projects that are running around $1 
billion or more are of national significance, and FHWA ought to 
stay on top of them to ensure they are kept on time and budget. 
But for the overall highway program, FHWA ought to institute an 
oversight program that is aimed at ensuring those major project 
drivers are working well.
    That is going to require a change in the staff at Federal 
Highway Administration that is more in keeping with the 
complexities of the modern-day transportation project. FHWA's 
staff is and has been predominantly engineers--very few people 
with project management skills, transportation project 
management skills or that understand the financing of today's 
modern transportation project.
    We think they also ought to give some consideration to 
using the Federal Transit Administration's approach of 
contracting out oversight. That has worked reasonably well. It 
is not perfect, but it helped the Federal Transit 
Administration get off the General Accounting Office's high-
risk list. I think it could help while FHWA develops a 
multidisciplinary staff.
    Project finance plans--I think this is great that Congress 
enacted that in TEA-21. I think it only makes sense that when 
you are spending millions of taxpayer dollars that we ought to 
have a finance plan about how we are going to pay for it. Right 
now, that requirement applies to $1 billion and up. I would 
reduce it probably to $500 million or perhaps even lower. I am 
not sure that the Federal Government needs to get in the 
business of approving ones, though, that are under $1 billion, 
but I think there should be one.
    Cost estimating--there are no standards for cost estimating 
projects that are under $1 billion. I think there ought to be a 
standard so the 50 States are singing off the same sheet of 
music.
    Information--you need information to manage these projects. 
We think it is pretty basic that the Federal Highway 
Administration ought to know how much a project is going to 
cost and roughly when it is going to be completed. When there 
are major cost overruns and delays, we ought to be able to tell 
you. Right now, we cannot. Fraud prevention--This is an 
important subject because I think that it would be unfair to 
characterize the TEA-21 program as being riddled with abuse 
like fraud. Nothing on the scale of the 1950's and 1960's and 
in the Interstate era. We are not seeing problems like that. 
But I do need to tell you that given the large increase in 
funding in TEA-21, our indicators for fraud are on the upswing. 
This is a major area of emphasis by the Department and by the 
States. Secretary Mineta and Administrators Peters and Dorn 
both appeared at the National Fraud Conference earlier this 
year to emphasize the importance of this. To give you an idea 
of the numbers, from 1999 to 2001, indictments moved from 12 to 
39; convictions from 12 to 26; monetary recoveries, $15.8 
million to $43.2 million. That is just for my office alone. 
Right now, we have about 106 pending investigations across the 
United States in 37 States.
    One thing I would recommend that the Congress consider in 
reauthorization is when we go in and prosecute a case and we 
get a judgment, and there is a fine involved, the current 
practice is to send that money back to the U.S. Treasury. I can 
give you a whole series of examples where what prompted the 
case was that the State was damaged. For example, in the State 
of Louisiana, giant culverts--they were buried in the soil in 
the State of Louisiana, but they did not have the laminant that 
you need around these culverts in the acidic soils of that 
State. So you had these culverts buried all over the State, and 
the government was being defrauded. The State of Louisiana 
suffered. Now, they are going to have to dig them up and 
replace them. We got a $30 million judgment on that.
    I think that some of the money in cases like that ought to 
go back to the States that have been damaged. It could help in 
the fraud prevention efforts and it can also help restore the 
State--kind of make the State whole. But to do what we did in 
the State of Louisiana, it is a torturous process. You have got 
to go to the highest levels of the Justice Department. You have 
got to make special procedures. I think we ought to be doing 
that as a matter of course.
    Thank you, Mr. Chairman. I know I ran a bit over, but thank 
you.
    Senator Jeffords. Thank you. Excellent testimony.
    Ms. Siggerud?

    STATEMENT OF KATE SIGGERUD, ACTING DIRECTOR OF PHYSICAL 
        INFRASTRUCTURE ISSUES, GENERAL ACCOUNTING OFFICE

    Ms. Siggerud. Thank you.
    Mr. Chairman and members of the committee, thank you for 
the opportunity to appear before you today. In this series of 
hearings on TEA-21 reauthorization, you have heard about the 
importance of mobility to the Nation's economy. Delivering 
Federal aid highway projects in a timely manner is a key 
contribution to improving mobility.
    My testimony today will cover three topics: first, the time 
it takes to deliver a federally financed highway project; 
second, the types of events that can affect delivery time; and 
third, Federal and State initiatives designed to improve 
delivery time for highway projects. My testimony is based today 
on ongoing work for Chairman Jeffords. We plan to conduct 
additional research and issue a final report in spring of 2003.
    Regarding my first point, in FHWA's best judgment, it 
typically requires from nine to 19 years to build a major 
highway project. In developing this estimate, FHWA focused on 
new roads that had significant environmental impacts. This 
estimate is based on FHWA's best judgment, rather than an 
analysis of actual projects, because FHWA and State DOTs do not 
track how long it takes to build federally financed roads. 
Projects take his long in part because they are large and 
complex, involving up to 200 key steps. However, only about 3 
percent of highway projects are major projects. Most are 
narrower in scope, for example, resurfacing an existing road, 
which would presumably take less time. According to the experts 
with which we spoke, these kinds of highway projects can range 
from three to 20 years depending on their complexity.
    To make sense of this nine to 19 year timeframe, we broke 
it down into four phases. Planning, the first phase, typically 
takes four to 5 years. Activities include developing a multi-
year plan that lists approved projects; consulting with the 
public on the plan; and review and approval of the plan by the 
Federal Highway Administration. Preliminary design and 
environmental review, the second phase, takes one to 5 years. 
Activities include an initial project design and environmental 
review of project alternatives. About 3 percent of projects 
require an environmental impact statement, the most extensive 
type of review. As a result, these are likely to take longer 
than other reviews. Most projects--91 percent--are 
categorically excluded from needing an environmental impact 
statement, while 6 percent require an environmental assessment 
instead.
    The third phase, final design and right-of-way acquisition, 
takes two to 3 years. Activities include acquiring title to the 
property needed for the project and locating and making plans 
to move the utilities. In construction, the final phase, this 
takes two to 6 years. During this phase, States let a 
construction contract subject to FHWA approval, of course, and 
then build the project.
    Turning now to events that can affect duration of highway 
projects, larger and more complex projects take longer in part 
because they are large and complex. They involve Federal and 
State requirements, more Federal stakeholders, and attract more 
public interest. However, we conducted a limited review of six 
new road projects in California, Florida and Texas. These 
varied in their complexity. We found that the projects took 
from seven to over 15 years to complete, excluding the planning 
phase for which the data were not available at the State level. 
Several of these projects experienced events that affected the 
duration of the project. For example, during the preliminary 
design phase, one project needed to be altered to accommodate 
clearances for large trucks. Another project was altered in 
response to wetlands that had been previously undiscovered. 
During the final design phase, several projects ran into 
difficulty obtaining clear title to the right-of-way and other 
encountered delays while relocating the utilities. Finally, 
during construction, several States encountered weather delays 
and problems with the contractor performance.
    Turning now to Federal and State initiatives, we identified 
several initiatives that looked promising in terms of reducing 
project duration. Most of these efforts have focused on the 
environmental review phase. Since DOT has already testified 
today on its environmental streamlining process, I am going to 
concentrate my remarks on State efforts.
    Thirty-four States are using interagency funding agreements 
to hire staff at Federal and State resource agencies to help 
expedite project reviews. Forty-one States have delegated 
enforcement of historic preservation requirements to their 
DOTs. In Vermont, for example, this is believed to expedite 
project approval by weeks or months. States also had 
initiatives for the other phases of a project. For example, 
several States that we talked with are identifying utility 
locations earlier in order to save time in the final design and 
construction. Several others, including Florida, have made 
successful use of incentives in contracts to improve their 
contractors' performance.
    Mr. Chairman, this concludes my short statement. I would be 
pleased to answer any questions.
    Senator Jeffords. Thank you. Thank you all for very 
excellent statements.
    Now, I will go back to Mr. Frankel.
    Mr. Frankel. Thank you, Mr. Chairman.
    Senator Jeffords. I would like to ask you a few questions 
about the President's Executive Order. How does this Executive 
Order differ from the environmental streamlining memorandum of 
understanding signed in 1999?
    Mr. Frankel. Mr. Chairman, I think that as I mention in my 
remarks, I think this has to be viewed in context, in a 
continuum--obviously, Congress' own action and the enactment of 
TEA-21 and section 1309; the administrative actions which I 
have cited and of which you are aware, were in the report; 
memoranda of understanding that have been drafted with other 
resource agencies. I think the most important thing is that the 
Executive Order puts the weight of the President, of the White 
House, behind this process. With all due respect, the 
environmental streamlining provisions of TEA-21 were directed 
primarily, if you will, at the Secretary of Transportation at 
the Department of Transportation. This needs to be obviously a 
cooperative effort involving the resource agencies, so the 
Department of Transportation is not in the position of 
regulating, of administering the various laws relating to 
environmental protection and environmental quality.
    I think the key thing with this is that the President 
himself has basically said to all the relevant agencies, under 
the leadership to be sure of the Secretary of Transportation, 
but to the resource agencies that on a project-by-project 
basis, we must work together, not in any way to shortchange the 
substantive outcomes. I want to emphasize this. This does not 
speak to the substantive outcomes, but rather to assure an 
expedited, timely and appropriate review. In that sense, it 
reinforces, continues the efforts undertaken, as you mention, 
with the memorandum of understanding.
    Senator Jeffords. The Executive Order calls for the 
Secretary of Transportation to develop a list of high priority 
transportation infrastructure projects for expedited agency 
review. What process will be used to select these projects, and 
will there be safeguards in the selection process to ensure 
that projects have come from the transportation planning 
process, and have realistic funding for their completion?
    Mr. Frankel. Let me say about the process, Mr. Chairman, 
that this really is proceeding on the track, as I indicated, 
that we want advice from Congress, from stakeholders, from the 
States as to what our process should be in terms of defining 
the standards for the nominations, if I can use that word. It 
will proceed under the same time. We are going to go, and as a 
matter of fact, the Secretary has already written to Governors 
and to other stakeholders, but particularly to the Governors 
asking them to nominate projects for this. Quite candidly, we 
have some ideas within the Department, but that is not even a 
beginning point. This really must come from States and local 
officials and from various transportation agencies.
    At the same time, on a parallel track, if you will, we want 
advice about what process we should use within the Department 
so that the Secretary can reduce that number, whatever it may 
be, of possible nominees to key projects--ten, fifteen. As I 
emphasized in my remarks, this is going to be a rolling list. 
This is not a list that we will do our ten or fifteen, and then 
the Executive Order goes away--quite the contrary. But we want 
help and advice about what the process, what the standards 
ought to be, as we are soliciting and in fact sifting through 
the possible nominees. We want to make sure that these are 
projects that are genuinely affected, where the issue genuinely 
is one of, for whatever reason, not timely consideration by the 
resource agencies of the applications and of the environmental 
process.
    Senator Jeffords. Following up on that question, what does 
the Administration envision as an expedited review for these 
projects?
    Mr. Frankel. Again, Mr. Chairman, I do not think there is a 
blanket answer, as I said in my remarks. Here, frankly, I draw 
on my own experience, not over the last year, as an official of 
the U.S. Department of Transportation, but as you know, I 
served as a Commissioner of a State Department of 
Transportation. There are no silver bullets for this. This is a 
tedious, time-consuming, project-by-project basis. I share with 
many members of the committee that there need to be deadlines. 
There need, where we can, to be concurrent reviews. But I think 
that really needs to be negotiated, worked out, if you will, on 
a project-by-project basis because some projects are a lot more 
complicated. Projects raise different issues. They involve 
different resource agencies. There are many other factors 
involved.
    I think the question of expediting really, as I said, 
depends on the specific characteristics of the project, and 
negotiating, working out the deadlines, and then ensuring that 
the resource agencies meet those deadlines that they have 
agreed to. I have had experience, as I know others have, in 
terms of working projects in that way. I think that expedited 
is in a sense of making sure the resources are available for 
the environmental review to go forward; that commitments are 
made and that those commitments are honored; and that we get 
decisions--we get decisions, not dictating whether they are up 
and down decisions, but that there is a final decisionmaking 
process in the case of each of these major projects.
    Senator Jeffords.port of the Transportation Infrastructure 
Streamlining Task Force will be issued at least once a year. 
When would the first issuance of this report be made, and will 
the report be issued to Congress as well as the President?
    Mr. Frankel. Actually, let me say, Mr. Chairman, I am glad 
you mentioned that. I didn't have a chance, really, to speak to 
that. That part of the Executive Order I think is one of the 
most important parts. As you have said, it talks about a 
report, but what is in that report would describe the results 
of these coordinated, expedited reviews, and identify 
procedures. Someone here earlier made reference to the fact of 
best cases and learning from examples. You have cited something 
in Vermont. I think States should learn from each other. We 
will learn from this process. We will share those experiences 
with others. These will be contained in the report. We will 
address procedures that can be undertaken and implemented, 
which will continue to improve the process.
    I must tell you candidly, I am going to have to get back to 
the committee on the question of exactly when the first report 
would be made. I am sure that it is something that would be 
shared and available. This is intended to be a transparent 
process. I think the transparency of it and the accountability 
of it is one of the things that is most important. That is 
really something else that is implicit, if not explicit, in 
this Executive Order--instructions to DOT and the resource 
agencies, that we be transparent and not use delays in order to 
frustrate the achievement of important and good transportation 
infrastructure projects.
    Senator Jeffords. The Inspector General recommends changes 
to thresholds required for projects to have a finance plan from 
the current $1 billion to $500 million. What were your thoughts 
on this recommendation? What additional workloads will this 
create?
    Mr. Frankel. Let me say, we obviously have spoken to the 
Inspector General as we and you well know from conversations we 
have had that we have been involved in the preparation of the 
Administration's reauthorization bill now for several months. 
We expect to address this. We are aware of the Inspector 
General's recommendations. We are considering recommendations. 
I think you can appreciate the fact that I cannot indicate to 
you the specifics of those recommendations in regard to 
oversight, and the specific suggestion made by the Inspector 
General at this point because we have not completed our own 
internal processes of what is going to be in our 
recommendations to the Congress. But this is something that we 
are taking very seriously and we are looking at the range of 
options, including that one which the Inspector General has 
mentioned.
    Senator Jeffords. In your testimony, you explain that 
environmental streamlining and stewardship is a term for a new 
way of doing business that brings together the timely deliver 
of transportation projects with the protection and enhancement 
of the environment. In essence, it is the rejection of the 
false choice so often presented between adding transportation 
capacity and protecting the environment. Can you give the 
committee an example of these false choices?
    Mr. Frankel. Well, I am not sure whether you are seeking a 
specific project. If so, I think that is something--a specific 
project or projects--that I would like to supply subsequently 
to the committee. But I think in general, the use of delay, and 
again someone mentioned this in the opening remarks maybe 
several times, the use of delay as a device to defeat a project 
I think is not appropriate. I think that is an example, if you 
will, maybe false choice is not exactly the right term, but bad 
public policy.
    We need, and indeed the environmental laws, NEPA and the 
various permitting and regulatory laws, are written in a way so 
that we balance investments with environmental protection and 
quality of life. I think we just have to ensure that 
substantive decisions are made. That, in and of itself, is the 
way these laws and public policies are supposed to work.
    Senator Jeffords. Senator Voinovich?
    Senator Voinovich. Thank you, Mr. Chairman.
    I have a couple of areas I am interested in. Mr. Mead and 
Ms. Siggerud, you had an opportunity to review these agencies. 
I have been spending a lot of time in another committee on the 
human capital crisis that we have--the crisis in competence; 
the issue of having the people with the right skills and the 
right knowledge at the right places and at the right time.
    What is your observation about the capacity of the 
Department of Transportation in terms of fulfilling their role, 
in terms of personnel and the people they need to get the job 
done?
    Mr. Mead. I think there needs to be a major change. 
Specifically in our testimony, I mentioned that today's project 
requires many things in addition to just the engineering 
discipline, just like the profession of auditing needs more 
than just people with the discipline of accountancy today. The 
Federal Highway Administration, for example, I think they need 
to develop some skills in the financial management area. When 
you are talking about multi-billion dollar projects; when you 
are going to be inviting the public to invest in projects and 
spend their money in a project, it is important that the 
prospectus make the appropriate disclosures, particularly if 
the Federal Government is supposed to sign-off on a finance 
plan, as they are required by law to do.
    At the Department of Transportation, they would have to 
make a concerted effort to develop a more multi-disciplined 
workforce in the Federal Highway Administration. I think they 
are examining that. That cannot be done overnight. That is why 
I would suggest that as an interim measure, at least, and on a 
selected basis you contract out some of those reviews so you 
can secure that talent in that fashion.
    Ms. Siggerud. Senator Voinovich, we report to the new 
Congress every 2 years in what we call our performance and 
accountability series on each cabinet-level department. We will 
be including in that report this year a very similar message to 
what Ken just outlined. There is a human capital crisis in the 
Department of Transportation and within the highway community 
in general. We will point out that the engineering profession, 
while it has been very important in developing the highways in 
this country, has not necessarily set up the use of technology, 
the kind of public outreach and environmental analysis that is 
needed, as well as the financial management issues that Ken 
mentioned.
    We will be pointing out that this is an issue both for the 
Federal Highway Administration and also at State and local 
transportation agencies as well, and there is a need to look at 
that issue.
    Senator Voinovich. I had asked the Department of 
Transportation, and I am going to write to your people over 
there, I want to see in the next couple of months your plan to 
re-shape the workforce of the Department of Transportation. I 
know that the Administration has asked agencies to do it. Mr. 
Chairman, I think we should insist upon finding out from them 
where their problems are, what they are going to do to re-
shape, what they are going to do to bring on the people that 
can get the job done.
    This issue was ignored by Congress and it has been ignored 
by Administrations. Until we deal with this personnel problem, 
a lot of the problems that we are talking about here are not 
going to get taken care of.
    The second area that I am concerned about is that we are 
talking about changing rules, changing regulations. We are 
going to be hearing later on from some people out in Oregon and 
others, where things have really worked out quite well. I am 
really interested in getting back--we are going to be working 
on this legislation--but getting back on just what changes 
really need to be made. You have got projects where you have 
been able to get the job done. My experience as a manager is if 
you get the right people with the right interpersonal skills at 
the table, you can get the job done.
    Now, the issue is, what rules are standing in the way? If 
you have got these people that have got this right attitude 
toward things and have moved projects along, to ask them, what 
are the regs that if they were changed would have helped 
expedite the process even more? OK. I want to know, what are 
those. No. 2, are there laws that are in place that have stood 
in the way, or stand in the way of our moving forward? Gee, if 
we could have got this, we could have gotten that. Boy, things 
would have been even smoother.
    Last but not least, the issue of role models. What are the 
role models? I would like an around the country--particularly 
projects that deal with some really sensitive environmental 
concerns. I am sure that some of the people here today are 
interested about the environment. Are we going to sacrifice the 
environment on the altar of expediting highway projects? I 
would like to know where we have had some very sensitive 
projects and where they have moved along in a smooth fashion, 
so that we have the best information we can have when we are 
putting together legislation to deal in this particular area.
    Is there anything, Mr. Frankel, on your mind of a model 
that you could share with us?
    Mr. Frankel. Well, Senator, your comments are very 
thoughtful and we will obviously try to be as responsive as we 
can to the variety of personnel workforce issues, as well as 
the rules and best cases. I think that is something we are 
trying to do, as I have indicated. I think the Executive Order 
advances, moves the ball forward, does not get us by any means 
to the end of the road. Because again, if you will forgive me 
for drawing on my experience when I worked at the State level, 
and something you certainly know far more about than I, but 
nonetheless it is people and it is tedious, tough work of 
getting people of good will.
    EPA, for example, has regulatory responsibilities. They 
have a law or laws to enforce, if you will. We need to identify 
what the issues are, but ultimately it is people of good will 
around a table on a continuing basis, tables over a long period 
of time, working out the details, trying to assure that these 
appropriate interests--advancing the economy, infrastructure 
investment, and environmental protection are all balanced in an 
appropriate way. They can be. That is my own experience. A 
couple of times there are some projects where it is just very 
difficult to achieve, but generally people, if they are there, 
and this Executive Order I think is basically saying not just 
to the technical staff, but saying to the Administrator of EPA, 
to the Secretary of Agriculture, the Secretary of the Interior, 
and the Secretary of Transportation--you have got to weigh-in 
on these projects. You have to apply the best cases. What have 
we learned here and what can we apply there?
    I might say that, and I think you would be the first to 
acknowledge, I am quite familiar obviously from my own 
background of some of the things done in Vermont, for example; 
less aware, perhaps, about Ohio and Oregon. But I also know 
that the circumstances are different. There are different 
environmental laws which are applicable in Oregon from 
Connecticut, and there may be, while there are things we can 
learn in Oregon and apply elsewhere, there are also things 
which are unique project-by-project. This is tedious, tough 
work, and you know that from your experience as a Governor, as 
the leader of a State. There really is no cookie cutter. There 
is no, as I said, silver bullet here to come up with an answer 
which is going to be the answer for all projects.
    We can, and I think you are quite right--are there 
particular legislative statutory issues or regulatory issues 
which stand in the way of those sorts of negotiations and 
dispute resolution and so forth, and we should dismantle those. 
I know this committee and the Congress will address those in 
reauthorization. We hope to be helpful in that process. We will 
have some statutory recommendations to make, consistent with 
your question. But again, I want to emphasize that we have to 
learn and apply ourselves on a case-by-case basis.
    Senator Voinovich. I would just like to make one last 
comment, and that is this. Mr. Chairman, I would like to see us 
expedite this issue and get it over with before we get into the 
whole rest of the reauthorization of TEA-21. This has been 
around here for too long and it is too important to just say, 
well, we are going to wait around, because we will add another 
3 years.
    The last thing, my advice to you would be, if the President 
is going to do an Executive Order and pick out the projects, 
what I would do is I would get the people involved in those 
projects from the States to sit down with the people from 
Vermont and Oregon and have a seminar for them for a couple of 
days; have them come in and talk to these people about what 
they did locally to get the job done. Because I don't care what 
you do with the heads of all these Federal agencies, it happens 
on the--you know, where the rubber meets the road, with the 
people that are involved. If they can get together and hear 
from other people and say, hey, this is the way we got the job 
done, I think you are going to get much farther ahead than if 
you try to do this from the top down.
    Thank you.
    Mr. Frankel. Senator, I think that is a very good 
suggestion. A lot of that has been going on, but we need to do 
more of that, and thank you for the suggestion.
    Mr. Mead. I think you are onto something, too, about the 
best practices in these projects. This transcends just the 
environmental issue--I-15 in Utah, brought in on time; I-40, 
which was the bridge collapse that was recently done--that was 
done on time; Alameda Corridor in California; and I think even 
the Central Artery in Boston today stands as some testament to 
the wisdom of Congress in establishing the finance plan. Some 
people may find that is a strange comment for the Inspector 
General from the DOT to make, but I think it is true.
    Senator Jeffords. Thank you.
    Senator Corzine?
    Senator Corzine. Thank you, Mr. Chairman. I appreciate you 
holding these hearings. They are very informative and one that 
impacts all of us in our local communities.
    I have a statement that I would like to submit for the 
record, if that is OK.
    Senator Jeffords.
    [The prepared statement of Senator Corzine follows:]
    Senator Corzine. I am curious why when only 3 percent of 
all the federally funded projects are being held up, according 
to this GAO study and testimony, by environmental issues, why 
we are not doing some of the things that Senator Voinovich is 
talking about. It seems to me that a lot of these major 
projects, there are issues that are far more impacting on the 
length of time it takes. Isn't that making the case of working 
on best practices in the planning area, and best practices in 
the design area, and dealing with, I think you used the word 
``concurrent'' efforts with regard to all of these various 
phases of development with regard to projects. Why are we 
singling out environmental stewardship--if you would speak to 
that; any of you, but certainly Mr. Frankel, since the 
Department of Transportation is working on it. Can you give me 
some understanding of why that is the focus of expediting this 
process, streamlining this process, relative to, at least from 
this testimony, a four to 5 year planning process for a major 
project.
    Mr. Frankel. Senator, first of all as I indicated in my 
remarks, there are other issues. By no means is the 
environmental review and permitting process the only factor 
that impacts the timing of a project. I suppose our comments in 
the Executive Order were addressed to environmental 
streamlining and stewardship because that was the subject of 
section 1309, and it was an important action, in my mind, for 
the President and the Administration to take as not fulfilling, 
but moving forward, being responsive to the mandate of that 
section of TEA-21.
    As I indicated in my remarks, we hoped--we want to make 
sure, I think it is very important that Federal law not in any 
way inhibit States from innovating. The issue of bidding, 
procurement, which also is a very--the contracting process 
itself, which is a very important factor in project initiation, 
is primarily, as you well know, an issue of State law, but we 
need to make sure that Federal law does not inhibit States from 
taking innovations. Again, the application of best cases--that 
is going on within the Department. I think we need to advance 
that.
    I might say, incidentally, the 3 percent figure--actually 
the 3 percent figure is of transportation projects which are 
subject to EIS's. It is not even 3 percent are subject to 
delays, because a lot of those projects move forward. There is 
a certain time requirement, but nonetheless are not 
unnecessarily or inappropriately delayed, but it is a factor. 
We single it out here. The Executive Order does really because 
we thought it was, and it is important that we be responsive to 
the mandate that the Congress established, and the leadership 
of many members of this committee, and contained in section 
1309 of TEA-21.
    Senator Corzine. Well, I would just make the comment that I 
identify with the kinds of managerial issues, if you will, that 
I think Senator Voinovich is talking about, being 
accountability issues, being at least as significant in the 
delaying process by most analysis that I have seen, as opposed 
to singling out environmental issues, which seem to be the 
whipping boy of why this is a slower process than people expect 
in the political realm. I question whether that is where we 
ought to be directing our efforts, or whether we ought to be 
directing our efforts toward the managerial and accountability 
issues that bring delivery. It certainly has a lot of impact 
with regard to how State and Federal authorities work with each 
other. So much of this is done at the State level, so looking 
at best practices that are being accomplished in the State, I 
encourage and I think the chairman is working in that area.
    Thank you.
    Senator Jeffords. Senator Warner?
    Senator Warner. Thank you, Mr. Chairman, and colleagues. I 
am pleased to join in this very important hearing. I am just 
going to make a few personal observations, Mr. Chairman.
    Senator Jeffords. Go right ahead.
    Senator Warner. I would start off by saying with all due 
respect to my long-time friend and chairman, I am going to part 
with you and associate myself with Mr. Baucus and others this 
morning who spoke with regard to the need for legislation. 
Roughly 16-plus years I have been on this committee. It has 
been a great pleasure and an honor to serve on it. I went 
through the 1991 ISTEA, in which we made a reference to this 
subject--I noted, just a reference. And then in 1996, 1997, I 
was privileged to be chairman of the subcommittee, and in that 
bill, we put in provisions in that bill. But here we are today 
still looking at the same subject, and with all due respect to 
a very distinguished President, I feel it is time that the 
matter has to be codified, and we will be working with those 
colleagues to do so.
    I just wish to inform the chair of that.
    Senator Jeffords. I appreciate that.
    Senator Warner. And to show you the intensity of my feeling 
on this subject, I am up for reelection. Now, that is not any 
great moment to anybody sitting in this room, but on the 
referendum in two major geographic areas of my State, in 
Northern Virginia and Tidewater, is a very simple authorization 
to raise taxes on the citizens--got that?--raise taxes for 
transportation needs. Most skilled politicians, which I am not, 
would learn how to duck and run from that.
    [Laughter.]
    Senator Warner. But I feel I have an obligation to tell my 
constituents, since I am going to vote on one of those ballots 
for that referendum item, I am going to vote for it. Now, not 
too many, particularly who pride themselves as conservative 
Republicans, vote to raise taxes, and particularly in the year 
in which you are seeking reelection to the Senate. But that is 
the intensity with which I feel on this issue of 
transportation, my constituents are just plain weary of waiting 
year after year after year after year to see that these 
programs materialize, combining most often State and Federal 
funds. So the time has arrived to codify this and I will work 
to do so. Whether I will be here next year remains to be seen, 
but I will cast that vote.
    I thank the chair.
    Senator Jeffords. I think there is no one that can do so 
with less fear of retribution than you, Senator.
    [Laughter.]
    Senator Warner. Well spoken.
    [Laughter.]
    Senator Jeffords. I want to thank the panel. We will now 
move on to our next panel.
    I want to welcome our second panel. This is an important 
hearing and I really look forward to this panel and your 
participation. I will introduce each of the witnesses and ask 
for their statement. The first witness is the Honorable Carol 
Murray, Commissioner in the New Hampshire Department of 
Transportation, from Concord, New Hampshire.
    Ms. Murray, please proceed.

  STATEMENT OF HON. CAROL MURRAY, COMMISSIONER, NEW HAMPSHIRE 
                 DEPARTMENT OF TRANSPORTATION.

    Ms. Murray. Good morning, and thank you very much, Mr. 
Chairman. As wonderful as Washington is, I think you and I 
would rather be back in our respective States.
    Mr. Chairman, members of the committee, I do appreciate 
very much the opportunity to be here today, having said I would 
rather be in New Hampshire. I thank you very much to be here to 
talk about environmental streamlining.
    The subject of environmental streamlining is a very 
important and unfortunately very complex and difficult topic, 
one that has no silver bullet solution that I can identify and 
isolate. I can readily identify the reason that I and my 
counterparts nationally consider this so significant. The 
public has asked the transportation agencies to provide this 
Nation with the mobility critical for our quality of life and 
our economic vitality. The same public also wants the 
environment preserved and protected. The only way to accomplish 
these twin goals is for transportation and environmental 
agencies to work cooperatively.
    The public looks to these agencies to implement the policy 
direction provided by elected officials with an open, trusting, 
balanced and communicative spirit. But I am not convinced that 
the public's vision or that of their elected officials is being 
implemented very well by the agencies involved. The concept of 
environmental streamlining was not conceived to put 
environmental preservation and enhancement as secondary or a 
minor interest in the development of transportation projects, 
but rather to encourage early discussion, involvement and 
decisionmaking by the agencies with environmental and 
transportation duties. If the public agencies could work to 
provide the best balanced project in a timely way, then the 
public's voice will have been heard.
    Over the last two reauthorization bills, Congress set a new 
direction for transportation. Transportation agencies moved 
into a new era. With some resistance, we realized that mobility 
for the future was not just highways. Choices in modes of 
transportation and connection between modes are now a focus. 
Congress also said that to develop the best projects for this 
country, the participation of local communities, regional 
planning agencies and the public must be encouraged and their 
voice heeded. The evolution in how State DOTs work came hard to 
those of us used to doing the designs by the book, and 
approaching the public with our well-designed, but off-the-
shelf, standard highway solutions.
    What we in the transportation business have found is 
Congress was right in the direction they gave us. After a 
decade of increasingly successful implementation, we are 
believers. We are cutting ribbons and celebrating projects that 
have been developed with more thoughtful consideration of 
transportation user needs, local communities' visions for their 
future, and in balance with the natural and cultural 
environment. I do believe that over the last two decades, the 
transportation community has changed and become better. While I 
would like to say that we have got it perfect, that would 
certainly not be true. We need to continue to listen, to learn, 
and I think we are going to do that with an acceptance that was 
not there before ISTEA and what we have learned since.
    What is frustrating is the reluctance of the environmental 
community to recognize this change. It is disheartening that 
this environmental community has not championed and joined in 
early involvement and commitment to transportation project 
planning. We have found reluctance in engaging and working 
toward a mobility solution that balances the various public 
needs in a fiscally responsible way.
    You have all heard about the Interstate 93 widening project 
in New Hampshire, and Senator Smith's work to bring 
streamlining to reality. As we agree, policy level 
representation from the public regulatory agencies met as 
decision points were approached. Early agreement was reached to 
operate in an open, trustful and professional manner. This 
group has met numerous times over the past 2 years, and the 
culmination of this work is the draft environmental impact 
statement which is being published as we speak.
    Then, on September 9, I received a letter from the EPA that 
discounts the work accomplished in the streamlining process. 
Primary reasons given were that only regulatory agencies were 
involved, not private environmental groups, and the 18 
communities that may experience secondary growth, even though 
they are directly not on the Interstate. This letter came 
despite over four dozen public meetings that have been held as 
this project develops, with all these meetings publicly noticed 
well in advance and individual notices sent to those specific 
environmental groups.
    The project impacts an estimated 70 acres of wetland over 
19 miles of widening of an existing Interstate highway. Our 
proposed mitigation includes 650 acres of land purchased and 
wetland creation, at an estimated cost of $15 million, plus a 
$3 million technical assistance program for local communities 
to assist in developing local land-use regulations that reflect 
their future vision for their community. The proposed 
mitigation package was severely criticized in the letter from 
EPA because, and this is a quote, ``While of importance to the 
towns, it does not have high ecological value.'' The EPA letter 
further states, and again I quote, ``Current State and Federal 
wetland regulations and typical zoning rules have generally not 
been effective.''
    While the debate about local, State and Federal roles in 
land-use transportation and secondary impacts is a really 
engaging debate, I believe that is a public policy decision 
that Congress, State legislatures, municipalities and the 
public should decide, not governmental employees, particularly 
those far removed from the project area. The EPA submits that a 
mitigation package of approximately 2,300 acres at a cost of 
upwards of $50 million is needed. The reason cited is secondary 
impacts that may occur due to the project, not the direct 
impacts, which they even agree are a relatively minor 
consequence.
    Additionally, to their way of thinking, the highway 
widening should include concurrent construction of transit 
options beyond what we have already planned--enhanced bus 
service and potential rail being provided for in the project.
    All of these proposed environmental mitigation elements 
are, I think, good things. But the fundamental question is 
whether or not it is the responsibility of this transportation 
project to pay for all of them. In fact, because New Hampshire 
has done a very good job in providing a high quality of life in 
all arenas, including environmental protection, mobility and 
economic vitality, people will come to New Hampshire with or 
without that Interstate being widened.
    Why do we need environmental streamlining? Because all 
agency implementers of elected officials' laws need to work 
together effectively and in a fiscally responsible way to 
respond to the public's needs in a balanced manner.
    The transportation agencies after ISTEA and TEA-21 learned 
we have not got the answers. The designers and builders of our 
Interstate system achieved a wonder, but in hindsight, it might 
and probably should have been done differently. So Congress 
passed ISTEA and TEA-21, and now in 2002, it seems that the 
transportation projects, in the environmental view, are seen as 
a financial resource to implement conservation projects. Early 
involvement in all transportation project planning is needed, 
but additionally mutual respect for professional 
responsibilities, fiscal reality, and overall an understanding 
that we need to make honest decisions that respects the 
public's will as envisioned by our elected leaders.
    The EPA letter that I mentioned states that mitigation 
costs should be up to 20 percent of the total project cost. In 
a time when we are all struggling to fund the public's 
transportation mobility needs, a decision by a government 
employee to direct funding to non-transportation purpose seems 
to me inappropriate.
    What do we need to meet the public's goal of providing 
mobility for quality of life and economic vitality, while 
protecting and preserving the environment? This is best 
achieved if the principles envisioned by Congress for 
environmental streamlining are implemented. Above all, we need 
a process that includes early involvement that is consistent, 
truth-based, cooperative, a process that is streamlined, 
effective, balanced, and then we will get to good 
transportation project delivery which unfortunately is not what 
we are seeing today.
    Hopefully, the next reauthorization or sooner will produce 
a streamlined process that follows the direction of Congress 
and meets the public expectations.
    Thank you very much, Mr. Chairman and members of the 
committee for your time. I would be happy to answer any 
questions.
    Senator Jeffords. Thank you, Ms. Murray.
    Mr. Morefield?

    STATEMENT OF KENNETH MOREFIELD, ASSISTANT SECRETARY FOR 
 PLANNING AND ENGINEERING, FLORIDA DEPARTMENT OF TRANSPORTATION

    Mr. Morefield. Mr. Chairman, members of the committee, it 
is my pleasure to appear before the committee today to present 
view of the Florida Department of Transportation concerning 
project delivery and environmental stewardship.
    Section 1309 of TEA-21 has provided the impetus for State 
and Federal agencies to look for ways to improve the delivery 
of transportation projects, while protecting our environment. 
The Federal Highway Administration, along with the Federal 
Transit Administration, have worked with us and many other 
Federal, State and local agencies to develop a new process we 
call the Efficient Transportation Decision Making process, or 
ETDM for short. I am pleased to report that we are virtually 
finished developing the new process. We expect to begin full 
statewide implementation by July of next year.
    The development of this new process began in February of 
2000, when over 20 Federal, State and local agencies met and 
pledged their support of an effort to examine how 
transportation decisions are made in Florida, and to develop an 
improved process. The multi-agency working group was then 
formed and met several times during the year. Nine task work 
groups worked on issues related to implementation of the 
process.
    In December 2001, Federal, State and local agencies 
gathered at an executive summit and signed a memorandum of 
understanding endorsing the ETDM process and pledging their 
continued support for full development and implementation of 
the process. We believe our ETDM process is fully responsive to 
the direction of section 1309 and the National Environmental 
Policy Act. We have been pleased to brief your committee, staff 
and others on our process, but we do not promote it as one that 
would fit every State. In fact, Florida's environmental laws, 
our own mix of State and local agencies, and other differences 
led us to an early conclusion that the best way to address 
improved project delivery and efficient decisionmaking was with 
our own efforts, and not through a one-size-fits-all approach. 
Section 1309 of TEA-21 calls for change. Florida's ETDM process 
accomplishes all the objectives in section 1309.
    The State of Florida is fortunate to have a very rich data 
base of information about our resources. We have collected that 
information at the University of Florida GeoPlan Center in 
Gainesville. This high technology digital data base tool allows 
direct access to project planning information over the 
Internet. It provides the foundation for our ETDM process and 
is called the Environmental Screening Tool. This tool enables 
us to perform two screenings which document agency and 
community input much earlier in our transportation planning 
process. We call these screening events the Planning Screen and 
the Programming Screen. Modification of project plans in 
response to these early screening events will enable us to 
avoid or reduce costly changes late in the process. These 
screening events will provide information that will allow 
agencies to be engaged in the thoughtful exchange necessary to 
properly balance land use, environmental protection and 
mobility needs.
    The primary purpose for the Planning Screen is to provide 
decisionmakers with better information to stage transportation 
improvements in the Cost Feasible Long Range Transportation 
Plan. The Programming Screen provides an opportunity to 
identify project issues and the need for technical studies 
prior to the project advancing into our work program. The NEPA 
process begins at the Programming Screen with a class of action 
determination that leads to environmental documentation and 
construction permits. A fundamental premise of our process is 
that it builds upon earlier analyses, rather than reopening all 
issues at every step of the process.
    The screening events will be performed by Federal, State 
and local agencies working together as an Environmental 
Technical Advisory Team. We will have one team in each of our 
seven geographic districts. Each team will be responsible for 
agency reviews and feedback as projects are developed. 
Community outreach coordinators within FDOT will seek input 
from affected communities and post the input received so that 
agencies are aware of community concerns.
    Project planning information is entered into the 
environmental screening tool by metropolitan planning 
organizations or by the Department for rural areas. 
Standardized analysis will then be performed on these planned 
projects, and the results are then made available to agencies 
through the Internet. All agencies will perform their reviews 
on a coordinated time schedule, and enter the agency's official 
comments about the impact on the resources protected by their 
agency. The agency will be able to suggest changes to project 
concepts through the feedback portion of the data base system.
    At the same time, opinions of the affected community are 
also posted in the feedback portion of the system. The results 
are visible to the agencies, nongovernmental organizations, and 
the public. Everyone will have access to the same information.
    In summary, Florida is about to implement a new way of 
doing business. We believe the Efficient Transportation 
Decision Making process meets the objectives of this committee 
as set forth in TEA-21. We are convinced that this new process 
will provide for earlier and concurrent agency reviews, 
resulting in a reduction in the time required to plan projects 
and achieve earlier permit approval.
    Thank you for the opportunity to share Florida's approach 
on environmental stewardship, and I would be pleased to answer 
any questions.
    Senator Jeffords. Thank you for your statement.
    Ms. Wadhams, I welcome you here, and commend you for all 
the wonderful work you have done in Vermont. It is a pleasure 
to have you here.

    STATEMENT OF EMILY WADHAMS, STATE HISTORIC PRESERVATION 
  OFFICER, VERMONT DEPARTMENT OF HOUSING AND COMMUNITY AFFAIRS

    Ms. Wadhams. Thank you, Senator Jeffords. Good morning, Mr. 
Chairman, members of the committee.
    Thank you for the opportunity to provide testimony today on 
how Vermont has expedited our historic preservation reviews of 
transportation projects. For the record, my name is Emily 
Wadhams and I am the State Historic Preservation Officer in 
Vermont.
    It is an honor to be here, and I especially want to thank 
you, Senator Jeffords, for the invitation. We in Vermont have 
long looked to you as a leader in historic preservation. 
History is important to Vermonters, as you know, and you have 
worked hard to help Vermont citizens preserve our State as a 
special place. You have recognized the importance of landmarks 
like covered bridges and barns, with national legislation that 
helps preserve these icons for all Americans, and you have 
championed our small towns and village centers with your 
leadership on Postal Service policy that helps keep post 
offices active as vital community centers, so we thank you.
    Senator Jeffords. Thank you.
    Ms. Wadhams. In Vermont, my office has worked very hard 
with State and Federal transportation officials to develop a 
programmatic agreement. We accomplished this in the year 2000. 
This agreement created a simplified review process under 
section 106 of the National Historic Preservation Act. As you 
know, section 106 requires Federal agencies to assess the 
impact of their funding on historic and archaeological 
resources. Before we had this agreement, the agency of 
transportation would submit projects to my staff for review. 
Resolving impact issues often meant the time consuming exchange 
of memos, telephone calls, and meetings. Like other States, we 
found that transportation safety and efficiency goals often 
collided with historic preservation goals, pitting our 
Department against our Agency of Transportation in battles over 
the preservation of cultural resources. Mistrust among the 
parties to the process was common, often resulting in a blame 
game of who was at fault for delaying projects.
    I believe that we did not have much to lose by changing the 
way we did business around environmental reviews. Now, under 
the terms of our new programmatic agreement, the State Historic 
Preservation Officer has delegated the review and sign-off 
authority to qualified historic preservation professionals 
within the Vermont Agency of Transportation for all State and 
Federal projects. After almost 2 years of experience with the 
agreement, I can report that the success of this approach has 
far exceeded our expectations. The first annual evaluation by 
the signatories of the agreement last December proclaimed it a 
resounding success. Thirty other States recently requested 
copies of our agreement so that they can consider it for their 
jurisdictions.
    Vermont is the only State so far to have developed such a 
comprehensive, and some might say radical solution. One could 
argue that the State Historic Preservation Office has given 
away control over projects, but I would contend that we have 
gained time to do other important preservation work. We have 
gained a constituency within our agency of transportation that 
we never had before. I also think that historic resources are 
being better protected.
    In the 1990's, several things happened that set the stage 
for allowing us to take this step. First, my office and AOT 
worked together to address historic metal truss bridges, one of 
the most adversarial issues that we have had to deal with. We 
both committed time and money to develop a survey, to produce a 
consensus bridge plan that prescribes treatments for over 100 
bridges in our State. In Arlington, Vermont, for example, an 
obsolete metal truss bridge next to a fishing access on the 
famed Batten Kill trout stream is now a fishing platform 
accessible for people with disabilities. This is one of many 
useful and historic bridges that would have been demolished 
without this bridge program.
    Another collaborative effort occurred about the same time, 
a project sanctioned by the passage of ISTEA in 1991, the 
development of the new Vermont Design Standards. The standards 
allow for more creativity and flexibility in designing 
transportation projects and increased community input early in 
the planning process. One of the first beneficiaries of the 
Standards was the town of Underhill, where citizens fought for 
and won a so-called ``footprint'' replacement bridge--a bridge 
that matched the dimensions of the old bridge, as well as the 
small scale of the community. So with ISTEA and TEA-21 
encouraging departments of transportation to look beyond the 
pavement; and with the new relationship we had developed in 
creating the bridge program and the design standards, there was 
an increased level of trust between my office and the Agency of 
Transportation. This trust allowed us to take the leap of faith 
needed to write the comprehensive programmatic agreement.
    A critical step was working together with them on the 
manual of procedures that we were going to follow. We 
negotiated the list of activities that are exempt from any kind 
of review. We found a way for the SHPO to be kept informed and 
to intercede if necessary, and we defined an annual reporting 
and amendment process.
    The key to our success was really our Agency of 
Transportation's willingness to take its responsibility toward 
historic preservation seriously. Now, resource stewardship is 
more naturally integrated into the Agency's thinking in the 
very earliest stages of planning projects, not as an 
afterthought or a burden. In the past when preservation issues 
came up, as you have heard before, it was often late in the 
process, making it very difficult and expensive to make 
changes.
    The programmatic agreement has reduced delays in the review 
process dramatically. It has increased and improved the quality 
of public involvement and public education. It has increased 
interagency cooperation on non-regulatory projects in ways that 
benefit Vermonters. For example, our AOT now sponsors our 
annual statewide historic preservation conference, and our 
Vermont archaeology month. And AOT has now begun on their own 
initiative to develop projects like a railroad depot initiative 
to rehab the State-owned railroad stations. This probably would 
not have happened without this new consideration of historic 
resource protection in their day-to-day activities.
    There has been much discussion recently about problems with 
section 4(f) of the Department of Transportation Act, and I 
felt I needed to put in a word in about this. Section 4(f) 
prohibits the use of historic sites on public lands unless 
there is no prudent and feasible alternative. It is viewed by 
some as being rigid and cumbersome, and sometimes results in 
solutions that do not make sense, especially with smaller 
projects. In Vermont, 4(f) has not been an issue because AOT's 
historic preservation staff flags adverse affects early on in 
the planning process and addresses them at this stage. Almost 
everyone who works with 4(f) agrees that improvements to the 
process could and should be made, but changing the statute is, 
in my opinion, unnecessary and would weaken the protection in 
the law.
    The success of the Vermont example to expedite reviews 
under 106 can be applied to improving the 4(f) process. As we 
learned, willing partners, committed to making the process 
work, can come up with good solutions. We have demonstrated 
that with a collaborative approach, everyone wins. Projects get 
built faster. Resources get protected, and the public is better 
served.
    Thank you.
    Senator Jeffords. Thank you, Ms. Wadhams, for an excellent 
statement. We really appreciate the work you are doing. Vermont 
probably has the most difficult time because the whole State is 
historic.
    Ms. Wadhams. Exactly, exactly.
    [Laughter.]
    Senator Jeffords. Our next witness is Vice President of 
Highways Programs for Parsons Brinckerhoff, Hal Kassoff of 
Washington, DC. Please proceed.

 STATEMENT OF HAL KASSOFF, VICE PRESIDENT OF HIGHWAY PROGRAMS 
           FOR PARSONS BRINCKERHOFF, WASHINGTON, D.C.

    Mr. Kassoff. Mr. Chairman, members of the committee, good 
morning. My name is Hal Kassoff. I am Vice President with the 
consulting engineering firm of Parsons Brinckerhoff. This 
morning I am representing the 5,800 member firms of the 
American Council of Engineering Companies, where I chair the 
Transportation Subcommittee on Environmental Streamlining. I am 
also co-chair of the Planning and Environmental Working Group 
for the American Road and Transportation Builders Association's 
Reauthorization Task Force.
    Let me just add as an aside, it is a pleasure to sit 
between two success stories--one that you have just heard and 
one that you are about to hear. If these successes were typical 
of what was happening across the land, much of my testimony 
would not be necessary.
    Expediting project delivery is one of the premier issues 
for members of the transportation community. And those who are 
experienced in delivering surface transportation projects will 
agree that the most difficult and time-consuming challenge 
involves coping with what has too often become an overly 
arduous and time-consuming environmental review process.
    Recently, those who oppose streamlining this process have 
begun to argue that environmental factors are not the 
significant cause of project delay; that funding constraints 
and mismanagement are the real problems. Mr. Chairman, I am 
afraid these arguments are a distortion of the reality that I 
have known for the last 23 years working with the project 
development process across this country in both the public and 
private sectors.
    In his testimony before this committee on April 29, 1999, 
Mr. Roy Kienitz, the then-Executive Director of the Surface 
Transportation Policy Project, said, and I quote, ``In the 
struggle between the proponents and opponents of a 
controversial project, the best that an opponent can hope for 
is to delay things until the proponents change their minds or 
tire of the fight. It is the only option they have, and so they 
use it.''
    Mr. Kienitz went on to say, and I quote, ``There is no good 
reason for Federal approval to take years if there are no major 
disagreements over the project being proposed. These delays are 
the most needless of all and are the easiest ones to attack,'' 
end of quote. Mr. Chairman, this refreshing observation by Mr. 
Kienitz underscores the fact that the process needs to be 
fixed. A recent study by FHWA found that in the 1970's, the 
average time for completion of environmental impact statements 
was 2.2 years, and this time period doubled to 4.4 years in the 
1980's, moved further to an average of 5 years in the 1990's. 
Also, the average time grew by nearly two additional years when 
either section 404 wetland permit issues or section 4(f) issues 
were involved.
    Now, we have heard about the 3 percent EIS's. Let's look at 
the 97 percent environmental assessments and categorical 
exclusions. Another recent study under the National Cooperative 
Highway Research Program reported on a survey of well over 30 
States who described their experiences with delays in 
satisfying environmental requirements for smaller, simpler 
projects. According to this report, 63 percent of all DOTs 
responding to the survey experienced environmental processing 
delays with preparation of these categorical exclusions, CEs, 
and 81 percent reported similar delays involving environmental 
assessments, or EAs. These delays triple average environmental 
review times from about 8 months to just under 2 years for the 
CEs and more than double these time periods, from under 1.5 
years to about 3.5 years for the EAs.
    Now, some Departments of Transportation have actually 
extended their schedules to reflect these extremely long 
durations. Unfortunately, this can then give the misimpression 
that the environmental process is not causing needless delay, 
because the schedules have been lengthened. Other DOTs will 
simply not allocate funds to projects until environmental 
requirements have been cleared, in order to avoid tying up and 
then delaying the use of critically important financial 
resources.
    In an ironic twist, environmental activists can then claim 
that such projects are being delayed not by environmental 
requirements, but by funding constraints, when in fact the 
opposite is often the case.
    Mr. Chairman, ten national environmental organizations 
recently joined in releasing a one-page document, and there are 
copies in this room, entitled Expediting Project Delivery 
Without Sacrificing Environmental Protection. While exception 
could be taken with a number of specific points in the paper, 
the overall title is right on the mark. In fact, we are not 
aware of anyone in the transportation community who would argue 
that environmental protection should be sacrificed in order to 
expedite the project deliver process. You heard this from Carol 
Murray. We have gotten the message. This issue is no about 
weakening environmental protection. The issue is about 
implementing an improved process that expedites project 
delivery without sacrificing environmental protection.
    We believe that section 1309 needs a legislative booster 
shot in the form of a carefully balanced approach that reflects 
three basic components--the first, clarify expectations of both 
transportation and environmental agencies; second, transform 
specific processes; and third, hold both transportation and 
environmental agencies accountable for achieving positive 
results.
    Mr. Chairman, time does not permit us to talk about the 
entire list of specific measures which we are urging this 
committee to support through legislation. They are spelled out 
in our written statement, which is submitted for the record. I 
am about to close. They cover a variety of areas, including 
some you have heard--streamlining, planning rules, as well as 
environment, 4(f) reform, delegation of authority.
    Mr. Chairman, in closing, the need for fixing the 
environmental review and approval process is unfortunately very 
real. The problem has been building for decades. Solutions are 
needed now, or urgently needed projects will continue to be 
bogged down. The results will be lives lost, a weakened 
economy, less time with our families, fuel wasted, expensive 
and undependable delivery of freight, and increased air 
pollution. On behalf of the transportation community, we urge 
the committee to support legislation that will address the 
problem in a meaningful and effective way.
    Thank you.
    Senator Jeffords. Thank you very much.
    Mr. Hales is the Transit Planning Principal, HDR, Inc., of 
Portland, Oregon. Out to Oregon we go.

 STATEMENT OF CHARLES HALES, TRANSIT PLANNING PRINCIPAL, HDR, 
                              INC.

    Mr. Hales. Thank you, Mr. Chairman. It is an honor to be 
here.
    I am Charlie Hales and I am with HDR in Portland. When I 
was first contacted about testifying here at the committee, I 
was a little apprehensive because I knew you would hear from a 
variety of experts, as you have this morning, including my 
colleague, Mr. Kassoff. I am not one of those experts in terms 
of the laws and the regulations and their specifics, but I am a 
practitioner because I served for 10 years on the Portland City 
Council as an elected Commissioner in charge of transportation 
and planning. I think my story and our community's story is, I 
hope, helpful to your committee as an example.
    I want to frame that story, really, in two paradoxes. 
First, I have during my entire political career enjoyed strong 
support from environmental organizations and that alliance 
continues today. And yet in all three of my campaigns for 
public office, most of my financial support came from real 
estate developers. The other paradox is that our city and our 
State is loaded with environmentalists. We have lots of trees 
and lots of tree huggers. And our city is awash in neighborhood 
associations. We have 100 of them, and in some people's minds 
to make that even more bizarre, we actually fund them to 
provide them staff support. If there was ever a recipe for 
paralysis, we should be it. And yet Portland boomed in the 
1990's, and I was involved in the construction of over $2 
billion worth of infrastructure, including highway widening 
projects. We have grown and grown well. Money magazine calls us 
the most livable city in America.
    So how is this possible? How is it possible that we have 
grown this way, and during that process, by the way, in almost 
no case, in almost no case, have major transportation projects 
been held up by appeals or multiple trips through the NEPA 
process, and a similar story is true for private development. 
Almost all projects are approved at the permit counter.
    I believe the answer to that question and the resolution of 
those paradoxes is that in our State, smart growth is not just 
a turn of phrase. It is a way of life. In applying that 
philosophy to these projects, we have really found three 
principles that are consistent all the way across the board. 
First, public works projects are placemakers. This is true 
whether the project is a highway or a transit line or a park or 
a community center. When you build a public works project, a 
freeway interchange, a light rail line, you exert a massive 
influence on the character and the destiny of the place. 
Suburban sprawl results from the compartmentalized, rather than 
integrated approach to this question. Designing projects which 
support the place is the only prudent investment strategy for 
public funds. The alternative strategy, and one which is far 
too common, is building public works projects and then letting 
the place develop spontaneously.
    Second, land use planning must lead project engineering. We 
believe the purpose and need section of NEPA is just applied 
common sense. We need to honestly consider all the alternatives 
and their side-effects, and that failure to do this is 
expensive. We think that transportation investments that serve 
a well thought-out plan pay dividends. My company summarizes 
this integrated approach in three words: community, mobility 
and environment. It is sound public policy to respect all 
three.
    The third principle: bring all stakeholders and all points 
of view to the table. As I mentioned, I build a lot of 
infrastructure. For those projects to succeed, all who have a 
stake in them must be appropriately involved early on. An open, 
inclusive process considering all the issues involved in a 
major project is legally, pragmatically and politically 
required.
    Portland believes that the best way to, quote, ``streamline 
NEPA,'' end quote, is to go through the planning process right 
and the first time. A sustained commitment to comprehensive 
land use planning integrates these requirements and addresses 
the concerns of Federal, State and local agencies and 
communities in our plans and projects. We get to ``yes'' in 
that environment, even in a city with an endangered species 
swimming through our downtown.
    We have taken this coordination and public involvement and 
alternative analysis instructions from you seriously and put it 
into our practices. We do not believe because of that 
incorporation of this philosophy into our approach that 
environmental review needs to hold up projects, or add 
significantly to their costs. That is important in my State. If 
Oregonians are green, they are also tight. We do not like to 
spend money and are almost as serious about that as Vermonters, 
I suspect.
    [Laughter.]
    Mr. Hales. We think that done right and expeditiously, 
environmental review reduces interagency conflict. The Oregon 
DOT, like most State DOTs, is still primarily a road and 
highway organization, but our ODOT staff has incorporated this 
planning-based approach into their work. They, in return, 
expect counties and municipalities to work cooperatively with 
them.
    I do not think it is possible to mandate cooperation or 
consensus or trust. So trying to push projects forward by 
arbitrary time limits or curtailing public or judicial review 
or limiting consideration of alternatives or determinations of 
the project's purpose and need--I do not think those are going 
to work. I think in a complex environment like the design and 
permitting of major public works projects, cooperation, 
consensus and trust are necessities. Our experience is that if 
local citizens participate in the planning process and have a 
clear buy-in and responsibility for commitment, there are few 
lawsuits and few appeals and few challenges. The plan is the 
community's plan.
    I should also emphasize, because Portland gets bandied 
about as this example, maybe too much, that one does not need 
to adopt Portland's approach. You do not have to clone Portland 
in the rest of the country in order for this approach to be 
effective. Portland is not a charming abnormality, but we get 
projects built by embracing smart growth. There are lots of 
ways to do that, and that is the message that I hope other 
communities will heed in making these laws work.
    To sum up, I believe that a community which first engages 
in real, comprehensive and sustained land use planning and 
which makes infrastructure decisions subordinate to and 
consistent with that plan, and conducts a genuine and genuinely 
open process of alternatives analysis, not only gets through 
environmental review with a minimum of difficulty, the people 
in that community own the results of that process and they get 
to live in a better place.
    Thank you, Mr. Chairman.
    Senator Jeffords. Thank you. I have enjoyed working with 
Oregon for over 30 years now, I think, since we did away with 
billboards and beverage container laws and all those kind of 
things. So it is pleasure to have you here to testify.
    Now, I turn to questions. Trust, Ms. Wadhams--Emily--trust 
seems to be the key in your successful interactions with the 
Vermont Agency of Transportation. What would you say are things 
that other States can do to build trust between the State 
Transportation Agency and the State Historic Preservation 
Office?
    Ms. Wadhams. That is a good question. I think you could do 
it the way we did, by having specific projects that we worked 
on, like our bridge project and our Vermont Design Standards 
Project, that were a collaborative effort. So people from the 
Agency of Transportation and the Division for Historic 
Preservation got to work together on projects with common 
goals. That was one thing that got us to the point where we had 
enough trust.
    But I think another really critical part of it was the 
leadership at both the Agency of Transportation and at the 
Division for Historic Preservation. As a matter of fact, in the 
early 1990's, Jeff Squires, who now is on your staff here, 
worked for the Agency of Transportation as a planner, and then 
was the Deputy Secretary. That was the same time that ISTEA was 
coming in, and there was a cultural shift that began to happen 
at the Agency of Transportation. A lot of it I give Jeff credit 
for. Instead of having an engineer-based approach to create 
roads for ``happy cars,'' as we like to call them, it was 
really an approach that looked at people in communities and 
what they wanted. The leadership at the Agency of 
Transportation insisted that it happen. Plus, the Federal 
regulation--ISTEA and the enhancements program--really helped.
    On my side, I found there was great mistrust on the part of 
my staff about ``letting the fox guard the hen house.''--(we 
cannot give up authority to review these projects to AOT. They 
are building the roads; they are going to be the ones that are 
tearing down the historic resources.) My sense was, it is the 
Federal agencies' responsibility delegated to the States, to 
comply with section 106 and to review and evaluate historic 
resources. It is by law their responsibility. They have trained 
professionals on staff who have the same skills that we have. 
Give them the opportunity to prove that they will do a good 
job. If it does not work, we can stop. We can terminate the 
agreement.
    I really had to pull my own staff into this reluctantly, 
and I think they have also been surprised by how well it has 
worked. It is the leadership saying, we can do this, we can 
cooperate, much as you have in Oregon.
    I think a third thing that you could do at the Federal 
level that might help us, (and I have to put in a plug here for 
more resources for historic preservation offices--I am the 
historic preservation officer--is the Historic Preservation 
Fund. Federal funds (over approximately 60 percent of our 
office expenses) have been level-funded at best over the last 
30 years. As a matter of fact, while our mandated 
responsibilities have increased, we have seen our dollars 
decrease in real-dollar value. What we would like to be able to 
do, is what Florida has done a very up-to-date data base and 
Internet-based survey. We in Vermont do not have that and a lot 
of States are in the same position that we are. If we could 
create the infrastructure for good decisionmaking, do good 
surveys, update the ones that we have, get good data bases, do 
good public education--do that part of our job, then we can 
make better decisions. We can give the information to the 
Agency of Transportation. They do not have to go out and do a 
survey every time they have a project. I think that would give 
the State Historic Preservation Offices the confidence that 
they were doing their job; they had the resources to provide 
information. Bring us into the 21st century with our 
technology, because many States are not there.
    So that is another thing that I think the Federal 
Government could do, either by earmarking transportation 
dollars for historic preservation offices, since we do work so 
closely together, to make sure we provide the transportation 
offices with the tools they need to do their work.
    Senator Jeffords. Mr. Morefield, do you have a comment to 
make on Ms. Wadhams' statement?
    Mr. Morefield. Overall on the historical process, I think 
in Florida we would love to work together, and I think we are 
moving toward that way on that particular activity through what 
we are doing with our streamlining process. I think some of the 
issues that we see is the 106 process being historic, and then 
having to go back through again the same type of a process 
because of the 4(f) requirements of the USDOT.
    So I think there are some efficiencies if we can do it one 
time would be good. As she related to our data base, I think 
that that particular issue is going to be key to our process. 
Is it going to work? We have got a program. We have got the 
Internet-based system. We are going to have timeframes for 
agencies to put into their portion of the file, their comments. 
I think it is going to behoove the Department of Transportation 
to make sure this process is going to work, that we listen. We 
read those comments. We actually meet with those folks when 
they have valid comments, and that we actually make some 
changes in the process.
    It is not going to work if we just gather comments and 
then, like the old highway and bridge companies or agencies of 
the past, we are the Department of Transportation, we need to 
take into account those, work with those that have comments, 
and make sure that we do in fact change the projects so that 
when we get to the NEPA process, we have identified those 
issues that need to go through the formal process. Once we do 
that, hopefully the NEPA process, instead of taking 5 years 
will take something less because we have narrowed it down to 
those few critical issues.
    So it behooves the Department of Transportation, who has 
got the overall responsibility, to make sure that we do 
something with these comments now that we are going to have 
them, on a timely basis.
    Senator Jeffords. I am afraid we are going to have to end 
in about 15-20 minutes, so I am going to ask one question and 
have your comments on the panel.
    Section 1309 of TEA-21 was Congress' attempt to focus 
public policy toward improved transportation decisions, while 
still protecting and enhancing the environment. It directed the 
Department of Transportation to work with the Federal resource 
agencies to improve the environmental decisionmaking process. 
As practitioners from the State and local governments and the 
private sector, what programs and policies developed by DOT 
have been most successful, and where can further improvements 
be made?
    Anybody want to start? Mr. Hales, go right ahead.
    Mr. Hales. One of the programs that I think is working 
particularly well because it does recognize--I know talking 
about land use here in the Senate and in the Congress is 
problematical, having a lot of people running and screaming 
from the room saying it is a local issue, but the FTA has 
recognized that unless a transit project really carries out a 
local land use plan, it is unlikely to exceed its ridership 
estimates. Unlike a highway project, obviously a transit 
project is better and better if more people are using it.
    So in their new-starts criteria, which guide their 
selection of those projects for funding, they have incorporated 
in those criteria a land use criteria, as well as ones about 
ridership and cost-per-mile and so on. I think that merits-
based approach, that naturally involves other agencies because 
the FTA, after all, is not in the land use planning business; 
tends to bring the other parties to the table and tends to 
assure that the projects that get funded are the ones that 
really do multi-objective, do accomplish multiple objectives, 
rather than simply the transportation objective. So I would 
commend those new-starts criteria as an example of how an 
agency can put those provisions into practice.
    Senator Jeffords. Mr. Kassoff?
    Mr. Kassoff. I think ironically the area I would say has 
been most successful is one which the environmental community 
cites as an area that would be in the greatest jeopardy if 
streamlining were implemented, and that is the area of public 
involvement. Through ISTEA, which transformed the philosophical 
basis, the philosophical approach to transportation planning, 
and TEA-21, which kept that philosophy intact, you have public 
involvement in the long-range planning process that produces 
area-wide plans and statewide plans. You have public 
involvement in the programming process that produces what is 
called the STPs and TIPs, which are the capital improvement 
programs. And then at the project level, when a project 
proceeds forward you have public involvement again.
    What transportation agencies are learning is that it can't 
even end at the planning and environmental stage, right down 
through construction, particularly when you are impacting 
people with construction, that public involvement process 
actually helps the agency get its job done.
    So I think the public involvement process, while not 
perfect and there is always room for improvement, has been one 
of the great successes in this country.
    Senator Jeffords. Ms. Wadhams?
    Ms. Wadhams. I would say the enhancements program in TEA-21 
(originally ISTEA). I mentioned this earlier, I think because 
it did really effect a cultural shift in agencies of 
transportation, and allowed them to incorporate the idea of 
enhancements, not just pavement, bridges, new highways, but 
ideas of community, how you are affecting community, and 
building highways not for happy cars, as I said, but for people 
and communities. I think the enhancements program has been 
very, very successful and I would encourage that it be 
maintained and increased even.
    Senator Jeffords. Mr. Morefield.
    Mr. Morefield. One of the things that, not just in the 
environmental area, but overall the FHWA, speaking specifically 
about them, is that their delegation for more responsibilities 
down to the division level in the States--they have done that. 
That has been working out great. We have been getting answers 
and a lot more decisions made on a lot quicker basis, whether 
it be design issues, environmental issues or whatever. So I 
think the delegation of some of the decisions that heretofore 
had been in Washington level or even at the regional level, 
giving it to the State FHWA division has worked out extremely 
well.
    Senator Jeffords. Ms. Murray?
    Ms. Murray. There are actually a couple of things that I 
would like to cite of things that USDOT has done that have been 
tremendous. You heard about the TE projects. They are fabulous. 
I absolutely agree. Some of that is reflective of their 
approach these days to be more flexible in allowing the State 
DOTs to determine how money is spent. It no longer has to fit 
in very rigid rules. That increases our ability to respond to 
the public, to respond to the environment, to respond to the 
communities.
    Quite frankly, I think it is something that Federal 
Highway, and certainly USDOT should be complimented for because 
States have said all along, give us the money, let us make the 
decision, we will do what is right for the States. I think that 
has happened.
    One program we did not talk about at all is the TCSP 
program. We have four TCSP projects that we are doing in New 
Hampshire, and if you want to talk about the ultimate public 
involvement at the community level, that is those four 
projects. One of them began 3 years ago in the capital city of 
Concord. It is not a State DOT project. It is the city's in 
partnership with us and in partnership with USDOT. The first 
step was community-wide envisioning. Believe it or not, we 
turned out over 10,000 people in the course of a summer to come 
in and talk about, this is what Concord looks like today; what 
do you want it to look like in the year 2020? They were 
energized. They were enthusiastic. And New Hampshire has a long 
tradition of building things on the back of volunteers. Once 
again, we did it and we got their input.
    We are now moving to phase two, where we have said, OK, you 
have defined the vision, you have said what you want your 
neighborhoods and your villages within the city to look like. 
Let's start moving forward and putting things on the ground. 
Again, the flexibility that Federal Highway and USDOT and in 
fact Congress in creating this program gave to the States I 
think is a wonderful opportunity to bring in those local land 
use discussions. But before I leave that project, I do want to 
say very quickly that as we set up the board of directors, for 
lack of a better word, that will be overseeing phase two, we 
reached out to the environmental community--public, private, 
State and Federal--and we had a Federal agency that has 
declined to participate because they do not--the meetings are 
at night, and they are too far away from home, and they will 
reserve their comments until phase two is complete and we move 
to phase three. That is so damaging to the over 10,000 people 
that have been involved.
    The final thing that I would have to say with USDOT is I 
think along with the State, they got it when you told us, 
Congress told us to get out there, be more involved, be more 
inclusive. The flexibility that they now allow the States to 
make their decision on how their funds are spent and how they 
interact with the public and the communities is reflective of 
that. So there are successes.
    Senator Jeffords. Thank you.
    Senator Voinovich?
    Senator Voinovich. Thank you, Mr. Chairman.
    This is a really important hearing today, and I really have 
enjoyed getting the different perspectives of those of you here 
at the table.
    My first questions is, would you like us to move on with 
this before we wait until the end of next year and deal with 
the reauthorization of TEA, fresh TEA or whatever we are going 
to call it?
    [Laughter.]
    Senator Voinovich. Just yes or no. Is there unanimity about 
moving forward with this and not waiting until the end of next 
year?
    Ms. Murray. If I might, Mr. Chairman, I am going to answer 
from my perspective, and certainly I can only offer my opinion. 
I think certainly from my perspective, there is a need to get 
on with this. We have talked about it, we have talked about it. 
We are frustrating the public. Quite frankly, on the Interstate 
93 project, we have a crash rate that is totally unacceptable. 
It is not unusual on a daily basis to have an eight to 12 car 
crash, with injuries, with bodily injuries. The air is 
affected. Everything in those folks' quality of life was 
affected, but above all safety. We need to get on with it.
    Senator Voinovich. You are just saying, get on with it. All 
right. Anybody who does not think we should get on with it? 
Anybody? Ms. Wadhams?
    Ms. Wadhams. I feel it is working in Vermont, the way we 
have approached our historic preservation reviews. I am 
hesitant about, if you mean get on with it, looking at enacting 
legislation to open up section 4(f) of the Department of 
Transportation Act of 1966, because I really do feel that we 
have proven that you do not need legislative action to address 
that issue. So my only caution is there are some things I think 
with good faith effort and good leadership on the part of the 
people in the agencies of transportation, Federal highways, 
AASHTO, to really try to come up with good guidance or a 
regulatory solution, rather than a legislative solution in that 
case. I think it is hard to mandate change.
    I think it is important to--I like the idea of looking at 
different best case examples and working on those, and finding 
ways to encourage other States to do what you have heard about 
today. When I went to a conference in Kentucky a few months ago 
on transportation and historic preservation, I was swamped with 
people that were very interested in what we were doing and how 
to do it and how did you make it work. And people have asked if 
I could come to their State, or send them information and talk 
about what it was we did. I am not sure legislation is always 
the answer to affect streamlining. I think there may be other 
ways, and I would be very hesitant to open up 4(f) to a 
legislative change.
    Senator Voinovich. Go ahead. Yes, Mr. Kassoff?
    Mr. Kassoff. I would like to comment on that, because 
first, we think it is essential to move on. There are many 
other issues in reauthorization, particularly funding issues, 
that could overwhelm this particular issue if we wait.
    Senator Voinovich. We ought to spend our time figuring out 
where to get the money, and the rest of it gets in the . . .
    Mr. Kassoff. And just a different perspective on 4(f)--I 
had the occasion yesterday to be in a meeting with one of Ms. 
Wadhams' colleagues who is a State historic preservation 
officer, who offered a different perspective and one that I 
share, that often historic preservation goals are blocked as a 
result of 4(f) because the 4(f) tag is so onerous that State 
agencies would avoid an impact that a private owner could 
create on that same property without any difficulty, and there 
would be no mitigation. If 4(f) is looked at in the context of 
106, you see sheer duplication and a lot of non-common sense 
solutions. So I am afraid I have a different perspective on the 
4(f) issue.
    Senator Voinovich. The thing is that what I would be 
interested in is the categorizing of these things. No. 1 is, 
those of you who have had good experiences, getting back to the 
question I asked the first panel, have there been any 
regulations, laws that have impeded your ability to achieve 
what you have wanted to achieve by just sitting at a table and 
having good interpersonal skills and having consensus and 
getting everybody at the table? That is one thing. The second 
thing then becomes, what are the techniques that you have 
used--Ms. Wadhams--to bring people--now, you have put your 
historic preservation people over in the Department of 
Transportation--no?
    Ms. Wadhams. No, they have their own historic preservation 
staff in the . . .
    Senator Voinovich. OK, but they have, and they are 
competent people. In effect, you have kind of given your proxy 
there because you have the confidence that those people will do 
a good job and they are there, and that helps out.
    I think one of the things that a lot of people do not 
understand is it takes a lot of time to do these things, 
doesn't it? I know it took us--we have a transportation track, 
transportation resource allocation. It took us almost 4 years 
to put the standards together. Now, the President is looking 
around for priority projects. All he has to do is come to Ohio. 
We have got them. We know exactly what they are and we have 
objective standards in order to determine them, rather than 
arbitrary, so that the next Governor comes in and says, ``I am 
going to build that highway.'' That took a lot of work, of 
getting everybody involved to agree on what the standards 
should be.
    So the issue then becomes, what are the best practices that 
you have put in place, Mr. Hales and Ms. Wadhams, and others, 
that facilitate that? And then the issue then is, is it the 
Federal Government's responsibility to have seminars, like Ms. 
Wadhams you went to one in Tennessee about historical 
preservation, to do that, to get that message out there. In 
other words, Mr. Chairman, we have to concentrate on the stuff 
that really impedes the process from going forward, but after 
that, it looks to me like the magic here in so many areas is 
how do people get together and do the job. And then the next 
issue, and I am going to ask you to comment on some of these, 
is like the National--I am past chairman of the National 
Governors Association, and one of the things that we created 
when I was chairman was our best practices. They wanted to call 
it the Department of Innovations, and I said I am not 
interested in innovations, because many people announce 
innovations, and 5 years later nothing has happened. I want to 
know what has worked. Would it be the National Governors 
Association or the AASHTO? Somebody has got to get out there in 
this area, and it may not be the Federal Government, that is 
going to pull people together. There is enough synergy among 
various groups here that maybe they could take on that 
challenge. I think that might do more to move things ahead than 
the new regs and the laws.
    I will stop. Would you comment on what I have just 
mentioned?
    Mr. Hales. I will take a stab at that first, Senator 
Voinovich.
    To your first question, are there laws or Federal law that 
has really gotten in our way in the 10 years that I have been 
involved in projects in Portland. The short answer to that 
question is no, at least in terms of environmental review. 
Actually, the only Federal requirement that I can think of that 
really cramped our style on a project was that we built a new 
street car line in downtown Portland, primarily as a 
development tool for a new district that we have created there. 
It is a great real estate success story, as well as a 
transportation success. That project would not have passed 
muster through the conventional FTA process because the 
neighborhood that it was about to serve did not exist yet, so 
you could not do a ridership estimate, and we wanted to buy 
vehicles from the Czech Republic, and therefore could not meet 
the U.S. content requirements for manufacturing. So we built 
that project with local money. So maybe that is the result the 
Federal Government would prefer, but if we want to fund those 
kinds of projects, some kind of small start or--I hate to use 
that overused word again--innovative projects provision in the 
next TEA bill I think could encourage those kinds of fairly 
quickly developed, inexpensive and very effective projects.
    To your idea about best practices and some kind of 
collaborative effort, perhaps through the organizations 
involved, I think it is a very good idea. I think although I 
was involved in the National League of Cities and in fact was 
the President of my State League of Cities, I have not found 
the conventional structure of the associations, as good as they 
are, to be a good source of that kind of information exchange 
because they tend to be too insular--this professional 
association, that government association. I think some kind of 
collaborative effort among them would really be a good idea and 
I hope we can do that.
    Senator Voinovich. Maybe I can do that because I am the 
only person in the history of the United States who was 
President of the National League of Cities and chairman of the 
National Governors Association, so maybe we can get them 
together and bang their heads and see if we can't get them to 
work together on this.
    Mr. Hales. I suspect they will return your phone calls, 
Senator.
    [Laughter.]
    Mr. Morefield. If I might, Senator, on the best practices, 
I think with the Florida Department of Transportation, we try 
and do that across the board. We try to benchmark other 
agencies, whether it is a highway agency or a sister agency in-
state or out of state, whether it is a financial issue or 
engineering issue. I think in this case, certainly I have heard 
enough here today that I have got enough ideas to go back to 
have our historic officer contact Vermont and talk about 
certain things. But also in benchmarking, I think you do also 
have to look at the processes. If you do not continually look 
at the processes to improve the processes, I think you get a 
lot of that out when you benchmark. That means you go back and 
take a look at your processes. I think NEPA is a process; the 
4(f) is a process, and the 106 is a process. So I am not saying 
you need to go out and change it, but I think it does behoove 
anyone when you are talking about best practices to take a look 
at the processes you are best practicing, and there may be some 
legislative changes and/or rule changes, because primarily the 
only concerns that I have noted over the years--obviously, I do 
not agree with every, with all due respect, law that Congress 
or our State legislature passed--but most of the problems that 
we have is in the agencies that do the implementing rules. What 
they put into it is not in the law--that gives us a lot of 
problems.
    Senator Voinovich. Efficient transportation decisionmaking 
process--have you done any projects yet underneath that?
    Mr. Morefield. We have got some pilot projects and everyone 
is going in the system, as I said. As of the middle of next 
year, we will have to go through this process. As we update the 
TIPs, we will be doing that.
    Senator Voinovich. One other point, if you would continue 
to comment on it--I was very disturbed that you have indicated 
that you got everybody together, Ms. Murray, and that the 
Federal agencies were not willing to sit at the table. Mr. 
Chairman, that may be a problem because if we are going to gain 
consensus and get things, it seems to me that if the community 
is willing to get together at the table, that any Federal 
agencies that are involved ought to have representation there 
so that they have input in the beginning of the process. You 
thought you worked out something good, and they came back and 
said, no, we do not like this; it didn't do the thing; spend 
$50 million, it didn't do the thing. It seems to me that if 
they had been there initially at the time that you started the 
discussion, that probably would not have occurred--either that 
or you got it out on the table earlier and then you would have 
started talking about it, or they would have seen that there 
were some other things that were there that maybe would have 
satisfied the wetland problem. Would you comment on that?
    Ms. Murray. Yes, Senator, that is a very good observation 
that you have made. We have monthly meetings with the resource 
agencies on the State and Federal level--monthly meetings where 
all of our projects as they develop are discussed. In addition 
to that, we invite all of the resource agencies to come out as 
we update our 10-year plan, which we do every 2 years as other 
States do. We have found that the response from the 
environmental agencies, whether they be regulatory or private, 
is minimal to those attempts. We set aside a fair amount of our 
planning money every year to do what we call corridor studies. 
As a matter of fact, we have one going on with Vermont and 
Maine, because we share a lot of things. We have been out in 
numerous public settings talking about the potential of what is 
the future of Route 2. The environmental communities have not 
come to those meetings.
    So we are out in the public. We are talking about engaging 
with them on land use discussions, on what their vision is for 
the future. We put all this effort into it, and we have been at 
that one for about 2.5 years. Now, if the resource agencies in 
turn come back and say, no, we do not agree with that, then I 
think we have severely let the public down, because they 
thought they were hearing from one voice.
    The other issue that I have seen, unfortunately, is 
positions that are taken early in a project development by a 
resource agency, a regulator, do not last to the next phase. 
That is, again, you talk about a way to waste time, if you get 
past a certain point, work on a project for 5 years, and then 
you hear, you did not get the purpose and need right, and you 
have to go back and start over--that frustration is huge. I do 
think that you highlighted a real weakness. If we are going to 
get out there, we are trying to improve how we are doing 
business. We need the others to engage, make decisions, stick 
to those decisions, and don't revisit those decisions.
    Senator Jeffords. Thank you all. It has been very helpful 
testimony, and this is an extremely important area as we move 
into the future to make sure we can expedite, as well as do 
things better.
    So thank you, and the hearing is adjourned.
    [Whereupon, at 12:12 p.m., the committee was adjourned, to 
reconvene at the call of the chair.]
    [Additional statements submitted for the record follow:]
 Statement of Hon. Jon S. Corzine, U.S. Senator from the State of New 
                                 Jersey
    Thank you, Mr. Chairman, for holding these continuing hearings on 
the reauthorization of the Transportation Equity Act for the 21st 
Century--TEA-21--and I'd like to join you in welcoming our witnesses.
    Mr. Chairman, the issue of expediting the completion of federally 
funded highway construction and mass transit projects is an important 
one. I am extremely concerned that this can often be an expensive and 
time-consuming process that discourages the completion of valuable road 
and rail projects. As someone who represents the most densely populated 
State in the Nation, I can state to the need we have for quick help for 
the traffic problems that we face.
    I want to see things go faster. I know that the witnesses appearing 
before the committee today all want to see things go faster. But we 
need to make sure that we do not turn our backs on the strides we have 
made in protecting the environment over the past 30 years--on the land, 
in the air and in the water.
    Congress enacted streamlining provisions in TEA-21. We need to 
consider the effects of these provisions within the reauthorization 
process. But we also need to consider the progress that is being made 
on the State level because it is usually State Departments of 
Transportation that are responsible for the completion of environmental 
documents. I was heartened, for example, to see in a report from the 
Department of Transportation that all 50 States have adopted or 
initiated agreements for streamlining environmental review. I look 
forward to hearing from the witnesses today as to what has been 
accomplished and what can still be done.
    Mr. Chairman, in conclusion we need to focus on an inclusive 
process that considers the views of all stakeholders and brings them 
all together in an expedited process that does not sacrifice 
environmental protection. I look forward to working with the committee 
to see such an approach happen.
                               __________
    Statement of Hon. Bob Smith, U.S. Senator from the State of New 
                               Hampshire
    Thank you, Mr. Chairman, and welcome to our witnesses.
    Progress on implementing the TEA-21 Environmental Streamlining 
provisions, Section 1309, has been a challenge. TEA-21 was authorized 
over 4 years ago, and implementing regulations have not yet been 
issued.
    On their own initiative, with support from DOT, a number of States 
have developed improved project delivery and environmental management 
systems, demonstrating that Section 1309 is not only a laudable goal 
but a practical reality.
    I believe we all recognize that delays in the delivery of highway 
projects can cause severe economic impact, increased congestion and 
accidents, and higher construction costs.
    In addition to the States and DOT, other Federal agencies, 
especially those under EPW jurisdiction (Corps, EPA, Fish and Wildlife 
Service) must do better to make streamlining a priority.
    So I am very pleased that President Bush issued this executive 
order which I believe will make huge strides in implementing the 
fundamental elements of section 1309, including:

      Integrated review of environmental regulations or 
concurrent reviews;
      Full and early participation by all relevant agencies;
      Coordinated time schedules; and,
      Dispute resolution procedures.

    Mr. Chairman, I ask unanimous consent to include a copy of 
Executive Order titled ``Environmental Stewardship and Transportation 
Infrastructure Project Reviews,'' dated September 18, in the record of 
this hearing.
    I would also like to acknowledge today some important work being 
undertaken by the Western Governor's Association, and led by Governors 
Leavitt of Utah and Kitzhaber of Oregon, to reform the NEPA process.
    This effort is called ``Enlibra'' and being undertaken in a growing 
number of States. At the heart of ``Enlibra'' is a set of principles 
that I believe could help guide our effort to streamline highway 
project delivery and improve environmental stewardship.
    These principles provide a common-sense approach to making progress 
on streamlining and improving our protection of the environment.
    They emphasize the need to reward results (project construction and 
environmental stewardship), and not red-tape process and procedures.
    They recognize the need to promote collaboration, not polarization; 
and the need to support national standards yet allow flexibility for 
local solutions.
    They also promote basic conservative principles of sound science 
and economics.
    I ask unanimous consent to include a copy of the Enlibra principles 
in the record of this hearing.
    Lastly, I'd like to make a few remarks about New Hampshire's I-93 
highway widening.
    The widening of I-93 is the State's highway priority project. It 
experiences daily rush-hour congestion and there are serious safety 
concerns.
    In 2000, Congress designated I-93 a National Environmental 
Streamlining Pilot Project.
    I'd like to applaud Carol Murray and the other members of the I-93 
Board of Directors, which was created to develop a streamlined and 
environmental sound project.
    Your efforts have led to greater trust, reduced delays, and 
provided for a rapid dispute resolution process.
    It is unfortunate, however, that U.S. EPA cannot join the other 
agencies in either a consensus or negotiated package of wetlands 
mitigation and continues to demand that DOT purchase over $50 million 
(dollars) worth of land for conservation.
    I do not want to see transportation projects used as a back door to 
fund Federal conservation programs.
    This certainly appears unreasonable, and I hope today's hearing 
will provide us guidance for how we may resolve this, and other 
streamlining issues.
                           enlibra principles
       National Standards, Neighborhood Solutions--Assign 
Responsibilities at the Right Level
    NEPA is basically sound--the Act does not need to be changed. Local 
areas, however, need flexibility, with accountability, to address local 
environmental, economic and social conditions.
       Collaboration, Not Polarization--Use Collaborative 
Processes to Break Down Barriers and Find Solutions
    Increase public involvement early in the transportation planning 
and NEPA process, and close legal loopholes used for disruptive and 
special interest lawsuits. Collaborative approaches produce longer-term 
solutions and save money.
       Reward Results, Not Programs--Move to a Performance-
Based System
    Eliminate unnecessary paperwork and procedures, while rewarding 
better accountability, environmental protection and faster 
transportation project delivery.
       Science For Facts, Process for Priorities--Separate 
Subjective Choices from Objective Data Gathering
    Use sound science, engineering and economics to assess the impact 
of transportation projects on the environment and economy. Increase 
State and local use of GIS to provide better location information on 
environmental and historical resources.
       Markets Before Mandates--Pursue Economic Incentives 
Whenever Appropriate
    Market incentives can encourage more cost-effective and sustainable 
solutions to the environmental impacts of transportation projects
       Change A Heart, Change A Nation--Environmental 
Understanding is Crucial
    Ultimately, environmental protection depends on the transportation 
choices people make every day. Government has a role in educating 
people about the impact their transportation choices have on the 
environment.
       Recognition of Benefits and Costs--Make Sure All 
Decisions Affecting Infrastructure, Development and Environment are 
Fully Informed
    Decisions should be guided by an assessment of the true 
environmental and transportation costs and benefits. These assessments, 
with equal consideration of non-qualitative factors, can illustrate the 
advantages of different options.
       Solutions Transcend Political Boundaries--Use 
Appropriate Geographic Boundaries for Environmental Problems
    Focusing on the natural boundaries, or watershed, of the 
transportation project can help insure that the full range of 
scientific, economic, and political factors and interests are taken 
into consideration.
                               __________
      Statement of Hon. Emil H. Frankel, Assistant Secretary for 
        Transportation Policy, U.S. Department of Transportation
    Mr. Chairman and members of the committee, thank you for this 
opportunity to discuss the issues of transportation project delivery 
and environmental stewardship.
    Ensuring that important transportation projects are completed as 
quickly as possible is one of the top priorities for all of us at the 
Department of Transportation, as I know it is for members of this 
committee. Transportation system users too are becoming more and more 
frustrated with a process they perceive to be overly laborious and 
cumbersome. Growing congestion is fueling this frustration. This 
Department has already made great strides in the area of streamlining 
the project development process while protecting the environment, and 
the reauthorization of the Transportation Equity Act for the 21st 
Century (TEA-21) presents an excellent opportunity to review and refine 
those efforts.
    There are a multitude of factors that impact the timing of project 
delivery, from the planning process to construction techniques to 
environmental issues. Issues confronted in one project will often vary 
substantially from the issues confronted in another seemingly similar 
project. Many problems are local in nature and thus demand local 
solutions. The Federal Government's role in creating project delays is 
frequently minor, although occasionally it is not. Unfortunately, the 
nature and complexity of the issues mean that blanket solutions have 
proved very elusive. That is not to say that progress cannot be made. 
In fact, this Department's expansive efforts have brought positive 
change. Progress has always required great efforts, and the area of 
transportation project delivery is no different.
    While this testimony will focus heavily on the environmental aspect 
of project delivery, it is important to note that advancements have 
been made in streamlining other aspects transportation project 
development. A few of those advancements are discussed later in the 
testimony.
Environmental Streamlining
    Secretary Mineta noted to this committee back in January that one 
of the goals of the Department's reauthorization proposal will be to 
increase the efficiency of our infrastructure while retaining 
environmental protections that enhance our quality of life. 
Transportation agencies realize today, more than ever, that 
environmental stewardship is a critical part of how we do business.
    Public expectations and demands for transportation solutions today, 
not 10 years from now, are understandable, given the magnitude and 
pervasiveness of America's transportation problems. Equally 
understandable is the public's desire for environmentally sensitive 
ways of doing business. Sometimes these two societal goals work in 
conflict. Environmental streamlining and stewardship is the term used 
for a new way of doing business that brings together the timely 
delivery of transportation projects with the protection and enhancement 
of the environment. In essence, it is a rejection of the false choice 
so often presented between adding transportation capacity and 
protecting our environment.
    In its simplest terms, environmental streamlining consists of 
cooperatively establishing realistic project development timeframes 
among the transportation and environmental agencies, and then working 
together cooperatively to adhere to those timeframes. Because major 
transportation projects are affected by dozens of Federal, State, and 
local environmental requirements administered by a multitude of 
agencies, improved interagency cooperation is critical to the success 
of environmental streamlining.
    The Department has worked extremely hard to solidify relevant 
interagency partnerships through a series of actions that include pilot 
efforts, process reinvention, alternative dispute resolution, and a 
focus on performance evaluation. We can and will do more.
TEA-21
    TEA-21 has also been crucial in encouraging meaningful streamlining 
and stewardship. The objectives of TEA-21's streamlining section 1309 
were to: expedite transportation project delivery; integrate review and 
permitting processes to identify key decision points and potential 
conflicts as early as possible; encourage full and early participation 
by all relevant agencies that must review a highway construction or 
transit project or issue a permit, license or opinion relating to the 
project; coordinate time schedules for agencies to act on project 
decisions; establish dispute resolution procedures to address 
unresolved project issues; and to improve decisionmaking under the 
NEPA.
    Consistent with the mandate of Section 1309, the Department has 
taken a series of administrative actions to enhance environmental 
streamlining. The fiscal year 2002 Department of Transportation 
Appropriations Conference Report, of November 30, 2001, directed FHWA 
to report on agency streamlining efforts by January 2, 2002. In 
January, we submitted a report to Congress that summarized many of the 
steps the FHWA has taken to enhance environmental streamlining:
    From 1999 to 2001, the median time for completing environmental 
review for projects requiring an Environmental Impact Statement 
decreased by 1 year (from five and a half years to four and a half 
years). This reflects respectable progress for projects that are most 
complex, challenging and have significant impacts. These constitute 
less than 3 percent of all federally funded surface transportation 
projects.
    This year, FHWA has set internal goals to continue to decrease the 
review time for all projects requiring rigorous environmental analysis. 
This would be accomplished through negotiated project timeframes with 
each State DOT and FHWA division office and consultation with review 
agencies. FHWA has put an Environmental Data tracking system in place 
to track review times on an ongoing basis. FWHA expects to have a solid 
data base within the first year.
    Fifty States have adopted initiatives for streamlining that 
clarify, amend, or re-invent the project development process. At least 
24 States have focused their process redesign efforts on integrating 
planning and National Environment Policy Act (NEPA) activities.
    A number of these initiatives have evolved into major process 
reinventions that FHWA has supported with streamlining funds as well as 
technical assistance. Not only are environmental concerns integrated 
into the long range planning process, the processes themselves and the 
agency reviews and comments are conducted electronically. This cuts 
review time and makes the web-based process transparent and accessible 
to the public.
    Using TEA-21 authority, 34 States have agreed to provide personnel 
to State and Federal environmental agencies for the purposes of 
expediting reviews. The Department is very encouraged by the efforts. 
FHWA has now finalized guidance for using these arrangements, as well 
as documented the lessons learned for viewing by all States. The 
guidance includes a template that other States can easily adapt and 
modify for their use.
    Twenty-nine States have adopted agreements to merge the FHWA NEPA 
process and the Clean Water Act permitting process administered by the 
USACOE. This eliminates what can be a duplicative process. FHWA is 
working with the Corps to modernize merger agreements already in place 
and update agency policy directives and clarifications that will help 
foster new NEPA merger agreements.
    Forty-one States have created some level of delegated authority for 
historic resources that allows many projects to be processed quickly. 
This also frees up Federal and State resources to focus on complex 
issues. Vermont's efforts in this area are to be commended, and their 
approach sets the standard nationwide.
    FHWA's streamlining website, www.fhwa.dot.gov/environment/strmlng/
index.htm, has proven to be a key medium for communication on these 
topics. It includes an inventory of best practices and a catalogue of 
State efforts and national activities. A new ``Success Story'' is 
featured each month, and feedback from our stakeholders has been very 
positive. Links to other key sites (e.g., AASHTO Center for 
Environmental Excellence) will make the website more interactive and 
provide access to very useful resources.
    Successful environmental streamlining requires fostering good 
working relationships across a number of organizational lines. These 
relationships allow for the development and establishment of reasonable 
and realistic schedules for advancing major projects. It is important 
for the Department to facilitate agreement by Federal agencies on 
timeframes for conducting reviews and granting approvals. Working 
together in partnerships, combining a full range of Federal, State, and 
local officials and interest groups, will lead to reasonable ways to 
meet the Nation's transportation needs, while being good stewards of 
the environment. A wonderful example has been Senator Smith's efforts 
to initiate a successful partnering model in NH that has fostered the 
examination and exploration of improved and more efficient approaches 
to mitigation while adhering to deadlines.
    Pursuant to a national memorandum of understanding signed among 
Federal agencies, DOT and other agencies have worked to further 
progress on a coordinated environmental process to expedite Federal 
highway and transit projects. The agencies have developed interagency 
action plans. We are on track for the successful implementation of our 
2002 priority items adopted by the Federal Interagency groups. Our 
activities in this regard include:
    1. Securing commitments from Federal agencies to develop national 
templates for regional general permits, NEPA/404 mergers, National 
Historic Preservation Act of 1966 Section 106 delegations/testing of 
alternative procedures, Section 4(f) programmatic agreements, and 
Endangered Species Act programmatic agreements;
    2. Encouraging and supporting watershed-based approaches to 
environmental stewardship implementation/oversight through a best 
practices scan, and innovative mitigation pilots.
    3. Supporting research priorities that emphasize flexible 
mitigation for habitat connectivity.
    4. Maximizing staff resources using cross training, interagency 
workshops, development and shared uses of data bases such as GIS maps 
of environmental resources, tribal interests and transportation 
facilities;
    5. Defining specific FHWA performance measures for streamlining and 
stewardship. We have invited other Federal agencies to work with us to 
develop measures that demonstrate how they have aided the 
implementation of successful project delivery.
    6. Continuing to add to our baseline studies on national timeframes 
for environmental reviews. A supplemental study on major projects 
completed from 1990-95 is underway. This will validate our historical 
baseline data and help us to better isolate which variables may add 
time to the process. We are also expecting an initial assessment of 
streamlining implementation progress from both environmental and 
transportation frontline professionals some time this fall. This Gallup 
Organization managed research project will help define expectations and 
definitions of success and measures of quality.
    In addition, we are implementing actions to streamline the 
environmental review of airport projects. Secretary Mineta's May 2001 
report to Congress on the Environmental Review of Airport Improvement 
Projects concluded that reducing environmental delays should be 
addressed in areas of resource, process, product, and interagency 
coordination. FAA is implementing administrative initiatives outlined 
in the report. These include establishing expert teams to expedite 
environmental reviews for critical airport capacity projects, 
allocating more resources to environmental reviews, maximizing the use 
of consultant resources, expanding the list of projects with minimal 
impacts that don't need detailed environmental review, issuing guidance 
to streamline reviews, better interagency coordination and cooperation, 
and a guide to best practices.
Environmental Stewardship
    When the first President Bush set a national ``no-net loss'' 
wetlands policy to stop a decades-long history of cumulative losses, 
FHWA set a target of 1.5 acres replaced for every acre adversely 
affected by highway projects. Our recent performance figures show that 
we are exceeding that target by a substantial margin, providing over 
two acres of replacement wetland for every acre taken. To our 
knowledge, no other public or private entity is setting goals as 
ambitious as ours or is tracking their wetlands performance as we are.
    To date, we have invested over $11 billion dollars to improve air 
quality in areas that do not, or did not, meet Federal air quality 
standards under the Congestion Mitigation and Air Quality Improvement 
Program, or CMAQ. These funds have furthered air quality improvement in 
a number of very important ways. They have helped to accelerate use of 
cleaner technologies by retrofitting, or replacing, heavily polluting 
trucks and buses. They have helped to further Intelligent 
Transportation Systems on the road and for transit, making our 
transportation system work better, smarter and cleaner. And they have 
helped to put in place alternatives to driving alone. No single source 
of funding has made a greater investment in clean air than CMAQ.
    Looking at the human environment, more money has been spent on 
historic preservation from transportation funds than any other source. 
Historic preservation often leads to private investment far beyond the 
transportation investment. For example, the city of Meridian, 
Mississippi strategically used the $7 million rehabilitation of the 
Meridian, Mississippi Union Station for reuse as a multi-modal 
transportation center to leverage over $10 million in private 
investment in the depot district.
    As we look ahead, we see a number of possible environmental 
stewardship opportunities to pursue in collaboration with 
transportation and environmental colleagues. We are providing funds and 
staff assistance to the new American Association of State Highway 
Transportation Officials (AASHTO) Center for Environmental Excellence. 
Working in partnership with the Federal Highway Administration (FHWA) 
and with involvement from other Federal agencies, the Center will 
promote the use of environmental management systems by transportation 
agencies, as a systematic way of institutionalizing environmental 
stewardship.
    We have provided Texas with funds to support their streamlining 
efforts to develop a Geographic Information Systems (GIS) based mapping 
and environmental management system that is helping State and Federal 
agencies to devise the best protection, conservation and mitigation 
strategies for the entire 1,000-mile section of the I-69 North American 
Free Trade Agreement corridor project within Texas. The Environmental 
Protection Agency (EPA) and the United States Army Corps of Engineers 
(USACOE) are consolidating their reviews and comments so that Texas 
will have just one set of comments from each agency. This action is 
greatly facilitated by the coordination, training and development of 
those management efforts we are funding.
    We have asked FHWA division offices to help establish at least 30 
exemplary ecosystem initiatives around the country during the next 5 
years. When we say ``exemplary,'' we are looking for initiatives that 
raise the bar, that push the boundaries. Such initiatives will result 
in project delivery efficiencies through mitigation and conservation 
measures that are defined for regions or corridors and for which 
credits are applied to types of projects, or within specific 
transportation corridors.
    Endangered species habitat conservation plans fall in this category 
and so do large-scale studies of migration patterns by large mammals 
and ways to minimize conflicts between the migration of people on the 
highways and the migration of animals near and across highways. FHWA is 
working with Alaska to advance habitat connectivity and GIS data base 
mapping efforts that will significantly address human and wildlife 
mortality along critical habitat corridors for major freight, 
transportation and railroad corridors and effectively plan for future 
transportation improvements.
    FHWA and Federal Lands Highway offices are working with States to 
develop integrated approaches to transportation and environmental 
planning and project development at the system level and supporting 
``context sensitive solutions'' at the project level. Many States have 
embraced or are advancing these approaches. We will continue to 
facilitate the success of such endeavors.
    Context-sensitive solutions are an effort to get all of the players 
to work together in an integrated fashion to ensure that transportation 
decisions are fully respectful of the community and the natural 
environment. In Montana, on US 93, the State Department of 
Transportation, Indian tribes, and local communities were able to come 
together with a context sensitive approach. Currently 26 States have 
some type of context sensitive design activities underway.
Project Construction Innovations
    As I discussed above, aside from environmental issues, other 
problems can delay the completion of a project. Construction of a 
typical highway project generally takes from one to more than 5 years 
depending on the complexity, size and controversy of the project. 
Unforeseen and often uncontrollable circumstances impede construction 
efficiency. There are, however, some fairly recent and significant 
advancements that have been made in the ways projects are constructed.
Design/Build
    The most significant of these advancements is the design/build 
construction technique. TEA-21 expanded and clarified the circumstances 
under which design/build projects may be advanced. At least 30 States 
have adopted the technique. Under the design/build concept, the 
contracting agency identifies the end result parameters and establishes 
the design criteria minimums. The prospective bidders then develop 
proposals that optimize their construction capabilities. Allowing the 
project design to be tailored to a contractor's advantage provides 
flexibility to compensate for cost increases in one area through 
efficiencies in another. This concept allows the contractor to optimize 
his work force, equipment and scheduling.
    However, along with the increased flexibility, the contractor must 
also assume greater responsibility and risk. Because both design and 
construction are performed under the same contract, delays related to 
design error claims are eliminated, and the potential for other types 
of claims are greatly reduced. Recently, design/build projects have 
been authorized to include right-of-way (ROW) acquisition in addition 
to design and construction, creating a ``turnkey'' project for the 
State. Prior to this authorization, necessary ROW for design/build 
projects was typically provided by the State or local transportation 
agency. To include ROW acquisition services as part of the design/build 
approach, it must be allowed by State procedures for procurement of 
such services. From a State highway agency's perspective, the potential 
time savings can be substantial.
    With generous cooperation from the States of South Carolina and 
Virginia, and the Transportation Corridor Agency, Orange County, 
California, the FHWA's Office of Real Estate Services reviewed several 
design/build projects. We interviewed officials from the State and FHWA 
Division offices, along with key individuals from the prime 
contractor's team, to determine ``best practices'' and the extent of 
any problems associated with these projects. As a result, the 
Department is now working with State and local transportation officials 
on the most effective means and times to implement a design/build 
approach.
Cost-Plus-Time Bidding
    Another innovative construction approach is called cost-plus-time 
bidding, also referred to as the A+B method. This is a procedure that 
selects the low bidder based on a monetary combination of the contract 
bid items (A) and the time (B) needed to complete the critical portion 
of the project. This procedure is intended to provide a contractual 
incentive for the contractor to minimize delivery time for high 
priority and congested roadways by offering incentives for early 
completion and assessing disincentives for late completion.
Lane Rental
    Lane rental is the practice of charging the contractor a fee for 
occupying lanes or shoulders during construction. Charges are based on 
hourly or daily rates and can vary with time of day, amount of traffic, 
and other measures of user costs. Similar to cost-plus-time bidding, 
lane rental provides strong contractual incentives for early 
completion.
Major Project Oversight
    One cannot have a complete conversation about transportation 
project delivery without talking about the Department's oversight role. 
Although TEA-21 directed extensive delegation of approval authorities 
to the States for most Federal-aid projects, FHWA's oversight role on 
larger projects was enhanced. Section 1305(b) requires that projects 
with an estimated total cost of $1 billion or more submit an annual 
Finance Plan, based on detailed estimates of the cost to complete the 
project and on reasonable assumptions of future cost increases.
    Projects subject to this requirement have been labeled ``major'' or 
``mega'' projects. However, FHWA includes in the major project category 
those projects designated ``major'' projects by senior management due 
to their complexity or a high level of interest by the public, 
Congress, or the Administration. Finance plans may be required for such 
projects even though their estimated total cost is less than $1 
billion.
    Over the past 10 years, the number of projects greater than $1 
billion has grown and, at present, we have identified 14 active major 
projects across the country, including six that are at the stage of 
requiring an initial Finance Plan.
    FHWA now has the benefit of ``lessons learned'' from some of the 
early major projects--construction of the Boston Central Artery/Tunnel 
(CA/T) project, reconstruction of I-15 in Salt Lake City, and the 
management of the Alameda Corridor--and we are putting these lessons to 
work. We have seen that the primary cost drivers of major projects, 
from the Plans, Specifications, and Estimates stage to completion of 
construction, are: (1) inflation, since many of these projects take 
years to complete; (2) phasing of the projects to use available funds; 
and (3) regional and national economic trends, since these projects are 
such large economic investments and typically stretch the available 
technology and industry abilities. We know that the most common factor 
leading to cost increases and delays for all major projects, especially 
in 2001-2002, has been the annual adjustment of project schedules to 
fit actual revenues available. Currently, as a result of the national 
economic situation and revenue shortfalls, States are readjusting their 
statewide programs, in some cases stalling major projects.
    While cost overruns and schedule delays on major projects 
occasionally occur, we have seen notable successes as well. The Alameda 
Corridor project in Los Angeles, California, was a huge success in 
being completed on schedule and within budget. Also, the I-15 
reconstruction project in Salt Lake City, Utah, was completed ahead of 
schedule, well before the opening of the 2002 Winter Olympic Games. 
Although the CA/T has been the subject of many controversies, it has 
resulted in important engineering and technological advances. 
Engineering innovations included new solutions for tunnel ventilation 
systems that have also been used to reduce the costs on the Cumberland 
Gap Tunnel project. When complete, the CA/T will link air, sea, rail, 
bus, and subway facilities, to facilitate local and regional economic 
growth, while providing environmental benefits, reducing traffic 
congestion, and improving traffic safety.
    Our approach to improving management of major projects has been to 
continue to strengthen our oversight of all programs, while issuing 
certain specific requirements for major projects within the framework 
of existing laws and taking into account that each major project is 
unique in its complexity, sponsoring agencies, and contracting plans. 
This approach is consistent with the overall delivery of the FHWA 
program as a federally assisted, State-administered program.
FHWA Stewardship and Oversight Policy
    Implementation of the restated FHWA Stewardship and Oversight 
Policy (issued June 2001) underpins all of our major project oversight 
actions. A key element in implementing the policy is to emphasize that 
all federally funded projects are subject to Federal oversight, even 
where State agencies have title 23 project approval authorities. FHWA 
has also committed to conducting risk assessments with States to 
identify strengths, areas needing improvement, and then prioritizing 
oversight activities accordingly. FHWA will trust, but verify. We must 
have confidence in the quality of a State's products and processes, or 
we must work with the State to achieve appropriate improvement.
    The Plan for Oversight and Management of Major Transportation 
Projects (issued October 5, 2001), provides that improved management of 
major projects will rely on the sound implementation of the restated 
FHWA Stewardship and Oversight Policy, FHWA technical assistance and 
technology deployment, dissemination of best practices information, 
industry and agency partnership activities, and specific initiatives 
for major projects in response to recommendations of the DOT Task Force 
on the Oversight of Large Infrastructure Projects (Report issued 
December 2000). The Division offices have lead responsibility for the 
delivery of FHWA programs and are assisted in oversight of major 
projects by the Major Project Team within FHWA Headquarters. The 
Divisions are building on a foundation already in place that consists 
of existing FHWA/State Stewardship agreements, the documented State 
project development and financial procedures, and the FHWA Financial 
Plan Guidance (issued May 2000). In addition, once a project is 
identified as a ``major project'' based on Division Office information, 
the Major Project Team begins tracking the project and increases FHWA 
Headquarters involvement following the environmental clearance of the 
selected alternative. Each major project will be reviewed at this stage 
for unique features, or unique relationships between the project 
sponsors, that require additional documentation to clarify 
responsibilities and ensure that sound planning and management is 
implemented.
    In response to the TEA-21 major project finance plan requirement, 
FHWA issued Financial Plan Guidance and, since then, the Division 
Offices and Headquarters have applied this guidance in the review of 
finance plans on seven projects. Key major project finance plan 
requirements include: project cost estimates must be prepared in ``year 
of expenditure'' dollars; agency accountability must be increased for 
the proposed financing in the plan; and significant changes to the 
project scope in the annual finance plan must be accurately disclosed. 
FHWA requires annual updates to the plans and obtains independent 
verification of the financial data provided by the States in these 
plans.
Conclusion
    The upcoming reauthorization of the Federal-aid highway program 
gives us an opportunity to refine the appropriate Federal role in 
overseeing infrastructure projects, particularly the high-cost 
projects. As the Secretary has directed, we will focus on the 
management and performance of the system as a whole, while ensuring 
appropriate oversight for both project management and program 
performance.
    We will look for ways to encourage well-managed State programs, 
without adding additional layers of Federal requirements. Our oversight 
procedures must harmonize with our efforts to streamline project 
approvals and expedite project delivery.
    The bottom line is: improve oversight and accountability for the 
expenditure of public funds, without negatively impacting the ability 
of States and local governments to deliver their programs. Together 
with Congress, we will define what our role should be and how we carry 
out our responsibilities.
    Mr. Chairman and members of the committee, thank you again for the 
opportunity to testify before you today. I look forward to responding 
to any questions you may have.
                               __________
Statement of John Peter Suarez, Assistant Administrator for Enforcement 
     and Compliance Assurance, U.S. Environmental Protection Agency
    Mr. Chairman and members of the committee, I am J.P Suarez, 
Assistant Administrator for OECA. Thank you for inviting me to appear 
before you today to discuss project delivery and environmental 
stewardship under the Transportation Equity Act for the 21st Century 
(TEA-21). I understand the committee is particularly interested in 
EPA's contribution to the environmental streamlining called for in 
Section 1309 of TEA-21.
    I am pleased to be here today as this is the first time I have 
testified before you since my confirmation. I look forward to a 
productive relationship with this committee and to working with you as 
you consider reauthorization of the TEA-21 legislation. As you know, I 
am responsible for EPA's National Environmental Policy Act (NEPA) 
program. In addition to OECA, other EPA programs have an interest in 
various TEA-21 provisions, such as those related to congestion 
management and air quality. My remarks today will focus on how EPA has 
incorporated the provisions of Section 1309 into the NEPA program.
    EPA embraces the streamlining provisions of Section 1309. We are 
committed to working with our Federal and State partners to better 
serve the American people with faster yet environmentally sound, 
transportation decisions. We are bringing our special expertise to bear 
earlier in the transportation decisionmaking process to improve the 
quality of analysis, protect the environment, and speed project 
approvals. We have put new staff in key positions: we hired a manager 
with Federal Highway Administration (FHWA) experience for EPA's 
regional NEPA office in California; and, in Texas, another State with a 
large number of highway projects, the regional office placed an EPA 
NEPA employee in the Texas Department of Transportation (DOT) office. 
In several key States, we are able to provide more timely and sustained 
assistance on State priority projects thanks to the additional 
personnel funded by State DOTs that Section 1309 allows. While it is 
too early in the process to measure time savings for many of these 
efforts, we are confident that we will be able to quantitatively 
demonstrate the value of these investments in the near future.
    Interstate Highway 69, a proposed 1600-mile across-America 
highway--from Mexico to our border with Canada--is a good example of 
EPA's current effort to expedite a specific national priority project. 
Three EPA regions are coordinating with the FHWA and seven State DOTs 
to identify and resolve environmental issues at the earliest possible 
stage. On February 22, 2002, the EPA Regions sent one set of 
coordinated and consistent pre-Environmental Impact Statement (EIS) 
technical comments to the many highway offices and Federal agencies 
working on project design. The EPA regions are also providing technical 
assistance to the State DOTs with geographic mapping of sensitive 
resources to improve and streamline the environmental impact analyses. 
In fact, Arkansas estimates that in one recent case use of GIS and 
early coordination cut in half the time needed to complete the NEPA 
process.
    While EPA has devoted considerable energy to implementing Section 
1309, we realize there needs to be more progress before we have a truly 
streamlined transportation review process. Both we and our State 
partners recognize that it takes an up-front investment to produce a 
pay-off. Initially, having all the stakeholders at the table well ahead 
of the Draft EIS takes more time on the planning end. However, 
indications are that well-planned projects do move faster once the 
environmental documentation is completed. FHWA's statistics show that 1 
year has been shaved off the median time to process environmental 
documents for major projects since passage of TEA-21. And, we are 
encouraged that newer tools such as geographic information system 
analysis are starting to have a marked impact on the speed of the 
environmental analysis.
    As we work more closely than ever with FHWA and with the State 
DOTs, formal agreements are being cooperatively negotiated that set the 
stage for future early involvement and technical assistance on 
individual projects. Within a year of TEA-21's enactment, EPA had 
expanded the model process developed with the mid-Atlantic States, FHWA 
and our other Federal and State partners to streamline the 
environmental review of transportation projects. The Mid-Atlantic 
Transportation and Environment Process, also known as the MATE Process, 
resulted in a formal agreement that commits all parties to a timely, 
cost-effective, and environmentally sound transportation project 
development process. This agreement is supported by specific project 
development and agreement steps and specified input and concurrence 
points to avoid future gridlock. The mid-Atlantic States are funding 
four EPA positions through streamlining agreements between EPA and the 
individual States.
    In addition to the MATE process in the Mid-Atlantic, other EPA 
regional offices have signed a variety of streamlining agreements 
tailored to the needs of individual States. For example, last year EPA 
and the California DOT (CALTRANS) signed an MOU for the review of 
California's priority transportation projects. TEA-21 substantially 
increased the number of transportation projects in California, and 
through this agreement CALTRANS ensures increased EPA early involvement 
in project planning and development. Early involvement reduces delays 
at the later stages of project review resulting from interagency 
disagreements. It also ensures that critical resource issues are 
identified and analyzed, which can reduce the time lost to third-party 
litigation on the adequacy of the NEPA documentation. This MOU followed 
a July 2000 agreement (the Mare Island Accord) which has resulted in 
improvements such as joint training of EPA and CALTRANS staff. Joint 
training has long-term benefits by ensuring that the staff in both 
agencies have a shared understanding of each agency's requirements and 
the analytical processes that are needed to ensure a review that will 
meet all statutory and regulatory requirements.
    Another outgrowth of the Mare Island Accord is a pilot project to 
which CALTRANS, EPA, FHWA and the Merced County Association of 
Governments have committed staff and funding. The Merced Partnership 
for Integrated Planning will update the STET regional transportation 
plan taking into account environmental requirements; this project is 
supported with a geographic information system analysis and is intended 
to become the model for regional transportation planning California-
wide.
    In Oregon, EPA and the State have formally agreed to prescribe and 
implement a specific process for resource agency involvement and 
streamlining. And, after the Washington State Legislature passed its 
Environmental Permit Streamlining Act last year, EPA became an active 
partner in developing and implementing streamlined processes in that 
State. Additionally, EPA is serving as a cooperating agency with the 
Kansas DOT on the U.S. 59 project and on the I-70 Second Tier studies 
in Missouri. EPA and the Minnesota DOT are working under an MOU to 
streamline the approval process for the 169 Trunk Highway.
    Our stronger relationship with the States is exemplified by our 
participation in streamlining discussions at many of the American 
Association of State Highway and Transportation Officials (AASHTO) 
Planning and Environment Committee meetings. We greatly appreciate the 
State association's invitation to meet and their willingness to discuss 
our experiences with streamlining. EPA certainly benefits from hearing 
directly from State DOTs about their successes and frustrations in 
dealing with us! This level of direct discussion with AASHTO members 
has come about since the passage of TEA-21, and we believe results from 
Congress' emphasis on streamlining. EPA also is participating in the 
development of AASHTO's Center for Environmental Excellence. This 
Center holds great potential for sharing expertise across agency and 
State boundaries on a quick-turn-around basis, another result of the 
improved collaboration streamlining has engendered.
    One very encouraging sign EPA has noted since the passage of TEA-21 
fours years ago is the growing endorsement of environmental stewardship 
by the State DOTs. Half of our State DOT partners are formally 
supporting AASHTO's Environmental Stewardship Demonstration Program. 
This program has tremendous potential from an environmental, 
transportation and financial perspective. New York State, for example, 
has found that by mulching land adjacent to highways, the State saves 
mowing costs while preventing stream damage from runoff. The more we 
can build environmental considerations into all aspects of 
transportation planning and delivery, the better we will serve the 
American public by providing environmentally sound transportation 
solutions.
    At the national level, EPA has taken a number of steps to promote 
streamlining since the passage of Section 1309. A National MOU on 
Environmental Streamlining set the stage for a number of specific 
initiatives, including EPA's early involvement in the planning and 
scoping of projects and EPA's active participation in streamlining 
pilots. EPA participates in FHWA's streamlining committee, and is 
working with FHWA to develop guidance and training on streamlining. We 
have helped train Federal resource agencies on drafting streamlining 
MOUs with State DOTs to strengthen relationships in the field and 
improve project management. We continue to encourage our regional 
offices, where most NEPA reviews are done, to work with their States to 
obtain funding for positions and technical support. These resources are 
providing intensive expedited attention to State priority 
transportation projects.
    EPA is also working with FHWA in its effort to develop training for 
Federal agencies and State DOTs on Alternative Dispute Resolution. This 
training, expected to start next Spring, will ensure that disagreements 
during the project review process can be identified and swiftly 
resolved.
    In conclusion, I would like to endorse the critical role NEPA plays 
in coordinating environmental requirements. NEPA has served the 
American public well for 30 years by providing full disclosure of the 
impacts of major Federal actions and requiring an examination of 
alternative ways to achieve a project's purpose. EPA is committed to 
streamlining as the way to make NEPA even more effective through a more 
efficient and timely process.
    Thank you for the opportunity to testify today. I would like to 
work with you as you continue to promote environmental stewardship and 
streamlining. These efforts are good for the environment and the 
economy, and they allow EPA to focus our resources where we can achieve 
the best results.
    I look forward to responding to any questions you may have.
                                 ______
                                 
  Responses of John Peter Suarez to Additional Questions from Senator 
                                 Carper
    Question 1. Can you discuss the relationship that EPA has with the 
States and the use of Section 1309 funds to provide additional 
personnel for environmental review of State priority projects?
    Response. EPA generally has a good working relationship with the 
State DOTs. State reaction has varied widely to EPA suggestions to use 
TEA-21's Section 1309 authority to fund dedicated positions to 
streamline the environmental review process. Currently, 6 States fund a 
total of 8 EPA positions, and one State provides funding for EPA 
technical assistance. Several States are considering increasing the 
number of Federal positions or providing one for the first time. Some 
States do not believe that EPA's review creates significant timing 
issues, and many rely on the concurrence points laid out in the NEPA/
Clean Water Act Section 404 merger process to define issues earlier in 
the process and achieve shorter review timeframes. EPA believes that 
the more complex or controversial projects benefit from State 
investment in additional EPA personnel focused on their priority 
projects, especially in those States with a heavy transportation 
workload where EPA's resources are spread across a number of projects, 
and we will continue to pursue these arrangements.

    Question 2. Can you discuss the President's Executive Order 
regarding NEPA and transportation project delivery? How do you think 
this Order will affect your agency's ability to fulfill its mission?
    Response. The Executive Order on Environmental Stewardship and 
Transportation Infrastructure Project Reviews was signed by the 
President on September 18, 2002. It sets up a Federal Task Force, 
including EPA, to expedite the review of selected transportation 
projects. EPA looks forward to working with our fellow departments and 
agencies to focus attention on projects of national priority which we 
hope can serve as models of streamlining for other projects. While the 
Executive Order will require EPA to focus additional resources on the 
priority projects in the short term, we expect that the lessons learned 
from these projects will produce longer term savings as we apply these 
lessons to streamlining future transportation projects.
                                 ______
                                 
  Responses of John Peter Suarez to Additional Questions from Senator 
                               Voinovich
    Question 1. What is the process to establish formal agreements 
between the EPA, the Federal Highway Administration, and State DOTs?
    Response. There are formal agreements for streamlining that do not 
involve transfer of funds as well as those which do. There is no set 
process for either, but EPA helped the Federal Highway Administration 
develop guidance for our respective staffs and the State DOTs on 
establishing formal streamlining agreements. The guidance is on FHWA's 
website at:
    The guidance explains requirements for use of TEA-21's Section 1309 
funding authority and suggests how to structure a formal agreement to 
produce the desired results. A State wishing to use Federal-aid funds 
to pay for another agency's costs submits a request to FHWA and should 
have a formal agreement in place with that agency once funds are 
approved. FHWA's website also has examples of agreements between 
Federal agencies and State DOTs, and my office maintains a file of 
current EPA agreements to assist EPA's regions as they develop new ones 
with States.
    Many formal agreements do not involve a transfer of funds and only 
require the signatures of the agencies involved. In addition to one-on-
one agreements with States, such as EPA's wetlands banking agreement 
with PA and our transportation stewardship agreement with OR, EPA is a 
signatory to a multi-State agreement, the Mid-Atlantic Transportation 
and Environmental Streamlining Process (known as MATE). MATE was 
developed with PA, MD, DE and WV DOTs as well as State and other 
Federal resource agencies. The MATE agreement applies to the entire 
project planning and development process and provides for integrated 
permitting and environmental review processes. MATE was the result of 
an extensive mapping of the various decision points needed to complete 
the environmental review of a project and determining when each agency 
needs to concur to streamline decisionmaking.
    Question 2. In your testimony, you claimed that some of the 
benefits of an agreement between the California DOT and the EPA were 
due to joint training of the Federal and State agency staff. Is this a 
new innovation? Is it being applied in other agreements? Are there 
other examples of innovations that you could share with the committee 
that have streamlined the transportation review process?
    Response. While not a new innovation, EPA and its State partners 
are increasingly recognizing the value of joint training of our staffs. 
Interagency training helps establish a common knowledge base and 
provides opportunities for networking and building relationships. Some 
EPA NEPA training includes staff of other Federal agencies, as well as 
the State DOTs, providing even greater cross-fertilization.
    An important innovation in streamlining is the NEPA/Clean Water Act 
Section 404 merger process used by EPA, State DOTs and our Federal 
partners to coordinate early on transportation projects and avoid 
duplication and reconsideration of issues as a project progresses. This 
is the key streamlining tool used by many States and EPA where there is 
no specific streamlining or funding agreement in place. In EPA's Region 
5 (upper mid-West), for example, agencies benefit from the concurrence 
process set up under the merger agreement and several State DOT's use 
this process routinely to work more efficiently with EPA on their 
transportation projects. (EPA's Region 5 office notes, though, that 
staffing and/or travel assistance from the DOTs would allow for more 
up-front involvement and opportunities for early resolution of issues.)

    Question 3. As one of the steps at the national level to promote 
streamlining, you stated that the EPA is encouraging its regional 
offices, which mainly do the NEPA reviews, to work with their States to 
obtain funding for positions and technical support. How big of an issue 
is State funding in causing transportation review delays? How have 
States been responding to requests from EPA regional offices for 
additional funding?
    Response. State funding or lack thereof can be a big issue in 
streamlining the review of transportation projects. In those States 
which have a large number of projects underway, or one or more complex 
or highly controversial projects, having State funding support is 
critical for EPA to provide early and sustained involvement on State 
priority projects. EPA has approximately 15 FTE nation-wide devoted to 
NEPA reviews of highway projects, plus 8 positions funded under Section 
1309. In any given year, EPA receives about 100 draft and final EISs 
for transportation projects and reviews a number of Environmental 
Assessments. In heavy workload States not providing assistance, EPA 
finds it difficult to be involved prior to receiving the draft EIS. 
With little or no EPA involvement prior to the draft EIS, projects may 
be delayed if EPA's review uncovers issues that could have been 
resolved during the scoping process for the project. If EPA is involved 
while projects are being planned, we can bring our expertise to bear 
and work with DOTs to choose transportation routes and options that 
minimize environmental impacts and mitigation costs while providing 
needed transportation solutions.
    As noted under Senator Carper Question #1, State DOT response has 
varied widely to EPA suggestions for additional funding. Those States 
which (1) have the heaviest workload, (2) have invested in streamlining 
at the State level and (3) which perceive EPA's review to create timing 
delays are the most open to funding EPA positions or technical 
assistance. As other States see the benefits the States providing 
funding are achieving, it is likely that more will do so. In addition 
to the 8 positions and one State's funding of EPA technical assistance, 
several other States are considering increasing the number of funded 
positions or providing one for the first time. In the meantime, EPA 
will continue to promote streamlining and look for ways to achieve 
greater efficiencies with our current resources. Reauthorization of 
Highway and Transit Programs:
                               __________
Statement of Hon. Kenneth M. Mead Inspector General, U.S. Department of 
                             Transportation
    Mr. Chairman and members of the committee: We appreciate the 
opportunity to participate in the committee's preparation for 
reauthorization. I commend the committee for examining project delivery 
and environmental streamlining issues. Although meeting environmental 
requirements can take a significant amount of time, delays can occur 
throughout any project's planning, design, and construction phases for 
any number of reasons. We know of no panacea that will prevent all 
problems. However, our work has shown that effective management and 
oversight can help prevent avoidable problems, and mitigate the cost 
increases and schedule delays when problems do occur.
    Today, I want to discuss a series of steps that can be taken in the 
reauthorization to improve management and oversight, and facilitate the 
delivery of projects to taxpayers approximately on budget, on schedule, 
and free from fraud. These steps are (1) refocusing Federal Highway 
Administration's (FHWA's) oversight to ensure State programs operate 
effectively and projects of national significance are well managed, (2) 
promoting the use of proven project management tools, and (3) 
strengthening efforts to prevent fraud, waste, and abuse. Of course, 
whether moneys are lost to cost overruns, schedule slippage, or fraud, 
the result is the same--fewer resources remain for transportation 
projects.
    The Transportation Equity Act for the 21st Century (TEA-21) 
provided record levels of transportation funding for highways and 
transit, with the investment almost doubling, from $23 billion in 
fiscal year (FY) 1997 to nearly $39 billion this fiscal year. The 
combined Federal, State and local investment in highways and transit 
during the 6-year period of TEA-21 will exceed $500 billion--an average 
expenditure of more than $225 million a day.
    Although the recent economic downturn has reduced Federal and State 
transportation funding streams, the demand for investments in 
transportation infrastructure remains great. For example, the 14 active 
FHWA large projects are estimated to cost more than $39 billion. FHWA 
also has identified another 21 large projects on the drawing board that 
are expected to cost over $32 billion, and 22 large corridor projects 
that will cost over $44 billion. For fiscal year 2003, the Federal 
Transit Administration (FTA) is requesting funding for 34 new starts 
projects valued at a total cost of $21.2 billion.
    Managing the construction of large projects, especially in densely 
populated urban areas, has become much more difficult over the last 
several decades. Specifically, project managers are faced with such 
factors as having to maintain traffic flow and commerce during 
construction; meet environmental and historic preservation 
requirements; and incorporate intermodal capabilities. Financing large 
projects has also become a much more difficult proposition because it 
can often involve complex financial techniques, such as structured 
bonding, innovative financing mechanisms, and private equity 
investments.
    These issues affect not only billion dollar projects, but often 
those in the hundreds of millions of dollars as well. Changing 
conditions have materially affected project delivery and have wide-
ranging implications for the approaches and staffing of FHWA, FTA, the 
States, and grantees. However, improving project management and 
delivery can provide significant benefits. For example, increasing the 
efficiency with which $500 billion is spent by only 1 percent provides 
an additional $5 billion--an amount equal to 4 of the 14 active FHWA 
large projects.
    The States have generally developed the capability to meet their 
responsibilities, and we have reviewed a number of large projects that 
stand as examples of good project management--projects such as Utah's 
I-15, New Jersey's Hudson Bergen Light Rail project, and the Alameda 
Corridor in California. In contrast, we have reviewed projects in which 
management and oversight were ineffective, leading to significant cost 
increases, financing problems, schedule delays, and technical or 
construction difficulties. These projects include the Central Artery, 
the Woodrow Wilson Bridge, the Springfield Interchange in Virginia, 
Puerto Rico's Tren Urbano, the Los Angeles Metro Red Line, and the 
Seattle Central Link. In each of those cases, project management has 
agreed to take action to correct the deficiencies we reported. We are 
in the process of conducting follow-up work on several of the projects.
    Our testimony today is based on audit reports we have issued on 18 
large highway and transit projects, our ongoing work, as well as 
significant criminal investigations we carried out with the Justice 
Department.
    Overall, we see several opportunities to improve project delivery 
in the reauthorization by:

      Refocusing FHWA's oversight to ensure State programs 
operate effectively and projects of national significance are well 
managed.
      Recognizing that the interstate system was largely 
completed, and that States and localities know better what is needed 
for their citizens, Congress delegated responsibility for project 
selection and execution to the States during the 1980's and 1990's. The 
States have improved their capability to manage their transportation 
programs, including engineering expertise. However, FHWA has 
historically continued to focus most heavily on oversight of 
engineering and contract issues, rather than on oversight of management 
and financial issues. To a large extent, FHWA defers to the States for 
both the implementation and oversight of federally funded 
transportation programs. Although FHWA has taken several steps to 
improve its stewardship it has not completed the transition from its 
traditional role of reviewing and approving contract level actions, to 
a new higher-level role of conducting reviews to ensure the 
effectiveness of the States' processes in areas that are major project 
drivers, such as financing, controlling project-level costs, schedule 
performance, transportation planning, and maintaining accountability 
over funds.

    Because FHWA remains focused on detailed engineering activities, 
rather than developing a more multi-disciplinary staff and higher level 
approach to oversight, it has sometimes missed larger management 
issues. For example, FHWA approved thousands of design changes on the 
Central Artery, but was caught unaware when the project's cost 
increased by $1.4 billion.
    Among the actions that would promote more timely and efficient 
project delivery are:

      Clarifying FHWA's role to ensure it is focused on the 
programs and processes in which States use Federal highway funding, 
rather than on detailed, contract level reviews and approvals. On 
projects costing more than $1 billion, FHWA must have clear direction 
to monitor and ensure these projects of national significance are kept 
on time and on budget.
      Delegating detailed contract and project actions to the 
States and refocusing FHWA on independently monitoring State management 
processes, rather than approving detailed contract level actions. For 
example, FHWA still performs many detailed contract administration 
actions, such as approving contract change orders and the location and 
wording of highway signs.
      Requiring FHWA to report on the skills and competencies 
it needs to implement a process and program oriented oversight program. 
Reflecting its historical focus on engineering issues, the current FHWA 
staff mix is dominated by engineers (see Chart). Engineering skills 
will remain important, but on today's projects a more multidisciplinary 
staff will be needed. This is not to suggest FHWA needs more staff. A 
strategy for achieving a more multidisciplinary approach to oversight 
activities within current staffing levels could include a mix of 
actions such as hiring staff with private sector project management 
skills, that is, financing, program analysis, and cost estimating; 
streamlining and delegating project-level approvals to the States so 
staff time can be refocused on overseeing higher-level management and 
financial issues.
      On a selected basis, allowing FHWA to emulate FTA's 
approach to overseeing large, significant, projects through project 
management oversight contractors (PMOCs) and financial management 
oversight contractors (FMOCs). This approach helped FTA become one of 
only a few agencies to get off the General Accounting Office's ``High 
Risk List.'' The use of PMOCs and FMOCs needs further fine tuning, 
which we are working with FTA on, but overall it is a sound approach to 
project oversight.
      Promoting the use of proven project management tools. In 
reviewing large projects, we have identified a number of tools that can 
help managers keep projects approximately on time and on budget. These 
tools include reliable costs estimates, project finance plans, 
achievable State transportation program plans, and integrated master 
schedules. When managers look to attract investors to participate in 
financing large infrastructure projects, reliable information is 
essential to make appropriate disclosures. Finally, information is 
critical for policymakers as they decide which projects would be the 
best use of resources to address transportation problems and promote 
economic development.

    We have found several troubled highway and transit projects and 
programs in which these tools were not used, or were not used 
effectively. For example, several large projects were not using the 
full capability of their schedule tools, and thus, did not have the 
information needed to deal with the inevitable schedule conflicts that 
arise in complex projects employing multiple contractors.
    Actions that could promote more timely and efficient project 
delivery include:

      Expanding the use of project finance plans to include 
other projects that can strain a State's capability. Finance plans 
provide senior program and oversight officials with the comprehensive 
information needed to make appropriate financial decisions regarding 
the projects. Our work has shown that requiring finance plans for 
projects costing more than $1 billion in TEA-21 was a very wise 
decision on the part of Congress.
    On the other hand, projects costing less than $1 billion can also 
burden a State's management resources. The threshold for requiring 
plans could be reduced to $500 million. In States that have smaller 
highway programs, projects costing less than $500 million may be 
difficult to undertake. An alternate threshold could be to require 
finance plans for projects costing more than half a State's 
apportionment. We also suggest, however, that there be some limits on 
finance plan requirements, such as exempting projects with minimal 
Federal participation or any project less than $100 million regardless 
of the percentage of State apportionment. FHWA should continue to 
approve the plans for each project costing more than $1 billion, and 
should review States' processes for preparing finance plans on other 
projects.
      Requiring FHWA to establish baseline cost estimating 
standards for all projects exceeding $100 million or 50 percent of a 
State's annual apportionment, and to ensure that cost growth on large 
projects is monitored and controlled. Presently, FHWA has established 
no detailed standards for preparing cost estimates on projects under $1 
billion.
      Requiring large projects to use integrated resource 
loaded schedule tools and earned value project measurement techniques. 
Given the complexity typical of large projects, problems with one 
contractor can have a domino effect that delays the overall project 
delivery. Integrated, resource loaded schedules can help to identify 
schedule conflicts and prevent or mitigate delays, thereby reducing 
cost increases.
      Requiring FHWA to develop and implement systems to 
provide timely information on the performance of State programs and 
large projects. FHWA's information system tracks only costs by 
individual project segment and each entry overwrites previous data. 
Consequently, to develop nationwide reports, such as identifying the 
status of large projects, FHWA must request data from each State and 
combine the data manually. Having timely, consistent information would 
enable FHWA to better analyze trends, such as might be found by 
comparing program-wide statistics on State planning, project delays, or 
cost increases beyond initial estimates on large-dollar highway 
projects.
      Improving efforts to prevent fraud, waste, and abuse. 
Congress, the Federal Government, and State governments are all 
concerned with preventing fraud and abuse in transportation projects. 
Secretary Mineta has also recognized that DOT needs to develop better 
mechanisms to prevent and detect fraud, waste, and abuse. As he has 
said on numerous occasions ``My credo on waste, fraud and abuse is 
simple: If the project calls for concrete and it's a 10-sack job, we at 
[the Department of Transportation] DOT are going to be sure we don't 
end up with a 7-sack job.''

    Our work does not suggest abuse on a scale such as was experienced 
in the 1950's and 1960's. Nonetheless, in the last 3 years, since the 
increases in funding in TEA-21, we have seen significant increases in 
our fraud case work and judicial actions involving highways and 
transit. Overall, from 1999 to 2001, indictments based on our highway 
and transit fraud investigations increased from 12 to 39; convictions 
increased from 12 to 26; and monetary recoveries increased from $15.8 
million to $43.2 million (see chart). Those include some of the biggest 
cases in the history of the highway program. At present, we have 106 
pending investigations of contract and grant fraud involving highway 
and transit projects in 37 States.
    The types of fraud we are commonly seeing today include activities 
such as bid rigging, bribery and kickbacks, false claims, product 
substitution, and disadvantaged business enterprises (DBEs). For 
example:

      This month (September), two construction companies 
pleaded guilty to separate charges of making false statements to the 
Government in their bids on separate Federal highway construction 
projects in North Carolina. The companies had shared their bid prices 
with an unnamed competitor after certifying that they would not 
disclose bid prices to any other bidder or competitor before the sealed 
bid opening. The two contractors subsequently were awarded contracts 
for about $1.6 million and $3 million. Sentencing is pending, but each 
company faces a maximum corporate fine of $500,000 that may be 
increased to twice the gain derived from the crime or twice the loss 
suffered by the victims of the crime, if either amount is greater than 
the statutory minimum.
      One of the most significant highway fraud cases occurred 
in Illinois. The scheme, which ran from the mid-1980's until 1996, 
involved both fraud and bribery. The owners of two companies and 
several of their employees altered equipment in their production plant 
to overstate the amount of materials (like asphalt) delivered to 
various highway projects. To conceal their activities, they bribed the 
State engineer by building the engineer's summer home. As a result, 
FHWA permanently debarred six companies and individuals from 
participating in federally funded road construction projects. In 
addition, the participants had to pay about $15 million in fines and 
restitution and faced sentences ranging from 3 years probation to 21 
months in jail.
      Two minority business enterprises (MBEs) admitted they 
acted as fronts for contractors on public projects. This was one of the 
largest MBE frauds in U.S. history, involving approximately 60 
fraudulent MBE subcontracts with a total value of over $40 million. 
Approximately 46 subcontracts totaling $26 million were on contracts 
let by Department of Transportation grantees, including projects to 
repave area highways and rehabilitate transit stations.

    The States are the first line of defense in preventing such fraud, 
and we have been working closely with a number of State Inspectors 
General and State auditors on our fraud investigations. The Office of 
Inspector General, FHWA, and FTA have implemented many initiatives to 
protect major investments in infrastructure programs. For example, we 
co-sponsored two National Fraud Conferences on Highway Construction and 
Related Programs with the American Association of State Highway & 
Transportation Officials (AASHTO), American Public Transportation 
Association (APTA) Internal Audit Committee, FHWA and FTA, and the 
Missouri and Georgia Departments of Transportation. Secretary Mineta 
personally addressed the conference we held this past May to emphasize 
the importance of fraud prevention. We have also increased the number 
of special agents working fulltime on fraud investigations involving 
highway and transit infrastructure programs. Finally, we provided fraud 
awareness briefings to over 10,500 Federal, State, and local officials, 
law enforcement agencies, and industry organizations.
    Preventing losses to fraud will make additional resources available 
for improving project delivery. Some States and even large transit 
authorities have established Offices of Inspector General or Offices of 
Audit to detect and prevent fraud and abuse. In our work, we have heard 
from several State officials that the pressure to fund ``concrete and 
steel'' projects sometimes makes it difficult to provide resources for 
oversight and fraud prevention. During the reauthorization, Congress 
should consider ways to help States fortify their oversight and fraud 
prevention efforts with dedicated funding, separate from funds used for 
constructing transportation projects.
    A possible source of funding may be to allow States to retain 
monetary recoveries resulting from Federal transportation 
infrastructure enforcement actions. Normally, fines and recoveries from 
such judgments are returned to the Federal Treasury. Since the States 
programs are damaged by the fraud that leads to the enforcement action, 
sharing in the recoveries would help them restore their programs and 
provide support for further fraud deterrence efforts.
    An example of this occurred in a civil settlement with Contech 
Construction Products, Inc., and Ispat-Inland, Inc., which was a case 
involving product substitution in the State of Louisiana. The companies 
substituted sub-standard polymer-coated steel culvert pipe used in 
highway and road construction projects from 1992 through 1997. Under 
the settlement agreement, the United States and the State of Louisiana 
shared in a $30 million recovery.
    That concludes my prepared remarks. I would be glad to answer any 
questions you may have.
                                 ______
                                 
Responses of Kenneth Mead to Additional Questions from Senator Jeffords
    Question 1. In your written testimony, you cite three examples 
(Utah's I-15, New Jersey's Hudson Bergen Light Rail Project, and the 
Alameda Corridor in California) of good project management. Could you 
provide the committee with your insights into why these projects were 
well managed? Are there themes of good management practices that are 
common among these projects?
    Response. These projects are examples of good management in that 
they were completed substantially on time, on budget, and with no known 
major instances of fraud or corruption. Our reviews found no 
significant problems or deviations from good management practice, 
although we did make suggestions to improve project controls in several 
instances. We did note some common characteristics which, we believe, 
contributed to their overall success.
    First, all three projects prepared finance plans or analyses that 
contained financial data similar to finance plans. In two cases, the 
projects provided this detailed information about costs, funding 
sources, cash-flows, schedules even though they were not required to do 
so. We have identified finance plans as a key management tool that 
helps projects stay on track.
    We also found that reliable and even conservatively developed cost 
estimates was a common management practice in these projects. The cost 
estimates consistently included reasonable estimates for all 
anticipated cost elements, and reflected appropriate contingency 
reserve to account for risks.
    These projects also applied disciplined management practices, 
including controls over costs and schedules and detailed tracking and 
reporting of progress compared to plans. The I-15 project created an 
internal audit function that reviewed controls to ensure they operated 
effectively. The Alameda Corridor Project even hired an internal 
auditor who reported directly to the agency director, rather than to a 
division manager.
    Each of the projects also used, in one form or another, a ``design-
build'' contracting approach. Under design-build, one contractor is 
selected to both design and construct the project. This is in contrast 
to the more traditional approach of hiring one contractor to design the 
project, and then soliciting bids from other contractors to build the 
project as designed (``design-bid-build''). One of the benefits of 
design-build contracting is that, by using only one contractor, the 
conflicts and delays that result from disagreements between multiple 
contractors can be reduced. Design build is not a panacea because we 
have identified other design build projects that have encountered 
problems. However, it appears that, properly managed, the design build 
concept has significant potential.
    Question 2. Given the constraints of making major personnel changes 
over a short time, what actions can the Federal Highway Administration 
take to improve the quality of oversight that FHWA provides? What long-
term skill sets need to be in place at FHWA and how can we get those in 
place?
    Response. DOT has begun the process of improve the quality of 
FHWA's oversight. In June 2001 FHWA issued its Stewardship and 
Oversight Policy and, in October 2001, an action plan for implementing 
that policy. The policy calls for FHWA Division Offices to conduct risk 
assessments of State programs and to periodically review State 
management processes to ensure they are effective. The most important 
short-term action for FHWA is to implement its new policy effectively.
    Another near term action that would improve the quality of FHWA's 
oversight would be to begin to improve the agency's management 
information systems. Reliable data to support in-depth analyses of 
program performance is essential to improving oversight. However, over 
the years, we have found that FHWA lacks the data needed to understand 
the reasons for project delays and cost increases on highway projects. 
For example, FHWA's information system cannot track changes in project 
costs or the reasons for cost increases. For example, FHWA was unable 
to answer Congress when it requested that FHWA identify projects of $10 
million or more that had cost increases of 25 percent or more.
    Turning to the skill sets, engineering skills will remain 
important, but FHWA needs to strengthen its capability in other 
important areas such as financial planning and budgeting, controlling 
project-level costs, program analysis, transportation planning, and 
maintaining accountability over funds. For example, complex financing 
approaches such equity financing and grant anticipation notes require 
sophisticated finance skills. To determine the needed skills will 
require FHWA to re-examine the activities it should be performing and 
to analyze the types of skills and number of people needed to perform 
the required functions. Once required skill levels are identified, FHWA 
should develop a staffing plan to effectively meet the needs of the 
agency.
    A strategy to obtain the necessary skills should include a mix of 
actions such as hiring staff with private sector project management 
skills such as financing, program analysis, and cost estimating; 
streamlining and delegating project-level approvals to the States so 
staff time can be refocused on overseeing higher-level management and 
financial issues; and perhaps adapting FTA's approach of hiring 
contractors to provide needed expertise.

    Question 3. What are your thoughts on the mission of the FRA? What 
improvements need to be made to FRA if Congress was to make a major 
thrust of its reauthorization effort the revitalization of rail freight 
and passenger rail?
    Response. FRA's stated mission is to promote ``safe, 
environmentally sound, successful railroad transportation to meet 
current and future needs of all customers.'' Because economic and 
competitive issues, including entry and exit from markets and 
infrastructure investments have, in the past, been the province of the 
Interstate Commerce Commission and the Surface Transportation Board, 
FRA's focus has tended to be on railroad transportation safety and 
research.
    Any approach to improving rail freight and passenger services would 
need to include significant investments to expand existing rail 
infrastructure. If Congress were to assign FRA responsibility for 
directing major Federal involvement in railroad infrastructure 
investment, FRA would need to develop the capability to provide 
effective stewardship and oversight of those investments. FRA is not 
currently a grant-making institution in the mold of the Federal Transit 
Administration or the Federal Highway Administration. As a result, if 
infrastructure investments were made through grants, FRA's capacity for 
and expertise in analyzing, approving, and overseeing grants would need 
to be strengthened. Furthermore, the best practices we have noted in 
other surface grant-making programs, such as requirements for finance 
plans and continuous project management and financial oversight, should 
be essential elements of any new FRA programs.







 Response from Katherine Siggerud to Additional Questions from Senator 
                                 Carper
    Question: In your testimony, you note wide diversity in the time 
needed to complete environmental review depending on the scope of the 
project. You also note a general agreement that the environmental 
review process improves project decisions, though it can be time-
consuming. Are there broad measures that Congress can apply to improve 
the process, or will gains be driven by allowing more flexibility and 
innovation at the State level, within the context of strong Federal 
oversight and financial partnership?
    Response. The General Accounting Office will be issuing a report to 
Senator Jeffords in March, 2003. In this report, we will outline 
promising approaches to improve the process of highway delivery and 
reduce the time required to complete highway projects. Our report will 
focus on the environmental review process, as well as other phases of 
highway projects, including planning, design and construction. Once we 
have finished our analysis, I will be able to provide a more detailed 
response to your question.
                               __________
 Statement of Carol Ann Murray, Commissioner, New Hampshire Department 
                           of Transportation
    Mr. Chairman, members of the Senate Environment and Public Works 
Committee and certainly, Senator Smith, good morning.
    Thank you for the opportunity to be here today to talk about 
environmental streamlining. For the record I am Carol Murray, actually, 
let me correct that, for my Mom that I lost a month ago, I am Carol Ann 
Murray, the Commissioner of the New Hampshire Department of 
Transportation. The subject of environmental streamlining is a very 
important, difficult topic. One that has no silver bullet solution that 
I can identify and isolate.
    I can readily identify the reason that I and my counterparts 
nationally consider this so significant. The public has asked the 
transportation agencies to provide this nation with the mobility 
critical for our quality of life and economic vitality. The same public 
also wants the environment preserved and protected. The only way to 
accomplish these twin goals is for transportation and environmental 
agencies to work cooperatively. This public looks to all these agencies 
to implement the policy direction provided by elected officials with an 
open, trusting, balanced, communicative spirit.
    I am not convinced that the public's vision, or that of their 
elected officials, is being implemented very well by the various public 
agencies involved. The concept of environmental streamlining was not 
conceived to put environmental preservation and enhancement as a 
secondary or minor interest in the development of public transportation 
projects, but rather to encourage early discussion, involvement and 
decisionmaking by the agencies with environmental and transportation 
duties. If the public agencies could work to provide the best-balanced 
projects in a timely way, then the public's voice is being heard.
    Over the last two reauthorization bills, Congress set a new 
direction for transportation. Transportation agencies moved into a new 
era. With some resistance, we realized that mobility for the future was 
not just highways: choices in modes of transportation and connections 
between modes are now a focus. Congress also said that to develop the 
best projects for this country, the participation of the local 
communities, regional planning agencies and the public must be 
encouraged and their voice heeded.
    This evolution in how State transportation departments work came 
hard to those of us used to doing designs by the book and approaching 
the public with our well designed, but off the shelf, standard highway 
solutions.
    What we in the transportation business have found is that Congress 
was right in the policy direction they gave us. After a decade of 
increasingly successful implementation we are believers. We are cutting 
ribbons and celebrating projects that have been developed with more 
thoughtful consideration of the transportation users' needs and the 
local communities' vision for their future, and in balance with the 
natural and cultural environment they are built in.
    I do believe that over the last two decades the transportation 
community has changed and become better. While I would like to say that 
we have got it all perfect, that would certainly not be true. We need 
to continue to listen, learn and, I think, we are ready to do that with 
an acceptance that was not there before ISTEA and the lessons learned 
since.
    What is a frustrating is the reluctance of the environmental 
community to recognize this change. It is disheartening that the 
community has not championed and joined our early involvement and 
commitment to transportation project planning. We have found reluctance 
to engage in working toward a mobility solution that balances the 
various public needs in a fiscally responsible way.
    You have all heard about the Interstate 93 widening project in New 
Hampshire and Senator Smith's work to bring streamlining to a reality 
with this project. As agreed, policy level staff from all the public 
regulatory agencies met as decision points were approached. Early 
agreement was reached to operate in an open, trustful and professional 
manner.
    The group has met a number of times over the past 2 years. The 
culmination of this work is the draft environmental statement to be 
published this week. Then on September 9, I received a letter from the 
EPA that discounts the work accomplished in the streamlining process. 
Primary reasons given were that only the regulatory agencies were 
involved, and not the private environmental groups and the 18 
communities that may experience secondary growth pressure even though 
they are not directly on the Interstate. This letter came despite the 
four dozen public meetings held as this project has developed; with all 
meetings publicly notice well in advance, with individual notices to 
the specific environmental groups.
    This project impacts an estimated 70 acres of wetland over 19 miles 
of widening of an existing Interstate highway. Proposed mitigation for 
this project includes 650 acres of land purchase and wetland creation 
at a cost estimated to be $15.0 million, plus a $3.0 million technical 
assistance program for local communities to assist in developing local 
land use regulations that reflect their future vision for their 
communities.
    The proposed mitigation package was severely criticized in the 
letter from EPA because, and this is a quote, ``while of importance to 
the towns, it does not have high ecological value''. The EPA letter 
also says that (again I quote) ``current State and Federal wetland 
regulations and typical zoning rules have generally not been effective 
. . .''
    While the debate about local, State and Federal roles in land use, 
transportation, and secondary impacts is an engaging debate, I believe 
that is a public policy decision that Congress, State Legislatures, 
municipalities and the public should decide, not government employees, 
particularly those far removed from the project area.
    The EPA submits that a mitigation package of approximately 2300 
acres at a cost of upwards of $50 million is needed. The reason cited 
is secondary impacts that may occur due to the project; not the direct 
impacts which they agree are of relatively minor consequence. 
Additionally, to their way of thinking, the highway widening should 
include the concurrent construction of transit options beyond the 
enhanced bus service already planned to be implemented and rail 
potential currently provided for in the project.
    All these proposed environmental mitigation elements are, I think, 
good things. The question is whether or not it is the responsibility of 
this project to pay for all of them? And, in fact, because New 
Hampshire has done a very good job in providing a high quality of life 
in all arenas including environmental protection, mobility and economic 
prosperity, people will come here even without Interstate 93 being 
widened.
    Why environmental streamlining? Because all agency implementers of 
elected officials' laws need to work together to effectively and in a 
fiscally responsible way to respond to public needs in a balanced way.
    The transportation agencies, after ISTEA and TEA-21, learned that 
we don't know all the answers. The designers and builders of our 
Interstate highway system achieved a wonder, but in hindsight it might 
have been done differently. So Congress passed ISTEA and TEA-21. And 
now in 2002 it seems that the transportation projects in the 
environmental view are seen as a financial resource to implement 
conservation projects.
    Early involvement in transportation project planning by all 
involved is needed. But, additionally, mutual respect for professional 
responsibilities, fiscal reality and, overall, an understanding that we 
need to make honest decisions that respects the public's will as 
envisioned by our elected leaders.
    The EPA letter that I mentioned earlier States that mitigation 
costs should be up to 20 percent of the total project cost. In a time 
when we are all struggling to fund the public's transportation needs, a 
decision by a government employee to direct funding to a 
nontransportation purpose is inappropriate.
    What do we need to meet the public's goal of providing mobility for 
quality of life and economic vitality while protecting and preserving 
the environment? This is best achieved if the principals envisioned by 
Congress for streamlining are implemented.
    Above all, we need a process that includes early involvement that 
is consistent, trust based and cooperative; a process that is 
streamlined, effective, balanced, public transportation delivery which 
unfortunately is not what we are experiencing today.
    Hopefully the next reauthorization will produce a streamlined 
process that follows the direction of Congress and meets the public's 
expectations.
    I am happy to answer any questions, and again I thank you for this 
opportunity.
                               __________
  Statement of Ken Morefield, Assistant Secretary for Transportation 
              Policy, Florida Department of Transportation
    Mr. Chairman, it is my pleasure to appear before the committee 
today to present the views of the Florida Department of Transportation 
(FDOT) concerning the reauthorization of the Transportation Equity Act 
for the 21st Century (TEA-21). This committee is to be commended for 
the extensive hearings that have been held in preparation for 
legislative action next year.
    Florida's natural resources and pristine environment are what make 
us unique among the States. We are indeed fortunate to be home to the 
Nation's oldest city, St. Augustine, the Nation's largest restoration 
project in history, America's Everglades, and some of the most 
endangered large terrestrial and marine mammals in the world. It is the 
policy of the Florida Department of Transportation to help preserve and 
enhance Florida's natural, physical, cultural and social environment as 
we develop, implement and maintain transportation facilities and 
services.
    My testimony today will address ``Project Delivery and 
Environmental Stewardship''. Section 1309 of TEA-21 has provided the 
impetus for State and Federal agencies to look for ways to improve the 
delivery of transportation projects while protecting our environment. 
The Federal Highway Administration along with the Federal Transit 
Administration have worked with us and many other Federal, State, and 
local agencies to develop a new process we call the ``Efficient 
Transportation Decision Making Process'' or ``ETDM''. I am pleased to 
report that we are virtually finished developing the new process. 
Training on the new process is scheduled to begin in January 2003 with 
completion by the end of June. We expect to begin full statewide 
implementation by July 2003.
    This new process has not been developed by the Florida Department 
of Transportation working in isolation. It began on February 3, 2000 
when over 20 Federal, State, and local agencies met and pledged their 
support of an effort to examine how transportation decisions are made 
in Florida and to develop an improved process. A multi-agency working 
group including representatives of Metropolitan Planning Organizations 
was then formed and met several times during the year. Later, nine Task 
Work Groups worked on specific issues related to implementation of the 
new process.
    In December 2001, Federal, State, and local agencies gathered at an 
``Executive Summit'' and signed a Memorandum of Understanding endorsing 
the ETDM process and pledging their continued support for the full 
development and implementation of the process in Florida. I am equally 
proud of the assistance we received from one of our environmental 
organizations, 1000 Friends of Florida, as they hosted five meetings 
around the State to explain the process to non-governmental 
organizations.
    We believe our ETDM process is fully responsive to the direction of 
Section 1309 and the National Environmental Policy Act. We have been 
pleased to brief your committee staff and others on our process, but we 
do not promote it as one that will fit every State. In fact, Florida's 
environmental laws, our own mix of State and local agencies, and other 
differences led us to an early conclusion that the best way to address 
improved project delivery and efficient decisionmaking was within our 
own efforts, and not through a ``one-size-fits-all'' approach.
    Section 1309 of TEA-21 called for change. Key changes requested by 
Congress included:

      Early and continuous agency and public involvement
      Integrated environmental review and permitting processes
      Early approvals in the planning process
      Coordinated time schedules for agency involvement
      Effective dispute resolution mechanisms

    Florida's ETDM process accomplishes all these objectives and more. 
The State of Florida is fortunate to have a very rich data base of 
information about our resources. We have collected that information at 
the University of Florida GeoPlan Center in Gainesville, Florida. This 
high technology digital data base tool allows agencies and the public 
to access project planning information over the Internet. It provides 
the foundation for our ETDM process and is called the ``Environmental 
Screening Tool''.
    This tool enables us to perform two ``screening events'' which 
document agency and community inputs much earlier in our transportation 
planning process. We call these screening events the ``Planning 
Screen'' and the ``Programming Screen''. Modification of project plans 
in response to these early screening events will enable us to avoid or 
reduce costly changes late in the process. These screening events will 
provide information that will allow agencies to be engaged in the 
thoughtful exchange necessary to properly balance land use, 
environmental protection and mobility needs.
    The primary purpose for the ``Planning Screen'' is to provide 
decisionmakers with better information to stage transportation 
improvements in the Cost Feasible Long Range Transportation Plan. The 
``Programming Screen'' provides an opportunity to identify project 
issues and the need for technical studies prior to the project 
advancing into our Work Program. The NEPA process begins at the 
``Programming Screen'' with a class of action determination that leads 
to environmental documentation and construction permits. A fundamental 
premise of our process is that it builds upon earlier analyses rather 
than reopening all issues at every step of the process.
    The screening events will be performed by Federal, State, and local 
agencies working together as an Environmental Technical Advisory Team. 
We will have one team in each of our seven geographic Districts. Each 
team will be responsible for agency review and feedback as projects are 
developed. Community Outreach Coordinators within FDOT will seek input 
from the affected community and post the input received so that 
agencies are aware of community concerns.
    Project planning information is entered into the Environmental 
Screening Tool by Metropolitan Planning Organizations (or by FDOT for 
our rural areas). Standardized analyses will then be performed on these 
planned projects and the results are then made available to agencies 
through the Internet. All agencies will perform their reviews on a 
coordinated time schedule and enter the agencies' official comments 
about the impact on the resources protected by their agency. The agency 
will be able to suggest changes to project concepts through the 
feedback portion of the data base system. At the same time, the 
opinions of the affected community are also posted in the feedback 
portion of the system. The results are visible to the agencies, non-
governmental organizations and the public. Everyone will have access to 
the same information.
    In summary, Florida is about to implement a new way of doing 
business. We believe the Efficient Transportation Decision Making 
Process meets all the objectives this committee set forth in TEA-21. We 
are convinced that this new process will provide for earlier and 
concurrent agency reviews resulting in a reduction in the time required 
to plan projects and achieve earlier permit approval. Further benefits 
include improved public participation in the transportation planning 
process, a reduction in the cost of planning and building projects, 
and, most importantly, improved decisions.
    Thank you for the opportunity to share Florida's efforts on project 
delivery and environmental stewardship. I will be pleased to address 
any questions you may have.
                                 ______
                                 
    Responses of Ken Morefield to Additional Questions from Senator 
                                Jeffords
    Question 1. The proposed Efficient Transportation Decision Making 
Process seems to be an innovative approach to making better decisions. 
FDOT has invested a large amount of time and resources to bring this 
program to this stage. Since this process is a departure for how 
business is being done, how is FDOT dealing with the institutional and 
cultural changes that will have to happen within FDOT and within the 
Federal, State, and local agencies involved in ETDM?
    Response. The following are past and present actions to bring about 
change within FDOT and other participating agencies:

      FDOT began our first meeting with Federal, State, and 
local agency heads stating that we were willing to change our old way 
of doing business and partner with these agencies in developing a new 
more efficient transportation process. Our challenge to these leaders 
was to be willing to change the way their agencies operate to improve 
the process for transportation projects.
      A Memorandum of Agreement was signed by all participating 
agency heads to support, develop, and implement this new process. Also, 
there has been consistent and continuous communication with these 
agencies.
      The Manager of our Central Environmental Management 
Office is meeting with the management of each of our District Office to 
discuss what will be required of their offices and their Metropolitan 
Planning Organization (MPO) counterparts.
      An ETDM Manual is being developed to provide operating 
procedures for FDOT and other agencies involved in this process in 
order to change how we will do business in the future.
      Extensive training of the Manual and this process will be 
completed within a 6-month period of time in order to begin 
implementation of this process within all of the agencies. Each of the 
seven geographic FDOT District Offices will host training to include 
the agencies, MPOs, and their own District personnel who will serve on 
the Environmental Technical Advisory Team. This will allow each agency 
to see the roles of others and how collective involvement of all 
members will improve decisions efficiently.
      Agency Operating Agreements are being developed that will 
describe how each agency's operational processes will be practiced to 
accommodate this new process. Also, separate agreements are being 
developed to provide funding assistance to agencies for additional 
personnel and equipment needs where applicable so that agencies can be 
effective in partnering with FDOT.
      Electronic technology will bring about better 
coordination with agencies creating consistency as agencies change 
their operations to complement this new process.





                               __________
Statement of Emily Wadhams, Vermont State Historic Preservation Officer
    Mr. Chairman and members of the committee, thank you for inviting 
me to provide testimony today on the approach Vermont has taken to 
expedite historic preservation reviews of transportation projects. My 
name is Emily Wadhams. I am the Vermont State Historic Preservation 
Officer. I am also on the Board of Directors of the National Conference 
of State Historic Preservation Officers and am an Advisor to the 
National Trust for Historic Preservation. Although I am not speaking on 
behalf of these national organizations, I have been working closely 
with them on the issues I'll be addressing this morning.
    I appreciate the opportunity to testify today and especially want 
to thank Senator Jeffords for the invitation. We in Vermont have long 
looked to Senator Jeffords as a leader in historic preservation. 
History is important to Vermonters, and Senator Jeffords has done a lot 
to help the citizens of Vermont preserve our State as a special place. 
He has recognized and supported the importance of landmarks like 
covered bridges and barns with national legislation that helps preserve 
these icons for all Americans. And he has championed our small towns 
and villages with his leadership on postal service policy that keeps 
post offices active as vital community centers.
    In Vermont, my office collaborated with State and Federal 
transportation officials to improve the way we review the impacts of 
transportation projects on historic and archeological resources. In 
brief, we developed an agreement known officially as a Programmatic 
Agreement, or PA, that creates an alternative review process for 
transportation projects under Section 106 of the National Historic 
Preservation Act. Although Section 106 regulations encourage 
programmatic agreements, Vermont is the only State to have developed 
such a comprehensive document. Under the agreement, the State Historic 
Preservation Officer has delegated the review and sign-off authority to 
qualified historic preservation professionals within the Vermont Agency 
of Transportation for all State and Federal transportation 
undertakings. After almost 2 years of experience with the PA, I can 
report that the success of this approach has far exceeded our 
expectations.
Background
    Section 106 of the National Historic Preservation Act requires 
Federal agencies to consider the effects of their undertakings on 
historic and archeological resources. In Vermont, as in other States, 
transportation safety and efficiency goals have often collided with 
historic preservation goals, sometimes delaying projects, and pitting 
State DOT's against State Historic Preservation Offices (SHPOs) in 
battles over the preservation of cultural resources. Mistrust among the 
parties to the process was common, and it often turned into a 'blame 
game' of whose fault it was that projects were being delayed. In the 
end both sides lost--project schedules lengthened, costs increased, and 
cultural resources were destroyed. Vermont, like most States, was mired 
in the problem. We were hearing from communities that they were not 
being heard and that changes were being made in the name of improving 
roads that were ruining the character of their towns.
    Vermonters believe that it is possible to change things for the 
better, that if you bring together the right people and talk about a 
problem, you can fix it. In the mid 1990's, Vermont started talking 
about how to solve the Section 106 review problem for transportation 
projects. Many of the most pressing--and adversarial--projects involved 
historic metal truss bridge replacements, and so we focused first on a 
survey of these bridges--which ones were most important, which ones 
were good candidates for preservation, which ones had to be removed, 
and was it feasible to reuse some elsewhere? The Vermont Agency of 
Transportation and the Vermont State Historic Preservation Office both 
committed time and money to answer the questions and produced a 
consensus bridge plan, formalized into a programmatic agreement for 
bridges. Although many bridges have been saved in place and continue to 
serve vehicular traffic, AOT developed a Historic Bridge Program to 
relocate and restore important bridges. In Hinesburg, Vermont, a small 
pony truss has been reused to cross a stream on a heavily used 
community pedestrian and bike path. In Arlington, a bypassed metal 
truss bridge next to a fishing access on the famed Battenkill trout 
stream became a fishing platform accessible for people with 
disabilities.
    Another collaborative effort also occurred at the same time. This 
was the development of the Vermont Design Standards (1996) and a new 
community review process designed to create more flexibility and 
creativity in designing transportation projects and to increase 
community input early in the planning process. One of the first 
beneficiaries of the new Standards was the town of Underhill where 
citizens fought for and won a ``footprint'' replacement bridge, a 
bridge that matched the dimensions of the old bridge as well as the 
small scale of the community. The success of these efforts led to 
broader discussions about how to streamline all Section 106 reviews and 
better protect cultural resources in transportation planning.
    These projects changed our relationship with the Agency of 
Transportation. We began working on the premise that we shared the same 
two goals--to improve the review process to allow AOT to do it's job, 
and to be good stewards of the State's historic resources. The trust 
that evolved led to the creation of a general Programmatic Agreement, 
or PA, that emerged in 2000. The PA delegates Section 106 sign-off 
authority to the Agency of Transportation itself, for its own projects, 
a radical concept. The PA relies on qualified historic preservation 
professionals within AOT to ensure appropriate consideration of 
historic and archeological resources in transportation project 
planning. AOT now files a final comment with the SHPO, and there is a 
specified timeframe for the SHPO to ask questions or disagree. AOT and 
SHPO staff worked together to create the PA Manual that clarified or 
developed procedures and other guidance to define how resources should 
be evaluated and treated in the Section 106 process. That effort 
allowed us to discuss, debate, and agree on exactly how the Section 106 
process would work under the PA, which set the overall tone of the 
process, but did not provide details. The first annual evaluation of 
the PA process proclaimed it a resounding success. Thirty other States 
have requested copies so that they may consider it for their 
jurisdictions.
What has changed--Increased stewardship
    Preservationists have long thought that consideration of historic 
and archeological resources early in project planning could eliminate 
many potential adverse effects on those resources in transportation 
projects. The PA promotes early consideration by sanctioning AOT 
historic preservation staff to actively and authoritatively participate 
in that early planning to avoid adverse effects. Formerly, when 
preservation issues came up late in the project planning process, it 
was often difficult and expensive to redesign to avoid adverse effects, 
and resources were lost.
Reduces project and process delays
    The PA has reduced delays in the review process dramatically. AOT 
estimates that review of routine projects has been shortened by weeks, 
and complex projects, by months or more. The PA exempts from review a 
long list of activities with little potential to affect historic and 
archeological resources. The time-consuming exchange of memos, 
telephone calls and frequent meetings have been eliminated between the 
SHPO and AOT staff.
Increases amount and range of public involvement
    The PA Manual prescribes opportunities for broad public involvement 
and comment on the issues covered by Section 106, piggybacked on the 
Agency's existing public process. The Manual requires that the Agency 
reach out to certain interested constituencies and inform them about 
their opportunity to comment, thereby enhancing the public's ability to 
understand and comment on affected historic and archeological 
resources. The PA also stresses public education about historic and 
archeological resources, both as projects occur and as mitigation.
Enhances interagency coordination
    The PA also called for interagency cooperation on other innovative 
non-regulatory projects, and several are currently underway which will 
benefit Vermonters: AOT now co-sponsors our annual State-wide historic 
preservation conference and Vermont Archeology Month; it is working 
with us to develop a data base of historic resources, refine a GIS-
based predictive model for archeological sites; and is considering 
helping us update our long-neglected State survey of historic sites. 
And I'll throw in a plug for more capacity for State historic 
preservation offices here. The appropriation to Department of 
Interior's Historic Preservation Fund, which provides Federal funding 
to State historic preservation offices to do all the things we are 
mandated to do under Federal law,--survey work, regulatory reviews, 
historic tax credit reviews, provide technical assistance, and so on--
has seen only minor increases in the last 30 years. In Vermont, we have 
not been able to invest in the infrastructure--good data base, historic 
sites surveys and GIS mapping--to allow information about historic 
resources to be integrated into State, local and Federal planning 
processes. Any way that the Historic Preservation Fund can be increased 
or enhancement dollars earmarked to assist us with this process would 
greatly improve our ability to be better stewards of these resources 
while improving the historic preservation offices' regulatory review 
process.
Increases Agency's stewardship role
    The key to success of the Vermont Programmatic Agreement has been a 
willingness on AOT's part to take its mandated responsibility toward 
historic preservation seriously. In the past, it was too easy for AOT 
to say the State historic preservation office was ``making them'' do 
something. With the new process, historic preservation concerns are 
more naturally integrated into the agency's thinking in the earliest 
stages of project development, not as an afterthought or a burden. In 
addition, the Agency of Transportation has now begun to develop 
projects, like a new railroad depot initiative to rehabilitate the 
State-owned railroad depots that probably wouldn't have happened 
without this new integration of historic resource protection into their 
day-to-day activities.
Role of Enhancements Programs
    Without the enactment of ISTEA and TEA-21--the enhancement programs 
that began in 1991, I'm not sure we would be where we are today. 
Congress made a clear statement with the enhancements program that 
built upon on the 1966 National Historic Preservation Act. It said that 
'yes' in 1966 we were serious about making sure that federally funded 
highway projects and other Federal undertakings couldn't ignore the 
impacts of interstate highways and other transportation projects on our 
nation's historic resources. Now, with the enhancements program, 
Congress has also made a commitment to those ``activities that enhance 
community benefits of transportation investments''. Enhancements are 
engines of change and natural partnership builders. They enhance the 
natural and built environments through which roads pass. Vermont's 
Agency of Transportation's major responsibility is to repair and builds 
roads and bridges for safe and efficient travel. But it also takes its 
environmental responsibilities seriously. AASHTO honored the Vermont 
enhancements program as one of the four best in America in a 2000 
competition.
    We have come a long way toward recognizing the importance of 
stewardship. We still need better policies to address important issues 
like limiting truck length and weight on the National Highway System 
roads, changing Federal funding policy to encourage, not discourage 
retention of historic bridges, and provide funding that will allow for 
the retention of unpaved scenic roads, for example. Also badly needed 
are changes to the enhancements program that remove serious impediments 
in applying for scenic easement acquisitions. Vermont is making a major 
effort to gain scenic or conservation easements at interstate exits to 
help communities address growth and traffic concerns. The current 
program, which will not allow for an appraisal or negotiated purchase 
price until after the enhancements grant has been awarded, make this 
almost impossible.
    In Vermont our ``new and improved'' approach to regulatory reviews 
is working. I believe it works because we have a citizenry that values 
the resources we strive to protect, we have legislators in Washington 
who recognize the importance of protecting these resources for future 
generations of Vermonters, we have a Governor who has worked hard to 
protect our downtowns, village centers and scenic landscapes, we have 
supportive leadership within our Agency of Transportation, and we have 
a Federal Highway Administration staff that has been a strong partner 
in these efforts. Our mutual goal has been to address issues of safety 
and efficiency in a modern transportation system in a way that enhances 
and does not compromise the special characteristics of the State we 
love.
Section 4(f)
    I strongly believe that the approach we're taken in Vermont to 
improve the regulatory process can also work with the protections 
established in Section 4(f) of the Department of Transportation Act. 
4(f) prohibits the use of historic sites and public lands unless there 
is no prudent and feasible alternative. It is viewed by some as being 
rigid and cumbersome and sometimes results in solutions that don't make 
sense especially with smaller projects. In Vermont, 4(f) is rarely a 
problem, because AOT's historic preservation staff flags adverse 
effects very early on in the planning process and can work to either 
avoid the adverse effect or go through the required alternatives 
analysis early on. I think almost everyone who works with 4(f) agrees 
that improvements to the process could be made. But changing the 
statute would be drastic and unnecessary and open the door to weakening 
the protections created by the law. The success of the Vermont example 
to expedite reviews under Section 106 can be applied to improving the 
4(f) process. As we learned with our project, willing partners 
committed to making the process work effectively, can devise a 
regulatory or procedural solution to address the problem. In Vermont, I 
believe we have shown that with a collaborative approach, everyone 
wins--projects get built, resources get protected and the public is 
better served.
    Thank you.
                              attachments
    1.) Manual of Standards and Guidelines, in accordance with the 
Programmatic Agreement among the VAOT, FHWA, ACHP, VSHPO regarding the 
Implementation of the Federal-Aid Highway Program in Vermont (12/28/0). 
Manual includes the Programmatic Agreement as Appendix A.
    2.) Better Historic Preservation Reviews for Road Projects, 
National Trust for Historic Preservation, 2002
                                 ______
                                 
Responses of Emily Wadhams to Additional Question from Senator Jeffords
    Question 1. Transportation agencies and associations are 
recommending that Congress make changes to Section 4(f). They contend 
that Section 106 can in many cases take the place of 4(f). In your 
testimony, you mentioned that this was not a good idea. Why would 
transportation agencies seek such changes? Please expand upon your 
concerns over this proposed change.
    Response. Section 4(f) has always provided a greater level of 
protection than Section 106 because it prohibits damage or destruction 
of historic resources unless there is no prudent and feasible 
alternative. Section 106 provides a process for considering 
alternatives to damage or destruction, but not a mandate to avoid them. 
Large-scale transportation projects have the potential to damage or 
destroy significant numbers of historic and archeological resources. 
The extra protection provided by 4(f) beyond Section 106 (which applies 
generally to all Federal agencies) highlighted a specific public 
concern for potential environmental impacts of such transportation 
projects. The presence of 4(f) has flagged consideration of historic 
resources as a priority for State transportation agencies across the 
country, and has resulted in early planning for their preservation in 
transportation projects where possible. In some cases, where Section 
106 has failed to protect resources where it was feasible to do so, 
4(f) has done the job. From what I have heard from transportation 
agencies and organizations around the country, there is legitimate 
concern that there is sometimes redundancy between 4(f) and Section 
106, especially on minor projects. That redundancy can contribute to 
project delays. However, I believe that there is an easier and faster 
way to address that problem than changing the law and then spending 
many months on developing implementing regulations and training. 
Section 4(f) protection for historic resources is too important to 
lose. But we can streamline the process to avoid unnecessary 
duplication and delays through administrative action, specifically 
through Programmatic Agreements (PA's).
    State or regional multi-State Programmatic Agreements (PA's) could 
allow Section 106 reviews to satisfy 4(f) requirements for minor takes 
and other projects where there is concurrence on an appropriate 
outcome. States could tailor PA's to reflect their resource base, 
typical kinds of undertakings, and staff capacity and procedures. The 
Exempt List feature of a PA could include types of projects unlikely to 
affect historic resources because of their size and nature, and/or 
categories of Section 106 determinations, like ``No Historic Properties 
Affected'', that all parties agreed on. Likewise, the Standard 
Mitigation Measures feature of a PA could provide a menu for mitigating 
adverse effects in meaningful ways, without the added time and expense 
of developing separate mitigation on each individual project with an 
adverse effect. Vermont operates under a similar PA for Section 106 
review of transportation undertakings (described in my September 19th 
testimony), and we have found it to be very successful at both 
streamlining reviews and protecting resources.
    I have heard complaints about a one-size-fits-all approach to 4(f) 
alternatives analyses that results in unnecessary extra work on smaller 
projects. We believe that either in a PA or in administrative guidance 
from FHWA, it would be possible to relate the depth of an alternatives 
analysis to the scale of a project and its potential effect. Common 
sense could prevail.
    The goal of streamlining historic resource reviews for 
transportation projects could be achieved quickly and effectively 
through a PA approach. Many Federal and State agencies have experience 
in creative problem-solving through PA's, and the Vermont Division for 
Historic Preservation would be happy to contribute to such an effort. 
Please let us know if we can help.






                               __________
  Statement of Hal Kassoff, Vice President, Parsons Brinckerhoff, on 
        Behalf of the American Council of Engineering Companies
    Good morning. My name is Hal Kassoff. I am Vice President with the 
consulting engineering firm of Parsons Brinckerhoff. I am representing 
the 5,800 member firms of the American Council of Engineering 
Companies, where I chair the Transportation Committee's Subcommittee on 
Environmental Streamlining. I am also co-chair of the Planning and 
Environmental Working Group for the American Road and Transportation 
Builders Association's TEA-2 Reauthorization Task Force.
    Expediting project delivery is one of the premier issues for 
members of the transportation community. And those who are experienced 
in delivering surface transportation projects will agree that the most 
difficult and time consuming challenge involves coping with what has 
become an overly arduous and time consuming environmental review 
process.
    Recently, those who oppose streamlining the transportation project 
environmental review and approval process have begun to argue that the 
process is not a significant cause of project delay--that funding 
constraints and mismanagement are the real problems. These arguments 
are a distortion of the reality that I have known for 18 years as 
planning director and then Administrator for the Maryland State Highway 
Administration, and for the past 5 years working on a national basis 
with Parsons Brinckerhoff. Environmental groups have, on occasion, 
candidly acknowledged that using the current process to delay projects 
that they oppose is key to meeting their objectives.
    In his testimony before this committee on April 29, 1999, Mr. Roy 
Kienitz, the then Executive Director of the Surface Transportation 
Policy Project said:

``In the struggle between the proponents and opponents of a 
    controversial project, the best an opponent can hope for is to 
    delay things until the proponents change their minds or tire of the 
    fight. It is the only option they have, and so they use it.''

    Mr. Kienitz went on to offer:

``We think of the projects that navigate the Federal approval process 
    as falling into two natural categories: first, those on which a 
    consensus has been reached locally, and second, those where strong 
    disagreement still exists . . . We believe that Federal process 
    reforms can be most effective in addressing the treatment of 
    projects in the first category. There is no good reason for Federal 
    approval to take years if there are no major disagreements over the 
    project being proposed. These delays are the most needless of all, 
    and are the easiest ones to attack.''

    Mr. Chairman, this is a refreshing observation by Mr. Kienitz that 
underscores the fact that the process needs to be fixed.
    A recent study by FHWA has confirmed that the time required to 
process environmental documents for large projects has more than 
doubled over the past 20 to 30 years. According to this report, in the 
1970's the average time for completion of environmental impact 
statements was 2.2 years. This time period doubled to 4.4 years in the 
1980's and grew further to an average of 5.0 years in the 1990's. Also 
of interest is that the average time grew by nearly 2 years when 
section 404 wetland permit issues come into play and the same occurred 
when section 4(f) historic preservation or parkland avoidance issues 
are involved.
    And another recent study under the National Cooperative Highway 
Research Program (NCHRP) reported on a survey of more than 30 States 
who described their experiences with delays in satisfying environmental 
requirements for small, simple projects as well. According to this 
report, 63 percent of all DOTs responding to the survey reported 
experiencing environmental processing delays with preparation of 
categorical exclusions (CEs), and 81 percent reported similar delays 
involving environmental assessments (EAs). These delays triple average 
environmental review times from about 8 months to just under 2 years 
for CEs, and more than double these time periods from under 1.5 years 
to about 3.5 years for EAs.
    Some DOTs have extended their schedules to reflect these extremely 
long durations--which can then give the misimpression that the 
environmental process is not taking an inordinately lengthy period of 
time. Other DOTs will simply not allocate funds to projects until 
environmental requirements have been met in order to avoid tying up and 
then delaying the utilization of critically important financial 
resources. In an ironic twist of reality, environmental activists can 
then claim that such projects are being delayed not by environmental 
requirements but by funding constraints, when in fact the opposite is 
often the case.
    Mr. Chairman and members of the committee, needless delay to 
transportation projects caused by environmental processing is 
widespread, and the opportunity is at hand to take positive action. 
Section 1309 of TEA-21 attempted to address the problem by calling upon 
the U.S. DOT and environmental resource agencies to cooperatively 
implement streamlined procedures, including concurrent processing, 
adherence to deadlines and dispute resolution. The goal was to expedite 
project delivery by eliminating unnecessary delays and requiring timely 
resolution of conflicts without diminishing environmental protections.
    The last point--``without diminishing environmental protections''--
is critically important. Ten national environmental organizations 
recently joined in releasing a one-page document titled ``Expediting 
Project Delivery Without Sacrificing Environmental Protection.'' And 
while exception could be taken with a number of specific points in the 
paper, the overall title is on the mark. In fact, we are not aware of 
anyone in the transportation community who would argue that 
environmental protection should be sacrificed in order to expedite the 
project delivery process. This issue is not about weakening 
environmental protection. The issue is about implementing an improved 
process that expedites project delivery without sacrificing 
environmental protection.
    There are some environmental groups who are interested in 
continuing a process that facilitates delay, or can be manipulated or 
challenged to cause delay, of project decisions with which they 
disagree. Those of us involved in delivering transportation project 
decisions are interested in a process that allows full public 
participation and ensures that only environmentally sound projects that 
meet the public and business demand for safe and efficient travel move 
forward. We also want a process, however, that is fair, certain, and 
comes to closure in what most people would consider a reasonable amount 
of time.
    We believe that Section 1309 needs a legislative ``booster shot'' 
in the form of a carefully balanced approach that reflects three basic 
components:

    (1) clarify expectations of both transportation and environmental 
agencies,
    (2) transform specific processes, and
    (3) hold both transportation and environmental agencies accountable 
for achieving positive results.

(1) Clarify Expectations
    Congress should clearly define its expectations for expediting 
project delivery by articulating in clear and unmistakable language a 
balanced array of basic policy principles. Such clearly defined 
expectations will be of great value in guiding the actions of 
participants in the process. Attached to this testimony is a draft of 
20 such principles--10 that would apply to transportation agencies and 
10 to environmental resource agencies. Taking just a few as examples, 
transportation agencies would be expected to advance projects that 
reflect environmental sensitivity as a priority. This will help lend 
substance and meaning to the philosophy of environmental stewardship 
which AASHTO and FHWA have been articulating and practicing. At the 
same time, environmental agencies would be expected to recognize the 
economic, safety/health and mobility needs for transportation projects, 
and offer constructive and problem solving ideas that respect their 
basic purpose. Environmental staffs would work with transportation 
agencies in a search for win/win outcomes.
    To fully appreciate how far the transportation community has come 
with respect to environmental stewardship, I commend to you the 
definition and goals as presented by AASHTO in its Transportation 
Environmental Stewardship Program, which is also attached. One of the 
key points that AASHTO makes is that environmental stewardship is a 
voluntary commitment to go beyond the minimums required by law. It can 
only succeed if States embrace the concept in their own unique ways. It 
cannot be standardized, nor can it be embodied in a new set of 
requirements, without defeating the whole purpose of inducing a culture 
change that encourages going beyond bare minimums.
(2) Transform Processes
    Mr. Chairman, transformations of certain processes are essential if 
significant improvements in expediting project delivery are to be 
achieved. Legislation is needed to ensure that these changes occur. 
They include the following:

      US DOT Lead Agency Responsibilities: The US DOT must play 
a stronger lead agency role in advancing process improvements and in 
advocating responsible transportation projects. This can be achieved 
legislatively by clarifying DOT responsibilities in defining the 
purpose and need for transportation projects, in determining the 
legitimate range of transportation alternatives to be considered, in 
approving transportation related technical methodologies, in 
establishing and enforcing reasonable project schedules, including 
review and comment periods, and in orchestrating the involvement of 
appropriate agencies.
      Streamlined Planning and Environmental Regulations: The 
US DOT should be directed to transform its planning and environmental 
regulatory approach from an overly complex and prescriptive framework 
to a more concise, flexible, performance-based combination of 
rulemaking and guidance that focuses on outcomes. Opportunities to 
integrate planning and environmental requirements should be offered, 
but not prescribed, and should be predicated on the notion that 
guidance derived from duly certified and valid long range 
transportation planning processes bearing upon such issues as 
transportation corridor purpose and need, mode selection, and range of 
alternatives will be acknowledged and have standing in subsequent 
environmental stages. Duplicative corridor studies that have no 
standing under NEPA should clearly be eliminated as a requirement.
      Section 4(f) Reform : Legislation is needed in addition 
to administrative actions that US DOT might advance to address Section 
4(f) problems that have become a major source of delay. The needed 
reforms include:

  Section 4(f) Finding of No Significant Impact (FONSI) 
    designation to streamline those actions where impacts to 4(f) 
    resources are determined to be insignificant
  Integration of 4(f) alternatives as part of the NEPA process
  Review of ``feasibility'' and ``prudence'' in a manner that 
    permits weighing the balance and proportionality of diverse impacts
  Satisfactory completion of the Section 106 Historic 
    Preservation process for historic properties should suffice for 
    4(f)
  Exclude 4(f) applicability to private properties unless they 
    are National Historic Landmarks or fall under some form of legal 
    protective covenant
  Exclude the consideration of Interstate highways themselves 
    as being historic and falling under Section 4(f) and 106 
    requirements

      Decision/dispute Resolution Process: US DOT should be 
expected to implement a simplified, responsive and effective decision 
and dispute resolution process to be invoked at the request of a 
Governor and led by the Secretary or his designee.
      Time Limits to Legal Challenges: A reasonable time limit 
should apply to the filing of legal actions that challenge the 
environmental process (90 days seems reasonable).
      Delegation of Authority: US DOT and Federal environmental 
resource agencies should be required to implement programs to delegate 
authority to willing and able State counterpart agencies for EA/FONSI 
and Categorical Exclusion projects, using a post-audit quality 
assurance process to ensure adherence to Federal requirements. 
Environmental agencies should conserve their limited resources to focus 
attention upon the relatively small number of projects that involve 
significant environmental issues. Various models exist for implementing 
the delegation process, such as Section 404 wetland permitting in New 
Jersey and Michigan, and Section106 historic preservation procedures in 
Vermont. These have been described in a recently completed AASHTO 
requested study funded under the NCHRP.
(3) Hold Agencies Accountable
      Annual Report: Congress should require annual reports on 
the progress that is being made to achieve a streamlined environmental 
review and approval process that does not weaken environmental 
protections. The report should include discussion of process changes 
and results. Results should be measured in two ways.

  Milestone Durations: Similar to the recent report by FHWA on 
    the time required to process EIS's over the past 3 decades, a 
    monitoring and reporting framework should be established to 
    determine trends for time required in achieving key milestones, 
    classified by type of project and type of environmental document
  Interagency Cooperation: Building upon a prototype process 
    being developed by the Gallup Organization under contract to FHWA, 
    a peer review ``report card'' should be implemented to gauge the 
    degree to which congressionally endorsed expectations are, in fact, 
    being fulfilled by individual transportation and environmental 
    agencies. If done well, this approach can foster working 
    relationships in which environmental stewardship as well as 
    environmental streamlining will flourish.

      Project Reports: Reports on a project basis should be 
filed by US DOT with Congress when certain milestone criteria have not 
been achieved (by a wide margin) and also in connection with designated 
transportation projects of national significance.

    Mr. Chairman, the need for fixing the environmental review and 
approval process is real. The problem has been building for decades. 
Solutions are needed now, or urgently needed projects will continue to 
be bogged down. The result will be lives lost, a weakened economy, less 
time with our families, fuel wasted, expensive and undependable 
delivery of freight, and increased air pollution.
    On behalf of the transportation community we would urge the 
committee to support legislation that will address the problem in a 
meaningful and effective way. We believe that the objective articulated 
by the environmental community to ``expedite project delivery without 
sacrificing environmental projection'' is both laudable and 
achievable--but it will require a 3-pronged legislative approach that 
clarifies expectations, transforms processes, and holds agencies 
accountable to achieve success.
    Thank you for the opportunity to testify.
                              attachments
Expectations of Transportation Agencies in Expediting Project Delivery
      Advance reasonable projects that reflect environmental 
sensitivity
      Ensure that the purpose and need are well established and 
compelling
      Consider alternatives that reflect environmental concerns
      Treat environmental concerns on a par with transportation 
issues
      Foster an open and interactive project development 
process
      Encourage early involvement by environmental resource 
agencies
      Keep unavoidable environmental impacts to a bare minimum
      Develop context sensitive solutions with environmental 
agency as well as public involvement
      Provide effective mitigation and reasonable enhancements 
to temper unavoidable impacts
      Adhere rigorously to environmental commitments and 
monitor effectiveness
Expectations of Environmental Agencies in Expediting Project Delivery
      Uphold and implement environmental laws and regulations
      Recognize the need for environmentally sensitive 
transportation projects
      Participate early and effectively in transportation 
project development
      Demonstrate a spirit of cooperation
      Offer constructive and problem-solving ideas that address 
purpose and need
      Reflect a sense of urgency about meeting schedules
      Implement concurrent processing and a performance 
approach to permitting
      Apply clear and consistent interpretations of legal and 
regulatory requirements
      Consider common sense, balance and proportionality 
consistent with legal and regulatory requirements
      Avoid unnecessary duplication by sharing responsibilities 
with capable and willing State counterparts
Environmental Stewardship Is: (AASHTO)
      Improving environmental conditions and quality of life 
when possible, not just complying with regulations
      Careful management of environmental resources and values 
through partnerships among public and private entities.
      Attitude, ethics, and behavior by individuals.
      Wise choices based on understanding consequences to 
natural, human-made, and social environment.
      Fulfilling responsibilities as trustees of the 
environment for succeeding generation, moving toward a cost-effective 
and environmentally sustainable future.
      Integrating environmental values with partners within all 
transportation work as a ``core business value''.
Environmental Stewardship Works Toward: (AASHTO)
      Agency-wide commitment to environmental excellence
      Improved public and regulatory attitudes
      Improved transportation programs and services
      Achieving TEA-21 streamlining goals
      Developing an environmental stewardship ethic
      Overcoming barriers
                               __________
Statement of Charles Hales, Transit Planning Principal, HDR, Portland, 
                                 Oregon
    Mr. Chairman, members of the Committee on Environment and Public 
Works. My name is Charles Hales. I am the Transit Planning Principal 
with the engineering firm of HDR in Portland, Oregon. HDR is a member 
of the American Council of Engineering Companies, and supports their 
efforts to improve project delivery. I am pleased to testify today as a 
former elected official and as a principal of HDR. In both of those 
capacities, I have worked collaboratively with a broad coalition of 
environmental and smart growth organizations. Some of them have 
endorsed my testimony here today and have supplied supporting materials 
for the points I will make here; those include: The Surface 
Transportation Policy Project, Environmental Defense, The Sierra Club, 
The National Coalition to Defend NEPA, Defenders of Wildlife and the 
Natural Resources Defense Council.
    Thank you for this opportunity to advise you on your work on 
Federal policy affecting transportation project delivery. In both my 
public service as Portland's Transportation Commissioner and in my role 
now in the private sector, building public works--particularly 
transportation projects--has been and is the focus of my work.
    Twelve years ago, I was working in the development and construction 
industry. In 1991, I made the decision to run and was elected to the 
office of Portland City Commissioner. I did so because I believed that 
Portland was about to experience a major wave of growth and change, and 
I wanted to help steer our course through the perils and opportunities 
that growth brings. As it turned out, I was correct in that prediction; 
Portland boomed in the 1990's, and I was involved in the construction 
of over $2 billion worth of infrastructure. I'm happy to report that we 
have grown well. Money Magazine and others share my opinion when they 
call us America's Most Livable City.
    My experience might prove instructive as you consider issues 
involved with the reauthorization of the Transportation Equity Act for 
the 21st Century (TEA-21), and ideas for ``streamlining'' the planning 
process required under this law or the National Environmental Policy 
Act (NEPA). What we have found is a set of principles that have been 
validated in project after project:
    (1) Public works projects are ``place-makers.'' This is true 
whether the project is a highway, a transit line, a park, a community 
center, or a police station. To pretend otherwise is . . . well, to 
pretend. When we build a freeway interchange or light rail line, we 
exert a massive influence on the character and destiny of the land 
around the project. A lot of unlovely places have been created and a 
lot of infrastructure money wasted by ignoring this principle. Suburban 
sprawl results from the compartmentalized, rather than the integrated 
approach to land use and development planning in one realm, while the 
provision of public works happens in another. In an era when 
infrastructure dollars are limited (actually, is there ever a time when 
this isn't true?) and quality of life is the most important driver of 
local economic development, designing projects which support the 
``place'' is the only prudent investment strategy for public funds. The 
alternative strategy, and one, which is far too common, is building 
public works projects, and letting the ``place'' spontaneously develop 
around them. Sprawl, congestion and other unintended consequences are 
the predictable result.
    (2) Land use planning must lead project engineering. The ``purpose 
and need'' stage of NEPA is applied common sense. Before we build a 
project, we need to ask what our goals are and how a proposed 
``improvement'' will advance those goals. We need to honestly consider 
all the alternatives. We need to examine the consequences and side 
effects of the proposed improvement. If we don't we will not leverage 
the benefit of the infrastructure investment as we should, and we will 
likely create problems that will be worse and more expensive to solve 
than the one that we just ``solved.'' The classic example of this 
phenomenon is the much-repeated fallacy of the past 50 years: expanding 
highways to alleviate traffic congestion. We don't need to be subtle 
about this issue anymore: building highway capacity without integrating 
transportation planning and project design with regional and local land 
use planning is counterproductive.
    Lewis Mumford warned us more than 50 years ago when he said, 
``Americans will soon have every facility for moving around the city, 
and no reason whatsoever to go there.'' Transportation investments 
which serve a well-thought-out land use plan pay dividends; those which 
take an engineering-only approach cause terrible side-effects or at 
least, don't perform very well or very long. My company summarizes the 
integrated approach in three words: community, mobility and 
environment. It is sound public policy to respect all three.
    (3) Bring all stakeholders and points of view to the table. As I 
mentioned, I've built a lot of infrastructure and now, as a principal 
with HDR, I look forward to being involved with building a lot more. 
For those projects to succeed, all who have a stake in them must inform 
their concept and design. The ``good old days'', in which a Robert 
Moses in New York or in my State, a Glenn Jackson could locate and 
authorize a project by fiat, are gone. The public, with good cause, 
won't stand for it. Similarly, Federal, State, regional and local 
agencies have their responsibilities under law, and they are bound to 
carry them out.
    An open, inclusive process of considering all the issues involved 
in a major infrastructure investment is legally, pragmatically, and 
politically required.
    The good news I have to report, Mr. Chairman, is that these 
principles are not simply lofty ideals.They are standard practice in my 
community, and as a result Portland is widely considered to be one of 
America's most livable cities.
    My community's experience shows that the best way to ``streamline 
NEPA'' is to go through the planning process right the first time and 
only once. We have made a sustained commitment to comprehensive land 
use and transportation planning. We work collaboratively to integrate 
the requirements and address the concerns of Federal and State 
regulatory agencies in our plans and projects. We then ask those 
agencies to sign off early on purpose and need. We base our project 
priorities on the plans. We are thrifty in our expenditure of public 
moneys. We build transportation projects on time and on budget. And our 
transit projects in particular outperform their projections.
    Our experience allays some concerns about environmental review:

    (1) It is not my experience that environmental groups and NIMBY's 
(not-in-my-back yard neighborhood groups) will exploit environmental 
review and tie needed projects up for years. If there is any place in 
America where this should be true, it is Portland, Oregon. Our State is 
loaded with environmentalists (remember the book ``Ecotopia''?), and 
our city is populated with neighborhood activists. In fact, Portland 
actually goes so far as to provide funding and staff support for 
neighborhood associations and gives them a free land use appeal right 
for discretionary land use decisions. Some might expect this to be a 
recipe for paralysis.
    Yet the contrary is true. In the 10 years I served as a Portland 
City Commissioner and as Portland's representative to the MPO for our 
region, we built dozens of major highway, transit, sewer, and water 
projects, and other major facilities. In almost no case . . . allow me 
to repeat that . . . in almost no case have projects been held up by 
appeals, litigation or multiple trips through the NEPA process or 
though State or local review. I'm proud of that track record; I believe 
that I made good decisions. I must admit, though, that I was not 
infallible. Some appeals are meritorious; they are part of the checks 
and balances system, and their scrutiny accomplishes a legitimate 
purpose of these laws: avoiding bad projects, or reshaping them to be 
good ones.
    Similarly, in 10 years of rapid growth and dramatic change in the 
built landscape of my city, only citizen blocked a handful of private 
development projects in Portland or neighborhood appeals. This paradox 
is explained by the fact that we have taken the coordination, public 
involvement and alternatives analysis goals of NEPA and TEA-21 to 
heart. We plan, we work for consensus, and we follow our plans. We are 
a case study that demonstrates that good administrative practice gets 
good treatment under the Federal requirements. We demonstrate that even 
in a city with Endangered Species swimming through its downtown, 
Federal and State agencies can reach agreement and construction of 
public works and private development can continue apace.

    (2) Environmental review does not need to hold up projects or add 
significantly to their costs. If my community's citizens are ``green,'' 
they are also ``tight.'' Oregonians are frugal, and expect frugality in 
public expenditure. In my experience, this expectation is more likely 
to be met with a truly good faith effort to follow these planning and 
alternatives analysis requirements. To borrow a popular phrase, 
planning is expensive and time-consuming, but not compared to the 
alternative.

    (3) These laws and regulations don't foster internecine warfare 
among public agencies; done right, environmental review reduces 
interagency conflict. The Oregon DOT, like most State DOTs, is still 
primarily a road and highway organization. The ODOT staff has, however, 
incorporated this planning-based approach in their work. They, in 
return, expect counties and municipalities to work collaboratively with 
them; for example, we are transitioning some former State highways 
located in urban areas into locally managed streets. These projects 
don't require environmental review, but the cooperative working 
relationships forged in environmental review makes these other ``win-
win'' agreements possible.
    Environmental review requirements, well integrated and well 
administered, help assure that good projects are advanced with public 
support, avoiding adverse impacts and mitigating unavoidable impacts. 
This translates into public acceptance and smoother permitting. Indeed, 
efforts to expedite project delivery are likely to fail and work 
against sound decisionmaking if they set arbitrary time limits, curtail 
public and judicial review, limit consideration of alternatives and 
determinations of project purpose and need, or allow use of project 
segmentation and analysis models insensitive to induced traffic and 
other indirect impacts. Such approaches are likely to spur increased 
conflict and reduced public support for transportation funding and 
programs.
    It's not possible to mandate cooperation, consensus and trust. 
Trying to push projects forward by the means I just listed will fail 
because in a complex environment like the design and permitting of a 
major public works project, cooperation, consensus and trust are 
necessities, not niceties. Likewise, it's not possible to measure a 
transportation project's success on transportation or engineering terms 
alone, so evaluation measures, if the committee pursues them, should 
evaluate a project's affect on a community's goals and plans. Land use 
results--i.e. the places where Americans live their lives--are not a 
``secondary effect.''
    When I was first contacted about testifying before your committee, 
I was reluctant to accept the invitation. I knew that the subject was 
streamlining the approval process for transportation projects, and that 
the committee would, necessarily, confer with experts on the specific 
language of Federal law and the regulations, both current and draft, 
which have been promulgated to implement these laws. My reticence was 
based on my understanding that I am not one of those experts and, more 
powerfully, that I have spent 10 years governing a growing city and 
building major infrastructure projects without having to think much 
about NEPA or the planning requirements of TEA-21.
    That, ultimately, is my message and why I am here after all: if you 
take the commonsense planning, coordination and public involvement 
requirements of these Federal policies seriously, they don't get in 
your way. If you are committed to the spirit of these laws, the 
particulars are relatively unimportant. And as a local or State 
official, your time is much better spent in genuine consensus-building 
and integrated planning than in complaining about the regulations or 
defending against citizen suits. Our experience is that if citizens 
participate in the planning process and have a clear buy-in and 
responsibility for commitment, there are few suits. The plan is the 
community's plan. I should also emphasize that one does not need to 
adopt Portland's approach, or anyone else's; a community is free to 
plan its own future, not imitate anyone else's approach in order to get 
these beneficial results.
    I'm not simply saying that if one plans, coordinates and 
communicates, the Federal regulatory requirements are not so bad. The 
results can be better than that. A community which first, engages in 
real, comprehensive, and sustained land use planning, and which makes 
infrastructure decisions consistent with that plan, and conducts a 
genuine and genuinely open process of alternative analysis not only 
gets through the environmental review process with a minimum of 
difficulty; the people of this community own the results of the 
planning process and get to live in a better place.
    That is the opportunity that environmental review offers to States 
and localities. I hope that this committee, in its work on the next 
transportation bill, encourages us all to get serious about taking it.
    Thank you. I would be pleased to answer any questions.
                              attachments:
      Attachment 1, ``Expediting Project Delivery Without 
Sacrificing Environmental Protection,'' summarizes broadly supported 
principles for accomplishing improved project delivery and better 
environmental stewardship through better administration of the planning 
and project review process. These principles are fully consistent with 
the approach we have followed to achieve success in Portland.
      Attachment 2, ``Questions and Answers About Environmental 
Streamlining,'' provides important background on the debate over 
streamlining vs. stewardship and transportation project delivery, 
including information about sources of project delay identified by 
AASHTO and FHWA studies.
      Attachment 3, ``The Most Environmental Impact: Forests, 
Highways and Army Corps of Engineers,'' shows the share of agencies 
issuing Environmental Impact Studies (EISs) by year and the trends in 
number of EISs filed each year. These charts show that transportation 
still accounts for a large share of projects that are so 
environmentally significant as to trigger a full EIS, but that the 
number of EISs filed is actually declining slightly overall.
      Attachment 4, ``Environmental Streamlining: Better 
Decisions from Integrated Transportation Plans/Reviews? Or Steam-
rolling for Destructive New and Bigger Highways and Airports?,'' 
summarizes key talking points developed by Environmental Defense to 
explicate the current public policy issues in this area and offering 
ideas for what streamlining should and should not seek to accomplish if 
it is to protect the environment and expedite project delivery. These 
are principles that are highly consistent with our experience in 
Portland and I commend them to your attention.
      Attachment 5, ``Comments by Environmental Defense on 
Proposed Metropolitan Planning and NEPA Streamlining Rules,'' provides 
important background on the statutory requirements for regional 
planning in TEA-21 and how these relate to NEPA requirements, Title VI 
of the Civil Rights Act, and other elements of the Federal highway law 
that require consideration of the adverse effects of air pollution 
prior to the approval of plans and specifications for a highway, as 
well as measures to eliminate or minimize the adverse effects of air 
pollution. The approaches advocated in these comments are consistent 
with Portland's efforts to integrate transportation, growth management, 
and air quality efforts.
      Attachment 6, ``Letter to Transportation Secretary Rodney 
Slater from Rep. John Lewis and four other Members of Congress, 
December 2000'', calls for U.S. DOT to adopt a national mobility goal 
to measure the performance of metropolitan transportation system and 
ensure equal access to employment opportunities and public facilities 
through regional transportation plans and timely progress toward this 
goal through transportation improvement programs. Adoption of this goal 
would be consistent with making our communities better places to live, 
with greater transportation choices, with a transportation system that 
delivers effective performance for all citizens, fostering a sense of 
place and a sense of region built on access to opportunities.
    I64
 Statement of Defenders of Wildlife, National Wildlife Federation and 
        The Humane Society of the United States, Washington, DC.
    Our organizations submit the following testimony to the public 
record on behalf of our millions of members and supporters, who support 
strong environmental protections as well as sustainable transportation 
solutions.
    There is no question that America's transportation infrastructure 
is imperative to our mobility, productivity and success. However, it 
has also had significant impacts on ecosystems of the U.S. Four million 
miles of roadways in the U.S. cover an area approximately the size of 
the State of South Carolina, and impacts beyond the road surface extend 
to as much as 20 percent of the total land area. Unfortunately, roads 
have not always been planned wisely, leaving a destructive B and 
permanent B footprint on landscapes and wildlife habitat. That is why 
it is imperative that transportation decisions are made after careful 
consideration of not only the immediate need and purpose, but also the 
long term and cumulative effects. In addition, transportation decisions 
cannot be made in a vacuum, but only after consultation with all 
stakeholders and interested parties.
    Our primary concern with environmental streamlining, as some have 
proposed it, is simple and transparent: the potential for weakening 
environmental considerations required by the National Environmental 
Policy Act (NEPA). NEPA is the foundation for environmental protection 
in this country, and is largely credited for the level of environmental 
quality we enjoy today. When the 91st Congress enacted NEPA, the intent 
was clearly to declare environmental protection a national priority B 
not to delay projects, or pit agency against agency. The NEPA review 
process was intended to ensure that the actions of Federal agencies 
reflect the nation's dedication to environmental quality. It was not 
intended to be an assembly line of meaningless paperwork in pursuit of 
a mindless rubber-stamp approval. However, when agencies perceive the 
process as a nuisance, it not only contributes to the added costs and 
delays, it is an aberration of congressional design and a miscarriage 
of the trust and responsibility endowed upon these agencies by the 
American people.
    Rather than advocating solutions that would shortchange critically 
needed environmental reviews required by NEPA, we believe that 
administrative actions that have been adopted in response to 
streamlining provisions in TEA-21 are fundamentally working. Some State 
streamlining activities, including early involvement of natural 
resource agencies in highway planning, coordination with existing 
natural resource planning efforts and enhanced application of 
mitigation approaches, can further reduce project completion time and 
do so without the need for additional legislation.
TEA-21's Streamlining is Working
    Past streamlining debates resulted in the inclusion of an 
environmental streamlining provision in the Transportation Equity Act 
for the 21st Century (TEA-21). This provision, Section 1309, mandates 
that the Department of Transportation (DOT) work to reduce delays in 
project delivery while maintaining environmental protection: AThe 
Secretary shall develop and implement a coordinated environmental 
review process for highway and mass transit projects.\1\
---------------------------------------------------------------------------
     \1\Transportation Equity Act for the 21st Century, Pub. L. No. 
105-178, 191309.
---------------------------------------------------------------------------
    Since then, great strides have been made in expediting the 
environmental review process. A report to Congress by the Federal 
Highway Administration (FHWA) in February 2002 examined States' efforts 
in carrying out Section 1309. The report found significant progress 
across the country, in particular that Athrough trial and error, 
innovation, testing, and early lessons learned, much of the 
transportation community has adopted a new way of thinking to get 
beyond the usual environmental process bottlenecks.\2\ Among other 
findings were that every State has adopted or initiated a process for 
streamlining that clarifies, amends, or re-invents the project 
development process. Nearly half of the States (24) have focused their 
efforts on integrating planning and NEPA activities. Forty-one States 
have some level of delegated authority for historic resources 
permitting.
---------------------------------------------------------------------------
     \2\Federal Highway Admin., Highway and Transit Environmental 
Streamlining Progress Summary (Feb. 2002).
---------------------------------------------------------------------------
    Streamlining, as set out in TEA-21, is working. Improved project 
delivery is already being realized, simply by improving the process. 
One measure of that achievement, cited by FHWA, is that the length of 
time spent processing environmental documents has declined by 8 months 
between 1999 to 2001.
Environmental Reviews Are Not Causing Most Project Delays
    There is no doubt that some transportation projects stretch far 
beyond their projected timeframe for delivery. However, there is little 
evidence to suggest that environmental regulations are the cause of 
most project delays. Three new studies, from the American Association 
of State Highway and Transportation Officials (AASHTO) and FHWA, 
quantify the impact that the NEPA process has had on transportation 
projects. The results of these studies call into question the 
complaints that environmental regulations are the source of delays, and 
provide further evidence that efforts to reduce review time are 
successfully under way.
    Federal Highway Administration published two reports on 
transportation project delay in late 2000. The first study examined 89 
projects requiring an environmental impact statement (EIS) that have 
yet to complete the review process after five or more years. Contrary 
to popular belief, the most common reason for delay was lack of funding 
or low priority (32 percent), local controversy (16 percent), or the 
inherent complexity of the project (13 percent). These issues, as well 
as changing or expanding the scope of the project (8 percent) far 
outweigh environmental review as causes of project delay.\3\
---------------------------------------------------------------------------
     \3\FHWA. Reasons for EIS Project Delays. September 2000.
---------------------------------------------------------------------------
    The second study, conducted by the Louis Berger Group, set out to 
establish a baseline of the length of time required to comply with the 
NEPA process. The study found that the average (mean) time required to 
complete the NEPA process was about 3.6 years. The median time was only 
3 years B which in this case is a better indicator because of outliers 
in the sample. It is important to note that the time required to 
complete the NEPA process is not necessarily additive to the project 
planning and design process, and may be coincident with other phases of 
the project.\4\
---------------------------------------------------------------------------
     \4\The Louis Berger Group, Federal Highway Admin., Evaluating the 
Performance of Environmental Streamlining: Development of a NEPA 
Baseline for Measuring Continuous Performance (2000).
---------------------------------------------------------------------------
    A third study, commissioned by AASHTO and conducted by the 
consulting firm TransTech Management, looked specifically at the causes 
of delay for projects receiving a Categorical Exclusion or requiring an 
Environmental Assessment. According to AASHTO's survey of 32 State 
DOTs, the vast majority of transportation projects require only a 
Categorical Exclusion (CE). In fact, the AASHTO study found that fully 
92 percent of environmental documents processed by State DOTs are CEs. 
Environmental assessments (EA) make up 7 percent, with Environmental 
Impact Statements (EIS) rounding out the sample at less than 2 
percent.\5\
---------------------------------------------------------------------------
     \5\American Ass'n of State Highway and Transp. Officials, 
Environmental Process Streamlining: A Report on Delays Associated with 
States' Categorical Exclusion and Environmental Assessment Processes 
(Oct. 2000).
---------------------------------------------------------------------------
Consideration of Natural Resources Can Expedite Projects
    We fully support efforts to reduce costly delays in transportation 
projects to the extent that they do not compromise environmental 
safeguards. We emphasize several measures which can expedite project 
delivery while enhancing natural resource conservation. Each of these 
measures is authorized in TEA-21, and many States are already taking 
advantage of the benefits.
1. Early, continued, substantive and supported involvement by 
        regulatory agencies
    Many projects are delayed because they are planned and designed 
before consultation with regulatory agencies. If regulatory agencies 
are involved from the beginning, they can steer DOTs clear of problems 
early. We support the facilitation of agency representation at the 
early stages of project design. Early agency consultations can identify 
decision points and potential conflicts before considerable time and 
resources have been committed to a particular plan of action which may 
later be discovered to be unacceptable or inconsistent with existing 
standards.
    NEPA reviews are but one of many responsibilities of Federal land 
and resource management agencies. Delays are often the result of 
inadequate funding and understaffed field offices. When agencies are 
fiscally restrained, their ability to respond to applicants' requests 
is likewise restrained. TEA-21 significantly increased transportation 
funding, resulting in an increase in transportation projects requiring 
environmental review. TEA-21 did not, however, increase funding to the 
agencies charged with reviewing and permitting these projects. The 
experience of the U.S. Fish and Wildlife Service (USFWS) provides an 
excellent example. Between 1998 and 2000, USFWS experienced a 77 
percent increase in transportation project workload. However, since 
1994 the USFWS budget and personnel levels for transportation technical 
assistance have increased only 1 percent.
    Section 1309 allows transportation funds to be used to reimburse 
permitting agencies for staff hours and expenses, so that these 
agencies can dedicate staff time to reviewing proposed road projects 
early on and in a timely manner. Such reimbursement is an efficient 
investment that prevents delays in project delivery and increases 
natural resource conservation. To date, several States have taken full 
advantage of the reimbursement provision and are reaping the 
streamlining benefits of early, continued and supported involvement.
2. Incorporate conservation into transportation planning
    Substantial progress can be made in reducing project delays by 
coordinating conservation planning and transportation planning. Several 
States, including Florida and Massachusetts, have undertaken 
comprehensive wildlife conservation plans which identify the most 
important habitats for sustaining the full complement of species in the 
State into the future. Under the State Wildlife Grants program in the 
FY2002 Interior Appropriations Act, States are now receiving Federal 
funding that can be used to develop these State plans. State natural 
resource agencies are awarded formula-based grants with the requirement 
that it complete a comprehensive wildlife conservation plan by 2005. 
Transportation plans and projects will have reduced impacts on wildlife 
and proceed more smoothly if they take these conservation plans into 
account by avoiding impacts to ecologically important lands and 
directing mitigation funds to the preservation of those lands.
    Florida's Efficient Transportation Decision-Making (ETDM) process 
is an example of coordination of conservation plans with transportation 
plans. ETDM was developed as a streamlining program, in which 
transportation plans, very early on in the process, are evaluated in 
terms of their environmental impacts, including impacts to the State's 
strategic habitat conservation areas. The ETDM system also enables more 
rapid permitting by moving the permitting to earlier stages of the 
process.
3. Advance programmatic mitigation or conservation banking
    Better coordination of conservation plans and transportation plans 
can allow transportation agencies to avoid and minimize impacts to 
biodiversity. These conservation plans can also inform mitigation 
efforts, when impacts to remaining natural areas cannot be avoided. 
Current mitigation practice, however, is not only time-consuming and 
expensive for action agencies; it may not always provide the best 
return for resource agencies. Most mitigation is done on an onsite, 
project-by-project basis, which often misses important indirect and 
cumulative impacts. On-site mitigation is often necessary, but project-
by-project mitigation can result in isolated patches of protected land 
that are not ecologically viable and are more vulnerable to continued 
development.
    We support innovative efforts by State DOTs to conduct advance 
programmatic mitigation and conservation banking for endangered 
species. In these efforts, State DOTs acquire or ``bank'' large blocks 
of conservation lands, from which they can extract conservation credits 
for those projects deemed to have negative environmental impacts. 
Mitigation funds are used most effectively when directed toward the 
acquisition of lands identified as ecologically important in State or 
eco-regional conservation plans. We support wider use of conservation 
mitigation and banking as part of expediting project delivery, with 
appropriate regulations and guidance, and with assurances proper 
sequencing would not be compromised. We believe that this approach will 
save DOTs considerable time and expense, while implementing State and 
ecoregional conservation goals.
    In closing, we reiterate that implementation of TEA-21 has largely 
resulted in faster project delivery and meaningful streamlining that 
still preserves environmental standards. Our points of emphasis above 
(early involvement, coordination with conservation planning, and 
advance mitigation) are all authorized and supported in TEA-21. Major 
legislative changes in streamlining are not needed. Finally, we urge 
the committee to embrace the reformative ideals of Section 1309 without 
losing sight of the original intent of NEPA: to protect and preserve 
our natural heritage.
                               __________
          Statement of the American Society of Civil Engineers
    The American Society of Civil Engineers (ASCE) wishes to express 
its views on the environmental streamlining provisions in section 1309 
of the Transportation Equity Act for the 21st Century (TEA-21) and to 
recommend some simple adjustments to section 1309 to improve the 
functioning of the streamlining process, as well as the larger issue of 
project delivery related to surface transportation projects.
    ASCE was founded in 1852 and is the country's oldest national civil 
engineering organization. It represents more than 125,000 civil 
engineers in private practice, government, industry, and academia who 
are dedicated to the advancement of the science and profession of civil 
engineering. ASCE is a non-profit educational and professional society 
organized under Part 1.501(c)(3) of the Internal Revenue Service rules.
    As you know, Congress enacted section 1309 in 1998 to remove the 
procedural bottlenecks in the environmental review process for Federal-
aid highway projects, many of which take years to complete. The Act 
directed the Federal Highway Administration (FHWA) to issue new 
regulations to implement the streamlining program. The FHWA proposed 
regulations under section 1309 in May 2000. The regulations have not 
been made final as of this writing.
    ASCE opposed the FHWA's streamlining regulations at the time that 
they were proposed. We believed then--and continue to believe--that the 
proposed regulations were faulty because they failed, at a minimum, to 
establish firm deadlines for the completion of the Federal portion of 
the transportation streamlining process and they appeared to clear the 
way for pilot projects in contravention of the intent of Congress.
    Because the FHWA has estimated that the environmental review 
process still averages approximately 5 years to complete, ASCE 
recommends that the committee provide more detailed guidance to the 
FHWA on the implementation of section 1309. Specifically, we urge the 
committee to add binding deadlines to the environmental review process.
    Additionally, ASCE considers section 1309 to be flawed because it 
does not require agencies other than the FHWA to comply with the Act's 
streamlining requirements. This failure should be remedied in the 
reauthorization of TEA-21.
    ASCE advocates two important steps that government can take 
immediately that would profoundly enhance our ability to preserve and 
improve our infrastructure. First, revamp and simplify the regulatory 
regime affecting infrastructure planning and implementation to be less 
prescriptive and confining and more performance based and flexible. 
Second, reform the rules to be more concise, outcome oriented, plainly 
written, common sense oriented and, supplemented by best practice 
models that encourage continuous improvement. Specifically, ASCE 
supports concurrent reviews, and the designation of a lead agency to 
manage the process.
    Few will disagree that it takes too long to deliver major projects. 
Recent studies by FHWA have documented that the environmental process 
alone takes twice as long as it used to, due in large part to expanded 
environmental requirements. While major efforts are focused on speeding 
up that process, it is clear that there are other factors contributing 
to the extended timeframe required to navigate from early planning to 
completion, a timeframe often measured in decades.
    With structural, safety and service issues spurring the need for 
renewing, replacing and expanding an aging infrastructure, the nation's 
long-term economic vitality and quality of life will be affected by 
whether project planning, financing, and delivery systems can keep up 
the necessary pace.
    It is clear that processes considered adequate over the past 50 
years are inadequate to meet the needs of the next half-century. And 
compounding the problem during a period of generally expanding 
financial resources has been a depletion of human resources as measured 
by numbers and experience within organizations responsible for 
deployment.
    The answer lies in reinventing processes for planning, financing, 
and delivery of infrastructure, and doing so in a way that retains and 
builds upon vitally important and successful principles and practices. 
For example, improving the environmental review process cannot be at 
the expense of protecting and enhancing environmental quality. And 
streamlining project delivery cannot be at the price of weakening 
market forces or reducing competition.
Procurement of A/E Services
    ASCE believes that the selection of professional engineers as prime 
consultants and subconsultants should result from competition based on 
the qualifications best suited to complete the work successfully. Cost 
of engineering services, while important and meriting careful 
negotiations and performance accountability, should be secondary to 
professional qualifications.
    Accordingly, ASCE supports qualifications-based selection (QBS) 
procedures such as those specified by the Brooks Architect-Engineers 
Act of 1972, 40 U.S.C. 541 et seq., and the American Bar Association's 
Model Procurement Code for State and Local Governments for the 
engagement of engineering services. This process has withstood the test 
of time.
    Traditionally, Federal Government procurement procedures properly 
have emphasized awarding contracts to the lowest bidder, or using price 
as a dominant factor. For many goods that the government purchases ? 
paper, office equipment, desks, even construction services ? this 
process serves the government and the taxpayer well. Specifications can 
be written, products can be inspected and tested, and safeguards can be 
built in to assure saving money.
    Sometimes, however, agencies mistakenly assume professional 
architecture, engineering, surveying and mapping services fall into 
this category. Unfortunately, the assumption ignores the increase in 
costs to administer the preparation of detailed scopes of work and bid 
specifications, to evaluate numerous bids, and to remedy serious 
consequences of unprofessional A/E related services.
    Quality, therefore, should always be the primary focus in the 
competition for architectural, engineering and surveying and mapping 
procurement. Only after high-quality performance is ensured should the 
focus turn to the contract price. That is exactly what QBS provides. 
The Brooks A/E Act ensures that specialized skills and technologies are 
evaluated properly and are not overlooked. At the same time, the Act 
also ensures that small businesses are able to compete on an even basis 
with large A/E design firms. In this manner, the government benefits 
from direct control of both the quality of the services and the 
project's development.
    The Brooks A/E Act applies to the acquisition of all architectural 
and engineering services, including services of an architectural or an 
engineering nature that are logically and justifiably to be performed 
by architects or engineers. The language of the Brooks Act governs the 
broadest range of A/E design services, i.e., any that are performed by 
architects or engineers and those that may be. Nothing in the Act 
limits or restricts the application of QBS procedures to some 
architectural or engineering services while exempting others.
    The use of negotiated procedures directs the focus of procurement 
activity where it should be, on the quality of the professional A/E 
services specifically suited to a given contract.
    All competitors must submit their qualifications to the procuring 
agency; the agency assesses the relative expertise of the competing 
firms; and the most qualified firm is selected for the particular 
procurement. Such procedures produce a more cost effective design, map 
and related professional service than can be achieved under price 
bidding procedures.
    The qualifications-based selection law was codified to protect the 
interest of taxpayers. It is Federal law because over the life of a 
project, engineering-related services account for less than one-half of 
1 percent of total costs. Yet these important services play a major 
role in determining the other 99.5 percent of the project's ``life 
cycle costs,'' such as construction, operation, and maintenance.
    This process has been so successful at the Federal level that it is 
recommended by the American Bar Association in its model procurement 
code for State and local government. Forty-two States have enacted 
their own qualifications-based selection laws for architecture, 
engineering, surveying and mapping services based on the Federal model. 
Others use it as a standard procedure. Today, no State has a specific 
law requiring bidding of these services.
    For design build procurement, ASCE strongly supports the use of the 
two-phase competitive source-selection process required by the Federal 
Acquisition Reform Act of 1996, 41 U.S.C. 253m, for design-build 
contracts awarded by government agencies. The design-build team must be 
selected using the modified QBS criteria specified by the Act.
Expedited Project Delivery
    If we are to meet the needs of a future where infrastructure 
investments and improvements are increasingly large and complex, where 
requirements are more diverse, where time is of the essence, then it is 
essential to continue to improve and expand creative and innovative 
approaches that provide the broadest array of necessary tools. It is 
essential that future legislation and policies be supportive of this 
goal. Alternative delivery systems such as fast-tracking, design/build, 
CM/GC and program management have taken root, again where large-scale 
projects and programs exceeded the capability or effectiveness of 
established processes.
    Thank you for considering our views. If ASCE can be of any 
assistance to the committee in the debate over section 1309 or other 
aspects of the reauthorization of TEA-21, please do not hesitate to 
contact Brian Pallasch, Director of Government Relations, in our 
Washington Office at (202) 789-2200 or by e-mail at 
.















                       REAUTHORIZATION OF TEA-21

                              ----------                              


                     WEDNESDAY, SEPTEMBER 25, 2002

                                       U.S. Senate,
                 Committee on Environment and Public Works,
                                      Committee on Finance,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 9:36 a.m., 
Hon. Max Baucus (chairman of the Committee on Finance) and Hon. 
James M. Jeffords (chairman of the Committee on Environment and 
Public Works) presiding.

          INNOVATIVE FINANCING: BEYOND THE HIGHWAY TRUST FUND

    Present for the Committee on Environment and Public Works: 
Senators Jeffords, Reid, Inhofe and Crapo.
    Present for the Committee on Finance: Senator Baucus.

  OPENING STATEMENT OF HON. MAX BAUCUS, U.S. SENATOR FROM THE 
                        STATE OF MONTANA

    Senator Baucus. The joint hearing of the Finance Committee 
and the Environment and Public Works Committee will come to 
hearing.
    This is a unique and quite possibly historic occasion 
because the Environment and Public Works Committee and the 
Finance Committee are holding a joint hearing in the Finance 
Committee hearing room, chaired by the chairman of the 
Environment and Public Works Committee. I am sure that all 
historians will note this. It surely will be recorded as a 
major moment in history.
    Senator Jeffords. If you hear a rumbling up there, let me 
know.
    Senator Baucus. But at the very least, I welcome everyone. 
I will make an opening statement, then turn the hearing over to 
Chairman Jeffords, who will chair the joint hearing.
    First, as a member of this committee and also Environment 
and Public Works Committee, I have spent a lot of time working 
on highway issues and financing highway programs because 
highways are just so important to the State of Montana.
    This joint hearing, clearly, is one that recognizes the 
joint interests between the two committees: providing the funds 
to the Finance Committee for a highway program--the trust fund; 
and second, the authorization of programs by Environment and 
Public Works Committee, deciding which projects will be built 
and maintained over the life of the authorization law.
    I was also privileged to be a co-author of TEA-21, with 
Senators Warner, Chafee, Byrd, and Graham. There are many 
others, also, who helped to make it a successful bill.
    It was a time, frankly, where we all worked very well 
together. I expect the same camaraderie and relationship to 
prevail among the principal members of the Environment and 
Public Works Committee again this year.
    I am especially pleased that Senator Grassley, the Ranking 
Member of the Finance Committee, has also shown such a great 
interest in these issues. He, too, will play a very important 
role during TEA-21 reauthorization.
    The Finance Committee recently held a hearing that 
explained how the Highway Trust Fund is structured to provide 
funding for our highway system. We heard testimony that was 
quite interesting. The testimony focused on the projections for 
trust fund income over the next 10 years.
    As successful as the trust fund has been, unfortunately our 
transportation needs far outweigh the resources. In fact, I 
remember the Department of Transportation mentioning--this has 
been the case over many years--how the needs of our country in 
developing our highway program provide only about half of the 
funds that are available about 50 percent. My guess is, that 
figure is not going to get any better in the future.
    Today's hearing is intended to discover how we can get 
additional financing beyond the trust fund for our highway 
program. We are looking at additional means to finance the 
ordinary way--that is, the gasoline tax and fuel taxes that the 
users pay to the trust fund--in order to meet our Nation's 
needs.
    In recent years, there has been increased recognition of 
the greater importance of our highways to our country. As we 
prepare to reauthorize the highway program next year, the big 
question for Congress will be how to increase the level of 
investment for the benefit of us all.
    Earlier this year, Senator Crapo and I introduced 
bipartisan legislation with 12 co-sponsors, S. 2678, the MEGA-
TRUST Act, for Maximum Economic Growth for America through the 
Highway Trust Fund.
    This bill laid out some ways to increase investment in the 
highway program without raising taxes. That legislation would 
allow the trust fund to be properly credited with taxes either 
paid or foregone with respect to gasohol consumption.
    We would also reinstate the principal that the highway and 
mass transit accounts of the Highway Trust Fund should be 
credited with the interest on their respective balances.
    As we all know now, the general fund does not go back to 
the respective balances of those two programs. I think that 
change is very important.
    But we must also continue to work out additional ways to 
enable a stronger level of highway investment. Next week, I 
will introduce the MEGA-INNOVATE, Maximum Economic Growth for 
America through Innovative Financing. I do not know where in 
the world we got that name.
    Under this legislation, the Secretary of the Treasury would 
sell bonds, with the proceeds being placed in the highway 
account of the Highway Trust Fund. The Treasury would be 
responsible for the principal and the interest. The bond 
proceeds would enable the basic highway program to grow. It 
would help the citizens of every State.
    The administration of this initiative would be simple. No 
new structure is required. It is a new idea that does not raise 
taxes, but would advance our national interest in a strong 
highway program.
    As this is a new idea for highways, the bill introduces 
this concept at a very modest level, in the range of $3 billion 
annually in bond sales.
    However, when combined with the provisions of the Trust Act 
and the continuation of current resources of revenue, this 
legislation should enable the highway program to achieve an 
obligation level of approximately $41 to $42 billion by fiscal 
2009.
    Many other elected officials and organizations have shown 
interest in both of these acts, and I would like to enter their 
statements into the record.
    Senator Jeffords. Without objection.
    [The prepared statement of Senator Grassley follows:]
Statement of Hon. Charles Grassley, U.S. Senator from the State of Iowa
    I would like to thank Chairmen Baucus and Jeffords for scheduling 
this joint hearing between the Senate Finance Committee and the Senate 
Environment and Public Works Committee. We are here to examine issues 
of highway finance in anticipation, of the reauthorization of TEA-21. 
As Senator Baucus indicated, both committees have an interest in 
providing adequate funding for our nation's transportation system 
whether it be through the traditional fuel tax regime or through other 
tax-based financing mechanisms. As I noted in our first hearing on the 
highway trust fund reauthorization in May, transportation issues are 
very important to Iowa. Accordingly, I look forward to working with 
Senators Baucus, Jeffords, and Smith in reauthorizing TEA-21 during the 
next Congress.
    On May 9, the Finance Committee held its first hearing to begin 
evaluating the future health of the Highway Trust Fund. In that 
hearing, we focused largely on the flow of taxes into the trust fund 
and the continued ability of the highway trust fund to support 
transportation needs under reauthorized TEA-21.
    We also began talking about the impact that alternative vehicles 
and alternative fuel sources will have on the trust fund in the years 
ahead. Finally, we began to consider how we would maintain the existing 
levels of trust revenue for transportation demands without raising 
taxes.
    Today, we will not focus on trust fund revenue. Instead, we will 
shift our attention to various financing mechanisms that will 
supplement transportation needs beyond the dedicated revenues in the 
trust fund.
    Historically, issuing State and local bonds (which are exempt from 
Federal taxation) was the principal way States raised capital for 
transportation needs in excess of those currently available with 
highway trust fund resources. While this works well in some States, 
some including Iowa have decided against using bonds to finance 
infrastructure projects while others are constitutionally prohibited 
from doing so.
    During the reauthorization of TEA-21, a concerted effort was made 
to begin using Federal resources to encourage private investment in 
transportation projects. During the reauthorization, the drafters also 
attempted to expand and make more flexible the resources available to 
State transportation departments. A number of pilot programs were 
established to achieve those goals including (i) TIFIA Funding (named 
for the Transportation Infrastructure Finance and Innovation Act), (ii) 
SIBs (State Infrastructure Banks), (iii) GARVEES (Grant Anticipation 
Revenue Vehicles), and GANS (Transit Grant Anticipation Notes). Because 
many of these programs rely on State borrowing, they are not viable 
solutions for all States. In other circumstances, the programs may not 
have worked as intended.
    Iowa, for example, is in the process of closing out its State 
infrastructure bank. Without the ability to use State and local bonds 
to increase SIB funding, it was difficult for Iowa to effectively use 
the concept. In addition, several shortline and regional railroads in 
my State have tried to use the railroad infrastructure fund 
administered by the Federal railroad administration. The application 
process is extremely cumbersome and prevents many railroads from even 
considering the option. Those who have applied have had difficulty 
coming up with the required credit risk premium to access funds. The 
role of the State DOT in these projects has been limited to moral 
support--a problem that should clearly be fixed.
    Evaluating the successes and failures of previously authorized 
programs is an important first step in the reauthorization process. I 
look forward to hearing from the witnesses today on how we may improve 
and further refine existing programs. We should particularly examine 
programs that involve public-private partnerships such as TIFIA. Many 
of the witnesses have commented on the operation of these programs in 
their testimony, and at least one of our witnesses has suggested 
program modifications. These types of comments are highly instructive, 
and I look forward to hearing additional witness views on these issues.
    As we move into reauthorization, I know we will want to maintain 
the important goals of stretching available resources and inducing 
private investment into the transportation sector. This hearing should 
help us evaluate alternative financing mechanisms for achieving those 
goals. Specifically, I look forward to learning more about the bond 
proposals offered by the American Association of Highway and 
Transportation Officials (AASHTO) and Senator Baucus. Because these 
ideas are new to the transportation sector, we will want to consider 
carefully the details of those proposals. With respect to each new 
proposal, I would like to further consider whether additional funds 
should be raised for State apportionment (program finance) or, for the 
benefit of specific projects (project-finance). In addition, I would 
like to further consider whether leveraged funds should be retired 
using tax-arbitraged escrow funds, repayments from the general fund, or 
project-specific revenue sources.
    In closing, I would like to reiterate that I look forward to 
working with my colleagues on the reauthorization of TEA-21. I am 
anxious to hear from the witnesses on how to most effectively finance 
the important needs of our highway transportation system. Thank you, 
Mr. Chairmen.
    Senator Baucus. Concerning other statements for the record, 
the first, is from the Departments of Transportation from the 
following five States: Montana, Idaho, Wyoming, North Dakota, 
and South Dakota, endorsing both the MEGA-TRUST and my 
forthcoming bond proposal. Second, a statement from the 
American Highway Users Alliance, also indicating support for 
both measures.
    I very much appreciate the support of these groups, as well 
as the support of others, for these two important initiatives. 
A well-funded highway program is certainly essential to the 
economic future of each of our States. I look forward to 
working with my colleagues on these measures, and on other ways 
to help our citizens benefit from increased levels of highway 
investment.
    I also look forward to hearing additional proposals on 
alternative means to finance the Nation's surface 
transportation program. The more we can get the private sector 
involved and the more we can leverage funds, the better we will 
be able to meet our transportation needs.
    [Additional statements submitted for the record appear at 
the end of the hearing record.]
    Senator Baucus. I would now like to turn the hearing over 
to my good friend, Jim Jeffords from Vermont, who will chair 
the joint hearing.

OPENING STATEMENT OF HON. JAMES M. JEFFORDS, U.S. SENATOR FROM 
                      THE STATE OF VERMONT

    Senator Jeffords. Thank you, Senator Baucus. I appreciate 
the opportunity to sit in your seat here. We work very closely 
together on both committees, and you are doing an excellent job 
on the Finance Committee. It is appreciated, your hard work 
that brings us here today.
    I am pleased this morning to join in this hearing on a 
very, very important subject. Today, we will focus on money, a 
key to the future of America's transportation system.
    By some accounts, the annual level of investment needed to 
just maintain our transportation system is nearly $110 billion 
per year. Our current national program falls well short of that 
figure.
    Over the last 50 years in our successful campaign to 
develop the Eisenhower Interstate Highway system, we have used 
Federal grants to States in a pay-as-you-go program to build 
our national system. Today, that system is essentially 
complete.
    We are in a post-interstate era. Our Federal aid programs 
now focus, appropriately, on maintaining, operating, and 
enhancing the highway asset that we have built. But this 
Federal/State partnership is now being overwhelmed by just its 
asset management responsibility. Unless we adapt, I foresee a 
continuing deterioration of our transportation system.
    We are a Nation with unlimited potential and boundless 
possibility. That spirit has propelled a range of achievement 
unparalleled anywhere else in this world. Our renewal of 
America's transportation program must reflect this national 
heritage in meeting the needs of the next generation.
    It should be as bold as President Eisenhower's vision was 
in its time. Our vision should not be hobbled by artificial 
constraints or narrow thinking which would permit other nations 
to gain competitive advantages over us. To fully compete in the 
world markets and to offer all American families and businesses 
the full range of products in international commerce, we need 
strategic investment in key new facilities, while reinvesting 
in those already built.
    We have explored options to increase revenues to the 
highway fund in previous hearings. I will consider all options 
for growing the trust fund. But today we will look beyond the 
Highway Trust Fund, beyond the grant and aid programs, and 
beyond the Federal/State partnership.
    We will hear today from two distinguished panels on a topic 
that has been referred to in the last 10 years as innovative 
financing. We will look at the role of revenue streams, private 
capital, special-purpose entities, and intermodal facilities in 
meeting the needs of the next generation. But this is not 
innovative, radical, or even new. In fact, what we will explore 
today is really the pre-interstate approach to financing roads 
and bridges. It is the standard way that our free enterprise 
system creates our means of production through private capital 
and return on investment.
    I am pleased that Councilwoman Hahn from Los Angeles is 
here to discuss a pioneering effort in modern transportation 
finance, the Alameda Corridor. This prototype project is 
intermodal in its nature, provides both freight and passenger 
benefits, draws on new revenues to retire debt, and is 
sponsored by a special-purpose district.
    In my home State of Vermont, we have utilized a finance 
program called a State Infrastructure Bank, or a SIB. A SIB is 
a revolving fund mechanism for financing a wide variety of 
highway and transit projects through loans and credit 
enhancement. Vermont has taken hundreds of fuel delivery trucks 
off our roads by financing bulk storage facilities in key rail 
yards.
    Other States have used this mechanism, and others, to 
provide early project financing. In the State of South 
Carolina, a variety of finance techniques, coupled with public/
private partnerships, has resulted in the construction of 27 
years' worth of projects in a 7-year timeframe.
    On a smaller scale, the State of Delaware has joined with 
the Norfolk Southern Railroad to renovate historic Shellpot 
Bridge, with the railroad retiring the project's cost over time 
through fees on its rail cars.
    What we will discuss today is a complement to our 
traditional programs, not a replacement. Private capital 
represents a realistic means to expand our buying capacity. The 
key is revenue streams.
    When a project is supported by dedicated revenues, whether 
it is tied directly to the use of the facility as in the case 
of Alameda or Shellpot Bridge, or simply earmarked from more 
general sources such as property rentals or operating revenues, 
then the project can retire debt.
    The freight community particularly will benefit from 
expanded use of financing. Today's freight interests are 
frustrated by their inability to compete when projects are 
ranked at the State and NPO level.
    Through its capacity to generate revenue, the freight 
sector can essentially create its own program. This will also 
reduce demand on the traditional Federal aid grant program.
    Let me close by suggesting a vision for transportation 
finance. In the future, every responsible fund manager, both 
here and globally, will have a fraction of his or her portfolio 
invested in U.S. transportation infrastructure. They will do so 
with confidence in the investment and the bold Nation it 
supports. Over the next few hours, I will listen for ways to 
make this vision a reality. Thank you.
    Now we turn to the hearing, the best parts of it. I would 
turn, also, to the Senator from Nevada for any statement.

   STATEMENT OF HON. HARRY REID, U.S. SENATOR FROM THE STATE 
                             NEVADA

    Senator Reid. I thank you and Chairman Baucus. I commend 
both of you for holding this joint hearing. It is so important. 
I am thankful also, of course, that Ranking Members Smith and 
Grassley have agreed to do this.
    We are authorizing TEA-21 the legislation to address our 
Nation's infrastructure needs is a big job, an important job, 
and one that will take the cooperation of more than one 
committee.
    Early this month, the Subcommittee on Transportation, 
Infrastructure, and Nuclear Safety conducted a joint hearing on 
freight issues with Senator Breaux's Commerce Subcommittee. We 
need more cooperation between committees involved in 
reauthorizing TEA-21.
    We have to work together to ensure that our significant 
diverse transportation needs are addressed. Our highways, 
transit system, and railways are too important to our economic 
well-being and quality of life to ignore.
    I look forward to working with the Finance Committee and 
other committees to see if we can adequately address our 
transportation needs. We are nearing the completion of the 
Environment and Public Works Committee's year-long series of 14 
hearings and symposia addressing the critical issues related to 
reauthorization. It is appropriate that our final two scheduled 
hearings focus on funding issues.
    As we have been told today, we will review opportunities 
for innovative financing. On Monday, the Transportation 
Subcommittee will examine the state of the infrastructure and 
the funding necessary to maintain and improve our Nation's 
highway system.
    The State of Nevada has been a leader in the field of 
innovative financing and has aggressively sought to leverage 
private investment through existing Federal financing programs.
    For example, the project that should have taken place 100 
years ago, the Reno Transportation Rail Access Corridor, RTRAC, 
is seeking to use $70 million in loans under TIFIA to leverage 
$200 million in State, local, and private funding to build a 
below-grade rail transportation corridor. This project will 
increase safety and reduce traffic congestion by eliminating 10 
at-grade rail crossings. That is important, of course.
    The Las Vegas monorail project is seeking a $120 million 
TIFIA loan to bridge the gap between Federal, State, local, and 
private financing to build Phase II of what will eventually be 
an 18-mile regional rail transit system.
    Finally, the State is expediting the critical Hoover Dam 
Bypass--and we are working with the State of Arizona on this--
by using a bonding mechanism similar to the GARVEE bonds to 
allow construction to proceed before Federal funding is 
completed.
    Each of these vital highway transit rail projects were made 
possible by innovative financing opportunities provided by the 
Federal Government. In the future, we hope to creatively use 
new, innovative financing tools to bridge the gap between 
public and private investment to build a high-speed magnetic 
levitation train between Southern California and Las Vegas.
    There is no question that innovative financing must be a 
critical component of next year's transportation bill. We 
should encourage new public/private partnerships and focus on 
where Federal resources can creatively be used to leverage 
State, local, and private investment for critical highway 
transit and rail projects.
    Let me say publicly what I have said privately. I think it 
is tremendous that the chairman of the Finance Committee, the 
all-power Finance Committee as we know here, and the former 
chairman of this committee is working so closely with us.
    I think that we are going to benefit so greatly in the year 
to come from Senator Baucus' experience as chairman of this 
committee, and his experience as chairman of the Finance 
Committee, to help come up with some of these innovative ways 
to finance these projects. We need this very, very badly.
    I applaud and commend the chairman of the Environment and 
Public Works committee, Senator Jeffords, for his agreeing to 
do these kinds of joint hearings. This is something we do not 
do here very often. We were so protective of our turf here. I 
think we should Senator Baucus for all we can because of his 
experience.
    [Laughter.]
    I think that we need to understand that we, as the 
Transportation and Infrastructure Committee, cannot do it 
alone. We need to do things differently than we have done in 
the past. I think this is great to have this hearing. I think 
this is an indication of what is to come next year, and coming 
up with a highway bill. It is going to be different than any 
highway bill we have ever done before.
    I want to apologize to the committee. Senator Inouye is not 
here today, and I have got to help him on a committee beginning 
at 10 o'clock.
    Senator Jeffords. Well, thank you very much for your 
excellent statement.
    Senator Baucus. If I might, Mr. Chairman, also thank 
Senator Reid for his very strong endorsement of the joint 
hearing. I think that we get better legislation here with more 
joint hearings, as a general rule. The legislation is good as 
it is, but I think joint hearings are very, very helpful. I 
compliment the Senator for making that observation.
    Senator Jeffords. There is no subject that a joint hearing 
is more appropriate for than this one right now.
    Senator Crapo?

STATEMENT OF HON. MICHAEL D. CRAPO, U.S. SENATOR FROM THE STATE 
                            OF IDAHO

    Senator Crapo. Thank you very much. I would like to thank 
both of our joint chairmen today and associate myself with the 
remarks of Senator Reid about the importance of the fact that 
we are working together and having these joint hearings.
    As we work together to put together the next highway bill, 
it is going to be critical that we do a good job, and a prompt 
job. But, even more importantly, we have got to work together 
to make sure that we build the kind of support for the good 
bill that we will need to build. I appreciate the efforts of 
both of our joint chairmen for holding this hearing. Clearly, 
innovative financing and the funding aspects of this are going 
to be critical.
    In terms of talking about working together, I want to 
especially thank Senator Baucus. He and I, both coming from 
neighboring States out in the Northwest, have similar concerns 
with regard to our States' issues with regard to 
transportation.
    We have found an opportunity to work together across party 
lines to put together some innovative approaches of our own to 
try to address the question of how to increase the pot of 
funding for our highway needs in this country. With the two 
approaches that we have come together on, we have done it 
without raising taxes, and I think that that is a very 
important first step: the MEGA-TRUST Act, which Senator Baucus 
already mentioned, and then the MEGA-INNOVATE Act that will be 
introduced soon.
    We have two ideas on the table that are very important. As 
has been indicated by Senator Baucus and Senator Jeffords 
today, I look forward to hearing from people around the country 
who have had a lot of experience with this and who have a lot 
of ideas about how we can accomplish it, to giving us more 
ideas and more proposals for how we can address the needs for 
funding our next highway bill.
    So, again, to both of our chairmen, I thank you for this 
opportunity. I look forward to the information we are going to 
receive today, and working with you as we put together the next 
bill.
    Senator Jeffords. Thank you. A very helpful statement.
    Senator Inhofe?

STATEMENT OF HON. JAMES M. INHOFE, U.S. SENATOR FROM THE STATE 
                          OF OKLAHOMA

    Senator Inhofe. Thank you, Mr. Chairman.
    As we work together in drafting the reauthorization of TEA-
21, it is safe to say that all members here recognize that this 
is a time of extraordinary challenge and opportunity for the 
transportation sector.
    The world of surface transportation is changing. It is now 
our job to work together to ensure adequate funding for 
investment in the Nation's transportation system and preserve 
State and local government flexibility to allow the broadest 
application of funds for transportation solutions.
    TEA-21 dramatically altered the transportation funding 
mechanisms, provided greater equity among States in the Federal 
funding, and record levels of transportation investment. For 
most Federal aid projects, the law requires that 20 percent of 
the costs be derived from a non-Federal source.
    In order to maximize the use of all available resources, 
States now have a range of options for matching the Federal 
share of highway projects. By providing flexibility in a form 
that the non-Federal match might take, Federal dollars can be 
leveraged more effectively.
    What we have been taking advantage of in Oklahoma is the 
toll credit match. We apply certain toll revenues/expenditures 
to build and improve our public highway facilities as a credit 
toward the non-Federal matching share of particular projects.
    However, transportation officials at all levels of 
government still face a significant challenge when considering 
the ways to pay for improvements to transportation 
infrastructure. It is apparent that traditional funding sources 
are insufficient to meet the increasing complex needs.
    I remember when I was mayor of Tulsa, we worked diligently 
trying to focus on the public/private partnerships. I recognize 
that the implementation process is a complex undertaking with a 
wide range of organizational and financial options. But it is 
important for public agencies to evaluate all of their 
alternatives.
    Despite the record levels of investment, funding is not 
keeping pace with the demands for improvement and to maintain 
the vitality of the Nation's transportation system.
    I am in a unique position to appreciate this because I 
spent 8 years in the House of Representatives on the 
Transportation Committee and I was really into it.
    When I came to the Senate, I was more on some of the 
problems we were having in the EPA and clean air problems. 
Until I became chairman of the Subcommittee on Transportation 
and Infrastructure, I was more involved with those issues.
    In that 4-year period, the congestion and other severe 
problems that we are facing are brought home to me in such a 
way that I see that we are going to have to try something new 
and different.
    That is what we did with TEA-21; that is what we are going 
to continue to do. I am looking forward to working with you. I 
ask unanimous consent that my entire statement be made a part 
of the record at this point.
    Senator Jeffords. It certainly will.
    [The prepared statement of Senator Inhofe follows:]
   Statement of Hon. James M. Inhofe, U.S. Senator from the State of 
                                Oklahoma
    Thank you Mr. Chairman. As we work on the drafting of this 
reauthorization, I think it is safe to say that all the members here 
recognize that this is a time of extraordinary challenge and 
opportunity in the transportation sector. The world of surface 
transportation is changing. It is now our job to work together to 
ensure adequate funding for investment in the nations transportation 
system and preserve State and local government flexibility to allow the 
broadest application of funds to transportation solutions.
    TEA-21 dramatically altered transportation funding mechanisms. It 
provided greater equity among States in Federal funding and record 
levels of transportation investment.
    For most Federal-aid projects, the law requires that 20 percent of 
the costs be derived from a non-Federal source. In order to maximize 
the use of all available resources, States now have a range of options 
for matching the Federal share of highway projects. By providing 
flexibility in the form that the non-Federal match might take, Federal 
dollars can be leveraged more effectively.
    What we have been taking advantage of in Oklahoma is the toll 
credit match. We apply certain toll revenue expenditures to build and 
improve our public highway facilities as a credit toward the non-
Federal matching share on particular projects.
    However, transportation officials at all levels of government still 
face a significant challenge when considering ways to pay for 
improvements to transportation infrastructure. It is apparent that 
traditional funding sources are insufficient to meet the increasingly 
complex needs. I remember when I was Mayor of Tulsa, we worked 
diligently trying to focus on public private partnerships. I recognize 
that the implementation process is a complex undertaking with the wide 
range of organizational and financing options but its important for 
public agencies to evaluate all their alternatives.
    Despite the record levels of investment, funding is not keeping 
pace with demands for improvements to maintain the vitality of the 
nation's transportation system.
    Some transportation projects are so large that their costs exceed 
available current grant funding or would consume so much of these 
current funding sources that they would delay many other planned 
projects.
    ARTBA proposed a number of options for enhancing the Highway 
Account revenues. Some included indexing the motor fuels excise taxes 
for inflation, crediting the Highway Account with gasohol tax revenues 
that currently go into the General Fund, and expanding innovative 
financing programs. I might also mention that since the enactment of 
TEA-21, interest accrued on any obligation held by the fund does not 
get credited to the Highway Trust Fund, the interest earned goes to the 
General Fund. This is obviously something that we need to rethink 
during reauthorization. These are all revenue enhancements that would 
increase the fund substantially.
    With the Energy bill pending in Conference, the Trust Fund will 
recoup an additional 2.5 cents per gallon of ethanol currently being 
deposited into the general revenue. The Senator from Montana has been 
very aggressive at trying to make the Trust Fund whole with respect to 
the current 5.3 cent per gallon ethanol subsidy. Although he and I do 
not agree on how to best address this issue, we are in agreement that 
the Highway Trust Fund should not pay to subsidize any fuel source. Our 
surface transportation infrastructure needs are such that we cannot 
afford to forego any revenue source.
    Certainly one of the key factors in the economic engine that drives 
our economy is a safe, efficient transportation system. If our economic 
recovery is going to continue to expand, we cannot ignore the immediate 
and critical infrastructure needs of highways, bridges, and State/local 
roadway systems.
    Finally, I would encourage our witnesses to address the current 
issues with funding dilemmas and how the use of innovative finance can 
generate real economic returns by expediting project construction.
    Thank you Mr. Chairman. I look forward to today's hearing and want 
to welcome all of our witnesses.
    Senator Inhofe. I also want to say, Mr. Chairman, that at 
the same time in the next room we have the Senate Armed 
Services Committee that is meeting, so we have required 
attendance at both places and I will be going back and forth.
    Senator Jeffords. Thank you very much.
    Now we turn to the important part of the hearing, and that 
is listening to our witnesses.
    Our first witness is David Seltzer, Distinguished 
Practitioner at the National Center for Innovations in Public 
Finance, University of Southern California, Los Angeles. Please 
proceed.

   STATEMENT OF DAVID SELTZER, PRINCIPAL, MERCATOR ADVISORS, 
   PHILADELPHIA, PA, ON BEHALF OF THE UNIVERSITY OF SOUTHERN 
  CALIFORNIA, LOS ANGELES, NATIONAL CENTER FOR INNOVATIONS IN 
                         PUBLIC FINANCE

    Mr. Seltzer. Thank you very much, Mr. Chairman and members. 
I am affiliated with the National Center at USC. It is a 
professional education and research center in the field of 
infrastructure finance. As part of the record, I have furnished 
this copy of a report that USC published last year concerning 
public/private partnerships in California. I feel compelled to 
tell you, this will be covered on the final exam.
    [Laughter.]
    Senator Jeffords. It will be made a part of the record. 
Thank you.
    Mr. Seltzer. I, too, would like to commend you for holding 
this joint hearing on innovative finance. Because the Nation's 
transportation needs require a wide array of tools, it is very 
valuable that both the tax writing and authorizing committees 
are jointly deliberating this important issue.
    This morning you will be hearing from a distinguished panel 
of individuals from the Federal, State, local, and private 
sectors on various innovative finance tools, including New 
Mexico's GARVEE bonds, the Alameda Corridor, TIFIA credit 
instruments, private activity bonds, and tax credit bonds.
    What I would like to do, briefly, is provide a table-
setter, giving you a framework for evaluating these and other 
innovative finance tools. This may help your committees 
determine which tools would be most effective in filling the 
funding gap and, in essence, provide a context for considering 
innovative finance.
    To my mind, the central problem in Federal transportation 
policy is that, on the one hand, transportation projects are 
lumpy investments. They are capital-intensive, long-lived, and 
very heterogeneous.
    On the other hand, Federal budgetary policy is very short-
term oriented. It is cash-based and it is focused on costs 
rather than benefits. This treatment is really reflected in 
Federal budgetary scoring, where current outlays are treated 
the same way as long-term capital investments in transportation 
infrastructure. That mismatch between the period of when costs 
and benefits are recognized can distort project investment 
decisions.
    Where innovative finance comes in, is that it can help 
redress some of that imbalance, in my view. Innovative finance 
tools are generally less intrusive than direct Federal grants. 
They, as you pointed out, Mr. Chairman, allow market forces to 
work by drawing on private capital, and can better match the 
periods of the costs and the benefits.
    Your two committees have at their disposal, really, three 
approaches that may be used to advance infrastructure projects: 
regulatory incentives, Tax Code incentives, and credit 
incentives.
    Regulatory incentives are best demonstrated perhaps by New 
Mexico. You will be hearing in the next panel about not just 
innovative financing using GARVEE bonds, but also innovative 
procurement using design build procurement and innovative asset 
management, employing long-term warranties. Those three 
regulatory reforms were put together to advance an important 
project.
    The second incentive, the Tax Code, includes things like 
tax-oriented leasing of capital assets, private activity bonds, 
and tax credit bonds. These tax measures have the benefit of 
using the pay-go scoring methodology, where the tax 
expenditures are recognized on an annual basis, not all up 
front. That approach represents something more akin to a 
commercial practice of amortizing costs.
    The third of the three general approaches, Mr. Chairman, is 
credit incentives, as evidenced by Federal loan and loan 
guarantee programs like TIFIA and the Railroad Rehabilitation 
and Improvement Financing Program.
    For Federal credit instruments, the budget scoring uses a 
present value concept, again akin to commercial practices where 
the time value of money is taken into account.
    Now, for any of these various innovative finance tools to 
be successful, they must satisfy three groups of stakeholders 
simultaneously. First is the project sponsor, the public or 
private entity that is developing, advancing, and managing the 
capital investment.
    The second of the three stakeholders is the investor. You 
have to provide a competitive, risk-adjusted rate of return 
that an investor can compare to options to invest capital 
elsewhere.
    The third of the three stakeholders is, of course, Federal 
policymakers who have to look at both policy objectives and 
budgetary costs.
    Senator Jeffords, you indicated an interest in identifying 
new products for portfolio managers. One interesting example 
would be a way to attract pension funds into infrastructure 
finance.
    Public, corporate, and union funds represent some $3.6 
trillion of investment assets, yet today there are virtually no 
U.S. transportation projects in their portfolios.
    The principal reason for that is that the primary financing 
vehicle of tax-exempt bonds does not appeal to tax-exempt 
entities such as pension funds. However, something like tax 
credit bonds, which you will be hearing about later, where the 
principal could be sold to, say, a pension fund and the tax 
credits decoupled and sold to other investors, might address 
some of your objectives.
    In summary, different innovative finance tools are suited 
to different products and projects. I have submitted also as 
part of the record a methodology for looking at how one can 
systematically compare tools such as GARVEE bonds, tax credit 
bonds, private activity bonds, and TIFIA instruments in 
considering reauthorization.
    So, thank you very much for your time. I appreciate it.
    Senator Jeffords. Thank you for a very helpful statement.
    Our next witness is Phyllis Scheinberg, Deputy Assistant 
Secretary for Budget and Programs a the U.S. Department of 
Transportation, right here in Washington, DC.
    Ms. Scheinberg, please proceed.

STATEMENT OF PHYLLIS SCHEINBERG, DEPUTY ASSISTANT SECRETARY FOR 
     BUDGET AND PROGRAMS, U.S. DEPARTMENT OF TRANSPORTATION

    Ms. Scheinberg. Thank you, Chairman Jeffords. I want to 
send my appreciation to Chairman Baucus and members of the 
committees.
    Thank you for holding this hearing today and inviting me to 
testify on Federal innovative finance initiatives for surface 
transportation projects.
    These financing techniques, in combination with our 
traditional grant programs, have become important resources for 
meeting the transportation challenges facing our Nation.
    Last January, Secretary Mineta indicated to you his desire 
to ``expand and improve innovative finance programs in order to 
encourage greater private sector investment in the 
transportation system.''
    He stated that innovative financing will be one of the 
Department's core principles in working with Congress, State, 
local officials, tribal governments, and stakeholders to shape 
the surface transportation reauthorization legislation. 
Secretary Mineta remains steadfast in his support for these 
programs, so we want to tell you that we are here to work with 
you.
    But, first, let us talk about, what is innovative finance? 
We at the Department apply the term to a collection of 
financial management techniques and debt finance tools that 
supplement and expand the flexibility of the Federal 
Government's transportation grant programs.
    We see the primary objectives of innovative finance as 
leveraging Federal resources, improving utilization of existing 
funds, accelerating construction timetables, and attracting 
non-Federal investment in major projects.
    There are three major innovative finance programs that I 
would like to talk about today: the Transportation 
Infrastructure Finance and Innovation Program, or TIFIA, Grant 
Anticipation Revenue Vehicles, or GARVEE bonds, and State 
Infrastructure Banks, or SIBs.
    First, the TIFIA credit program. Through the leadership of 
the Senate, and this committee in particular, TIFIA was 
established to provide a direct role for the Department of 
Transportation to assist nationally or regionally significant 
transportation projects through direct loans, loan guarantees, 
and stand-by lines of credit.
    TIFIA allows the Federal Government to supplement, but not 
supplant, existing capital finance markets for large 
transportation infrastructure projects. We seek to take prudent 
risks in order to leverage Federal resources through attracting 
private and other non-Federal capital projects.
    We have selected 11 projects, representing $15.7 billion in 
transportation investment, to receive TIFIA credit assistance. 
The TIFIA commitments themselves total $3.7 billion in credit 
assistance, with a budgetary impact of only a little bit more 
than $200 million. Highway, transit, passenger rail, and 
multimodal projects have all sought, and received, TIFIA credit 
assistance.
    We are pleased with the results that we are seeing. The 
overall leveraging effect of the Federal assistance for the 
TIFIA projects has been 5 to 1. Private co-investment has 
totaled $3.1 billion, or about 20 percent of the total project 
costs.
    We believe that a limited number of large surface 
transportation projects each year will continue to need the 
types of credit instruments offered under TIFIA. Project 
sponsors and DOT staff are still exploring how best to utilize 
this credit assistance, and we welcome congressional guidance 
and dialog during this evolutionary program period.
    A second financing tool used by States has been the 
issuance of Grant Anticipation Revenue Vehicles, or GARVEEs. 
These bonds enable States to pay debt service and other bond-
related expenses with future Federal-aid highway 
apportionments.
    A GARVEE generates up-front capital for major highway 
projects and enables a State to accelerate project 
construction, and spread the cost of a facility over its useful 
life. With projects in place sooner, costs are lower and safety 
and economic benefits are realized earlier. In total, six 
States have issued 14 GARVEE bonds totaling more than $2.5 
billion to be repaid using a portion of their future Federal-
aid highway funds.
    A third significant project finance tool is the State 
Infrastructure Bank, or SIB, which is a revolving fund 
administered by a State. Federally capitalized SIBs were first 
authorized under the provisions of the National Highway System 
Designation Act of 1995. SIBs provide various forms of credit 
assistance. As loans are repaid, a SIB's capital is replenished 
and can be used to support new projects.
    As of June 2002, SIBs had entered into almost 300 loan 
agreements, for a total of $4 billion of loans. This level of 
activity indicates that the SIB program is ready to move beyond 
its pilot phase to become a permanent program.
    Looking ahead, the use of TIFIA, GARVEEs and SIBs are 
moving from innovative to mainstream. This reflects significant 
success, but it does not indicate that the needs of project 
finance have been completely met.
    Secretary Mineta has issued a clear challenge to those of 
us in the Department in our development of a reauthorization 
proposal for TEA-21, asking us to expand innovative finance 
programs to encourage private sector investment.
    We are considering options for further leveraging Federal 
resources for surface transportation. Among these options are 
enhancing the use of innovative finance in intermodal freight 
projects and adapting the financing techniques used in other 
public work sectors. The challenge is to build on our successes 
to date, but not set unrealistic expectations for the future.
    We look forward to working with our partners in the State 
DOTs, metropolitan planning organizations, and private industry 
to apply innovative funding strategies that extend the 
financial means of our individual stakeholders.
    Senator Jeffords, we look forward to working with you and 
the Congress to craft the next surface transportation 
legislation.
    Thank you for the opportunity to testify today. I will be 
happy to answer any questions.
    Senator Jeffords. Well, thank you very much for your 
excellent testimony. I extend my good thoughts to your 
Secretary. We have been friends for over 20 years, and I now 
have the opportunity to work closely with him on this. I am 
looking forward to it.
    Ms. Scheinberg. Thank you.
    Senator Jeffords. Next, we have JayEtta Hecker, Director of 
Physical Infrastructure Issues at the GAO. Please proceed.

       STATEMENT OF JAYETTA HECKER, DIRECTOR OF PHYSICAL 
 INFRASTRUCTURE ISSUES, GENERAL ACCOUNTING OFFICE, WASHINGTON, 
                               DC

    Ms. Hecker. Thank you, Mr. Chairman. I am very pleased to 
be here, and appreciate the historic occasion of the two 
committees working together. As you and others have said, there 
could be no topic that more justifies that kind of 
collaboration.
    First, the use and performance of innovative financing 
mechanisms; second, the cost involved in alternative 
approaches; and finally, selected issues for reauthorization.
    I will skip over the use of the existing programs. I think 
Phyllis clearly described 6 States with GARVEEs, 32 States with 
SIBs, and 9 States with having agreements in TIFIA.
    What I will do, is summarize the key advantages and 
limitations that have been identified in some of the studies 
and some of our own interviews with different States.
    There is no doubt that one of the most significant 
advantages of these new financing and grant management tools is 
that they accelerate project construction. That is 
unequivocally a real result for many of these projects.
    It is also very clear that they increase the tools in the 
State, local, or regional toolbox. They are financing multi-
billion dollar long-term investments and you need tools that do 
that wisely and well.
    The third advantage, is they have the potential to leverage 
Federal investment. Some of our work on the costs will discuss 
what we mean by leveraging and what we are really measuring 
with some of the different approaches.
    The limitations on the use of these tools are real. The 
biggest one, of course, is States' willingness and authority. 
You have a lot of States that are very cautious about debt 
financing and financing projects in a manner other than on a 
pay-as-you-go basis.
    There is also a skill issue. At a hearing last week, we 
talked about the skill capability in the DOTs. This is a brand-
new kind of skill, financing and bond market specialists. It is 
very different than highway engineering.
    Also, it is mostly affected by legislators at the State 
level or the local level and their willingness to look at these 
different tools.
    There are also limitations in Federal and State law. The 
application of TIFIA is limited to projects costing over $100 
million. Only 5 States are allowed to use TEA-21 funds to 
capitalize their SIBs.
    Then there are State laws that restrict public/private 
partnerships and, of course, there are Federal tax policies on 
private activity bonds. So, there are a whole range of factors 
that are really behind some of the limitations in the extensive 
application of these new tools.
    Our real contribution today is, in part, to examine options 
for financing $10 billion though four different approaches. 
Basically, we compare the Federal grants, similar to the 
current highway program, with an 80/20 match; a TIFIA-like 
Federal loan; State tax credit bonds that are basically similar 
to the AASHTO proposal. Of course, the credit is from Federal 
taxes. State-issued tax-exempt bonds are again, exempt from 
Federal taxes.
    I have two charts that I present. One, is about the short-
versus the long-term costs of the different tools, and they 
vary quite dramatically. The other chart compares the State 
versus Federal costs, as well as other parties.
    Depending on how the programs are structured and who ends 
up paying can vary considerably not only across the 
alternatives, but even within them. Then the risks vary.
    Looking at the tax credit bond, for example, the total cost 
of that, in present value terms, is nearly $13 billion compared 
to $10 billion that it would cost in direct appropriations in 
the grant program. The tax credit bond also varies quite a bit 
in its distribution of costs between the Federal Government and 
State and other parties.
    The tax credit bonds, because of the costs of borrowing and 
are paying investors, cost $12.7 billion, but most of that is 
borne by the Federal Government in a tax credit bond. Compare 
that with the TIFIA direct loan, where most of the costs, with 
the 33 percent limitation, are borne by the State and other 
parties.
    The broad overview here is that there is, in fact, only 
modest success in leveraging private investment. We are getting 
debt financing, new debt to the table, which is significant and 
has benefits.
    But these approaches have limits in how mu ch they are 
really bringing private equity capital and real investors to 
the table who are absorbing a substantial amount of the risk.
    That goes back to some of the limitations that I cited 
earlier. There are limited projects that really can generate 
their own revenue. That is in part a reflection of how we 
finance highways and that users tend to view highways as free. 
There are conflicts with the Federal tax-exempt finance rules 
and the cap on the private activity bonds, and the State laws.
    So, you have got some restrictions inherent in the current 
system that are limiting how much private investment in 
highways and other intermodal facilities you can bring to the 
table.
    These financing tools are a critical part of 
reauthorization. They decide on whether current users or future 
users pay, they decide on the extent to which we continue to 
rely on user financing or switch toward the use of general 
revenues, and they have very different results in the use of 
State and Federal funds.
    We have ongoing work for your committee and are looking 
forward to being able to provide more detail on this. I think, 
as you and others have said, some of the real opportunities are 
to provide new structures or to get broader applicability of 
these to projects of national concern, intermodal needs, and to 
focus on the effect on promoting the efficiency in the 
transportation sector.
    That concludes my statement, Mr. Chairman.
    Senator Jeffords. Thank you very much.
    I think I will ask you the first question. While many 
States have embraced transportation financing techniques, 
several States seem resistant to these tools.
    What precludes some States from the use of innovative 
financing?
    Ms. Hecker. There is a concern among many States about 
moving further from pay-as-you-go to debt financing, as well as 
State DOTs unfamiliar with these approaches.
    There are also a range of State laws that could apply, 
restrictions on public/private partnerships that are written 
into State laws. There are State laws that prohibit committing 
their future apportionment to debt repayment and thus prohibit 
the use of GARVEEs.
    We've talked with several of the States who are applying 
these tools and are very excited about it. So it seems once 
folks get involved, they are pretty enthusiastic.
    Senator Jeffords. I want to bring sort of a current 
situation and ask you what difference makes now, when we have 
had this huge downturn in the economy and the threats to 
various means of financing. How does that impact what may or 
may not be a better way to borrow, or what kind of financing 
instruments you have put on the rockets?
    Ms. Hecker. Well, certainly there is more interest in 
looking for alternative sources with the revenue conditions and 
budget pressures at both the Federal and State level. So, the 
impetus of the economic downturn actually increases interest in 
these tools.
    The ultimate financing question, though, is really not the 
tool itself. It is how the debt is going to be paid for. That 
is really what we are looking at, and we encourage the 
committee to keep very transparent.
    If you look at the TIFIA loans where you get over 70 
percent at the private and State level, most of it is different 
State taxes that get dedicated. In only a few instances do you 
really have private equity. So, there is borrowing going on and 
new taxes being raised.
    As the instruments are broadened and extended, the issue is 
the extent to which costs are borne by current versus future 
users, and the extent to which costs are borne by general 
taxpayers versus users.
    Senator Jeffords. Thank you.
    Mr. Seltzer, in your testimony you state that ``capital is 
notoriously unsentimental, and finance techniques used for 
transportation projects must compete for investor demand 
against other investment products in the marketplace.''
    What conditions need to be in place to make transportation 
projects more attractive when competing for private investment?
    Mr. Seltzer. Well, Senator, you yourself in your statement 
indicated that the first ingredient or prerequisite is 
identifying the revenue stream. It has to be stable and 
reliable enough to attract investors. If it is debt financing, 
typically there is a watershed investment-grade rating category 
that indicates it is not a speculative type of investment.
    Some of the innovative finance tools that your committee 
will be considering could help advance debt financing through 
providing various forms of credit enhancements such as the 
TIFIA program that Ms. Scheinberg mentioned.
    Senator Jeffords. Ms. Scheinberg, currently the threshold 
for projects to be eligible for TIFIA programs is $100 million. 
How would lowering the threshold for projects to $50 million 
affect the program?
    Ms. Scheinberg. Senator Jeffords, we are not sure. We have 
no experience with anyone coming in and saying they could not 
meet the $100 million threshold. So, we cannot tell you that 
that is a barrier to this program.
    The program, as you probably know, is new to the users and 
there is a fair amount of learning that goes on regarding how 
to engage in the TIFIA program. So its original purpose was for 
large projects that could not find funding in the traditional 
categories of funding that the Federal Government provides--
large, intermodal, complicated, lumpy projects, as David said.
    I think we still have not tapped out those projects. We are 
still working with folks. We have six letters of interest that 
have come in that are seriously looking at asking for a TIFIA 
loan.
    We have not seen people who have come in and said, we wish 
it was a lower threshold, so I cannot really tell you what the 
difference would make. We have a lower threshold for ITS 
projects of $30 million and we have not seen any takers on 
that. That does not seem to have made a difference.
    Senator Jeffords. Our next generation effort will place 
greater emphasis on intermodal projects and on project 
financing. I am concerned that U.S. DOT is not adequately 
staffed or structured to accommodate this shift in focus.
    Do you share my concern? I imagine you will say yes.
    Ms. Scheinberg. Well, first I would say, yes, we are also 
very focused on intermodal in general, and freight in 
particular, which we believe needs much more attention than it 
has received in the past.
    As far as our staffing, we are looking at this. I can tell 
you that it is a topic of discussion in the Department, 
organizationally, financially, and with resource attention.
    We are looking at this issue of freight very seriously, 
both how to help the freight sector and how to deal with it 
internally in DOT.
    Senator Jeffords. Well, I want to thank you, all three of 
you, for very helpful testimony. I assure you, we will be 
taking advantage of your expertise as time goes by to assist us 
as we move forward to try and improve the ability to finance 
these projects.
    Thank you very much.
    Mr. Seltzer. Thank you, Mr. Chairman.
    Ms. Scheinberg. Thank you.
    Ms. Hecker. Thank you, Mr. Chairman.
    Senator Jeffords. I want to let everyone know that we are 
going to have votes starting, two votes, in the next few 
minutes. So we will postpone the testimony on the next panel. 
You can relax and await my return. Since it takes about 20 
minutes for the first vote and I have to wait for the second 
vote, it will probably be about 25 minutes before we resume.
    So if anybody wants to take a break, take a break.
    [Whereupon, at 10:29 a.m. the hearing was recessed.]
    [At 11:16 a.m. the hearing was reconvened.]
    Senator Jeffords. The hearing will come to order. I am 
sorry for the delay, but we are in the process of saving the 
Nation, so it took a little bit longer than we anticipated.
    [Laughter.]
    Welcome, panel No. 2. Our first witness is the Honorable 
Janice Hahn, Councilwoman for the city of Los Angeles, 
California, on behalf of the Alameda Corridor Transportation 
Authority. We have been waiting anxiously for your testimony 
because of all the exciting work that you have been involved 
in. Please proceed.

   STATEMENT OF HON. JANICE HAHN, COUNCILWOMAN, CITY OF LOS 
  ANGELES, LOS ANGELES, CA, ON BEHALF OF THE ALAMEDA CORRIDOR 
 TRANSPORTATION AUTHORITY; ACCOMPANIED BY DEAN MARTIN, ALAMEDA 
CORRIDOR'S CHIEF FINANCIAL OFFICER, AND JOSEPH BURTON, GENERAL 
                            COUNSEL.

    Ms. Hahn. Thank you, Mr. Chairman. Good morning. Thank you 
for this opportunity to be here today. Besides being a city 
councilwoman in Los Angeles, I serve as the chairwoman of the 
Governing Board of the Alameda Corridor Transportation 
Authority.
    So, on behalf of the city of Los Angeles, the mayor, Jim 
Hahn, my brother, the city of Long Beach, Mayor Beverly 
O'neill, and the Corridor Authority's Governing Board and our 
CEO Jim Hankla, I am honored to be here today.
    Accompanying me today are Dean Martin, the Corridor 
Authority's chief financial officer, and Joseph Burton, our 
general counsel.
    The Alameda Corridor Transportation Authority, or ACTA, is 
a joint powers authority created by the Cities of Long Beach 
and Los Angeles in 1989 to oversee the financing, design, and 
construction of the Alameda Corridor.
    The project was monumentally complex, running through eight 
different government jurisdictions in urban Los Angeles County, 
requiring multiple detailed partnerships between public and 
private entities, and presenting extensive engineering 
challenges.
    One of the key partnerships that has been vital over the 
years has been with the U.S. Congress. We greatly appreciated 
the strong support you and your colleagues provided to ACTA in 
developing the innovative loan from the Department of 
Transportation.
    Indeed, the Federal Government, by its $400 million 
Department of Transportation loan, became the first financial 
partner in this magnificently successful project. We are 
particularly thankful for the strong leadership demonstrated by 
many of you in Congress, including our two distinguished 
Senators, Dianne Feinstein and Barbara Boxer, along with 
Congressman Steve Horn and Congresswoman Juanita Millender-
McDonald. Without their vision and support, it is unlikely the 
Alameda Corridor would be in operation today, strengthening the 
Nation's global economic competitiveness.
    The $2.4 billion Alameda Corridor, one of the Nation's 
public works projects, opened on time and on budget on April 
15th of this year.
    A container train from the ports of Los Angeles and Long 
Beach to the transcontinental rail yards near downtown Los 
Angeles used to take more than 2 hours and wreak havoc to L.A. 
traffic at dozens of crossings. It now takes about 45 minutes, 
avoiding traffic conflicts.
    As cargo volumes increase, this enhanced speed and 
efficiency is critical. More than 100 trains per day are 
expected on the Alameda Corridor by the year 2020.
    We have demonstrated that governments can work together, 
and they can work with the private sector, putting aside 
competition for the benefit of greater economic and societal 
good.
    We have proven that communities do not have to sacrifice 
quality of life to benefit from international trade and port 
and economic activity. The volume of containers doubled in the 
1990's, and last year reached more than $10 million 20-foot 
containers. Last year, our ports handled more than $200 billion 
in cargo, or about one-quarter to one-third of the Nation's 
waterborne commerce.
    ACTA consolidated four branch lines serving the ports into 
a 20-mile freight rail expressway that is completely grade 
separated, including a 10-mile long 30-foot trench that runs 
through older, economically disadvantaged industrial 
neighborhoods south of downtown Los Angeles.
    The linchpin of ACTA's funding plan was designation of the 
Alameda Corridor as a high-priority corridor in the 1995 
National Highway System's Designation Act. That designation 
cleared the way for Congress to appropriate $59 million needed 
to back the $400 million loan to the project from the U.S. 
Department of Transportation.
    That was the leverage, if you will, for the biggest piece 
of our financing package, more than $1.1 billion in proceeds 
from revenue bonds sold by ACTA. The bond and the Federal loan 
are being retired by corridor use fees and paid by the 
railroads.
    The funding breaks down roughly like this: 46 percent from 
ACTA revenue bonds, 16 percent from the U.S. DOT loan, 16 
percent from the ports, 16 percent from California's State and 
local grants, much of it administered by the L.A. County 
Metropolitan Transportation Authority, and 6 percent from other 
sources.
    There are many reasons why our project stayed on schedule, 
but at the top of the list are permit-facilitating agreements 
with corridor cities, relocating agreements with utility 
companies, and our decision to use a design-build contract with 
the Mid-Corridor Trench.
    Among the direct community benefits, the Alameda Corridor 
is projected to reduce emissions from idling trucks and 
automobiles by 54 percent, slash delays at railroad crossings 
by 90 percent, and cut noise pollution by 90 percent.
    Disadvantaged firms have earned contracts worth more than 
$285 million, meeting our goal of 22 percent DBE participation. 
The goal of our Alameda Corridor job training and development 
program was to provide job training and placement services to 
1,000 residents of the corridor communities.
    We exceeded that goal. Almost 1,300 residents received 
construction industry-specific job training, and of those, 600 
were placed in construction trade union apprenticeships. The 
Alameda Corridor Conservation Corps provided the life skill 
training to 447 young people from that community.
    In the future, ACTA and the California DOT are working at 
an innovative, cooperative agreement to develop plans for a 
truck expressway that would provide a ``life-line'' link 
between Terminal Island at the ports and the Pacific Coast 
Highway at Alameda Street.
    The Alameda Corridor truck expressway is intended to speed 
the flow of containers into the Southern California 
marketplace. This project could be ready for approval as early 
as March, 2003.
    At ACTA, we believe that by restructuring our Federal loan 
we can undertake this critical truck expressway project without 
any additional Federal financial support. But we need this 
committee----
    Senator Jeffords. Would you repeat that, please?
    [Laughter.]
    Ms. Hahn. I am glad you asked for that. Hold my time, Mr. 
Chairman. At ACTA, we believe that by restructuring our Federal 
loan we can undertake this critical truck expressway project 
without any additional Federal financial support, but we need 
this committee to help us get Congress to give the approval to 
DOT to allow us to do this.
    Let me just give you a few recommendations for your 
committee as you are looking at reauthorization of TEA-21. We 
think the planning and funding of intermodal projects of 
national significance directly benefiting international trade 
should be sponsored at the highest levels within the Office of 
the Secretary of Transportation.
    There should be a national policy establishing the linkage 
between the promotion of free trade and the support for 
critical intermodal infrastructure, moving goods to every 
corner of the United States. Public-private partnerships do, in 
fact, work and should be promoted and encouraged by Federal 
transportation legislation.
    We think a specific funding category is needed to support 
intermodal infrastructure projects and trade connector 
projects. Consideration should be given to new and innovative 
funding strategies for the maritime intermodal systems, 
infrastructure improvements enhancing good movements.
    The Corridor benefited from the DOT being willing to 
undertake some risks and provide loan terms that were not 
available on a commercial basis. The Federal participation gave 
private investors confidence in the project and made our bond 
financing possible.
    Most important in my mind is this. The success of the 
Alameda Corridor has shown that Federal investment in trade-
related infrastructure can benefit the economy without 
sacrificing the quality of life issues.
    Thank you for inviting me. I am happy to answer any 
questions.
    Senator Jeffords. Thank you very much.
    The Honorable Peter Rahn. Please proceed.

STATEMENT OF HON. PETER RAHN, SECRETARY, NEW MEXICO DEPARTMENT 
                OF TRANSPORTATION, SANTA FE, NM

    Mr. Rahn. Good morning, Mr. Chairman. I am Pete Rahn. I am 
the Secretary of the New Mexico State Highway and 
Transportation Department and I am very pleased to be here 
today to testify before this very unique joint hearing.
    It seems so important that the two committees work smoothly 
together in the reauthorization of the National Highway Funding 
bill, which is absolutely critical to the States and their 
transportation systems.
    Mr. Chairman, I am here to not only urge, but plead, that 
Congress not only allow, but actually encourage, innovative 
public-private partnerships. Public-private partnerships draw 
on the experiences and expertise of both sides to perfect just 
tremendous success in projects like New Mexico 44, which is now 
called U.S. 550.
    New Mexico traditionally has been a pay-as-you-go State, 
which meant we paid as we went downhill and lost more and more 
of our system.
    New Mexico 44 is, I believe, a national example of a 
successful project that brought together the Federal 
Government, State government, and private concerns to open up a 
corridor into northwest New Mexico that is providing economic 
opportunity and greatly improved safety for those people 
traveling on that roadway.
    New Mexico 44 stretches 141 miles from just north of 
Albuquerque into northwest New Mexico. Northwest New Mexico did 
not have a four-lane highway for the entire corridor of the 
State.
    This corridor has opened up economic opportunity in the 
region of Farmington and Bloomfield in which they are now 
experiencing growth at twice the rate of the average of the 
State of New Mexico.
    The project itself brought together innovative financing, 
innovative procurement, innovative contracting, and innovative 
construction. I need to give credit to the Federal Highway 
Administration as a very critical partner in developing this 
project.
    The project itself was a 118-mile corridor that utilized 
innovative financing in the form of GARVEE bonds. I understand 
it is not very flattering to Jane Garvey that our particular 
bonds were named ``naked'' GARVEE bonds because they did not 
have the guarantee of the State government, but only the 
revenue stream of future Federal programs to back up the 
issuance of those bonds. The bonds were issued for 15 years. We 
also utilized the soft match provisions of TEA-21.
    Our procurement was unique in that we were able to utilize, 
not design-build, but the traditional low-bid process in a very 
unique way in which we secured a developer, and the developer 
designed the project, provided the designs back to the 
department, we utilized low bid, selected the contractor, 
presented the contractor back to the developer which managed 
the construction of it, and then warranteed the project for 20 
years. Twenty years, to our belief, is the longest period of 
time that a highway has ever been warranteed in the United 
States.
    From concept to contract, the project took us 15 months. 
From contract to construction of a 118-mile long four-lane road 
was 28 months. Using traditional methods, we estimate it would 
have taken us 27 years to have built that roadway utilizing the 
traditional 3-and 5-mile increments that most DOTs undertake in 
constructing long corridors.
    The warranty is a $114 million guarantee for performance of 
the roadway for 20 years. It is a no-fault guarantee that we 
estimate will save the State $89 million over the life of the 
warrantee.
    Coke Industries, which was the developer, has $50 million 
of their own assets at risk within the warranty and have 
produced a roadway from their design and management of the 
contractors that is smoother and will last longer than any road 
built in New Mexico today.
    Utilizing the leveraging of Federal revenue streams at very 
competitive interest rates, our overall bonding program, of 
which the GARVEE bonds are only once piece, has an average 
interest rate of 4.47 percent, when the Federal Highway 
Administration estimates inflation in the construction industry 
at 4.5 percent. So the value of a road in place today is 
greater than the value of a road in place tomorrow.
    I will close by just saying that I believe it is very 
important that Congress, as it is looking at reauthorization, 
not only allow the DOTs the flexibility to use Federal revenues 
in the ways best suited for their particular States, but the 
importance of a stable revenue stream that the States can 
depend upon is critical to our ability to leverage those 
dollars through using innovative financing, whether it is 
bonding or any of the other ways.
    The last point I would make, Mr. Chairman, is just simply 
that if Congress wants to encourage private investment in our 
transportation system, I believe there is going to have to be a 
mechanism for the private sector to invest on par with 
government tax-free bonds in order for that investment to 
occur.
    Thank you, Mr. Chairman.
    Senator Jeffords. Thank you. Excellent presentation.
    Our next witness is John Horsley, executive director of the 
American Association of State Highway and Transportation 
Officials right here in Washington, DC. Please proceed.

    STATEMENT OF JOHN HORSLEY, EXECUTIVE DIRECTOR, AMERICAN 
  ASSOCIATION OF STATE HIGHWAY AND TRANSPORTATION OFFICIALS, 
                         WASHINGTON, DC

    Mr. Horsley. Thank you, Mr. Chairman.
    First, we want to commend you and Senator Baucus for 
convening this joint hearing, and commend you, Senator Reid, 
and your colleagues in the Senate for fully restoring highway 
funding for fiscal year 2003 to the $31.8 billion level that 
Governors, States, and many others have been pushing for. It is 
vital that you succeed, and we want to commend you and the 
Senate for your leadership.
    We also hope you will convey our thanks to Senator Baucus 
for his leadership in moving the 2.5 cents of gasohol revenues 
that now go to the general fund over to the Highway Trust Fund, 
and some of the other work that he is doing, including pushing 
for use of the interest in the Highway Trust Fund in order to 
put that into our cash-flow and be able to put it to work.
    So, I want to thank you both for holding this hearing 
today. I heard a lot of good things so far, and look forward to 
Jeff's testimony.
    Pete is one of my bosses, so I will try to represent you 
well, Pete.
    Mr. Chairman, we believe that the central issue on 
reauthorization will be how to grow the program. Huge safety, 
preservation and capacity needs exist in every region of the 
country.
    To fund them, AASHTO believes Congress must find a way to 
increase highway funding from $34 billion in fiscal year 2004 
to at least $41 billion in 2009, and annual transit funding 
over the next 6 years from $7.5 billion to $10 billion.
    The challenge, is how to fashion a funding solution that 
can achieve these goals and garner the bipartisan support 
needed for enactment next year.
    AASHTO has explored a menu of options for generating 
additional program revenues, including tapping Highway Trust 
Fund reserves, gasohol transfers, indexing, and raising fuel 
taxes. While the program could grow somewhat without raising 
taxes, it would fall short of meeting national needs.
    We also directed our staff to explore the feasibility of 
leveraging new revenues through a federally chartered 
transportation finance corporation which could achieve AASHTO's 
goals for highway and transit funding in coordination with all 
of the other proposals, such as those proposed by Chairman 
Baucus.
    They have developed a creative proposal which appears 
feasible and has been well received. Let me describe it for you 
in brief.
    Under this concept, Congress would be asked to charter a 
nonprofit transportation finance corporation, authorized to 
issue $60 billion in tax credit bonds over 6 years. We describe 
this as program finance rather than project finance.
    Thirty-four billion dollars would go to highways and be 
apportioned to States through Federal highways, and $8.5 
billion, 20 percent, would be apportioned to transit agencies; 
$17 billion of the bond proceeds would be invested in 
government securities which, over 25 years, would generate a 
return sufficient to pay off the bond principal.
    The Department of Treasury would be reimbursed for the 
annual cost of the tax credits from the Highway Trust Fund. 
There would be no impact on the Federal deficit. The TFC would 
leverage approximately $18 billion in new revenues into an 
increase of nearly $43 billion in program funding.
    When we tested this concept with seven Wall Street 
investment banks and two rating agencies, this is what we 
heard. No. 1, tax credit bonds are marketable. Capital markets 
can absorb the amount of bonds being discussed.
    Second, bond marketability and liquidity are enhanced by a 
central issuer, and there is a broad potential investor base, 
especially if the tax credits could be decoupled from the bond 
principal.
    Our analysis shows that AASHTO's funding targets through 
fiscal year 2009 could be achieved through the Transportation 
Finance Corporation without indexing or raising taxes. Over the 
longer term, however, the program for the following 4 years 
would slip slightly before it resumed positive growth again in 
fiscal year 2013.
    When the TFC is combined with indexing, not only does the 
program continue with healthy growth from fiscal year 2010 on, 
even higher funding levels in the $41 billion for highways and 
the $10 billion for transit would be possible.
    We believe this idea has potential, and stand ready to work 
with Congress to find a way to grow the program using this 
technique, or other techniques.
    In addition to this concept for program financing, we also 
believe reauthorization needs to make improvements in several 
project financing tools such as extending State Infrastructure 
Bank to all 50 States, lowering the threshold for TIFIA loans 
from $100 million down to $50 million, and working with you to 
change the terms of the RRIF program.
    I will be glad to submit the balance of my testimony for 
the record.
     Senator Jeffords. Thank you. Excellent testimony.
    Our last witness is Jeff Carey, Managing Director of 
Merrill Lynch & Co., New York, NY.

  STATEMENT OF JEFF CAREY, MANAGING DIRECTOR, MERRILL LYNCH & 
                    CO., INC., NEW YORK, NY

    Mr. Carey. Mr. Chairman, ladies and gentlemen, I am a 
managing director in public finance at Merrill Lynch. I have 
had the privilege to work with U.S. DOT, Federal Highway 
officials, as well as our clients, State transportation 
officials, and other project sponsors during the last decade on 
the development and implementation of innovative finance 
mechanisms.
    Thank you for inviting me to provide a wrap-up commentary 
from a capital markets perspective at today's joint hearings 
and for encouraging private sector participation during your 
on-ramp to reauthorization.
    Public finance industry professionals are pleased to have 
played a role in creating a strong market reception for the new 
transportation funding tools and expanded flexibility for 
public-private partnerships.
    We commend these panel participants, the leadership from 
DOT and Federal Highway, other State transportation officials, 
and private sponsors for the dramatic evolution from Federal 
aid funding to the wide array of financing vehicles and 
programs introduced and utilized over the last 8 years.
    To briefly reflect on the prior testimony, ISTEA, post-
ISTEA initiatives, and TEA-21 implementation have produced many 
market-related accomplishments, dramatically increased 
bondholder investment in transportation projects and State 
programs; new and/or specially dedicated revenue sources, 
particularly for the purpose of paying off debt obligations; 
broad market acceptance in the use of Federal aid funding for 
debt instrument financing; more coordination with other funding 
partners beyond just the States, and lower financing costs and 
increased project flexibility and feasibility through Federal 
credit enhancement.
    Addressing characteristics sought by capital markets and 
private sector project sponsors provides efficient market 
access and innovative transportation finance opportunities.
    Coining an earlier term, the ``unsentimental 
characteristics'' sought by capital markets participants 
include: sound, understandable credits; evidence of government 
support at the Federal and State level; strong debt service 
payment coverage; predictability in Federal programs and a 
consistency with an evolution of new funding instruments, 
something that the MEGA-Fund and Trust Acts would enhance; 
market rate investment returns for bonds, development costs, 
and equity investment; reasonable and reliable timing in terms 
of the receipt of grants and revenues; acronyms that capture 
Federal programs' spirit and promote investor familiarity; and 
volume market profile, and liquidity.
    For example, the track record and predictability of Federal 
aid highway programs enabled GARVEE bonds to be structured 
without the double-barreled credit of other State credit-backed 
stops, as described earlier in New Mexico. It was the strong 
issuance history of municipal bond banks in States like Vermont 
that served as the model for the development of State 
Infrastructure Banks or SIBs in the mid-1990's.
    Mr. Chairman, I agree that SIBs such as Vermont's can 
provide an extremely flexible and responsive financing tool. 
How various innovative financing components have been used by 
public agencies and received by the markets provides a strong 
road map for reauthorization.
    When SIBs were created as part of the 1995 Act, the pilot 
program for 10 State transportation revolving funds became very 
popular in 1996, in part because supplemental Federal funding 
was available for seed capitalization.
    Thirty-two States have active SIBs and have made different 
levels of highway or other project assistance primarily through 
loans, despite widespread under-capitalization and the 
curtailment of the program in TEA-21.
    Limited capitalization has resulted from the inability to 
use Federal aid funds outside of five States and the 
application of Federal requirements and rules to all moneys 
deposited in the SIB revolving fund, regardless of whether the 
source was a State, a public contribution, or repaid loan 
proceeds. In addition, only two States have leveraged their 
SIBs with bonds.
    As a flexible, State-directed tool, SIBs have a greater 
potential to provide loans and credit enhancement that can be 
realized through further modifications as part of 
Reauthorization.
    Reauthorization should provide incentives for public-
private market-based partnerships that finance, develop, 
operate, and maintain highways, mass transit facilities, high-
speed rail and freight rail, and intermodal facilities. This 
could be accomplished by permitting the targeted use of a new 
class of private activity bonds, or by modifying certain 
restrictions in the Internal Revenue Code on tax-exempt bond 
financing of transportation modes. We commend the Senate and 
this committee's earlier consideration of HICSA, HIPA, and, 
most recently, the Multimodal Transportation Financing Act.
    Mr. Chairman, my office is across the street from the World 
Trade Center site. As workers in downtown Manhattan, we greatly 
appreciated your passage of Federal legislation creating a 
Liberty Zone for the redevelopment of lower Manhattan and for 
the creation of a new type of tax-exempt private activity 
bonds, Liberty Bonds, for the rebuilding and economic 
revitalization of New York City. Transportation infrastructure 
financing deserves a bond mechanism similar to Liberty Bonds 
under Reauthorization to attract more private investment, as 
well as to increase the use of new construction techniques, 
cost controls, performance guarantees, and technologies, as 
also described by the New Mexico Secretary.
    Past ``innovative finance'' should become mainstream 
transportation finance under TEA-21 Reauthorization, and the 
Federal Government should provide additional, new financing 
tools and initiatives, at least on a pilot basis.
    The market's perception of the integrity of the Federal 
Highway Trust Fund would be greatly enhanced by the MEGA-TRUST 
Act and the MEGA-INNOVATE Act, providing tax-credit bond 
proceeds to augment gas tax revenues.
    The success of innovative finance places a higher level of 
responsibility on the Federal reauthorization process to 
maintain the characteristics that attract strong capital 
markets and private sector participation.
    We want to meet your vision, Mr. Chairman, and your 
challenge to structure and sell U.S. transportation credits to 
investor portfolios in U.S. municipal markets and in other 
appropriate markets.
    Thank you.
    Senator Jeffords. Well, thank you. Excellent testimony, all 
of you. I am very appreciative, as I think we are going to make 
some good progress this year.
    The first question is for Janice Hahn. Design-build was 
utilized on the Mid-Corridor Trench portion of the Alameda 
Corridor. How important was this approach to project the 
development in your efforts to finance and build the Alameda 
Corridor?
    Ms. Hahn. Well, I think design-build was really one of the 
reasons that this project came in on time and on budget. It was 
so important, that actually we had to get an ordinance passed 
by the City Council of Los Angeles, because previously that was 
not allowed under the normal building of projects and the RFP 
proposals. So we estimate that that concept saved the project 
18 months in terms of streamlining the majority of that 
project.
    Senator Jeffords. Thank you.
    I note that the Alameda project was sponsored by ACTA, a 
special-purpose entity. Does this institutional arrangement 
provide any advantages?
    Ms. Hahn. Well, certainly the whole structure and the 
cooperative agreements that we came to, joining together two 
cities, Los Angeles and Long Beach, both rival ports and 
competing railroads, and then with the public entity of ACTA, 
provided really a very unique partnership and agreement. I must 
say, as chairwoman of this Governing Board of ACTA, it is a 
very small, focused governing board. I think that really is the 
reason this is so successful.
    Senator Jeffords. David Seltzer, in an answer to my earlier 
question, said that one of the keys to attracting private 
investors is a reliable revenue stream. Janice, can you tell us 
more about your project's revenue stream?
    Ms. Hahn. Well, that really was another huge piece of 
success, is we locked in a great revenue stream, which was the 
containers themselves. The containers have been there. They are 
there now, and more are coming every year.
    As a matter of fact, as I mentioned, we have 10 million 
containers using the Corridor on an annual basis. The charge is 
about $15 per 20-foot container, so you can see that that is an 
incredible revenue stream that we have locked in for a very 
long time.
    Senator Jeffords. Peter, as a member of the AASHTO Board of 
Directors, what are your thoughts on that organization's 
funding proposal?
    Mr. Rahn. Mr. Chairman, I support their proposal because I 
believe it is a way for us to get more money into 
infrastructure today. I hope that that was one of the things 
that was made clear by my testimony, was the belief that 
transportation infrastructure is more valuable in place today 
than it is tomorrow.
    The proposal from AASHTO is a vehicle by which this country 
can invest in more infrastructure, thereby supporting our 
economic activity, as well as quality of life and safety of its 
citizens. I believe it is a very innovative approach. I believe 
it is workable, and I am hopeful that Congress will approve it.
    Senator Jeffords. John, in your testimony you state that 
``finance tools are useful, but only fill a niche in program 
and project funding.''
    What changes are needed in reauthorization to allow for 
more financing of transportation projects?
    Mr. Horsley. Mr. Chairman, there is need for change at both 
levels. At the Federal legislative level, we think the 
authority to extend State Infrastructure Banks to all 50 
States, for example, should be included in your bill. There is, 
I think, a great interest in the success of the five States 
that are currently authorized.
    We would seek your authority to extend it to all 50 States, 
but with the understanding that all Title 23 requirements come 
with the extension of that authority, including Davis-Bacon, 
for example. We are willing to continue to advance the program 
in partnership with a broad base of interests, including labor, 
that wants the Davis-Bacon provision to apply to future funding 
cycles.
    Many of our smaller States have told us that the $100 
million restriction in TIFIA is too tight, and they have 
smaller projects that would benefit from either the additional 
loan security or other finance enhancements of TIFIA. So, we'd 
like to have you take a look a dropping that threshold.
    The terms and conditions of RRIF includes restrictions that 
Treasury has put on that are too tight, and we think, if you 
could take a look at flexing the terms of finance for railroad 
finance, that would be helpful.
    Now, let me tell you, at the State level we have a long way 
to go. For example, New Mexico represented by Pete here, 
California and Florida. But we have some very sophisticated 
States that have long track records of innovative finance and 
are using those tools well.
    We have 17 States that we understand are statutorily barred 
from using debt finance. So when it comes to enhancing project 
finance, we have some change that also needs to take place at 
the State level so they can put to work GARVEEs and some of the 
other excellent techniques that you have approved over the last 
6 years.
    Senator Jeffords. A major piece of your testimony centers 
on the creation of a Transportation Finance Corporation. Under 
your proposal, the TFC would issue tax credit bonds. We have 
heard testimony from GAO that these instruments are the most 
costly long-term to the Federal Government. Why does AASHTO 
consider this to be the most appropriate bonding mechanism for 
the Federal aid program?
    Mr. Horsley. Well, Mr. Chairman, we are looking for the art 
of the possible. When we tried to put together a vehicle that, 
as Pete was describing, could leverage revenues that are 
currently available to achieve the funding targets that we are 
seeking for fiscal years 2004 to 2009, we looked at several 
options.
    We looked at whether municipal bonds issued at the State 
level would work, and concluded they would not because so many 
States have obstacles, either statutory or constitutional, to 
the issuance of debt and the utilization of GARVEEs in some of 
the current techniques, so we figured that that would not 
extend universal help to all 50 States.
    We looked at the utilization of municipal bonds at the 
Federal level and figured that would compete directly with 
Treasury's, so that was not as good a vehicle. We then looked 
at the appeal of the tax credit bonds. It was currently pending 
in RAIL-21 as a vehicle for funding high-speed rail and had 
been used previously to fund schools through so-called QSABs.
    But our conclusion was that the TFC was the most efficient, 
most viable method that would also score well under Federal 
scoring rules and just in practical terms, would get us, with 
current revenues or revenues enhanced with indexing, to the 
funding targets that States feel are essential, which is over 
$40 billion for highways and over $10 billion for transit.
    Senator Jeffords. Does it make sense to issue bonds to 
support the mainline work of State DOTs, namely system 
preservation? Would it not be more appropriate to reserve debt 
financing for capital improvements, and particularly for those 
projects with associated revenue streams?
     Mr. Horsley. Mr. Chairman, the Transportation Finance 
Corporation funding, that we are talking about, we classify as 
program finance, which would then be available to States to use 
for all of those purposes.
    But we are looking for a near-term practical solution that 
gives you a measure you can pass with bipartisan support to 
boost funding for the next cycle to the funding levels we are 
after.
    When it comes to the use of the issuance of municipal bond 
debt at the State level, I think each State has to make a 
judgment whether they issue long-term debt, for long-term 
purposes, such as schools, water and sewer plants, and most 
hospitals.
    Almost every other area of public infrastructure is 
financed through debt. We think that transportation has been 
slower than those other entities to come to the table and use 
debt finance for long-term infrastructure. But we think the 
time has come.
    As you have from both of these panels, the market is there 
and the transportation agencies are there and are utilizing 
debt finance on an increasing basis. But the one 
differentiation I wanted to make was between the program 
finance, which would flow out to States for utilization as if 
it were cash over the next 6 years, and then Pete could 
leverage it as he saw fit through further leverage through 
GARVEEs and other means, as opposed to project finance, which 
we also support.
    Senator Jeffords. Mr. Carey, as I mentioned in my opening 
remarks, I have a vision that investment in U.S. transportation 
infrastructure would become a component of every fund manager's 
portfolio. Based on your experience, what measures should 
Congress consider to expand private sector investment to assist 
in making transportation a solid investment choice?
    Mr. Carey. I think it is a focus on the previously stated 
``unsentimental characteristics'' in terms of maintaining 
predictability and Federal program consistency in the 
introduction of new instruments. Also, to provide an 
opportunity for market rate investment returns on 
transportation project finance.
    Also, as has been described in some of the proposals today, 
an opportunity to look at new taxable instruments, as well as 
variations on existing tax-exempt instruments, to broaden the 
existing capital markets participation in transportation 
finance.
    I have to stress, however, that the municipal markets in 
the United States are unique in the world. These markets are 
incredibly deep, conservative, and provide guidance for Federal 
credit assistance and other initiatives on the part of the 
Federal Government under TIFIA.
    Also, these markets provide a lot of examples that have 
been adopted for transportation ``innovative finance'' over the 
last 8 years. They are incredibly easy for States and local 
governments to access, which is not the case in the taxable 
markets or in foreign government markets.
    Senator Jeffords. Well, thank you very much, all of you. I 
find that you have done such a wonderful job, I am not even 
going to ask you the final question I had because you have 
already answered it with all of your testimony. So, you have a 
grade A+ for your participation today.
    [Laughter.]
    I would like you to know that.
    But we will also reserve the right to continue to hound you 
until such time as we come through with a perfect solution. 
Thank you very much. That goes for both panels. This has been a 
very excellent hearing. I look forward to working with you as 
we continue forward to give our people the best advantages we 
can to make this the best transportation bill that ever 
occurred. Thank you very much.
    [Whereupon, at 11:58 a.m. the hearing was concluded.]
    [Additional statements submitted for the record follow:]
Statement of Senator Jon S. Corzine, U.S. Senator from the State of New 
                                 Jersey
    Thank you, Chairman Jeffords and Chairman Baucus, for holding this 
joint hearing on the success we have had on expanding the reach of the 
highway trust fund through innovative financing and how we can continue 
that success in the reauthorization of TEA-21. I look forward to 
hearing from our witnesses.
    Chairman Jeffords and Baucus, it is clear that we need to consider 
alternative means to finance our important highway and mass transit 
projects. AASHTO estimates that the annual level of investment needed 
to maintain current conditions and performance of our highway systems 
is $92 billion. For mass transit, the amount is $19 billion. We are 
falling far short of this under the authorized amounts of TEA-21. To 
get even close, we need to look at all sources of funding, including 
financing.
    Congress enacted financing provisions in TEA-21. Under the 
``Transportation Infrastructure Finance and Innovation Act'' (TIFEA), 
the Department of Transportation may provide secured loans, lines of 
credit and loan guarantees to public and private sponsors of eligible 
surface transportation projects. $530 million was authorized for this 
program.
    Chairman Jeffords and Baucus, we need to look at what good has been 
done under TIFEA, what needs to be changed, and what can be done in 
addition to TIFEA. I look forward to working with you both to explore 
ways to do this.
                               __________
 Statement of David Seltzer, Distinguished Practitioner, The National 
   Center for Innovations in Public Finance, University of Southern 
                               California
   a federal policy comparator for putting ``innovative finance'' in 
                                context
    Good morning, ladies and gentlemen. My name is David Seltzer, and I 
am a principal at Mercator Advisors, LLC, a consulting firm that 
advises public, private and nonprofit organizations on infrastructure 
financing issues. I also am affiliated with The University of Southern 
California's National Center for Innovations in Public Finance. The 
National Center, established 2 years ago, undertakes research and helps 
provide mid-career professional training in the field of infrastructure 
finance, including the growing use of public-private partnerships for 
project delivery. I would like to submit for the record a copy of a 
report USC published last year on California's 10-year experience with 
Innovations in Public Finance, which may prove informative to your 
committees.
    Previously, I had the privilege of serving as Capital Markets 
Advisor for 3 years at the U.S. Department of Transportation during 
TEA-21's authorization, and before I that spent over 20 years 
assembling bond issues for transportation and other public agencies as 
an investment banker. So having worked in the public and private 
sectors, I have clearly violated both ends of the timeless dictum of 
``neither a borrower nor a lender be.''
    You will be hearing testimony this morning from a distinguished 
array of Federal, State, local and private sector experts in connection 
with new financing initiatives for reauthorization. Since many of the 
new ideas draw upon tax incentives as well as other Federal policy 
tools, I commend you on making this is a joint hearing of both the tax 
writing and surface transportation authorizing committees.
    I found when in Federal service that the wide array of financial 
tools, techniques and even terminology can be bewildering. If I may, 
I'd like to put on my academic hat for a couple of minutes and try to 
present an analytic framework that may be helpful in comparing so-
called ``Innovative Finance'' options.
    The term ``innovative finance'' in Federal transportation parlance 
encompasses not only new financing techniques such as State 
Infrastructure Banks and TIFIA credit support, but also new approaches 
in the areas of project delivery, asset management, and service 
operations. In many cases, the techniques involve some form of public 
and private sector partnering. Private participation is seen as 
offering the potential to transfer risks, achieve production or 
operating efficiencies, and attract additional capital.
    In order to systematically analyze the cost-and policy-
effectiveness of an innovative finance proposal, I believe it would be 
useful to employ a ``Federal Policy Comparator.'' A comparator is a 
scientific instrument used for measuring the features of different 
objects. In much the same way, it should be possible to compare various 
innovative finance proposals within an analytic framework to determine 
which proposals would be most effective.
    The Federal Policy Comparator would seek answers to three central 
questions:
    1. Which Federal Policy Incentives are most suitable to attaining 
the proposal's objectives?
    2. Does the proposal achieve balance among Sponsors, Investors and 
Policymakers? And
    3. What is the Budgetary Treatment of the proposal?
    1. Which Federal Policy Incentives are Most Suitable? Aside from 
conventional grants, the Federal Government has available to it three 
major types of incentives it can use to stimulate capital investment:

      Regulatory Incentives make existing programs and tools 
more flexible, in order to expand project resources or accelerate 
project delivery. (GARVEE Bonds are one such example, in that they 
broadened allowable uses for grants to include paying debt service on 
bond issues that fund eligible projects. Other regulatory reforms 
include design-build contracting, in-kind match and environmental 
streamlining.)
      Tax Incentives involve modifying the Internal Revenue 
Code to attract investors into transportation projects. (Examples 
include private activity bonds, tax credit bonds, and tax-oriented 
leasing.)
      Credit Incentives provide Federal assistance in the form 
of Federal loans or loan guarantees to reduce the cost of financing and 
fill capital gaps. (Examples include Federal credit instruments 
provided through TIFIA and the Railroad Rehabilitation and Improvement 
Financing (RRIF) program.)

    Generally, there is a tradeoff between the budgetary cost of the 
incentive and its degree of effectiveness in making the desired capital 
investment feasible. For instance, many regulatory reforms have little 
or no budgetary cost, but they also generally provide only very 
incremental assistance in advancing projects. Tax measures typically 
are a ``helpful but not sufficient'' pre-condition for investment; the 
project must be on the margin of viability to benefit from them. Credit 
assistance can fill funding gaps and attract co-investment, but its 
uncertain cost depends on risk factors and interest rate subsidies. For 
instance, a complex and capital-intensive initiative such as Maglev may 
confer significant mobility, environmental and technology benefits. 
However, it also may well require deeper tax and/or credit subsidies in 
order to bring projects to fruition than that afforded by an incentive 
such as private activity bond eligibility.
    2. Does the Proposal Achieve Balance Among Sponsors, Investors and 
Policymakers? To be successful, each innovative financing initiative 
should be designed to meet the requirements of three distinct groups of 
stakeholders. First, the proposal must be attractive to project 
sponsors-the public or private entity responsible for delivering the 
project. Attractiveness to the project sponsor can be measured in terms 
of its cost-effectiveness, flexibility, and ease of implementation. 
Second, the proposal must make sense to investors-offering them a 
competitive risk-adjusted rate of return. Capital is notoriously 
unsentimental, and the innovative finance tool must compete for 
investor demand against other investment products in the marketplace. 
And finally, the concept must make sense to Federal policymakers. This 
entails not only achieving public policy objectives but also being 
affordable in terms of budgetary cost. These three groups-project 
sponsors, investors and policymakers--can be thought of as the legs of 
a three-legged stool. If any one leg of the stool has shortcomings, the 
proposal will wobble, and probably not be supportable.
    For example, dating back to the 1993 Federal Infrastructure 
Investment Commission, there has been a wide-stated interest in trying 
to voluntarily attract pension fund capital into the infrastructure 
sector. Public, union and corporate plans represent over $3.6 trillion 
of assets, yet they have virtually no U.S. transportation projects in 
their portfolios. Why? Because the dominant financing vehicle to date 
has been tax-exempt municipal bonds. While the tax-exempt market will 
continue to be an absolutely critical component of infrastructure 
financing, pension funds, as tax-exempt entities, place no value on the 
tax-exemption. Pension funds gladly would purchase infrastructure debt 
if it were offered at higher taxable yields, but that has limited 
appeal for the project sponsors who can access the municipal market. 
Consequently, the three-legged stool is uneven. (I note that various 
proposals have been introduced recently to create a ``win-win'' 
security that is both cost-effective for borrowers and competitively 
priced for pension fund lenders-while at the same time satisfying 
Federal policy drivers.)
    3. Finally, what is the Budgetary Treatment of the proposal? 
Efficient markets rely upon transparent pricing signals to function 
properly. However, oftentimes when Federal proposals are being 
developed, the key pricing information-budget scoring-is at best 
translucent, if not completely opaque. It seems it is the mysterious 
scoring of a proposal, and not its policy effectiveness, that too 
frequently drives the ultimate policy decision--perhaps a case of the 
``tail wagging the dog.'' Better information on budgetary costs earlier 
on in the process would benefit the development and evaluation of 
alternative policy options.
    Unlike corporate and State and local entities, the Federal 
Government makes no budgetary distinction between current period 
operating outlays and long-term capital investments. Nor does it 
distinguish between full faith and credit general obligations and 
limited special revenue pledges. From the perspective of infrastructure 
advocates, this is both inequitable and inefficient: Inequitable in 
that costs are not shared by future beneficiaries, and inefficient in 
that there is a bias toward considering those proposals that have the 
lowest front-end costs, rather than looking at cost-effectiveness over 
the long-term.
    Some Federal innovative finance concepts attempt to overcome this 
problem by drawing upon either credit reform budgetary rules (a rare 
case where Federal accounting is on an accrual basis and conforms to 
best commercial practices) or by utilizing the tax code (where the 
PAYGO rules recognize tax expenditures on an annual basis).
    While some may consider these tools to be unnecessarily complicated 
attempts to circumnavigate cash-based accounting, I believe they offer 
the benefit of rationalizing the budgetary treatment of capital 
spending and facilitating sound decisionmaking on Federal 
infrastructure policy.
    In conclusion, I submit that by using this three-part Federal 
Policy Comparator as an analytic framework, policymakers can more 
systematically compare the budgetary cost with the policy effectiveness 
of proposals. It would allow comparisons of initiatives as varied as 
private activity bonds for intermodal facilities, shadow tolling for 
highways, national or regional loan revolving funds for freight rail, 
tax credit bonds for high-speed rail, and reinsurance for long-term 
vendor warranties. By way of illustration, I am including as an 
attachment a pro-forma Federal Policy Comparator analysis of four 
current or proposed Federal innovative finance tools for surface 
transportation--GARVEE Bonds, TIFIA Instruments, Private Activity Bonds 
and Tax Credit Bonds.
    Thank you very much for your time. I would be happy to answer any 
questions you might have.
                              Attachments
        Appendix A. Federal Policy Comparator PowerPoint Slides





  Appendix B: Findings & Recommendations: A Roundtable Discussion of 
    California's Experience with Innovations in Public Finance, The 
   National Center for Innovations in Public Finance, University of 
                   Southern California, April, 2001.
                          [December 13, 2000]
  Findings and Recommendations, Report Prepared by the University of 
 Southern California, National Center for Innovations in Public Finance
a roundtable discussion of california's experience with innovations in 
public finance: findings, recommendations and proceedings: implications 
               for financing our nation's infrastructure
     (Edited by Daniel V. Flanagan, Jr.; Director, David Seltzer, 
  Distinguished Practitioner, USC; Sarah Layton, President, Advancing 
                          Infrastructure, LLC)
                                 ______
                                 
                         University of Southern California,
         National Center for Innovations in Public Finance,
                                     Los Angeles, CA April 2, 2001.

Dear Friends: On December 13, 2000, the University of Southern 
California hosted a Roundtable policy discussion at USC's Sacramento 
Center entitled ``California's Experience with Innovations in Public 
Finance.'' The program was sponsored by a grant received from the 
United States Department of Transportation. The National Center for 
Innovations in Public Finance, located within USC's School of Policy, 
Planning & Development, served as the host coordinator.
    As the Director of the National Center, it is my pleasure to 
enclose a summary of Findings, Recommendations and Proceedings elicited 
from the participants at the Roundtable. Approximately 75 experts, 
drawn from governmental, academic and business organizations within 
California and throughout the country, were in attendance.
    The National Center for Innovations in Public Finance is dedicated 
to exploring how new development and financing techniques involving 
public-private partnerships could contribute to addressing the nation's 
infrastructure challenges at the national, State and local levels. We 
believe sthat many of the ideas and recommendations generated at the 
Roundtable could serve as important references in future public policy 
decisions.
    For those interested in a more complete record of proceedings, a 
videotape of the conference as well as a summary of each speaker's 
remarks may be obtained through the National Center. We would welcome 
any comments you might have on the Roundtable. I would like to thank 
the entire faculty and staff at the USC Sacramento Center for their 
support of this valuable effort.
            Sincerely,
                          Daniel V. Flanagan, Jr., Director
                  National Center for Innovations in Public Finance
                   university of southern california
    The USC School of Policy, Planning, and Development (SPPD) builds 
on the strengths of two premier professional schools to address the 
dynamic intersects of the public, private and nonprofit sectors. 
Launched on July 1, 1998, the new School combined the former nationally 
ranked schools of Public Administration and Urban Planning and 
Development and offers degrees in five core areas--public policy, 
planning, public administration, health administration and real estate 
development.
    The School's primary mission is to cultivate leaders--the ethical 
men and women who will design and build our communities, reshape our 
governmental structures and processes and rethink the relationship 
between government, citizens and business. We accomplish this in three 
important ways: teaching that prepares students to lead, shape and 
manage in the evolving new 21st century world order; research that 
takes advantage of and contributes to Southern California, the State, 
the Nation and the world; and action that yields insights and offers 
solutions to pressing societal problems.
    The USC Sacramento Center, located at 1800 I Street, Sacramento, 
offers Master programs in Public Administration, Health Administration, 
and Planning and Development. The Center also offers leadership 
training programs. For more information about the Center and additional 
programs, please visit www.usc.edu/sacto.
    The National Center for Innovations in Public Finance was 
established in 1999 to promote research and instruction in the field of 
infrastructure finance. Housed within USC's School of Policy, Planning 
and Development, the National Center draws upon USC academic faculty 
and distinguished practitioners from the public and private sectors to 
teach courses, conduct research projects and provide advice on key 
public policy issues. The Founder and Executive Director of the 
National Center is Daniel V. Flanagan, Jr. who has been centrally 
involved in framing national policy in the areas of deregulation of 
utilities and in transportation finance.
    This report was prepared as part of a project sponsored by the 
University of Southern California with funding from the Federal Highway 
Administration, under the terms of a cooperative agreement. The views 
expressed herein are those of the conference speakers, participants and 
authors of this report and do not necessarily represent the views of 
the University of Southern California or the Federal Highway 
Administration.
                              introduction
    Ten years have passed since the first toll road franchises were 
awarded by the California Department of Transportation in December 
1990, under Assembly Bill No. 680 (A.B. 680). To date, only one of the 
four projects selected through that process-the SR 91 Express toll 
lanesactually has been built and is operational. Yet this landmark 
legislation and other initiatives across the State for highways, 
seaports, transit, intercity rail, and airports have made California 
the nation's leading incubator for using public-private partnerships to 
develop, finance and manage transportation facilities and services.
    The California experiment with public-private partnerships has seen 
a number of new approaches used to deliver and manage transportation 
projects. In the highway sector, in addition to the SR 91 project, 
three major new toll roads have combined design-build development 
teams, a project-finance approach, and Federal credit assistance: a 
second AB 680 franchise--the SR 125 toll road south of San Diego, which 
is scheduled to come to market during 2001--as well as two new toll 
roads developed in the mid-1990's by the Orange County Transportation 
Corridor Agencies.
    In the transit sector, major new capital investments such as the 
BART Airport Extension and the recently awarded Los Angeles-Pasadena 
light rail line have drawn upon novel design-build procurement 
techniques. The Alameda Corridor freight rail project represents a 
unique joint venture between two major rail carriers, the Ports of Long 
Beach and Los Angeles, and numerous other local, State and Federal 
stakeholders. Several new private sector initiatives are being pursued 
across the State in the aviation sector.
    Outside of California, one sees unmistakable evidence both in other 
States and at the Federal level of greater willingness to experiment 
with innovative public-private approaches to address infrastructure 
investment needs. Taken together, these developments indicate that the 
evolution-if not the revolution--is well underway in how large 
infrastructure investments are being developed and financed.
    With a decade's experience in California, it is timely to look back 
and candidly assess the strengths and weaknesses of using public-
private partnerships for major transportation projects.
    Among the questions that need to be explored are:

      What kinds of projects are most suitable for public-
private partnerships?
      Are public policy objectives adequately being served 
through these public-private approaches?
      Have there been demonstrable advantages in terms of 
expedited project completion, greater cost-effectiveness, or reduced 
public sector risk?
      What are the appropriate roles for the public and private 
sectors at various stages of each project's development?
      Does the current development process properly balance 
social objectives such as environmental considerations and fair labor 
practices with capital investment needs?
      Which institutional models and capital structures appear 
to work best in terms of both economic efficiency and social equity?
    The lessons learned from California's experience--as well as that 
of other States and from recent Federal activities--could provide 
valuable insights into what new policies to consider for the upcoming 
State of California budget considerations and for the Federal 
reauthorization of the TEA-21 transportation bill in 2003.
           policy driver i: assessing the state of the state
The State Economy
    California's economy-really a series of major regional sub-
economies-has changed dramatically in recent years. The State domestic 
product is now of similar magnitude to the gross national products of 
major Western European trading partners such as Italy, the United 
Kingdom, and France. Moreover, California has been the epicenter of the 
e-economy. And yet, as profound as the emergence of e-commerce has 
been, the ``new'' economy is very much dependent on the infrastructure 
of the ``old"; businesses are increasingly reliant upon timely delivery 
of goods and services. At the same time, the mobility of e-business, 
which allows employers to locate their places of employment 
``virtually'' anywhere, makes good transportation links critical if the 
State is to remain an attractive venue for these high value 
enterprises. The State's population is expected to grow by another 10 
million residents by 2020, placing further burdens on aging transport 
infrastructure systems to move people and goods safely, quickly and 
cost-effectively.
Past State Investment Policy
    Investment in transportation infrastructure within the State has 
not kept pace with either the growth of population or the increase in 
travel demand. California's per capita investment in transport has 
declined by two-thirds in real terms since the 1960's. Forty years ago, 
transportation spending represented 23 percent of the State budget; 
today, it comprises about 6 percent. One of the major reasons for 
underinvestment has been the fiscal constraints of the tax limitation 
measures enacted in the 1960's and 1970's. The current electricity 
crisis has also added a new uncertainty as to budgeting for 
transportation.
    Presently, there is no exclusive dedicated State funding source for 
transportation, so it has had to compete with other governmental and 
social service programs for annual funding through the political 
process. Because of the lengthy lead-time required to develop major 
infrastructure projects, such investments are dependent upon stable and 
reliable long-term funding commitments. And, as with the electricity 
sector, new capital formation has been curtailed because of increased 
concerns about environmental issues. As a result, transportation 
services have deteriorated dramatically. For example, the time lost by 
the average motorist due to freeway delays has doubled over the last 
decade. Prospects for the future are problematic: Many of the county 
local option sales taxes adopted in the 1980's for transportation 
funding expire over the next several years, yet their extension by 
voters is uncertain.
Recent Initiatives
    The State has taken several positive steps in recent months to 
address these concerns. The Governor's Commission on Building for the 
21st Century will soon publish the results of its 18month survey of 
California's infrastructure investment needs. The final report is 
expected to cite that California today has over $100 billion in unmet 
transportation investment needs.
    Even prior to the completion of the Commission's report, the State 
had started leveraging its available funding through mechanisms such as 
the California Infrastructure and Economic Development Bank and Grant 
Anticipation Revenue Vehicles (GARVEEs). The Bank is a new $475 million 
State loan revolving fund designed to make loans to small and mid-sized 
transportation and other infrastructure projects. GARVEE Bonds, which 
were authorized by the State legislature last year, are a form of non-
tax backed borrowing in anticipation of future year's grant assistance 
from the Federal Department of Transportation. Another important 
advance is the enactment of bill A.B. 1473, under which the State would 
begin preparing annual Five-year Capital Facilities Plans to better 
integrate capital planning and financial policy decisions.
    Yet these measures by themselves will not be sufficient to overcome 
past years' underinvestment. Simply stated, more resources must be 
identified, collected and committed. And the State needs to consider 
how best to leverage these finite resources most effectively. 
California's recent electricity crisis has underscored the importance 
of a comprehensive State strategy that responds to market signals as 
conveyed through the pricing mechanism, to ensure a proper balance 
between supply and demand. Public-private partnerships (PPP' s) can 
play a key role in helping solve the problem-especially for the larger, 
more complicated projects.
Issues to be Addressed
    Conferees identified the following issues currently confronting 
State policymakers:

      There is a clear need for better planning of capital 
investments-specifically, more closely relating State transportation 
spending policy to State land use and housing policy. The State should 
integrate its planning and funding strategies for water systems, 
drainage, waste management and public buildings with its transportation 
investment decisions.
      The current allocation formula under S.B. 45 distributes 
75 percent of State transportation funding to the metropolitan planning 
organizations and retains 25 percent to be administered at the State 
level. This regional emphasis, while valuable in vesting investment 
decision authority with metropolitan organizations, makes it difficult 
to address statewide transportation issues on a comprehensive and 
systematic basis. For example, it is difficult to coordinate actions 
for inter-regional investments such as intercity high-speed rail or 
regional airport systems to relieve congestion at heavily used 
facilities.

    As zoning is a local matter, the MPO's cannot control land use 
policy decisions at the municipal level. Fractionalized zoning policy 
at the local level often leads to a disconnect between infrastructure 
planning efforts and actual development activities.

      The plan of finance for new capital projects should 
explicitly identify not only how to finance upfront acquisition costs 
but also how to pay yearly operating and maintenance costs over the 
projects' useful lives. The financial interdependence between asset 
acquisition and asset maintenance must be firmly established at the 
outset. The initial capital investment decision should be based upon 
Life-Cycle Costing, taking into account the best value for money over 
the long-term economic life of the asset.
      To the extent tax sources fall short, the State should 
explore user fees, since they send a clear market signal about consumer 
demand for goods and services. To the extent there are ``free'' 
transportation alternatives (such as a freeway with tolled express 
lanes), the user charge allows individuals to make an economic decision 
as to whether the timesavings and convenience of the tolled facility 
are worth the cost. User charges also free up limited grant funds for 
those projects that are important for reasons of social equity or 
public policy, but are not financially self-sustaining. By freeing up 
capacity on non-tolled facilities, user charges actually may benefit 
those who are not in a position to pay. Ideally, these charges would 
reflect the user's actual consumption of transportation services, such 
as fees based on weight-distance or vehicle miles traveled. The 
challenge in establishing user charges is discerning the benefits that 
accrue to society as a whole from the benefits accruing to the 
individual user or some narrower group of beneficiaries.
      In addition to direct user charges, indirect user charges 
such as supplemental gas taxes, capacity charges on Alternative Fuel 
Vehicles, and the extension of expiring local option sales taxes also 
deserve consideration. Once the underlying funding sources are in 
place, policymakers can select which tactical financing techniques 
would be most effective.
   policy driver ii: defining roles and responsibilities in a public-
                       private partnership (ppp)
    For the overwhelming majority of transportation projects and 
services, traditional governmental ownership, operation and financing 
will continue to be the most appropriate approach. However for some 
types of projects-especially those that are large or complex-a joint 
venture between the public and private sectors may prove advantageous. 
The non-profit sector may also play a significant role in the 
institutional structure.
Reasons to Consider PPP's
    State and local governments around the country are turning to joint 
ventures with private sector organizations to meet their capital needs. 
They are doing so for a variety of reasons, including:

      Production Efficiency. Oftentimes, private firms can 
build projects faster (if not cheaper), using design-build and other 
innovative procurement techniques.
      Operating Efficiency. Complex projects may be managed 
more efficiently, due to greater expertise with innovation and 
technology, the presence of commercial competition, and the incentive 
of performance-based compensation.
      Risk Transfer. Private firms may be willing to assume 
certain risks from the governmental project sponsor as concerns 
construction, performance, or demand for the facility. However, the 
private sector should not be viewed as the ultimate repository for all 
project risks-only for those exposures which are of a business (as 
opposed to regulatory or political) nature.
      Access to New Sources of Capital. Private firms may be 
able to help identify new sources of project revenues that can be 
monetized. In addition, the private sector partners may be willing to 
invest directly in projects or draw upon other funding sources not 
typically employed in conventional municipal financing of projects.
      Simplified Project Management. Out-sourcing 
responsibilities to third party providers should reduce the 
governmental unit's need for staffing up during construction and allow 
the organization to maintain its institutional focus on current 
operations.

    Features that make a Project a Good PPP Candidate The following 
project characteristics lend themselves to a PPP:

      Size and/or complexity issues, which neither the public 
nor the private sector could resolve adequately on their own.
      Widely acknowledged need for the project (public 
acceptance).
      Equilibrium and trust among the various public and 
private stakeholders in the project. Central to achieving this goal is 
obtaining financial commitments from both public and private 
participants, to align their interests (i.e., ensure that both public 
and private participants are ``sitting on the same side of the 
table'').
      A governmental sponsor with the policy and legal 
infrastructure to see the process through.
      Clear demarcation of responsibilities of different 
parties for securing public approvals, environmental clearances, etc.
      A dependable and bankable revenue stream.
      The ``tummy test''--an intangible sense that the project 
``feels right,'' being structured as a PPP.
Key Issues Confronting PPP's
    While joint ventures can confer substantial benefits, several 
sensitive public policy issues need to be addressed early on in the 
project development process:

      Labor Policy. At least for larger capital projects in 
California, the issue in construction is not labor wage levels, (Davis-
Bacon) but labor availability. There is a dearth of qualified workers 
to build and manage complex projects. Concerns about displacement of 
governmental workers in PPP's generally can be resolved.
      Unsolicited Proposals. The A.B. 680 program of 1990 has 
seen one of the four projects built and become operational (SR91 in 
Orange County). The second project (SR 125 near San Diego) is expected 
to be financed in spring of 2001. A third (Santa Ana Freeway) is still 
in the planning stages, and the fourth has been tabled. Each of these 
projects was identified and advanced by private development teams, not 
by metropolitan planning organizations (MPO's) or the State. Yet 
private sector identification and sponsorship of projects is not a 
problem per se. What is imperative, however, is that the projects be 
placed on State transportation plans and supported by the host 
governmental jurisdiction.
      Procurement Rules. In California (as in most States), 
prevailing law generally does not permit design-build procurement. For 
the handful of major projects done thus far in California using design-
build, either special legislation was required or special legal 
authority was available. A.B. 680, for example, expressly authorized 
design-build for its four pilot highway projects. Two measures enacted 
by the legislature last year, A.B 958 and A.B. 2296, allow design-build 
to be used by transit agencies and certain counties for larger 
projects.

    Another approach is to establish a Joint Powers Authority, which 
can draw upon the inherent powers of one of its sponsoring local 
governmental units to use design-build, as was the case with the 
Alameda Corridor freight rail project.
    At the Federal level, although TEA-21 has liberalized the 
procurement rules for federally assisted projects, contractors under 
the National Environmental Protection Act still are prohibited from 
having an interest in the ultimate development of a project. This rule 
generally prevents construction firms that assist projects in their 
environmental review process from continuing to be involved in design 
and construction. It results in a loss of continuity and discourages 
entrepreneurial efforts in the critical developmental phase of 
potential projects.

      Environmental Risk. Environmental permitting and 
governmental approvals are inherently political processes. Although 
private developers can play a valuable role in synthesizing the project 
design with the environmental review process, they are ill equipped to 
absorb what fundamentally are non-business risks. Moreover, in contrast 
to other environmental statutes such as the Clean Air and Clean Water 
Acts, there is no statute of limitations governing challenges to 
transportation projects under the National Environmental Protection 
Act. Unlike a decade ago, developers are now unwilling to assume the 
financial risk of public approvals in these early stages (as in SR 
125).
      Exit Strategy. Most of policymakers' efforts thus far on 
PPP have been focused on developing projects and negotiating entrance 
strategies for private sector participation. Yet a fundamental 
requirement for attracting investment capital is liquidity. 
Insufficient attention has been given to the investor's exit strategy 
during the life of a franchise, including valuation of the asset or 
concession. Although there were a number of political issues 
surrounding the proposed sale of the SR91 franchise, at least part of 
the controversy was attributable to insufficient local input into 
evaluating the concession operator's desired exit strategy.
     policy driver iii: selecting tools to guide capital investment
Benefits of Design-Build Procurement
    As demonstrated by the two Transportation Corridor Agency toll 
roads built thus far (total investment of $3 billion) design-build (vs. 
traditional design-bid-build) can provide substantial benefits for 
larger projects:

      Simplified Project Management for the governmental 
project sponsors;
      Better Cost controls (reduced exposure to cost overruns);
      Faster Completion (a recent university study surveying 
major capital projects determined on average that design-build leads to 
33 percent faster construction completion); and
      Base price of hard costs may be comparable or even 
slightly higher, but savings on soft costs and the other benefits 
described above often justify it.
Linkage between Investment and Ongoing Asset Management
    The relationship between the initial project investment decision 
and periodic capital maintenance and renewal must be strengthened to 
preserve the value of the investment over time. On toll roads with a 
net revenue pledge, the rate covenant covers both capital recovery and 
operations and maintenance requirements.
    For non-tolled facilities, this full-cost recovery can be achieved 
through synthetic mechanisms. For example, long-term performance 
warranties from the constructor can require that assets be maintained 
at a specified service level in exchange for an up-front or ongoing 
warranty fee.
    Another approach, used in the United Kingdom and elsewhere 
overseas, involves shadow tolling. Under shadow tolls, an operator is 
paid a per vehicle fee by the governmental sponsor based on throughput, 
to build and maintain an asset at a defined level.
    GASB Statement 34, going into effect for governmental units July 1, 
2001, mandates more complete disclosure of governmental infrastructure 
assets, including recognition of depreciation expense if asset quality 
deteriorates. Warranties or shadow tolls would link capital investment 
with capital renewal, and help ensure that infrastructure assets are 
adequately maintained-both for accounting and transportation purposes.
Special Purpose Entities
    California popularized the concept of creating new Special Purpose 
Public Agencies (like the Orange County Transportation Corridor 
Agencies, Alameda Corridor Transportation Authority, and LA-Pasadena 
Rail Construction Authority) to carry out infrastructure development on 
a project-finance basis. An alternative approach involves the formation 
of a special purpose notfor-profit corporation under Internal Revenue 
Service revenue procedure 63-20. For example, two recently opened 
several hundred million-dollar toll roads, the Pocahontas Parkway in 
Virginia and the Southern Connector in South Carolina, utilized 63-20 
corporations to develop and finance the facilities. Having a singular 
mission, these entities bring a special focus to completing the 
projects.
      policy driver iv: comparing different transaction templates
Institutional Models
    There are a variety of organizational forms that can be used to 
advance infrastructure projects. They can be viewed as stretching along 
a continuum, ranging at one end as conventional public projects to the 
other end as fully commercialized facilities. The accompanying diagram 
illustrates four distinct positions along the spectrum from purely 
public to purely private. Projects can be categorized in terms of 
whether public or private parties share in the risks and rewards of 
development, operation and ownership.
               increasingly public--increasingly private
    The financing component is a discrete element but also may be 
classified as being either public or private. Financing is considered 
to be public if either:

    a. the capital funding source for the loan or investment is public 
tax dollars (e.g. a governmental infrastructure bank, revolving fund or 
public pension fund capitalized with public funds); or

    b. if the loan repayment source is derived from or guaranteed by 
public tax dollars (sales taxes, State Highway Fund moneys, Federal-aid 
supported, etc.).

    On this basis, a loan funded by a State infrastructure bank, even 
if the borrower is a corporate entity, would be deemed ``public 
financing.'' Likewise, a privately funded loan for a transit project 
developed and operated by a private consortium but payable from or 
guaranteed by the State transportation fund, would be considered public 
financing. On the other hand, a taxable or tax-exempt revenue bond sold 
into the capital markets and backed by user charges would be deemed 
``private,'' even though the obligations were issued by a public 
conduit (e.g. Transportation Corridor Agencies, Alameda Corridor). The 
ultimate determinant is whether public capital is at-risk, either in 
terms of the initial funding or the ultimate repayment of the 
obligation.

                                                     Matrix of Public-Private Transaction Templates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Turnkey Development    Warranty/Concession
                                       Governmental Model            Model                  Model                       Profit-Sharing Model
--------------------------------------------------------------------------------------------------------------------------------------------------------
Examples of Projects...............  LACMTA; Caltrans......  TCA; ACTA; BART        Hudson-Bergen; NM44..     Las Vegas Monorail; SR 91, Dulles Greenway
                                                              Airport; Extn.
Development........................  Public................  Private..............  Private..............                                        Private
Operation..........................  Public................  Public...............  Private..............                                        Private
Ownership..........................  Public................  Public...............  Public...............                                        Private
Financing..........................  Public................  Public or Private....  Public or Private....                                        Private
--------------------------------------------------------------------------------------------------------------------------------------------------------
Models on the left of the table are increasingly public and models on the right are increasingly private.

    The four principal financing templates are:
Governmental Model
    Starting on the left side of the chart would be governmentally 
developed, owned and operated projects, using public tax dollars. 
Examples include Caltrans highway projects or other normal public works 
spending, either pay-as-you-go or debt financed, with the governmental 
unit responsible for funding operating and maintenance costs. The vast 
majority of transportation projects are developed in this fashion.
Turnkey Development Model
    Of greater ``private'' character are turnkey financings, where the 
projects are developed under a guaranteed maximum price and guaranteed 
completion date by a private design-build team and then turned over to 
the governmental sponsor. Because of construction risk transfer, there 
are financial rewards and penalties to the constructors based upon 
performance. In some cases, the facilities are financed principally 
with project-generated revenues (project-financing) such as the San 
Joaquin Hills and Foothill-Eastern Toll Road projects developed by the 
Transportation Corridor Agencies in Orange County. In other cases, such 
as the BART airport extension, the projects are funded conventionally 
with public grants and local tax dollars.
Warranty/Concession Model
    Farther along the spectrum to the right would be projects that are 
publicly owned, but use private parties not only for development but 
also for operation/maintenance of the facility. Generally, the 
compensation is based on a flat fee or a cost-plus basis, rather than a 
profit-sharing formula based upon the net revenues or patronage volume. 
The new Hudson-Bergen light rail line in New Jersey falls into this 
category. Under current tax law, the term and compensation for private 
management contracts associated with facilities financed with tax-
exempt debt is severely constrained, diluting any incentives for 
superior performance.
    Another way to get ongoing private participation without running 
afoul of the IRS management contract rules is through long-term 
performance warranties on the physical condition of the infrastructure 
assets themselves. For example, the New Mexico Corridor 44 road-
widening project has entered into a long-term warranty with a private 
firm for the pavement and bridge structures extending up to 20 years. 
In both the Hudson-Bergen and the New Mexico 44 projects, the pledged 
repayment source for debt service is public moneys, not project 
revenues.
Profit-Sharing Model
    Finally, at the far right end are fully commercial projects, 
involving private development, operation, and even ownership of the 
facility. Financing sources are largely or entirely project-based 
revenue streams, rather than public or tax-backed sources. Compensation 
to the operator is based upon utilization of the facility and/or net 
income, resulting in performance-based rewards. Major examples of this 
are the SR91 Express Lanes in Orange County, the Dulles Greenway in 
Virginia, and the Las Vegas monorail, currently under construction.
    No single model or structure can be said to be ``the best"; rather, 
the most suitable model will depend on facts and circumstances 
surrounding each particular project. Among the factors that will 
determine which approach is most appropriate are:

      political support for an alternative project delivery 
method;
      need for project cost and completion date certainty 
(which is particularly applicable to project financings);
      State law considerations (especially procurement 
regulations);
      Federal tax code implications (as concerns eligible 
financing instruments);
      commercial potential of the project, as reflected in 
capital markets acceptance; and
      degree of risk transfer to the private sector.

    As noted above, projects need not be self-liquidating to benefit 
from a PPP approach. Concession arrangements for subsidized services 
such as public transport have proven successful overseas because 
incentivized performance for private operators can produce better 
service, lower public subsidy, and greater cost transparency. For 
instance, Melbourne, Australia achieved these enhancements in out-
sourcing operations of its commuter rail network.
    Nor is a commercial or ``privatized'' approach incompatible with a 
cooperative working arrangement with organized labor. In fact, both the 
management team and the union work force can benefit from entering into 
a project labor agreement at the outset of the project that squarely 
addresses prevailing wages, non-disruption of work schedule, and other 
features that will facilitate the timely, on-budget completion of a 
high-quality project.
    Historically, most transportation projects have been funded either 
through governmental grants (public equity) or tax-supported municipal 
bonds (public debt), since these have represented the lowest cost 
sources of capital. However, there are alternative sources of private 
sector equity and debt capital that may be drawn upon for 
infrastructure projects with steady cash-flows linked to economic 
growth. Low tax bracket institutional investors such as life insurance 
companies and non-taxable pension funds would benefit from being able 
to diversify into a new economic sector that presently is absent from 
their portfolios. Because the major financial vehicle for 
infrastructure has been tax-exempt bonds, it has not been appropriate 
for pension funds as tax-exempt entities to purchase such paper when 
higher-yielding corporate bonds of equal quality are available.
    However, several recent developments have lowered the relative 
funding cost of taxable debt and equity:

      The Federal budget surplus has reduced the supply of 
Treasury bonds, lowering the benchmark against which taxable paper is 
priced, relative to municipal bonds.
      Pension funds and insurance companies have gained greater 
familiarity with project financings, through investing in debt and 
equity in overseas infrastructure projects and domestic power 
generation facilities. They are now willing to accept longer term debt 
obligations with minimal amortization in the early years, cushioning 
the cash-flow impact on project revenues.
      New Federal programs such as TIFIA (the Transportation 
Infrastructure Finance and Innovation Act of 1998) provide debt capital 
on terms which in some cases are even more favorable than those in the 
municipal bond market. Other proposed legislation such as tax credit 
bonds would allow de-coupling of the principal from the interest 
portion, creating a stand-alone taxable debt instrument suitable for 
retirement funds.
      Finally, even though infrastructure projects are highly 
capital intensive, cost savings on the operating side from private 
participation may partially offset the higher capital costs of taxable 
rate financing.

    Taxable Investment Funds. Together, these factors are combining to 
reduce the disparity in funding cost between the taxable and tax-exempt 
markets. As a result, project sponsors may now find that it is cost-
effective to seek out pension funds and other taxable market investors 
to invest equity and debt capital in project financings. As corporate, 
union and public retirement systems represent $5 trillion in investment 
assets, even allocating a small portion of their portfolios to invest 
in U.S. transportation infrastructure could have significant 
ramifications. They could invest either directly or through pooled 
investment accounts similar to mutual funds.
"Innovative Finance'' Techniques
    Innovative approaches that involve PPP's to develop, operate or own 
transportation assets will lend themselves toward using innovative 
financing techniques. ``Innovative Finance,'' while not a panacea, can 
help address these capital investment needs once the underlying payment 
source for the project has been identified.
    Innovative Finance can be defined as the use of external financing 
approaches that draw upon at least one of the four following elements:

    1. New Sources of Repayment that haven't previously been used to 
secure external financing.

    2. New Methods of Service Delivery that offer development, 
production or operational efficiencies.

    3. New Sources of Investment Capital that broaden the funding 
alternatives for transportation projects beyond conventional tools.

    4. New Methods of Paying Financial Return to investors, that either 
reduce effective financing cost for the project sponsor or shift risks 
(such as interest rate and financial risk) to third party investors, or 
do both.


    Participants at the Roundtable suggested a number of innovative 
finance ideas relating to repayment streams, service delivery, funding 
sources, and investment return:
                        new sources of repayment
State & Local Taxes

      Extension of Local Option Sales Tax
      New Tax on Alternative Fuel Vehicles
      Inflation adjusted Gas Tax
      Other User-related fees (e.g. weight-distance)
      Non-user related Taxes (internet/mail order sales tax, 
property transfer tax, etc.)
      A defined percentage of State General Fund Revenues
Other

      Shared revenue from fiber optics, etc. along State 
rights-of-way
      Tobacco Funds
      State version of GARVEE Bonds (using counties' share of 
State Gas tax allocation)
      State-aid Intercept mechanism to credit enhance local 
bonds
      Development Risk Insurance
New Methods of Service Delivery

      Broaden application of innovative procurement techniques 
such as design-build.
      Modify transit requirement 13(c) [consent required of DOL 
and local unions to proposed project labor agreements] to make it 
easier for transit agencies to out-source existing operations/capital 
improvements via tendering routes to concessionaires.
      Liberalize the management contract rules or seek tax code 
change (private activity bonds for highways) to allow performance-based 
compensation to private operators of toll facilities financed with tax-
exempt debt.
      Permit outsourcing of highway maintenance activities or 
enter into long-term warranties to guarantee defined service standard 
levels of State highways under GASB Statement 34.
      Change statute of limitations under NEPA for challenges, 
so that it is consistent with other environmental statutes (e.g. within 
60 days from the Record of Decision).
New Sources of Investment Capital

      Public (State and local) Pension Funds and Taft-Hartley 
(union) Pension Funds, investing either directly or through pooled 
accounts.
      Leveraged Leasing (domestic and cross-border tax-oriented 
equity).
      Extend TIFIA beyond 2003.
      Reduce threshold project size below $100 million for 
TIFIA assistance, to make it consistent with the lower thresholds in 
TEA-21 for using design-build (e.g. $50 million).
New Methods of Paying Financial Return

      Tax Credit bonds (interest paid by U.S. Treasury in the 
form of a tax credit to the investor).
      Shadow Tolls (per vehicle compensation to private 
concessionaire).
      Variable Rate bonds for State transportation borrowings 
to hedge interest rates.
Government Policy Tools
    Historically, the public sector has used direct governmental 
spending to expand transportation capital investment. However, where 
innovative finance and public-private ventures are involved, it may be 
possible to generate additional investment through less costly means. 
To encourage the foregoing innovative finance techniques, the 
government sector may use these policy tools:

    1. Regulatory Incentives-streamlining procedures, removing program 
restrictions, etc.;

    2. Tax Incentives-using the tax code to encourage the free flow of 
capital into certain desired investment and operational activities; and

    3. Credit Incentives-using fractional credit assistance (direct 
loans or loan guarantees) to leverage a larger multiple of private 
financing.

    Each of the suggestions under the four innovative financing tools 
may be addressed through regulatory, tax, or credit policy initiatives.
              conclusion: encouraging continued innovation
    The following policy recommendations emerged from the Roundtable 
discussion:--Process Streamlining. Process reform was recommended in 
three areas:

      State procurement practices should be simplified for 
public-private partnerships;
      Regional financing protocols with Federal agencies need 
to be supported; and
      Environmental review processes should be consolidated 
with public agency responsibility.

    Environmental Risk. Project-based financings must have time-
certainty and cost-discipline to attract private debt and equity 
capital. Because securing environmental and public permitting approvals 
is fundamentally a governmental rather than a commercial process, the 
private sector is not equipped to assume the financial responsibility 
for obtaining the environmental record of decision. The time period for 
challenges to projects' environmental impact statements under NEPA 
should be made consistent with other environmental statutes.
    Co-Investment by Public & Private Sector. User fees can be both an 
effective and equitable way of generating project-funding streams. 
However, in most cases, project-generated revenues alone will not be 
sufficient to fully finance the projects. Some level of public 
investment will be required, and it needn't take the form of 
contributed capital. For instance, the Alameda Corridor has four 
distinct layers of debt investment-first tier capital markets, second 
tier TIFIA loan, third tier capital markets, and fourth tier port 
loans-as well as lesser amounts of Federal, State and local grant 
funding. In addition to reducing the burden on project revenues to 
cash-flow the private investment, public co-investment is useful in 
that it gives all parties a financial stake in the commercial success 
of the enterprise.
    Subsidy Level. Even where an external operating subsidy is required 
(e.g. public transit or freeway maintenance), the public sector doesn't 
have to provide that service. As has been demonstrated overseas, there 
may be substantial reductions in public subsidy required and/or 
enhancement of service levels through selective outsourcing of 
operations to private parties.
    Special Purpose Agencies. Major capital projects can benefit by 
establishing a special purpose entity to undertake development and 
operations, whose sole responsibility is the project. The organization, 
which could be a legislatively established new authority, a joint 
powers authority formed by several jurisdictions, or a private non-
profit corporation formed by the principal public and private 
stakeholders, helps bring a singular institutional focus to completing 
the project on-time and within budget.
    Design-Build. Larger or more complex projects often can accelerate 
completion and reduce construction and performance risk through design-
build procurement. Yet State law may make it difficult to proceed on 
any other basis than design-bid-build, with its attendant delays and 
lack of accountability. Also, State and Federal law should allow a 
contractor to participate in both the environmental analysis of a 
project and its subsequent construction, to gain the benefit of their 
continued involvement from project inception to project completion.
    Linking Investment & Maintenance. Reliable funding of ongoing 
project operations and maintenance costs must be identified at the 
outset, to ensure the best capital investment decision is made. Among 
the institutional arrangements that can foster this Life-Cycle Costing 
perspective are long-term franchise agreements (for toll facilities) or 
shadow toll agreements (for free facilities); or long-term warranties 
stipulating that specific asset quality levels be maintained over the 
life of the project.
    Role of Innovative Finance. Once a project's revenue stream has 
been identified, innovative finance techniques can assist in 
capitalizing the value of the future project revenues to fund the 
investment today. Federal, State and local policymakers can use 
regulatory, tax and credit incentives to encourage the use of new 
financial instruments. The financial tools themselves may draw upon one 
or more of the following mechanisms: new repayment streams, new 
procurement methods, new sources of investment capital, and new methods 
of a paying financial return. Given that many of these financing 
approaches already are in use in the private sector, a more apt name 
for ``innovative finance'' might be ``project-based finance.''
    Continuing Education. Presently, there is very little offered in 
the way of organized educational programs on the use of PPP's for 
infrastructure development. The dearth of relevant training extends 
both to entry-level candidates for public or private positions (Masters 
programs) and to mid-career corporate and governmental practitioners. 
An ongoing university-sponsored program on new project development and 
financing techniques could prove highly useful in further developing 
both public and private sector management skills in this growing and 
dynamic discipline.
                                 ______
                                 
   Table 1: Key Drivers on Innovative Finance Proposals for Project 
              Sponsors, Investors and Federal Policymakers
           perspective key questions project sponsor/borrower
      What is the effective financing cost (IRR)?
      How high is the Annual Payment Factor?
      Is the transaction reported as a direct or contingent 
liability on the Sponsor's balance sheet?
      What legal steps (State legislation, etc.) must be taken 
to utilize it?
      How difficult is it for Management to implement it?
Investor
      Is the risk-adjusted rate of return competitive?
      Is there a secondary market for the product (liquidity)?
      Are there other investment risks (tax compliance, call 
risk, etc.)?
      Will it help diversify the investor's portfolio exposure?
      Are there any other strategic reasons for investing aside 
from its return?
Federal Policymaker
      What is the proposal's budgetary cost?
      Is the finance tool cost-effective (how much leveraging 
of Federal resources)?
      What is the overall economic return (benefit/cost ratio)?
      How well does it achieve multiple Federal policy 
objectives?
      Improve Access
      Enhance Mobility
      Shift Risks away from the Government
      Attract Non-Federal Resources / Private Participation
      Accelerate Projects
                                 ______
                                 
  Response of David Seltzer to Additional Question from Senator Baucus
    Question. Many of us are concerned about the continued viability of 
the Highway Trust Fund. That is, with increased fuel economy and 
incentives for alternative fuels, can the Trust Fund continue to meet 
our ever-increasing highway needs? In fact, in the MEGA-TRUST Act, I 
create a commission to look at the Trust Fund and its continued 
sustainability. When we talk about innovative financing for highways 
are we talking about a way to supplement the Highway Trust Fund or 
replacing the Trust Fund with this ``new way of doing business?"
    Response. Perhaps the most accurate answer is ``a new way of doing 
certain types of business.''
    The vast majority of highway projects are not capable of generating 
their own revenue streams, and will continue to be reliant upon grant 
funding from Federal and State sources. That is why the findings of the 
National Surface Transportation Infrastructure Financing Commission 
proposed in S. 2678 will be so vital to policymakers in identifying 
ways to sustain the Highway Trust Fund in coming years.
    However, the term ``Innovative Finance'' really encompasses a 
number of different initiatives that can help promote investment in the 
Nation's surface transportation system.
    First, it references grant management techniques that give States 
greater flexibility in using existing Highway Trust Found resources. 
GARVEE Bonds are a good example of this; the total resources committed 
to highways are not increased, but projects can be greatly accelerated, 
through monetizing future streams of Federal receivables. Another 
example is State Infrastructure Banks and section 129 loans, where 
States may use Federal-aid apportionments to fund loans and provide 
other types of financial assistance.
    Second, Innovative Finance connotes innovative procurement methods, 
such as design-build contracting, which can expedite projects, transfer 
risks to private parties, and/or save the project sponsor money. The 
pilot provisions for design-build contracting in TEA-21 provide an 
excellent vehicle for evaluating such alternative approaches. Further 
refinements, especially as concerns streamlining Federal approvals, 
would be beneficial.
    Third, the term includes innovative asset management techniques 
that provide superior value-for-money over the long-term. Initiatives 
that encourage States to make project investment decisions with regard 
to the life cycle costing over the economic life of the project should 
be encouraged. For example, long-term warranties such as those New 
Mexico has used on its Corridor 44 project, or other long-term 
performance-based private management contracts, help ensure that the 
initial capital investment is maintained adequately to optimize its 
value.
    Finally, Innovative Finance includes new financial instruments that 
either lower the cost of capital obtained from existing sources, 
identify new sources of capital, or do both. For instance, Federal 
credit programs such as TIFIA establish the Federal Government as a new 
source of debt capital on favorable terms for certain types of 
projects. This can make it easier for projects with their own revenue 
streams, such as toll roads, to access the capital markets for the 
balance of their needs. To the extent a project sponsor can more 
readily borrow against non-Federal revenue streams, the number of 
claimants on a State's apportionments is reduced.
    Other new financial instruments, based on tax code incentives, can 
reduce the required cash outlays from traditional funding sources by 
providing a return to investors in the form of a non-cash tax benefit. 
Techniques such as tax credit bonds or tax-oriented leasing serve to 
attract debt and equity capital from private sources, again freeing up 
traditional revenue sources for other projects.
    In summary, the combination of grants management, procurement, 
asset maintenance and financing techniques comprising ``Innovative 
Finance'' should be viewed as an important element of any national 
transportation policy. But it will never replace the need for a long-
term strategy for augmenting Highway Trust Fund resources that are used 
to fund grants required by most surface transportation investments. 
Ultimately, the political process will determine the types and amounts 
of resources directed to the HTF, based on the desired level of 
investment activity and the perceived role of the Federal Government 
relative to State, local and other funding partners. .
                               __________
  Statement of Phyllis F. Scheinberg, Deputy Assistant Secretary for 
     Budget and Programs United States Department of Transportation
    Chairman Jeffords, Chairman Baucus, Ranking Members Smith and 
Grassley, and members of the committees: Thank you for holding this 
hearing today and inviting me to testify on Federal innovative finance 
initiatives for surface transportation projects. These financing 
techniques, in combination with our traditional grant programs, have 
become important resources for meeting the transportation challenges 
facing our Nation. Secretary Mineta, in his testimony last January 
before the Environment and Public Works Committee, indicated his desire 
to increase their application.
    The Secretary stated that ``Expanding and improving innovative 
financing programs in order to encourage greater private sector 
investment in the transportation system . . .'' will be one of the 
Department of Transportation's core principles in working with 
Congress, State and local officials, tribal governments and 
stakeholders to shape the surface transportation reauthorization 
legislation. He remains steadfast in his support for these programs.
Defining ``Innovative Finance''
    Perhaps the first issue to address today is ``What is innovative 
finance?'' We increasingly hear the term used in the context of 
transportation projects, but what does it really mean? We at the 
Department apply the term to a collection of management techniques and 
debt finance tools available to supplement and expand the flexibility 
of the Federal Government's transportation grant programs. We see the 
primary objectives of innovative finance as leveraging Federal 
resources, improving utilization of existing funds, accelerating 
construction timetables, and attracting non-Federal investment in major 
projects. The quantifiable successes of such innovative finance are 
beginning to mount.
    The July 2002 report entitled ``Performance Review of U.S. DOT 
Innovative Finance Initiatives'' states that Federal investments of 
$8.6 billion have helped to finance projects worth a total of $29 
billion, a ratio of $3.40 invested for each Federal dollar. Of this $29 
billion, more than 27 percent, or $8 billion, consists of debt that 
will be repaid from new revenue sources. Sponsors report that more than 
50 projects were accelerated from 6 months to 24 years as a result of 
innovative financing compared to transportation grants. The total 
economic impacts of $91 billion nationwide represent benefits that have 
accrued more rapidly than ever possible using a pay-as-you-go method.
    While these achievements demonstrate the value of innovative 
finance techniques and tools, they also deserve a realistic assessment 
in the context of the grant system, financed by the Highway Trust Fund, 
that provides the foundation of Federal financial assistance for 
surface transportation projects.
    The first assessment in realism is to examine the ``innovative'' 
nature of the financial tools. Improving the flexibility of fund 
administration and creating opportunities to borrow and lend Federal 
money have been vitally important initiatives, and we can thank 
numerous role models outside the transportation sector for developing 
these tools long ago. The ``new'' or ``innovative'' feature of these 
tools, then, derives from their application to the Federal 
transportation program. Further, these financing techniques have now 
become better known and accepted by many State and local transportation 
partners. Because the demand for transportation investment throughout 
the country consistently exceeds the supply of resources, those regions 
facing the greatest challenges to mobility have readily embraced--and 
in many cases paved the way for--the opportunities provided by 
innovative finance.
    The second assessment concerns the potential for innovative finance 
to ease demands on the current grant funding distributed each year to 
States and local agencies. That doesn't seem likely. The focus of 
innovative finance (and perhaps a more appropriate term to designate 
these tools) is project finance. The techniques supplement existing 
programs on an as-needed, project-by-project basis. Transportation 
officials must evaluate each project individually to determine the best 
financing approach. The grant programs remain the bulk of Federal 
transportation assistance, supplemented by the extra muscle and 
flexibility of innovative finance.
    The diagram below depicts a pyramid that illustrates the range of 
surface transportation projects and the innovative tools available for 
financing them. The base represents the majority of projects: those 
that rely on grant-based funding, but may benefit from measures that 
enhance flexibility and resources. Various Federal funds management 
techniques, such as advance construction, tapered match, and grant-
supported debt through Grant Anticipation Revenue Vehicles, or GARVEEs, 
can help move these projects to construction more quickly. The mid-
section represents those projects that can be partially financed with 
project-related revenues, but may also require some form of public 
credit assistance. State Infrastructure Banks (SIBs) can assist State, 
regional, and local projects through low-interest loans, loan 
guarantees, and other credit enhancements. State loans of Federal grant 
funds known as Section 129 loans represent another credit assistance 
technique. The Transportation Infrastructure Finance and Innovation Act 
(TIFIA) program provides credit assistance to a small number of large-
scale projects of regional or national significance that might 
otherwise be delayed or not constructed at all because of risk, 
complexity, or cost. The peak of the pyramid reflects the very small 
number of projects able to secure private capital financing without any 
governmental assistance.
        Federal Project Finance Tools for Surface Transportation


The TIFIA Credit Program
    Let me begin with the program that, through the leadership of the 
Senate during enactment of the Transportation Equity Act for the 21st 
Century (TEA-21), provides a direct role for the Federal Government to 
assist large transportation projects. In June 2002, the Department 
delivered its Report to Congress on the Transportation Infrastructure 
Finance and Innovation Act of 1998 (TIFIA), which authorizes the 
Department of Transportation (DOT) to provide three forms of credit 
assistance--secured (direct) loans, loan guarantees and standby lines 
of credit--to surface transportation projects of national or regional 
significance.
    The public policy underlying the TIFIA credit program asserts that 
the Federal Government can perform a constructive role in 
supplementing, but not supplanting, existing capital finance markets 
for large transportation infrastructure projects. As identified by 
Congress in TEA-21,``. . . a Federal credit program for projects of 
national significance can complement existing funding resources by 
filling market gaps, thereby leveraging substantial private co-
investment.'' Because the TIFIA program offers credit assistance, 
rather than grant funding, its potential users are infrastructure 
projects capable of generating their own revenue streams through user 
charges or other dedicated funding sources.
    Identifying a constructive role for Federal credit assistance 
begins with the acknowledgement that, compared to private investors, 
the Federal Government's naturally long-term investment horizon means 
that it can more readily absorb the relatively short-term risks of 
project financings. Absent typical capital market investor concerns 
regarding timing of payments and financial liquidity, the Federal 
Government can become the ``patient investor'' whose long-term view of 
asset returns enables the project's non-Federal financial partners to 
meet their investment goals, allowing the project's sponsors to 
complete a favorable financing package.
    The TIFIA program's pragmatic challenge is to balance the objective 
of advancing transportation projects with the equally important need to 
lend prudently and protect the Federal interest. The DOT must apply 
rigorous credit standards as it fashions assistance to improve the 
financial prospects of participating projects. The Federal objective is 
not to minimize its exposure but to optimize its exposure-that is, to 
take prudent risks in order to leverage Federal resources through 
attracting private and other non-Federal capital to projects.
    The TIFIA program assistance is meant to support expensive, complex 
and significant transportation investments. In general, a project's 
eligible costs must be reasonably anticipated to total at least $100 
million. Credit assistance is available to highway, transit, passenger 
rail and multi-modal projects. Other types of eligible projects include 
intercity passenger rail or bus projects, publicly owned intermodal 
facilities on or adjacent to the National Highway System, projects that 
provide ground access to airports or seaports, and surface 
transportation projects principally involving the installation of 
Intelligent Transportation Systems (ITS), for which the cost threshold 
is $30 million. The TIFIA credit assistance is limited to 33 percent of 
eligible project costs.
    Congress has authorized the DOT to provide up to $10.6 billion of 
TIFIA credit assistance through the TEA-21 authorization period of 
1998-2003. From the Highway Trust Fund, Congress authorized $530 
million, subject to the annual obligation limitation on Federal-aid 
appropriations, to pay the subsidy cost of TIFIA credit assistance and 
related administrative costs. The subsidy cost calculations establish 
the capital reserves which the DOT must set aside in advance to cover 
the expected long-term cost to the Government of providing credit 
assistance, pursuant to the Federal Credit Reform Act of 1990 (FCRA).
    To date, the DOT has selected 11 projects, representing $15.7 
billion in transportation investment, to receive TIFIA credit 
assistance. The TIFIA commitments total $3.7 billion in credit 
assistance at a subsidy cost of about $202 million. The DOT has 
received 38 letters of interest and 15 applications from project 
sponsors. All major categories of eligible projects--highway, transit, 
passenger rail and multi-modal--have sought and received credit 
assistance. The TIFIA credit assistance ranges in size for each 
project, from $73.5 million to $800 million, mostly in the form of 
direct Federal loans from the DOT to the project sponsors. These 
projects are summarized in the table below.

                                     TIFIA Commitments as of September 2002
----------------------------------------------------------------------------------------------------------------
             Project                  Project Type        Project Cost       Instrument Type     Credit Amount
----------------------------------------------------------------------------------------------------------------
Miami Intermodal Center.........  Intermodal.........  $1,349 million....  Direct Loan.......       $269 million
                                                                           Direct Loan              $163 million
SR 125 Toll Road................  Hwy/Bridge.........  $450 million......  Direct Loan.......        $94 million
                                                                           Line of Credit            $33 million
Farley Penn Station.............  Passenger Rail.....  $800 million......  Direct Loan.......       $140 million
                                                                           Line of Credit            $20 million
Washington Metro CIP............  Transit............  $2,324 million....  Guarantee.........       $600 million
Tren Urbano (PR)................  Transit............  $1,676 million....  Direct Loan.......       $300 million
Tacoma Narrows Bridge...........  Hwy/Bridge.........  $835 million......  Direct Loan.......       $240 million
                                                                           Line of Credit            $30 million
Cooper River Bridge.............  Hwy/Bridge.........  $668 million......  Direct Loan.......       $215 million
Staten Island Ferries...........  Transit............  $482 million......  Direct Loan.......       $159 million
Central Texas Turnpike..........  Hwy/Bridge.........  $3,580 million....  Direct Loan.......       $917 million
Reno Rail Corridor..............  Intermodal.........  $242 million......  Direct Loan.......        $51 million
                                                                           Direct Loan                $5 million
                                                                           Direct Loan               $18 million
SF-Oakland Bay Bridge...........  Hwy/Bridge.........  $3,305 million....  Direct Loan.......       $450 million
                                                      --------------------                    ------------------
    Total.......................                       $15,711 million...                         $3,704 million
----------------------------------------------------------------------------------------------------------------

    Already limited by statute to 33 percent of total project costs, 
actual TIFIA assistance has averaged 23 percent of project costs. 
Including grant assistance, total Federal investment in TIFIA projects 
amounts to 43 percent of total costs. Investments from other government 
and private sources comprise the remaining 57 percent.
    Because credit assistance requires a small fraction of the contract 
authority needed to provide a similar amount of grant assistance, TIFIA 
promotes a cost-effective use of Federal resources to encourage co-
investment in transportation infrastructure. Federal grant funds that 
otherwise might be required to support these large projects can then be 
redirected toward smaller but critical infrastructure investments.
    An explicit goal of the TIFIA program is to induce private 
investment in transportation infrastructure. Private co-investment in 
the TIFIA project selections totals about $3.1 billion, comprised of 
more than $3 billion in debt (including State and local debt held by 
private investors) and nearly $100 million in equity. This co-
investment totals approximately 20 percent of the nearly $15.7 billion 
in total costs.
    The DOT believes that a limited number of large surface 
transportation projects each year will continue to need the types of 
credit instruments offered under TIFIA. Project sponsors and DOT staff 
are still exploring how best to utilize this credit assistance, and we 
welcome congressional guidance and dialog during this evolutionary 
program period.
    As stated in the Conference Report accompanying TEA-21 and TIFIA, 
``[a] n objective of the program is to help the financial markets 
develop the capability ultimately to supplant the role of the Federal 
Government in helping finance the costs of large projects of national 
significance.'' The current form of TIFIA administration--within a 
Federal agency subject to regular budget oversight--enables 
policymakers to monitor program performance as staff, sponsors and the 
financial markets gain experience. As current TIFIA projects move into 
their construction, operation and repayment phases, and as additional 
projects obtain TIFIA assistance, policymakers will acquire better 
information with which to determine whether TIFIA should remain within 
the DOT, ``spin off'' into a Government corporation or Government 
sponsored enterprise, or phaseout entirely and rely on the capital 
markets to meet the program's objectives.
    The Department also administers a credit assistance program 
specifically for the railroad industry: the Railroad Rehabilitation and 
Improvement Financing Program (RRIF). Also authorized in TEA-21, the 
RRIF program provides direct loans and loan guarantees to railroads and 
other public and private ventures in partnership with railroads. The 
aggregate unpaid principal amount under the program cannot exceed $3.5 
billion, and the subsidy cost is covered by a ``credit risk premium'' 
paid by or on behalf of the borrower from a non-Federal source. To 
date, the Federal Railroad Administration (FRA) has approved four RRIF 
loans for a total of more than $200 million, and six more applications 
are currently being evaluated.
GARVEE Bonds
    Another financing tool among States has been the issuance of Grant 
Anticipation Revenue Vehicles (GARVEEs): bonds that enable States to 
pay debt service and other bond-related expenses with future Federal-
aid highway apportionments. States are finding GARVEEs to be an 
attractive financing mechanism to bridge funding gaps and accelerate 
construction of major corridor projects. The GARVEE generates up-front 
capital for major highway projects at tax-exempt rates and enables a 
State to construct a project earlier than using traditional pay-as-you-
go grant resources. With projects in place sooner, costs are lower due 
to inflation savings and the public realizes safety and economic 
benefits. Paying via future Federal highway reimbursements spreads the 
cost of the facility over its useful life, rather than just the 
construction period. GARVEEs expand access to capital markets, 
supplementing general obligation or revenue bonds.
    A GARVEE is a debt-financing instrument authorized to receive 
Federal reimbursement of debt service and related financing costs. In 
general, projects funded with the proceeds of a GARVEE debt instrument 
are subject to the same requirements as other Federal-aid projects with 
the exception of the reimbursement process. Instead of reimbursements 
as construction costs are incurred, the reimbursement of GARVEE 
projects occurs when debt service is due.
    Candidates for GARVEE financing are typically large projects, or a 
program of projects, where the costs of delay outweigh the costs of 
financing and other borrowing approaches may not be available. In 
total, six States have issued 14 GARVEE Bonds, totaling more than $2.5 
billion, to be repaid using a portion of their future Federal-aid 
highway funds. The table below summarizes this activity.

                                       GARVEE Transactions as of July 2002
----------------------------------------------------------------------------------------------------------------
                State                       Date of Issue         Face Amount of Issue      Projects Financed
----------------------------------------------------------------------------------------------------------------
Ohio.................................  May-98.................  $70 million............  Various projects
                                       Aug-99                   $20 million               including: Spring-
                                       Sep-01                   $100 million              Sandusky and Maumee
                                                                                          river improvements
New Mexico...........................  Sep-98.................  $100 million...........  New Mexico SR 44
                                       Feb-01                   $19 million
Arkansas.............................  Mar-00.................  $175 million...........  Interstate Highways
                                       Jul-01                   $185 million
                                       Jul-02                   $215 million
Colorado.............................  May-00.................  $537 million...........  Any project financed
                                       Apr-01                   $506 million              wholly or in part by
                                       Jun-02                   $208 million              Federal funds
Arizona..............................  Jun-00.................  $39 million............  Maricopa freeway
                                       May-01                   $143 million              projects
Alabama..............................  Apr-02.................  $200 million...........  County Bridge Program
                                                               --------------------------
    Total............................                           $2,517 million.........
----------------------------------------------------------------------------------------------------------------

State Infrastructure Banks
    Another significant project finance tool is the State 
Infrastructure Bank (SIB), a revolving transportation investment fund 
administered by a State. A SIB functions as a revolving fund that, much 
like a bank, can offer loans and other credit products to public and 
private sponsors of Title 23 highway construction projects or Title 49 
transit capital projects. Federally capitalized SIBs were first 
authorized under the provisions of the National Highway System 
Designation Act of 1995. The initial infusion of Federal and State 
matching funds was critical to the startup of a SIB, but States have 
the opportunity to contribute additional State or local funds to 
enhance capitalization. SIB assistance may include loans (at or below 
market rates), loan guarantees, standby lines of credit, letters of 
credit, certificates of participation, debt service reserve funds, bond 
insurance, and other forms of non-grant assistance. As loans are 
repaid, a SIB's capital is replenished and can be used to support a new 
cycle of projects. And, as has been accomplished in Minnesota and South 
Carolina, SIBs can also be structured to issue bonds against their 
capitalization, increasing the amount of funds available for loans.
    SIBs complement traditional funding techniques and serve as a 
useful tool to stretch both Federal and State dollars. The primary 
benefits of SIBs to transportation investment include:
      Flexible project financing, such as low interest loans 
and credit assistance that can be tailored to the individual projects;
      Accelerated completion of projects;
      Incentive for increased State and/or local investment;
      Enhanced opportunities for private investment by lowering 
the financial risk and creating a stronger market condition; and
      Recycling of funds to provide financing for future 
transportation projects.
    The pilot program was originally available to only 10 States, and 
was later expanded to include 38 States and Puerto Rico. TEA-21 
established a new pilot program for the States of California, Florida, 
Missouri, and Rhode Island. Texas was later authorized to participate 
in the TEA-21 program. To date, however, only Florida and Missouri have 
elected to revise their agreements in accordance with TEA-21.
    The authorizing Federal legislation allows States to customize the 
structure and focus of their SIB programs to meet specific 
requirements. While a SIB can offer many types of financing assistance, 
loans have been the most popular tool. As of June 2002, 32 States had 
entered into 294 loan agreements totaling more than $4 billion. This 
activity has been largely concentrated within six States. The largest 
SIB, the South Carolina Transportation Infrastructure Bank, has 
approved financing and begun development of almost $2.4 billion in 
projects, helping to condense into 7 years a transportation program 
that would have taken 27 years under a pay-as-you-go approach. The 
Florida SIB had executed 32 loan agreements through the end of fiscal 
year 2001, at a value of $465 million. The Florida SIB has been 
augmented with a State appropriation of $150 million, and both Ohio and 
Arizona have also contributed additional State funds to their SIBs. The 
table below demonstrates the concentration of activity in the six 
largest SIBs.

         State Infrastructure Banks Transactions as of June 2002
------------------------------------------------------------------------
                                        Number of        Loan Agreement
               State                    Agreements           Amount
------------------------------------------------------------------------
South Carolina....................                  6     $2,382 million
Florida...........................                 32       $465 million
Arizona...........................                 37       $424 million
Texas.............................                 37       $252 million
Ohio..............................                 39       $141 million
Missouri..........................                 11        $73 million
                                   -------------------------------------
    Subtotal......................                162     $3,738 million
 
2Other States.....................                132       $318 million
                                   -------------------------------------
    Total.........................                294     $4,056 million
------------------------------------------------------------------------

Looking Ahead
    Although States and local partners have not adopted them evenly, 
the tools of TIFIA, GARVEEs and SIBs have clearly moved from the 
innovative to the mainstream. This reflects significant success, but it 
doesn't indicate that the needs of project finance have been completely 
met. Secretary Mineta has issued a clear challenge to the Department in 
our development of a reauthorization proposal for TEA-21, asking us to 
expand innovative finance programs to encourage private sector 
investment and examine other means to augment existing revenue streams. 
As part of our internal reauthorization deliberations, we are 
considering options for further leveraging Federal resources for 
surface transportation. Enhancing the use of innovative finance in 
intermodal projects and examining the financing techniques used in 
other major public infrastructure investments are among the areas we 
are looking at. The challenge is to build on our successes to date, but 
not set unrealistic expectations for the future.
    A particular focus is on the issue of private investment, an at-
risk contribution to a project with the expectation of repayment from 
project revenues--and a return on investment--over time. Unlike much of 
the world, the provision of roads and transit systems in the U.S. is 
almost completely a public sector responsibility. As has been often 
pointed out, our system of tax-exempt financing means that the public 
cost of capital is significantly less expensive than for a private 
entity. Many public works sectors in the U.S. permit private firms to 
gain access to tax-exempt capital for the construction of public 
infrastructure. Legislation has been introduced previously to confer 
this opportunity to a limited number of highway projects. Before the 
Department would consider any proposed amendment to the Internal 
Revenue Code, it would first consult with the Department of the 
Treasury.
    One transportation sector with a high degree of private 
participation, which deserves a higher profile among public 
transportation planners and policymakers, concerns the movement of 
freight. Supporting the efficiency of commercial freight transportation 
continues to be a cornerstone of the Department's vision for America's 
transportation system. ISTEA and TEA-21 legislation gave us many tools 
to bring this vision to reality, and our experience has given us new 
ideas for programs that will get us even closer to our goal of a 
seamless transportation network. Greater investments in transportation 
infrastructure and wider use of information technology will certainly 
be required to achieve this goal.
    The activity of SIBs in many States indicates that this program is 
ready to move beyond its pilot phase to become a permanent feature of 
the innovative finance landscape.
    The Department looks forward to working with our partners in State 
DOTs, metropolitan planning organizations, and private industry to 
apply innovative funding strategies that extend the financial means of 
our individual stakeholders. And we look forward to working with the 
Congress to craft the next surface transportation legislation. Working 
together, the Administration, the Congress, States and localities and 
the private sector can preserve, enhance, and establish surface 
transportation programs that will result in increased mobility, safety 
and prosperity for all Americans.
    Thank you for the opportunity to testify before you today. I would 
be happy to answer any questions you may have.
                                 ______
                                 
 Responses of Phyllis Scheinberg to Additional Questions from Senator 
                                Jeffords
    Question 1. State Infrastructure Banks (SIBs) are currently limited 
to only a few States. What is the track record of SIBs? Are they 
performing as anticipated? Are SIBs a viable option that should be 
available to all States? Do you have suggestions which this committee 
should consider to improve the effectiveness of SIBs?
    Response. Thirty-nine States, including the Commonwealth of Puerto 
Rico, were authorized by the Department of Transportation to establish 
a SIB under the National Highway System Designation Act of 1995 (NHS 
Act). In addition, the Transportation Equity Act for the 21st Century 
(TEA-21) established a SIB pilot program that was limited to only a few 
States that already had authorized SIBs under the NHS Act. 
Specifically, five States (Florida, Missouri, California, Rhode Island, 
and Texas) were authorized to use TEA-21 funds to capitalize their 
SIBs. However, only Florida and Missouri have modified their SIB 
agreements to comply with the TEA-21 requirements and are currently 
eligible to use TEA-21 funds for SIB capitalization. To date, States 
have transferred $456 million of Federal funds apportioned in FYs 1996 
and 1997 into SIBs and $52.1 million of TEA-21 funds have been 
transferred to SIBs.
    We believe that SIBs have been a viable tool for States that have 
established them. Of the 39 authorized SIBs, 32 remain active even 
though only two (Florida and Missouri) are using the additional TEA-21 
funds for capitalization. As of June 2002, these States have entered 
into 294 SIB loan agreements for a total of $4 billion dollars for 
surface transportation projects. Some benefits of SIBs assistance are 
flexible project financing, accelerated completion of projects, 
recycling of funds, increased State and/or local investment, and 
enhanced private investment and economic development opportunities.
    There is an important distinction between the SIB provisions in the 
NHS Act and TEA-21. For SIBs operating under the provisions of the NHS 
Act, all ``first generation'' SIB assisted projects are subject to 
Federal requirements. Federal requirements, however, do not apply to 
SIB projects funded with ``second and subsequent generation'' SIB 
funds--i.e., funds derived from repayment proceeds of the first 
generation projects. All SIB projects assisted with TEA-21 funds are 
subject to Federal requirements regardless of whether they are first 
generation projects or financed from repayment proceeds of previously 
assisted projects. Most States seem to prefer the NHS Act provision 
that does not expand the application of Federal requirements.

    Question 2. In my statement I mentioned that the State of South 
Carolina is undertaking what would be 27 years worth of projects using 
traditional Federal-aid funding in a span of 7 years. They are able to 
accomplish this through various transportation financing mechanisms. 
What challenges does a State face if they use this approach to ``jump 
start'' project construction? Are programs like those helping or 
harming the State's future ability to invest in infrastructure?
    Response. One significant challenge involves a State's ability to 
manage a sudden increase in the number of projects. Another challenge 
relates to the availability of contractors to perform the work. South 
Carolina has addressed the first challenge by supplementing its own 
staff with consultants. In addition, the State has not, to date, 
reported problems with the availability of contractors.
    Accelerating the start of transportation infrastructure projects 
can result in the twin benefits of (1) cost savings from reduced cost 
escalation due to inflation and increases in right-of-way costs and (2) 
earlier returns on economic and safety benefits provided by the new 
facility.
    At this point, we are not aware of instances in which the use of 
financing mechanisms to ``jump start'' projects has jeopardized a 
State's furture ability to invest in infrastructure. For example, 
States that have issued GARVEE bonds thus far have judiciously imposed 
coverage tests and dollar limits that they believe are appropriate and 
marketable. GARVEE bonds are State-issued bonds whose repayment source 
is future Federal-aid highway apportionments.

    Question 3. AASHTO is proposing a Transportation Finance 
Corporation (TFC) be created in the next reauthorization to increase 
the size of the Federal program. The TFC would be involved in various 
financing mechanisms such as bonding. Has DOT investigated or 
researched similar ideas? What are your thoughts on the viability of 
such an approach?
    Response. DOT is currently formulating its highway reauthorization 
policies, but has not finalized its proposals. DOT has considered a 
variety of alternative financing approaches and has solicited input 
from all relevant stakeholders.

    Question 4. In your statement you mention that DOT is pursuing more 
avenues for transportation financing. We are very interested in this 
matter including looking at Federal loan guarantees, bonding, tax 
incentives to purchasing bonds, and a range of other options. One 
concept I heard was ``adapting the financing techniques using other 
public works sectors''. Could you give us examples of other public 
works techniques? How applicable would they be to transportation 
investment? What other innovative financing approaches should we work 
with you on? Are there other models which have worked well in other 
areas which could be helpful here--for example, the Farm Credit System 
sells securities to raise funds to make loans. What existing financing 
ideas regarding other Departments, Government Sponsored Enterprises, 
Federal or State agencies, or private entities should we at least 
consider in terms of the reauthorization?
    Response. One mechanism that is currently available for certain 
major public infrastructure projects--but not highways--is private 
activity bonds. Private activity bonds are tax-exempt financings issued 
for certain privately developed and operated public infrastructure. 
Examples of projects that are currently eligible for private activity 
bonds are airport facilities; docks and wharves; water, wastewater and 
solid waste disposal facilities; mass commuting facilities; and high 
speed intercity rail facilities. Whether private activity bonds would 
be a useful tool for highway financing could be worth investigation.
                               __________
   Statement of JayEtta Z. Hecker Director, Physical Infrastructure 
                   Issues, General Accounting Office
    Mr. Chairman and members of the committees: We are pleased to be 
here today to discuss alternative financing for surface transportation 
infrastructure projects. As Congress considers reauthorizing the 
Transportation Equity Act for the 21st Century (TEA-21) in 2003, it 
does so in the face of a continuing need for the Nation to invest in 
its surface transportation infrastructure and at a time when both the 
Federal and State governments are experiencing severe financial 
constraints.\1\ Many observers are concerned that a significant gap 
exists between the availability of funds and immediate needs. In the 
longer term, questions have been raised about the financial capacity of 
the Highway Trust Fund to sustain current and future levels of highway 
and transit spending. This is of particular concern since Congress has 
by law established a direct link between Highway Trust Fund revenues 
and surface transportation spending levels.
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     \1\Performance Budgeting: Opportunities and Challenges. (GAO-02-
1106T, Sept.19, 2002).
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    In recent years, as transportation needs have grown, Congress 
provided States--in the National Highway System Designation Act of 1995 
(NHS) and TEA-21--additional means to make highway investments through 
alternative financing mechanisms. These alternative mechanisms included 
State Infrastructure Banks (SIBs)--revolving funds to make or guarantee 
loans to approved projects; Grant Anticipation Revenue Vehicles 
(GARVEEs)--which are State issued bonds or notes repayable with future 
Federal-aid; and credit assistance under the Transportation 
Infrastructure Finance and Innovation Act (TIFIA)--including loans, 
loan guarantees, and lines of credit. All are part of the Federal 
Highway Administration's (FHWA's) Innovative Finance Program. As the 
time draws nearer to reauthorizing TEA-21, information is needed about 
the performance of these tools and the potential for these and other 
proposed tools to help meet the nation's surface transportation 
infrastructure investment needs.
    At the request of your committees, we are examining a range of 
surface transportation financing issues, including FHWA's Innovative 
Finance Program and proposed alternative financing approaches. My 
testimony today is based on the preliminary results of our work and 
discusses (1) the use and performance of existing innovative financing 
tools and the factors limiting their use, and (2) the prospective costs 
of current and newly proposed alternative financing techniques for 
meeting surface transportation infrastructure investment needs. I will 
also discuss issues concerning the potential costs and benefits of 
expanding alternative financing mechanisms to meet our nation's surface 
transportation needs. My testimony is based on our review of applicable 
laws, FHWA's evaluation studies and other reports concerning its 
Innovative Financing Program, and interviews with FHWA officials, 
transportation officials in eight States, and bond rating companies. It 
is also based on a cost comparison we conducted of four current and 
newly proposed financing techniques.
    In summary:
      A number of States are using existing alternative 
financing tools such as State Infrastructure Banks, GARVEE bonds, and 
TIFIA loans. These tools can provide States with additional options to 
accelerate projects and leverage Federal assistance--they can also 
provide greater flexibility and more funding techniques. However, a 
number of factors can limit the use of these tools, including some 
States' preference not to use the tools, restrictions in State law on 
using them, and restrictions in Federal law on the number of States and 
types of projects that can use them.
      Federal funding of surface transportation investments 
includes Federal-aid highway program grant funding appropriated by 
Congress out of the Highway Trust Fund, loans and loan guarantees, and 
bonds that are issued by States and that are exempt from Federal 
taxation. In addition, the use of tax credit bonds--where investors 
receive a tax credit against their Federal income taxes instead of 
interest payments from the bond issuers--have been proposed for helping 
to finance surface transportation investments. Because each of these 
financing mechanisms is structured differently, we determined that the 
total cost of providing $10 billion in infrastructure investment using 
each of these existing or proposed mechanisms ranges from $10 billion 
to over $13 billion (in present value terms). The mechanisms that 
involve greater borrowing from the private sector, such as tax-exempt 
bonds and tax credit bonds, require the least amount of public outlays 
up front. However, those same mechanisms have the highest long-term 
costs to the public sector participants in the investments because the 
latter must compensate the private investors for the risks that they 
assume. With respect to the Federal Government's contribution, tax 
credit bonds are the most costly mechanism, while TIFIA loans and tax 
exempt bonds are the least costly.
      Expanding the use of alternative financing mechanisms has 
the potential to stimulate additional investment and private 
participation. But expanding investment in our nation's highways and 
transit systems raises basic questions of who pays, how much, and when. 
How alternative financing mechanisms are structured determines how much 
of the needs are met through Federal funding and how much are met by 
the States and others. The structure of these mechanisms also 
determines how much of the cost of meeting our current needs are met by 
current users and taxpayers versus future users and taxpayers.
Background
    The Federal-aid highway program is financed through motor fuel 
taxes and other levies on highway users. Federal aid for highways is 
provided largely on a cash basis from the Highway Trust Fund. States 
have financed roads primarily through a combination of State revenues 
and Federal aid. Typically, States raise their share of the funds by 
taxing motor fuels and charging user fees. In addition, debt 
financing--issuing bonds to pay for highway development and 
construction--represents about 10 percent of total State funding for 
highways, although some States make greater use of borrowing than 
others.
    Federal-aid highway funding to States is typically in the form of 
grants. These grants are distributed from the Highway Trust Fund and 
apportioned to States based on a series of funding formulas. Funding is 
subject to grant-matching rules--for most federally funded highway 
projects, an 80-percent Federal and 20-percent State funding ratio. 
States are subject to pay-as-you-go rules where they obligate all of 
the funds needed for a project up front and are reimbursed for project 
costs as they are incurred.
    In the mid-1990's, FHWA and the States tested and evaluated a 
variety of innovative financing techniques and strategies.\2\ Many 
financing innovations were approved for use through administrative 
action or legislative changes under NHS and TEA-21. Three of the 
techniques approved were SIBs, GARVEEs, and TIFIA loans.\3\ SIBs are 
State revolving loan funds that make loans or loan guarantees to 
approved projects; the loans are subsequently repaid, and recycled back 
into the revolving fund for additional loans. GARVEEs are any State 
issued bond or note repayable with future Federal-aid highway funds. 
Through the issuance of GARVEE bonds, projects are able to meet the 
need for up-front capital as well as use future Federal highway dollars 
for debt service. TIFIA allows FHWA to provide credit assistance, up to 
33 percent of eligible project costs, to sponsors of major 
transportation projects. Credit assistance can take the form of a loan, 
loan guarantee, or line of credit. See appendix II for additional 
information about these financing techniques.
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     \2\FHWA uses the term ``innovative finance'' to refer to any 
funding measure other than grants to States appropriated from the 
Highway Trust Fund. Most of the innovative measures entail debt 
financing. The term is used to contrast that approach with traditional 
methods of funding highway projects.
     \3\FHWA's test and evaluation research initiative (TE-045) 
evaluated a number of other innovations, including flexible match, toll 
credits, advance construction, partial conversion of advance 
construction, and tapered match. Many of these techniques were 
subsequently approved for use.
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    According to FHWA, the goals of its Innovative Finance Program are 
to accelerate projects by reducing inefficient and unnecessary 
constraints on States' management of Federal highway funds; expand 
investment by removing barriers to private investment; encourage the 
introduction of new revenue streams, particularly for the purpose of 
retiring debt obligations; and reduce financing and related costs, thus 
freeing up the savings for investments into the transportation system 
itself. When Congress established the TIFIA program in TEA-21, it set 
out goals for the program to offer sponsors of large transportation 
projects a new tool to leverage limited Federal resources, stimulate 
additional investment in our nation's infrastructure, and encourage 
greater private sector participation in meeting our transportation 
needs.
Alternative Financing Mechanisms Offer States Options, But Factors 
        Limit Their Use
    Over the last 8 years, many States have used one or more of the 
FHWA-sponsored alternative financing tools to fund their highway and 
transit infrastructure projects. As of June 2002:

      32 States (including the Commonwealth of Puerto Rico) 
have established SIBs and have entered into 294 loan agreements with a 
dollar value of about $4.06 billion;
      9 States (including the District of Columbia and 
Commonwealth of Puerto Rico) have entered into TIFIA credit assistance 
agreements for 11 projects, representing $15.4 billion in 
transportation investment; and
      6 States have issued GARVEE bonds with face amounts 
totaling $2.3 billion.

    These mechanisms have given States additional options to accelerate 
the construction of projects and leverage Federal assistance. It has 
also provided them with greater flexibility and more funding 
techniques.
    Accelerate Project Construction
    States' use of innovative financing techniques has resulted in 
projects being constructed more quickly than they would be under 
traditional pay-as-you-go financing. This is because techniques such as 
SIBs can provide loans to fill a funding gap, which allows the project 
to move ahead. For example, using a $25 million SIB loan for land 
acquisition in the initial phase of the Miami Intermodal Center, 
Florida accelerated the project by 2 years, according to FHWA. 
Similarly, South Carolina used an array of innovative finance tools 
when it undertook its ``27 in 7 program''--a plan to accomplish 
infrastructure investment projects that were expected to take 27 years 
and reduce that to just 7 years. Officials in the States that we 
contacted that were using FHWA innovative finance tools noted that 
project acceleration was one of the main reasons for using them.
Leverage Federal Investments
    Innovative finance-in particular the TIFIA program-can leverage 
Federal funds by attracting additional nonFederal investments in 
infrastructure projects. For example, the TIFIA program funds a lower 
share of eligible project costs than traditional Federal-aid programs, 
thus requiring a larger investment by other, non-Federal funding 
sources. It also attracts private creditors by assuming a lower 
priority on revenues pledged to repay debt. Bond rating companies told 
us they view TIFIA as ``quasi-equity'' because the Federal loan is 
subordinate to all other debt in terms of repayments and offers debt 
service grace periods, low interest costs, and flexible repayment 
terms.
    It is often difficult to measure precisely the leveraging effect of 
the Federal investment. As a recent FHWA evaluation report noted, just 
comparing the cost of the Federal subsidy with the size of the overall 
investment can overstate the Federal influence--the key issue being 
whether the projects assisted were sufficiently credit-worthy even 
without Federal assistance and the Federal impact was to primarily 
lower the cost of the capital for the project sponsor.
    However, TIFIA's features, taken together, can enhance senior 
project debt ratings and thus make the project more attractive to 
investors. For example, the $3.2 billion Central Texas Turnpike 
project--a toll road to serve the Austin-San Antonio corridor--received 
a $917 million TIFIA loan and will use future toll revenues to repay 
debt on the project, including revenue bonds issued by the Texas 
Transportation Commission and the TIFIA loan. According to public 
finance analysts from two ratings firms, the project leaders were able 
to offset potential concerns about the uncertain toll road revenue 
stream by bringing the TIFIA loan to the project's financing.
Provide Greater Flexibility And Additional Financing Techniques
    FHWA's innovative finance techniques provide States with greater 
flexibility when deciding how to put together project financing. By 
having access to various alternatives, States can finance large 
transportation projects that they may not have been able to build with 
pay-as-you-go financing. For example, faced with the challenge of 
Interstate highway needs of over $1.0 billion, the State of Arkansas 
determined that GARVEE bonds would make up for the lack of available 
funding. In June 1999, Arkansas voters approved the issuance of $575 
million in GARVEE bonds to help finance this reconstruction on an 
accelerated schedule. The State will use future Federal funds, together 
with the required State matching funds and the proceeds from a diesel 
fuel tax increase, to retire the bonds. The GARVEE bonds allow Arkansas 
to rebuild approximately 380 miles, or 60 percent of its total 
Interstate miles, within 5 years.
    Factors Can Limit the Use Finance Tools
    Although FHWA's innovative financing tools have provided States 
with of additional options for meeting their needs, a number of factors 
can limit the use of these tools.

      State DOTs are not always willing to use Federal 
innovative financing tools, nor do they always see advantages to using 
them. For example, officials in two States indicated that they had a 
philosophy against committing their Federal aid funding to debt 
service. Moreover, not all States see advantages to using FHWA 
innovative financing tools. For example, one official indicated that 
his State did not have a need to accelerate projects because the State 
has only a few relatively small urban areas and thus does not face the 
congestion problems that would warrant using innovative financing tools 
more often. Officials in another State noted that because their DOT has 
the authority to issue tax-exempt bonds as long as the State has a 
revenue stream to repay the debt, they could obtain financing on their 
own and at lower cost.
      Not all State DOTs have the authority to use certain 
financing mechanisms, and others have limitations on the extent to 
which they can issue debt. For example, California requires voter 
approval in order to use its allocations from the Highway Trust Fund to 
pay for debt servicing costs. In Texas, the State constitution 
prohibits using highway funds to pay the State's debt service. Other 
States limit the amount of debt that can be incurred. For example, 
Montana has a debt ceiling of $150 million and is now paying off bonds 
issued in the late 1970's and early 1980's and plans to issue a GARVEE 
bond in the next few years.
      Some financing tools have limitations set in law. For 
example, five States are currently authorized to use TEA-21 Federal-aid 
funding to capitalize their SIBs. Although other States have created 
SIBs and use them, they could not use their TEA-21 Federal-aid funding 
to capitalize them. Similarly, TIFIA credit assistance can be used only 
for certain projects. TIFIA's requirement that, in general, projects 
cost at least $100 million restricts its use to large projects.
Costs and Risks of Alternative Financing Mechanisms Vary
    We assessed the costs that Federal, State and local governments (or 
special purpose entities they create) would incur to finance $10 
billion in infrastructure investment using four current and newly 
proposed financing mechanisms for meeting infrastructure investment 
needs.\4\ To date, most Federal funding for highways and transit 
projects has come through the Federal-aid highway grants--appropriated 
by Congress from the Highway Trust Fund. Through the TIFIA program, the 
Federal Government also provides subsidized loans for State highway and 
transit projects. In addition, the Federal Government also subsidizes 
State and local bond financing of highways by exempting the interest 
paid on those bonds from Federal income tax. Another type of tax 
preference--tax credit bonds--has been used, to a very limited extent, 
to finance certain school investments. Investors in tax credit bonds 
receive a tax credit against their Federal income taxes instead of 
interest payments from the bond issuer.\5\ Proposals have been made to 
extend the use of this relatively new financing mechanism to other 
public investments, including transportation projects.
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     \4\In deriving our comparisons we use current rules and practices 
relating to State matching expenditures. Specifically, when computing 
the costs associated with grants we assume that States pay for 20 
percent of the investment expenditures; we assume a similar matching 
rate would be applied if a tax credit bond program were introduced. Our 
tax-exempt bond example represents independent investments by the State 
or local governments (or special purpose entities) with no Federal 
support other than the tax subsidy. In the case of the direct loan 
program, we assume that the $10 billion of expenditures is financed by 
approximately the same combination of Federal loans, Federal grants, 
State, local or special purpose entity bonds, State appropriations, and 
private investment as the average project currently financed by TIFIA 
loans. (See app. I for further details of our methodology). However, it 
is important to note that the current rules and practices could be 
revised so that any desired cost sharing between the Federal and State 
governments could be achieved through any of the mechanisms.
     \5\The only tax credit bonds currently in existence are Qualified 
Zone Academy bonds. State or local governments may issue these bonds to 
finance improvements in public schools in disadvantaged areas. The 
issuance limit for these bonds is set at $400 million for 2002 and is 
allocated to the States on the basis of their portion of the population 
below the poverty level.
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    The use of these four mechanisms to finance $10 billion in 
infrastructure investment result in differences in (1) total costs--and 
how much of the cost is incurred within the short term 5-year period 
and how much of it is postponed to the future; (2) sharing costs--or 
the extent to which States must spend their own money, or obtain 
private investment, in order to receive the Federal subsidy; and (3) 
risks--which level of government bears the risk associated with an 
investment (or compensates others for taking the risk). As a result of 
these differences, for any given amount of highway investment, combined 
and Federal Government budget costs will vary, depending on which 
financing mechanism is used.
Total Costs--And Short-and Long-Term Costs--Differ
    Total costs--and how much of the cost is incurred within the short 
term 5year period and how much of it is postponed to the future--differ 
under each of the four mechanisms. As figure 1 shows, grant funds are 
the lowest-cost method to finance a given amount of investment 
expenditure, $10 billion.\6\ The reason for this result is that it is 
the only alternative that does not involve borrowing from the private 
sector through the issuance of bonds. Bonds are more expensive than 
grants because the governments have to compensate private investors for 
the risks that they assume (in addition to paying them back the present 
value of the bond principal). However, because the grants alternative 
does not involve borrowing, all of the public spending on the project 
must be made up front. The TIFIA direct loan, tax credit bond, and tax-
exempt loan alternatives involve increased amounts of borrowing from 
the private sector and, therefore, increased overall costs.
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     \6\We present our results in present value terms so that the value 
of dollars spent in the future are adjusted to make them comparable to 
dollars spent today.
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    Grants entail the highest short term costs as these costs, in our 
example, are all incurred on a pay-as-you-go basis. The tax-exempt bond 
alternative, which involves the most borrowing and has the highest 
combined costs, also requires the least amount of public money up 
front.\7\
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     \7\The results presented in figure 1 were computed using current 
interest rates, which are relatively low by historical standards. At 
higher interest rates, the combined costs of the alternatives that 
involve bond financing would be higher, while the costs of grants would 
remain the same. If we had used bonds with 20-year terms, instead of 
30-year terms, in our examples, the costs of the three alternatives 
that involve bond financing would be lower, but they all would still be 
greater than the costs of grants.


Alternatives Result in Different Shares of the Cost
    There are significant differences across the four alternatives in 
the cost sharing between Federal and State governments. (See fig. 2). 
Federal costs would be highest under the tax credit bond alternative, 
under which the Federal Government pays the equivalent of 30 years of 
interest on the bonds. Grants are the next most costly alternative for 
the Federal Government. Federal costs for the tax-exempt bond and TIFIA 
loan alternatives are significantly lower than for tax credit bonds and 
grants.\8\
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     \8\Using different assumptions could produce different results. 
For example, Congress could reduce the Federal cost differences across 
the four alternatives by establishing higher State matching 
requirements for those programs. In the case of tax credit bonds, 
setting the rate of credit to substitute for only a fraction of the 
interest that bond investors would demand would require States to pay 
the difference.


    In some past and current proposals for using tax credit bonds to 
finance transportation investments, the issuers of the bonds would be 
allowed to place the proceeds from the sales of some bonds into a 
``sinking fund'' and, thereby, earn investment income that could be 
used to redeem bond principal. This added feature would reduce (or 
eliminate) the costs of the bond financing to the issuers, but this 
would come at a significant additional cost to the Federal Government. 
For example, in our example where States issue $8 billion of tax credit 
bonds to finance highway projects, if the States were allowed to issue 
an additional $ 2.4 billion of bonds to start a sinking fund, they 
would be able to earn enough investment income to pay back all of the 
bonds without raising any of their own money. However, this added 
benefit for the States could increase costs to the Federal Government 
by about 30 percent--an additional $2.7 billion (in present value), 
raising the total Federal cost to $11.7 billion.
The Federal Role in Bearing Investment Risk Varies
    In some cases private investors participate in highway projects, 
either by purchasing ``nonrecourse'' State bonds that will be repaid 
out of project revenues (such as tolls) or by making equity investments 
in exchange for a share of future toll revenues.\9\ By making these 
investments the investors are taking the risk that project revenues 
will be sufficient to pay back their principal, plus an adequate return 
on their investment. In the case where the nonrecourse bond is a tax-
exempt bond, the State must pay an interest rate that provides an 
adequate after-tax rate of return, including compensation for the risk 
assumed by the investors. By exempting this interest payment from 
income tax, the Federal Government is effectively sharing the cost of 
compensating investors for risk. Nevertheless, the State still bears 
some of the risk-related cost and, therefore has an incentive to either 
select investment projects that have lower risks, or select riskier 
projects only if the expected benefits from those projects are large 
enough to warrant taking on the additional risk.
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     \9\A nonrecourse bond is not backed by the full faith and credit 
of the State or local government issuer. Purchasers of such bonds do 
not have recourse to the issuer's taxing authority for bond repayment.
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    In the case of a tax credit bond where project revenues would be 
the only source of financing to redeem the bonds and the Federal 
Government would be committed to paying whatever rate of credit 
investors would demand to purchase bonds at par value, the Federal 
Government would bear all of the cost of compensating the investors for 
risk.\10\ States would no longer have a financial incentive to balance 
higher project risks with higher expected project benefits. 
Alternatively, the credit rate could be set equal to the interest rate 
that would be required to sell the average State bonds (issued within 
the same timeframe) at par value. In that case, States would bear the 
additional cost of selling bonds for projects with above-average risks.
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     \10\In the case of Qualified Zone Academy Bonds the statute calls 
for the credit rate to be set so that the bonds sell at par. Selling at 
par means that the issuer can sell a bond with a face value of $1,000 
to an investor for $1,000. If, alternatively, the credit rate were set 
at an average interest rate, bonds for riskier projects would have to 
be sold below par (e.g., a bond with a $1,000 face value might sell for 
only $950), meaning that the issuer receives less money to spend for a 
given amount of bonds issued. Conversely, bonds sold for less risky 
projects could be sold above par, so that issuers receive more funds 
than the face value of the bonds issued.
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    In the case of a TIFIA loan for a project that has private sector 
participation, the Federal loan does not compensate the private 
investors for their risk; instead, the Federal Government assumes some 
of the risk and, thereby, lowers the risk to the private investors and 
lowers the amount that States have to pay to compensate for that risk.
    In summary, Mr. Chairman, alternative financing mechanisms have 
accelerated the pace of some surface transportation infrastructure 
improvement projects and provided States additional tools and 
flexibility to meet their needs--goals of FHWA's Innovative Finance 
Program. FHWA and the States have made progress to attain the goal 
Congress set for the TIFIA program--to stimulate additional investment 
and encourage greater private sector participation--but measuring 
success involves measuring the leverage effect of the Federal 
investment, which is often difficult. Our work raises a number of 
issues concerning the potential costs and benefits of expanding 
alternative financing mechanisms to meet our nation's surface 
transportation needs. Congress likely will weigh these potential costs 
and benefits as it considers reauthorizing TEA-21.
    Expanding the use of alternative financing mechanisms has the 
potential to stimulate additional investment and private participation. 
But expanding investment in our nation's highways and transit systems 
raises basic questions of who pays, how much, and when. How alternative 
financing mechanisms are structured determines how much of the needs 
are met through Federal funding and how much are met by the States and 
others. The structure of these mechanisms also determines how much of 
the cost of meeting our current needs are met by current users and 
taxpayers versus future users and taxpayers.
    While alternative finance mechanisms can leverage Federal 
investments, they are, in the final analysis, different forms of debt 
financing. This debt ultimately must be repaid, with interest, either 
by highway users--through tolls, fuel taxes, or licensing and vehicle 
fees--or by the general population through increases in general fund 
taxes or reductions in other government services. Proposals for tax 
credit bonds would shift the costs of highway investments away from the 
traditional user-financed sources, unless revenues from the Highway 
Trust Fund are specifically earmarked to pay for these tax credits.
    Mr. Chairman this concludes my prepared statement. I would be 
pleased to answer any questions you or other members of the committees 
have.
                                 ______
                                 
  Appendix I: Methodology for Estimating the Costs of Transportation 
                         Financing Alternatives
    We estimated the costs that the Federal, State or local governments 
(or special purpose entities they create) would incur if they financed 
$10 billion in infrastructure investment using each of four alternative 
financing mechanisms: grants, tax credit bonds, tax-exempt bonds, and 
direct Federal loans. The following subsections explain our cost 
computations for each alternative. We converted all of our results into 
present value terms, so that the value of the dollars spent in the 
future are adjusted to make them comparable to dollars spent today.\1\ 
This adjustment is particularly important when comparing the costs of 
bond repayment that occur 30 years from now with the costs of grants 
that occur immediately.
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     \1\For example, current interest rates on long-term bonds indicate 
that, to the government and investors, the present value of a dollar to 
be spent 30 years from now is less than 25 cents.
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The Cost of Grants
    We estimated the cost to the Federal and State governments of 
traditional grants with a State match. We assume the State was 
responsible for 20 percent of the investment expenditures. We then 
found the percentage of Federal grants such that the Federal grant plus 
the State match totaled $10 billion. This form of matching resulted in 
the State being responsible for $2 billion of the spending and the 
Federal Government being responsible for $8 billion.
The Cost of Tax Credit Bonds
    We estimated the cost to the Federal and State governments of 
issuing $8 billion in tax credit bonds with a State match of $2 
billion. The cost to the Federal Government equals the amount of tax 
credits that would be paid out over a given loan term.\2\ We estimated 
the amount of credit payment in a given year by multiplying the amount 
of outstanding bonds in a given year by the credit rate. We assumed 
that the credit rate would be approximately equal to the interest rates 
on municipal bonds of comparable maturity, grossed up by the marginal 
tax rate of bond purchasers.\3\ For the results presented in figures 1 
and 2 we assumed that the bonds would have a 30-year term and would 
have a credit rating between Aaa and Baa. The cost to the issuing 
States would consist of the repayment of bond principal in future 
years, plus the upfront cost of $2 billion in State appropriations for 
the matching contribution.
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     \2\Although the credits that investors earn on tax credit bonds 
are taxable, we assume that any tax the Federal Government would gain 
from this source would be offset by the tax that investors would have 
paid on income from the investments they would have made if the tax 
credit bonds were not available for purchase.
     \3\For the tax credit and tax-exempt bond computations we based 
our rates on municipal bond interest rates reported in the August 22, 
2002 issue of the Bond Buyer.
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The Cost of Tax-Exempt Bonds
    The cost of tax-exempt bonds to the State or local government (or 
special purpose entity) issuers would consist of the interest payments 
on the bonds and the repayment of bond principal. The cost to the 
Federal Government would equal the taxes forgone on the income that 
bond purchasers would have earned form the investments they would have 
made if the tax-exempt bonds were not available for purchase. For the 
results presented in figures 1 and 2 we made the same assumptions 
regarding the terms and credit rating of the bonds as we did for the 
tax credit bond alternative. We computed the cost of interest payments 
by the State by multiplying the amount of outstanding bonds by the 
current interest rate for municipal bonds with the same term and credit 
rating. We assumed that the pretax rate of return that bond purchasers 
would have earned on alternative investments would have been equal to 
the municipal bond rate divided by one minus the investors' average 
marginal tax rate. Consequently, the Federal revenue loss was equal to 
that pretax rate of return, multiplied by the amount of tax-exempt 
bonds outstanding each year (in this example), and then multiplied by 
the investors' average marginal tax rate.
Direct Federal Loans
    In order to have our direct loan example reflect the financing 
packages typical of current TIFIA projects, we used data from FHWA's 
June 2002 Report to Congress\4\ to determine what shares of total 
project expenditures were financed by TIFIA direct loans, Federal 
grants, bonds issued by State or local governments or by special 
purpose entities, private investment, and other sources. We assumed 
that the $10 billion of expenditures in our example was financed by 
these various sources in roughly the same proportions as they are used, 
on average, in current TIFIA projects. We estimated the Federal and 
nonFederal costs of the grants and bond financing components in the 
same manner as we did for the grants and tax-exempt bond examples 
above. To compute the Federal cost of the direct loan component, we 
multiplied the dollar amount of the direct loan in our example by the 
average amount of Federal subsidy per dollar of TIFIA loans, as 
reported in the TIFIA report. In the results presented in figure 1, 
this portion of the Federal cost amounted to $130 million. The 
nonFederal costs of the loan component consist of the loan repayments 
and interest payments to the Federal Government. We assumed that the 
term of the loan was 30 years and that the interest rate was set equal 
to the Federal cost of funds, which is TIFIA's policy. The private 
investment (other than through bonds), which accounted for less than 1 
percent of the spending, and the ``other'' sources, which accounted for 
about 3 percent of the spending, were treated as money spend 
immediately on the project.
---------------------------------------------------------------------------
     \4\U.S. Department of Transportation, TIFIA Report to Congress, 
June 2002.
---------------------------------------------------------------------------
Sensitivity Analysis
    A number of factors--including general interest rate levels, the 
terms of the bonds or loans, the individual risks of the projects being 
financed--affect the relative costs of the various alternatives. For 
this reason, we examined multiple scenarios for each alternative. In 
particular, current interest rates are relatively low by historical 
standards. In our alternative scenarios we used higher interest rates, 
typical of those in the early 1990's. At higher interest rates, the 
combined costs of the alternatives that involve bond financing would be 
higher, while the costs of grants would remain the same. If we had used 
bonds with 20-year terms, instead of 30-year terms in the examples, the 
costs of the three alternatives that involve bond financing would be 
lower, but they would still be greater than the costs of grants.
                                 ______
                                 
         Appendix II: States' Use of Innovative Financing Tools
State Infrastructure Banks
    One of the earliest techniques tested to fund transportation 
infrastructure was revolving loan funds. Prior to 1995, Federal law did 
not permit States to allocate Federal highway funds to capitalize 
revolving loan funds. However, in the early 1990's, transportation 
officials began to explore the possibility of adding revolving loan 
fund capitalization to the list of eligible uses for certain Federal 
transportation funds. Under such a proposal, Federal funding is used to 
``capitalize'' or provide seed money for the revolving fund. Then money 
from the revolving fund would be loaned out to projects, repaid, and 
recycled back into the revolving fund, and subsequently reinvested in 
the transportation system through additional loans. In 1995, the 
federally capitalized transportation revolving loan fund concept took 
shape as the State Infrastructure Bank (SIB) pilot program, authorized 
under Section 350 of the NHS Act. This pilot program was originally 
available only to a maximum of 10 States, but then was expanded under 
the 1997 U.S. DOT Appropriations Act, which appropriated $150 million 
in Federal general funds for SIB capitalization. TEA-21 established a 
new SIB pilot program, but limited participation to four States--
California, Florida, Missouri, and Rhode Island. Texas subsequently 
obtained authorization under TEA-21. These States may enter into 
cooperative agreements with the U.S. DOT to capitalize their banks with 
Federal-aid funds authorized in TEA-21 for fiscal years 1998 through 
2003. Of the States currently authorized, only Florida and Missouri 
have capitalized their SIBs with TEA-21 funds.

                                          Table 1: State's use of SIBs
----------------------------------------------------------------------------------------------------------------
                                                 Number of       Loan agreement amount    Disbursements to date
                   State                         agreements             ($ 000)                  ($ 000)
----------------------------------------------------------------------------------------------------------------
Alabama....................................
Alaska.....................................                  1                   $2,737                   $2,737
Arizona....................................                 37                 $424,287                 $216,104
Arkansas...................................                  1                      $31                      $31
California.................................
Colorado...................................                  2                     $400                     $400
Connecticut................................
Delaware...................................                  1                   $6,000                   $6,000
D.C........................................
Florida....................................                 32                 $465,000                  $98,600
Georgia....................................
Hawaii.....................................
Idaho......................................
Illinois...................................
Indiana....................................                  1                   $3,000                   $1,122
Iowa.......................................                  2                   $2,874                   $2,874
Kansas.....................................
Kentucky...................................
Louisiana..................................
Maine......................................                 23                   $1,758                   $1,478
Maryland...................................
Massachusetts..............................
Michigan...................................                 23                  $17,034                  $13,033
Minnesota..................................                 15                  $95,719                  $41,000
Mississippi................................
Missouri...................................                 11                  $73,251                  $67,801
Montana....................................
Nebraska...................................                  1                   $3,360                   $3,360
Nevada.....................................
New Hampshire..............................
New Jersey.................................
New Mexico.................................                  1                     $541                     $541
New York...................................                  2                  $12,000                  $12,000
North Carolina.............................                  1                   $1,575                   $1,575
North Dakota...............................                  2                   $3,565                   $1,565
Ohio.......................................                 39                 $141,231                 $116,422
Oklahoma...................................
Oregon.....................................                 12                  $17,471                  $17,471
Pennsylvania...............................                 23                  $17,403                  $17,403
Puerto Rico................................                  1                  $15,000                  $15,000
Rhode Island...............................                  1                   $1,311                   $1,311
South Carolina.............................                  6               $2,382,000               $1,124,000
South Dakota...............................                  1                  $11,740                  $11,740
Tennessee..................................                  1                   $1,875                   $1,875
Texas......................................                 37                 $252,013                 $225,461
Utah.......................................                  1                   $2,888                   $2,888
Vermont....................................                  3                   $1,023                   $1,000
Virginia...................................                  1                  $18,000                  $18,000
Washington.................................                  1                     $700                     $385
West Virginia..............................
Wisconsin..................................                  3                   $1,814                   $1,814
Wyoming....................................                  8                  $77,977                  $42,441
                                            --------------------------------------------------------------------
Total......................................                294               $4,055,578               $2,067,432
----------------------------------------------------------------------------------------------------------------
Source: FHWA, June 2002

Transportation Infrastructure Finance and Innovation Act (TIFIA) credit 
        assistance
    As part of TEA-21, Congress authorized the Transportation 
Infrastructure Finance and Innovation Act of 1998 (TIFIA) to provide 
credit assistance, in the form of direct loans, loan guarantees, and 
standby lines of credit to projects of national significance. The TIFIA 
legislation authorized $10.6 billion in credit assistance and $530 
million in subsidy cost to cover the expected long-term cost to the 
government for providing credit assistance. TIFIA credit assistance is 
available to highway, transit, passenger rail and multi-modal project, 
as well as projects involving installation of intelligent 
transportation systems (ITS).
    The TIFIA statute sets forth a number of prerequisites for 
participation in the TIFIA program. The project costs must be 
reasonably expected to total at least $100 million, or alternatively, 
at least 50 percent of the State's annual apportionment of Federal-aid 
highway funds, whichever is less. For projects involving ITS, eligible 
project costs must be expected to total at least $30 million. Projects 
must be listed on the State's transportation improvement program, have 
a dedicated revenue source for repayment, and must receive an 
investment grade rating for their senior debt. Finally, TIFIA 
assistance cannot exceed 33 percent of the project costs and the final 
maturity date of any TIFIA credit assistance cannot exceed 35 years 
after the project's substantial completion date.

                                                     Table 2: State's use of TIFIA credit assistance
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Project         Project cost ($                        Credit amount ($     Primary revenue
              State                  Project name         description          millions)        Instrument type        millions)            pledge
--------------------------------------------------------------------------------------------------------------------------------------------------------
California......................  SR 125 Toll--1999.  Road Highway/       $455..............  Direct loan.......  $94.000 User......
                                                       Bridge                                 Line of credit      $33.000 Charges
                                                       Construction of
                                                       11 mi 4-lane toll
                                                       road in San Diego.
                                  San Francisco-      Replacement of SF-  $3,305 Direct loan  $450.000 Toll
                                   Oakland Bay         Oakland Bay                             surcharge.
                                   Bridge--2002.       Bridge east span.
D.C.............................  Washington Metro--  Transit capital     $2,324 Guarantee..  $600.000 Other....
                                   1999.               improvement
                                                       program.
Florida.........................  Miami Intermodal    Multi-modal center  $1,349 Direct loan  $269.076 Tax
                                   Center--1999.       for Miami          Direct loan          revenue.
                                                       Intern'l Airport,                      $163.676 User
                                                       including car                           charges
                                                       rental garage,
                                                       intermodal
                                                       center, people
                                                       mover, and
                                                       roadways.
Nevada..........................  Reno Rail Corridor  Intermodal........  $280 Direct loan..  $73.500 Other.....
New York........................  Farley Penn         Intermodal........  $800 Direct loan..
                                   Station--1999.
                                  $140.000 Other....
Line of credit                    $20.000 Other
                                  Staten Island       Transit...........  $482 Direct loan..  $159.068 Other....
                                   Ferries--2000.
Puerto Rico.....................  Tren Urbano--1999.  Transit rail line.  $1,676 Direct loan  $300.000 Tax
                                                                                               revenues.
South Carolina..................  Cooper River        Replace double      $668 Direct loan..  $215.000 Other....
                                   Bridge.             bridges over the
                                                       Cooper River,
                                                       connecting
                                                       Charleston and
                                                       Mt. Pleasant.
Texas...........................  Central Texas       Construct 120+ mi.  $3,220 Direct loan  $917.000 User
                                   Turnpike--2001.     toll facilities                         charges.
                                                       to ease I-35
                                                       congestion.
Washington......................  Tacoma Narrows      Construct new       $835 Direct loan..  $240.000 User.....
                                   Bridge--2000.       parallel bridge,   Line of credit      $30.000 charges
                                                       toll plaza, and                         (both)
                                                       approach roadways.
                                                                         ---------------------
    Total.......................                                          $15,393...........
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: FHWA, June 2002.

Grant Anticipation Revenue Vehicles (GARVEEs)
    Grant anticipation revenue vehicles (GARVEEs) are another tool 
States can use to finance highway infrastructure projects. GARVEE bonds 
are any bond or note repayable with future Federal-aid highway funds. 
The NHS Act and TEA-21 brought about changes that enabled States to use 
Federal-aid highway apportionments to pay debt service and other 
bondrelated expenses and strengthened the predictability of States' 
Federal-aid allocation. While GARVEEs do not generate new revenue, the 
new eligibility of bond-related costs for Federal-aid reimbursement 
provides States with one more option for repaying debt service. 
Candidate projects are typically large enough to merit borrowing rather 
than pay-as-you-go grant funding; do not have access to a revenue 
stream (such as local taxes or tolls) or other forms of repayment 
(State appropriations); and have support from the State's DOT to 
reserve a portion of future year Federal-aid highway funds to fund debt 
service. In some cases, States may elect to pledge other sources of 
revenue, such as State fuel tax revenue, as a backstop in the event 
that future Federal-aid highway funds are not available.

                                      Table 3: State's use of GARVEE bonds
----------------------------------------------------------------------------------------------------------------
                                                        Face amount of
              State                Date of issuance          issue             Projects       Backstop financing
----------------------------------------------------------------------------------------------------------------
Alabama.........................  Apr-02............  $200 million......  County Bridge       All Federal
                                                                           Program.            construction
                                                                                               reimbursements.
                                                                                               Also insured
Arizona.........................  Jun-00............  $39.4 million.....  Maricopa freeway    Certain sub-
                                  May-01              $142.9 million       projects.           account transfers
Arkansas........................  Mar-00............  $175 million......  Interstate          Full faith and
                                  Jul-01              $185 million         highways.           credit of State,
                                                                                               plus State motor
                                                                                               fuel taxes
Colorado........................  May 00............  $537 million......  Any project         Federal highway
                                  Apr-01              $506.4 million       financed wholly     funds as
                                  Jun-02              $208.3 million       or in part by       allocated
                                                                           Federal funds.      annually by CDOT;
                                                                                               other State funds
New Mexico......................  Sep-98............  $100.2 million....  New Mexico SR 44..  No backstop; bond
                                  Feb-01              $18.5 million                            insurance
                                                                                               obtained
Ohio............................  May-98............  $70 million.......  Spring-Sandusky     Moral obligation
                                  Aug-99              $20 million          project and         pledge to use
                                  Sep-01              $100 million         Maumee River        State gas tax
                                                                           Bridge              funds and seek
                                                                           Improvements.       general fund
                                                                                               appropriations in
                                                                                               the event of
                                                                                               Federal shortfall
                                                     ---------------------
    Total.......................                      $2,301.7 million..
----------------------------------------------------------------------------------------------------------------
Source: FHWA, June 2002

                                 ______
                                 
Responses by JayEtta Hecker to Additional Questions from Senator Baucus
    Question 1. One way of organizing some of these ideas are selling 
bonds for project specific financing versus using bond proceeds to 
supplement the Highway Trust Fund. Will you comment on the advantages 
and disadvantages of each?
    Response. Mr. Chairman, in the competition for finite 
transportation resources, selling bonds to help finance a specific 
project can help advance a project that might otherwise go unfunded or 
be delayed. In addition, project-specific financing can be useful for 
large-dollar projects that would otherwise take up a large portion of a 
State's Federal highway apportioned funds in any given year. However, 
as we indicated in our statement, given the restrictions in some State 
laws and the views of some State officials, project-specific financing 
currently has limited applicability. As a result, not all States can 
use project specific financing, nor can it be used for all projects. In 
addition, State officials will weigh the risks associated with project-
based bonds against the expected benefits from those projects to 
determine whether the added risk is justified.
    In the short term, using bond proceeds to supplement the Highway 
Trust Fund would increase the available funding, and this additional 
funding would then be apportioned to all the States. This approach 
could enable a wider range of projects to be advanced. If the Federal 
Government sold these bonds, they would be less risky than project-
specific bonds. Consequently, investors would not demand as high an 
interest rate as they would for the project-specific bonds. However, 
this debt would ultimately have to be repaid--either by the general 
population through increases in general fund taxes or reductions in 
other government services, or by earmarking funds from the Highway 
Trust Fund. If funds were earmarked from the Highway Trust Fund to 
repay the bonds in the future, highway funding would not be increased. 
Rather, costs would be shifted to future users.
    Raising new sources of funding presents Congress with the option of 
devising alternatives to the existing formula-based grant program for 
delivering funds, in either a project-or program-based fashion. This 
could open the possibility of engaging new approaches to deal with 
seemingly intractable transportation problems and national priorities. 
For example, DOT and FHWA have concluded that the reliability and 
effectiveness of the freight transportation system is being constrained 
because of increasing demand and capacity limitations. Many observers 
have questioned the ability of our surface transportation systems to 
keep pace with the growing demands being placed upon them as pressure 
continues to build on already congested road and rail connections to 
major U.S. seaports and at border crossings. Either a project-based or 
a program-based financing approach could target funds to these or other 
major national priorities.
                                 ______
                                 
   Responses by JayEtta Hecker to Additional Questions from Senator 
                                Jeffords
    Question 1. In your statement you make reference to the lack of 
qualified personnel at the Department of Transportation in regard to 
financing. How many positions (FTE) does the DOT currently have 
invested in finance personnel? What is your best guess as to the 
percentage of those FTEs having the necessary skill sets to advance a 
more aggressive transportation financing program?
    Response. Mr. Chairman, FHWA requested 2,412 FTEs for fiscal year 
2003. Of these, 99 were for financial manager and financial specialist 
positions. The degree to which staff in these positions are involved in 
innovative finance activities varies. They include staff located in 
each of FHWA's division offices in every State who have some 
involvement with innovative finance, staff located in headquarters and 
other locations who specialize in innovative finance, and other staff 
who are not directly involved with innovative finance but need some 
knowledge of it.
    We have not reviewed DOT's staffing profile in sufficient detail to 
determine whether the right number of personnel are performing these 
functions or to assess their skills. But the department--and indeed all 
Federal agencies--face a growing human capital crisis that threatens 
their ability to effectively, efficiently, and economically perform 
their missions and to ensure maximum government performance and 
accountability for the benefit of the American public. For that reason, 
as you know, we have designated strategic human capital management as a 
high-risk concern governmentwide. As I mentioned in my statement, this 
challenge ripples throughout the State and local transportation 
agencies that build, maintain, and operate the vast preponderance of 
the nation's transportation system. About 50 percent of the people who 
plan, develop, and manage the nation's transportation system will 
become eligible to retire in the next 5 years. A survey of State 
departments of transportation conducted by the New Mexico State Highway 
and Transportation Department in 1999 identified the need to attract, 
hire, and retain skilled personnel as the greatest human resource 
issues facing these departments. In addition, the Transportation 
Research Board has cited the impending shortage of skilled personnel as 
among our nation's most critical transportation issues.
    In our view, addressing human capital challenges requires 
comprehensive workforce planning strategies to identify the mix of 
skills needed to accomplish an agency's mission, the skill mix the 
agency has on hand, whether those employees are expected to retire and 
when, and a recruiting and hiring strategy to fill the gaps where needs 
exist. For example, any examination of the transportation finance arena 
would necessarily reflect the changing nature of the surface 
transportation program-from a federally funded formula grant program to 
one involving a multiplicity of funding sources and delivery 
mechanisms. This change requires people with new skills-for example, 
persons skilled in public finance who can navigate the private capital 
markets. DOT has made progress addressing its human capital concerns by 
publishing its Human Resources Strategic Action Plan for 2001-2003 with 
goals that call for increased human capital investments and workforce 
planning. In addition, FHWA is actively working with major national and 
State transportation organizations and independent experts to identify 
human capital needs and innovative ways to meet them. Clearly, it is 
important that the needs of financing the nation's transportation 
system be part of this assessment. In January 2003, we will be 
reporting further on human capital challenges faced by DOT and other 
Federal agencies in our biannual high risk and performance and 
accountability assessment.

    Question 2. One of the outcomes of reauthorization should be the 
ability to allow for more meaningful investment by the private sector 
into transportation. Current transportation bonding techniques do not 
seem to provide the income that the private sector is seeking since we 
primarily use tax-exempt mechanism. Can you provide more insights on 
how we can ``decouple'' the bonding process to make it more attractive 
to these types of investors? Are there examples where such activity is 
occurring?
    Response. Mr. Chairman, proponents of tax credit bonds have 
advocated ``decoupling'' as you suggested. These proponents contend 
that if the bonds are sold as two separate components-the right to 
receive the tax credits and the right to receive the principal 
repayment when the bond comes due-then the bond issuer could receive 
larger proceeds for selling a bond with a given face value. This 
practice is known as ``stripping.'' The reason this result is expected 
is that each component of the bond would be better tailored to suit the 
requirements of different types of investors. For example, some 
investors may prefer to receive the periodic benefit of the tax credit 
and may be less interested in receiving a principal repayment in the 
distant future. Other investors, such as pension funds or taxpayers 
setting up individual retirement accounts, have no need for current 
income or tax benefits and may simply prefer to receive a certain 
amount of money at a specified future date. Therefore, the sum that the 
two different types of investors would be willing to pay for the two 
components is likely to be larger than the sum that either type of 
investor would be willing to pay for an ``unstripped'' bond.
    The practice of ``stripping'' is prevalent in the sale of interest-
bearing securities. For example, Treasury bonds with maturities of 10 
years or longer generally can be sold as two separate components. 
However, under current law, no existing tax credit bonds can be 
stripped. A Treasury department official told us that the monitoring of 
tax compliance would be more complicated if tax credit bonds were 
allowed to be stripped. For example, if the tax credits ever had to be 
recaptured because of noncompliance on the part of issuers, it might be 
difficult to track down the recipients of the credits if those credits 
had been resold separately in the secondary market.

    Question 3. It seems that our current transportation financing 
mechanisms work well for large-scale projects. What avenues are 
available for smaller scale projects? Are there other models which have 
worked well in other areas which could be helpful here--for example the 
Farm Credit system sells securities to raise funds to make loans. What 
existing financing ideas regarding other Departments, Government 
Sponsored Enterprises, Federal or State agencies, or private entities 
should we at least consider in terms of the reauthorizations?
    While our current transportation financing mechanisms are--for the 
most part--geared toward larger scale projects, Mr. Chairman, at least 
one mechanism, SIBs, have effectively supported smaller projects. 
TIFIA, as you know, is limited by statute to projects with an estimated 
cost of $100 million or more, and States that have used GARVEEs have 
generally done so to support the financing needs of large projects. 
Although SIBs have also been used to fund some large projects-such as 
the projects in South Carolina's ``27 in 7'' program-they also support 
smaller projects in those States that have SIBs. For example, loans in 
Missouri have averaged $7 million per project, while loans from Maine's 
SIB have averaged $76,000 per project. FHWA officials told us that SIBs 
have been effectively used for smaller projects that might otherwise 
have received a lower priority for funding. However, these projects 
have required some type of revenue stream in order for the borrower-
often a municipality-to repay the loan.
    I agree with you, Mr. Chairman, that a variety of financing 
mechanisms exist in different sectors to bring private participation 
and investment to the table in support of public goals and purposes. 
For example, as you pointed out, the Congress has created government-
sponsored enterprises (GSE) such as the Farm Credit System-as well as 
Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System--to 
provide support for agricultural and home lending beyond what the 
financial markets would provide in their absence. These GSEs are 
sophisticated financial institutions with Federal charters that grant 
them benefits so that they can help achieve their public missions. 
Among these benefits, GSEs can issue debt in the capital markets at 
favorable interest rates to help finance a wide range of lending to 
farmers and homeowners. Our work has shown that these institutions 
often have unique flexibilities and play a key role in providing 
services and options that are beyond the capacity of public agencies or 
financial markets to provide.
    However, the Congress did not decide to create these entities 
lightly. Because of the sophistication of their financial operations, 
the risks they face, and the requirements of their missions, GSEs 
require public oversight mechanisms to ensure their safety and 
soundness, and to ensure that the public purposes for which they were 
created are being carried out. As such, a decision to create a GSE 
might best follow a conclusion that one was uniquely positioned to 
fulfill unmet national needs and priorities and that the benefit of 
government sponsorship and the role of such an institution in 
fulfilling those needs and priorities exceeded the costs of creating 
and operating it. To date, GSEs have not been used for financing public 
facilities, such as highways. We have completed an extensive body of 
work on this subject and would be pleased to work with you and the 
committee staff to examine more specifically the potential application 
of these and other financing mechanisms to meeting our surface 
transportation needs.

    Question 4. I am interested in attracting private capital to 
supplement the Highway Trust Fund in meeting the nation's 
transportation needs. The key consideration for private investors is 
the availability of a reliable revenue stream to retire debt. Where 
might we turn to secure such revenue streams?
    Response. Mr. Chairman, probably the most prevalent and reliable 
revenue stream is the user fee. User fees can be in the form of tolls, 
fuel taxes, or license and vehicle fees--and States have turned to a 
variety of user fees to finance transportation projects. For example, 
Arkansas imposed a diesel fuel tax to partially pay for the GARVEE 
bonds issued to reconstruct the State's interstate highways, while 
Illinois increased its vehicle registration fees to finance bonds for 
its ``Illinois First'' project--which included a number of significant 
highway renovations. User fees are increasingly taking less 
conventional forms--Florida intends to repay part of its TIFIA loan for 
the Miami Intermodal Center from fees levied on rental cars while New 
York's Farley Penn Station TIFIA loan is to be repaid from lease 
payments from the Port Authority of New York and New Jersey, revenues 
from Amtrak, and rents paid from planned station retail facilities. In 
addition to highway user fees, many States and localities have tapped 
property-based sources of financing, including general property taxes, 
real estate transfer taxes, and developer impact fees to finance 
surface transporttion projects.
    As we discussed in our March 2000 report (Port Infrastructure: 
Financing of Navigation Projects at Small and Medium-Sized Ports), some 
States allow local sponsors of Corps of Engineers' navigation projects 
to levy property taxes or issue general obligation or revenue bonds. 
General obligation bonds issued to support projects are generally paid 
for through taxes implemented by State or local governments. Revenue 
bonds issued to support a particular project are typically paid for out 
of the revenues generated by that project.
                               __________
Statement of Janice Hahn, Member, Los Angeles City Council Chairwoman, 
               Alameda Corridor Transportation Authority
    Mr. Chairmen, and members of the joint committees, good morning, 
and thank you for inviting me here today. My name is Janice Hahn. I am 
a Los Angeles City Councilwoman and serve as Chairwoman of the 
Governing Board of the Alameda Corridor Transportation Authority. The 
Alameda Corridor Transportation Authority is a joint-powers authority 
created by the Cities of Long Beach and Los Angeles in 1989 to oversee 
the financing, design and construction of the Alameda Corridor. The 
Governing Board of the Alameda Corridor Transportation Authority is a 
seven-member board representing the cities of Los Angeles and Long 
Beach, the ports of Los Angeles and Long Beach and the Los Angeles 
County Metropolitan Transportation Authority (MTA).
    On behalf of city of Los Angeles Mayor James Hahn, city of Long 
Beach Mayor Beverly O'Neill, the Corridor Authority's Governing Board, 
and our CEO Jim Hankla, I am honored to be here.
                              introduction
    We are commonly called ACTA. ACTA is the public agency that built 
the Alameda Corridor, a 20-mile-long freight rail expressway linking 
the Ports of Los Angeles and Long Beach to the rail yards near downtown 
Los Angeles. The project was monumentally complex, running through 
eight different government jurisdictions in urban Los Angeles County, 
requiring multiple detailed partnerships between public and private 
entities, and presenting extensive engineering challenges.
    One of the key partnerships that has been vital over the years has 
been with the U.S. Congress. We greatly appreciate the strong support 
you and your colleagues provided to ACTA in developing the innovative 
loan from the Department of Transportation. We are particularly 
thankful for the strong leadership demonstrated by many of you in 
Congress including our two distinguished Senators, Dianne Feinstein and 
Barbara Boxer along with California Congressman Stephen Horn and 
Congresswoman Juanita Millender-McDonald. Without their vision and 
support it is unlikely the Alameda Corridor would be in operation 
today, strengthening the nation's global economic competitiveness.
    Over the years there were many who doubted the Corridor project 
could be built, let alone on time and on budget. But after more than 15 
years of planning and 5 years of constructing the $2.4 billion Alameda 
Corridor, one of the nation's largest public works projects opened on 
time and on budget on April 15. Today, more than 35 freight trains per 
day use the Alameda Corridor, handling containers loaded with shoes, 
clothing, furniture and other products bound for store shelves 
throughout the United States. They also deliver to the ports U.S. goods 
such as petroleum products, machine parts, and agricultural products 
for shipment to worldwide markets.
    A trip from the Ports of Los Angeles and Long Beach to the 
transcontinental rail yards near downtown Los Angeles used to take more 
than 2 hours. It now takes about 45 minutes. As cargo volumes increase, 
this enhanced speed and efficiency will be critical; more than 100 
trains per day are expected on the Alameda Corridor by the year 2020. 
It is important to note that ACTA is collecting revenue from these rail 
shipments in amounts sufficient to meet its current and future 
financial obligations.
                           model for success
    Because of our success, the Alameda Corridor is considered a model 
for how major public works projects should be constructed. The Corridor 
illustrates the significance of intermodalism to the future of our 
economic and transportation systems. Among those praising the Alameda 
Corridor have been Transportation Secretary Norman Mineta--a long time 
supporter and friend of the Corridor project--and three of his 
predecessors, one from the first Bush Administration and two from the 
Clinton Administration.
    At our grand opening ceremony last April, Secretary Mineta said 
this about the Alameda Corridor: ``Its successful completion 
demonstrates what we can accomplish with innovative financing and 
public-private cooperation, and it provides a powerful paradigm for the 
kinds of intermodal infrastructure investment we want to encourage as 
we begin working with the Congress to develop legislation reauthorizing 
America's surface transportation programs.'' We were also pleased to 
see that just this month in testimony before a joint hearing of the 
Environment and Public Works and Commerce Committees, Associate Deputy 
Secretary of Transportation Jeff Shane praised the Corridor project as 
a national model. The project, he said, ``will have far-reaching 
economic benefits that extend well beyond Southern California.'' 
Similarly, in an article written for TrafficWorld, former U.S. 
Department of Transportation Secretaries Federico Pena and Samuel 
Skinner said: ``The Alameda Corridor is of national significance not 
only because of its direct economic impact on jobs, taxes and commodity 
prices but because the corridor serves as a model of how our country 
can and must expand and modernize our freight transportation system if 
we are to remain a world-class trading partner.'' In addition, former 
U.S. Department of Transportation Secretary Rodney Slater has also been 
a supporter of the Alameda Corridor project.
    We are flattered by the accolades and pleased and proud to share 
our experience with those who hope to benefit from it. In fact, one of 
the goals of the ACTA Governing Board is to support other projects that 
promote international trade and the efficient movement of cargo.
    The key to our success can be attributed to two major themes that 
guided us throughout the planning, financing and construction of the 
project: First is multi-jurisdictional cooperation. The Alameda 
Corridor is built on the partnerships forged between competitive public 
agencies and between those agencies and the private sector. We have 
demonstrated that governments can work together, and they can work with 
the private sector, putting aside competition for the benefit of 
greater economic and societal good. Second is direct and tangible 
community benefits. The Alameda Corridor provided direct community 
benefits in the form of significant traffic congestion relief, job 
training and other programs. We have proven that communities don't have 
to sacrifice quality of life to benefit from international trade and 
port and economic activity.
                       project need and planning
    The roots of our multi-jurisdictional cooperation began to take 
hold in the early 1980's, when a committee was formed by the Southern 
California Association of Governments to study ways to accommodate 
burgeoning trade at the Ports of Los Angeles and Long Beach. The panel 
included representatives of the ports, the railroad and trucking 
industries, the Army Corps of Engineers as well as local elected 
officials and others. The ports had projected--accurately, it turns 
out--massive cargo increases driven by the growing use of intermodal 
containers transferred directly from ships to rail cars and trucks. The 
volume of containers crossing the wharves doubled in the 1990's and 
last year reached more than 10 million 20-foot containers per year. 
That figure is expected to exceed 36 million by the year 2020. Last 
year, the ports handled more than $200 billion in cargo, or about one-
quarter to one-third of the nation's waterborne commerce. This has had 
huge ripple effects in Southern California and across the country in 
the form of jobs, tax revenues and general economic activity.
    In the early 1980's, there was growing concern about the ability of 
the ground transportation system to accommodate increasing levels of 
trade-related rail and truck traffic in the port area. By 1989, the 
cities and ports of Los Angeles and Long Beach had joined forces to 
form a joint powers authority that later became the Alameda Corridor 
Transportation Authority. The agency then selected a preferred project: 
consolidating four branch lines serving the ports into a 20-mile 
freight rail expressway that is completely grade-separated, including a 
10-mile-long 30-foot-deep trench that runs through older, economically 
disadvantaged industrial neighborhoods south of downtown Los Angeles. 
The project would eliminate traffic conflicts at more than 200 street-
level railroad crossings.
                     project financing and funding
    Our broad base of cooperation is also evident in the project's 
unique finance plan, which draws revenue from a range of both public 
and private sources.
    The linchpin of this funding plan was designation of the Alameda 
Corridor as a ``high-priority corridor'' in the 1995 National Highway 
System Designation Act. That designation cleared the way for Congress 
to appropriate $59 million needed to back a $400 million loan to the 
project from the U.S. Department of Transportation. As mentioned 
previously, Senators Boxer and Feinstein, along with California 
Congressman Stephen Horn and Congresswoman Juanita Millender-McDonald 
and other members of our congressional delegation, were instrumental in 
helping to form a bipartisan congressional coalition to support this 
effort. It is important to point out that this financing arrangement 
preceded the passage of TEA-21, and the associated provisions known as 
TIFIA. ACTA was pleased to work cooperatively with Department of 
Transportation officials and congressional staff, to be a 
``trailblazer'' with the Office of Management and Budget and forge an 
innovative arrangement to finance an intermodal project of national 
significance.
    Similarly, at the State level, ACTA worked closely with both 
Republican and Democrat members of the Legislature, Governor Pete 
Wilson along with the California Business, Transportation and Housing 
Agency, the California Transportation Commission and the Department of 
Transportation to include the project in short-and long-range plans and 
to expedite State funding. At the local level, ACTA coordinated closely 
with Mayor Beverly O'Neill of Long Beach and then-Mayor Richard Riordan 
of Los Angeles for support of the project, and ACTA worked closely with 
the Los Angeles County Metropolitan Transportation Authority to set 
aside State and Federal grant funds and local transportation sales tax 
revenues for use on the Alameda Corridor. And, of course, the ports 
provided almost $500 million in startup funding and for the purchase of 
rights-of-way.
    The collective assistance offered by Federal, State and local 
agencies and elected officials provided the base funding--the leverage, 
if you will--for the biggest piece of our financing package--more than 
$1.1 billion in proceeds from revenue bonds sold by ACTA. The bonds and 
the Federal loan are being retired by use fees paid by the railroads. 
The Use and Operating Agreement between ACTA and Burlington Northern 
and Santa Fe Railway and Union Pacific Railroad, approved in October 
1998, is truly unprecedented. Never before had the competitive 
railroads cooperated on a project to the extent that they did on the 
Alameda Corridor. Like the ports, the BNSF and the UP put aside their 
rivalry to cooperate on a project with positive economic implications 
at the national, regional and local levels.
    In the end, funding for the Alameda Corridor came from multiple 
public and private sources and resulted from bipartisan support. The 
funding breaks down roughly like this: 46 percent from ACTA revenue 
bonds; 16 percent from the U.S. Department of Transportation loan; 16 
percent from the ports; 16 percent from California State and local 
grants, much of it administered by the Los Angeles County Metropolitan 
Transportation Authority, and 6 percent from other sources.
                          project construction
    As with project planning and funding, construction also required 
extensive cooperation and coordination among multiple entities.
    The Alameda Corridor included, among other elements, construction 
of 51 separate bridge structures, relocation of 1,700 utilities, 
pouring of 27,000 concrete pilings and removal of 4 million cubic yards 
of dirt excavated to make way for the Mid-Corridor Trench. More than 
1,000 professionals from 124 engineering and construction management 
firms, as well as more than 8,000 construction workers, contributed to 
the project. Moreover, construction occurred in eight different 
government jurisdictions. Any project of the Alameda Corridor's size 
and scope inevitably encounters hurdles in the construction process 
that can lead to delays. There are many reasons why our project stayed 
on schedule, but at the top of the list are our permit facilitating 
agreements with corridor communities and utility providers, and our 
decision to use a design-build contract for the Mid-Corridor Trench.
    ACTA saved an estimated 18 months on project delivery by utilizing 
the design-build approach for our largest contract, the Mid-Corridor 
Trench. The design-build approach allows for the overlapping of some 
design and construction work and provides greater control over cost and 
scheduling. Design-build authority was obtained through an ordinance 
approved by the Los Angeles City Council. This enabled ACTA to subject 
the contractor to significant liquadative damages if the contract was 
not completed by a fixed date at a fixed price.
    Before construction began, ACTA negotiated separate Memoranda of 
Understanding with each city along the route, detailing expedited 
permitting processes, haul routes for construction traffic and the 
protocol for lane closures and temporary detours. By agreeing in 
advance on these and other issues, we streamlined a complex 
construction process and saved time and money.
                       direct community benefits
    One key to securing the MOUs and additional community cooperation 
and support was to deliver on our promises of direct community 
benefits.
    By eliminating more than 200 at-grade railroad crossings, the 
Alameda Corridor is projected to reduce emissions from idling trucks 
and automobiles by 54 percent, slash delays at railroad crossings by 90 
percent and cut noise pollution by 90 percent. The project also reduces 
traffic congestion through improvements to Alameda Street. But from the 
start, the ACTA Governing Board wanted to leave a lasting legacy beyond 
construction of a public works project. This was accomplished by 
creating several community-based programs.
    Through its contractors and various community partnerships, ACTA 
administered several programs designed to provide local residents and 
businesses with direct benefits that would long outlive construction. 
For example:
      The Alameda Corridor Business Outreach Program offered 
technical assistance, networking workshops and aggressive outreach to 
provide disadvantaged business enterprises with the tools they need to 
compete for work on the project. Disadvantaged firms--known as DBEs--
have earned contracts worth more than $285 million, meeting our goal 
for 22 percent DBE participation.
      The goal of our Alameda Corridor Job Training and 
Development Program was to provide job training and placement services 
to 1,000 residents of corridor communities. We exceeded that goal--
almost 1,300 residents received construction industry-specific job 
training, and of those 637 were placed in construction-trade union 
apprenticeships.
      The Alameda Corridor Conservation Corps provided life 
skills training to 447 young adults from corridor communities, 
exceeding the goal of 385. While studying for high school class 
credits, these young adults completed dozens of community 
beautification projects in corridor communities, including graffiti 
eradication, tree-planting and debris pickup. After completing the 3-
month program, recruits had the option to join the Los Angeles or Long 
Beach conservation corps chapters full time, phase into a city college 
program or enroll in a business, vocational, trade school or 
apprenticeship program.
      And finally, in partnership with the World Trade Center 
Association Los Angeles-Long Beach, the Alameda Corridor Transportation 
Authority International Trade Development Program has provided 
technical training and international trade-specific job skills to 30 
entry-level job seekers in local communities. In addition, some 600 
local companies seeking inroads into the import or export business have 
been identified for one-on-one technical assistance. That assistance is 
being provided throughout this year. This unique program is helping 
local residents and businesses capitalize on international trade.
    These community-based programs ensured that local residents and 
businesses did not get left behind, that they would receive direct and 
long-lasting benefits from the project.
                               the future
    The efficient movement of cargo through our nation's ports and on 
our rail lines and highways is a critical issue not only in Southern 
California--which has the nation's two busiest ports--but the Nation as 
a whole. The Alameda Corridor is truly the backbone of an emerging 
trade corridor program in Southern California. Already, others are 
following our lead, including governmental agencies in Los Angeles, 
Orange, San Bernardino, and Riverside Counties who are building grade-
separation projects.
    In addition, ACTA and the California Department of Transportation 
are working under an innovative cooperative agreement to develop plans 
for a Truck Expressway that would provide a ``life-line'' link between 
Terminal Island at the Ports and the Pacific Coast Highway at Alameda 
Street. The Alameda Corridor Truck Expressway is intended to speed the 
flow of containers into the Southern California marketplace. 
Environmental reports are being prepared, and the project could be 
ready for approval as early as March 2003. At ACTA, we believe that by 
restructuring our Federal loan we can undertake this critical Truck 
Expressway project without any additional Federal financial support.
                    implications and recommendations
    The Alameda Corridor not only creates a more efficient way to 
distribute cargo, but it also boosts the regional and national 
economies by keeping the ports competitive and capable of generating 
additional economic growth. Moreover, it provides direct, long-lasting 
benefits to local residents and companies, benefiting the entire region 
with a legacy well beyond actual construction. In short, the Alameda 
Corridor has demonstrated the benefit of investment in well-planned and 
well-executed intermodal transportation infrastructure.
    As your committees, the full Congress, and the U.S. Department of 
Transportation begin the TEA-21 reauthorization process, including the 
formulation of policies to address growing freight rail and truck 
traffic congestion and other challenges posed by international trade, 
we respectfully offer these policy recommendations, based on our 
experience with the Alameda Corridor:
      The planning and funding of intermodal projects of 
national significance, directly benefiting international trade, should 
be sponsored at the highest levels within the Office of the Secretary 
of Transportation. There should be a national policy establishing the 
linkage between the promotion of free trade and support for the 
critical intermodal infrastructure moving goods to every corner of the 
United States. Public-private partnerships do in fact work and should 
be promoted and encouraged by Federal transportation legislation.
      A specific funding category is needed to support 
intermodal infrastructure projects, and trade connector projects. 
Consideration should be given to new and innovative funding strategies 
for the maritime inter-modal systems, infrastructure improvements 
enhancing goods movement.
      The Alameda Corridor project benefited from a Department 
of Transportation willing to undertake risk and provide loan terms that 
were not available on a commercial basis. This Federal participation 
gave private investors confidence in the project and made bond 
financing possible.
    Most important, in my mind, is this: The success of the Alameda 
Corridor has shown that Federal investment in trade-related 
infrastructure can benefit the economy without sacrificing quality-of-
life issues.
    Mr. Chairmen, once again, thank you for inviting me here today. 
That concludes my remarks. I would be happy to address any questions.
                               __________
 Statement of Peter Rahn, Cabinet Secretary, New Mexico State Highway 
                     and Transportation Department
 innovative finance: leveraging ordinary resources into extraordinary 
                               successes
    Mr. Chairman and members of the committee, I appreciate this 
opportunity to submit testimony concerning the positive benefits that 
the State of New Mexico has received through innovative financing for 
transportation, and how our State has leveraged ordinary resources into 
extraordinary successes.
    Flexible and stable revenue from Congress has enabled the New 
Mexico State Highway and Transportation Department the ability to 
deliver dramatic results for our citizens through improvement and 
enhancement of our transportation system. We have developed and 
implemented new ways to finance and contract highway construction 
projects.
    Since 1998 we have used innovative financing techniques to bond 
$1.2 billion that advance highway construction projects by as much as 
27 years. We are building quality projects that provide enormous 
returns on investment for the taxpayers and deliver economic benefits 
today.
    New Mexico's strategy is to connect our communities to regional and 
national economic opportunities by building four-lane corridors. This 
access has historically been limited to our Interstate system, serving 
less than 70 percent of our population. Today we have added 653 miles 
of new four-lane highways that link 96.7 percent of our citizens to 
these vital economic opportunities.
    As well as adding 653 miles of four-lane highways, we have built 4 
urban relief routes, 15 interstate interchanges and the Big I, which is 
the intersection of the Interstates 25 and Interstate 40-that serves as 
a bridge for regional, national and global commerce. Our efficiency, 
combined with stable and flexible Federal funding, provides a seamless 
regional transportation system to serve this commerce and continue the 
movement of products to market. Our urban citizens are moving more 
quickly and safely to work, school and medical care.
    Innovative finance enabled us to use Grant Anticipation Revenue 
Vehicle Bonds (GARVEE Bonds) to construct four-lanes on NM 44 from 
central to northeast New Mexico. Because of Federal revenue stability, 
both Standard and Poor's and Moody's rated our bonding proposals at 
``A'' level investment grade. We were able to construct a 118-mile 
four-lane highway corridor in 28 months with a 20-year warranty that 
will save the taxpayer $89 million in maintenance costs. This 118-mile 
corridor would have taken 27 years to construct under traditional 
methods.
    We have also improved the road quality of our Interstate and State 
Highway system through our innovative financing program. We have 
reversed a 20 5-year trend in our deteriorating State and interstate 
highways. Since 1998, we have improved 3,035 miles highways--a 51 
percent decrease in our deficient status highway miles. In 1999 only 
81.8 percent of our Interstate highway system was rated in good 
condition--today 98.7 percent of this system is in good condition.
    In addition to major improvements to our system, our citizens have 
benefited through economies of scale. In 1995 New Mexico's cost per 
mile of four-lane construction was $1.3 million. In 2002, through our 
large bonding program, we reduced that cost to $740 million per mile. 
This economy of scale construction saves our State over $182 million in 
four-lane corridor construction.
    Investment in the nations transportation infrastructure yields high 
returns. Based on information generated by the National Highway Users 
Alliance, the Big I will save personal and commercial users $8.1 
billion in time; $870 million in fuel; $460 million in safety; and 
another $670 million in environmental impacts. This $286 million 
investment by Congress will realize a $10.1 billion return on 
investment. This $10.1 billion return on investment for one project is 
34 times greater than the interest paid on our entire bonding program.
    It is critically important that we understand and acknowledge our 
innovative financing program would not be the success that it is 
without the provision for flexible, stable and reliable funding. States 
across the country have invested in the national infrastructure based 
on the guaranteed funding levels. These guarantees have enabled us to 
program and deliver projects in a predictable financial climate. In 
fact-based on the FHWA highway construction inflation rate of 4.5 
percent--our entire bonding program, with an interest rate of 4.47 
percent, delivers $1.2 billion of transportation improvements to New 
Mexico at a lower cost and the benefit of being used today rather than 
years in the future.
    We can assure our citizen's that all user fees directed to the 
Highway Trust Fund are being spent for its designated purposes, and we 
can speak with confidence about the Federal transportation-financing 
picture over a multi-year period. Strong budgetary mechanisms, balanced 
planning and streamlining program delivery have made innovative finance 
work for New Mexico.
                                 ______
                                 
    Responses of Peter Rahn to Additional Questions from Sen. Baucus
    Question 1. I have some concerns about Garvee bonds. I understand 
the advantage using future apportionments to guarantee bonds, so you 
can enjoy the additional capital today. But what is going to happen 
tomorrow when you need to use your future apportionments to build and 
maintain highways, but the money already been spoken for as repayment 
for the project you did today?
    Response. States have to be adept at what they utilize GARVEE bonds 
for. Critical projects that produce major returns on investment in the 
areas of economic development opportunities, safety and congestion 
relief are most suitable for bonding, especially when the cost of the 
project is outside the bounds of what can be accommodated within the 
normal STIP process. By this I mean, that a single project would take 
an inordinate percentage of the annual construction program to 
construct. Three of our bonded projects would have each exceeded the 
total annual construction dollars available to New Mexico and three 
more would have each exceeded 50 percent.
    To utilize GARVEE bonds, or any bonds for that matter, to pay for 
maintenance activities would be a mistake. Maintenance should be 
accommodated within existing budgets, as we have provided for in our 
future plans. However, the notion that new construction projects will 
be on hold until the issued bonds are retired--and therefore bonds 
should not be used at all--is flawed. If bonds had not been issued in 
New Mexico, not only would those other projects be waiting, so would 
the projects now in place.
    The economic benefits of bonding must also be factored into the 
decision. Building large projects at one time can produce many millions 
of dollars in savings from economies of scale. Additionally, current 
low interest rates are attractive when compared to nearly identical 
inflation costs within the highway construction sector. The true costs 
are practically the same, but the benefits of use are available today.

    Question 2. Why didn't the State just issue State general 
obligation bonds or private activity bonds? Why chose Garvees?
    Response. New Mexico chose to issue GARVEE bonds rather than 
general obligation bonds due to the ease and speed with which GARVEES 
could be taken to market versus the lengthy process required by the 
State constitution to utilize GO bonds. Private activity bonds do not 
enjoy the same tax advantages as GARVEE bonds.
                               __________
Statement of John Horsley, Executive Director, the American Association 
             of State Highway and Transportation Officials
    Mr. Chairmen and members of the committees, my name is John 
Horsley. I am the Executive Director of The American Association of 
State Highway and Transportation Officials (AASHTO). I am here today to 
testify on innovative and other financing issues as the Congress begins 
consideration of legislation to reauthorize the Federal-aid highway and 
transit programs.
    First, I want to thank you both for your leadership in fully 
restoring highway funding for fiscal year 2003 to $31.8 billion as 
AASHTO, the National Governors' Association and many others have urged. 
As I will discuss today, RABA needs to be fixed next year to avoid 
radical swings in funding levels, but without your help, we would still 
be facing a disastrous cutback this year.
    Senator Baucus, AASHTO would like to commend you for your 
leadership in transferring the 2.5 cents per gallon of gasohol tax 
revenues from the General Fund to the Highway Trust Fund and for your 
efforts to credit interest to the Highway Trust Fund where it belongs 
and will help greatly.
    In addition, I want to thank both Chairmen for demonstrating their 
leadership by scheduling this very important hearing. I am honored to 
be invited to testify on these important issues and to offer the views 
of AASHTO on a variety of financing issues. Mr. Chairmen, I would like 
to begin by recognizing the contribution that TEA-21 has made to 
address the nation's need to invest in our highway and transit systems. 
We have seen record level investment made possible by that legislation 
and we at AASHTO commend the Congress and these two committees for your 
contributions to achieving that result. However, as much as that 
investment has contributed ($208 billion), the national needs continue 
to far outstrip the available resources. Your holding this hearing 
gives us the opportunity to recognize those needs and to suggest ways 
that working together we can increase investment in surface 
transportation as part of the reauthorization bill while maintaining 
fiscal discipline.
                 highway and transit financing history
    Mr. Chairmen, the Federal-aid highway program since 1956, and since 
1982 the mass transit program, have financed critical national 
transportation investments primarily from the dedicated depository of 
revenue the Highway Trust Fund. There are a variety of fees deposited 
in the Trust Fund, but the largest source of income by far has been 
fees levied on motor fuels (gasoline and diesel). Although the needs 
for highway and transit investment have dramatically increased, fuel-
related user fees have been adjusted only on a sporadic basis. The 
following chart provides a history of changes in rates since the 
creation of the Trust Fund in 1956.

                                      Changes in Gasoline Tax: 1956-Present
----------------------------------------------------------------------------------------------------------------
                                                                              Mass                     Leaking
                     Year                        Total Tax     Highway      Transit      Deficit     Underground
                                                               Account      Account     Reduction   Storage Tank
----------------------------------------------------------------------------------------------------------------
1956.........................................           3              3
1959.........................................           4              4
1983.........................................           9              8            1
1987.........................................           9.1            8            1                        0.1
1990.........................................          14.1           10          1.5          2.5           0.1
1993.........................................          18.4           10          1.5          6.8           0.1
1995.........................................          18.4           12            2          4.3           0.1
1997.........................................          18.4        15.44       2.86            0.1
----------------------------------------------------------------------------------------------------------------
Source: FHWA, ``Financing Federal Aid Highways,'' 1999

    In concert with increases in user fees there was growth in funding 
for both the highway and transit programs. The most dramatic growth 
occurred since 1991 starting with the enactment of ISTEA and reinforced 
by TEA-21. However, in spite of this growth, needs continue--by 
anyone's measures--to far outstrip available Federal, State and local 
resources. At its completion, TEA-21 will have provided $208 billion 
for highways, transit and safety, but the needs as measured by the U.S. 
Department of Transportation are far greater than even this record 
level investment.
    In the 1990's, various innovative financing techniques were piloted 
and then enacted into law through the National Highway System 
Designation Act and TEA-21. Among the tools that now are part of many 
State DOT financing approaches are: eligibility of Federal-funding to 
pay debt service for project financings; grant anticipation notes also 
known as GARVEE Bonds; tapered match, which allows States to manage 
matching shares over the life of a project; and the Transportation 
Infrastructure Finance and Innovation Act of 1998 (TIFIA) program 
introduced in TEA-21 that provides secured loans, loan guarantees and 
standby lines of credit to surface transportation projects of national 
or regional significance. These tools are useful but only fill a niche 
in the program and project financing toolkit. We clearly need to do 
more with innovative financing in the future to enhance the mechanisms, 
and apply innovative financing to more areas of surface transportation. 
I will provide ideas for the committees' consideration later in my 
testimony.
  aashto's proposed funding levels for reauthorization and financing 
                                options
    Mr. Chairmen, we believe the central issue in reauthorization will 
be how to grow the program. Huge safety, preservation and capacity 
needs exist in every region of the country. AASHTO will release shortly 
its Bottom Line Report, which projects needed highway investment to 
assure American mobility and to advance our economy.
    The report will show that the annual level of investment needed to 
maintain current conditions and performance of our highway systems is 
$92 billion. The estimated annual level of investment needed to 
maintain the current conditions and performance of the nation's transit 
systems is $19 billion. These investment levels far exceed current 
investment and we recognize that the magnitude of increase needed is 
not likely to be made available through the Federal-aid highway 
program.
    However, to begin to address these needs, AASHTO is seeking a 
substantial increase in funding over TEA-21 for both the highway and 
transit programs. Overall, as compared to TEA-21\1\ obligation levels 
for highways and funding for transit, we seek to grow the program from 
at least $34 billion in fiscal year 2004 to at least $41 billion in 
fiscal year 2009 for highways and, likewise, from at least $7.5 billion 
in fiscal year 2004 to at least $10 billion in fiscal year 2009 for 
transit. These minimum figures represent 35 percent and 45 percent 
program increases, respectively.
---------------------------------------------------------------------------
     \1\Growth calculations: Highway baseline of $168.7 billion 
includes TEA-21 obligation limitation, exempt and RABA. Transit 
baseline includes guaranteed funding of $36.35 billion.
---------------------------------------------------------------------------
    The challenge is how to fashion a funding solution that can achieve 
these goals and garner the bipartisan support needed for enactment next 
year.
    New sources of funding are needed to significantly grow the 
program. Without the introduction of new sources of funding, growth in 
the highway and transit programs will rely on additional revenues from 
increased travel and truck sales. Based on the latest data available to 
AASHTO, these revenues would translate to about a 10 percent program 
increase for highways over the life of a 6-year reauthorization bill.
    This increase would not even come close to keeping up with the loss 
of purchasing power due to inflation. From 1996 projecting through 
2009, inflation as measured by the Consumer Price Index results in a 26 
percent decline in purchasing power. If reauthorization of TEA-21 
includes only ``status quo'' options for achieving a larger program, we 
will soon find that the status quo is actually a rather a dramatic 
decline in investment due to the erosion of purchasing power. The 
following graph illustrates the impact of inflation on the current user 
fee rates.


    Put another way, based on the Bureau of Labor Statistics inflation 
calculator, merely to have maintained the purchasing power of the three 
cent gasoline tax as was instituted in 1956, the gasoline tax today 
would need to be 20 cents.
    Maintaining the status quo is not an option; however, as I said, 
the challenge is to develop a solution that attains at least $41 
billion for highways and $10 billion for transit by 2009 that garners 
bipartisan support. The AASHTO Board of Directors is considering a menu 
of funding options to create additional revenues that includes drawing 
down the Highway Trust Fund reserves; capturing 2.5 cents per gallon 
gasohol revenues currently going to the General Fund for the Highway 
Trust Fund; transferring the equivalent of 5.3 cents per gallon of 
gasohol tax from the General Fund to the Highway Trust Fund to make up 
for the rate differential between gasohol and gasoline; capturing 
interest on Highway Trust Fund reserves; increasing General Fund 
support for transit; selling financial instruments; and indexing and 
raising Federal fuels taxes.
    Although the program could grow somewhat without raising taxes, it 
would fall short of meeting national needs. AASHTO recognizes that the 
Congress needs funding and financing options beyond the traditional 
user fee increase approach. The Board also directed the AASHTO staff to 
explore the feasibility of leveraging new revenues through a 
Transportation Finance Corporation. While most of AASHTO's funding 
options are very straightforward, I would like to take a few minutes to 
describe the proposal to create a Transportation Finance Corporation, 
which could achieve AASHTO's goals for highway and transit funding 
without indexing or a tax increase, in more detail.
                   transportation finance corporation
    In order to help close the sizable funding gap between surface 
transportation investment needs and projected resources available in 
the Highway Trust Fund, AASHTO is exploring including among its menu of 
funding options the concept of establishing a new tax credit bond 
program to raise revenue in the capital markets. We describe this 
concept as program finance, rather than project finance.
    AASHTO proposes that Congress consider chartering a private, non-
profit organization-the Transportation Finance Corporation-to serve as 
the centralized issuer of tax credit bonds. Approximately $60 billion 
in bonds would be issued between 2004 and 2009. From the bond proceeds, 
approximately $34 billion would be distributed to the highway program 
through FHWA according to an apportionment formula determined by 
Congress (perhaps similar to the current Federal-aid highway funding 
formula). About $8.5 billion would be made available to transit 
agencies on a basis to be determined. From a State (or transit agency) 
perspective, these funds would essentially be indistinguishable from 
regular Federal-aid apportionments: States would be required to comply 
with all Title 23 requirements to use the funds. In summary, the TFC 
would leverage approximately $18 billion in new revenues into an 
increase of nearly $43 billion in program funding for fiscal year 2004-
2009.
    The States would not in any way be liable for the repayment of the 
bonds. A portion of the bond proceeds (approximately $17 billion) would 
be set aside at issuance and deposited in a sinking fund, which would 
be invested in Federal agency or other high-grade instruments. At 
maturity, the sinking fund will have grown to be sufficient to repay 
the bond principal. These taxable bonds would have a term of 20-25 
years.
    In lieu of interest, the bond holders would receive taxable tax 
credits that could be applied against the holder's Federal income tax 
liability. There is a cost to the U.S Treasury for this type of tax 
credit program. The Treasury would be reimbursed for the budgetary cost 
of the program (arising from tax expenditures) by additional Highway 
Trust Fund receipts derived from a new net source of revenue. Thus, 
there would be no impact on the Federal deficit.
    This summer, AASHTO met with seven major bond underwriting firms 
(investment banks), two ratings agencies, and a bond insurer to assess 
the viability of the Transportation Finance Corporation proposal from 
the perspective of the financial community. In our due diligence we 
investigated the ability of the capital markets to absorb an additional 
$60 billion in investment; overall marketability of the bonds, 
including necessary and preferred characteristics of the financial 
instruments; potential investors; and credit assessment.
    In addition, the TFC proposal contemplates up to $5 billion of 
Federal funding being used to fund a Capital Revolving Fund, which 
would make available direct loans, loan guarantees and standby lines of 
credit to a variety of surface transportation projects not readily 
fundable under existing Federal programs. This fund would be a catalyst 
to leverage capital for an expanded list of transportation to include, 
highways, transit, freight rail, passenger rail and security 
infrastructure. This funding would assist in promoting public private 
partnerships and attract new private capital to transportation 
projects.
    Overall, we found a high level of interest in the program due to 
the equity and efficiency advantages of using debt proceeds to finance 
long-term infrastructure investments. Our key findings:
    Tax credit bonds are marketable. The Corporation should be 
authorized to de-couple the principal from the stream of tax credits, 
and market each portion of the financing instrument to different groups 
of buyers on a discounted basis. For example, the principal component 
is likely to appeal to pension funds, and tax credits should be 
attractive to financial institutions & corporations. Major individual 
investors anticipating Federal income tax liability in future years are 
also potential purchasers of the tax credits, as are individual 
investors interested in safe, long-term investments. Securities firms 
would maintain an active and continuous secondary market in both the 
principal and tax credit portions to assure their liquidity.
    Capital markets can absorb TFC paper. The proposed size of the 
program (an average of $10 billion per year over 6 years) equals 0.2 
percent (two tenths of 1 percent) of the U.S. bond markets' $4.6 
trillion debt issuance volume in 2001.
    Marketability and liquidity are enhanced by a central issuer. 
Larger, more homogenous issues than the fragmented Qualified Zone 
Academy Bond (QZAB) school construction program should result in a more 
efficient secondary market and reduced transactions fees as well as 
centralized investor information leading to price transparency. A 
centralized issuer also mitigates tax compliance risk and ensures that 
all States benefit from the program rather than only States using debt 
financing.
    There is a broad potential investor base. Decoupling tax credits 
from principal will be more efficient and result in a broader investor 
base. The principal component should appeal to pension funds; tax 
credits are likely to be attractive to financial institutions and 
corporations; and allowing individuals to buy credits will broaden the 
market. The TFC will need to mount an investor education program to 
develop an efficient market.
    Other aspects of the due diligence show that tax credit bonds are 
likely to be investment grade and, of course, that specific terms of 
the legislation will be critical to the success of the program.
    Our analysis shows that AASHTO's funding targets through fiscal 
year 2009 could be achieved through the Transportation Finance 
Corporation without indexing or raising fuel taxes. However, the 
program level would drop below fiscal year 2009 slightly for the 
following 3 years before it resumes positive growth in 2013. In our 
modeling, when the TFC concept was combined with indexing, the program 
continues healthy growth from fiscal year 2010 on. As you can see, the 
AASHTO staff and our Financial Issues Work Team have developed a 
creative proposal that appears feasible and has been well received. We 
commend it to you for your consideration.
Potential Program Growth Summary
    The following charts illustrate potential sources of growth in 
highway and transit program funding.


    ``Incremental'' represents revenues from travel growth, 2.5 cent 
per gallon gasohol transfer, and drawing down the Highway Trust Fund.





Innovative Financing Options
    In addition to the menu of funding options, AASHTO wants to work 
with the Congress to enhance and strengthen current Innovative 
Financing tools. These changes include enacting legislation to extend 
the legislative authority in TEA-21 for State Infrastructure Banks to 
all States, assuring the continuance of the current innovative 
financing provisions and making improvements to the TIFIA program. 
Specifically, regarding TIFIA we recommend that the current $100 
million threshold be reduced to $50 million which will serve to expand 
the universe of projects that can take advantage of this financing 
tool. In addition we urge the Congress to make clear the intent of the 
program is to be a minority investor and thus to demonstrate more 
flexibility in taking credit actions under TIFIA. This is not to 
suggest that care should not be taken in transactions involving 
taxpayer money but rather to meet the program goals which are to round 
out financing of projects with Federal assistance.
    The Board of Directors will be making final decisions on AASHTO's 
reauthorization financing recommendations in the late fall and I note 
that Chairman Baucus has included a number of items similar to those on 
the menu of options in legislation he recently introduced.
                         other financing issues
Guaranteed Spending
    One of the key features of TEA-21 is guaranteed spending. The 
assurance of stable, predictable funding has made it much easier for 
States to plan and carry out programs. AASHTO has adopted as a top 
priority ensuring the continuation of funding guarantees. Funding 
guarantees are essential to meeting our commitment to the traveling 
public, which pays the dedicated user fees for highways and transit 
programs, that they are receiving the benefits of their fees. The 
return on this investment in transportation programs is ensuring a 
competitive economy with hundreds of thousands of high-paying American 
jobs.
RABA Calculations
    Another key feature of TEA-21 is the budgetary mechanism known as 
Revenue Aligned Budget Authority (RABA). This mechanism was designed to 
ensure that the receipts coming into the Highway Trust Fund Highway 
Account are fully utilized by the program. This mechanism added over $9 
billion to the program thorough fiscal year 2002. However, due to the 
downturn in the economy, the look-ahead provision of RABA substantially 
overestimated fiscal year 2001 revenues; thus the RABA adjustment for 
fiscal year 2003 would have reduced the obligation levels for the 
highway program by $8.6 billion or 26 percent. AASHTO is pleased that 
the Congress is moving to restore this much needed investment funding.
    AASHTO believes that it is necessary to preserve a RABA mechanism. 
However, action is necessary to ensure a more stable and predictable 
outcome. Therefore, we offer an option that would eliminate the look-
ahead provision of current law and replace it with a provision that 
retains the look-back part of the calculation. This likely will make 
the program funding more stable but also will cause a buildup of 
revenue in the Highway account. Therefore to ensure full use of the 
revenue we also recommend including a provision that would reduce the 
cash balance in the Highway Account to a fixed minimum by raising the 
program level in the last year of the authorization bill to a level 
sufficient to reduce the balance.
Long-term Financing
    Given the advent of more fuel efficient vehicles and the increasing 
use of alternative fuels, income to the Highway Trust Fund may be 
significantly reduced. In order to prepare for future reauthorizations 
AASHTO recommends that Congress create a Blue Ribbon Commission to 
study financing options and report its findings prior to the next 
reauthorization cycle.
                              conclusions
    The Federal-aid highway and transit programs have a long history of 
strong partnership with the States and have made major contributions to 
creating surface transportation systems that are among the best and 
safest in the world. However, by all measures surface transportation 
needs far outstrip investment resources.
    AASHTO recognizes the need for additional investment and has 
proposed program increases of 35 and 45 percent for highways and 
transit. This increased investment is vital to the nation's economy and 
assures the continuance of high paying jobs in the transportation 
sector.
    Recognizing the need to offer creative solutions for revenue 
generation, AASHTO is considering including a proposal for the creation 
of a Transportation Finance Corporation in its menu of funding options. 
This federally chartered non-profit corporation would leverage funds 
for the program and take advantage of the private capital markets for 
bringing revenue into the program. In addition, the TFC would include a 
Capital Revolving Fund that could leverage as much as $30 billion in 
credit support for a variety of transportation programs including, 
highways, transit, freight, and passenger rail and security 
infrastructure. This fund will likely serve as a catalyst for 
generating public/private partnerships and thus further expand 
investment in transportation programs.
    Guaranteed spending is a key feature of TEA-21. It provides 
predictable funding so that States can plan with a greater degree of 
certainty. It assures that dedicated user fees are spent on the 
programs for which they were collected in a timely manner. One of 
AASHTO's reauthorization goals is to preserve guaranteed spending.
    RABA has served to ensure that increased revenue is utilized for 
programs without having to wait until the next reauthorization cycle to 
increase program levels in highways. There needs to be adjustments to 
the RABA mechanism to make the results more predictable and AASHTO has 
offered a solution that could accomplish that end.
    In the long-term, consideration needs to be given to possible new 
sources of income and way to collect income to ensure that there is 
sufficient income to make the investments in transportation necessary 
to meet the nation's needs in the future.
    We look forward to working with the Congress to enact legislation 
that will ensure continuing maximum possible investment in our 
transportation system. 1 Growth calculations: Highways baseline of 
$168.7 billion includes TEA-21 obligation limitation, exempt and RABA. 
Transit baseline includes guaranteed funding of $36.35 billion.
                                 ______
                                 
Responses of John Horsley to Additional Questions from Senator Jeffords
    Question 1. A major piece of your testimony centers on the creation 
of a Transportation Finance Corporation. Under your proposal, the TFC 
would issue tax credit bonds. We have heard testimony from GAO that 
these instruments are the most costly long-term to the Federal 
Government. Why does AASHTO consider this to be the most appropriate 
bonding mechanism for the Federal-aid program?
    Response. I think GAO's testimony points out how difficult it is to 
compare these disparate financing tools on an ``apples-to-apples'' 
basis.
    On the one hand, it shows that financing transportation 
improvements by issuing debt--whether through TIFIA credit instruments, 
tax credit bonds or tax exempt bonds--entails a cost (interest expense) 
that could be avoided if sufficient grant funds were on hand in the 
first place. But the problem, of course, is that grant moneys often are 
not available up front. And obtaining the benefits of accelerating 
infrastructure investment through debt financing techniques, while 
perhaps not the least costly method, may in fact be the most cost 
effective approach taking into account the benefits as well as the 
costs.
    On the other hand, GAO's testimony reveals the different ways in 
which certain financing tools are used and the different levels of 
Federal subsidy conferred by those techniques. GAO's cost assumptions 
attempt to capture the various financial profiles of ``typical'' 
transportation projects that might benefit from the different financing 
tools. For example, under the normal Federal-aid grant reimbursement 
scenario, the Federal share is 80 percent. Compared to that traditional 
payas-you-go approach, the various debt financing techniques tend to 
leverage Federal resources and induce greater non-Federal investment. 
The average Federal share ranges from about 20 percent for projects 
funded with tax-exempt bonds to about 25 percent for TIFIA-funded 
projects to somewhere between 50 and 70 percent for projects funded 
with tax credit bonds (depending on several underlying assumptions). hi 
all cases, however, the relative Federal share is less than that of the 
base case of grant reimbursements.
    The important point, I think, is that these different tools may be 
most cost-effective for different types of projects that require 
different levels of Federal assistance. If critical infrastructure 
investments need to be made, and up-front grant funding is not 
available, then project sponsors simply must look at other financing 
options. And depending on a particular project's costs, benefits and 
access to revenues, the use of one or more of the financing tools 
examined by GAO may prove cost effective.
    Mr. Chairman, we are looking for the art of the possible. When we 
tried to put together a vehicle that, as Pete Rahn was describing, 
could leverage revenues that are potentially available to achieve the 
overall funding targets we are seeking for fiscal years 2004-2009, we 
looked at several options.
    We looked at whether simply relying on tax-exempt municipal bonds 
issued at the State level would work, and concluded it would not--
because so many States have obstacles, either statutory or 
constitutional, to the issuance of debt and the utilization of GARVEEs 
and some of the other financing techniques. So we figured that simply 
proposing what is currently allowed would not extend universal help to 
all 50 States with regard to raising overall transportation funding 
levels.
    We looked at the possible utilization of tax-exempt bonds at the 
Federal level and figured that would compete directly with Treasury 
securities, so that was not a good vehicle. We then looked at the 
appeal of the tax credit bond concept. It was currently pending in 
RIDE-21 (the Rail Infrastructure Development and Expansion Act for the 
21St Century) as a vehicle for funding high-speed rail, and has been 
used to help fund schools through the so-called QZAB (Qualified Zone 
Academy Bond) program.
    Our conclusion was that the TFC (Transportation Finance 
Corporation) was the most efficient, most viable method for boosting 
surface transportation funding. It would score well under the Federal 
budgetary scoring rules and, just in practical terms, would get us with 
current or likely revenues--or revenues enhanced with indexing--to the 
overall funding targets that the States feel are essential: more than 
$40 billion annually for highways and more than $10 billion annually 
for transit.

    Question 2. Does it make sense to issue bonds to support the 
mainline work of State DOTs, namely system preservation? Would it not 
be more appropriate to reserve debt financing for capital improvements, 
and particularly for those projects with associated revenue streams?
    Response. Mr. Chairman, the Transportation Finance Corporation we 
are talking about we classify as program financing, which would be 
available to all States to use for those purposes. TFC proceeds, in our 
proposal, would be available for the same types of capital outlays 
eligible under title 23 and title 49 as are Federal-aid grants and 
GARVEE bonds today. Maintenance and system preservation would still be 
the responsibility of the States.
    We are looking for a near-term practical solution that gives you a 
measure you can pass with bipartisan support to boost funding for the 
next cycle to the levels we are after.
    When it comes to the issuance of municipal bonds at the State 
level, I think each State has to make a judgment about whether they 
should issue long-term debt for long-term purposes, such as schools, 
water and sewer plants, and hospitals.
    Almost every other area of public infrastructure is financed 
significantly through debt. We think that transportation has been 
slower than those other sectors to come to the table and use debt 
financing for long-term infrastructure. But we think the time has come.
    As you have heard from both of these panels, the market is there 
and the transportation agencies are there and are utilizing debt 
financing on an increasing basis. But the one differentiation I wanted 
to make was between program finance, which would generate grants from 
bond proceeds that flow out to all the States as cash over the 6-year 
reauthorization period--and then State DOTs could leverage it further 
by issuing GARVEEs or through other means--as opposed to project 
finance (bonds earmarked for a particular project), which States can do 
today and which we also support.
                               __________
   Statement of Jeffrey Carey, Managing Director, Municipal Markets, 
                          Merrill Lynch & Co.
    mainstreaming innovative finance: a capital markets perspective
    Chairmen, Ranking Members, members of the committees, ladies and 
gentlemen, I am Jeff Carey, a Managing Director in Municipal Markets at 
Merrill Lynch. As a 24-year veteran in public, transportation, and 
infrastructure finance, I have had the privilege to work with U.S. 
Department of Transportation and Federal Highway Administration 
officials, as well as our clients, State transportation officials and 
other project sponsors, during the last decade on the development and 
implementation of ``Innovative Finance'' mechanisms for Federal-aid 
transportation programs. Thank you for inviting me to provide a wrap-up 
commentary from a Capital Markets perspective at today's Joint Hearing.
    You have heard testimony this morning from two very experienced 
panels of U.S. DOT and State transportation officials, a city 
councilwoman, the GAO, and Professor Seltzer on the very significant 
accomplishments of the DOT Innovative Finance Initiatives. Public 
finance industry professionals are pleased to have played a role in 
creating the strong market reception for the new transportation funding 
tools and expanded flexibility for public/private partnerships. We 
commend these panel participants, and the leadership from DOT and FHwA, 
other State transportation officials, and private sponsors for the 
dramatic evolution from the Eisenhower-era, Federal-aid funding to the 
wide array of financing instruments and programs introduced and 
utilized over the last 8 years.
    To briefly reflect on the prior testimony involving program and 
project finance and case studies, ISTEA, post-ISTEA initiatives and 
TEA-21 implementation have produced the following market-related 
accomplishments: 1) dramatically increasing bondholder investment in 
transportation projects and State programs; 2) new and/or specially 
dedicated revenue streams, particularly for the purpose of retiring 
debt obligations; 3) broad market acceptance of the use of Federal-aid 
funding for debt instrument financing; 4) more coordination with other 
funding partners beyond States, and; 5) lower financing costs and 
increased project feasibility through Federal credit enhancement.
    1. Addressing characteristics sought by the Capital Markets and 
private sector project sponsors provides efficient market access and 
innovative transportation finance opportunities. What do market 
intermediaries underwriters, rating agencies, bond issuers, project 
sponsors and institutional and individual investors want?
Characteristics
      Sound, understandable credits
      Evidence of government support
      Strong debt service payment coverage
      Predictability and Federal program consistency with 
evolution of new instruments
      Market rate investment returns for bonds, development 
costs, and equity
      Reasonable and reliable timing of issuer's revenue/grant 
receipts
      Acronyms that capture the Federal programs' spirit and 
promote investor familiarity
      Diversified range of investment opportunities
      Volume, market profile, and liquidity

    For example, the track record and predictability of the Federal-aid 
highway program since the Eisenhower-era has enabled Grant Anticipation 
Revenue Vehicles (GARVEE) bonds to be structured without the double-
barrel credit of other State credit backstops, as first used in New 
Mexico.
    It was the strong issuance history of municipal bond banks in 
States such as Vermont, as well as the successful use of State 
wastewater and clean water revolving funds, that served as the model 
for the development of State Infrastructure Banks (SIBs) in the mid-
1990's.
    And it was the broad market acceptance of municipal bond insurance 
and bank letters of credit that provided a model for the development of 
TIFIA credit assistance and pre-TIFIA successes such as the Alameda 
Corridor multi-modal project.
    As David Seltzer commented in the first panel, are the Federal 
policy incentives in Innovative Finance initiatives suitable to attract 
and expand capital markets investment? And are the programmatic tools 
and requirements balanced to provide the characteristics sought by debt 
investors and private sponsors, as well as public entities?
    2. How various Innovative Financing components have been used by 
public agencies and, in some cases, private sponsors, and received by 
the markets provides a roadmap for surface transportation 
reauthorization.
    When State Infrastructure Banks (SIBs) were created as part of the 
NHS Act in 1995, the pilot program for 10 State transportation 
revolving funds became very popular in 1996, in part, because of 
supplemental Federal funding for ``seed'' capitalization matched with 
non-Federal funds. As highlighted in FHwA's State Infrastructure Bank 
Review from earlier this year, 32 States have active SIBs and have made 
different levels of highway and transit project assistance primarily 
through loans, despite widespread under-capitalization and the 
curtailment of the program in TEA-21. Limited capitalization has 
resulted from the inability to use Federal-aid funds, outside of four 
States, and the application of Federal requirements to all moneys 
deposited in the SIB, regardless of whether the source was State or 
private contributions, or repaid loans. In addition, only two States 
have leveraged their SIB programs through the issuance of bonds.
    As a flexible, State-directed tool, SIBs have greater potential to 
provide loans and credit enhancement that can be realized through 
further modification as part of Reauthorization:

      Extend the program to included all States;
      Expand capitalization to meet demands with supplemental 
Federal appropriations and by permitting the use of future Federal-aid 
funds to capitalize SIBs;
      Rollback the imposition of Federal requirements on SIB-
funded projects, or, at least, exempt ``recycled'' loan repayments and 
State contributions, as permitted under the 1995 NHS Act Pilot Program;
      Encourage States to expand capitalization by leveraging 
their SIB program through the issuance of bonds; and
      Remove ``pilot'' moniker from the SIB Pilot Program to 
send strong signal of on-going Federal support.

    Reauthorization should provide incentives for public/private, 
market-based partnerships that finance, develop, operate, and maintain 
highways, mass transit facilities, high-speed rail and freight rail, 
and inter-modal facilities. This could be accomplished by permitting 
the targeted use of $15-20 billion of a new class of private activity 
bonds, and/or by modifying certain restrictions in the Internal Revenue 
Code on tax-exempt bond financing of transportation modes. We commend 
the members of the Senate and the Finance Committee for your prior 
consideration of the Highway Innovation and Cost Savings Act (HICSA, 
1999), the Highway Infrastructure Privatization Act (HIPA, 1997), and, 
most recently, the Multi-Modal Transportation Financing Act 
(Multitrans).
    My office is across West Street from the World Trade Center site. 
As workers in downtown Manhattan, we greatly appreciated your passage 
of Federal legislation creating a ``Liberty Zone'' for the 
redevelopment of lower Manhattan and for the creation of a new type of 
tax-exempt private activity bonds, Liberty Bonds, for the rebuilding 
and economic revitalization of New York City.
    Existing tax law discourages private investment in transportation 
projects, prohibiting lower cost tax-exempt financing for projects 
involving private equity investment and incentive-based, private sector 
operating contracts. Transportation infrastructure financing deserves a 
bond mechanism similar to Liberty Bonds under Reauthorization to 
attract more private investment, as well as increase the use of new 
construction techniques, cost controls, performance guarantees and 
technologies. A new class of private activity bonds for qualified 
highway infrastructure, mass commuting vehicles, and other 
transportation projects would expand the application of the tax-exempt 
financing and lower the cost of capital, making public-private 
partnerships more attractive to public sector sponsors than 
conventional approaches.
    3. Past ``Innovative Finance'' should become mainstream 
transportation finance under TEA-21 reauthorization and the Federal 
Government should provide new financing tools and initiatives, at least 
on a pilot basis. From a financial markets perspective, Congress should 
use this opportunity to make refinements to more clearly articulate 
transportation financial assistance goals and send a consistent message 
as to how the Federal Government is going to act toward investors, 
project sponsors and all program participants.
      TEA-21's funding guarantees and firewalls that permit the 
flexible use of GARVEE Bonds beyond multiple reauthorization periods 
should be maintained, and radical swings in budgetary funding from RABA 
(Revenue Aligned Budgetary Authority) should be avoided. Similarly, 
transit funding guarantees should also be preserved.
      Examine the creation of a government corporation, perhaps 
in a form discussed by AASHTO, to provide a focus on transportation 
infrastructure finance, possibly administer a portion of DOT's 
financing programs, and provide a basis for new financing tools, such 
as tax credit bonds. Federal Government corporations have helped the 
capital markets create strong and liquid markets to fulfill other 
policy and programmatic objectives.
    The creation and implementation of U.S. DOT Innovative Financing 
Initiatives over the last 8 years has prompted an even more vigorous 
debate about transportation financing issues, challenges, and future 
innovation with the coming year's surface transportation 
reauthorization. This ongoing debate, coupled with past and current 
Program successes, will encourage a further willingness to look beyond 
Federal-aid grant reimbursement, introduce additional players in 
transportation finance and enlarge the spectrum of instruments and 
programs to attract additional private and capital markets investment. 
The success of Innovative Finance places a higher level of 
responsibility on the Federal reauthorization process to maintain the 
characteristics attracting strong capital markets participation. 
Municipal Markets participants will continue to work with Congress, 
DOT, States, local governments, and private sector sponsors to maximize 
leverage and investment levels in transportation infrastructure over 
the coming authorization period and beyond.
    I am pleased to have the opportunity to participate in today's 
Joint Hearing with such knowledgeable witnesses. Thank you, again, for 
the opportunity to testify. I look forward to responding to any 
questions you may have.
                                 ______
                                 
 Responses of Jeffrey Carey to Additional Questions from Senator Baucus
    Question 1. The Capital Markets would positively view and receive a 
Tax Credit bond proposal where the proceeds of the bonds are deposited 
directly into the Trust Fund. First, raising and depositing additional 
funds to the Trust Fund will supplement and diversify the sources of 
Trust funding, adding to the proposed sources from the MEGA-TRUST Act, 
and further address characteristics sought by the capital markets, as 
noted in my testimony. This additional, predictable funding will 
further strength GARVEE credits and other Federal aid highway derived 
project financing.
    Response. In your question, you correctly acknowledge that QZABs, 
as the only existing tax credit bonds, provide little guidance for the 
market's receptivity due to relatively small issuance volume, disparate 
issuers, and credit considerations. The proposed year sale of $3 
billion, Qualified Highway Bonds by Treasury under the MEGA-INNOVATE 
Act responds to some tax credit bond marketability concerns by 
providing larger issuance volume over the Reauthorization period by a 
centralized issuer. Market participants continue to believe that the 
centralized issuance of tax credit bonds where the tax credit can be 
decoupled, or stripped, from the principal repayment stream could 
attract major buyer interest, as well as active trading by securities 
dealers. Decoupling would broaden the market for the bonds since tax 
credit bonds are hybrids, with a tax-advantaged non-cash piece (the 
credits) and a cash-on-cash piece (the principal), attracting different 
types of investors. This follows the Senate Finance Committee 
Chairman's goal to attract new and different taxable bond and tax 
credit investors to supplement the current, dominant buyers of tax-
exempt transportation bonding.

    Question 2. The advantages and disadvantages of using some of the 
proposed Tax Credit bond proceeds to go into a sinking fund to 
repayment bond principal closely relate to using a centralized issuer, 
either Treasury or dedicated national transportation issuer.
    Response.
Advantages of a Sinking Fund:
      Should result in very low risk of default of principal, 
if sinking fund investments are limited to highly rated instruments;
      Homogenizes the creditworthiness of different series of 
bonds, enhancing marketability/liquidity (no local issuer variances); 
and
      Overcomes disparities among States in terms of their 
legal ability to incur debt or their political willingness to do so.
Disadvantages of a Sinking Fund:
      Somewhat inefficient from a tax viewpoint, in that 30 
percent (plus or minus) of the tax expenditures are for bonds that are 
funding the retirement of principal rather than funding new 
transportation projects.
      At some point, it may be difficult to find attractively 
priced, highly rated, long-term defeasance investments in sufficient 
volume.
                                 ______
                                 
    Responses of Jeffrey Carey to Additional Questions from Senator 
                                Jeffords
    Question 1. As many in the Senate will recall, Private Activity 
Bond (PABs) rules were historically an outgrowth of the perceived 
overuse of industrial development bonds, where purely corporate 
investments were nominally financed through a State or local industrial 
development authority to gain tax exemption without adequately serving 
governmentally perceived, economic development or service objectives. 
As a result of successive Federal tax acts and IRS regulations, we now 
have a patchwork of inconsistent tax rules--i.e., seaports and airports 
can issue PABs not subject to volume cap; transit systems can finance 
infrastructure with PABs, but subject to volume cap. Neither transit 
rolling stock nor highways can be financed with tax-exempt bonds at all 
if there is what is termed ``private use'' and a so-called ``private 
security interest.'' Within TEA-21 Reauthorization, the Senate should 
consider providing a new concept centered on whether the transportation 
project is of ``public benefit.'' If a highway (or transit line) is 
publicly available to any user, what difference should it make if there 
is incidental private management of the asset? The State or local 
political subdivision would already have determined that the public 
(and taxpayers) would benefit from private sector participation
    Response. Private participation is not just applicable to the 
development of toll roads. Even greater potential application is 
outsourcing the asset maintenance of expressways and freeways to 
private firms which agree to maintain roads to publicly required 
standards, in compliance with GASB 34. Current IRS ``Qualified 
Management Contract'' provisions do not permit incentive, performance-
based compensation. Allowing the financial interests of the private 
sector developer/manager (in combination with private equity) to be 
aligned with the tax-exempt bond investors (i.e., maximize net 
revenues) should facilitate the financing for additional transportation 
projects. Tolls and private sponsor or participant returns can be 
regulated using a rate covenant (governmental utility model) or 
regulated return on capital (investor-owned utility model) mechanics. 
The Multimodal Transportation Financing Act (``MultiTRANs'', S. 870) 
would achieve most of the aforementioned, desired tax law or regulatory 
reforms.

    Question 2.  One of the outcomes of reauthorization should be the 
ability to allow for more meaningful investment by the private sector 
into transportation. There seems to be barriers for participation for 
numerous large investment sectors. One example is pension plans or 
retirement investment sector. Current transportation bonding techniques 
do not provide the income this sector is seeking since we primarily use 
tax-exempt mechanisms. Can you provide more insights on how we can 
``decouple'' the bonding process to make it more attractive to these 
types of investors? Are there examples where such activity is 
occurring? Are there changes that need to be made to statue to assist 
this type of activity?
    Response. As your question correctly recognizes, pension funds 
represent one of the largest sources of capital in the economy--for the 
1,000 largest plans in the U.S., the total assets are $3.6 trillion in 
defined benefit plans and $1.2 trillion in defined contribution plans 
(2001). Pension funds are invested in multiple asset classes (including 
overseas infrastructure) with the exception of domestic infrastructure. 
Yet, as tax-exempt entities they have no demand for lower returns on 
tax-exempt securities. An objective going back to the 1993 
Infrastructure Investment Commission--develop an investment product 
that is cost-effective to the transportation project sponsor 
(overwhelmingly, a public sector entity eligible to issue tax-exempt 
bonds), while at the same time providing competitive, pre-tax returns 
to the pension funds. One possibility, highlighted above, is decoupled 
tax credit bonds. The tax credits could be sold to taxable investors, 
leaving a zero coupon, taxable bond with a sufficient credit rating to 
be marketed to pension funds--providing a secure long-term asset to 
offset long-term liabilities (retirement benefits). It is important to 
note that decoupling routinely occurs with other market instruments, 
including U.S. Treasury bonds (since 1985) and the mortgage-backed 
securities market.
                                 ______
                                 
       [From The Bond Buyer, Wednesday, June 12, 2002, Vol. 340]
    Senate Panel Leaders Lobby DOT To Use Innovation in Its Funding
                         (By Humberto Sanchez)
    WASHINGTON--Leaders of the Senate Finance and Environment and 
Public Works committees urged the Department of Transportation 
yesterday to investigate new ways to leverage Federal funds to finance 
the construction of needed infrastructure, including using a 
centralized entity to fund loans and issue taxable tax-credit bonds.
    In a letter sent to Transportation Secretary Norman Y. Mineta, 
Sens. James M. Jeffords, I-Vt., chairman of the public works panel, Max 
Baucus, D-Mont., chairman of the finance committee, and 11 other 
senators said they want the DOT to look closer at ``ways to leverage 
limited Federal resources through so-called 'innovative finance' 
techniques.''
    The senators also said they believe that additional research into 
the matter ``would benefit the administration and the Congress as we 
develop'' reauthorization proposals for the Transportation Equity Act 
for the 21st Century, which expires Sept. 30, 2003.
    The senators--including public works ranking member Robert C. 
Smith, R-N.H., and finance ranking member Charles E. Grassley, R-Iowa--
said they are interested in exploring the possibility of ``using a 
centralized entity to fund loans and provide credit enhancement, and 
the use of tax credit bonds as a financing vehicle for transportation 
infrastructure,'' according to the letter.
    The letter comes as the American Association of State Highway and 
Transportation Officials is floating a similar proposal in which a 
federally chartered corporation would be authorized to sell taxable 
tax-credit bonds in order to provide funds to States for construction 
of roads, mass transit, and rail.
    Under the AASHTO plan, the transportation finance corporation would 
use new or increased Federal funds to back a $60 billion tax-credit 
bond issue that, over 6 years, would increase funding for highways by 
$34 billion, $8.5 billion for transit, and $5 billion for other needs, 
including rail.
    The senators wrote that ``a detailed examination of some of these 
fairly complex financial tools and vehicles is warranted.'' They also 
said that they look forward to ``close coordination regarding the 
continuation of'' State infrastructure banks--which provide low-
interest loans to local governments to build transportation 
infrastructure--and the TIFIA program, which provides direct loans, 
loan guarantees, and lines of credit for up to 33 percent of the 
construction cost of transportation projects costing at least $100 
million.
    A joint public works and finance committee hearing on innovative 
finance is being planned for late September.
                                 ______
                                 
  [From the Bond Buyer, Thursday, August 1, 2002, Vol. 341, No. 31440]
    Senate Panel Tells TIFIA Program to Make Do With 2002 Leftovers
                         (By Humberto Sanchez)
    Because the TIFIA program has only awarded funds to 11 
transportation projects since it was launched in 1998, the Senate 
Appropriations Committee has decided not to provide any more funds to 
the slow-starting financing program in fiscal 2003.
    Under the $64.6 billion fiscal 2003 transportation funding bill 
that was approved by the committee last week, the $130 million that was 
authorized under the Transportation Infrastructure Finance and 
Innovation Act to provide credit assistance to large transportation 
projects would be shifted to three other programs in the fiscal year 
that starts Oct. 1. Those are the transportation and community and 
system preservation pilot program, the national corridor planning and 
development program, and the coordinated border infrastructure and 
safety program.
    The proposed diversion of funds means that any transportation 
projects selected for TIFIA loans, loan guarantees, or lines of credit 
in fiscal 2003 would have to make do with the $96.million that program 
administrators estimate is left over from the $120 million authorized 
in the current fiscal year.
    So far, in fiscal 2002--which ends Sept. 30--the Department of 
Transportation has designated just one project for TIFIA assistance--a 
subsidy to back a $450 million loan for a $3.3 billion plan to fortify 
and rebuild parts of. the San Francisco-Oakland Bay Bridge that was 
severely damaged by an earthquake 12 years ago. Although the Texas 
Turnpike Authority closed on a $916.76 million TIFIA loan Monday, that 
aid was actually approved in 2001.
    ``We think we'll have enough to finance any projects that we 
anticipate,'' said Max Inman, acting head of the DOT office that 
oversees the TIFIA program. ``Hopefully it won't have an impact. But 
you never know what might happen later in the year. Currently, we are 
not seeing anything that would be beyond the anticipated need.''.
    Documents accompanying the transportation appropriations bill--
which was approved last Thursday and is currently awaiting 
consideration by the full Senate--explain that the committee diverted 
the funds because it believes that demand for credit assistance has not 
kept pace with the amount of subsidy available under the program. 
Meanwhile, the House Appropriations Committee has not started work on 
its bill and has not decided whether to follow the Senate panel and 
transfer TIFIA funds to other projects.
    While TIFIA program administrators agree that the program has more 
funds than it will likely use, they contend that the program could 
assist more projects after project sponsors and TIFIA administrators 
get used to the subtleties of the program.
    Despite the diversion of funds, the program has strong support. 
``The committee believes that TIFIA is an important part of the Federal 
Government's overall infrastructure investment effort--one that is 
likely to grow in importance and size in the future,'' the Senate 
Appropriations Committee said in the report accompanying the 2003 
transportation bill.
    Last month Transportation Secretary Norman Y. Mineta lauded the 
program and noted that it will be included in the Bush Administration's 
plan to reauthorize the Transportation Equity Act for the 21st Century, 
or TEA-21, which expires on Sept. 31, 2003. Mineta will unveil the 
proposal in the fiscal 2004 budget, which is due to be sent to Congress 
in February.
    The Senate Environmental and Public Works Committee and the Finance 
Committee plan to hold a hearing in September on innovative finance 
where ways of making the program more efficient will be explored.
    To date, the DOT has selected 11 projects in eight States, the 
District of Columbia, and Puerto Rico to receive TIFIA assistance. At a 
budgetary cost of slightly more than $200 million to the Federal 
Government, the projects have provided $3.7 billion in credit 
assistance that has backed transportation investments worth more than 
$15 billion. The program provides direct loans, loan guarantees, and 
lines of credit--in lieu of traditional grants--and can cover up to 33 
percent of the cost of major surface transportation projects that cost 
at least $100 million.
                                 ______
                                 
 [From The Bond Buyer, Tuesday, September 3, 2002, Vol. 341, No. 31462]
                        Road Revolution Coming?
                         (By Humberto Sanchez)
    WASHINGTON--First of a two-part series.
    fannie mae and freddie mac revolutionized the mortgage business.
    Now a plan being floated by the American Association of State 
Highway and Transportation Officials wants to copy that success by 
establishing the Transportation Finance Corporation, a centralized, 
federally chartered entity that would issue taxable tax-credit bonds to 
finance transportation infrastructure projects.
    Fannie Mae and Freddie Mac are publicly held corporations that were 
established by the Federal Government to increase the availability of 
home mortgages by establishing a liquid, well-functioning home loan 
secondary market. The corporations, known as government-sponsored 
enterprises, or GSES, purchase mortgages from banks and financial firms 
and package them into securities that are sold to investors. The banks' 
financial firms use the money from the sale of the home loans to make 
more loans.
    But the TFC, whose name some believe will be shortened by lobbyists 
and congressional staffers to Trannie Mae or Trans Mac, would be 
designed to increase Federal investment in transportation 
infrastructure by establishing an active market for tax-credit bonds.
    The plan, calls for Congress to charter the TFC as a new, private, 
nonprofit organization that would be authorized to sell about $60 
billion in tax-credit bonds over 6 years. The bond proceeds would be 
given as grants to States primarily to help finance highway and transit 
projects, and the Treasury would provide a tax credit to investors in 
lieu of interest payments.
    AASHTO--the lobbying group representing State departments of 
transportation--is currently shopping the proposal around to Congress, 
investment bankers, and rating agencies to assess its viability. 
Depending upon the level of interest in the plan, the association will 
vote later this fall on whether to adopt the proposal as part of its 
lobbying campaign to reauthorize the 1998 Transportation Equity Act for 
the 21st Century, which expires Sept. 30, 2003.
    But while AASHTO maintains that preliminary responses to the 
proposal have been positive, the success of the plan rests on its 
ability to balance Congress' cost concerns with the transportation 
finance interests of States and the interest of investors.
                         how the tfc would work
    Under AASHTO's plan, the TFC would issue the $60 billion in tax-
credit bonds over 6 years, starting the year TEA-21 is reauthorized and 
extending through the transportation act's proposed 6-year life span.
    ``The bonds would have a 20-to 25-year life,'' said Jack Basso, 
AASHTO's director of management and business development. ``We would 
cycle them out so that we have a 25-year level of activity because of 
the way the bonds are issued over time.''
    Of the $60 billion in bond proceeds, about $17 billion would be set 
aside in a sinking fund that would be used to pay back the principal. 
The sinking fund would invest in Treasuries or other similarly safe 
instruments that, over time, should yield enough to pay back the 
principal.
    ``We are assuming that we will get about a 6 percent return on our 
investment, and our market research says that that is perfectly 
reasonable,'' Basso said. ``At the end of that 25-year cycle, that $17 
billion will have grown sufficient to pay off the principal of the 
bonds--the $60 billion.''
    The plan also calls for repaying the Federal Government for the 
income tax credits--which go to bondholders in lieu of debt service 
payments--through one or more strategies that are currently being 
explored by the association.
    States would be required to provide a 20 percent match to receive 
their share of the bond proceeds, which would be distributed to States 
through apportionment formulas similar to the ones currently used to 
redistribute gas tax receipts collected into the highway trust fund. 
States would not be liable for repayment of the bonds because a portion 
about 30 percent of the bond proceeds would be invested in a sinking 
fund that would raise the money to pay back the bond principal, and the 
tax credits would be paid by the Treasury.
    However, the plan calls for the tax credits--which AASHTO estimates 
will cost the Federal Government roughly $19 billion--to be repaid by 
one or more methods from a list of possible strategies. The list 
includes drawing down reserves in the highway trust fund, collecting 
the interest on fund reserves, a gas tax increase, or indexing the gas 
tax.
    Other possibilities AASHTO is exploring to generate funds to pay 
for the tax credits include capturing the 2.5 cents for each gallon of 
ethanol sold that now goes into the general fund rather than the 
highway trust fund, and the 5.3 cents per gallon subsidy that 
encourages the use of ethanol and ethanol blended fuels, such as 
gasohol.
    The highway trust fund--a pool of money created by gasoline and 
highway user taxes and tapped to finance the nation's highway and 
transit projects--is the primary funding source for highway and transit 
construction. Transportation infrastructure advocates are concerned 
that increased use of ethanol would deplete the trust fund.
    Ethanol is currently taxed at 13.1 cents per gallon--5.3 cents a 
gallon less than gasoline. However, 2.5 cents of the 13.1 cents goes 
into the Treasury's general fund, rather than the highway trust fund. 
AASHTO believes that the trust fund could gain an additional $3 billion 
to $4 billion over 6 years by capturing that 2.5 cents.
    AASHTO would also like to have an amount equal to the 5.3 cents per 
gallon ethanol subsidy paid into the trust fund, a move the group 
estimates would add $6 billion to $7 billion to the trust fund over 6 
years.
    Diverting the 2.5 cents per gallon in ethanol taxes into the trust 
fund has a good chance of becoming law, the group believes, because it 
has support in the House and Senate and is included in the energy bill 
that is currently being negotiated by the two chambers. If the energy 
bill fails to become law, which many observers expect, Sen. Max Baucus, 
D-Mont., who heads the Senate Finance Committee, is expected to push 
legislation he introduced in June to get both the 2.5 cents and the 
equivalent of the 5.3 cents in reduced taxes per gallon of ethanol paid 
into the trust fund.
    in addition to the ethanol-related funds, the group anticipates 
that the highway trust fund will grow by an additional $17 billion over 
6 years due to an estimated 3 percent increase in travel.
    ``There is this menu of several possible options,'' said Bryan 
Grote, a principal with Mercator Advisors, which is working on the plan 
with the group. ``AASHTO is not advocating any particular option at the 
moment, they are just saying that from one or more of those menu items, 
you could possibly raise additional revenues that would off set the 
budget costs of the tax credits of this proposal.''
                                politics
    The inclusion of a device to repay the $19 billion in tax credits 
gives the measure a significant advantage in gaining approval from 
Congress, the plan's proponents believe.
    ``In order for this to have any kind of realistic consideration, 
they have to propose some budgetary offset to the cost of those tax 
credits,'' said Grote, a former official with the Department of 
Transportation.
    There are currently two tax-credit bond measures pending in 
Congress, and AASHTO believes that the TFC proposal has an advantage 
over both. The pending measures include a bill in the House that would 
authorize States to issue $12 billion in taxable tax-credit bonds and 
$12 billion in tax-exempt bonds over 10 years for high-speed rail 
projects and legislation in the Senate that would authorize Amtrak to 
issue $12 billion in tax-credit bonds over 10 years for high-speed rail 
projects.
    ``What makes this proposal unique, as opposed to other proposals of 
this nature, like the high-speed rail bill or the Amtrak bill, is that 
we propose a way to raise revenue to pay the tax-credit costs,'' said 
AASHTO's Basso. ``Our strategies will allow us to raise the money and 
reimburse the Treasury for the cost of those tax credits. That's a very 
significant and distinguishing feature in this matter,'' he said.
    Despite any advantages the plan may have, Members of Congress still 
need to be convinced.
    One objection Congress may have to the plan, according to a 
staffer, is that the proposal would, in effect, take the funds out of 
Congress' control and put it in the hands of the board that would run 
the TFC.
    However, AASHTO maintains that the TFC board would just administer 
the operation of the entity and the issuing of the bonds. The bond 
proceeds would be distributed to the States according to a 
congressionally approved formula.
    ``The board's purpose would be to administer the bonds; do the 
fiduciary work that's necessary from an investor's standpoint,'' Basso 
said. ``But principally the decisions on money would work exactly as 
they do now because the bulk of the highway and transit funding, almost 
all of it, would go out under congressionally mandated formulas. The 
program, from the State's perspective, would look and feel and work 
pretty much as it does today; the difference is where the money's 
coming from,'' he said.
    The principal committees that would need convincing are the two 
tax-writing committees--the Senate Finance Committee and the House Ways 
and Means Committee.
    The transportation authorizing committees--the House Transportation 
and Infrastructure Committee and the Senate Environment and Public 
Works Committee--would also have jurisdiction. The Senate Banking 
Committee, in addition, would have a say in the legislation because it 
oversees the nation's transit program.
    While it''s early in the process of selling the plan to Congress, 
AASHTO officials maintain the reception to it so far has been 
favorable.
    ``It's important that we work with the Congress to help find some 
way to increase transportation funding,'' said Pennsylvania 
Transportation Secretary Bradley L. Mallory, who is also AASHTO's 
president. And ``the political reception to the plan has been good.''
    But that does not surprise AASHTO officials, since some of the 
chairmen of these committees are very amenable to innovative finance 
ideas for transportation projects.
    For example, Sens. James M. Jeffords, I-Vt., chairman of the public 
works panel, and Baucus plan to hold a joint Environment and Public 
Works and Finance committee hearing on innovative finance as soon as 
this month.
    The two, along with 11 other senators, sent a letter on June 11 to 
Transportation Secretary Norman Y. Mineta, asking him to investigate 
new ways to leverage Federal funds to finance the construction of 
needed infrastructure, including using a centralized entity to fund 
loans and issue taxable tax-credit bonds.
    The senators--including Robert C. Smith, R-N.H., and Charles E. 
Grassley, R-Iowa, the top Republicans on the public works and finance 
committees--said they are interested in exploring the possibility of 
``using a centralized entity to fund loans and provide credit 
enhancement, and the use of tax credit bonds as a financing vehicle for 
transportation infrastructure,'' according to the letter.
    In the House, Rep. Thomas E. Petri, R-Wis., chairman of the 
Transportation and Infrastructure Committee's highways and transit 
subcommittee, has shown interest in the plan, noting at a hearing in 
May that AASHTO had ``stepped up to bat.''
    Officials in the Bush Administration are also exploring the plan, 
but have not endorsed it.
    At a hearing in May, Federal Highway Administration chief Mary E. 
Peters told a congressional panel that she had met with AASHTO 
representatives and is reviewing their initiatives.
    ``We are actively working at a number of the options but have not 
yet taken an administration position on any,'' Peters said.
                             states' needs
    States have long argued that increasing traffic congestion around 
the Nation has resulted in a pressing need to build additional roads 
and highways, as well as to maintain and improve aging ones. According 
to the DOT, an annual investment of $56.6 billion is needed over the 
next 20 years just to maintain the physical condition of existing 
highways and bridges.
    To meet these needs, AASHTO wants to increase funding each year to 
$41.4 billion for highways and to $10 billion for transit by the end of 
the 6-year life span of the successor to TEA-21. By comparison, the 
Federal Government in fiscal 2002 provided $31.8 billion for highway 
programs and $6.8 billion for transit.
    The TFC, the proceeds of which would work in conjunction with the 
highway trust fund, would play a crucial role in achieving those 
funding levels and would increase funding by $34 billion over 6 years 
for highways and $8.5 billion for transit, AASHTO officials maintain. 
The plan also would provide $5 billion for a capital revolving fund 
that would help finance other needs, such as freight rail, intermodal 
projects, passenger rail, and transportation security infrastructure. 
The $5 billion could be generated, over 6-years, from the menu of 
revenue-generating options, but the association has not specified where 
the funds would come from. The revolving fund would provide direct 
loans, lines of credit, and loan guarantees.
    ``The dollars that we have in the system just don't come anywhere 
near meeting the needs at the State, city, and county level,'' said 
John Horsley, AASHTO executive director. ``When we look at what is 
needed out there and where we stand in the current program, it is clear 
that we need to substantially grow the program.''
    Previously, it was a gas tax increase that provided additional 
funding for road construction. During the administrations of Presidents 
George Bush and Bill Clinton, highway trust fund revenues--which are 
made up of gas-tax receipts--were doubled.
    But, ``this time we are not seeing a willingness, or an openness, 
or an appetite, in Congress or the administration to enact a 
substantial fuel-tax increase,'' Horsley said.
    The TFC would allow all States to benefit from debt leveraging and 
innovative finance and meet the funding goals, AASHTO contends.
    Horsley noted that bonding and innovative finance ``have enabled 
many States to do substantially more than they could with just current 
cash-flows or current Federal allocations,'' and he cited the issuance 
of Garvees, the use of State infrastructure banks, and the 
Transportation Infrastructure Finance and Innovation Act in particular.
    Grant anticipation revenue vehicles, or Garvees, are backed by 
annual Federal transportation grants, while State infrastructure banks 
provide low-interest loans to local governments to build transportation 
infrastructure. The TIFIA program provides direct loans, loan 
guarantees, and lines of credit for up to 33 percent of the 
construction cost of transportation projects costing at least $100 
million.
    ``But we've also seen some States that are restricted by 
constitution, restricted by statute, or simply haven't, as a matter of 
practice, gone to debt financing to extend what they could do,'' 
Horsley said.
    In addition, the primary funding mechanism for highway and transit 
financing, the highway trust fund, is under fire because gas tax 
receipts have been down and subsidies for alternative fuels have 
reduced the fund.
    Under TEA-21, receipts going into the highway trust fund were tied 
to Federal highway and transit funding levels so that the funds could 
only be used to finance highway and transit projects.
    As a result, TEA-21 provided specified funding amounts for highway 
and transit programs for fiscal 1999 through 2003 and included a 
provision that the funding levels would be recalculated annually to 
reflect actual and projected increases and decreases in tax receipts 
over the 6-year life of the law.
    States were initially pleased with this arrangement, and the 
adjustment, referred to as the revenue aligned budget authority, has 
added over $9 billion to the nation's highway programs, due primarily 
to the booming economy of the late 1990's.
    But as the economy stalled and estimates of gas-tax receipts turned 
out to be too optimistic, funding for highways in fiscal 2003 under 
TEA-21 was set at $23.3 billion--$8.5 billion below the fiscal 2002 
funding amount. The cut was included in the president's fiscal 2003 
budget, which sought $23.3 billion for highway programs.
    But highways will get at least $27.7 billion in 2003 after $4.4 
billion was included in the emergency supplemental spending measure 
approved this summer. In addition, the Senate Appropriations Committee 
recently approved a $64.6 billion transportation-spending package for 
fiscal 2003, which included $31.8 billion for highway construction. 
Most observers believe that fiscal 2003 highway finding will fall 
somewhere in this range.
    State departments of transportation are anxiously watching to see 
how much highway funding they'll get, because a cut from the $31.8 
billion could adversely affect the ability of States to use bonds to 
finance transportation projects.
    ``I think what we are doing with the TFC proposal is expanding 
substantially on the concept of innovative finance,'' Basso said.
    While programs such as TIFIA and State infrastructure banks boosted 
the number of transportation projects, AASHTO maintains that they are 
niche programs and don't help finance the most projects in the most 
States.
    Under TIFIA, a project has to cost at least $100 million, a 
threshold that AASHTO contends is too high to help many States. Also, 
due to the manner in which TIFIA was authorized, State infrastructure 
banks finance projects in only a limited number of States. Thirty-nine 
States are authorized to operate State infrastructure banks, but under 
TEA-21, only four States--California, Florida, Missouri, and Rhode 
island--are permitted to augment their funds with new Federal 
transportation grants. As a result, most State programs have failed to 
take off to the extent many observers had expected.The TFC proposal, 
AASHTO maintains, is a broader form of innovative finance and will help 
more States and finance more projects.
    ``They work for certain types of projects, but they aren't 
universal,'' Basso said. ``What we are proposing here is a very 
centralized, universal attempt to raise money.''
    Next: How a market for tax credit transportation bonds can be 
created.
                                 ______
                                 
       [From Transportation Watch, Thursday, September 26, 2002]
     for upcoming reauthorization of tea-21 senators eye expanding 
                           innovative finance
    Senators interested in alternative financing methods for highway 
and transit projects learned Sept. 25 that while existing programs have 
accelerated project construction, limitations cause States to continue 
to look for traditional pay-as-you-go financing.
    As Congress prepares for the 2003 reauthorization of the 
Transportation Equity Act for the 21st Century (TEA-21), lawmakers are 
looking for ways to boost revenues to the Highway Trust Fund and to 
develop project financing mechanisms beyond the trust fund that would 
encourage greater private sector investment.
    ``As successful as the trust fund has been, our transportation 
needs far outweigh our resources,'' Senate Finance Committee Chairman 
Max Baucus (D-Mont.) said at a rare joint hearing of his committee and 
the Senate Environment and Public Works Committee.
    The three main innovative financing methods currently in use to 
make highway investments are State Infrastructure Banks (SIBs), Grant 
Anticipation Revenue Vehicles (GARVEEs) and the Transportation 
Infrastructure Finance and Innovation Act (TIFIA).
    Innovative financing techniques give States additional options to 
accelerate projects, leverage Federal investments, and increase the 
``tools in the toolbox'' of States and local or regional governments, 
according to JayEtta Z. Hecker, the General Accounting Office's 
director of physical infrastructure issues.
    According to the Federal Highway Administration, as of June 2002, 
six States have issued GARVEE bonds that are repayable with future 
Federal aid totaling $2.3 billion; 32 States have SIBs including 294 
loan agreements worth $4.06 billion, that once the loans are repaid, 
the money will recycle back to the revolving fund; and 9 States have 
TIFIA credit assistance agreements for 11 projects representing $15.4 
billion in investment.
Downsides Noted
    With the advantages, however, come a wide array of disadvantages, 
Hecker said.
    State DOTS that are comfortable and used to traditional funding 
methods are not always willing to use innovative financing nor do they 
always see the advantage.
    ``States are very cautious about debt financing,'' Hecker said. In 
her written testimony, she said two States said they have a philosophy 
against committing their Federal dollars to debt service, rendering 
themselves unable to partake in new funding methods.
    There also are a number of limitations in State and Federal law 
that do not give States the authority to use these funding methods. For 
example, California requires voter approval to use its trust fund 
allocations to pay for debt servicing costs, Hecker said. Other States 
have laws that restrict public-private partnerships.
    The TIFIA program has a requirement that projects cost at least 
$100 million, which limits it to large projects.
    In response to a question by Senate environment committee Chairman 
James M. Jeffords (I-Vt.), Phyllis F. Scheinberg, DOT's deputy 
assistant secretary for budget and programs, said it was unclear if 
lowering the TIFIA threshold to $50 million would make a difference.
    ``No one has come in and said they can't meet the $100 million 
threshold,'' Scheinberg said. ``We have a $30 million threshold for ITS 
and don't have takers on that.''
Looking to Reauthorization
    States also need to determine the short and long-term costs 
associated with various financing mechanisms to determine which best 
fits their needs and abilities. They also must decide which form of 
debt financing is best, with it being repaid by highway users or by the 
general population, Hecker said.
    One public finance industry professional told senators that TEA-
21's successor should provide incentives for public/private, market-
based partnerships that finance, develop, operate, and maintain 
highways, mass transit facilities, high-speed and freight rail and 
inter-modal facilities.
    ``This could be accomplished by permitting the targeted use of $15-
$20 billion of a new class of private activity bonds, and/or by 
modifying certain restrictions in the Internal Revenue Code on tax-
exempt bond financing of transportation modes,'' said Jeffrey Carey, 
managing director in Municipal Markets at Merrill Lynch.
    Carey also supported a proposal by the American Association of 
State Highway and Transportation Officials to create the Transportation 
Finance Corporation, a federally chartered, nonprofit corporation that 
would provide increased investment resources through the leveraging of 
existing resources.
    ``Federal Government corporations have helped the capital markets 
create strong and liquid markets to fulfill other policy and 
programmatic objectives,'' Carey said.
    Even if lawmakers refine some of these innovative finance tools to 
make them more mainstream, they will not supplant existing funding 
methods.
    ``What we discuss today is a complement to our traditional 
programs, not a replacement,'' Jeffords said.
Upcoming Highway Hearings
    The House Highways and Transit Subcommittee will hold a hearing 
Sept. 26 on capital and maintenance needs of the highway and transit 
system. The Senate Transportation, Infrastructure, and Nuclear Safety 
Subcommittee will hold a hearing Sept. 30 to examine the conditions and 
performance of the Federal-aid highway system.
    The Federal Highway Administration's long-awaited Conditions and 
Performance Report remains tied up at the Office of Management and 
Budget and DOT's Office of the Secretary and will not be available 
until October, a spokesman said. However, it will be discussed at both 
hearings.
                               __________
                    American Highway Users Alliance
                                                September 24, 2002.

The Honorable Max Baucus,
Chairman, Committee on Finance,
The Honorable James Jeffords,
Chairman, Committee on Environment and Public Works,
U.S. Senate,
Washington, D. 20510.

Re: Joint Hearing of September 25, 2002

Dear Chairmen Baucus and Jeffords: The Highway Users Alliance (AHUA) 
takes this opportunity to briefly address issues regarding the Federal 
highway program and asks that this letter be included in the record of 
the hearing of the Finance and Environment and Public Works Committees 
on this subject.
    Your committees are to be commended for holding this hearing on how 
the Federal Government can finance an increases level of Federal 
investment in highways--an investment that will provide important 
benefits country.
    As the nation's broadest-based highway advocacy organization and 
the organization that represents the motorists, truckers, and 
businesses that pay the taxes that fully fund and rely on our nation's 
highway and bridge investments, The Highway Users is particularly 
interested in your joint efforts to improve revenue collection and 
increase investments.
    America's roads have serious and documented funding needs--too many 
Americans are dying or being injured on roads suffering from outmoded 
design--traffic congestion is worsening, threatening safety, slowing 
air quality progress, increasing tailpipe greenhouse gas emissions, 
wasting fuel, slowing product deliveries, and taking commuters away 
from their families and other productive exercises.
    Some have called for increasing Federal fuel taxes. If there are 
demonstrated needs and current funding is being invested appropriately, 
highway users will seriously consider that option. But we believe that 
your committees must first improve where today's taxes are going, 
prevent further erosion of available resources, and examine all means 
available to boost highway revenues without raising taxes.
    Thus, we take this opportunity to support S. 2678, the ``Maximum 
Economic Growth for America Through the Highway Trust Fund Act,'' bi-
partisan legislation introduced earlier this year by Chairman Baucus. 
The 12 co-sponsors of that bill include the following members of the 
Finance or Environment and Public Works Committees: Senators Daschle, 
Reid, Graham, Warner, Bond, Thomas, and Crapo. We thank all the 
supporters of that legislation for their leadership in advancing the 
provisions of that bill.
    Among other provisions, S. 2678 would provide that the 2.5 cents 
per gallon of tax on gasohol that currently is directed to the General 
Fund of the Treasury would be deposited in the Highway Account.
    In addition, S. 2678 would deposit into the Highway Account an 
amount equal to the fuel taxes not imposed on gasohol due to the 
gasohol tax preference. This is in keeping with historical precedence 
of funding agricultural programs, like ethanol, from the general fund. 
The bill would not raise the tax imposed on gasohol. This means that 
the Highway Account would receive treatment on gasohol comparable to 
the treatment currently given to the Mass Transit Account. That 
account, unlike the Highway Account, already receives the same amount 
of funding for a gallon of gasohol as it does for a gallon of regular 
gas.
    S. 2678 would also resume the practice of crediting the Highway and 
Mass Transit Accounts of the Highway Trust Fund with interest on their 
respective balances. While we would prefer that Congress invest those 
surpluses, the trust fund should receive interest on highway use taxes 
collected, but not invested.
    Increased revenues for the highway program can also come from 
improved collections. We ask that the two committees work to achieve 
greater compliance with our tax laws that support the Highway Trust 
Fund. We have heard, for example, that changing the point of collection 
of aviation fuel taxes could add billions to the Trust Fund over the 
life of a reauthorization. Other enforcement steps could be beneficial 
as well. We urge the Congress to take appropriate steps to achieve the 
highest possible rate of collection of the taxes due to the Highway 
Trust Fund.
    In addition, we understand that Senator Baucus is exploring 
additional legislation that would allow the Secretary of the Treasury 
to sell tax credit bonds. The proceeds would go into the Highway Trust 
Fund and the General Treasury would be responsible for the principal 
and interest. We are eager to see this approach advance as an 
additional means of increasing highway investment.
    Mssrs. Chairmen, the American Highway Users Alliance commends the 
Committees for holding this hearing and urges enactment of legislation, 
in accord with the points outlined above, to finance increased Federal 
highway investment. Thank you for your consideration of our views on 
this important matter.
            Respectfully submitted,
                         William D. Fay, President and CEO,
                                   American Highway Users Alliance.
                               __________
 Statement of the Transportation Departments of Montana, Idaho, North 
                   Dakota, South Dakota, and Wyoming
    The transportation departments of Montana, Idaho, North Dakota, 
South Dakota, and Wyoming submit this brief statement for the record of 
the joint hearing held on this date by the Committee on Finance and the 
Committee on Environment and Public Works.
    We are extremely pleased that, today, there is a consensus in the 
country that a well funded highway program makes an important and 
positive contribution to our nation's economic prosperity and quality 
of life. But we urge the Congress not to rest on that consensus, but to 
buildupon it and increase today's level of Federal investment. As the 
Congress receives testimony and prepares to shape legislation to 
reauthorize federally assisted surface transportation programs, it is 
important to keep foremost in mind that increased transportation 
investments will truly advance the public interest and help all 
citizens and all States.
    The two committees are to be commended for holding this hearing. 
The nation's ability to achieve increased transportation investment 
requires increased funding. It requires an answer to the question of 
how the Federal Government will finance its contribution to such an 
increase.
    A very important part of the answer is already before you. Earlier 
this year, Chairman Baucus, with the co-sponsorship of Senators Crapo, 
Daschle, Thomas, Craig, Enzi, Johnson, Warner, Reid, Graham, Bond, 
Harkin, and Carnahan, introduced bi-partisan legislation, S. 2678, that 
would increase receipts into the Highway Trust Fund without raising 
taxes.
    We support every provision of that legislation.
    That legislation would allow the Highway Account of the Highway 
Trust Fund, which has foregone very significant revenue due to 
increased gasohol consumption, to be properly credited. The bill would 
ensure that the 2.5 cents per gallon of tax on gasohol that currently 
is directed to the General Fund of the Treasury would be deposited in 
the Highway Account. In addition, the bill would credit the Highway 
Account with funds equal to the amount of fuel taxes not imposed on 
gasohol due to the gasohol tax preference (currently 5.3 cents per 
gallon). The bill would not raise the tax imposed on gasohol. This 
approach would make the Highway Account whole with respect to taxes 
either paid or foregone with respect to gasohol consumption. It would 
allow the Highway Account to finally receive treatment on this issue 
comparable to the treatment on this issue currently given to the Mass 
Transit Account which, unlike the Highway Account, already receives the 
same funding for a gallon of gasohol as it does for a gallon of regular 
gas.
    S. 2678 also properly would reinstate the principle that the 
Highway and Mass Transit Accounts of the Highway Trust Fund should each 
be credited with interest on their respective balances. The bill also 
includes a thoughtful provision requiring a commission to look at long-
term issues in financing the surface transportation program.
    So, while witnesses today may be emphasizing various innovative 
ways of financing increased Federal surface transportation investment, 
we wanted to emphasize our support for the important and 
straightforward provisions included in S. 2678, the ``Maximum Economic 
Growth for America Through the Highway Trust Fund Act.''
    As to additional financing mechanisms, at this time we will limit 
ourselves to a brief positive comment on a concept that we understand 
to be under development by Senator Baucus. The approach would be for 
the Secretary of the Treasury to sell bonds with the proceeds being 
deposited in the Highway Trust Fund. The General Treasury would be 
responsible for the principal and interest. We welcome the development 
of this additional approach as a means of serving our national interest 
in increased investment in highways and transportation.
    In closing, we commend Chairman Baucus and Ranking Member Grassley 
of the Finance Committee and Chairman Jeffords and Ranking Member Smith 
of the Environment and Public Works Committee for holding this hearing 
on the important issues of finding ways to finance increased Federal 
transportation investment. That investment is certainly essential to 
the economic future of our States and we appreciate this opportunity to 
offer views on how that might be achieved.
                               __________
          Statement of the American Society of Civil Engineers
    The American Society of Civil Engineers (ASCE) is pleased to 
provide this statement for the record on financing alternatives for the 
nation's surface transportation programs.
    ASCE, founded in 1852, is the country's oldest national civil 
engineering organization representing more than 125,000 civil engineers 
in private practice, government, industry and academia who are 
dedicated to the advancement of the science and profession of civil 
engineering. ASCE is a 501(c)(3) non-profit educational and 
professional society.
    ASCE believes the reauthorization of the nation's surface 
transportation programs should focus on three goals:
      Expanding infrastructure investment
      Enhancing infrastructure delivery
      Maximizing infrastructure effectiveness
    ASCE's 2001 Report Card for America's Infrastructure graded the 
nation's infrastructure a ``D+'' based on 12 categories, including 
roads with a grade of ``D,'' bridges with a grade of ``C,'' and transit 
with a grade of ``C-.'' Roads, bridges and transit have benefited from 
an increase in Federal and local funding currently allocated to ease 
road congestion, to repair decaying bridges, and to add transit miles. 
However, with 29 percent of bridges still ranked as structurally 
deficient or obsolete and nearly a third of major roads considered to 
be in poor or mediocre condition, engineers warn that Congress cannot 
afford to allow promised funding for transportation to lapse. Transit 
ridership has increased 15 percent since 1995, adding a strain despite 
unprecedented growth in transit systems and increased funding.
    Establishing a sound financial foundation for future surface 
transportation improvements is an essential part of reauthorization. 
TEA-21 provided record funding levels to the States and significant 
improvements have been made to our nation's infrastructure. In spite of 
these notable efforts, the nation's surface transportation system will 
require an even more substantial investment. United States Department 
of Transportation (DOT) data reflect the fact that an investment of $50 
billion per year would be needed just to preserve the system in its 
current condition. With funding as the cornerstone of any attempt to 
reauthorize TEA-21 it is imperative that a variety of funding issues be 
advanced as part of ASCE's overall strategy.
Sustaining Infrastructure Investment
    ASCE supports the following goals for infrastructure investment.
      A 6-cent increase in the user fee with one cent dedicated 
to infrastructure safety and security. These new funds should be 
distributed between highways and transit using the formula approved in 
TEA-21.
      The user fee on gasoline should be indexed to the 
Consumer Price Index (CPI) to preserve the purchasing power of the fee.
      The Transportation Trust Fund balances should be managed 
to maximize investment in the nation's infrastructure.
      Congress should preserve the current firewalls to allow 
for full use of trust fund revenues for investment in the nation's 
surface transportation system.
      The reauthorization should maintain the current funding 
guarantees.
      Congress should stop diverting 2.5 cents of the user fee 
on ethanol to the General Fund, and put it back into the Highway Trust 
Fund.
      Make the necessary changes to alter the Revenue Aligned 
Budget Authority (RABA) to decrease the volatility in the estimates 
from year to year and ensure a stable user fee based source of funding.
      The current flexibility provisions found in TEA-21 should 
be maintained. The goal of the flexibility should be to establish a 
truly multi-modal transportation system for the Nation.
    ASCE supports a reliable sustained user fee approach to building 
and maintaining the nation's highways and transit systems. While ASCE 
supports a wide variety of innovative approaches to finance surface 
transportation projects, ASCE feels strongly that the current user fee 
arrangement is the most equitable and efficient means of ensuring 
stable transportation funding.
    First to be addressed is the issue of raising the user fee on motor 
fuels. While the gas tax is an important element of the current revenue 
stream feeding the Federal Highway Trust Fund, it continues to erode in 
value due to its inherent inelastic nature. Two strategies must be 
advanced to remedy this condition. First, raise the gasoline user fee 
by six cents. This would provide a much needed infusion of funding 
toward the $50 billion per year need. In tandem with raising the motor 
fuel tax, ASCE believes that it is important to shore up the weakness 
of the motor fuel tax and its inability to retain value over the long 
term by adding a provision to the law that would index it based on the 
Consumer Price Index (CPI). This would allow the rate to adjust and 
reflect the current economic conditions of the Nation.
Innovative Financing
    ASCE supports the innovative financing programs and advocates 
making programs available to all States where appropriate. 
Additionally, the Federal Government should make every effort to 
develop new programs.
    ASCE supports the following changes to enhance the existing 
programs:
Transportation Infrastructure Finance and Innovation Act (TIFIA)
      The TIFIA process for review, approval and negotiation is 
regarded as burdensome, and could be streamlined.
      TIFIA projects have a minimum eligibility threshold of 
$100 million and consideration could be given to lowering this to $50 
million to expand the pool of projects.
      TIFIA loans could be ``fully subordinated''. Current 
TIFIA legislation is written to subordinate TIFIA loans to other 
creditors. However, in the event of liquidation/default, the TIFIA loan 
advances to parity status with other creditors. This is known as the 
``springing lien'' provision. It is thought by some that this has 
limited the availability of other credit. The issue is controversial, 
with pros and cons on both sides, but reform should be seriously 
considered.
State Infrastructure Banks (SIBs)
      With the exception of five States (Texas, Rhode Island, 
Florida, Missouri, and California), TEA-21 did not permit further 
capitalization of SIBs with Federal funds. It is felt that this has 
suppressed SIB activity.
      Federal regulations still apply to loan funds that are 
repaid to the bank, encumbering SIB funded projects with Federal 
regulatory requirements.
Grant Anticipation Revenue Vehicles (GARVEEs)
      Increase the flexibility of GARVEE bond repayment 
methods. For example, utilize the total apportionment amount as a 
source of repayment (i.e., all funding categories), so that no 
particular funding category is overburdened.
    New programs for consideration as part of the next reauthorization 
are:
      Increased use of user fees, tolls, value pricing, and HOT 
lanes.
      Possible indexing of highway trust fund motor fuels tax 
to inflation.
      Establishing a true multimodal funding program (i.e., 
funds can be used interchangeably for rail, highway, freight, 
intermodal facilities, etc.).
      Tax credit bonds, private activity bonds, and tax-exempt 
bonds for privately developed projects.
    Tax-based revenues are not sufficient to keep pace with the 
nation's transportation needs.
    There is a compelling need for enhanced funding, to a large extent 
through user-oriented fees that have been demonstrated to be a well-
accepted and equitable source of infrastructure financing. In the case 
of surface transportation, federally sponsored studies demonstrate the 
need for higher levels of investment. An additional challenge is to 
convince our citizens and our elected leaders that we must either ``pay 
now'' or ``pay later'', and that paying now is much more cost-effective 
and prudent in the long run.
    Innovative financing techniques can greatly accelerate 
infrastructure development and can have a powerful economic stimulus 
effect compared to conventional methods. This is the current approach 
in South Carolina, Georgia, Louisiana, Florida, and Texas, where 
expanded and accelerated transportation investment programs have been 
announced. Innovative financing techniques, including toll road-based 
funding, figure heavily in several of these State programs.
    The innovative programs in TEA-21 have been a good start, but more 
needs to be done to expand their scope, and new programs or approaches 
must be introduced. We must find new and innovative ways to finance the 
critical transportation infrastructure needs of the Nation.
Life Cycle Cost & Surface Transportation Design
    The use of Life-Cycle Cost Analysis (LCCA) principles will raise 
the awareness of clients of the total cost of projects and promote 
quality engineering. Short-term design cost savings which lead to high 
future costs will be exposed as a result of the analysis. In the short-
term the cost of projects will increase; however, the useful life of a 
project will increase, and there may be cost savings in operations and 
maintenance over the long term.
    When the cost of a project is estimated only for design and 
construction, the long-term costs associated with maintenance, 
operation, and retiring a project, as well as the cost to the public 
due to delays, inconvenience and lost commerce are overlooked. The 
increasing use of bidding to select the design team has resulted in a 
pattern of reducing engineering effort to remain competitive, with the 
result of higher construction and life cycle costs.
    ASCE encourages the use of Life-Cycle Cost Analysis (LCCA) 
principles in the design process to evaluate the total cost of 
projects. The analysis should include initial construction, operation, 
maintenance, environmental, safety and all other costs reasonably 
anticipated during the life of the project, whether borne by the 
project owner or those otherwise affected.
Long-term Viability of Fuel Taxes for Transportation Finance
    ASCE supports the need to address impacts on future surface 
transportation funding and believes that provision should be made in 
the next surface transportation authorizing legislation to explore the 
viability of the most promising options to strengthen this funding. In 
particular, the impacts of fuel cell technology should be studied as 
well as how to create a mileage based system for funding our nation's 
surface transportation system as this technology comes to market and 
lessens the nation's dependence on gasoline as a fuel source for 
automobiles.
    Fuel taxes have long been the mainstay for transportation 
infrastructure finance, but their future is now uncertain. In many 
States, there is a strong reluctance to raise fuel taxes, and some 
State legislatures have even reduced taxes to compensate for the sharp 
increase in average gasoline prices over the last 2 years. Many 
localities and States are supplementing or replacing fuel taxes with 
other sources, such as sales taxes and other general revenue sources. 
There is also a growing trend to use additives to gasoline for 
environmental reasons, and the most prominent additive, ethanol, enjoys 
a Federal exemption from fuel taxes that reduces Federal and State 
trust fund revenues by some several billion dollars annually. Looking 
ahead, a slow but steady increase in fleet efficiency--perhaps due to 
increased market penetration by electric, fuel cell, or hybrid 
technologies--would reduce the revenue per mile of use generated by 
users. Whereas cleaner-burning fuels and increased fuel efficiency are 
desirable policy goals in their own right, particularly in regard to 
global warming, they may reduce the ability to rely on fuel taxes in 
the future.
    A helpful first step in this process will be the Transportation 
Research Board's recently initiated Study on Future Funding of the 
National Highway System, which will describe the current policy 
framework of transportation finance and evaluate options for a long-
term transition to sources other than fuel taxes. The goals of the 
study are to: (1) determine the extent to which alternatives to fuel 
taxes will be needed in the next two decades or so; (2) analyze the 
pros and cons of different alternatives in terms of political 
feasibility, fairness, and cost; (3) suggest ways in which barriers to 
these alternatives might be overcome; (4) recommend ways in which the 
efficiency and fairness of the fuel tax could be enhanced, and (5) 
recommend, as necessary, a transition strategy to other revenue 
sources. The study's first task, to be summarized in an interim report, 
will provide one or more scenarios to illustrate the time span during 
which petroleum-based gasoline availability and cost might reduce fuel 
tax revenues. The interim report has been requested to provide insight 
to those parties involved in the development of the surface 
transportation reauthorization legislation, particularly with regard to 
projections of fuel tax revenues during the next reauthorization cycle. 
The study will also provide estimates of trends in expenditures for 
transportation infrastructure from sources other than the fuel tax.
                               __________
Statement of Ross B. Capon, Executive Director, National Association of 
                          Railroad Passengers
    Thank you for the opportunity to present this information. Our non-
partisan organization has worked since 1967 in support of more and 
better passenger trains of all types in the U.S. Our vision of the 
future includes an intercity rail passenger network that connects all 
regions and metropolitan areas of the country and serves all important 
transportation routes. Such a vision would be similar to the one 
adopted with the authorization of the Eisenhower Interstate Highway 
system in 1956.
    It is critical that TEA-3 Reauthorization finally resolve the 
chronic under-funding of passenger and freight rail transportation by 
establishing a Federal program that encourages States to invest in both 
passenger and freight rail development.
    At a time of unprecedented highway congestion, the freight 
railroads are reducing infrastructure improvement projects due to 
decreasing rates of return on capital investments. Meanwhile, for 31 
years, we have subjected Amtrak to unpredictable funding levels that 
have left our national passenger rail system with a $5 billion backlog 
in needed capital investments. In California alone, over $100 million 
in intercity passenger rail investment plans that also would benefit 
freight operations have been shelved until more Federal funding becomes 
available. A strong rail system serving both passengers and freight is 
a national necessity.
    Individual States will never fulfill rail funding needs on their 
own, nor will they sustain the national vision for an efficient freight 
and intercity passenger rail network beyond their own borders. To 
realize the national vision, the Federal Government must lead. The 
traveling public wants intercity passenger rail. The rules for success 
are simple: Give people half decent service, and they will ride; give 
them great service, and they will come in droves. Very modest 
investments in service have brought substantial returns in patronage. 
To name just a few:
      Downeaster (Portland, Maine to Boston): Inaugurated in 
December 2001, this new route exceeded all revenue projections for the 
entire year in only 6 months. Through the summer, the trains often had 
standees even though third and fourth coaches were added to the 
original consists (which had one combined cafe/coach/Coastal Club 
Service car and two coaches). Although driving is an hour faster 
(without traffic), New Englanders are choosing the train for its 
convenience and comfort. August ridership was 30,700. With four daily 
round-trips, that is an average of about 124 passengers per trip.
      Long Distance Sleepers: In the January-March, 2002, 
quarter, sleeping-car revenues increased 18 percent and travel 
(measured in passenger-miles) 11 percent above year-earlier levels. 
Airline revenues were still down about 20 percent.
      Amtrak carries more passengers between New York and 
Washington than all airlines, and Acela Express/Metroliner service is a 
big factor in that. When all city-pair combinations between New York 
and Washington are included, Amtrak's market share of the air-rail 
segment surpasses 70 percent. Premium Acela Express and Metroliner 
service has experienced a ridership surge of 35 percent since 2001.
      Amtrak's share of the Boston-Philadelphia air-rail market 
was 8 percent before Acela and Boston-New Haven electrification, but 
that rose to 26 percent in the January-March, 2002, quarter (most 
recent available). This means that, in spite of Amtrak running-times of 
almost 5 or 6 hours (Acela Express and Acela Regional, respectively), 
there is more than one Amtrak customer for every three airline 
passengers. * In the Pacific Northwest, new Talgo trains helped boost 
ridership from 226,000 in 1993 to 658,000 in 2001. (Passenger-miles 
rose 2 percent during the first 11 months of fiscal 2002 in spite of 
the travel recession.) The overall growth from 1993 was based on 
marginal increases in frequency and speed (with the best Seattle-
Portland schedules now taking 31/2 hours, a 53 mph average).
      Capitol Corridor: Since 1998, ridership on this bustling 
Sacramento-San Jose route has climbed 132 percent, surpassing one 
million annual passengers.
    On the freight side, the Alameda Corridor in the Los Angeles area 
has improved over 200 grade crossings, reduced truck traffic, and 
tremendously enhanced the flow of freight trains between Los Angeles 
and Long Beach. Not long before, freight-passenger interference was 
reduced with construction of a rail-over-rail flyover in Los Angeles.
    To make similar success stories possible elsewhere in California 
and the rest of the Nation, the Federal Government must create a 
partnership with States that supports and encourages investment in 
passenger and freight rail. Several bills in the House and Senate, such 
as RIDE-21 and S. 1991, laudably set the framework for a Federal rail 
infrastructure program, where money should be spent, and how tax-exempt 
bonds, tax-credit bonds, and expanding the Rail Rehabilitation and 
Infrastructure (RRIF) program will provide the needed capital. However, 
none of these bills outline where the cash needed to support these 
Federal programs will come from.
    Thus, the National Association of Railroad Passengers strongly 
supports the creation of a Rail Trust Fund, similar to those used so 
effectively for the highway and aviation modes.
    While the Rail Trust Fund might eventually derive significant 
revenue from user fees, user-based revenue sources would not generate 
much revenue initially. In order for a rail trust fund to reach 
critical mass, the Federal Government must first ``prime the pump'' by 
earmarking revenue from other sources. Highways and aviation systems 
were already relatively mature before creation of their trust funds.
    Some possible Rail Trust Fund sources already exist in the form of 
taxes levied on the railroads, which, unlike highway and aviation 
taxes, do not benefit further investment in their respective mode.
    This counter-productive precedent has hindered development of both 
passenger and freight rail for decades. Between 1941 and 1962, the 
Railroad Ticket Tax raised billions in revenue, none of which went 
toward enhancing development of the freight or passenger rail service; 
some revenues actually went toward highway development. Today, through 
taxes levied on railroads on infrastructure and fuel, we continue to 
discourage investments in rail by funneling these revenues into the 
general treasury.
    We believe rail should receive a portion of any future increase in 
gasoline or aviation taxes. We support many State DOTs in the view that 
they should be allowed to spend flexible gasoline-tax dollars on 
intercity passenger rail. We do not believe the Nation or the cause of 
balanced transportation benefits from an 'ironclad' mode-specific 
approach to trust funds, but in the present context we certainly agree 
that taxes levied on railroads (including Amtrak) should benefit 
railroads--passenger and freight.
    We know that freight railroads are very sensitive to the 
possibility that creation of a trust fund would alter the competitive 
balance among the railroads, or result in rail tax payments cross-
subsidizing passenger projects. We believe these challenges can be 
addressed. General guidelines about overall project balance between 
competing freight railroads and how improvements must benefit both 
freight and passenger service could establish a fair process of 
disbursement for all parties. Other stipulations about the share of 
allowable projects whose benefits are judged to be ``passenger only'' 
could be negotiated. If Congress does not repeal the 4.3 cent diesel 
tax which Amtrak and the freight railroads currently pay toward general 
deficit reduction, then the $170 million raised annually from this tax 
should be directed into a Rail Trust Fund, and no longer be set aside 
for deficit reduction. This precedent has already been set, as similar 
airline and highway taxes were redirected into their respective trust 
funds in 1997. Since 1997, the railroads have paid approximately $1 
billion in diesel taxes to general revenue; this money should be 
retroactively rebated at its present value to the Rail Trust Fund and 
set aside for rail infrastructure development.
    Other revenue sources being considered for the Rail Trust Fund 
include taxes on equipment sales, and passenger ticket taxes on 
commuter and Amtrak trains. Any new taxes levied on the freight 
railroad industry and passengers must not be viewed as a panacea, and 
be implemented with restraint. Raising taxes on equipment will increase 
startup costs for new services as well as decrease an already 
diminished rate of return for capital investments. An equipment tax 
will be pointless if railroads simply reduce their capital investments 
further because they are now paying a tax on new equipment. A net gain 
for capital investments infrastructure must accompany any tax levied on 
new equipment purchases.
    With respect to passenger tickets, again, NARP believes these taxes 
must not be seen as a panacea, and be implemented cautiously (perhaps 
not at all, or only after the results of meaningful capital projects 
have become apparent in service improvements). Unfortunately, the vast 
reservoir of patronage that made the railroad ticket tax so successful 
(at raising general revenues!) between 1941 and 1962, is much smaller, 
and cannot generate nearly as much revenue as before. A passenger 
ticket tax must not try to make up this difference by imposing a much 
higher tax rate; taxing passengers too much would stifle ridership to 
the point that nobody rides the train. Amtrak already tries to set 
fares to maximize revenues, and many fares already are very expensive. 
Also, Amtrak, as noted above, already pays the 4.3 cent fuel tax.
    Polls over the years have consistently shown public support for 
faster, more frequent, and reliable passenger trains, including two 
national polls this summer. A poll conducted by CNN/Gallup/USA Today 
near the height of Amtrak's June cash crisis (June 21-23) found that 70 
percent of the public support continued Federal funding for Amtrak. 
Similarly, The Washington Post found that 71 percent of Americans 
support continued or increased Federal funding for Amtrak (August 5 
article reporting on July 26-30 poll).
    If we provide quality service, the public will ride the trains. If 
the Federal Government provides States a meaningful match, the States 
will drive the needed investments. At the same time, the public also 
will realize a tremendous benefit from an improved freight rail 
network. Again, the key to realizing these benefits will be a long term 
Federal partnership with States, and an adequately supported Rail Trust 
Fund that would bring balance into national transportation policy, and 
ultimately benefit the users of every mode of transportation.
    The web site of the National Association of Railroad Passengers is 
.
                               __________
 Statement of State Senator Betty Karnette, California State Capitol, 
                             Sacramento, CA
    Thank you for having this important hearing to discuss the security 
and infrastructure needs of trade-based transportation throughout this 
great country of ours.
    Clearly, America's long-term economic growth depends on our ability 
to move goods safely and efficiently. Throughout the Nation, we see how 
freight movement brings our trade economy to life. We can be proud of 
how we work as a nation to stay competitive in the global economy.
    However, there are serious obstacles to our nation's freight 
security and mobility that could significantly reduce the safe and 
efficient movement of goods in the immediate future. Unless we address 
these problems in an innovative, systematic fashion--without delay--we 
risk America's ability to provide the type of transportation 
infrastructure on which the goods movement industry has come to rely.
    Before 9/11/01, our freight mobility issues were already 
challenging enough. But today, we must also ensure that our nation's 
freight movement system is as secure as it is efficient. Clearly, our 
present challenge is to insure the security, efficiency and 
sustainability of the nation's freight movement system.
    It is awe-inspiring to see how the various regions of this nation 
collaborate in manufacturing, selling and moving goods to each other 
and to our trading partners throughout the world. For example, nearly 
$650 billion in domestic and international trade flows between 
California and other regions of the United States.
    What would happen if the goods movement between the east coast, 
west coast and points in between were to collapse? Clearly, our 
economy--and those who rely on it--would be in serious trouble, and 
that day may not be far away. Rail lines and rail yards in California 
are expected to reach maximum capacity within five to 7 years. Moving a 
freight container from one side of Chicago to the other can often take 
up to 4 days.
    There are countless examples of problems just like these that 
demonstrate the importance of developing a systematic strategy to meet 
the challenges that confront us. If we fail to act, our competitors in 
the global economy will be the only beneficiaries.
    I would like to focus my testimony on how we can ensure that our 
nation's freight transportation network can keep pace with the demands 
of economic growth.
    First, we need a comprehensive strategy for increasing capacity and 
improving the efficiency of goods movement in the United States. The 
strategy must be complete and it must include private sector 
participation.
    As I have indicated in my attached report, National Freight 
Security and Infrastructure Bank, we can simultaneously meet the needs 
of both government and industry by creating an organization that 
focuses on public/private finance and project selection. A public/
private partnership is the only sensible approach we can take. We must 
make sure that the two major stakeholders of the nation's freight 
system--government and industry--have a forum to collaborate and to 
solve national goods movement problems.
    Second, as Congress rightfully confronts the issue of freight 
security, it is essential that any such effort include an innovative 
and comprehensive financing strategy to address it. We do not have 
sufficient financial support from existing Federal programs to 
guarantee the freight security and mobility in the way we would like. 
Therefore, I have developed an innovative finance proposal for freight 
projects.
    My proposal for a National Freight Security and Infrastructure Bank 
demonstrates how to develop an innovative funding base and how to 
deliver freight transportation projects with public/private 
collaboration, while conforming to transportation programming 
requirements at the Federal, State and local levels.
    While there may be some concern that user fees may not be the best 
way to fund freight security and mobility, we simply cannot lose sight 
of the option. Security and mobility are key elements of America's 
ability to remain competitive in the global economy.
    These are the same considerations that led President Dwight David 
Eisenhower to create the Interstate Highway System. Creation of the 
Interstate Highway System was primarily driven by security concerns 
during the cold war years of the 1950's and 1960's (i.e., the need to 
quickly, safely and efficiently deploy troops and material).
    Today we face similar security concerns that must be addressed as 
we aggressively pursue goods movement infrastructure development. Many 
of our present challenges may seem insurmountable. But our nation's 
history is rich with examples of how Americans can rise above the 
challenges of the day.
    The bottom line is that a comprehensive approach will 
simultaneously enhance America's economic development and mitigate 
environmental and safety issues--while at the same time addressing 
national security.
National Freight Security and Infrastructure Bank
    The National Freight Security and Infrastructure Bank (NFSIB), a 
stand-alone Federal agency, would be funded by a new uniform NFSIB 
security and infrastructure fee, administered by U.S. Customs, and 
based in part upon a percentage of the existing duties on all imported 
cargo through border crossings and through the nation's seaports. The 
NFSIB would establish security and infrastructure fees for certain 
commodities, which at present have no existing U.S. Customs duty, but 
which have security or infrastructure impacts. The amount of the NFSIB 
security and infrastructure fee would be adjusted annually based upon 
the change in the Consumer Price Index (CPI).
    U.S. Customs would be responsible for collecting the NFSIB security 
and infrastructure fee. US Customs would receive compensation from 
NFSIB for providing this administrative service. Fees would flow to the 
National Freight Security and Infrastructure Trust Fund, which would be 
administered by the NFSIB. The NFSIB's staff and administrative costs 
would be funded by fees paid by project sponsors (from non-NFSIB import 
cargo fee resources). The NFSIB's Board of Directors would consist of 
15 representatives from the public and private sectors, including the 
U.S. Department of Transportation, U.S. Customs, ports, steamship 
lines, shippers, trucking and railroad industries.
    85 percent of the Trust Fund would be available as cash, or 
pledgable revenue to support project financings of eligible freight 
security and infrastructure projects. Project sponsors would be 
responsible for developing financing plans for individual projects. 
Project sponsors could choose direct funding, and/or use of leveraging 
strategies, including issuing debt, or a combination of funding 
strategies, in which the project sponsor would rely on cash or 
pledgable revenue provided by the NFSIB. 10 percent of the Trust Fund 
would be remanded to the U.S. Department of Transportation for grants 
for discretionary freight security and infrastructure projects, and 5 
percent would be available to the U.S. Customs Service for 
administering the collection of fees.
    Project sponsors/applicants may include any of the following: 
States; cities; regional and local public agencies; port authorities; 
joint powers authorities; and joint applicants involving public 
agencies and private transportation firms or associations.
    All eligible projects must address security and transportation 
needs of imported cargo through seaports located in specified Global 
Gateway Regions of the United States, or through selected border 
crossings, or through selected inland cargo interchange points, or 
through the area of jurisdiction of the local Metropolitan Planning 
Organization. Projects nominated for funding must be included in the 
Regional Transportation Plan adopted by the Metropolitan Planning 
Organization. Regardless of their distance from the seaport, border 
crossing, or interchange point, all nominated projects must address one 
or more of the following goals associated with the movement of imported 
cargo: 1) increase national or homeland security, 2) expedite shipments 
of imported cargo by increasing capacity, improving communications and 
information sharing, reducing delay or increasing speed or efficiency 
of shipment, and 3) relieve traffic congestion, reduce air and noise 
pollution or mitigate other environmental impacts.
    The Board of Directors of the NFSIB will determine which projects 
will receive funding. Funds will flow directly from the NFSIB to 
project sponsors. Project sponsors must provide 25 percent matching 
funds from any source. The U.S. Department of Transportation shall 
approve projects recommended for funding by the NFSIB, and shall have 
veto power over any project funding recommended by the NFSIB.
    Global Gateway Regions shall include:
    1) Southern California, including ports of Los Angeles, Long Beach, 
Hueneme and San Diego;
    2) Northern California, including the Port of Oakland, Port of 
Stockton; 3) Pacific Northwest, including the Ports of Portland, 
Seattle and Tacoma;
    4) Gulf Coast, including the Ports of Galveston, Houston, Corpus 
Christi, New Orleans, Mobile, Tampa;
    5) Southeast, including Jacksonville, Miami, Everglades, Palm 
Beach, Charleston, Charlotte, and Savannah;
    6) Northeast and Mid-Atlantic, including the Ports of New York/New 
Jersey, Philadelphia, Boston, Wilmington, Baltimore and Norfolk;
    Border Crossings shall include:
    1) Laredo, TX
    2) El Paso, TX
    3) Bellingham, WA
    4) Portal/Northgate, ND
    5) International Falls, ND
    6) Sault Ste Marie, MI
    7) Detroit/Port Huron, MI
    8) Niagara Falls, NY
    9) Plattsburg, NY
    10) Otay Mesa
    11) Calexico

    Inland interchange points shall include:
    1) Chicago, IL
    2) Memphis, TN
    3) Kansas City, MO
    4) Washington, DC
    5) Richmond, VA
    6) Charleston, WV
    7) Ft Worth, TX
    8) Chattanooga, TN
    9) Denver, CO
    10) Little Rock, AR
    11) Minneapolis/St. Paul, MN
    12) St. Louis, MO
    13) Albany, NY
    14) Syracuse, NY
    15) Cincinnati, OH
    16) Columbus, OH
    17) Pittsburgh, PA
    18) Hattiesburg, MS
    19) Atlanta, GA
    20) Lexington, KY
    21) Birmingham, AL
    22) Nashville, TN
    23) Cairo, IL
    24) Louisville, KY
    25) Indianapolis, IN
    26) Charlotte, NC
    27) Raleigh/Durham, NC

    Examples of projects that would be eligible for funding include:
1) California Global Gateways
    Accounting for 40 percent of all U.S. waterborne commerce, 
California represents the largest trading complex in the United States. 
Freight transport capacity, however, has not kept up with demand. 
Although the Alameda Corridor opened in April of 2002, serious 
deficiencies in railroad track and yard capacity and freeway capacity 
still exist in the L.A. area. California is facing explosive growth in 
international trade through its ports and border crossings over the 
next 20-25 years. Grade separations and other mitigations are needed to 
relieve freight-related congestion in local communities. Examples of 
specific projects that could apply for NFSIB funding include:
    Alameda Corridor-East (extension of the Alameda Corridor through 
the San Gabriel Valley, Orange County, San Bernardino County, and 
Riverside County);--Gerald Desmond Bridge replacement in the Port of 
Long Beach;--Oakland Joint Intermodal terminal at the Port of Oakland.
2) Florida's Gateway Project: The Americas Corridor
    Florida is the fourth largest container handling State in the 
Nation, with the State's South Florida seaports handling an important 
share of the international goods flowing through the State to and from 
global markets. The goal of the Americas Corridor is to optimize the 
movement of international cargo and domestic freight among seaports, 
rail lines and State highways in South Florida. In particular, the 60 
linear miles of the intermodal transportation system linking South 
Florida's three seaports is of critical concern. The containers moving 
across the docks of three South Florida seaports, each of which is also 
a premier cruise port and located adjacent to a busy downtown center, 
must traverse the choked streets of urban neighborhoods to access the 
Interstate highway system, impeding mobility, productivity and 
compromising the nation's security. Double tracking of the rail system 
between Jacksonville and Miami is another specific project that will be 
required in the future.
3) Chicago Cross Town Highway and Rail Improvements
    In Chicago six Class I railroads converge at some 18 major 
intermodal terminals ringing the city. 1,500 trains per day approach 
these terminals and 3,500 cross-town container moves occur daily. The 
stress on the region's roadways is enormous, and the delay to cargo 
delivery is increasingly inefficient. A series of improvements to this 
fragmented infrastructure would add capacity and velocity to the rail 
and trucking systems.
4) New York/New Jersey Port Access Projects
    The Port of NY/NJ is the largest port complex on the east coast, 
and the second largest in the Nation. Significant environmental 
concerns hamper overall freight investment. New highway building is 
constrained by land availability and environmental concerns. 15,000 
trucks move in and out of the port area each day, but each truck trip 
faces an average of 30-50 minutes of delay due to increasing congestion 
in the area. The port has devised a series of port access improvements 
and intermodal connectors needed in the region.
                               __________
 Statement of Professor David J. Forkenbrock, Director, Public Policy 
                       Center, University of Iowa
A New Approach to Assessing Road User Charges
    This testimony describes a major study in progress to develop a new 
approach for charging vehicles that travel on public roadways. The new 
approach applies intelligent transportation system (ITS) technology to 
the problem of assessing road user charges, enabling these charges to 
be fairer, more stable, and more flexible. Though very simple in 
concept, the new approach has required that a number of institutional 
and technological issues be resolved. It is to resolve both types of 
issues that we are undertaking this research.
    Phase I of this research was concluded in September 2002, and a 
final report is available from Professor Forkenbrock. The first phase 
of this research was funded through a special consortium comprised of 
the Federal Highway Administration and 15 State departments of 
transportation: California, Connecticut, Iowa, Kansas, Michigan, 
Minnesota, Missouri, North Carolina, Ohio, Oregon, South Carolina, 
Texas, Utah, Washington, and Wisconsin. If funded in the transportation 
reauthorization bill, Phase II will field-test the concepts developed, 
so that by the time implementation is considered, the new approach will 
be ready to implement by State legislatures and Congress. It is vital 
that it be fully tested because nationally the amount of revenue 
generated by road user charges is substantial-the motor fuel tax alone 
generates upwards of $50 billion annually.
         problems with current methods for charging road users
    At both the State and Federal level in the United States, the 
primary method for charging road users is the motor fuel tax. In many 
ways this tax has served quite well. Road users are charged roughly on 
the basis of the amount of travel on the public road system. As such, 
motor fuel taxes have the desirable attribute of being a ``pay-as-you-
go'' form of user charge. There are, however, several major 
shortcomings with motor fuel taxes including:
      first and foremost, an inability to generate the 
necessary revenue to provide quality transportation services in future 
years as hydrogen fuel cell vehicles and those with other new 
propulsion systems become more commonplace;
      high evasion, perhaps up to 10 percent for diesel fuel 
under some circumstances;
      increased fuel efficiency meaning lower receipts per mile 
traveled;
      no relationship to the type or cost of the facility being 
used or the level of service provided; and
      a weak relationship to the relative costs of particular 
trips such that some vehicle operators pay user charges that exceed the 
costs they impose, while others pay substantially less than their 
costs.
    From the standpoint of public policy, motor fuel taxes are not 
entirely satisfactory. Vehicle operators are not given price signals to 
make them aware of the costs a particular trip may imposes on society. 
With motor fuel taxes, it is not possible for government agencies to 
provide incentives to vehicle operators to change the nature of their 
road use, such as traveling on higher-standard roads or during off-peak 
hours.
    The move away from State and Federal motor fuel taxes must be 
accomplished with great care. Combining fuel tax receipts at both 
levels of government, this tax accounts for almost two-thirds of all 
road user charges. In short, a very large amount of road financing 
capability is at stake.
                            study objectives
    The purpose of Phase I of this research has been to design a system 
for charging road users that embodies as many attributes of an ideal 
user charge system as possible. Among the key attributes of an ideal 
system are that it enables:
      A low cost of collection for both agency and user.
      A stable revenue stream.
      An ability to assess higher user charges for users who 
impose higher costs (e.g., contributions to congestion delays by autos 
and road damage by heavy vehicles).
      A low evasion rate.
      Incentives for users to travel on appropriate roads and 
to spread their trips across time periods.
      Any form of vehicle propulsion to be accommodated.
    The approach to charging road users must not be burdensome, and it 
must be tamperproof, highly reliable, and a useful tool for achieving a 
variety of policy objectives. Of paramount importance, it certainly 
must not diminish the privacy of road users.
    Fortunately, newly emerging ITS technology makes it possible to 
design an approach to charging road users that avoids the problems and 
shortcomings of current mechanisms and that embodies the desirable 
attributes listed above.
    To progress closer to an ideal system of road user charges, our 
research is leading to a new approach that is practical and cost-
effective. The new approach will enable a real-time assessment of road 
user charges that is based on mileage accrual and, in the case of heavy 
vehicles, also on actual vehicle operating weights and configuration, 
as well as the type of road being traveled.
                       sketch of the new approach
    Key to the new approach is a simple on-board computer. The computer 
stores a record of actual road use charges. Periodically, this record 
is uploaded and transmitted to a data processing center; we refer to it 
as the collection center. The center bills a vehicle owner and 
reimburses the States, counties, and cities operating the roads on 
which the vehicle has traveled. The on-board system is simple, secure, 
and capable of protecting the user's privacy. Importantly, the on-board 
system enables a variety of user charge conventions. In its simplest 
form, this approach can be used to assess a vehicle-miles-traveled 
(VMT) tax. With a VMT tax, the computer would calculate road mileage 
actually traversed; it compares this mileage with that obtained through 
an odometer feed. It then applies appropriate user charge rates to the 
mileage traveled within each jurisdiction (typically each State). Only 
data on user charges due are stored in the on-board computer (i.e., 
where travel has occurred is not stored). Periodically, the vehicle 
owner uploads these stored data to a collection center. The collection 
center operates much like a credit card billing center.
Charging Autos
    Inputs to the computer can be quite simple for autos, involving 
only a global positioning system (GPS) receiver, a geographic 
information systems (GIS) data file, and the vehicle's odometer (for 
back-up data on distance traveled). The GIS file contains data polygons 
that define boundaries of the respective States. A receiver on-board 
the auto uses GPS signals to determine the vehicle's position. The 
computer reconciles this position with the stored data polygons to 
determine the State in which travel has occurred; the miles traveled 
within that data polygon are used to compute user charges, which in 
turn are stored. When a vehicle crosses into another State, it enters a 
different data polygon, and travel within that polygon is used to 
compute user charges. Of course, sub-State polygons, such as those 
defining a metropolitan area, also are feasible. The GIS file that 
defines polygons is stored in the on-board computer and is readily 
updateable. Periodically, the collection center transmits updates of 
the GIS file to the vehicle using a smart card as a ``messenger.'' A 
smart card is a small credit card-sized plastic device that contains an 
internal embedded computer chip in the form of a microprocessor and/or 
a memory module. This technology was developed in France more than 20 
years ago. Smart cards are very durable and should serve a typical user 
for the life of the vehicle. If the smart card is lost or destroyed, it 
can easily be replaced at a small cost to the user (a typical smart 
card costs less than $5).
    Communication via a smart card is done using a reader that closely 
resembles the credit card readers found in nearly all businesses.
    Normally, the smart card occupies a slot in the vehicle's dash 
panel. The on-board computer continuously updates the smart card 
regarding total user charges owed to each State or other jurisdiction 
that is defined by a polygon. Data transferred to the smart card, then, 
are in units of dollars, the on-board computer having (1) measured the 
distance traveled within each polygon, (2) applied the appropriate per-
mile user charge as established by the applicable jurisdiction, and (3) 
calculated the user charges owed to each jurisdiction. Thus, the 
vehicle operator can remove the smart card at any time and insert into 
a reader to transmit the charges due to the collection center.
    Why would a vehicle owner want to upload billing data very often? A 
simple display on the instrument panel during vehicle startup displays 
the current user charges stored in the on-board computer. Each 
jurisdiction can choose to levy an interest charge for road use that 
occurred more than, say, 30 or 45 days in the past. The instrument 
panel display can show both current user charges and interest accrued. 
As the interest charges mount, the display will serve to encourage the 
person to upload the billing data. Failing to upload data at all may 
result in a requirement to pay all user charges in arrears before 
receiving the next year's vehicle registration.
    During the data uploading process, the smart card authenticates the 
user and then anonymously uploads the road use information. When the 
collection center identifies the user, it checks for fraudulent 
behavior or malfunctions. If there is a problem, the smart card is 
notified to prompt the user to go to a service center, and the system 
flags that particular vehicle. During this communication, the 
collection center updates the vehicle's rate schedule through the smart 
card, if the stored schedule is not current. The center also provides a 
one-time encryption key to the smart card to facilitate anonymously 
uploading how much of the user charge arose from travel in each 
jurisdiction. Once the collection center receives the information on 
how much of the mileage occurred in which jurisdictions, the center 
correctly apportions the funds to the appropriate jurisdictions in 
which travel has occurred.
    We stress that the apportionment data would be anonymous. It is not 
necessary to know which vehicle generated a particular sum of user 
charges for each jurisdiction; what is necessary is the amount to be 
apportioned. In every case, the total amount for all jurisdictions 
taken together equals the single value uploaded in the initial contact 
made by the vehicle via the smart card. Thus, all of the necessary data 
are transmitted, but the only figure that can be tied to a particular 
vehicle is a single dollar amount for total user charges and interest, 
if applicable, due. This approach maximizes user privacy.
    User acceptance of the new approach to assessing user charges could 
be increased if other benefits result. For example, navigation 
displays, now a costly option on luxury autos, could become standard 
equipment or a low-cost option. Nearly all of the components needed for 
such displays would be on-board the auto; adding them in a mass-
production manner would be simple. Note, too, that looking a few years 
into the future, regardless of how user charges are assessed, traveler 
information displays are likely to become commonplace (their costs 
already are beginning to fall). In that case, adding the capacity to 
store road use information would be easy and inexpensive.
    Another user benefit of the GPS/GIS system would be emergency 
location notification. The Advanced Collision Notification System, 
which is beginning to receive national attention, uses cellular 
transmissions to relay a vehicle's exact location to the appropriate 
service provider in the event of a crash, health problem, or mechanical 
breakdown. The protection this sort of system offers motorists is 
likely to be valuable to many people, but it would be especially 
beneficial to elderly drivers and those who travel in remote areas or 
unsafe parts of cities. It should be stressed, however, that it is not 
the GPS system that transmits any form of location data. GPS satellites 
only send radio waves that the vehicle's GPS receiver uses to calculate 
its location. GPS satellites are unable to receive any form of 
information from a vehicle.
Charging Heavy Vehicles
    In the case of large trucks and other heavy vehicles, the on-board 
computer system could be very simple, enabling only a per-mile user 
charge to be levied, or it may be slightly more complex. Like autos, 
heavy vehicles will have a GPS receiver and stored GIS information on 
data polygons. Because privacy is much less of an issue with commercial 
vehicles, the polygon data could be supplemented with several levels of 
road classes. In this way, user charges for road use by heavy vehicles 
can be varied according to the standard of road traveled. For example, 
a State may choose to levy a lower per-mile charge for travel by heavy 
vehicles on interstate highways and other facilities that are capable 
of withstanding high axle loads without being damaged. The road user 
charges uploaded to the collection center can easily be made to reflect 
several different per-mile rates that vary with the standard of road 
used. Likewise, combination trucks with additional axles could be 
assessed lower per-mile user charges because they damage roads less. 
Optionally, an on-board weight indicator could be included, which would 
be activated each time the cargo doors are closed (in the case of a 
freight semi-trailer truck). The weight indicator, which is a simple 
strain gauge attached to the trailer's suspension, transmits 
information to the on-board computer, indicating the current weight. A 
code informs the computer about the configuration of the trailer, 
especially the number of axles. The computer then takes into account 
vehicle weight and configuration, along with type of road being 
traveled, in calculating the road use charges that are due.
    It is noteworthy that the new approach eliminates the pitfalls of 
such methods as weight-distance taxation: the uniform per-mile rate 
(regardless of current weight) of that approach is replaced with a much 
more flexible approach, and evasion will cease to be a problem. Of 
course, individual States can determine the extent to which they levy 
user charges based on the type of road being traveled or on vehicle 
weight and configuration.
    With the new approach, motor carriers will benefit by the 
elimination of tollbooths, and interstate permitting can be automated. 
Also, opportunities that do not exist today become available; for 
example, by adding axles and traveling on higher-standard roads, 
operators could minimize their user charges.
Related Advantages
    At least two related advantages would accrue to State departments 
of transportation in addition to the inherent benefits of the new 
approach. One advantage is that the expensive weigh-in-motion (WIM) 
scales used by many States can be eliminated. Another advantage is that 
toll facilities on roads and bridges no longer will be necessary. With 
segment-specific user charges, adjustments can be made for what are now 
toll roads and bridges. Privately owned highways, similar to SR 91 in 
California, will become highly feasible.
                        progress to date-phase i
    Phase I of the effort to design and test the new approach to 
assessing road user charges was recently completed. In Phase I, we 
accomplished the following:
      Developed the basic concept of using intelligent vehicle 
technology to assess road user charges.
      Refined the concept to absolutely maximize road user 
privacy.
      Incorporated features to ensure system security, 
robustness, and user convenience.
      Ensured that for the States, road use revenue will be 
stable, evasion will be extremely difficult, and fairness among both 
road users and taxing jurisdictions will be maximized.
Research Process Followed
    Dr. David Forkenbrock, principal investigator of this research, 
formed a research team comprised of several groups, each of which has 
had specific responsibilities. The groups studied:
      Legal aspects of privacy as it relates to road use.
      The most promising computer and electrical engineering 
approaches to collecting, storing, and transmitting road use data.
      Economic and policy needs, desirable attributes, and 
practical considerations in assessing road user charges.
      Technological capabilities existent today and likely to 
become available in the coming few years related to GPS, GIS files, on-
board computers, data transmission, and other key components.
    Work completed by the respective groups has been published in the 
form of a report that is accessible to a layperson. The research 
leading to publication of this report was reviewed in a series of 
meetings with representatives of the 15 participating States and the 
Federal Highway Administration. Throughout the 2-year Phase I effort, 
one-to 2-day meetings have been held every 6 months. The States and 
FHWA have been kept fully apprised of research progress, emerging 
issues, and intended research directions. Attendance in these meetings 
by the States and FHWA has been excellent, nearly 100 percent.
Where the Research Effort Currently Stands
    Phase I has led to the conclusion by the research team and the 
funding agencies that the new approach as described above is 
conceptually sound and operationally practical. It is highly flexible, 
so that each State can embody a variety of public policies regarding 
road user charges. The new approach will enable fair, stable user 
charges to be levied, even when hydrogen fuel cell vehicles and other 
vehicles that burn less or even no fossil fuels become commonplace, as 
they surely will. Many other limitations of current motor fuel taxes 
can be eliminated with the new approach, and essentially all of the 
attributes of an ideal user charge system listed at the beginning of 
this discussion paper can be incorporated.
    Even though the concept and features of the new approach are 
technologically and practically feasible, a great deal of testing and 
refinement is needed before it is ready for national implementation. We 
need to study how best to integrate the on-board equipment with 
emerging vehicle technologies, the best way to operate the collection 
center, and how the States would prefer to structure their road user 
charges, given the advances possible with the new approach. Choices 
need to be made regarding the sorts of data storage and uploading 
features to adopt. The bottom line is that before a gradual replacement 
of the motor fuel tax can be implemented, all parties must be very 
certain that the new approach works very well and does what 
policymakers want it to. Extensive testing is the only way to be sure 
that the on-board equipment is reliable under widely varied weather and 
operating conditions, tamperproof, and convenient for diverse groups of 
drivers whose needs are quite different.
                         the next step-phase ii
    Phase II is needed to fully test and demonstrate the basic concepts 
just discussed, to refine the working features of the new approach to 
assessing road user charges, and to develop working specifications for 
the applicable components.
Context for the Research
    This is an opportune time to develop the new approach to assessing 
road user charges. Auto manufacturers are making rapid advances in the 
electrical systems of their products. Soon, many of the systems needed 
to deploy the new approach will become standard equipment on most if 
not all autos. It is especially significant that several auto 
manufacturers intend to incorporate on-board computers to carry out 
various functions that now rely on mechanical switches, gauges, and 
linkages. These on-board computers will afford much greater user 
flexibility, and they will include such features as GPS receivers to 
facilitate emergency location and navigation, as well as electronic 
odometers. Such odometers are an important back-up system in the event 
that the GPS receiver should fail or be denied signals. In the same 
vein, major trucking companies are making widespread use of GPS to 
pinpoint the location of freight shipments.
    This is a propitious time to begin collaborating with motor vehicle 
manufacturers as they dramatically change their on-board electrical 
systems and include advanced new features. Specifically, we propose to 
work closely with these manufacturers to find the best means for 
incorporating the components needed to support the new approach. Early 
cost estimates are highly favorable in that the additional expense of 
adding the data storage and uploading capabilities will not be at all 
large, less than $100. Features like electronic odometers that cannot 
be tampered with are forthcoming, as vehicle manufacturers protect the 
limits of their mileage-based warrantees.
Phase II Work Plan
    Before State legislatures can pass the necessary enabling 
legislation, a comprehensive demonstration program must be carried out. 
As mentioned earlier, Federal and State motor fuel taxes generate over 
$50 billion annually. One must be very sure that the replacement 
approach is completely sound before implementing it. Following are key 
components of the Phase II work plan:
      Systematically test the security and reliability of on-
board computers and data uploading methods.
      Evaluate the acceptability of the approach by diverse 
user groups. These user groups include both operators of autos and 
various types of trucks.
      Carry out a well-designed operational test program. Five 
geographic areas across the United States will be selected as test 
sites, and several hundred autos and trucks will be outfitted with the 
required on-board equipment. Prototype uploading facilities will be 
established, and a prototype collection center will be developed 
cooperatively with a selected private firm.
      Work with several national interstate trucking firms to 
test the feasibility of assessing a mileage-based user charge system 
across numerous States. A key objective will be to make the new 
approach integrate well with trucking firm needs. Certainly, the 
greatest cost of Phase II will be outfitting participating autos and 
trucks with the necessary equipment to carry out a meaningful test of 
system robustness, security, and user convenience. Also significant 
will be the expenses related to establishing a prototype collection 
center. The center probably can be established cooperatively with a 
credit card processing company because the necessary capabilities are 
very similar.
Funding Requested in the Transportation Reauthorization Bill
    As we have discussed, Phase II of this multi-year research program 
is critically important. It will enable the technology and 
implementation strategies to be fully refined before State legislatures 
debate a major change in transportation financing. Technological 
advances in cleaner, less fossil-fuel consuming vehicle propulsion 
systems mean change is inevitable; the issue is how best to charge 
vehicles with a range of propulsion systems for travel on public roads 
and highways.
    Our research team estimates that funding Phase II of this 
university-based research program at the level of $3 million per year 
for the duration of the forthcoming transportation reauthorization bill 
will enable a full operational test of this promising approach. We 
stress that most of these funds will be used to outfit private vehicles 
for the operational test. The remainder will be used to design the 
test, work with equipment manufacturers on detailed specifications for 
the on-board gear, recruit participants, and analyze the results.
    The specific request is for an authorization of $3 million per year 
to the Iowa Department of Transportation to commission a demonstration 
of the intelligent transportation system (ITS) approach to assessing 
road user charges based on on-board computerized systems. The Iowa DOT 
will in turn commission the University of Iowa Public Policy Center to 
carry out the demonstration.
The Research Team
    Leading Phase I and the proposed Phase II is the Public Policy 
Center at the University of Iowa. The Center is an interdisciplinary 
research unit in the Office of the Vice President for Research. 
Director of the Center and Principal Investigator for this research is 
Dr. David Forkenbrock, who originally conceived the new approach. Dr. 
Forkenbrock has an international reputation as a scholar in the area of 
transportation policy and finance. He is assisted by a team of 
engineers, policy analysts, and social scientists from various 
universities and firms, who collectively are uniquely qualified to 
carry out this national study. New members with technical evaluation 
skills will be added to the research, and more active communications 
with vehicle designers within the auto and truck manufacturing industry 
will be established.
    We foresee a continuing role for the 15 State departments of 
transportation that have worked closely with the research team during 
Phase I of this project. The representatives of these DOTs are 
knowledgeable about the new approach being developed, and they have 
offered many useful suggestions as our work has progressed. Together 
with the equally valuable representatives of FHWA, we propose to 
continue our association with them.
Importance of Phase II Research
    Evidence of the importance of this issue may be found in the recent 
efforts by several European nations to implement some form of distance-
based user charges. For example, the Netherlands' parliament has passed 
legislation calling for this type of user charges to be implemented 
within the next several years. The United Kingdom and Germany are 
evaluating similar proposals. The study team has been actively 
collaborating with senior staff in these countries.
    The United States' energy security and environmental quality both 
will benefit by the exciting new vehicle propulsion technologies soon 
to be made operational. The need is to ensure that these vehicles can 
be charged for road use in a fair, cost-effective, and convenient way 
that protects the privacy of road users. At the same time, the inherent 
problems with the motor fuel tax can be eliminated.
Contact Information
    For further information, please contact: David J. Forkenbrock 
Director and Professor Public Policy Center 227 South Quad University 
of Iowa Iowa City, IA 52242-1192 Phone: (319) 335-6800; Fax: (319) 335-
6801 Email: [email protected] URL: http://ppc.uiowa.edu 
October 2002
                               __________
  Statement of Ric Williamson, Member, Texas Transportation Commission
                              introduction
    My name is Ric Williamson, a member of the Texas Transportation 
Commission, and I am pleased to provide this testimony on behalf of the 
commission and the Texas Department of Transportation (TxDOT) regarding 
transportation financing innovations in Texas. This testimony will 
provide information on Texas' current use of available State and 
Federal transportation financing mechanisms and our plans to implement 
new tools. I will also suggest changes to the existing Federal 
transportation financing tools that will help Texas take better 
advantage of them in our continuing effort to meet our State's 
tremendous mobility and access needs as effectively and efficiently as 
possible.
         texas' experience with existing federal finance tools
    The Federal Government has traditionally financed highways through 
80 percent reimbursement grants but the last three major pieces of 
Federal transportation legislation--ISTEA, the NHS Act of 1995, and 
TEA-21--have produced alternative forms of ``non-grant'' assistance. 
Over that same timeframe (since the early 1990's), Texas has slowly 
accrued complementary authority on the State level to enable us to 
begin to use these new Federal financing tools for transportation. 
Positioning TxDOT to utilize innovative financing where it is 
determined to be appropriate serves the users of the State's 
transportation system by accelerating construction of select projects 
of significance, delivering customer benefits ahead of schedule, and 
augmenting stretched revenues. While this section describes our 
experience to date, it also represents only the beginnings of a new era 
in transportation financing for Texas.
State Infrastructure Banks
    Background. In November 1995, the President of the United States 
signed Public Law 104-59, known as the 1995 National Highway System 
Designation Act (NHS Act). Section 350 of that law allowed the United 
States Secretary of Transportation to designate a maximum of ten States 
as pilot projects for the State Infrastructure Bank program. Texas was 
selected as one of the initial pilot States for an NHS Act SIB. About 
30 States eventually elected to participate.
    A State Infrastructure Bank, or a SIB, operates chiefly as a 
revolving loan fund and may provide a wide range of financial 
assistance in addition to loans. The purpose of the pilot program is to 
attract new funding into transportation, to encourage innovative 
approaches to transportation problems, and to help build needed 
transportation infrastructure. The NHS Act provides that each 
designated State may transfer up to 10 percent of certain Federal 
dollars, match those funds with State funds, and deposit them into a 
State Infrastructure Bank. The greatest benefit of this program may 
well be the creation of a self-sustaining, growing, revolving loan 
fund.
    In 1997, the 75th Texas Legislature passed Senate Bill 370, which 
created the State Infrastructure Bank to be administered by the Texas 
Transportation Commission, the governing body of the Texas Department 
of Transportation. In September 1997, the Texas Transportation 
Commission approved the administrative rules that govern the State 
Infrastructure Bank. The SIB allows cities and counties to access 
capital at lower-than-market rates. Since its creation, interest in the 
SIB program has been strong. TxDOT has approved 41 loans totaling more 
than $252 million to cities, counties, and toll authorities around the 
State. The loans are helping fund more than $1 billion in 
transportation projects in Texas.
    TEA-21 Changes. Section 1511 of the Transportation Equity Act for 
the 21st Century (TEA-21) created a new State Infrastructure Bank (SIB) 
Pilot Program allowing the establishment of TEA-21 SIBs in only four 
States: California, Florida, Missouri, and Rhode Island. California, 
Florida, and Missouri also had NHS Act SIBs. Texas was not included. 
Pre-existing SIBs created pursuant to Section 350 of the NHS 
Designation Act of 1995 (NHS Act SIBs) continue to exist, but Federal 
funds authorized for fiscal year 1998 or later may not be used to 
capitalize them.
    Through language in the fiscal year 2002 Department of Defense 
Appropriations Act, Texas Senator Kay Bailey Hutchison and Texas 
Congressmen Tom DeLay and Chet Edwards were instrumental in adding 
Texas to the list of TEA-21 SIB Pilot Program States. With this change, 
Texas may now use up to 10 percent of its NHS, STP, IM, Bridge, Seat 
Belt Incentive Grant, and Minimum Guarantee funds to capitalize its 
SIB. Without Federal funds, future loan applications--and any large 
single loan--would likely have little chance of being considered. The 
SIB has been our single most important financial tool in accelerating 
the delivery of projects. The ability to capitalize the SIB with future 
Federal funds will keep it an effective program for years to come.
    Texas supports the continuation of the TEA-21 SIB authority Texas 
now enjoys. In addition, we recommend that the reauthorization 
legislation shorten the time limits on the ability to draw down the 
Federal funds to capitalize our SIB. Finally, we encourage you to 
clarify that repayments to the SIB are cleansed of Federal requirements 
to ensure that future lendees (mainly cities and counties in Texas) are 
able to access the funds without Federal restrictions. Cities and 
counties, who are currently not subject to Federal requirements on 
their own projects, may not have access to SIB funds if they must 
follow Federal rules to use those funds.
The Transportation Infrastructure Finance and Innovation Act of 1998
    According to FHWA, the Transportation Infrastructure Finance and 
Innovation Act of 1998 (TIFIA, sections 1501-1504 of TEA-21) is 
intended to provide Federal credit assistance to major transportation 
investments of critical national importance, such as intermodal 
facilities, border crossing infrastructure, expansion of multi-State 
highway trade corridors, and other investments with regional and 
national benefits. The TIFIA credit program is designed to fill market 
gaps and leverage substantial private and other non-Federal co-
investment by providing supplemental and subordinate capital. Through 
three types of financial assistance products, TIFIA offers credit 
assistance of up to 33 percent of total project costs. The three types 
of products, designed to address projects' varying requirements 
throughout their life cycles, include:
      Secured loans, direct Federal loans to project sponsors 
offering flexible repayment terms and providing combined construction 
and permanent financing of capital costs;
      Loan guarantees, providing full-faith-and-credit 
guarantees by the Federal Government to institutional investors such as 
pension funds which make loans for projects; and
      Standby lines of credit as secondary sources of funding 
in the form of contingent Federal loans that may be drawn upon to 
supplement project revenues, if needed, during the first 10 years of 
project operations.
    The kinds of projects specifically listed as eligible for TIFIA 
support include international bridges and tunnels, inter-city passenger 
bus and rail facilities and vehicles (including Amtrak and magnetic 
levitation systems), and publicly owned intermodal freight transfer 
facilities (except seaports or airports) on or adjacent to the National 
Highway System. However, any type of highway, intermodal, or transit 
project eligible for Federal assistance through surface transportation 
programs under Title 23 or chapter 53 of Title 49 U.S.C. is also 
eligible for TIFIA support, assuming it meets program criteria. Those 
criteria include: (a) project cost of at least $100 million or 50 
percent of the State's annual apportionment of Federal-aid funds, 
whichever is less, except that for intelligent transportation system 
projects, the minimum cost is $30M; (b) project support in whole or in 
part from user charges or other non-Federal dedicated funding sources; 
and (c) inclusion in the State's transportation plan and the statewide 
Transportation Improvement Program (STIP).
    Qualified projects meeting those criteria are evaluated by USDOT 
and selected based on the extent to which they generate economic 
benefits, leverage private capital, promote innovative technologies, 
and meet other program objectives. Each project must receive an 
investment grade rating on its senior debt obligations before its 
Federal credit assistance may be fully funded.
History of the Central Texas Turnpike Project TIFIA Loan
    The $916.76 million TIFIA loan for the Central Texas Turnpike 
Project is the largest such loan in the history of the program. The 
TIFIA loan funds will help fund the $3.6 billion first phase of the 
Central Texas Turnpike Project, which is a toll highway facility 
through central Texas.
    The commission will use the loan proceeds to partly finance design 
and construction of the first phase of the Central Texas Turnpike 
Project, which is composed of three distinct elements: Loop 1, SH 45 
North, and the northern segment of SH 130. Loop 1, a 3.5-mile element, 
will serve as a major north-south route in the Austin vicinity. SH 45 
North, about 13.2 miles in length, will serve as a connector between 
the cities of Austin, Round Rock, and Pflugerville. SH 130, a 49-mile 
element, will be an eastern bypass for Austin, Texas, and is parallel 
to and east of I-35, one of the more congested urban parts of the 
interstate.
    The Texas Turnpike Authority Division of TxDOT is managing the 
project. TxDOT has retained a general consultant engineer and two 
engineering firms to assist with management of the construction 
project. The Loop 1 extension and SH 45 will be constructed using the 
traditional design-bid-build process, and SH 130 is under an exclusive 
development agreement with Lone Star Infrastructure. The first phase of 
the turnpike project will be open in segments and the final phase will 
open to traffic in December 2007.
    The entire 65-mile project is expected to be complete and open to 
traffic by December 2007.
      SH 130: From IH 35 south to US 71--September 2007
      SH 130: From SH 71 south to US 183--December 2007
      SH 130: From US 183 south to IH 10: to be determined 
based on future project financing
      SH 45: From Ridgeline East to three-quarters of a mile 
west of Loop 1 interchange--December 2007
      SH 45: From three-quarters of a mile west of Loop 1 
interchange to SH 130--September 2007
      Loop 1: From Parmer Lane to one quarter mile south of SH 
45 interchange: September 2007
    Central Texas needs relief from traffic congestion as soon as 
possible and tolls are the fastest way to accomplish it. By selling 
bonds and using tolls to pay off the bonds, these roads will be 
completed and open to traffic years ahead of schedule compared to using 
traditional transportation funds. In addition, toll roads help stretch 
limited transportation dollars. In this case, the State is getting a 
$2.9 billion project for only an initial $700 million equity injection.
    The four elements of the funding package include local 
contributions, State highway dollars, a Federal loan and the sale of 
bonds, which will be paid for through the collection of tolls. In 
addition to the TIFIA loan, the commission has issued $1.2 billion in 
revenue bonds and $900 million in bond anticipation notes. The 
remainder of the project will be financed through contributions from 
TxDOT and contributions of right-of-way by the surrounding 
jurisdictions.
    The TIFIA loan is an example of a Federal program helping us bring 
these needed highway projects on-line. We could not have put this 
financial package together without the TIFIA loan. To maximize the use 
of the loan--and save taxpayers approximately $75 million--we are using 
the TIFIA loan as a possible backstop to sell Bond Anticipation Notes 
(BANs) to finance construction and take advantage of current low short-
term interest rates. The interest rate we get on the BANs is lower than 
the TIFIA loan. The full TIFIA loan may be used later, but only if 
interest rates make it a good deal for taxpayers.
    The 65 miles of new toll roads in central Texas will cost $2.9 
billion. This covers right of way acquisition, utility adjustments, 
design, and construction for SH 45 North, Loop 1 and the first 49 (most 
needed) miles of SH 130. With the addition of required reserve funds, 
interest, insurance and issuance costs, the total estimated costs are 
$3.6 billion.
    Conservatively, it is estimated it would take at least 20 years to 
build these roads using traditional funding sources. By selling bonds, 
these roadways will be completed and open to traffic in 5 years.
    Advance Construction/Partial Conversion of Advance Construction 
Advance construction (AC) and partial conversion of advance 
construction (PCAC) are cash-flow management tools that allow States to 
begin projects with their own funds and later convert these projects to 
Federal assistance.
    AC allows a State to construct Federal-aid projects in advance of 
the apportionment and/or obligation limitation. Under normal 
circumstances, States can ``convert'' advance-constructed projects to 
Federal-aid at any time sufficient Federal-aid apportionments and 
obligation authority are available. States may convert and obligate the 
entire eligible amount, based on funding availability or, using PCAC 
may obligate funds in stages.
    PCAC allows States to obligate only the Federal funds necessary for 
the amount of expenditures anticipated in a year. This process thereby 
eliminates a major single year ``draw down'' of Federal funds in one 
fiscal year. PCAC may be used in conjunction with GARVEE bonds when 
Federal funds are obligated for debt service payments over a period of 
time.
    Using this technique affords the availability of Federal-aid funds 
to support a greater number of projects. The partial conversion 
technique can enable completion of a project earlier than under the 
conventional approach, avoiding construction cost inflation, and 
bringing the benefits of a completed facility to the public at an 
earlier date. To date, TxDOT has utilized the PCAC financing tool on 
approximately 170 projects.
Tapered Match
    Tapered match enables the project sponsor to vary the non-Federal 
share of a Federal-aid project during development and construction so 
long as the total Federal contribution toward the project does not 
exceed the Federal-aid limit.
    Under the tapered match approach, the non-Federal matching ratio is 
imposed on projects rather than individual payments. Therefore, Federal 
reimbursements of State expenditures can be as high as 100 percent in 
the early phases of a project provided that, by the time the project is 
complete, the overall Federal contribution does not exceed the Federal-
aid limit established when the project was authorized. To ensure 
effective management of Federal funds, FHWA limits the use of tapered 
match to situations that result in expediting project completion, 
reducing project costs, or leveraging additional non-Federal funds. 
TxDOT has used tapered match to expedite project completion on 
approximately 880 projects.
    Tapered match may be most useful in cases where the project sponsor 
of a Federal-aid project lacks sufficient funds to match Federal grants 
at the start of the project, but expects to accumulate the match in 
time for project completion. Tapering may also be beneficial when a 
project sponsor needs to overcome a near-term gap in State matching 
funds, thereby avoiding delays in getting the project underway. 
Tapering also allows a sponsor to advance a project before fully 
securing capital market financing.
    This technique may be used to facilitate a project when a new local 
transportation tax has been enacted, but revenue collections have yet 
to accumulate sufficient matching funds. Using tapered match, the 
project can move forward immediately with 100 percent Federal funds, 
allowing time for the tax revenues to accumulate. The locally generated 
revenues would be used to fund the final 20 percent share of project 
costs.
Toll Credits
    States may apply toll revenues used for capital expenditures to 
build or improve public highway facilities as a credit toward the non-
Federal share of certain transportation projects. Toll credits are 
earned when a State, a toll authority, or a private entity funds a 
capital highway investment with toll revenues from existing facilities. 
The amount of toll revenues spent on non-Federal highway capital 
improvement projects earns the State an equivalent dollar amount of 
credits to apply to the non-Federal share of a Federal-aid project. To 
utilize this tool, the State must certify that its toll facilities are 
properly maintained and must pass an annual maintenance of effort test 
to earn credits. By using toll credits to substitute for the required 
non-Federal share on a Federal-aid project, Federal funding can 
effectively be increased to 100 percent.
    Toll credits provide States with more flexibility in financing 
projects. For example, by using toll credits, 1) Federal-aid projects 
can be advanced when matching funds are not available, 2) State and 
local funds normally required for matching may then be directed to 
other transportation projects, or 3) project administration may be 
simplified when a single funding source is used. States wishing to take 
advantage of the toll credit provision must apply toll revenues to 
capital improvements and meet the maintenance of effort test that may 
result in an increased investment in transportation infrastructure. At 
this time, TxDOT has utilized toll credits on 34 construction projects. 
Toll credits have also been used on certain transit projects.
Flexible Match
    Flexible match allows a wide variety of public and private 
contributions to be counted toward the non-Federal match of Federal-aid 
projects. The NHS Act and TEA-21 introduced new flexibility to the 
matching requirements for the Federal-aid program by allowing certain 
public donations of cash, land, materials, and services to satisfy the 
non-Federal matching requirement. These matching options include:
      The value of private and certain State and local 
contributions, including publicly owned property;
      Funds from other Federal agencies may count toward the 
non-Federal share of recreational trails and transportation enhancement 
projects;
      Funds from the Federal Lands Highway Program may be 
applied as non-Federal match for projects within or providing access to 
Federal or Indian lands; and
      Funds from Federal land management agencies may be used 
as the match for most Federal-aid highway projects.
    Also States may seek program-wide approval for Surface 
Transportation Program (STP) projects. The matching requirement would 
then apply to the program instead of individual projects.
    Flexible match provisions increase a State's ability to fund its 
transportation programs by:
      Accelerating certain projects that receive donated 
resources;
      Allowing States to reallocate funds that otherwise would 
have been used to meet Federal-aid matching requirements; and
      Promoting public-private partnerships by providing 
incentives to seek private donations.
    To date, TxDOT has been unable to use this financing mechanism. The 
main reasons are that it is limited to certain programs within the 
Federal-aid highway program and that the program implementation 
requirements are cumbersome. While we are not currently using this 
financing option, we believe that the flexible match concept should be 
continued and indeed expanded in the TEA-21 reauthorization. We 
recommend that Congress expand the flexible match provision for use, at 
the State's discretion, in all of the existing Federal-aid highway 
programs.
Section 129 Loans
    Section 129 loans allow States to use regular Federal-aid highway 
apportionments to fund loans to projects with dedicated revenue 
streams.
    A State may directly lend apportioned Federal-aid highway funds to 
toll and non-toll projects. A recipient of a Section 129 loan can be a 
public or private entity and is selected according to each State's 
specific laws and process. A dedicated repayment source must be 
identified and a repayment pledge secured.
    The Federal-aid loan may be for any amount, up to the maximum 
Federal share of 80 percent of the total eligible project costs. A loan 
can be made for any phase of a project, including engineering and 
right-of-way acquisition, but cannot include costs prior to loan 
authorization. A State can obtain immediate reimbursement for the 
loaned funds up to the Federal share of the project cost.
    Loans must be repaid to the State, beginning 5 years after 
construction is completed and the project is open to traffic. Repayment 
must be completed within 30 years from the date Federal funds were 
authorized for the loan. States have the flexibility to negotiate 
interest rates and other terms of Section 129 loans. The State is 
required to spend the repayment funds for a project eligible under 
Title 23.
    States can use Section 129 loans to assist public-private 
partnerships, by enhancing startup financing for toll roads and other 
privately sponsored projects. Because loan repayments can be delayed 
until 5 years after project completion, this mechanism provides 
flexibility during the ramp-up period of a new toll facility.
    Loans can also play an important role in improving the financial 
feasibility of a project by reducing the amount of debt that must be 
issued in the capital markets. In addition, if the Section 129 loan 
repayment is subordinate to debt service payments on revenue bonds, the 
senior bonds may be able to secure higher ratings and better investor 
acceptance.
    If a project meets the test for eligibility, a loan can be made at 
any time. Federal-aid funds for loans may be authorized in increments 
through advance construction procedures, and are obligated in 
conjunction with each incremental authorization. The State is 
considered to have incurred a cost at the time the loan, or any portion 
of it, is made. Federal funds will be made available to the State at 
the time the loan is made.
    The President George Bush Turnpike Project in Texas exemplifies how 
a Section 129 loan can play an essential role in the total financing 
package. This project links four freeways and the Dallas North Tollway 
to form the northern half of a circumferential route around the city of 
Dallas. Primary funding for this $940 million project included a low 
interest, long-term Section 129 loan and revenue bonds. This $135 
million loan was critical in ensuring the affordability of the 
project's senior bonds. Completion of this important beltway extension 
will be accomplished at least a decade sooner than would have been 
possible under traditional pay-as-you-go-financing.
Summary of Texas Project Financing Mechanisms
    Texas has only recently begun to use the variety of Federal project 
financing mechanisms made available in ISTEA, the NHS Designation Act, 
and TEA-21. However, we have found their use to be beneficial and will 
continue their use in the future. Generally, as we've applied these 
financing options to our projects, we've found that they are most 
beneficial for projects that will take longer than 2 years to pay out, 
thereby allowing us to stretch our available funding and maintain a 
steady letting schedule from year to year. We typically consider using 
one of these financing options on projects over $5 million and 
sometimes on smaller projects at the end of the fiscal year.
    We encourage Congress to continue, expand, and enhance these 
Federal transportation financing mechanisms for use at the State's 
discretion. As we set a new course for a 21st century transportation 
system for Texas, we will continue to consider the use of all financing 
tools available to us to meet the transportation mobility needs of the 
State.
                       new texas financing tools
    In the statewide election on November 6, 2001, 68 percent of Texans 
voted in favor of the constitutional amendment known as Proposition 15. 
The passage of Proposition 15 provided TxDOT with three new tools to 
establish innovative financing for Texas State highways. With these 
tools TxDOT can begin to improve mobility and safety for all Texans by 
building more highways faster, thus keeping up with the population 
growth in the State and preparing for the opening of the border in 
June.
    The three financing tools provided to TxDOT with the passage of 
Proposition 15 are the creation of the Texas Mobility Fund, the 
authority for the Texas Transportation Commission to approve the 
creation of Regional Mobility Authorities by counties, and the 
authorization for TxDOT to use State highway fund moneys for equity in 
toll roads.
Texas Mobility Fund
    By voting to create the Texas Mobility Fund, Texas voters approved 
a funding mechanism to supplement the traditional pay-as-you-go method 
of financing highway construction in the State of Texas. Money in the 
Texas Mobility Fund must be appropriated by the State legislature and 
cannot include revenue from the gas tax, vehicle registrations or other 
dedicated funds. The legislature can provide revenue support to the 
Mobility Fund without raising taxes by committing general revenue to 
the fund.
    Currently there is no money in the Texas Mobility Fund. Once money 
has been appropriated to the Texas Mobility Fund, however, it can be 
used to finance road construction on the State-maintained highway 
system, publicly owned toll roads, and other public transportation 
projects. It is estimated that for every $100 million placed in the 
fund, $1 billion in bonding for road projects will be created. The 
issuance of debt to pay for public works projects is well established 
at the local level. The Texas Mobility Fund now allows this method of 
funding to be used for State highway projects, on and off the State 
system, and allows a combination of both revenue and general obligation 
bonds.
    In working to meet the States' transportation needs, the Texas 
Mobility Fund will help the department accomplish two things:
      Preserve the funds currently used for highway 
construction under the pay-as-you-go system; and
      Allow any new funding sources made available to highways 
to be used for payment of debt service on bonds issued to finance 
projects.
Toll Equity
    Toll Equity, the second financing option made possible by the 
passage of Proposition 15, will make potential toll projects more 
viable, speeding up congestion relief, while stretching limited State 
transportation funds. Toll Equity allows, for the first time, State 
highway funds to be used on toll roads without requiring repayment of 
the funds. Before the passage of Proposition 15, TxDOT could loan 
highway funds for toll projects but they had to be repaid. The loan 
increased the initial borrowing costs for toll road projects, impacting 
the overall viability of the project. Having to repay the department 
from tolls generated from the project often resulted in higher tolls 
and larger up front contributions from TxDOT.
    Toll equity has made future toll projects more attractive to 
investors because it allows the projects to accelerate debt retirement 
and hasten production of toll revenues. If a community decides to go 
with a toll equity approach on a project in an existing toll authority, 
the commission must approve the project to be constructed by that toll 
authority. If the community and/or the project are outside an existing 
authority, the commission will consider creating a regional mobility 
authority, the third tool created by the passage of Proposition 15.
Regional Mobility Authority
    A regional mobility authority (RMA) would be created for the 
purpose of constructing, maintaining, and operating a turnpike project 
in a region of the State. A RMA will allow local officials to exercise 
more responsibility, thus encouraging local innovation and better 
responses to the particular needs and desires of the local community. 
In order for a RMA to be created, one or more counties must petition 
the commission for authorization to create a RMA. The petition must 
contain certain information, such as a resolution from the 
commissioners court of each county and a description of how a RMA would 
improve mobility in that particular region. If TxDOT finds that the 
petition meets all the requirements it will notify the county(ies) and 
conduct one or more public hearings that conform to the criteria set 
forth in the rules adopted by the commission.
    If and when the commission gives approval, the county that 
petitioned the authorization of the RMA will create a RMA by resolution 
of each county to be a part of the RMA. Each county resolution must 
appoint directors consistent with the rules adopted by the commission. 
A board of directors, appointed by the county commissioner's courts 
where the proposed turnpike project is, representing political 
subdivisions, would govern each RMA. The Governor will appoint the 
presiding officer.
    Each TxDOT district will identify currently programmed projects 
that, from an engineering standpoint, could be developed as tolled 
facilities. These projects will be limited to new location or major 
capacity expansions. For each project selected with local support, any 
funds released from the State transportation plan through the issuance 
of revenue bonds for toll projects will be replaced by an equal amount 
of project funding in the same district and with the same programming 
authority as the original funds held.
    In most cases, projects selected to be developed as toll projects 
will be accelerated due to the issuance of toll bonds as opposed to 
waiting for programmed dollars. In addition, major projects will be 
developed as one project instead of being segmented, for the same 
reason. Surplus revenues from an RMA toll project can be used for other 
transportation purposes within the authority, if needed.
The Trans Texas Corridor
    Currently the department is focusing on how to use the Texas 
Mobility Fund, the toll equity concept, the authority of counties to 
create RMAs, and the exclusive development agreement concept to 
implement Governor Rick Perry's Trans Texas Corridor proposal.
    The Trans Texas Corridor will be a multi-use, statewide 
transportation corridor that will move people and goods safely and 
efficiently. The Trans Texas Corridor will include toll roads, high-
speed passenger and freight rail, regional freight and commuter rail, 
and underground transportation for water, petroleum, gas and 
telecommunications. The Corridor, as envisioned, is a 50-year plan for 
addressing the long-range transportation needs of Texas.
    Governor Perry established the Trans Texas Corridor concept as the 
vision of the future of transportation in Texas. He has directed TxDOT 
to develop and refine the concept and come up with an implementation 
process. TxDOT has established a preliminary map showing where the 
Trans Texas Corridor should be developed. These corridors were selected 
based on the existing and forecasted infrastructure needs of the State. 
The current location of the State trunk system and congressional high 
priority corridors were also taken into account when developing the 
Corridors. In terms of a starting point, the Governor has asked the 
Commission to focus on developing routes that are already part of the 
States long-range plan. For example, SH 130 is a new location highway 
that eventually will run from Seguin to Georgetown and parallel to I-
35. SH 130 is already a part of TxDOT's plans, therefore it is logical 
that SH 130 be a starting point for development of the Corridor. 
Ultimately, it will be the commission that will make the final decision 
about which projects are built and when.
    Building the Trans Texas Corridor will provide Texans with more and 
better transportation options. The Corridor will improve mobility and 
safety by reducing traffic congestion on current highways. The reduced 
congestion will have environmental benefits such as a reduction in the 
volume of air pollution in our urban areas. It will provide a fast, 
safe and reliable rail system, allowing Texans and their business to 
move, if they so choose, by rail instead of road, further reducing 
congestion and air pollution. The Corridor will move hazardous 
materials away from urban centers, and off heavily traveled highways, 
providing safer transport of such materials. The State will also 
benefit from economic development opportunities as a result of a 
faster, safer, and more comprehensive transportation system.
    TxDOT delivered The Trans Texas Corridor Plan to the Governor this 
summer. The plan outlines the basic design of the system and identified 
four routes as priority corridor segments. Under the action plan 
approved by the commission, TxDOT has designated its Texas Turnpike 
Authority Division as the central office to oversee the development of 
the corridor. Although it is a process that could take up to 50 years, 
the corridor report's action plan sets forth a series of first steps to 
be undertaken over the next year. Estimated total cost of the corridor 
ranges from $145.2 billion to $183.5 billion. The report discusses a 
variety of funding possibilities, although planners generally envision 
a public-private effort paid for with tolls, bonds, and other financing 
tools.
    The goal, at TxDOT, is to begin construction on the most 
appropriate segment as soon as practical. TxDOT envisions the build-out 
of the Trans Texas Corridor to take approximately 50 years. However, 
based upon our 85 years of experience in the business, TxDOT projects 
that most of the Corridor could be under construction or finished 
within 25 years and perhaps less. To a great degree, the time required 
to build the Corridor is dependent upon the interested parties and 
their proposals.
    As mentioned previously, the Trans Texas Corridor will utilize 
three types of financing tools (the Texas Mobility Fund, RMAs, and toll 
equity) combined with a project delivery mechanism known as exclusive 
development agreements. The Texas Mobility Fund will be used, if 
properly capitalized, to help build the segments of the Corridor that 
are less toll viable. If the Corridor is attractive enough, the 
legislature may commit a portion of general revenue funds toward the 
construction. These funds would be released to the commission to pay 
debt service on bonds issued to finance the Corridor.
    With regard to RMAs, certain high growth areas of the State are 
uniquely situated to help themselves and the State through the creation 
of a RMA. If we use the example of SH 130 and Travis, Williamson, and 
Hays Counties, you can see the benefit of RMAs to the Trans Texas 
Corridor. A RMA in Travis, Williamson, and Hays Counties would generate 
revenue to pay for local transportation goals much sooner while 
allowing the State to spread scarce State revenue over other important 
projects in the area--projects such as the segment of the Corridor east 
of I-35. In addition, a successful RMA could ultimately invest in light 
rail linked to a regional commuter rail that is part of the Trans Texas 
Corridor. The rules governing a RMA are flexible in nature and are 
intended to foster partnerships between local governments and the State 
in the development of transportation facilities that provide an 
efficient delivery of the end product.
    Toll Equity, as mentioned before, is the phrase used to depict the 
amount of State Highway Funds that may be used to construct a toll road 
without the requirement that the funds be repaid. The law limits 
TxDOT's annual toll equity contributions to a percentage of the Federal 
funds it receives each year. TxDOT will use toll equity funds on those 
proposals that generate the maximum total funding on the most 
appropriate segments and routes identified during the planning stages. 
With toll equity, any segment of the Corridor could be made toll 
viable. However, TxDOT will create and construct the Corridor based on 
a plan that identifies the most financially viable segments and routes 
and constructs them first, providing cash-flow to pay for the next 
logical segments and so on.
    An Exclusive Development Agreement is a contract and construction 
method that allows any organization to propose a transportation 
project, including design, construction, maintenance, and operation 
and/or financing to TxDOT. If TxDOT determines the concept is viable 
and it supports the long-range Transportation plan of the State, the 
concept is approved and put to the public for competing proposals. 
TxDOT will review all proposals and select the best one for negotiation 
and final contract. TxDOT must also determine a project is compatible 
with existing and planned transportation facilities before a concept 
may be approved.
    For the Corridor, it is anticipated that interested parties will 
make proposals for the Corridor, resulting in permission to operate 
part, or the entire Corridor. For those parties that used this method 
to win a contract from TxDOT, the right for the Commission to assume 
control of any part of the Corridor will be negotiated into the 
contract. This will protect the public's investment into the future.
    By State statute, TxDOT can use the Exclusive Development Agreement 
method for four projects only. Therefore, unless State law is changed, 
this will be a minor tool in the creation of the Corridor--unless, of 
course, one party proposed to build the entire Corridor or a major part 
of the Corridor and the Commission believed it to be in the best 
interest of the public.
    All of the tools mentioned here (the Texas Mobility Fund, RMAs, 
toll equity, and Exclusive Development Agreements) can be used on any 
TxDOT project, not just the Corridor. No matter where these tools are 
used they will benefit the public. They will help us build more 
highways faster and continue to expand our infrastructure to keep up 
with growing population and increasing traffic.
            helping states take advantage of financing tools
    Texans need to have a full array of financial and project 
development choices available to us, so that we can move forward to 
meet our transportation needs. Innovation and flexibility have become 
essential to enabling State and local governments to solve today's 
transportation challenges. The recently approved tolling authority for 
the I-10 (Katy Freeway) corridor is an example of the types of flexible 
financing and project development processes we now need for 
transportation projects. Reauthorization of Federal surface 
transportation programs and funding in 2003 will present many 
opportunities for releasing the creative powers of Texas and other 
States.
Tolling of Interstate Routes
    In March 2002, the FHWA approved a toll road proposal that calls 
for the construction of four toll lanes in the median of the I-10 Katy 
Freeway in the Houston region. The toll lanes will generate up to $500 
million in revenue toward the reconstruction of I-10, thus completing 
funding for the project and potentially cutting construction time in 
half.
    Despite the ultimate approval of the Katy Freeway tolling mechanism 
under Section 1216(a) of TEA-21, our experience with the process 
reveals some areas for improvement that, if implemented, would 
encourage more States to use this important financing option. In 
particular, the Harris County Toll Road Authority (HCTRA), one of our 
major partners in the Katy Freeway expansion project, had some initial 
concerns about certain requirements in the Section 1216(a) program that 
would have required a review and reapplication for the tolling 
authority every 3 years. This type of requirement often threatens the 
viability of the underlying bonding mechanism that the applicant is 
using to support the overall project. For the Katy Freeway project, 
HCTRA (the bonding authority in the project) was ultimately given a 
waiver of the reapplication process and HCTRA, TxDOT, and the Houston 
Metropolitan Transit Authority moved forward with our application under 
Section 1216(a).
    TEA-21 also provided a pilot program under Section 1216(b) that 
allows States to toll portions of the interstate system. Thus far, no 
State has successfully applied for this authority. TxDOT initially 
applied for tolling authority under Section 1216(b) for the Katy 
Freeway project. However, we were unsuccessful in this application 
mainly because the program requires an analysis to demonstrate that the 
facility could not be maintained or improved from the State's 
apportionments and allocations. This analysis is not time restrictive, 
i.e., projects can be funded over long periods of time, and therefore 
it is very difficult to demonstrate the funding shortfalls required to 
obtain Section 1216(b) authority. For the Katy Freeway project 
application (and frankly for any other application we may attempt), 
TxDOT of course could choose to use any of its $2.2 billion in annual 
Federal apportionments for the project instead of funding another 
project, so we couldn't pass the ``funding shortfall'' test. What we 
need is the ability to use this tolling authority to supplement our 
existing funding, not replace it. This situation is a major reason, we 
think, why this pilot program has never had a project approved for 
implementation. As currently written, this program appears too 
restrictive to go forth with a meaningful project.
    While the States have not successfully pursued the interstate 
tolling authority provided in Section 1216(b) for a variety of reasons 
(including political opposition from those who would ultimately pay the 
tolls), we in Texas would like to see it continue as an option for 
States. At the time Texas first considered using this provision, we did 
not have the various State-supported financing mechanisms and authority 
that we have recently acquired to help us take a new look at ways to 
finance our transportation needs. Also, we now have the Trans Texas 
Corridor plan that could benefit from the potential use of the Section 
1216(b) authority. As a result, we recommend that the Congress 
continue, expand, and improve the flexible application of the Section 
1216(a) and Section 1216(b) provisions in the reauthorization of TEA-
21.
    Buying Back Portions of the Interstate to Allow Tolling. With the 
except of the Section 1216 provisions mentioned above, Federal law 
generally prohibits imposing tolls on Interstate highways for which 
Federal funds have been used. In several situations, however, Congress 
has enacted specific legislation to allow States to reimburse the 
Federal Government for Federal funds applied to a highway segment, 
thereby relieving a highway segment of the prohibition against tolls. 
The FHWA has provided TxDOT staff with six examples of legislation 
authorizing such repayment of Federal funds for highways in 
Connecticut, Delaware, Maryland, Michigan, New Hampshire, and New 
Jersey. Texas would like to pursue this option in the development of 
the Trans Texas Corridor and other needed improvements. Your efforts to 
make this option as easily accessible as possible will greatly assist 
our future endeavors as we seek new ways to fund our tremendous 
transportation needs in Texas.
    Despite the availability of this option to buy back portions of the 
Interstate, we believe that the Congress needs to take a new look at 
the issue of residual Federal investment. For the most part, the 
Federal investment in the interstates has essentially been depreciated, 
leaving only increasing costs to maintain the aging system--costs that 
often are taken up by the States. We believe that States should be 
given the option to toll their interstates without the requirement of 
reimbursement of long-ago Federal funding so that we can improve and 
maintain the interstates to meet the mobility and access needs of our 
citizens and business communities.
    Since the beginning of the Interstate era in 1956, Texas has 
contributed more in Federal motor fuels tax payments than the State has 
received in Federal highway program funds, including its share of the 
Interstate Construction and Interstate Maintenance program funds. When 
these interstate program funds were originally distributed to Texas, we 
did not get a 100 percent return on our contributions. Now, if we were 
to repay a portion of the Federal funding it would be redistributed to 
all States. Since Texas continues to get less than a dollar for dollar 
return, Texas would suffer twice in the distribution of those funds. 
Therefore, we recommend that donor States (those that received less 
than 100 percent of their share of contributions to the Highway Trust 
Fund compared to their share of distributions through the Federal-aid 
highway programs) be allowed to toll portions of the interstate system 
without Federal reimbursement. This approach would partially compensate 
the donor States for their contributions to the national system and 
allow them extra flexibility in handling the mobility needs in their 
States.
Allow Toll Credits to be Derived from federally Funded Projects
    Currently if a project utilizes any Federal funding then all costs 
of the project are ineligible to be counted as toll credits by the 
State. In today's environment where fewer and fewer projects are 100 
percent toll-viable and require a mix of funding sources it is becoming 
more unlikely that a toll project will be built without some form of 
Federal assistance.
    We believe the non-Federal expenditures on these projects should be 
eligible as toll credits on a pro-rata basis. We consider toll credits 
to be a valuable tool in Texas and have distributed these primarily to 
small transit providers who might otherwise have to turn down Federal 
assistance due to a lack of matching funds.
Privatizing Rest Areas
    In a review of the Texas rest area system in the late 1980's, an 
internal TxDOT task force concluded that an innovative method of 
improving rest area quality without increasing costs appeared to be the 
concept of contracting with private developers to create joint 
development facilities. In other words, a commercialized rest area.
    Commercialization could transform selected rest areas into ``travel 
service centers,'' which would offer the traveling public facilities 
and services beyond those available at our existing sites. In addition 
to restrooms and picnic tables, commercialized rest areas could provide 
the public with food and fuel facilities and expanded travel 
information. These facilities could also provide expanded truck 
parking, a need that was only recently reaffirmed by a July 2002 FHWA 
Report on Truck Parking Facilities. One of the recommendations for 
State action in the FHWA report was to encourage the formation of 
public-private partnerships to address the nation's truck parking 
needs. At the same time, commercializing a rest area could reduce or 
eliminate the cost to the TxDOT of constructing and maintaining the 
facilities.
    In 1990, the Center for Transportation Research (CTR) at the 
University of Texas began a study to determine the feasibility of rest 
area commercialization in Texas. This study found that 
commercialization would be feasible and could turn many rest areas 
sites into revenue generators. However, as the study points out, Title 
23 USC, Section 111 prohibits the commercialization of rest areas with 
direct access to an interstate highway. It should be noted that this 
concept is supported by AASHTO. A 1989 AASHTO Task Force that studied 
commercialization recommended that the Federal restriction be lifted. 
Language lifting the ban on rest area commercialization on the 
interstate system was included in an initial draft of ISTEA; however, 
interests opposed to the concept defeated the provision. Tourist 
industry interests, truck-stop interests (National Association of Truck 
Stop Owners), and other private sector interests view rest area 
commercialization as unwanted competition, even though they can 
participate in such development.
    As we explore ways to maximize available funds to meet our 
transportation needs, Congress should allow States to use this concept 
on interstate routes.
Continue and Improve Access to Railroad Rehabilitation and Improvement 
        Financing Act Funds
    The Railroad Rehabilitation and Improvement Financing program 
(authorized in TEA-21) offers $3.5 billion in loans and guarantees to 
public or private sponsors of intermodal and rail projects, with $1 
billion reserved for projects benefiting freight railroads other than 
Class I carriers. Projects can include acquisition, development, 
improvement, or rehabilitation of intermodal or rail equipment or 
facilities. The program is intended to make funding available through 
loans and loan guarantees for railroad capital improvements. No direct 
Federal funding is authorized in TEA-21; however, the Secretary is 
authorized to accept a commitment from a non-Federal source to fund the 
required credit risk premium.
    Texas to date has had little opportunity to use the financing tools 
made available by the RRIF. In 2001 Amtrak approached the States of 
Mississippi, Louisiana, and Texas for assistance with the credit risk 
premium for a RRIF loan. The loan would have allowed one of the freight 
railroads in the region to upgrade its tracks to allow an extension of 
Amtrak's Crescent line to run between Meridian, Mississippi and Dallas/
Fort Worth. The Texas Constitution prohibits the use of dedicated State 
Highway Fund dollars for non-highway purposes; therefore TxDOT was 
unable to participate in the opportunity to bring additional passenger 
rail service to our State. However, supporters of the rail proposal 
approached the Texas Legislature and garnered an appropriation of $1.7 
million in other State funds for Texas' share of the credit risk 
premium. Unfortunately, Amtrak later announced that it was postponing 
its plans for the extension, known as the Crescent Star.
    Despite TxDOT's and Texas' limited involvement to date in railroad 
financing, as we begin development of the Trans Texas Corridor (which 
includes a freight rail, a commuter rail, and a high speed passenger 
rail component), the continued availability of financing from the RRIF 
will prove important. We encourage Congress to continue the program and 
to provide additional funds in the TEA-21 reauthorization.
Changes to the TIFIA Program
    The Transportation Infrastructure Financing and Investment Act 
(TIFIA) program has been possibly the single most important benefit for 
public-private partnerships in transportation and has provided 
opportunities both to fill the gaps in finance plans and to make 
finance plans more efficient and cost effective. While the program may 
end the current authorization period undersubscribed, this is not a 
reflection on the program's value or its potential utility. Rather, it 
reflects the very long lead times required for project sponsors to 
design finance plans and adapt, often only with new State legislation, 
to new financing methods.
    The clear benefit from TIFIA is flexibility in structuring 
repayment and deferral of interest. This feature enhances cash-flow 
from the projects during the initial construction period to pay for 
senior debt and fill rate stabilization and debt services reserve 
funds. Another benefit comes from the ability to leverage revenues from 
a ``startup'' toll road project. For a tax-exempt borrower such as 
TxDOT, the subordinate TIFIA loan produces savings in both interest 
rate costs and costs of bond issuance.
    Our experience suggests several potential drawbacks from TIFIA. 
Resolving some of these concerns may require changes to the TIFIA law; 
others might be corrected within the existing statutory and regulatory 
framework.
    Encourage Equity Investments in Projects Supported with TIFIA 
Credit. Congress should reauthorize the TIFIA program and refine it to 
encourage more private investment in projects supported with TIFIA 
credit. More thought should be given to the blending of private 
investment and TIFIA credit. Several of the current applicants for 
TIFIA credit, including TxDOT, are requiring private contractors to 
contribute subordinated debt or equity investments to the financing 
plan. Indeed, rating agencies and bond insurers have come to expect 
contractors to take part of their fee in the form of a project 
investment. Congress should encourage this expectation.
    The good news is that the contracting community is increasingly 
able to make these investments. The bad news is that, if the owner is 
using TIFIA credit, TEA-21 currently offers the owner a Hobson's 
choice: either the contractor's credit must be investment grade 
according to rating agency criteria (a result more favorable to the 
contractor than the owner wants or needs to allow) or the contractor's 
investment must be subordinate to TIFIA in right of payment (a risk the 
contractors cannot accept when TIFIA credit is large). This challenge 
can be cured by refining TIFIA to rank a developer's claim senior to 
TIFIA's without requiring that the developer's credit be investment 
grade and to allow the developer to receive payment of equity returns 
and subdebt payoff as long as the entity receiving TIFIA funds meets 
all its debt service obligations and coverage ratios. To allay concerns 
about diluting TIFIA credit quality, TIFIA could limit subdebt or 
private equity payoff to a specified percentage of project costs.
    Minimize Impact of TIFIA Loan ``Springing Up.'' Legal advisors to 
FHWA have been reluctant to interpret the TIFIA statute to limit the 
event under which the TIFIA loan would ``spring'' to parity to a 
bankruptcy filing or similar proceeding that results in an abandonment, 
liquidation, or dissolution of the project. We are concerned that 
insolvency is defined broadly, resulting in the TIFIA loan 
``springing'' to parity with senior bond indebtedness. This could 
adversely affect the ability to attract credit enhancement (e.g., 
insurance) for the bonds and result in higher interest cost. Credit 
enhancers consider the ``worst case scenario'' when evaluating their 
desire to guarantee bonds and the risk of doing so. The benefit of 
subordinating the TIFIA loan could be eroded if the credit enhancers 
evaluate their risk by assuming they will be sharing in revenues and 
other assets on parity with FHWA.
    Following receipt of TxDOT's TIFIA commitment letter, FHWA 
announced it would apply the ``Mega Project'' finance plan and 
reporting requirements to all TIFIA projects. As interpreted by FHWA, 
these requirements are more burdensome than the capital markets or SEC 
disclosure rules require. Furthermore, it's unclear how FHWA will use 
this information.
    More Liberal Terms in TIFIA Loan Agreements. To leverage new 
project revenue streams, reduce transactional costs, and attract 
private debt capital, FHWA must consider more liberal terms in the 
financial covenants in the TIFIA loan agreement. For example, we 
believe that there should be no debt service reserve requirement for 
the TIFIA loan. Also, FHWA must be willing to subordinate its debt to 
that issued to design/build contractors as payment for their work.
    The Central Texas Turnpike Project is a multi-phased capital 
program with multiple funding sources. TIFIA loan draw requirements/
priorities as well as provisions relating to repayment and final 
maturity of the TIFIA loan must give consideration to the complexity of 
the projects.
    As mentioned earlier, Governor Perry is exploring large-scale 
corridor development in Texas. We certainly expect TIFIA to be an 
important financing tool in this effort. Critical to this would be the 
ability to subordinate TIFIA to equity returns as well as senior debt 
service payments.
    Change Internal Revenue Code Private Activity Rules. Congress 
should modernize the Internal Revenue Code rules on private activity 
and management contracts as they apply to surface transportation. 
Project sponsors are now actually forced to turn down true private 
equity for important public projects if they expect to issue tax-exempt 
debt. This is not the result Congress intended when it adopted these 
restrictions in 1986. Inexplicably, these same restrictions do not 
apply to other public works such as airports and solid waste 
facilities. During the 106th Congress, Senator Smith authored a bill to 
cure these exact problems. Both houses of Congress ultimately passed 
this important curative legislation as part of a larger tax bill that 
year, but President Clinton vetoed the larger bill.
    TxDOT is embarking on an ambitious program that has the potential 
for attracting significant private equity. Curing this anomaly in the 
tax code would allow sorely needed private equity and innovation to be 
incorporated into surface transportation development without 
sacrificing access to the lower interest rates in the tax exempt 
financing markets.
    Modernize Internal Revenue Code Advance Refunding Rules. Congress 
should modernize the IRS rules applicable to surface transportation to 
permit two advance refundings. Most conventional transportation 
projects are funded on a pay as you go model or with bonds backed by 
tax revenues. As such, sponsoring agencies issue bonds only to advance 
funds as needed for construction. To finance a public-private 
partnership dependent in part on the project's own revenues, the bond 
markets require 100 percent of all capital costs be funded up front, at 
the time they invest. This means that the sponsor is issuing bonds many 
years removed from the economic conditions that will affect the project 
when it has opened.
    If interest rates become more favorable over time, IRS rules 
prevent the sponsor from refunding the bonds more than once, even 
though doing so would help reduce tolls, pay off debt quicker, and 
leverage dollars more efficiently. Other businesses aren't so 
restricted. These rules are even more puzzling because there is no loss 
to the Treasury from advance refundings.
    Encourage Design-Build and DBOM Contracting. Congress should 
continue to encourage Design-Build and Design-Build-Operate-Maintain 
(DBOM) contracting for federally funded projects and remove regulatory 
barriers to State DOT use of procurement processes. Private section 
financing frequently requires certainty early in the design phase for 
capital and long-term maintenance and rehabilitation costs. In 
effectively providing such certainty, these forms of contracts are an 
essential building block for project financing.
    TEA-21 required FHWA to issue a rule governing procurement. While 
the rule is not final, the problems identified in the published draft 
have been documented in comments submitted by AASHTO and others. Unless 
FHWA incorporates the recommended revisions into its final rule, this 
critical tool will have been undermined unless Congress intervenes.
    Allow Selection of Contractor Prior to ROD to Enhance Financial 
Benefits of Construction Acceleration. Congress should make clear to 
the USDOT modal administrations that it did not intend NEPA to prevent 
procurement activity from being completed prior to issuance of records 
of decision (ROD). One of the key values of effective project financing 
is construction acceleration. We recognize the major contribution to 
environmental planning that NEPA has brought to major Federal actions. 
No one suggests that construction should commence before a ROD. But 
FHWA is reading NEPA to prevent the issuance of an RFP, the selection 
of a contractor, and the award of a contract pending a final ROD. None 
of these actions affects the selection of a project alternative or even 
the decision not to build. For a State DOT to use its own funds to 
accelerate contractor selection so that it is prepared to move quickly 
if a ``build'' alternative is selected is acting in parallel rather 
than in sequence. This does not prejudice the NEPA process.
Modify Existing Transportation Programs to Enhance Funding Flexibility
    ISTEA and TEA-21 provided improved flexibility for States in 
addressing their varied transportation needs by allowing greater levels 
of transferability among the existing highways and transit funding 
categories. For example, States can transfer up to 50 percent of their 
National Highway System apportionments to the Interstate Maintenance, 
Surface Transportation Program, Congestion Mitigation and Air Quality 
Improvement Program, and Bridge Replacement and Rehabilitation Program. 
In addition, up to 100 percent of NHS apportionments may be transferred 
to STP if approved by the Secretary of Transportation. Similar 
transferability provisions are available for the other Federal-aid 
highway programs listed above. In addition, States have the option to 
use their Federal transit formula program funds for a highway project 
and vice versa. This type of transferability should be expanded, at 
State discretion, among the entire array of transportation programs.
    ISTEA and TEA-21 also enhanced flexibility by expanding the list of 
eligible activities that can be funded with highway program funds. For 
example, STP funds can be used for highways, bridges, transit capital 
projects, and intracity and intercity bus terminals and facilities. 
However, this is an area where additional flexibility will help States 
in finding funding solutions to meet their varied transportation needs. 
When you consider a concept as complex as the Trans Texas Corridor, it 
becomes obvious that having the flexibility to address multimodal 
funding issues is essential. We encourage Congress to consider 
expanding the eligibility of existing highway, transit, and rail 
programs to allow, at the State's discretion, the use of any of these 
funds for a broader range of transportation activities. At the same 
time, it will be essential for Congress to either consolidate or 
simplify the program procedures of the various modal programs or allow 
States to use the simplest procedures among them so that the 
flexibility of expanded eligibility is not negated by regulatory 
differences among the modal programs. This flexibility will better 
enable us in Texas to pool our available resources to tackle multimodal 
transportation projects. This is the future of transportation in Texas; 
Federal funding programs should facilitate our efforts, not provide 
roadblocks to efficient and effective use of Federal transportation 
dollars.
                               conclusion
    As you can see, Texas has indeed entered a new era in planning, 
building, and financing needed transportation systems. We can no longer 
afford to rely solely on the traditional pay-as-you-go method of 
finance for needed transportation systems. We are committed to taking 
advantage of every available transportation finance and project 
development mechanism. We will need your assistance to enable us to 
fully and flexibly use the complete range of tools to meet our growing 
transportation demands. We look forward to working with you to make our 
launch into the new century of transportation financing a continuing 
success for Texas and the Nation.
    If you have any questions about the information provided here, 
please contact Tonia Ramirez in TxDOT's Federal Legislative Affairs 
Section at 512-463-9957.













                         TEA-21 REAUTHORIZATION

                              ----------                              


                       MONDAY, SEPTEMBER 30, 2002

                                       U.S. Senate,
                 Committee on Environment and Public Works,
Subcommittee on Transportation, Infrastructure and Nuclear 
                                                    Safety,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:12 a.m. in 
room 406, Senate Dirksen Building, Hon. Harry Reid [chairman of 
the subcommittee] presiding.

      CONDITIONS AND PERFORMANCE OF THE FEDERAL-AID HIGHWAY SYSTEM

    Present: Senators Reid, Voinovich, and Jeffords [ex 
officio].

  OPENING STATEMENT OF HON. HARRY REID, U.S. SENATOR FROM THE 
                        STATE OF NEVADA

    Senator Reid. This committee will come to order.
    I apologize to everyone for being late. I guess I should 
have gotten up earlier. I slept in until six this morning.
    Welcome to today's hearing on the state of America's 
highway infrastructure. This is the last of a series of 14 
scheduled hearings and roundtables that the committee and this 
subcommittee have held this year as we prepare to write the 
next transportation bill. We have addressed many important 
policy issues, including traffic congestion, planning, safety, 
operations, air quality, freight and project delivery. These 
hearings have made one thing very clear, that transportation is 
central to our growth, global competitiveness and quality of 
life.
    In 1956, under the leadership of President Eisenhower, the 
Federal Government made a commitment to create an Interstate 
highway system. We have since expanded that commitment to 
include the national highway system in the broader Federal aid 
highway network. This system has been an enormous success and 
now includes 46,000 miles of interstate highways and one 
million miles of Federal aid highways. These roads serve as the 
lifeblood of our economy, moving people and freight trillions 
of miles each year. Our Nation's road and bridge infrastructure 
includes 8.2 million lane-miles of highway and 590,000 bridges 
valued at about $1.5 trillion.
    Our task is to protect this investment and ensure that it 
continues to meet the needs of our Nation's communities and 
businesses. Potholed roadways, deficient bridges and congested 
interstates threaten safety, diminish quality of life and 
impede economic efficiency.
    Today, we will review two new reports on the status of 
American highway systems. I will ask that my full statement be 
made part of the record.
    [The prepared statement of Senator Reid follows:]
    Senator Reid. We are honored to have as our first witness 
today the chairman of the Senate Appropriations Committee, 
Senator Byrd. No one has been a greater champion for increased 
investment in transportation than Senator Byrd. He was a leader 
of TEA-21 5 years ago and has been a leader every year as 
chairman of the Appropriations Committee. We do a 
transportation appropriations bill every year.
    Those of us who support increased investment in America's 
transportation infrastructure are thankful for Senator Byrd's 
continued leadership. We all look forward to working with 
Senator Byrd as we write the next transportation bill. We will 
count on his wisdom and experience as we work our way through 
this very difficult process.
    Mr. Chairman?
    [The prepared statement of Senator Reid follows:]
  Statement of Hon. Harry Reid, U.S. Senator from the State of Nevada
    Welcome to today's hearing on the state of America's highway 
infrastructure. This is the last in a series of 14 scheduled hearings 
and roundtables that the EPW committee and this subcommittee have held 
this year as we prepare to write the next transportation bill. We have 
addressed many important policy issues, including traffic congestion, 
planning, safety, operations, air quality, freight and project 
delivery.
    These hearings have made one thing clear that transportation is 
central to our economic growth, global competitiveness, and quality of 
life. In 1956, under the leadership of President Eisenhower, the 
Federal Government made a commitment to create an interstate highway 
system. We have since expanded that commitment to include the National 
Highway System and the broader Federal-aid highway network. This system 
has been an enormous success and now includes 46,000 miles of 
interstate highways and one million miles of Federal-aid highways. 
These roads serve as the lifeblood of our economy, moving people and 
freight trillions of miles each year.
    Our nation's road and bridge infrastructure includes 8.2 million 
lane miles of highway and 590,000 bridges, valued at $1.4 trillion 
dollars. Our task is to protect this investment and ensure that it 
continues to meet the needs of our nation's communities and businesses. 
Potholed roadways, deficient bridges and congested interstates threaten 
safety, diminish quality of life and impede economic efficiency.
    Today we will review two new reports on the status of America's 
highway system. The Federal Highway Administration will present the 
findings of its 2002 Conditions and Performance report, and the 
American Association of State Highway and Transportation Officials will 
unveil its Bottom Line report. These reports offer a mixed message. On 
the positive side, the increased investments provided by TEA-21 have 
begun to make a difference. Our infrastructure is in better shape today 
than it was a few years ago.
    Unfortunately, while the condition of our transportation system has 
improved somewhat, its performance continues to worsen. The increasing 
congestion our nation's roads are experiencing means dirty air, wasted 
fuel, lost time and reduced productivity. In addition, we continue to 
have a significant backlog of repairs that must be made to deficient 
bridges and inadequate roadways.
    Both studies conclude that America is spending too little money to 
maintain the current conditions and performance of our transportation 
system, much less improve conditions and performance. The needs have 
outpaced funding, and unless we change this pattern we will fail to 
address the backlog of infrastructure needs and will continue to 
experience deteriorating performance.
    I have seen this performance deterioration firsthand at home in 
Nevada. As the Las Vegas and Reno regions have grown, so has traffic 
congestion. Worsening congestion is one of the greatest threats to my 
State's continued economic growth and we will have to do things 
differently if we are to reverse this trend.
    As we will hear, the solutions range from improving the conditions 
of our roadways, to building new roads, expanding and improving transit 
service, employing new technology, enhancing the management and 
operations of our transportation systems, improving planning, creating 
high-speed rail connections, and managing demand.
    We have our work cut out for us as we begin the reauthorization 
process. It is our responsibility to ensure that the transportation 
infrastructure of this country meets the needs of America's citizens. I 
look forward to working closely with Chairman Jeffords and other 
members of this committee to develop a forward-looking reauthorization 
bill that adequately addresses the many challenges our transportation 
system is facing.
    We are honored to have as our first witness today the chairman of 
the Senate Appropriations Committee, Senator Robert Byrd.
    No one has been a greater champion for increased investment in 
transportation than Senator Byrd. He was a leader on TEA-21 5 years 
ago, and he is a leader every year as the chairman of the 
Appropriations Committee. Those of us who support increased investment 
in America's transportation infrastructure are thankful for Senator 
Byrd's continued leadership. I look forward to working with Senator 
Byrd as we write the next transportation bill and will count on his 
wisdom and experience as we work our way through this very difficult 
process.
    Senator Jeffords. I will wait on my statement.
    Senator Reid. Senator Voinovich?
    Senator Voinovich. Mr. Chairman, since we have the chairman 
of the Appropriations Committee here with us this morning and 
the subject of his testimony is the Appalachian Development 
Highway System, I will reserve my comments for after his 
presentation this morning.
    Senator Reid. Gentlemen, thank you very much. Again, I 
apologize to everyone for being late. I hate to be late.
    Senator Byrd?

STATEMENT OF HON. ROBERT C. BYRD, A UNITED STATES SENATOR FROM 
                   THE STATE OF WEST VIRGINIA

    Senator Byrd. Thank you, Mr. Chairman, and thank you 
Senators Jeffords and Voinovich.
    In just a few months' time, this subcommittee will be 
responsible for reporting one of the most important pieces of 
legislation for the 108th Congress. As such, I am grateful to 
you, Mr. Chairman and members of your subcommittee for allowing 
me this opportunity to testify at this, the last hearing that 
you will hold in the Nation's Capital on the reauthorization of 
the Transportation Equity Act for the 21st Century, or TEA-21.
    Later this morning, you will also take testimony from our 
capable Federal Highway Administrator, Mrs. Mary Peters, on the 
condition and the performance of our national highway system. 
The Administration's upcoming Conditions and Performance Report 
will again remind us that a great deal more needs to be 
invested in our infrastructure if we are not to fall farther 
and farther behind in stemming the deterioration of our 
Nation's highways and bridges, and alleviating congestion on 
our Nation's roads.
    As Chairman of the Senate Appropriations Committee, I have 
sought to do my part by championing the highest level of 
Federal highway investment that is possible under our very 
tight budget constraints. The transportation appropriations 
bill for our fiscal year 2003 as reported by my committee back 
in July restores every penny of the $8.6 billion cut in highway 
funding proposed by President Bush. I am pleased to say that 
every member of the Appropriations Committee, Republican and 
Democrat, voted to report that bill.
    One of the observations contained in Administrator Peters' 
testimony that especially caught my eye is her statement that 
the condition of higher-order roads such as Interstates has 
improved considerably since 1993, while the condition on many 
lower-order roads has deteriorated. It appears, Mr. Chairman, 
that the pattern of road conditions is beginning to mirror the 
distribution of wealth in our country, whereby the rich are 
getting richer, while the poor are getting poorer.
    That observation leads me into my ostensible topic for my 
testimony today, namely the need to use this next highway bill 
to finally fulfill a promise that was made to one of the most 
impoverished and isolated regions of our country more than 35 
years ago, and that is the region of our country from which I 
come. We need to use this next highway bill to finally complete 
the 3,025-mile Appalachian Development Highway System or ADHS.
    Mr. Chairman, while serving in the other body, I had the 
great privilege of casting my vote in favor of establishing the 
Interstate highway system. However, in 1964 it was recognized 
by the first Appalachian Regional Commission that while the 
Interstate highway system was slated to provide historic 
economic benefits to most of our Nation, the system was 
designed to bypass the Appalachian region due to the extremely 
high cost associated with building highways through 
Appalachia's rugged topography. As a result, the construction 
of the Interstates had the detrimental effect of drawing 
passengers and freight and the accompanying economic benefits 
away from the Appalachian region.
    In 1965, the Congress adopted the Appalachian Regional 
Development Act, which promised a network of modern highways to 
connect the Appalachian region to the rest of the Nation's 
highway network, and even more importantly the rest of the 
Nation's economy. Absent the Appalachian Highway System, my 
region of the country, the southern West Virginia coal fields, 
would have been left solely with a transportation 
infrastructure of dangerous, narrow, winding roads which follow 
the paths of river valleys and stream beds between mountains. 
These roads are still more often than not dangerous two-lane 
roads that were built to inadequate design standards.
    Mr. Chairman, as you know well, we have virtually completed 
the construction of the Interstate highway system and have 
moved on to many other important transportation goals. However, 
the people of my region are still waiting, still waiting for 
the Federal Government to live up to its promise made some 37 
years ago to complete the Appalachian Development Highway 
System. The system is still less than 80 percent complete, and 
I regret to observe that my home State of West Virginia is 
below the average for the entire Appalachian region, with only 
72 percent of its mileage complete and open to traffic.
    It is without hesitation that I come before this 
subcommittee and make this request on behalf of the 
transportation needs of my State and my region. Throughout my 
50 years in Congress, I have taken care to be attentive to such 
needs in other regions. In the late 1960's, Mr. Chairman, I 
served as chairman of the Appropriations Subcommittee on the 
District of Columbia. I held that exalted position for 7 years, 
7 years. I believe it was Jacob who worked 7 years for Rachel.
    [Laughter.]
    Senator Byrd. And then at the end of the seventh year, his 
future father-in-law gave him Leah, not Rachel, but Leah, who 
had weak eyes, said the Bible. So he had to work 7 years more 
in order to get Rachel. Well, I only had 7 years as chairman of 
that great subcommittee, and what a rough time it was--seven 
years, chairman of the District of Columbia Subcommittee. My 
old Pastor Shirley Donnelly, who was the chief chaplain in the 
Sixth Army, I believe it was, in World War II, always told me, 
``Bob, a big man makes a little job big; a big man makes a 
little job big.''
    So I tried to make that little job big, and I think I did. 
I think I was able to do that. So in the late 1960's, I am glad 
I did not have to serve another 7 years, I served as chairman 
of the Appropriations Subcommittee on the District of Columbia. 
It was at that time, Mr. Chairman, that I, Robert C. Byrd, you 
are looking right straight at him, if you look this way.
    [Laughter.]
    Senator Byrd. That I provided the first appropriations for 
the initial construction of the Washington Metro system. Those 
first two appropriations together totaled less than $100 
million, but they would start the ball rolling toward Federal 
assistance that would total tens of billions of dollars to 
construct the Washington Metro system. So I thought I was 
entitled to try to get some money for West Virginia's roads as 
well.
    The rationale behind the completion of the Appalachian 
Development Highway System is no less sound today than it was 
in 1964. Unfortunately, there are still children in Appalachia 
who lack decent transportation routes to school. There are 
still pregnant mothers, elderly citizens and others who lack 
timely road access to area hospitals. There are thousands upon 
thousands of people who cannot obtain sustainable well-paying 
jobs because of poor road access to major employment centers.
    The entire status of the Appalachian Development Highway 
System is laid out in great detail in the Cost to Complete 
Report for 2002 just completed by the Appalachian Regional 
Commission this month. Mr. Chairman, I would ask if this report 
might be made part of the committee's record, or at least be in 
the committee's permanent files.
    Senator Reid. Hearing no objection, that will be the order.
    [The document will be retained in the committee's files.]
    Senator Byrd. Thank you.
    The enactment of TEA-21 signaled a new day in the 
advancement of the ADHS. TEA-21 took a great leap forward by 
authorizing direct contract authority from the highway trust 
fund to the States for the construction of the ADHS. And 
Senator Phil Gramm of Texas, Senator John Warner of Virginia 
and Senator Max Baucus of Montana worked with me and helped me 
as we worked together to improve that bill. TEA-21 took a great 
leap forward by authorizing direct contract authority from the 
highway trust fund to the States for the construction of the 
ADHS. Up until that point, funding for the ADHS had been 
limited to uncertain and inconsistent general fund 
appropriations.
    By providing the States of the Appalachian Region with a 
consistent and predictable source of funds to move forward on 
its uncompleted ADHS segments, TEA-21 served to reinvigorate 
our efforts to honor the promise made to the people of the 
Appalachian region. As is made clear in the Cost to Complete 
Report, this initiative has been a great success, one for which 
this committee can be very proud. States are making greater 
progress toward the completion of the system than they would 
otherwise have made, and more than they have made in any 5-year 
segment in our recent memory. Since the last Cost to Complete 
Report, 183 miles of the system have been open to traffic and 
we have successfully brought down the cost to complete the 
system by roughly $1.7 billion in Federal funds. Back when we 
were debating TEA-21, some questions were asked as to how 
committed the States would be to completing the unfinished 
segments of the Appalachian Highway System. I am pleased, Mr. 
Chairman, to report that the 13 States to date have succeeded 
in obligating just under 90 percent of the obligation authority 
that has been granted to them for the completion of the system. 
Of critical importance to this discussion is the fact that the 
unfinished segments of the ADHS represents some of the most 
dangerous, most deficient roadways in our entire Nation.
    One thing that is often lost in our debate over the 
necessity to invest in our highways is the issue of safety. The 
Federal Highway Administration has published report indicating 
that substandard road conditions are a factor in 30 percent of 
all fatal highway accidents. I was in one of those fatal 
highway accidents, Mr. Chairman, and so was my former, late 
colleague Senator Randolph. We were driving one Sunday 
afternoon on a two-lane highway and we crashed head-on into a 
car coming from the opposite direction. So I know something 
about those highways. My wife and I have traveled them at all 
hours of the day and I think all hours of the night. I do not 
know of a road in West Virginia that we have not traveled on in 
these more than 50 years in which I have been in politics.
    They have also found that upgrading two-lane roads to four-
lane divided highways decreased fatal car accidents by 71 
percent, and that widening traffic lanes have served to reduce 
fatalities by 21 percent. Had the highway on which I was 
traveling on that Sunday afternoon been a four-lane highway, 
that accident would not have happened. These are precisely the 
kind of road improvements that are funded through the ADHS. In 
my State, the largest segment of unfinished Appalachian highway 
if completed will replace the second most dangerous segment of 
roadway in my State.
    So even those who would question the wisdom of completing 
these highways in the name of economic development should take 
a hard look at the fact that the people of rural Appalachia are 
taking their lives in their hands every day as they drive on 
their currently inadequate roads. Nor would the argument of 
economic development hold up against completing these 
Appalachian highways, certainly not in my State.
    Mr. Chairman, it is time for this committee and the entire 
Congress, in concert with the Administration, to take the last 
great leap forward and authorize sufficient contract authority 
to finally complete the Appalachian highway system. As you 
enact another 6-year highway bill with sufficient funds to 
complete the system, we will finally pay off the full costs of 
the ADHS almost by then, almost 45 years after the system was 
first promised to the people of my neglected region. When we 
convene the 108th Congress, it is my intention to introduce 
legislation to complete the job.
    I am very pleased that this Administration has taken on the 
goal of completing the ADHS. In her letter accompanying the 
Cost to Complete Report, Administrator Peters said, ``The 
completion of the Appalachian Development Highway System is an 
important part of the mission of the Federal Highway 
Administration,'' and that the ARC's 2002 Cost to Complete 
Report, ``provides a sound basis for apportioning future 
funding to complete the system.''
    Mr. Chairman, I thank Mary Peters for her leadership on 
this issue and I look forward to seeing her commitment borne 
out in their reauthorization legislation which will be 
submitted next year. Completion of a new highway bill will be a 
mammoth task for the 108th Congress. I can say, Mr. Chairman, 
that over the many years of my public career, one of the 
accomplishments of which I am most proud was my amendment 
providing an additional $8 billion in funding to break the 
logjam during the debate on the Intermodal Surface 
Transportation Efficiency Act in 1991. Another was my 
cosponsorship of the Byrd-Gramm-Baucus-Warner amendment during 
the Senate debate on the TEA-21 in 1998. That effort resulted 
in some $26 billion in funding being added to that bill, and it 
put us on a path to historic funding increases for our Nation's 
highway infrastructure.
    I look forward, again, to working with this committee on 
completion of a bill that makes the necessary investments in 
our Nation's highways, not just in the Appalachian region, but 
across our entire country. Now, someone will hand me this map--
Mr. Chairman, I have been--I was not here when Noah started his 
ark, but Abraham lived to be 175, and Isaac lived to be 180. 
Abraham, Isaac--Jacob lived to be 147, and Strom Thurmond is 
just 100.
    [Laughter.]
    Senator Byrd. I am pressing on and during my work in 
representing West Virginia in the Congress, I am proud to show 
this map. This is a roadmap of West Virginia in 1947. I was in 
the West Virginia House of Delegates at that time. In the whole 
State, this rugged mountainous State of 24,000 square miles--
rugged, rugged--in the whole State at that time, there were 
only four miles of divided four-lane highways. Governor 
Voinovich, on the roadmap of 1947, not one mile is shown on 
this map.
    In those days, it took a day or a 1 \1/2\ or 2 days to get 
from the southernmost point of West Virginia to the 
northernmost part, or to the eastern panhandle. And so it is a 
great joy to me to be able to look back and know that I voted 
with General Eisenhower in his days for the Interstate system. 
I used to say that Nixon was my favorite President in my time, 
my favorite Republican President, but I have changed that view. 
My favorite Republican President is former General Eisenhower. 
He said a prayer. He did not ask somebody else to order the 
prayer. He spoke the prayer in his first inauguration. He 
prayed, and that greatly impressed me. But he was the daddy of 
the Interstate system, and I was a member of the other body and 
voted for it--voted for the money to pay for it.
    Over the years as a member of that body and later as a 
member of the Senate, I voted to support moneys for the 
Interstate system and for the Appalachian Highway System. So I 
am very proud, Governor Voinovich, to be a neighbor of yours 
and we both know the importance and the value of good highways. 
But West Virginia is still wanting to have the promise 
fulfilled that we made back in 1965 when we inaugurated the 
Appalachian Regional Highway System.
    Senator Reid. How many miles of divided highway do you have 
now?
    Senator Byrd. A little over 1,000.
    So thank you very much, Mr. Chairman and members. I value 
my membership in the U.S. Senate at a time when there sit in 
that august body such Senators as the three who are before me 
today. I appreciate your courtesy and your kindness. May you 
succeed in your efforts and count on me if I can be of help, 
and I will certainly be there trying.
    Senator Reid. Senator Byrd, we are going to have a new 
panel now, but I am wondering if I could visit with you just on 
an unrelated matter. I will meet you outside.
    Senator Byrd. Yes.
    Senator Voinovich. Mr. Chairman, could I make a comment?
    Senator Reid. Of course.
    Senator Voinovich. I would like to publicly thank Senator 
Byrd for the leadership that he has exercised over the years, 
particularly in regard to Appalachia. Senator, I can understand 
how you feel about this. You were there in the beginning of 
this work. A lot of projects have yet to be finished in 
Cleveland, ones that I started as mayor there. I want to help 
finish them up as a member of the U.S. Senate. I will join you 
to make it possible that you will finish up your work.
    I think the committee should know that Appalachia still 
lags behind in America today. The infrastructure is not in 
place in spite of the fact that in my State, we have rebuilt 
many schools in rural areas, the most depressed areas, and 
brought in fiber-optics and technology and computers. In many 
of those communities, we are trying to get economic development 
and can't get economic development without highways.
    In terms of the quality of life, the situation has improved 
substantially from the days when Senator John Kennedy 
campaigned there and showed the nation the dirt floors in 
people's homes. Today, the infant mortality is down. We are 
getting good health care. Part of it, and I want to thank this 
committee, is the reauthorization of the ARC, which is going to 
continue to bring money into those areas.
    So Senator Byrd, thank you very much on behalf of the 
citizens of Ohio for your leadership over the years.
    Senator Byrd. Thank you, Governor.
    Our final miles in West Virginia on corridor D are in the 
Parkersburg area, where we cross over the river into your great 
State. I think you are a very valuable member of the Senate and 
a great booster of our highway building and needs. We look to 
you to help us to fulfill this promise to our peoples on both 
sides of the river.
    Senator Jeffords. Thank you, Senator, and I look forward to 
working with you on the reauthorization of our bill here, and 
for your help and guidance as we moved forward. You have been a 
tremendous help to this committee and we look forward to 
working with you.
    Senator Reid. The people of West Virginia should 
understand, as should the people in this whole corridor, 
Senator Byrd had the seniority to take the chairmanship of the 
Energy and Water Subcommittee when Senator Bennett Johnston 
left, but he said, ``You can go ahead and take it, but the one 
thing I want is to make sure you take care of the Appalachian 
corridor.'' So I have done that every year.
    Senator Byrd. Yes, you have.
    Senator Reid. I want you to know that I have not forgotten 
that.
    Senator Byrd. Thank you.
    Senator Reid. That is in you would think an unrelated 
subcommittee, but because of Senator Byrd, it's related.
    Senator Byrd. Thank you.
    Senator Reid. The next panel is the Honorable Mary Peters, 
the Honorable Joseph Perkins, and JayEtta Hecker. Would you 
please come forward and would you get them started? I am going 
to step outside.
    Senator Jeffords. Senator Voinovich, do you have a 
statement that you would like to make while we get organized 
here?
    Senator Voinovich. Yes, I think I would like to do that.
    Senator Jeffords. Please do.

  OPENING STATEMENT OF HON. GEORGE V. VOINOVICH, U.S. SENATOR 
                     FROM THE STATE OF OHIO

    Senator Voinovich. First of all, I would like to thank the 
chairman for conducting this hearing today. I am glad that 
Gordon Proctor, who is the Director of the Ohio Department of 
Transportation, is going to be testifying today. Gordon worked 
with me when I was Governor, and with Jerry Raye, who was our 
director. It is nice to know somebody as they work their way up 
to have the main job today. We are looking forward to your 
testimony, Gordon.
    Mr. Chairman, as the infrastructure built in the 19th and 
20th centuries reaches the end of its useful life, we are now 
faced with a question of how to fulfill current requirements 
and make improvements to our infrastructure that will best 
serve our Nation in this century. And while progress has been 
made, we all know that large capital and maintenance 
investments are going to have to be made.
    The first step in getting that done is developing a 
coherent and comprehensive national infrastructure strategy, 
and that is to get an assessment of the unmet infrastructure 
needs. When I was chairman of this subcommittee in 2000, I 
asked GAO to conduct a survey of the unmet major needs in the 
major public infrastructure areas which receive Federal 
assistance, including highways and mass transit.

    In July of 2001, the GAO released in its report, entitled U.S. 
 Infrastructure Agencies Approaches to Developing Investments Vary. In 
the report, the GAO provided a survey of seven agencies. In the Federal 
Highway Administration, they estimated that $50.8 billion per year over 
    20 years would be needed just to maintain the current physical 
condition of the Nation's highways and bridges. In addition, they said 
an investment of $83.4 billion per year--per year--over 20 years would 
                be needed to improve the infrastructure.

    The GAO report also reported that the Federal Transit 
Administration estimates the average cost to meet the Nation's 
mass transit needs is as high as $16 billion per year for 20 
years.
    I understand that our witnesses this morning are going to 
be making mention of some of those estimates. I am anxious to 
hear about them. Senator Byrd already eloquently mentioned the 
Appalachian Development Highway System, and Madam Secretary, we 
are very pleased that you understand how important it is. It 
would be wonderful if this Administration could say, we put the 
frosting on the cake and finished it up.
    It is no secret that the Nation has an aging 
infrastructure. We have got to figure our levels of funding and 
figure out where it fits in as far as this country's national 
priorities. I think that we need to, as Members of Congress and 
of this committee, develop a long-range strategy to deal with 
not only this infrastructure problem, but water and sewers and 
some of the other things that have been neglected around here 
for too long, while we go on undertaking other areas where 
perhaps Congress has not got as much authority or 
responsibility.
    I ask that my statement be made part of the record, Mr. 
Chairman.
    [The prepared statement of Senator Voinovich follows:]
 Statement of Hon. George V. Voinovich, U.S. Senator from the State of 
                                  Ohio
    Thank you, Mr. Chairman, for conducting this hearing today on the 
state of our nation's infrastructure.
    I would especially like to welcome Gordon Proctor, Director of the 
Ohio Department of Transportation, who is here to testify on Ohio's 
transportation needs, particularly those of the State's aging 
interstate highway system.
    Mr. Chairman, as the infrastructure built in the 19th and 20th 
Centuries reaches the end of its useful life, we are now faced with the 
question of how to fulfill current requirements and make improvements 
to our infrastructure that will best serve our nation in the 21st 
Century.
    While progress has been made at the Federal, State, and local 
levels to acknowledge and begin to address public infrastructure needs, 
major areas are still not being addressed, such as large capital 
investments and operations and maintenance. I recognize that simply 
devoting more Federal money to infrastructure needs is not the 
solution. Rather, a strategy must be developed to address the full 
range of short-and long-term issues, including appropriate Federal and 
state roles, adequate project evaluation, priority-setting, program 
efficiency and management.
    The first step in developing a coherent and comprehensive national 
infrastructure strategy is an assessment of our nation's unmet 
infrastructure needs. I realize that even the concept of ``unmet 
needs'' is difficult to define and that every Federal agency may define 
the term differently. That is why, as chairman of this subcommittee in 
2000, I asked the General Accounting Office (GAO) to conduct a survey 
of unmet needs in the major public infrastructure areas which receive 
Federal assistance, including highways and mass transit.
    Consequently, in July 2001, the GAO released its report, U.S. 
Infrastructure: Agencies' Approaches to Developing Investment Estimates 
Vary. In the report, the GAO provided a survey of seven Federal 
agencies' estimates for infrastructure investment. The Federal Highway 
Administration (FHWA), for example, estimated that $50.8 billion per 
year over 20 years would be needed just to maintain the current 
physical condition of the nation's highways and bridges. In addition, 
an investment of $83.4 billion per year over 20 years would be needed 
to improve the infrastructure.
    The GAO also reported that the Federal Transit Administration (FTA) 
estimates the average cost to meet the nation's mass transit needs is 
as high as $16 billion per year for 20 years.
    I understand FHWA Administrator Mary Peters and other witnesses 
this morning will present updated needs estimates for our highways and 
transit systems.
    In addition, the Appalachian Regional Commission (ARC) recently 
completed its Cost to Complete Report for the Appalachian Development 
Highway System (ADHS), a 3,025 mile system of highways that is designed 
to bring economic development to Appalachia. According to the Report, 
the estimated cost to complete the ADHS (combined Federal and State 
cost) is $8.5 billion. Thanks to TEA-21, which authorized $2.25 billion 
for the construction of the ADHS, the remaining Federal funds needed 
from Congress to complete the ADHS are $4.5 billion, $1.7 billion less 
than was needed in 1997. I look forward to addressing the ADHS' funding 
needs in next year's highway bill.
    It is no secret that this nation has an aging transportation 
infrastructure. If we continue to ignore the upkeep, and allow the 
deterioration of our infrastructure, we risk disruptions in commerce 
and reduced protection for public safety, health, and the environment. 
In my view, it is the responsibility of Congress to ensure that funding 
levels are adequate and efficiently allocated to our nation's priority 
needs.
    I strongly believe that Congress and the Administration need to 
develop a strategy to address the backlog of unmet infrastructure needs 
in this country, and ascertain the Federal role in responding to this 
backlog.
    In 1998 Congress recognized the importance of our nation's 
transportation system through the enactment of the 6-year 
Transportation Equity Act for the 21st Century (TEA-21), which 
increased by nearly 40 percent Federal investment in highways and 
transit.
    As Chairman of the National Governors Association, I was involved 
in negotiating TEA-21 and lobbied Congress to ensure that all Highway 
Trust Fund revenues were spent on transportation. I also fought to even 
out highway funding fluctuations and assure a predictable flow of 
funding to the States. TEA-21 achieved this goal with record, 
guaranteed levels of funding. However, more recently, as evidenced by 
this year's negative Revenue Aligned Budget Authority (RABA) 
calculation of $4.4 billion, we need to find a better way to smooth out 
the effects of fluctuating trust fund receipts for the long-term 
without adding to the Federal budget deficit.
    TEA-21 also dedicated nearly all highway gas taxes to 
transportation funding and guarantees that States will receive at least 
90.5 percent of their share of their contribution to the highway 
account of the Highway Trust Fund. Under TEA-21, Ohio received a 23 
percent increase in transportation funding.
    While TEA-21 has enabled States and localities to improve the 
condition of deteriorating and unsafe highways and to increase capacity 
and performance, the system is still aging, and in need of additional 
investment.
    As a member of this subcommittee and its former chairman I am eager 
to work on the reauthorization of the Federal-aid highway program. I 
understand that groups are talking about funding levels of up to $50 
billion a year, which is supported by the GAO study I mentioned 
earlier. I tell you now I do not think that is something we will be 
able to do unless Congress and/or the States raise the gas tax.
    The short-and long-term viability of the Highway Trust Fund to meet 
our transportation needs is an issue that will be discussed in the 
coming months. In the short-term, we will have to determine the annual 
funding level the Highway Trust Fund can sustain and still meet its 
obligations. With our country's finances already in the red, I do not 
think we can expect that additional resources outside the Highway Trust 
Fund will be available for highway projects. We must plan for the 
future based on the principle that the highway program is a fully user-
fee based system that pays its own way.
    In the long-term, we also have to recognize that two of Congress' 
goals protecting the environment and promoting energy efficiency will 
inadvertently affect the amount of money available for transportation 
projects. For instance, improvements in fuel efficiency and the use of 
alternative fuels, which we should encourage because they are good for 
the environment, will decrease revenues to the Highway Trust Fund. If 
we are to meet our future transportation needs, we will have to find 
ways to make up for this lost revenue.
    Again, thank you, Mr. Chairman, for holding this hearing. I look 
forward to the testimony of today's witnesses.
    Senator Voinovich. I just think that we have to understand 
that the money to do the job is not present. I met recently 
with the people who build the highways and we talked. They were 
reminding me that the GAO report said that it would take $50-
some billion a year, and I said, well, we are providing $31.5 
billion per year. If we go by the formula, we shouldn't be even 
providing that this year because of the fact that they 
miscalculated the amount of money that would be available.
    So we have got to face up to the reality, and the reality 
is this, and nobody likes to talk about it, but we are going to 
have to increase the Federal gas tax and/or raise gas taxes in 
our respective States to meet the responsibilities that we 
have. We also have to take the dollars that we have available 
to us and work harder and smarter and do more with less, which 
was my credo when I was Governor of Ohio. But for us to think 
that somehow we are going to squeeze more money out of this and 
deal with our highway problems is just not being realistic.
    I think it is really important that the people who are 
advocates of more highway spending better understand that we 
have gone from a $313 billion surplus for 2002 to borrowing 
$340 billion, including using all the Social Security surplus 
money, to run this government. At the rate we are going, next 
year we could be up around $400 billion.
    So I do not see money coming from some other source. In 
fact, there will be people here that will want to reach into 
the highway trust fund and use that for other purposes. As 
chairman of the National Governors' Association in 1998, we 
fought hard to put that firewall up and say that money that is 
going to be used for highways, and we need to have a continual 
amount of money that we could rely upon.
    So I think that we are going to hear all this testimony 
today, but the fact is we are going to need some more money to 
get the job done, and I think everybody ought to face up to 
that responsibility and figure out how we can go about getting 
it.
    Thank you, Mr. Chairman.

OPENING STATEMENT OF HON. JAMES M. JEFFORDS, U.S. SENATOR FROM 
                      THE STATE OF VERMONT

    Senator Jeffords. Thank you for that realistic appraisal.
    First of all, I want to thank Senator Reid, and not just 
for holding this committee hearing, but for all the work that 
he has done to benefit the committee regarding our most 
important responsibility next year--reauthorizing ISTEA and 
TEA-21. Congress is sometimes criticized correctly for waiting 
until a problem happens before action is taken, and then the 
law is sometimes passed very quickly, without enough careful 
analysis. Throughout the year, Senator Reid has greatly helped 
to gather much needed transportation information well ahead of 
time, that will be used and will be of great use as we are 
writing the transportation bill.
    In the past year, we have had 14 hearings and roundtable 
discussions to learn about the successes of our current 
transportation law. Today's hearing is a milestone in that it 
completes an ambitious and rigorous TEA-21 reauthorization 
hearing agenda which we unveiled 1 year ago. With the help of 
Senator Smith, we carved out a hearing agenda that explored a 
range of topics from rural transportation to air quality, 
freight delivery, transportation finance and everything in 
between. Throughout the year, this committee has sought out 
innovative ways to garner as much information as possible, and 
we have held two joint committee hearings, two field hearings 
and three roundtables in addition to 10 full subcommittee 
hearings.
    We have heard testimony from over 100 witnesses over the 
course of the past year. These witnesses have hailed from 30 
different States and have represented nearly 60 different 
organizations, State and Federal agencies and associations. 
This has not been an easy undertaking, but it was accomplished 
successfully through the hard work of dedicated members and 
staff, and a record of over 1,000 pages of testimony as a 
result of our efforts.
    Today, we focus on the critical topic--the conditions of 
our transportation system and how best to maintain and manage 
this extremely valuable asset. Asset management may not seem 
exciting, but it is critical to America's future. At the micro 
level, asset management means that a parent racing out for a 
quart of milk does not hit the huge pothole and have to change 
tires at 7 a.m. At the macro level, it protects American 
commerce, while preventing much larger expenditures later.
    Each dollar spent keeping a road in good condition save 
$10, versus rebuilding roads that have deteriorated. 
Transportation assets are a key complement of Americans, a 
component of America's economy, critical to family farmers, 
small businesses and the Nation's greatest corporations.
    There are least 3.11 million miles of public road mileage. 
There are over 550,000 bridges owned and maintained by the 
public, in addition to 9.4 billion rides taken by Americans on 
transit systems. We need to ensure that these assets are able 
to keep pace with the ever increasing demands that will be 
placed on the system in the coming years.
    Our system must be well maintained and in good working 
condition. This will require a balanced energy investment that 
promotes good management of our current assets, while retaining 
the flexibility to add capacity in critical areas. Today, 
Vermont has approximately 14,000 miles of roadway, 32 [sic] 
miles of Interstate, and over 2,370 miles of toll-free State 
highways, and 11,210 miles of municipal roads. There are 16 
public use airports and 10 State-owned airports--Burlington 
International Airport, the fourth busiest airport in New 
England, with eight carriers and approximately 900,000 
passengers a year.
    So Mr. Chairman, I appreciate all the work you have done, 
and now we look forward to hearing the testimony.
    Senator Reid. Thank you, Mr. Chairman.
    Our first witness in this panel is Federal Highway 
Administrator Mary Peters. This is her third appearance this 
year before this subcommittee. I also want to express my 
appreciation for your coming to Nevada in February to join me 
in Reno. I'm sorry. The first hearing I want to express my 
appreciation was way back in February when you just joined us 
in your Federal position. And then I want to express my 
appreciation to you for coming to Reno for the hearing that we 
had this past August. You made the hearing a real success.
    Our second witness will be Joseph Perkins, Commissioner of 
the Alaska Department of Transportation and Public Facilities. 
Commissioner Perkins wins a prize for the longest trip, as you 
always do, to testify before this subcommittee. Thank you for 
traveling so far to join us. We look forward to your testimony 
about the American Association of State Highway and 
Transportation Officials, AASHTO, and their bottom line report.
    Our third witness on the first panel will be JayEtta Hecker 
from the United States General Accounting Office. Ms. Hecker, 
thank you very much for being here. You, too, have appeared 
before this committee and subcommittee on a number of 
occasions. We appreciate the good work the GAO does in all 
fields, and especially in this area. We look forward to your 
work on the next transportation bill.
    You are all familiar with this little light. I know that 
Mary Peters and JayEtta Hecker are familiar with it, but you, 
Joseph Perkins, should be aware that there will be a yellow 
light come up when you have a minute and a red light when you 
are all through. We would ask you to stick with this as much as 
you can. We have a lot of things going on around here this time 
of year, but your testimony is extremely important.
    We will first hear from Mary Peters.
    Please proceed.

   STATEMENT OF HON. MARY E. PETERS, ADMINISTRATOR, FEDERAL 
   HIGHWAY ADMINISTRATION, U.S. DEPARTMENT OF TRANSPORTATION

    Ms. Peters. Senator, thank you so much. Mr. Chairman, 
members of the committee, thank you for the opportunity to 
provide testimony on the state of our Nation's highway and 
bridge infrastructure.
    First of all, I want to apologize for the delay in 
providing the Conditions and Performance Report to the 
committee. The report is now in final clearance and I am able 
to share some of the report's findings with you. A summary of 
the major findings of the report is attached to my written 
statement.
    The 2002 addition of the C&P Report will be the first to 
capture the effect of increased investment in transportation 
infrastructure under TEA-21 by all levels of government. 
Increased Federal funding for highway capital investment 
through 2000 has been matched, and even exceeded, by increases 
in State and local investments as well. These funds have been 
very well spent.
    Under TEA-21, States substantially increased their 
investment in system preservation projects, now reflected in 
the improvement in the overall physical condition of our 
Nation's infrastructure. For example, the percent of highway 
mileage with acceptable ride quality rose from 82.5 percent in 
1993 to 86 percent in 2000.
    The 2002 report also documents the Nation's continued 
improvement in the area of highway safety. I am pleased to 
report that highways have become safer even as travel on our 
Nation's system has sharply increased. The fatality rate per 
100 million miles traveled has decreased from 3.3 in 1980 to 
1.5 in 2000. From 1997 to 2000, investment in system expansion 
grew more slowly, increasing 20.8 percent, from $21.6 billion 
to $25.9 billion. Thus, despite historic investment in highway 
infrastructure and improved conditions on many roads and 
bridges, operational performance of the system, as determined 
by congestion, has steadily deteriorated.
    The heart of the Conditions and Performance Report is an 
analysis of future investment requirements under different 
scenarios. The Cost to Improve Highways and Bridges scenario 
defines the upper limit of cost effective national investment 
based on engineering and economic criteria. Essentially, it is 
an investment ceiling above which it would not be cost-
beneficial to invest. This scenario implicitly assumes 
unlimited availability of funding and does not take into 
account competing investment options in the economy or even 
whether or not those additional investment options are 
available at all.
    The Cost to Maintain Highways and Bridges scenario is 
designed to show the investment required to keep future 
indicators of conditions and performance at current levels. The 
current annual investment level under the Cost to Improve 
Highways and Bridges scenario is projected to be $106.9 billion 
for 2001 through 2020. This is 65.3 percent higher than the 
$64.6 billion of total capital investment by all levels of 
government in 2000.
    The average annual investment under the Cost to Maintain 
scenario for highways and bridges is projected to be $75.9 
billion for 2001 through 2020. That is a 17.5 percent increase 
over capital spending in 2000.
    If investments were to remain at 2000 levels, or 
anticipated levels for 2001 through 2003, it is projected that 
the recent trends observed in the condition and performance of 
the highways and bridges would continue. That is, conditions 
and safety performance would improve, but the operational 
performance of the highway system would further deteriorate. 
Average speeds would decline, the amount of delay experienced 
by drivers would increase, and congested periods on the 
Nation's urban principal arterials would lengthen. Although 
improvement in bridge conditions would continue, the aging of 
the Nation's bridges, particularly on the Interstate system, 
will present additional challenges to us all in the future.
    Since 1997, infrastructure investment at all levels of 
government has been more successful in addressing physical 
conditions than operating performance on the system. Therefore, 
the 2002 Conditions and Performance Report indicates that, 
while future funding continues to address system preservation 
needs, it would now be cost-beneficial to devote a larger share 
of any available future increases in highway capital investment 
to expanding the capacity of our system.
    Mr. Chairman and members of the committee, I thank you 
again for the opportunity to testify today, and I look forward 
to working with you as we prepare for reauthorization of the 
surface transportation programs. I would pleased to answer any 
questions you have at the appropriate time.
    Thank you.
    Senator Reid. Mr. Perkins?

    STATEMENT OF HON. JOSEPH PERKINS, COMMISSIONER, ALASKA 
       DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES

    Mr. Perkins. Thank you, Mr. Chairman.
    I am Joe Perkins, the Commissioner of the Alaska Department 
of Transportation, and chairman of AASHTO's Standing Committee 
on Highways. On behalf of the 50-State Departments of 
Transportation, I am here today to briefly summarize our 
recently completed bottom line report. This report is a 
comprehensive assessment of the investments needed from 2004 to 
2009 to improve or maintain our national transportation system.
    Our findings are as follows. An annual capital investment 
of $92 billion for highways and bridges is necessary to 
maintain the condition and performance of the system. $125.6 
billion would be needed to improve their condition and 
performance. An annual capital investment of $19 billion is 
required to maintain the condition and service performance of 
the Nation's transit systems. And $44 billion would be needed 
to improve transit conditions and performance.
    To put these figures in perspective, U.S. highway 
investment from all levels of government--Federal, State and 
local, including maintenance capital and other expenditures--
grew from $75 billion in 1990 to $128 billion in 2000, an 
increase of 71 percent. Of this total, States contributed 51.7 
percent, local governments 24.3 percent, and the Federal 
Government 24 percent.
    Of the 2000 total dollars, $64 billion was capital 
investment. If capital investment over the next decade were to 
increase at the same rate as overall highway spending in the 
1990's, it would need to reach $110 billion by 2010. This tells 
me our forecast to $125 billion is right on the money.
    Our assessment is based on data provided to the Federal 
Highway Administration by the States, considering 112,000 
sample road segments, and on data provided to the Federal 
Transit Administration by transit agencies. Our methodology is 
based on that of USDOT Conditions and Performance Reports. 
Several factors create the basis of our findings. First, repair 
backlog--over time, weather, wear and age take their toll on 
roads, bridges and transit facilities. The repairs, 
replacements and upgrades needed to bring the existing system 
up to standards have created huge backlogs in these areas.
    The good news is that because of the significant increase 
in funding made possible through ISTEA and TEA-21, progress has 
been made. The 1999 bridge repair backlog of $87 billion has 
been reduced to $52 billion today. Pavement conditions have 
improved on the Interstate, are holding their own in rural 
areas, but are deteriorating in urban areas. So while close to 
80 percent of the roads are rated fair to good, much remains to 
be done.
    The second factor is demand. The U.S. population grew by 
100 million over the last 40 years and is expected to grow by 
at least 100 million over the next 40 years. Highway demand, 
measured through vehicles miles traveled, increased from 2.1 to 
2.7 trillion over the last decade, and is expected to grow by 
another $600 million by 2010. Transit ridership has been 
growing at 3.5 percent for the last 6 years. If that continues, 
transit ridership will double by 2020.
    The challenges faced by my DOT in Alaska are somewhat 
different from those in the lower 48, but are just as 
significant. Our roads face extreme weather and geological 
conditions requiring more frequent repair. We have a marine 
highway system served by one of the largest ocean-going ferry 
fleets in the Nation, a network of remote airfields, as well as 
Anchorage and Fairbanks International Airports, and of course 
the Alaska Railroad. We also have over 300 miles of our 
national highway system that is not paved. In contrast, we have 
a congestion problem in Anchorage.
    Mr. Chairman, we hope this comprehensive qualification of 
the Nation's highway and transit needs contained in our bottom 
line report is helpful to you in determining future funding 
levels needed for TEA-21 authorization.
    Thank you for inviting me to make this presentation.
    Senator Reid. Ms. Hecker?

       STATEMENT OF JAYETTA HECKER, DIRECTOR OF PHYSICAL 
        INFRASTRUCTURE ISSUES, GENERAL ACCOUNTING OFFICE

    Ms. Hecker. Good morning, Mr. Chairman, Senator Voinovich, 
Senator Jeffords. We are very pleased to be here today and 
speak on the report that we have done for you and you are 
releasing today on challenges confronting the Nation in dealing 
with the range of mobility needs for both surface 
transportation and for freight transportation.
    The focus of the work really is on a couple of areas. One 
was, what are the key challenges in maintaining mobility in 
these areas; and then from that, we addressed what are some of 
the key strategies for addressing these problems.
    I will briefly summarize the challenges and then spend most 
of the time on what we outlined as the key strategies. The 
challenge, as you have heard before, is preventing congestion 
from overwhelming the system. In fact, from the numbers you are 
hearing today, you can see there is widespread agreement that 
the challenge is actually to keep it from deteriorating; that 
just doing that is actually an enormous challenge.
    So the data I am not going to review. It is unequivocal 
that we have got congestion. We also, though, have 
underutilized parts of the infrastructure, and that is an 
important thing that I will come back to. But there are peak 
periods, there are bottlenecks that are absolutely critical and 
that are continuing to play a key role. As you know, one of the 
key parts of our linkage of transportation investments is 
promoting efficiency, and we have generated very important 
benefits in logistics over the past decades, but in fact the 
congestion is beginning to deteriorate and we are not having 
those same potentials for improvement in the movement of goods 
and services.
    The other kind of challenges really relate to something you 
heard from Senator Byrd--underserved populations, rural 
populations, elderly, which will be an increasing problem over 
the coming decades. So there are real challenges that already 
exist and are likely to be even more severe in the future, of 
underserved populations.
    In addition, another challenge that we outline in the 
report that is inherent in transportation is achieving a 
balance with the environment and social goals. Clearly, the 
transportation system presents challenges to the environment 
and that balance is one of the critical challenges.
    The first of three strategies that we outline is basically, 
focus on the whole system, move away from modal stovepipes. The 
second is, get more attention and focus on the performance of 
the existing infrastructure, not just building new. And the 
third is identifying financing options and new sources of 
revenue.
    The first area, focusing on the entire system, rather than 
modes, builds on the concern that is a growing consensus that 
the modal funding mechanisms distort public decisionmaking. 
Particularly in the freight area, we are not getting the best 
investment, the best decisions. It is having to go forward only 
if there is CMAQ money or if there is NHS money, or if there is 
Border money, but there basically is an impediment for the best 
investment and the best decisionmaking in infrastructure and 
meeting mobility needs.
    The second is to tie Federal funding to defined outcomes, 
and relate those to specific national interests and priorities. 
Again, that is an area that is not in the current system well 
enough.
    The third is to match or better align funding criteria with 
national priorities. So that is the area of moving away from a 
pure modal focus and trying to get more intermodal integration 
in the way transportation is funded, and particularly focusing 
on both the freight side and the passenger side. We do a lot of 
work on Amtrak and the Amtrak relationship to highway 
investment, or to the essential air service. All of these 
programs have to be viewed in a coherent, integrated way.
    The second point or strategy is probably the single most 
important one. It is, not relying on new construction; 
recognizing that in fact new construction cannot meet and match 
the mobility needs of the country. There is a limitation by 
available space, by public opposition, and clearly, by money. 
We have seen today, we have heard these numbers. There is no 
way that with our deficit situation that these kinds of numbers 
can be brought to bear. So the importance of focusing on 
performance is that is where we get more out of the existing 
infrastructure.
    Focus on--I know you like specifics, Senator Reid--more 
focus on rehabilitation; more focus on improving traffic flow, 
incident management, coordinating traffic signals, better and 
more consistent use of technology. One of the hardest ones, yet 
one of the most promising, is demand management, moving toward 
a system where fees more accurately capture the cost of use so 
that individuals, freight, and passengers are making better 
choices about their use of infrastructure.
    The third area I will just briefly mention, it is the area 
where you had the hearing last week, on focusing new sources of 
revenue. I think your realism, Senator Voinovich, was accurate. 
A lot of the notion of alternative financing, it is debt 
financing that ultimately still has to be repaid. The user 
principle is an important one. So as we look to new financing, 
new sources, recognize the importance of the user-pay principle 
for promoting efficiency in the use of our transportation 
infrastructure.
    That concludes my statement. I would be pleased to answer 
any questions.
    Senator Reid. Thank you.
    What I would ask is unanimous consent that the three 
symposia that the full committee held and this subcommittee 
held, be included in the official record of this year's hearing 
process in TEA-21 reauthorization. Hearing no objection, that 
is the order.
    [Transcripts of the symposia referenced by Senator Reid 
appear in Part II of the hearings of the Committee on 
Environment and Public Works, S. Hrg. 107-668]
    Senator Reid. I also have a statement that I want made part 
of the record from Garth Dull. He represents--was formerly head 
of--the Nevada Department of Transportation and represents Safe 
Roads. I would ask that his statement be part of the record.
    [The referenced document follows:]
             Statement of Garth Dull, Nevada for Safe Roads
Introduction
    Thank you, Mr. Chairman. My name is Garth Dull and I am here today 
to represent Nevada for Safe Roads, a highway safety coalition focused 
on keeping trucks from getting longer and heavier. Among the members of 
our coalition are the Nevada Conference of Police and Sheriffs, the 
Alliance for Retired Americans, and the AFL-CIO. Attached is a full 
membership list.
    I have both hands-on and policy experience with the issue of truck 
size and weight from my more than 30 years as a practicing highway 
engineer and senior policy official with the Nevada Department of 
Transportation. I served as Director of NDOT from 1986 until 1995, 
during which time I was responsible for the agency's budget and oversaw 
the design, construction, and maintenance of over 5000 miles of roads 
and bridges. Truck size and weight directly impacts each. The heaviest 
trucks would tear up the pavements and reduce bridge life yet fail to 
pay their fair share of highway costs.
    I know that there are a number of proposals to allow trucks to get 
longer and heavier. Let me say right now: That would be a bad idea. 
Trucks are big enough. If you allow them to get any bigger, they will 
wreak havoc on our highway infrastructure and cause more fatal crashes. 
There is no question about that.
Bigger Trucks Would Tear Up Our Roads and Bridges
    In my tenure at NDOT, like all DOTs, we designed roads and bridges 
to accommodate projected heavy truck traffic. Most of Nevada's 
bridges--70-80 percent, in fact--were built before 1975, meaning they 
were not built to accommodate the weight or number of trucks on the 
road today. NDOT completed a study in 1994 showing that some of the 
heavy trucks using our roads today overstress our older simple span 
bridges by as much as 30 percent beyond their design parameters.\1\ 
While no one can quantify exactly what truck weight does to bridge 
life, we know that it does shorten it. Bridges are designed with a 
safety margin to ensure against bridge failure. Bigger trucks erode 
that margin, increasing the number of bridges that must be replaced, 
strengthened, or posted.
---------------------------------------------------------------------------
     \1\Nevada Department f Transportation (NDOT), (Bridge Study), 
1994.
---------------------------------------------------------------------------
    About 15 percent of Nevada's bridges are structurally deficient or 
functionally obsolete, meaning they are in need of serious repair.\2\ 
There is an even worse backlog nationwide: Nearly 30 percent of bridges 
nationwide are structurally deficient or functionally obsolete.\3\ The 
US Department of Transportation found in its 2000 Comprehensive Truck 
Size and Weight Study that allowing bigger trucks nationwide would only 
increase the number of bridges that must be upgraded. Longer 
combination vehicles (LCVs)--long double and triple trailer trucks--
would alone mean $319 billion in additional bridge costs.\4\
---------------------------------------------------------------------------
     \2\USDOT's National Bridge Inventory, 2000.
     \3\USDOT, 1999 Status Report on the Nation's Hiahwavs, Bridges and 
Transit: Conditions and Performance, Report to Congress, p. 3-14.
     \4\USDOT Study, Vol. III, Table VI-2, p. VI-2.
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    Heavier trucks also have the potential to decrease pavement life, 
particularly when weight is added without adding additional axles. The 
American Association of Highway Transportation Officials (AASHTO) 
determined in its 1950's Road Test that pavement damage increases 
exponentially with the weight of a truck. For example, one 80,000-pound 
five-axle truck does the same road damage as 9,600 cars. A seven-axle 
triple does as much damage as more than 27,000 cars. In a number of 
States, five-axle trucks operate well above 80,000 pounds. A number of 
States allow five-axle trucks to operate above 80,000 pounds on the 
Interstate highways under claims of grandfather rights.
    The number of axles a triple trailer truck has is directly related 
to the amount of pavement damage it causes. Some triple trailer trucks 
will operate with nine axles, which is easier on pavements, but in 
Nevada, triples can run at 119,000 pounds with only seven axles. Seven 
axles give the operators the greatest payload per axle.
The Heaviest Trucks Fail To Pay Their Fair Share
    To add insult to injury, the heaviest trucks fail to pay their fair 
share of road costs. The 2000 Federal Highway Cost Allocation Study 
found that heavy trucks on the road today underpay their share of 
hiqhway costs nearly $1.9 billion.\5\ Triple trailer trucks pay 70 
percent of their costs through fuel taxes, long doubles pay 60 percent, 
and 80,000-pound singles pay 80 percent. A single operating at 90,000 
pounds, as some proposals suggest, would pay only 50-60 percent of its 
costs.\6\
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     \5\Federal Highway Administration, Federal Highwav Cost Allocation 
Study, 2000 Addendum (Federal HCAS), unpublished Table 3: Federal Over 
and Underpayment by 20 Vehicle Classes.
     \6\Federal HCAS, unpublished Table VI-5: Federal Equity Ratios for 
Selected Vehicle Classes Based on Registered Weights.
---------------------------------------------------------------------------
    NDOT found that Nevada's motorists subsidized heavy trucks for 15 
of the 19 years between 1984 and 1998, when the agency completed its 
last highway cost allocation study. When I was Director of NDOT, I 
asked our State legislature to enact a cost recovery system. Between 
1985 and 1989, the legislature enacted a tax structure that required 
trucks to pay their fair share of highway costs. Unfortunately, the 
legislature repealed this system in 1989.\7\ Since then, underpayments 
have gotten consistently worse. In fact, heavy trucks underpaid by $335 
million in the 1998-1999 biennium.\8\
---------------------------------------------------------------------------
     \7\NDOT, 1999 Highwav Cost Allocation Study (Nevada HCAS), p. 8.
     \8\Nevada HCAS, Table 17, pp. 31 & 37.
---------------------------------------------------------------------------
    To simply maintain Nevada's roads and bridges at the current level 
of service will take an additional $1.8 billion over the next 10 
years.\9\ Simply maintaining our nation's roads and bridges will take 
$1.13 trillion over the next 20 years.\10\ Bigger trucks would only 
mean higher costs.
---------------------------------------------------------------------------
     \9\NDOT, (Report), August 2000.
     \10\USDOT's Status Report, Exhibit 7-1, p. 7-5.
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Bigger Trucks Would Be More Dangerous
    As you know, the Federal Government has responsibility for setting 
maximum truck weight limits on the Interstate Highway System, and for 
regulating the maximum length and weight of LCVs pursuant to the 1991 
LCV Freeze. Our highways are dangerous enough as it is. Nearly 3,500 
large trucks were involved in crashes in Nevada in the year 2000.\11\ 
Increasing the weight of the typical tractor-trailer and expanding the 
routes on which LCVs are allowed to operate would put everyday 
motorists in even more danger.
---------------------------------------------------------------------------
     \11\NDOT, 2000 Nevada Traffic Crashes (NDOT Crash Report), p. 23.
---------------------------------------------------------------------------
    In August of 2000, the US Department of Transportation completed 
its Comprehensive Truck Size and Weight Study (US DOT Study). In this 
study, the US DOT found that LCVs are likely to have fatal accident 
involvement rates at least 11 percent higher than today's single 
tractor-trailers.\12\
---------------------------------------------------------------------------
     \12\US Department of Transportation, Comprehensive Truck Size and 
Weight Study (US DOT Study), August 2000, Volume III: Scenario 
Analysis, p. VIII-5.
---------------------------------------------------------------------------
    There is good reason to believe that the fatal accident rate for 
LCVs could be much higher. Trucks with multiple trailers have extra 
``articulation points,'' the points where the tractor and trailers hook 
up. These articulation points can add instability. One measure of 
stability is rearward amplification: After the tractor makes an evasive 
maneuver, a lateral force moves down the truck so that the rear trailer 
snaps back, much like creating a ``crack-the-whip'' effect. The US DOT 
Study found that on this measure of stability triples show more than 
200 percent poorer performance than single tractor-trailers.\13\
---------------------------------------------------------------------------
     \13\USDOT Study, Vol. III, Figure VIII-11, p. VIII-12.
---------------------------------------------------------------------------
    Another problem with articulation points is trailer sway. In 1984, 
the California Department of Transportation (CaITrans) conducted its 
Longer Combination Vehicles Operational Test (CalTrans Operational 
Test), and found that the third trailer on a triple trailer truck 
swayed constantly from side-to-side from four-to-six inches to as much 
as three-to-four feet, even on a straight road on a windless day.\14\
---------------------------------------------------------------------------
     \14\California Department of Transportation, Longer Combination 
Vehicles Operational Test (CaITrans Operational Test), 1984, video 
narrative accompanying the written report.
---------------------------------------------------------------------------
    Because they are so big and so slow, LCVs have difficulty 
maintaining speed on upgrades, creating serious safety risks. During 
the CalTrans Operational Test, triples and long doubles on 3 percent to 
4 percent grades achieved speeds that were 15mph to 22mph slower than 
the mean speed for single trailer trucks.\15\ Slow trucks and fast cars 
are a dangerous combination. According to a 1981 University of Texas 
study, a speed differential of 15 mph increases accident risk nine 
times.\16\
---------------------------------------------------------------------------
     \15\CalTrans Operational Test, Fig. 9, p. 41.
     \16\University of Texas Center for Transportation Research, An 
Assessment of Changes in Truck Dimensions on Highwav Geometric Desiqn 
Principles and Practices, 1981.
---------------------------------------------------------------------------
    Heavier single trailer trucks would also be more dangerous. Heavier 
single tractor-trailers will tend to have a higher center of gravity. 
Raising the center of gravity increases the risk of dangerous 
rollovers.\17\ In Nevada, 115 large trucks were involved in rollover 
crashes in the year 2000.\18\ I recently passed the scene of a rollover 
crash in the ``Spaghetti Bowl,'' where 1-80 and I580 meet in Reno. A 
truck took a curve a little too fast and rolled over, backing up 
traffic for miles.
---------------------------------------------------------------------------
     \17\US DOT Study, Vol. III, p. VIII-8.
     \18\NDOT Crash Report, p. 26.
---------------------------------------------------------------------------
    Increasing truck weight is also likely to lead to brake maintenance 
problems. Roadside inspections continually show that brake adjustment 
levels are a serious issue. The Commercial Vehicle Safety Alliance 
found during its Roadcheck 2000 that almost 30 percent of the vehicles 
inspected had brakes far enough out of adjustment to be taken out of 
service.\19\ Heavier singles often have an extra axle at the rear of 
the truck to prevent additional pavement damage, and on that axle are 
two additional brakes. The US DOT expressed specific concern about the 
ability to maintain those extra brakes.\20\ When brakes are out of 
adjustment, trucks can take substantially longer to stop. In one study, 
an 80,000-pound truck took 300 feet--the length of a football field--to 
come to a complete stop from 60mph on a dry road. When that truck's 
brakes were put out of adjustment to the level at which a law 
enforcement officer would take the truck out of service, the truck took 
450 feet to come to a complete stop.\21\
---------------------------------------------------------------------------
     \19\Commercial Vehicle Safety Alliance, Final Report on Roadcheck 
2000, Appendix A.
     \20\USDOT Study, Vol. III, p. VIII-11.
     \21\Richard Radlinski of the National Highway Traffic Safety 
Administration, ``Braking Performance of Heavy U.S. Vehicles,'' Society 
of Automotive Engineers Technical Paper Series, International Congress 
and Exposition, Detroit, MI, February 23-27, 1987, Figures 9 & 16, pp. 
8 & 12.
---------------------------------------------------------------------------
    Heavier weights also cause more severe accidents. According to the 
University of Michigan Transportation Research Institute (UMTRI), ``The 
general point is that the energy to be dissipated in a collision, and 
hence the damage done, increases with weight, and that the probability 
of injury increases with increasing disparity of weights in two-vehicle 
collisions.\22\ This is simple physics: Force equals mass times 
velocity. When you increase the mass--in this case, the weight of the 
truck--you increase the force, or the severity of the crash.
---------------------------------------------------------------------------
     \22\USDOT Study, Phase 1, Working Papers 1 & 2: Vehicle 
Characteristics Affecting Safety, prepared by the University of 
Michigan Transportation Research Institute, 1995, p. 38.
---------------------------------------------------------------------------
    Finally, longer single trailer trucks also pose a safety hazard. 
Longer trucks take longer to pass and to be passed by other vehicles on 
a two-lane road.\23\ Longer trailers also ``swing out'' into adjacent 
traffic lanes after the truck's tractor has completed its turn. This 
off-tracking can take up to more than half the width of the oncoming 
traffic lane. Motorists can be caught unaware by the unexpected 
swingout and be hit by the extra-long trailer.\24\
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     \23\USDOT Study, Vol. III, p. VIII-11.
     \24\USDOT Study, Phase 1, Working Paper 5: Roadway Geometry, 
prepared by the Battelle Team, 1995, Fig. 1, p. 4.
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The Transportation Research Board's Recent Report is Faulty
    In Special Report 267, issued this past May, the Transportation 
Research Board (TRB) recommended creating a new Federal bureaucracy to 
oversee truck size and weight regulation, in particular permit programs 
and pilot projects that would put bigger trucks on our roads now and 
test their impacts later. This report is based neither on sound 
analysis nor on sound public policy. The TRB conducted no new research 
and presented no significant new findings on the safety and 
infrastructure impacts of longer and heavier trucks. In fact, they 
ignored or attempted to discount the many studies that show that bigger 
trucks would be more dangerous and would have a negative impact on 
roads and bridges.
    Take the issue of safety. The TRB declares that there is a 
``substantial probability'' that the safety effects of bigger trucks--
or, in plain English, the dangers of increasing truck size and weight--
would be large. But the TRB says that it ``hopes'' that the changes 
would contribute to safety.\25\
---------------------------------------------------------------------------
     \25\Transportation Research Board, Regulation of Weights, Lengths, 
and Widths of Commercial Motor Vehicles (TRB Report), Special Report 
267, May 16, 2002, p. 3-21.
---------------------------------------------------------------------------
    The TRB cites the US DOT's Comprehensive Truck Size and Weight 
Study as well as a 1991 Association of American Railroads (AAR) report 
on the safety of multi-trailer trucks. 'The US DOT found that multi-
trailer trucks had an overall fatal crash involvement rate 11 percent 
higher than single trailer trucks after correcting for travel 
distribution differences by highway type. The AAR study found that 
multi-trailer trucks had an even higher fatal accident rate--66 percent 
higher than single trailer trucks.
    The TRB says that the US DOT's findings ``contradict'' the AAR's 
findings, but the two studies support each other: they both found 
higher crash involvement rates for multi-trailer trucks. Because the 
studies were 9 years apart and used different analysis periods, it is 
reasonable to expect some variation in crash involvement ratios. Also, 
travel data for multi-trailer trucks suffers from fairly high 
uncertainty rates that result in large variations year-to-year in 
apparent fatality involvement rates. Either fatal crash rate--11 
percent or 66 percent--or something in-between--is completely 
unacceptable.
    As to bridges, the US DOT Study also concluded that there would be 
enormous additional bridge costs from the nationwide operation of LCVs 
and heavier singles. The US DOT based its analysis on a presumption 
that the Federal and State governments would spend the resources 
necessary to prevent bridges from collapsing or failing. As I said 
earlier, it found that with nationwide operations of LCVs, the total 
costs of reconstructing bridges would be $53 billion, with an 
additional $266 billion in costs borne by highway users in extra fuel 
and lost productivity.
    The TRB criticizes the US DOT's methodology for overestimating 
bridge costs because the DOT assumed that all affected bridges would 
need to be replaced. At the same time, the TRB said that the DOT 
underestimated bridge fatigue and the need to make future bridges 
stronger to accommodate the heavier trucks. Yet they say that the 
correct analysis has yet to be conducted, meaning they do not know what 
the bridge costs will be.\26\
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     \26\TRB Report, pp. 2.21-2.23.
---------------------------------------------------------------------------
    As I said earlier, nearly 30 percent of our nation's bridges are 
structurally deficient or functionally obsolete. There is an obvious 
backlog on maintenance and a shortage of funding. Yet the TRB is 
proposing testing these trucks on our highways.
    We have had LCVs in Nevada for 30 years. Nobody has said that we 
have not learned enough about them and certainly no one wants more of 
them.
    Congress Should Retain Jurisdiction Over Truck Size and Weight on 
the Federal System Proponents of bigger trucks have asked for a ``State 
option'' plan whereby the States would be able to set their own truck 
size and weight limits on the most important part of the Federal 
system: the Interstate highways. But any law regarding the national 
transportation system should have national oversight.
    In a previous authorization debate, some suggested that Congress 
devolve power to the States to create their own highway design 
standards. Some joked that we could have green signs in Nevada and 
yellow signs in Wyoming, but more importantly Congress realized that 
there must be basic uniformity on the Federal Aid system. That is why 
the Federal Government sets design, maintenance and construction 
criteria for the Federal Aid Highway System. Truck size and weight 
should be no exception.
    If the States were allowed to set their own limits, those with 
higher limits would place tremendous pressure on States with lower 
limits to allow bigger trucks to remain economically competitive. A 
number of Governors and State DOT directors have already rejected the 
State option approach for this reason. When Federal Highway 
Administrator Mary Peters was Arizona's DOT Director, she wrote a 
letter to her Washington representatives opposing bigger trucks. In her 
words, while proponents of bigger trucks ``argue that expanding the 
truck weight limit would be at a State's discretion, Arizona could not 
realistically exclude larger trucks from commerce here if all of the 
States surrounding Arizona opt for the higher limits. Regulation of 
interstate commerce is clearly one of the areas reserved by the 
Constitution to the Congress.\27\
---------------------------------------------------------------------------
     \27\Other State officials who have written letters (of which I am 
aware) are the Secretaries of the Florida Department of Transportation 
and the New Mexico State Highway and Transportation Department; the 
Illinois Secretary of State; and the Governors of Arkansas, Minnesota, 
Mississippi, Nevada and Rhode Island.
---------------------------------------------------------------------------
    What's more, ``State option'' is the reason there are 50 different 
sets of truck size and weight limits on the Interstate System. Before 
Congress set the current size and weight limits on single trailer 
trucks and twin 28-foot ``short'' doubles in 1982, the States had 
jurisdiction and local pressures dictated the various limits. The 
trucking industry played the States off one another to get higher 
limits. When three States held out, the trucking industry claimed they 
were hurting productivity and asked Congress to force those States to 
raise their limits.\28\
---------------------------------------------------------------------------
     \28\Oral statement of Edward V. Kiley, Senior Vice President, 
American Trucking Associations before the Committee on Public Works and 
Transportation, US House of Representatives, May 4, 1982.
---------------------------------------------------------------------------
    For these same reasons, the western States should not be ``carved 
out'' of the Federal picture as some proponents of bigger trucks 
suggest. The West does have wide-open spaces and a greater distance 
between communities, but we also have many mountainous areas that make 
heavy truck operations treacherous. Truck operators do not always 
upgrade their engines to accommodate extra weight, and for that reason 
triple trailer trucks are often the slowest trucks on the road. Driving 
up steep grades, that power-to-weight ratio becomes even worse. The 
CalTrans Operational Test proved this point. CalTrans drove a triple 
trailer truck up the Grapevine, a 6 percent grade pass on 1-5. The 
triple was the slowest truck on the road and blocked traffic in the 
right lane. The lighter trucks passed the triple in the two lanes to 
the left, leaving only one lane for cars.\29\
---------------------------------------------------------------------------
     \29\CalTrans Operational Test, video narrative accompanying the 
written report.
---------------------------------------------------------------------------
    Driving down steep grades can also mean serious braking problems. 
According to UMTRI, ``Given that the pounds of brake mass to pounds of 
vehicle mass is limited for trucks, there is a greater tendency for 
truck brakes to overheat than there is for car brakes.\30\ In other 
words, a truck's brakes can overheat when in constant use going down a 
hill. When that happens, the brakes fail to work properly, particularly 
when brakes are out of adjustment which, as I noted earlier, they often 
are.\31\ That is why we build truck escape ramps.
---------------------------------------------------------------------------
     \30\USDOT Study, Phase 1, Working Papers 1 & 2, p. 13.
     \31\Radlinski for NHTSA, pp. 11-12.
---------------------------------------------------------------------------
    Finally, a recent AAR study found that bigger trucks would result 
in 1,000 additional LCVs each day on 1-15 from Chicago to Los Angeles. 
That is a tremendous amount of truck traffic.
The Safe Highways and Infrastructure Preservation Act
    I am here today to ask you to reject any increases in truck size 
and weight. But I also ask you to take it one step further. There are 
loopholes in the current law that allow trucks to get longer and 
heavier, and weights on the National Highway System (NHS) are being 
ratcheted up. ``The Safe Highways and Infrastructure Preservation 
Act'', which has been introduced in the House of Representatives, would 
put a stop to these backdoor increases. The bill would establish common 
sense truck size and weight limits on the National Highway System and 
close loopholes in the law that allow longer and heavier trucks. I urge 
you to support a similar measure in the Senate.
    This is what the bill would do:
1. The bill would freeze all current trailer lengths on the NHS
    Trucks have been getting longer. There is no Federal trailer length 
maximum, only a minimum of 48 feet. The standard trailer length has 
increased over time from 25 feet in 1946 to 53 feet today. Eleven 
States allow trailers 57 feet or longer to operate regularly, with more 
than half of these having legalized the extra long trailers since 
1990.\32\ H.R. 3132 would freeze all current trailer lengths on the 
National Highway System.
---------------------------------------------------------------------------
     \32\The 11 States and their year of legalization are Oklahoma 
(1983), Wyoming (1984), Louisiana (1985), New Mexico (1986), Texas 
(1989), Colorado (1990), Kansas (1991), Arizona (1991), Florida (1992), 
Mississippi (1993) and Alabama (1993).
---------------------------------------------------------------------------
2. The bill would freeze all overweight permitting practices
    Trucks have been getting heavier on our Interstate highways. Truck 
operators are applying for--and getting--more ``multiple trip divisible 
load'' permits to run well over the Federal legal limit. States that 
issue these permits claim grandfather rights to allow trucks to operate 
over the Federal legal limit. H.R. 3132 would freeze all overweight 
permitting practices.
3. The bill would extend the Federal Interstate weight limits to the 
        entire National Highway System, grandfathering in higher 
        weights. The bill would also extend the LCV Freeze to the 
        entire NHS Trucks have also been getting heavier on the non-
        Interstate portions of the NHS
    Federal truck weight limits, including the LCV Freeze established 
by ISTEA in 1991, are limited to the 44,000-mile Interstate Highway 
System. By contrast, State weight limits apply to the more than 156,000 
miles of NHS.
    In June of 2001, Ohio raised the allowable tandem axle weight on 
NHS routes from the Federal limit of 34,000 pounds to 40,000 pounds. 
Georgia raised the allowable tandem axle weight on NHS routes from 
37,340 pounds to 40,680 pounds 3 years ago.
    If NHS weights continue to rise across the country, Congress will 
be faced with similar pushes for heavier Interstate weight limits.
4. The bill would address illegal overweight operations
    About 10-20 percent of trucks are operating illegally 
overweight.\33\ The US DOT says that a truck operator who runs at 
10,000 pounds over the Federal legal limit for 1 year will earn an 
extra $25,000.\34\ That is a huge profit incentive, especially when 
fines across the country often do not even cover the cost of filing the 
paperwork for the citation, let along acting as any sort of 
deterrent.\35\ H.R. 3132 would direct the US DOT to establish a model 
fine system.
---------------------------------------------------------------------------
     \33\USDOT Study, Phase 1, Working Paper 10: Enforcement, prepared 
by the Battelle Team, 1995, pp. 2-3 and Transportation Research Board, 
Special Report 225, Truck Weight Limits: Issues and Options, National 
Academy of Sciences, 1990, p. 141.
     \34\Church and Mergel, Effectiveness of Violator Penalties in 
Compelling Compliance with State Truck Weight Limits, prepared for the 
US DOT, September 2000, p. 12.
     \35\See Church and Mergel, pp. 19 & 20 for a list of first offense 
fines by State. In the contiguous States, the lowest fine for a 10,000-
pound illegal overload is $55 in Delaware; the highest is $2,625 in 
South Dakota.
---------------------------------------------------------------------------
    The Federal Government has a responsibility to keep trucks from 
becoming bigger and more dangerous. I ask that you support this 
measure.
Conclusion
    Thank you for inviting me to testify today. I am happy to answer 
any of your questions.
                         nevada for safe roads
State and Regional Organizations
Nevada Conference of Police & Sheriffs (NCOPS) Nevada State AFL-CIO

Nevada Alliance for Retired Americans (NARA)

Nevada Parent Teacher Association (PTA)

Peace Officers Research Association of Nevada (PORAN) Southern Nevada 
Council UAW Retirees Southern Nevada Fire Chiefs Association Southern 
Nevada Fire Prevention Association
Local Organizations
Clark County Chapter 4530 NARA Clark County Commission

Las Vegas Police Protective Association Reno Police Protective 
Association Republican Women of Reno Teamsters Local 533

Teamsters Local 631

Washoe County Commission Washoe County Medical Society
Community Leaders
Andy Anderson, President, NCOPS

Charlie Cox, President UAW Local 2162, Sparks

Garth Dull, former DOT Director

Jane Feldman, Conservation Chair, Southern Nevada Group of the Sierra 
Club Clarence Fend, AARP

The Honorable Bob Ferraro, city of Boulder City

Robert ``Bob'' Forbuss, Vice Chair, Las Vegas Convention & Visitors 
Authority Dario Herrera, Chairman, Clark County Commission

The Honorable Charles Horne, city of Mesquite

Jim Hulse, retired Professor of History

Wayne R. King, Teamsters Construction Division

Helen Klatt, PhD, Past President, Nevada Federation of Republican Women 
Cheryl Lau, former Secretary of State

Stan Olsen, Government Liaison, Las Vegas Metropolitan Police Bette 
Renwick, President, Republican Women of Henderson Ken Riddle, 
President, Southern Nevada Fire Chiefs Association Danny Thompson, 
Secretary-Treasurer, AFL-CIO

Linda Wilcock, President-Elect, Greater Federation of Women's Clubs
    Senator Reid. Senator Jeffords, would you ask the first 
round of questions? We will have 5 minutes, just like the 
witnesses. If you want to go again, we can have you do that. 
Chairman Jeffords?
    Senator Jeffords. Thank you very much, Mr. Chairman.
    Ms. Peters, I have a few questions for you. What avenues 
can Congress take to ensure the performance of the system does 
not continue to degrade?
    Ms. Peters. Mr. Chairman, I believe the way we can do that 
is to continue to have performance measures, as Ms. Hecker 
indicated. We need to have performance measures such as the 
pavement condition, the bridge condition, and monitor those to 
ensure that investments are made; that we are getting the best 
life out of our transportation assets.
    Senator Jeffords. One of the key features of our 
transportation program is its flexibility. Under TEA-21, a 
State can move funds from program to program. This feature 
enjoys universal support. I wonder, however, if we should be 
concerned about flexing money out of the bridge or Interstate 
maintenance program. How can we be sure that our national 
interest in asset management is adequately addressed, while 
preserving the flexibility provisions under the law?
    Ms. Peters. Mr. Chairman, again I think what we need to do 
is establish metrics where we are spending the money and 
meeting certain performance measures, and ensuring that States 
are doing that before we are transferring money out. As you 
know, we are fans at the Department of this flexibility 
provision as well, but we need to balance that, of course, with 
the performance of the system.
    Our preference is to work with States in establishing those 
performance measures and with the AASHTO community so that we 
all agree together how we can best get the longest useful life 
out of our transportation assets.
    Senator Jeffords. The Interstate system is vital to the 
economy. It moves a majority of the traffic in our country. 
What level of investment is needed to ensure that this vital 
network is free of major problems?
    Ms. Peters. Mr. Chairman, we did look at the specific level 
of investment in our Interstate highways, and in fact some of 
the best pavement conditions and best bridge conditions, as 
indicated earlier, do exist on our Interstate highway systems 
today, which again is appropriate because those systems do 
carry the majority of the travel.
    In looking specifically at those systems, I think we have 
to continue to focus both on how we are building, and on how we 
are maintaining and operating them to ensure that we are 
getting the maximum useful life out of them. Just for example, 
if we look at our pavement condition in the year 2000, overall 
pavement condition, it is about 86 percent, meaning the 
pavement with acceptable ride quality. On the Interstate 
system, it is nearly 97 percent, so continuing that type of 
focus is important in the future.
    Senator Jeffords. Mr. Perkins, how is AASHTO's strategic 
highway safety plan different from previous safety related 
efforts and programs?
    Mr. Perkins. Our safety plan actually is taking a look at 
some 20-plus activities. We are trying to put everything 
together, which includes the driver, the vehicle, all aspects 
of safety. This will result in also looking to see what kind of 
safety measures we can take, such as widening, such as 
different kinds of intersections and so on that we can build to 
meet these safety things. It is much more comprehensive 
program, Senator.
    Senator Jeffords. Ms. Hecker, how would you assess the 
quality of the data that is used by FHWA in the development of 
the Conditions and Performance Report? What can be done to 
improve the quality of future FHWA Conditions and Performance 
Reports?
    Ms. Hecker. We have reviewed them in the past, and in fact 
have positive observations, both on the methodology and the 
quality of the data. I think the improvement goes to my point, 
though, about the strategies for improving the performance--
those bottom line numbers, because they are so large and so 
beyond the existing resources or readily imaginable new 
resources. It is really, how do we get more for the money; how 
can we actually enhance the performance and do that, not with 
these numbers for new construction, but through less capital-
intensive means that improve the performance of the system.
    Senator Jeffords. We have heard a lot in previous hearings 
about the growing congestion overtaking our metropolitan areas. 
I see congestion even in my travels between Rutland and 
Burlington, Vermont. Is congestion a growing concern in the 
rural portions as well?
    Ms. Hecker. Yes. We have recently completed a study of the 
Interstate, and while congestion was more serious in the urban 
areas, we saw substantial agreement among States that 
congestion was an emerging problem in rural areas as well. Part 
of this is really the interface of freight and passenger 
traffic. That is where you get a lot of these bottlenecks where 
it may not be a heavily populated area, but if you combine peak 
times with movements of freight traffic through the area at 
those same times, then it is going to create congestion.
    Senator Jeffords. Thank you.
    Thank you, Mr. Chairman.
    Senator Reid. Senator Voinovich.
    Senator Voinovich. Ms. Peters, you talked about the 
increased congestion in urban areas. That has been a perplexing 
problem for this committee for as long as I have been here. 
What are your suggestions in terms of dealing with that? It 
gets into the environmental concerns and others, but we just, 
as you mention, I think, in your testimony, it is getting worse 
all the time. We are seeing more and more people sitting in 
their automobiles for hours in some cases trying to get home or 
go to work--usually it is going home. What are your ideas?
    Ms. Peters. I don't know, Senator. I spent literally two 
full hours trying to travel 13 miles in this region 1 day last 
week, so I think--and I was trying to get to work that day--so 
it is a problem both going to work and coming home from work. 
But I think there are a variety of strategies we can employ. 
One of the things that really concerns us in looking at this 
edition of the Conditions and Performance Report, as was 
mentioned earlier, is congestion is no longer just a big city 
issue. Congestion in cities of 500,000 population or less has 
increased 217 percent from 1987 to 2000. So in answer to your 
question, sir, we believe that there are a variety of tactics 
that we can use--first of all, bringing as much as we can to 
the table in terms of investment, so that we have investment 
choices and we can make those investments; as was mentioned by 
GAO, operating the system more efficiently, using technology or 
what is known as intelligent transportation systems to increase 
the through-put of the systems; maintaining those systems so 
that we have the highest performance of those systems, as was 
mentioned, is another tool that we can use as well.
    And, using the practices once we have decided to build a 
section of highway or freeway or expand that section of highway 
or freeway, of getting that done as quickly as and as 
efficiently as possible so that we have that portion of the 
transportation system available for use, is important.
    All of these tools can be used to deal with this issue of 
congestion. I do believe, though, we still do need to 
strategically add capacity. In areas such as Senator Reid's 
State in the Las Vegas area, with the growth that they are 
seeing, it simply is not possible to deal with it, even using 
the methods that I have described.
    Senator Voinovich. One of the things that I am hoping this 
committee can get done before we get into the final phase of 
this legislation is to get the 1309 provisions taken care of. 
We have been waiting years to get regulations out of the 
Department of Transportation going forward with those 
streamlined provisions of the legislation, recognizing the 
environmental concerns that we have. What are the chances of us 
getting something back that we can move on rapidly to get that 
out of the way?
    Ms. Peters. Senator, I think that the President's executive 
order which was issued the week before last was our effort both 
at withdrawing the existing regulations which were very 
controversial on both sides of the aisle, and moving forward 
with something that we believe will help us fulfill the tenets 
of section 1309 and get transportation projects moved through 
much more efficiently and effectively.
    Within the context of the reauthorization proposal which 
the Administration would hope to bring forward early next year, 
we may have other suggestions, but we do believe that the 
President's executive order will help us get these projects 
moving without sacrificing environmental concerns.
    Senator Voinovich. When you are entertaining highway 
projects, do you give consideration at all to the negative 
impact those projects might have on the traveling public? By 
that I mean, I will never forget when the State of Ohio 
contemplated putting a third lane on I-71. The original 
proposal was that we were going to shut it down to one lane. I 
just thought it was incredible, and they said, well, it's a way 
to save money. And I said, I can just see people traveling on 
I-71 in one lane and what it would do to the inconvenience to 
the public and the congestion and the use of gasoline, let 
alone the stress on the individuals driving the automobiles, 
and their families.
    Do you take that into consideration when you get some of 
these proposals back from the States on how they are going to 
go forward with a project?
    Ms. Peters. Senator, we do, and are working very actively 
with the AASHTO community, and in particular the committee that 
is chaired by Director Perkins here, the Standing Committee on 
Highways. We are looking at methods of constructing projects 
that are less detrimental to the traveling public, using tools 
such as design-build and lane rental incentives, we can keep 
more of the roadway section open and serving the public during 
construction periods than we have in the past. I think that is 
an area that is ripe for more improvement and we look forward 
to working with you and with members of the AASHTO community on 
making those improvements.
    Senator Voinovich. I know that we had a project in the 
Cleveland area, and I think it may have been the first or 
second dual-dual highway system where you have the main road 
and then you can get off on kind of like a speedway--not a 
speedway, but it is less traffic. It is just amazing what a 
difference that has made. And that was insisted on because we 
needed to put an exit onto 271 Interstate highway, and that 
would have kind of shut the highway down. So somebody in 
Washington said, let's give consideration to putting in another 
roadway that we can keep going, and it has turned into this 
dual-dual. It has just been amazing what it has done to reduce 
congestion in the area.
    The other thing I will never forget is that we had to raise 
our Ohio Turnpike--it had two lanes, and we increased the fees 
on the turnpike and went to a third lane. I do now know whether 
you have gone from a highway where you have gone from two lanes 
to three lanes, but it is just amazing how it has relieved some 
of the congestion and reduced the number of traffic fatalities 
that we have had there. But you do take those things into 
consideration?
    Ms. Peters. We do, sir.
    Senator Voinovich. Because a lot of them cost money, but 
you have to weigh that versus some of the other things that are 
available.
    Ms. Peters. That is correct.
    Senator Reid. The only good news that I have heard this 
morning is from you, Ms. Hecker, and that is we have to try 
something new in this new highway bill, and that is really hard 
to do--to break our old legislative habits. Our legislative 
habit in the past has been just more roads, more highways. We 
don't have money to do that, so we are going to have to come up 
with something new. So what did you call it? Demand management? 
What was the term?
    Ms. Hecker. Demand management has many aspects to it, but 
basically right now we are managing demand with congestion, 
that the excess of demand over supply is evidenced by people 
waiting in line and by the unreliability of trips.
    Senator Reid. This is really kind of a scary time to have 
this bill facing us. We know we do not have the money that we 
need. Some are talking about increasing gas taxes to try to 
meet the needs that we have. There are lots of interesting 
proposals, but I do not think there is--I ask you this, Ms. 
Peters. Your proposal includes funding levels that are high 
enough to ensure both conditions and performance. I do not see 
how that is going to improve. You know, we are limited in 
money. So as I have heard here today, the best we can do is 
manage what we have and not look forward to a lot of 
improvement. Is that a fair statement?
    Ms. Peters. Mr. Chairman, Senator Reid, the report, the 
Conditions and Performance Report is intended to be an 
objective analysis of long-term needs only, and it does not get 
into some of the policy issues. But if I could go away from 
that report, I think Ms. Hecker is exactly right in terms of 
what we need to do in the future and look at managing our 
system as a whole. In the past, I believe that we as an 
industry have been too supply side focused, and we really need 
to look at the demand side and determine what are the ways that 
we can meet demand. One of the ways is to reduce that demand. 
Other ways are to strategically add capacity, get more out of 
the system that we have today. Those are the types of 
conversations that we look forward to having with you as the 
Administration develops a reauthorization proposal.
    Senator Reid. Ms. Hecker, you mentioned freight and 
passenger--the problems it causes. We have been trying for 5 
years. We have approved Amtrak route from L.A. to Las Vegas. We 
have been trying for all those years to get that done. It would 
not seem like a real big deal. The tracks are already there. 
But the main problem is the freight and passengers. The 
passengers always take second-fiddle to freight. As a result of 
that, a ride from L.A. to Las Vegas should take 4 hours or 
thereabouts. I mean, they are saying it could take 8 or 9 
hours. Well, it defeats the whole purpose of what we are trying 
to accomplish is to alleviate some of the problems we have on 
I-15, which is just a jam-packed highway system.
    So I think we are going to have to put our heads together, 
all of us--AASHTO, Federal Highway Administration, see what we 
can get from the experts at GAO, as noticed, and look at this 
highway bill as a time for doing something different to 
alleviate the transportation problems of this country. Because 
as much as we all, and as Senator Byrd talked, we need more 
lanes and things that we have done in the past. We are going to 
have to come up with novel new ways with a limited amount of 
resources to try to alleviate the traffic that we have. Because 
as Senator Voinovich, the one thing you did not mention, 
Senator Voinovich, with your example of reducing the lanes from 
two to one while they put in a third lane, is what it does to 
people's businesses; what it does to commerce. Somebody is 
paying for those trucks that are stuck in traffic. Somebody is 
paying for those people who are trying to get to work and 
can't, or have another appointment someplace else. It just 
increases everyone's cost of doing business. That is one of the 
problems we have with these jam-packed highways.
    I have a number of questions that I would submit to the 
witnesses in writing. I have several questions for you, Ms. 
Peters. I have questions for all three of you that I would like 
you to answer--the same question. And for you, Mr. Perkins, we 
have a number of questions that we need to ask, not the least 
of which is, we have some mega-projects coming up in this 
highway bill. Question: What are these mega-projects like the 
Wilson Bridge out here--what does that do to overall highway 
funding? It is obvious, the answer is it hurts it very badly. 
And then for you, Ms. Hecker, I have a number of questions that 
I need to submit to you.
    Thank you all very much for being here. I would ask that 
these questions that we submit to you, if you could get the 
answers back in a couple of weeks, that would be a big help to 
us.
    Senator Voinovich. Mr. Chairman, I also have some questions 
that I would like to submit.
    Senator Reid. Yes, that would be certainly appropriate.
    The third panel is the Honorable Gordon Proctor, who is the 
Director of the Ohio Department of Transportation. I don't know 
how he got on the witness list, but he is on it. We have Thomas 
L. Jackson, President-elect of the American Society of Civil 
Engineers. We have Dr. William Buechner, Vice President, 
Economics and Research, American Road and Transportation 
Builders Association.
    We would ask you all to take your places here. You know 
what the rules are. We will first hear from Director Proctor, 
the State of Ohio. They are expecting you to do very, very well 
because Senator Voinovich has highly recommended you. So we 
have great expectations.
    Mr. Proctor. I will try to fulfill his expectations, Mr. 
Chairman.

   STATEMENT OF GORDON PROCTOR, DIRECTOR, OHIO DEPARTMENT OF 
                         TRANSPORTATION

    Mr. Proctor. Mr. Chairman, members of the committee, I am 
Gordon Proctor, Director of the Ohio Department of 
Transportation. I very much appreciate this opportunity to 
testify, and we very much appreciate the assistance of Senator 
Voinovich. His leadership on transportation in Ohio is very 
much appreciated.
    As you shape the next transportation act, I ask that you 
focus on the tremendous need to rebuild, reconstruct and 
rejuvenate the Interstate highway system. This system will 
reach its 50th anniversary in 2006, mid-way through the next 
act. The Interstate highway system has served us well and today 
plays a vital and irreplaceable role in our transportation 
system. At the same time, the system is aging, stressed and 
sorely in need of additional investment to ensure the safety, 
adequacy and competitiveness of our Nation's transportation 
system.
    When we put this system in context, it represents only 1.2 
percent of the public road miles in the United States, but it 
carries 24 percent of all traffic and an estimated 80 percent 
of all truck freight. Traffic volumes on the Interstate have 
risen 41 percent in the past 10 years, and truck volumes have 
grown by even more.
    The advent of computerized inventory systems, combined with 
the ease and access of the Interstate highway network, led to 
the creation of just-in-time inventory. This strategy played a 
large role in dropping the Nation's cost of logistics from 16 
percent of the gross domestic product in 1978 to only 10 
percent of the gross domestic product today. That means that a 
substantial portion of America's rise in productivity in the 
past 20 years has been attributable to our Interstate highway 
system. As Governor Taft has said, the Interstates are the 
conveyor belt for America's just-in-time economy.
    However, we are experiencing very troubling trends in Ohio 
and across the country. Ohio is a good microcosm because our 
Interstate highway system is America's fourth largest and we 
estimate it carries the third greatest value of truck freight. 
I mention it not because it is unique, but because it is so 
typical. In the past 25 years in Ohio, we have experienced an 
89 percent increase in truck volumes. Routinely every day in 
Ohio, truck volumes on our major Interstate highways approach 
20,000 trucks a day. We estimate truck volumes will grow by 
approximately 60 percent over the next 20 years, and some 
estimate that the growth will be even higher.
    That means within 20 years, 30,000 trucks a day will be the 
norm on the Interstates in Cincinnati, Dayton, Springfield, 
Toledo, Cleveland, Akron, Canton and Youngstown. Those routes 
used to be our safest and most reliable routes, but now severe 
congestion, outdated interchanges, poor geometrics, and 
tremendous volumes have turned nearly every Interstate route in 
Ohio and in Ohio cities into a high congestion, high accident 
bottleneck. I-75 in Toledo carries 19,000 trucks a day. It is 
43 percent over capacity and it has 100 accidents per mile, per 
year. On I-75 in Cincinnati, we have 184,000 vehicles, 14,000 
trucks and an average of 80 accidents per mile, per year.
    Our most congested location in Ohio is the overlap of 
Interstate 70 and 71 in Columbus, which is the literal and 
figurative crossroads of Ohio. Volumes are 114 percent over 
capacity and we average 274 accidents per mile, per year--274 
accidents per mile, per year. That equals more than one 
accident per every business day. Within a 2.5 mile radius of 
the intersection of those two Interstates, we have had 2,037 
accidents over a 3-year period.
    I will offer one final example. Just in Dayton, where we 
have 19,000 trucks a day and 80 accidents per mile, per year, 
it would cost us $750 million to reconstruct I-75 in Dayton to 
make it meet all current standards. We will never have $750 
million, so we have a secondary plan to invest $300 million to 
merely make it adequate. We can afford $300 million for Dayton. 
That equals 1 year's total new construction budget for the Ohio 
Department of Transportation. But you multiply that times 10, 
and you will know what we need in Cincinnati, in Columbus, in 
Cleveland and Akron and Canton and Youngstown, as well as 
Columbus. And then if you multiply that by all the States in 
the country, and as I say, what is in Ohio is not unique--it is 
very typical--it represents a major challenge that is addressed 
in the Condition and Performance Report.
    What can Congress do? I would ask that you please not 
dilute the basic highway core formula. We ask that you protect 
us from historic preservation requirements that could treat the 
Interstate system as a historic artifact in a few years as it 
reaches its 50th year. We ask that no new regulations be 
adopted that could impede our progress. And finally, we endorse 
an idea first suggested by Administrator Peters that a national 
commission is needed to evaluate the future of the Interstate 
system.
    Thank you very much, and I would be happy to answer 
questions at the appropriate time.
    Senator Reid. Very important testimony. I am very 
impressed.
    Thomas Jackson, please proceed.

   STATEMENT OF THOMAS L. JACKSON, PRESIDENT-ELECT, AMERICAN 
                   SOCIETY OF CIVIL ENGINEERS

    Mr. Jackson. Good morning, Mr. Chairman, and members of the 
committee. My name is Tom Jackson. Thank you for the 
opportunity to be here. I am currently serving as the 
President-Elect of the American Society of Civil Engineers, and 
I am pleased to represent ASCE here this morning.
    For 150 years, ASCE has been representing engineers who are 
responsible for the Nation's built environment. ASCE represents 
more than 130,000 civil engineers worldwide. We look forward to 
working with the committee on the reauthorization of TEA-21. 
ASCE believes the reauthorization should focus on three goals: 
expanding infrastructure investment, enhancing infrastructure 
delivery, and maximizing infrastructure effectiveness.
    In 2001, ASCE released a report card for America's 
infrastructure which gave America's infrastructure a grade of 
D-plus based on 12 categories. In our role as steward of the 
infrastructure, ASCE developed its first report card in 1998, 
and the infrastructure scored an overall grade of D. So there 
has been some modest improvement since 1998. In 2001, the 
Nation's roads earned a D-plus, up from a D-minus in 1998, and 
the Nation's bridges received a grade of C, an improvement from 
C-minus in 1998. The enactment of TEA-21 and additional State 
and local programs to fund surface transportation 
infrastructure has begun to address the investment crisis in 
crumbling infrastructure. But on our highways, nearly 70 
percent of those traveling in peak hour traffic experience 
congested conditions. Vehicle travel on America's highways 
increased by 148 percent from 1970 to 2000. The Nation's 
population grew by 38 percent over that period, while new road 
mileage increased by only 6 percent.
    According to a study by the Texas Transportation Institute, 
the total congestion bill for the 75 areas studied in 2000 came 
to $67.5 billion. In 1998, 29 percent of the Nation's bridges 
were rated structurally deficient or functionally obsolete by 
the Federal Highway Administration. The FHWA tells us that 
$10.6 billion are required each year for the next 20 years to 
eliminate the current backlog of bridge deficiencies and to 
ensure safety. Even with TEA-21's commitment, our Nation must 
increase its annual investment by at least $35 billion at all 
levels to improve the condition of our highways. The Nation 
should invest $106.9 billion a year in its road and bridge 
systems over the next 20 years, according to a FHWA 2002 
report.
    While traveling on our highways has increased dramatically 
in the past 10 years, America has been seriously underinvesting 
in needed road and bridge repairs, and has failed to even 
maintain the substandard conditions we currently have. This is 
a dangerous trend that is affecting highway safety and the 
health of the American economy.
    Establishing a sound financial foundation for future 
surface transportation improvements is an essential part of 
TEA-21 reauthorization and one way to improve the Nation's 
infrastructure grade point average. The Department of 
Transportation data indicate that an investment of $75.9 
billion per year is needed to preserve the system in its 
current condition. ASCE supports the total annual Federal 
funding of $40 billion to $50 billion for the Federal Highway 
Aid Program. To achieve this level, ASCE supports an increase 
of six cents per gallon in the Federal user fee on gasoline. 
Additionally, ASCE supports adding a provision to the law that 
would index it based on the consumer price index, or CPI. These 
changes would provide a much-needed infusion of funding toward 
the $50 billion per year needed.
    Safety and security have always been important, but have 
been driven to the top of our priority list by the events of 9-
11. In response, ASCE believes that one cent of the proposed 
six cents increase in user fee be directed toward safety and 
security projects. Even with increases in gasoline user fee, it 
is likely that the tax base revenues will not be sufficient to 
keep pace with the Nation's transportation needs.
    The innovative financing programs in TEA-21 have been a 
good start, but more needs to be done. ASCE encourages the use 
of life-cycle costs, analysis principles, and a design process 
to evaluate the total cost of the projects. The analysis should 
include initial construction, operation, maintenance, 
environmental, safety and all other costs reasonably 
anticipated during the life of the project, whether borne by 
the project owner or those otherwise affected. There continues 
to be a great deal of discussion on truck weights and sizes and 
their effects on roads and bridges. As an engineer, I can tell 
you increases in truck sizes and weights impact negatively on 
the life expectancy of roads and bridges.
    However, it is important to note that highways can be 
designed and constructed to accommodate various truck sizes and 
weights. Truck and highway design should be coordinated through 
joint research activities such as the National Cooperative 
Highway Research Program. New and reconstructed roadways should 
be designed to support modern truck sizes and weight, and to 
ensure the safe operation of the system.
    Let me conclude with this thought. A crumbling 
infrastructure cannot support a healthy economy or a healthy 
population.
    Thank you very much. I will be prepared to answer to answer 
any questions.
    Senator Reid. Dr. Buechner?

STATEMENT OF WILLIAM R. BUECHNER, VICE PRESIDENT, ECONOMICS AND 
RESEARCH, AMERICAN ROAD AND TRANSPORTATION BUILDERS ASSOCIATION

    Mr. Buechner. Mr. Chairman, Senator Voinovich--thank you 
very much for inviting the American Road and Transportation 
Builders Association to testify this morning. I am Dr. William 
Buechner, ARTBA's Vice President for Economics and Research. 
Prior to joining ARTBA in 1996, I served for 22 years as senior 
economist for the congressional Joint Economic Committee, and I 
have a doctorate in economics from Harvard University.
    Mr. Chairman, at the outset, I want to express our 
association's deep appreciation to you personally and to the 
bipartisan leadership of this committee for your work this year 
to maintain the fiscal year 2003 highway program at the 
current-year $31.8 billion funding level.
    The 2002 Conditions and Performance Report discussed 
earlier this morning by Federal Highway Administrator Mary 
Peters indicates that an average annual investment of just 
under $76 billion by all levels of government would be required 
during the next 20 years to maintain current conditions on the 
Nation's highways and bridges. During the past 20 years, the 
Federal share of highway investment has been around 45 to 47 
percent, which implies that a Federal investment of about $35 
billion a year for the next 20 years would meet our highway 
investment requirements.
    I think this greatly understates our investment needs. 
These conditions and performance reports are excellent reports, 
but you have to dig down into the details to find out the real 
level of needs. There are three reasons why the $76 billion 
investment figure is understated. The first is that it is 
stated in year 2000 dollars. Obviously, future inflation will 
significantly add to the investment required. For example, with 
projected inflation over the next few years of 2.4 percent per 
year, costs would be 10 percent higher than that in 2004 when 
we start the reauthorization period, and almost 25 percent 
higher in 2009. Congress needs to take this into account when 
setting annual highway investment levels.
    Second, it focuses on user costs, which are a combination 
of congestion costs, crash costs, and vehicle repair costs. The 
Conditions and Performance Report makes it very clear that the 
$76 billion figure will not maintain current conditions in 
terms of congestion. Traffic congestion at that level will 
continue to get worse, and the Administrator said that this 
morning.
    Finally, the report assumes that traffic growth is going to 
slow down significantly in the next 20 years, from 3 percent 
growth per year in the last 20 years to 2 percent per year in 
the next 20 years. This assumption greatly reduces the 
investment needs because less traffic means fewer highway 
repairs and less need for new capacity. Virtually every past 
report has understated traffic growth. This report points out 
that if you just assume continued traffic growth for the next 
20 years as we have in the past 20 years, that we would 
actually require $120 billion worth of investment just to 
maintain conditions.
    The AASHTO bottom line report, which was discussed earlier, 
concluded that an average annual investment of $92 billion in 
2000 dollars by all level of governments would be needed to 
maintain conditions, which is about $16 billion more than the 
Administrator focused on this morning.
    When ARTBA analyzed the data in the 1999 Conditions and 
Performance Report and adjusted the data for inflation and VMT 
growth, we concluded it would take an average Federal program 
of about $50 billion a year for the next 6 years just to 
maintain structural, safety and performance conditions on the 
Nation's highways and bridges. When the new report is finally 
released later this year, I think the data will inescapably 
show that a Federal highway investment of at least $50 billion 
per year will be required, and maybe $60 billion or more.
    ARTBA has developed a TEA-21 reauthorization funding 
proposal, which we call ``Two Cents Makes Sense,'' that shows 
how the Federal share of highway investment requirements during 
the next 6 years can be substantially met. First, we are 
recommending a Federal highway program funded at $35 billion in 
fiscal year 2004, and then growing $5 billion a year to $60 
billion a year by fiscal year 2009. The program would also 
double transit investment to $14 billion by 2009. This approach 
would result in a manageable program for both the State DOTs 
and the highway construction industry.
    We are also suggesting a fundamental change in the way 
highway trust fund cash is managed, to assure that highway 
users pay no more into the trust fund than is needed to cover 
actual cash outlays from the trust fund. Under our recommended 
changes, we calculate that a small annual increase in the 
Federal highway user fee of about two cents per gallon per year 
would be needed at most to meet projected cash outlays from the 
highway trust fund to fund the program that we have 
recommended. About a half a cent of this increase would come 
from permanently indexing the highway user fee to the consumer 
price index, and the other penny and a half a year would have 
to be included in the reauthorization legislation.
    To put this into perspective, we have included a chart in 
our prepared statement showing that the average weekly change 
in the retail price of gasoline over the last year and a half 
has been two-and-a-half cents a week. So we are talking about 
an annual increase that is smaller than the weekly change that 
Americans have become used to in the retail price of gasoline.
    Finally, we have proposed a change in the RABA provision to 
assure that the funding would be completely budget-neutral and 
would have no impact on the Federal surplus or deficit.
    Mr. Chairman, again I appreciate the opportunity to discuss 
the Nation's highway investment requirements and how to meet 
them. I would be prepared to answer questions.
    Senator Reid. Mr. Proctor, the State of Ohio has not grown 
much in the way of people, right, in the last decade?
    Mr. Proctor. That is correct, Mr. Chairman.
    Senator Reid. Tell me why the traffic is increasing so 
much, then?
    Mr. Proctor. As the gross domestic product rises, volumes 
of traffic, and particularly truck volumes, correlate almost 
one to one. In my written testimony, we have a chart to that 
effect. As we rise in affluence, we buy more things. Each 
product gets a little more complicated. With the advent of 
just-in-time inventory, people do not store components. So the 
volume of traffic per dollar of output has grown steadily over 
the last few decades, to the point where we have had a 90 
percent increase in truck volumes in Ohio in the last 25 years, 
whereas Senator Voinovich knows our State's population has 
grown very little.
    Senator Reid. I want to compliment all the witnesses today, 
but I particularly want to compliment you. The work that you 
have done preparing for this hearing will serve the committee 
big-time, so to speak.
    Mr. Proctor. We hope so, Mr. Chairman.
    Senator Reid. You have done a very good job, and I 
appreciate very much your work.
    Mr. Proctor. And if I could stress, too--I cite this not 
because Ohio is so unique, but my counterparts from 
Pennsylvania and New Jersey or Virginia . . .
    Senator Reid. Are having the same problems.
    Mr. Proctor. . . . or anywhere else could have made this 
same presentation and we think that is a national issue for all 
of my counterparts.
    Senator Reid. Mr. Jackson, you have indicated that you feel 
the gas tax should be increased by six cents a gallon. Is that 
right?
    Mr. Jackson. Yes.
    Senator Reid. That would be about $8 billion a year or 
something like that--that would raise? Is that about right?
    Mr. Jackson. Yes, we support an increase in the user fee on 
gasoline, as we prefer to call it.
    Senator Reid. Now, Dr. Buechner, did you also recommend an 
increase in the gas tax?
    Mr. Buechner. Our ``Two Cents Makes Sense'' proposal found 
that it would take about two cents a year for the next 6 years 
to fund a program that would grow from $35 billion to about $60 
billion, which is a practical program for meeting the 
investment needs.
    Senator Reid. Also, you indicated that would cause also the 
transit to also be about $14 billion or $15 billion a year, is 
that right?
    Mr. Buechner. Yes, sir.
    Senator Reid. Mr. Jackson, your report card on America 
should not make us feel very good--a D-plus and a C. My 
concern, though, is why did the bridges do so well, because we 
hear all the time about the deteriorating status of our 
bridges.
    Mr. Jackson. In the ISTEA and TEA-21 programs there has 
been a considerable amount of work done on the bridges, which 
helped. The Federal Bridge Replacement Program has also 
addressed those bridges which were structurally deficient.
    Senator Reid. So we have done some good, then.
    Mr. Jackson. There has been some headway made on the 
Federal Bridge Program.
    Senator Reid. Each of you know that we are really not 
talking about raising the gas tax. I think it is going to be 
hard to do. But you have made it very clear that under the 
present conditions and the amount of money we have, we are in 
big trouble. Is that what you are telling us?
    [All witnesses respond in the affirmative.]
    Senator Reid. Because with the trust fund being less than 
we expected, if we can get up to levels from previous years, we 
will be doing well. And even at that, we are slowly going 
under. Is that a fair statement?
    Mr. Buechner. It would be fiscal year 2006 under current 
revenue projections before we even got back to the 2002 funding 
level.
    Senator Reid. What does that do to our highway system in 
the country?
    Mr. Buechner. Congestion will continue to get much worse, 
and it will start having a significant impact on the economy. I 
think we are at a level now, at a situation now where failing 
to address some of these things will start to have an impact on 
jobs, on growth.
    Senator Reid. You, as a PhD Harvard economist, have no 
doubt that this congestion will hurt the economy?
    Mr. Buechner. Oh, I think it is probably already doing 
that. It is probably already having a significant influence, 
and letting it get worse will just make things worse.
    Senator Reid. Do either of the two of you disagree?
    [Both witnesses indicate in the affirmative.]
    Senator Reid. Senator Voinovich?
    Senator Voinovich. It is interesting. I have a reputation 
for being a deficit hawk in the Senate, and I vote against most 
appropriation bills. I received a call from Mitch Daniels early 
on telling me that we had made a mistake on the trust fund and 
that we had overextended ourselves and we needed to reduce it 
substantially. I said, in spite of my feelings regarding the 
budget, that I thought it was important that we at least bring 
the amount of money up to the $28.7 billion that we had 
promised when we put the program together, and underscored how 
important this even amount of money meant to the industry and 
to the States.
    That being said, I think that we ought to recognize that 
the additional money, if we reach the $31.5 billion we want, a 
portion of that money is going to be borrowed to pay for that. 
That is money we are going to borrow from the--either be paid 
for with the Social Security surplus, or we borrow. Whatever 
the case may be, we are borrowing it. We are going to have to 
remedy that formula, as you point out, with the--what did you 
say?--2006 to get up to the level where we are right now. So 
that is going to be a major consideration by this committee. If 
we are going to not have that happen, it means that we are 
going to have to have more money.
    Now, either we borrow the money to pay for it, or we raise 
the money to pay for it. That means that if you are fiscally 
responsible and we have this agreed upon user-pay philosophy in 
this area, that gas taxes, if we are going to get the job done, 
are going to have to be raised. In addition to that, they may 
have to be raised on the State level in some places.
    The issue is, what is the proper relationship in terms of 
the State and the local and the Federal? This was, as one of 
our witnesses said, 51 percent was State, 23 percent was local 
and then 24 percent Federal. Is that the breakdown? Do you know 
what the percentages are?
    Mr. Buechner. That would be the breakdown for all highway 
expenses, including standard maintenance, which is generally 
not eligible for Federal aid. It includes highway patrol. It 
includes bond redemptions and things like that.
    Senator Voinovich. Let's say about the Interstate--how much 
of that is paid for by the Federal Government?
    Mr. Proctor. Eighty percent, approximately.
    Senator Voinovich. About 80 percent.
    Mr. Proctor. About 80 percent, at least using Ohio as an 
example, about 80 percent.
    Senator Voinovich. So if we were going to do a better job 
and meet this--and by the way, this number, the $50 billion, is 
the one that has been bandied around. This is the one that, as 
I mentioned, in July of 2001, the GAO said that it was going to 
be $50.8 billion over 20 years, and then if we wanted to do an 
additional investment, it would take another--we would have to 
bring it up to $83.4 billion. So the real issue here is, where 
are we going to get the money to do the job that needs to be 
done, and Mr. Chairman, what responsibility do we have on the 
Federal level for this, and what responsibility should the 
States have as our partner. Do you want to comment on that?
    Mr. Buechner. For the capital costs, the real construction 
work, the Federal share has been about 45 to 47 percent over 
the last 20 years. So the Federal program is a major source of 
funding for the improvements that we are talking about here.
    Senator Voinovich. Gordon, do you want to respond?
    Mr. Proctor. Yes, Mr. Chairman, Senator Voinovich, clearly 
the cost has to be shared, and the States have to do their 
part. They cannot say this is solely a Federal problem, and I 
believe both States and the Federal Government have to step 
forward. I do have to say, even though the numbers are huge, an 
incremental increase will still do a lot of good for a lot of 
people. We may not solve everything, but eliminating one 
bottleneck in Cincinnati with the Fort Washington Way project 
created tremendous benefits. Eliminating one bottleneck in 
Toledo by eliminating a lift-bridge on the Interstate, we did 
not solve all of Toledo's problems, but that one project is 
creating a tremendous amount of good.
    So if we can get any increment of investment, we may not be 
solving every problem, but we will be doing a lot of citizens a 
lot of good in a lot of cities. And so we cannot be paralyzed 
by the magnitude of those numbers. We have to keep thinking 
incrementally how can we steadily approach this problem. It 
does do tremendous amounts of good if we can get any 
incremental growth.
    Senator Reid. You illustrated that very well with your 
Dayton example. I am sorry, Senator Voinovich, I hope there is 
nothing to this, but we have had another letter that is very 
suspicious in nature delivered to the Senate credit union. This 
announcement is that no one should go into the Hart Building. 
So we will submit some questions to you in writing. Is that 
where your office is?
    Senator Voinovich. Yes, it is.
    Senator Reid. So Senator Voinovich cannot go back into his 
office. We hope this is of short duration, but it is the world 
we live in. We have questions we will submit to you. We are 
sorry that this has arisen and we will submit some questions to 
you in writing.
    [Whereupon, at 11:53 a.m., the subcommittee was adjourned, 
to reconvene at the call of the Chair.]
    [Additional statements submitted for the record follow:]
 Statement of Hon. Robert C. Byrd, U.S. Senator from the State of West 
                                Virginia
    Mr. Chairman, in just a few months time this subcommittee will be 
responsible for reporting one of the most important, if not the most 
important, pieces of legislation for the 108th Congress. It is 
impossible to overstate the importance that I attach to the 
reauthorization of the Federal-aid Highway Program. This program is at 
the very core of the Federal infrastructure investment exercise. As 
such, I am grateful to you, Mr. Chairman, for allowing me this 
opportunity to testify at this, the last hearing you will hold in the 
nation's Capitol on the reauthorization of the Transportation Equity 
Act for the 21st Century, or ``TEA-21.''
    Later this morning, you will also take testimony from our very 
capable Federal Highway Administrator, Ms. Mary Peters, on the 
condition and performance of our National Highway System. The 
Administration's upcoming Conditions and Performance Report will again 
remind us that a great deal more needs to be invested in our 
infrastructure if we are not to fall further and further behind in 
stemming the deterioration of our nation's highways and bridges and 
alleviating congestion on our nation's roads. Administrator Peters will 
testify that, even in the wake of the historic funding increase 
accomplished through TEA-21, congestion on our roads continues to 
worsen. An investment in our highway infrastructure by all levels of 
government will have to increase by more than 65 percent or $42.2 
billion per year to actually improve the condition of our nation's 
highways. A funding increase of more than 17 percent or $11.3 billion 
will be necessary simply to maintain the current inadequate conditions 
of our highway network, where more than one in four of our nation's 
bridges are classified as deficient. As chairman of the Senate 
Appropriations Committee, I have sought to do my part by championing 
the highest level of Federal highway investment that is possible under 
our budget constraints. As a member of the Appropriations Committee and 
the Transportation Subcommittee, you are well aware that the 
involvement of the Appropriations Committee has never been more 
critical than this year. The Transportation Appropriations Bill for 
Fiscal Year 2003 as reported by my committee back in July restores 
every penny of the $8.6 billion cut in highway funding proposed by 
President Bush. And I am pleased to say that every member of the 
Appropriations Committee voted to report that bill.
    Mr. Chairman, one of the observations contained in Administrator 
Peters' testimony that especially caught my eye is her statement that, 
``The condition of higher-order roads, such as Interstates, has 
improved considerably since 1993 while the condition on many lower-
order roads has deteriorated.'' It appears that the pattern of road 
conditions is beginning to mirror the distribution of wealth in our 
country, whereby the rich are getting richer while the poor get poorer. 
That observation leads me into my principal topic for my testimony this 
morning--the need to use this next highway bill to finally fulfill a 
promise that was made to one of the most impoverished and isolated 
regions of our country more than 35 years ago. We need to use this next 
highway bill to finally complete the Appalachian Development Highway 
System or ``ADHS.''
    Mr. Chairman, while serving in the other body, I had the great 
privilege of casting my vote in favor of establishing the Interstate 
Highway System back in 1958. However, in 1964 it was recognized by the 
first Appalachian Regional Commission that while the Interstate Highway 
System was slated to provide historic economic benefits to most of our 
Nation, the system was designed to bypass the Appalachian Region due to 
the extremely high cost associated with building highways through 
Appalachia's rugged topography. As a result, the construction of the 
interstates had the detrimental effect of drawing passengers and 
freight, and the accompanying economic benefits, away from the 
Appalachian Region.
    In 1965, the Congress adopted the Appalachian Regional Development 
Act which promised a network of modern highways to connect the 
Appalachian Region to the rest of the nation's highway network and, 
even more importantly, the rest of the nation's economy. Absent the 
Appalachian Highway System, my region of the country would have been 
left solely with a transportation infrastructure of dangerous, narrow, 
winding roads which follow the path of river valleys and stream beds 
between mountains. These roads are still, more often than not, two-lane 
roads that are squeezed into very limited rights-of-way. They are 
characterized by low travel speeds and long travel distances and are 
often built to inadequate design standards.
    Mr. Chairman, as you know well, we have virtually completed the 
construction of the Interstate Highway System and have moved on to many 
other important transportation goals. However, the people of my region 
are still waiting for the Federal Government to live up to its promise, 
made some 37 years ago, to complete the Appalachian Development Highway 
System. The system is still less than 80 percent complete and I regret 
to observe that my home State of West Virginia is below the average for 
the entire Appalachian Region with only 72 percent of its mileage 
complete and open to traffic.
    Mr. Chairman, the rationale behind the completion of the 
Appalachian Development Highway System is no less sound today than it 
was in 1964. Unfortunately, there are still children in Appalachia who 
lack decent transportation routes to school; and there are still 
pregnant mothers, elderly citizens and others who lack timely road 
access to area hospitals. There are thousands upon thousands of people 
who cannot obtain sustainable well paying jobs because of poor road 
access to major employment centers. The entire status of the 
Appalachian Development Highway System is laid out in great detail in 
the Cost to Complete Report for 2002 just completed by the Appalachian 
Regional Commission this month. I would ask, Mr. Chairman, if this 
report could be made part of the committee's permanent hearing record. 
This is the most comprehensive report on the status of the Appalachian 
Development Highway System to date and I commend the staff of the 
Appalachian Regional Commission for their hard work on this report. The 
last report was completed in 1997 just prior to congressional 
consideration of TEA-21.
    The enactment of TEA-21 signaled a new day in the advancement of 
the Appalachian Development Highway System. Through the work of this 
committee, the House Transportation and Infrastructure Committee and 
the Administration, we took a great leap forward by authorizing direct 
contract authority from the Highway Trust Fund to the States for the 
construction of the ADHS. Up until that point, funding for the 
Appalachian Highway System had been limited to uncertain and 
inconsistent general fund appropriations. By providing the States of 
the Appalachian Region with a consistent and predictable source of 
funds to move forward on its uncompleted ADHS segments, TEA-21 served 
to reinvigorate our efforts to honor the promise made to the people of 
the Appalachian Region.
    As is made clear in the Cost to Complete Report, this initiative 
has been a great success--one for which this committee can be very 
proud. States are making greater progress toward the completion of the 
system than they have in any 5 year segment in recent memory. Since the 
last Cost to Complete Report, 183 miles of the system have been opened 
to traffic and we have successfully bought down the cost to complete 
the system by roughly $1.7 billion in Federal funds.
    Back when we were debating TEA-21, some questions were asked as to 
how committed the States would be to completing the unfinished segments 
of the Appalachian Highway System. I'm pleased to report that the 13 
States, to date, have succeeded in obligating just under 90 percent of 
the obligation authority that has been granted to them for the 
completion of the system. I think you will find, Mr. Chairman, that a 
90 percent obligation rate compares quite favorable to some of the 
other programs through which the States were granted multiple years to 
obligate their funds.
    TEA-21 apportioned $2.25 billion in contract authority to the 
Appalachian Highway System over the life of the reauthorization bill. 
However as I stated, over the period covered by that bill, we will have 
bought down roughly $1.7 billion of the cost to complete the system. I 
believe the difference in those two figures merits some explanation. 
The remaining Federal funds needed to complete the ADHS are now 
estimated by the Appalachian Commission to be $4.467 billion.
    The considerable cost in completing the last 20 percent of the 
system is explained by the fact that the easiest segments of the system 
to build have already been built. With the availability of the contract 
authority in TEA-21, the Appalachian States turned in earnest to 
designing some of their unfinished segments. That design process 
revealed cost growth that exceeded the roughly 20 percent cost growth 
that is attributable to the inflation index associated with highway 
construction. Much of the cost growth, it should be mentioned, is 
attributable to complying with other Federal laws, especially costs 
associated with environmental mitigation measures.
    However, of critical importance is the fact that these unfinished 
segments represent some the most dangerous and most deficient roadways 
in our entire nation. One thing that is often lost in our debate over 
the necessity to invest in our highways is the issue of safety. The 
Federal Highway Administration has published reports indicating that 
substandard road conditions are a factor in 30 percent of all fatal 
highway accidents. I'm quite sure that the percentage is a great deal 
higher in the Appalachian Region.
    The Federal Highway Administration found that upgrading two-lane 
roads to four-lane divided highways decreased fatal car accidents by 71 
percent and that widening traffic lanes has served to reduce fatalities 
by 21 percent. These are precisely the kind of road improvements that 
are funded through the ADHS. In my State, the largest segment of 
unfinished Appalachian Highway, if completed, will replace the second 
most dangerous segment of roadway in my State. So, even those who would 
question the wisdom of completing these highways in the name of 
economic development should take a hard look at the fact that the 
people of rural Appalachia are taking their lives in their hands every 
day as they drive on their currently inadequate roads.
    Mr. Chairman it is time for this committee and the entire Congress, 
in concert with the Administration, to take the last great leap forward 
and authorize sufficient contract authority to finally complete the 
Appalachian Highway System. If you enact another 6 year highway bill 
with sufficient funds to complete the system, we will finally pay off 
the full costs of the ADHS almost 45 years after the system was first 
promised to the people of my region. When we convene the 108th 
Congress, it is my intention to introduce legislation which will be 
named the ``Appalachian Development Highway System Completion Act''. 
That bill will provide sufficient contract authority to complete the 
system. Importantly, it will guarantee that the States of the 
Appalachian Region do not pay a penalty, either through the 
distribution of minimum allocation funds, or the distribution of 
obligation limitation, for receiving sufficient funds to complete the 
Appalachian system.
    I'm very pleased that this Administration has taken on the goal of 
completing the ADHS. In her letter accompanying the Cost to Complete 
Report, Administrator Peters said ``The completion of the ADHS is an 
important part of the mission of the Federal Highway Administration. We 
consider the accessibility, mobility and economic stimulation provided 
by the ADHS to be entirely consistent with the goals of our agency''. 
She goes on to say the Appalachian Regional Commission's 2002 Cost to 
Complete Report ``provides a sound basis for apportioning future 
funding to complete the system.'' I thank Mary Peters and the entire 
Federal Highway Administration for their leadership on this issue and I 
look forward to seeing their commitment borne out in their 
reauthorization legislation which will be submitted next year.
    Completion of a new highway bill will be a mammoth task for the 
108th Congress. I can tell you, Mr. Chairman that over the many years 
of my public career, one of the accomplishments of which I am most 
proud was my amendment providing an additional $8 billion in funding to 
break the logjam during the debate on the Intermodal Surface 
Transportation Efficiency Act in 1991. Another was my sponsorship of 
the Byrd, Gramm, Baucas, Warner Amendment during the Senate debate on 
TEA-21 in 1998. That effort resulted in some $26 billion in funding 
being added to that bill and put us on a path to historic funding 
increases for our nation's highway infrastructure. I look forward again 
to working with this committee on completion of a bill that makes the 
necessary investments in our nation's highways, not just in the 
Appalachian Region, but across our entire country.
    Thank you Mr. Chairman.
                               __________
   Statement of Hon. Mary E. Peters, Administrator, Federal Highway 
              Administration, Department of Transportation
    Mr. Chairman and members of the committee, thank you for this 
opportunity to discuss the state of our Nation's highway and bridge 
infrastructure.
    Section 502(g) of title 23 United States Code (U.S.C.) requires the 
Secretary of Transportation to submit to the Congress every 2 years a 
report that describes ``estimates of the future highway and bridge 
needs of the United States'' and ``the backlog of current highway and 
bridge needs.'' This is commonly known as the Conditions and 
Performance Report. Since 1993, the Federal Highway Administration 
(FHWA) has partnered with the Federal Transit Administration (FTA) to 
produce a Conditions and Performance Report that contains both highway 
and transit data.
    The 2002 edition of the Conditions and Performance Report is in 
final clearance. I know that this report is of interest to Congress in 
the reauthorization process, and it is my hope that the report will be 
transmitted to the Congress this fall. Today, I would like to share 
some of the findings from the Conditions and Performance Report that 
can help you understand the state of the Nation's highway and bridge 
infrastructure. In addition, a summary of the major findings of the 
Conditions and Performance Report is attached to this statement.
Significant Increases in Highway and Bridge Infrastructure Investment
    The 2002 edition of the Conditions and Performance Report is the 
first edition to capture the effects of investment in highways, 
bridges, and transit under the Transportation Equity Act for the 21st 
Century (TEA-21). Since the enactment of TEA-21 in 1998, combined 
investment in highway infrastructure, by all levels of government, has 
increased sharply. Total highway expenditures by Federal, State, and 
local governments increased by 25.0 percent between 1997 and 2000. This 
equates to a 14.4 percent increase in constant dollar terms. Highway 
capital spending alone rose to $64.6 billion in 2000, a 33.7 percent 
increase over 1997.
    The increased Federal funding levels for highway capital investment 
under TEA-21 through 2000 have been matched and exceeded by increases 
in State and local investment. This is a very important point. State 
and local governments did not simply substitute Federal funds for their 
own during this robust economic period. Instead, they poured billions 
of additional dollars into transportation projects beyond the minimum 
increases necessary to meet Federal matching requirements. As a result, 
the State share of highway capital investment rose from 1997 to 2000. 
In 1998, the State share of highway capital outlays was above 60 
percent for the first time since 1959, and remained above that level 
through 2000.
New Emphasis on System Preservation
    The TEA-21 era coincided with a shift in the types of capital 
improvements made by State and local governments. Under TEA-21, States 
redirected their investments toward system preservation projects (the 
resurfacing, rehabilitation, or reconstruction of existing highway 
lanes and bridges). There was a 45.7 percent increase in spending on 
system preservation, from $23.2 billion in 1997 to $33.6 billion in 
2000. The fact that system preservation projects tend to have shorter 
lead times and are often less controversial than system expansion 
projects, may have contributed to such projects attracting a greater 
share of the increased funding available under TEA-21. Investment in 
system expansion (the construction of new roads and bridges and the 
widening of existing roads) grew more slowly, rising 20.8 percent from 
$21.6 billion to $25.9 billion.
    This increase in system preservation investment has had a profound 
effect on the overall physical condition of the Nation's highway and 
bridge infrastructure. The percentage of highway mileage with 
``acceptable'' ride quality rose from 82.5 percent in 1993 to 86.0 
percent in 2000. The percentage of bridge deck area considered 
deficient dropped from 30.9 percent in 1996 to 27.9 percent in 2000. 
These improvements, however, were not uniform across all highways and 
bridges. For example, the condition of higher-order roads, such as 
Interstates, has improved considerably since 1993, while conditions on 
many lower-order roads have deteriorated. Bridge condition also differs 
by functional system. Interstate bridges, for example, tend to be less 
structurally deficient or functionally obsolete than bridges on 
collector or local roads.
Continued Improvement in Highway Safety
    The 2002 Conditions and Performance Report also documents the 
Nation's continued improvement in the area of highway safety. Safety is 
the top priority for the Department of Transportation. I am pleased to 
report that highways have become safer even as travel sharply 
increased. The fatality rate per 100 million vehicle miles traveled has 
decreased, from 3.3 in 1980 to 1.5 in 2000, which met the Department's 
Performance Plan target. The Department will continue to work with our 
State and local partners to reduce the number of crashes on our 
Nation's highways even further.
Deterioration in Operational Performance
    Despite the historic investment in highway infrastructure and 
improved conditions on many roads and bridges, operational performance 
of the infrastructure-the quality of the user's experience-has steadily 
deteriorated over the past decade. In 1987 for example, a trip that 
would take 20 minutes during non-congested periods required, on 
average, 25.8 minutes under congested conditions. By 2000, the same 
trip under congested conditions required 30.2 minutes, or an additional 
4.4 minutes.
    Some estimates attribute as much delay to incidents as to recurring 
congestion. Part of the answer to all forms of congestion is an 
increased emphasis on operations, including more effective responses to 
incidents, better management of work zones, and deployment of 
Intelligent Transportation Systems.
Highway Investment Requirements Analysis
    The heart of the Conditions and Performance Report is an analysis 
of future capital investment requirements under different scenarios. 
The Cost to Improve Highways and Bridges scenario is intended to define 
the upper limit of cost-effective national investment based on 
engineering and economic criteria. This is essentially an ``investment 
ceiling'' above which it would not be cost-beneficial to invest. This 
scenario implicitly assumes unlimited availability of funding, and does 
not take into account competing investment options in the economy that 
may have an even more favorable cost-benefit return. The Cost to 
Maintain Highways and Bridges scenario is designed to show the 
investment required to keep future indicators of conditions and 
performance at current levels, based on long term projections of future 
highway use. These benchmarks are intended to be illustrative and do 
not represent comprehensive alternative transportation policies.
    In addition to these primary scenarios, the report also identifies 
the projected level of investment required to achieve other specific 
benchmarks, such as average pavement conditions, and estimates the 
current backlog of cost-beneficial preservation and capacity 
investments based solely on current conditions and traffic volume.
    It is important to note that the scenarios in the Conditions and 
Performance Report are intended to address investment requirements for 
all levels of government combined. The report makes no attempt to 
address the question of what share of total infrastructure investment 
should be borne by the Federal Government, State governments, local 
governments, or the private sector.
    The average annual investment level under the Cost to Improve 
Highways and Bridges Scenario is projected to be $106.9 billion for 
2001 through 2020, stated in constant year 2000 dollars. This is 65.3 
percent higher than the $64.6 billion of total capital investments by 
all levels of government in 2000. The average annual investment level 
under the Cost to Maintain Highways and Bridges is projected to be 
$75.9 billion for 2001 through 2020, which is 17.5 percent larger than 
the $64.6 billion of capital spending in 2000.
    Capital spending by all levels of government is projected to 
increase in constant dollar terms over the remainder of the life of 
TEA-21. This assumes, however, that Federal, State, and local 
governments will be in a financial position to allow them to continue 
to increase their highway and bridge investments. Government at all 
levels may not be able to sustain the rate of increase in 
infrastructure investment observed in recent years.
    In addition to the two investment scenarios I have just described, 
the Conditions and Performance Report also predicts the impacts of 
numerous alternative investment levels on a variety of condition and 
performance indicators.
    If investment were to remain at year 2000 levels, or anticipated 
levels for 2001 to 2003, it is projected that recent trends observed in 
the condition and performance of the highway system would continue. At 
this range of investment levels, physical conditions and safety 
performance would improve, but the operational performance of the 
highway system would further deteriorate. Average speeds would decline, 
the amount of delay experienced by drivers would increase, and the 
average length of congested periods on the Nation's urban principal 
arterials would increase. Recent trends toward improvement in bridge 
conditions would also continue; however, the aging of the Nation's 
bridges, particularly on the Interstate system, will present additional 
challenges in the future.
    The preceding edition of the Conditions and Performance report 
suggested that it would be cost-beneficial to apply a larger share of 
future highway investment increases to system preservation. As I 
previously noted, such a shift did occur between 1997 and 2000, 
resulting in significant improvements in the physical conditions of the 
Nation's highways and bridges; however, the operational performance of 
the highway system continued to decline over this period. Since 1997, 
infrastructure investment at all levels of government has been more 
successful in addressing physical conditions than operating 
performance. Therefore, the Conditions and Performance Report now 
suggests that it would be cost-beneficial to devote a larger share of 
future increases in highway capital investment to system expansion.
Conclusion
    In conclusion, the state of the Nation's road and bridge 
infrastructure has generally improved due to the significant investment 
increases of the TEA-21 era. Since the enactment of TEA-21, State and 
local governments-spurred in part by higher levels of Federal 
investment-have poured billions of dollars into highway infrastructure. 
This investment led to improved highway and bridge conditions, 
particularly on higher-order functional systems. Despite record levels 
of funding, however, operational performance-measured by congestion-
worsened throughout the country. Congestion increased in metropolitan 
areas of every size. FHWA's analysis of highway and bridge needs and 
investment requirements suggests that future funding continue to 
address system preservation needs, but that increases be reoriented 
toward system expansion to reduce user costs and enhance system 
performance.
    Mr. Chairman and members of the committee, this concludes my 
statement. I again thank you for the opportunity to testify today and I 
look forward to working with you as we prepare for reauthorization of 
the surface transportation programs. I will be pleased to answer any 
questions you may have.
                                 ______
                                 






                                 
                                 
                                 
                                 ______
                                 
Responses of Mary Peters to Additional Questions from Senator Voinovich
    Question 1. You stated in your testimony that the percentage of 
``acceptable'' highway mileage has increased since 1993. How do you 
define acceptable? What are the other ratings you use in the Conditions 
and Performance Report to describe highway and bridge infrastructure 
and how are these defined?
    Response. The pavement ratings in the Conditions and Performance 
report are based primarily on the International Roughness Index (IRI) 
values, reported annually by the States as part of the Highway 
Performance Monitoring System (HPMS). The IRI measures the cumulative 
deviation from a smooth surface in inches per mile. This standard is 
generally accepted worldwide as an effective pavement roughness 
measurement and, as an objective, mechanically measured value, is 
considered to be more consistent across jurisdictions than other more 
subjective measures. The HPMS reporting requirements allow States to 
provide a Pavement Serviceability Rating (PSR) in lieu of an IRI value 
for certain types of highways. The PSR is an older subjective rating 
system in which inspectors evaluate pavement condition on a scale of 1 
to 5. In cases where PSR values are reported, a mathematical conversion 
was made to translate them to a roughly corresponding IRI value.
    For all types of roads, the C&P report applies the pavement 
classification standards introduced in the annual FHWA Performance Plan 
for NHS routes. To be rated ``acceptable,'' a highway section must have 
a measured International Roughness Index (IRI) value of less than or 
equal to 170 inches per mile. Good pavements comprise a subset of 
acceptable pavements. For a pavement to be rated as ``good,'' the IRI 
value must be less than or equal to 95 inches per mile. Previous 
editions of the C&P report used a different set of pavement condition 
categories, oriented around PSR ratings, and utilizing a more relaxed 
set of standards for non-Interstate routes. To facilitate comparisons 
between this report and previous editions, some data are provided based 
on the old classification scheme.
    The bridge condition ratings in the Conditions and Performance 
report are based on data reported in the National Bridge Inventory. 
Three indicators are examined in the report, bridge condition ratings, 
the number of deficient bridges, and the percentage of deck area on 
deficient bridges. Condition ratings are assigned to the bridge deck, 
superstructure, and substructure during bridge inspections, on a ten 
point system ranging from 9--``Excellent'' to 0--``Failed''. The number 
of deficiencies and the percentage of deck area on deficient bridges 
are both based on assessments on whether a bridge is structurally 
deficient or functionally obsolete. Bridges are considered structurally 
deficient if they are restricted to light vehicles, require immediate 
rehabilitation to remain open, or are closed. Bridges are considered 
functionally obsolete if they have deck geometry, load carrying 
capacity, clearance, or approach roadway alignment that no longer meets 
the criteria for the system of which the bridge is a part.

    Question 2. In your testimony, you indicated that the condition of 
the higher-order roads have improved over the last several years while 
the condition of lower-order roads have deteriorated. What accounts for 
the deterioration of the lower-order roads? What impact has this had on 
roadway safety? What can be done to ensure lower-order roads are not 
neglected?
    Response. The physical condition of lower-order roads (i.e., minor 
arterials and collectors) may have deteriorated due to greater emphasis 
placed on the maintenance, reconstruction, and construction of higher-
order roads that carry the majority of the Nation's traffic. Since 
funds are limited, any increase in the commitment of funds to projects 
on higher-order roads reduces the amount of funds available for the 
lower-order roads.
    The level of funding is not available to properly support the 
Nation's higher-order roads and at the same time totally support the 
lower-order roads. Since higher-order roads support greater levels of 
traffic and truck volumes, funds allocated to these projects have a 
potentially greater beneficial impact on the Nation's highway system. 
This does not mean the needs of the lower-order roads are ignored-only 
that available funds are being allocated in an attempt to provide the 
most benefit to the Nation's highway system user.
    Regarding safety, some States provide safety set-aside funds for 
projects on any public road and 15 to 35 percent of bridge funds are 
set aside for ``off-system'' bridges on lower-order roads. But the 
responsibility of repairing and maintaining these roads falls primarily 
on local governments and some States. Safety conditions on these roads 
are poor, particularly in rural areas. From 1994 to 2000, over 59 
percent of all fatalities occurred on rural roads, most of them 
considered lower-order. Rural local roads had a fatality rate six times 
higher than Urban Interstates in 1999 even though they had a third of 
the traffic.
    Lower-order roads are often two-lane. In 2000, 57 percent of all 
fatalities occurred on two-lane roads and 76 percent of these 
fatalities occurred on rural two-lane roads. Incentives to States to 
provide greater funding and technical assistance to local 
transportation practitioners are needed to improve the safety of these 
roads.

    Question 3. What affect has increased congestion over the last 
decade had on the condition, as well as performance, of the nation's 
highways and bridges? What is the most cost-effective way to deal with 
increasing congestion in our urban areas?
    Response. Congestion is an indicator of the operational performance 
of the highway system rather than one of the physical condition of the 
infrastructure. However, they are indirectly related in the sense that 
both are affected by traffic volumes. Increasing traffic volumes can 
contribute to both the accelerated deterioration of the infrastructure 
and to increased levels of congestion. The net impact on the condition 
and performance of the system depends on both the level of investment 
in highways and on the type of improvements that are implemented.
    The most cost-effective approach to reducing highway congestion is 
likely to be different for different areas. In most areas, the best 
solution likely involves increasing the effective capacity of the 
corridor. This investment can come in many forms, including improved 
facility management and operations, selective additions of new roads 
and new lanes, or investments in new or upgraded transit facilities. In 
other cases, it may be more cost effective to address travel demand 
through road pricing, land use planning, and economic development 
policies. A comprehensive strategy incorporating elements of all of 
these approaches in varying degrees is likely to be the most cost-
effective.

    Question 4. In your testimony, you stated that ``government at all 
levels may not be able to sustain the rate of increases in 
infrastructure investment observed in recent years.'' Given 
increasingly tight State budgets and the economic downturn in recent 
years, has there been an indication that State and local governments 
may not be able to sustain a high level capital investment over the 
life of the next highway bill?
    Response. Combined State and local government capital expenditures 
increased 37.1 percent from 1997 to 2000, rising even faster than 
Federal cash outlays during the first 3 years of TEA-21. Consequently, 
the portion of total capital investment funded by State and local 
governments rose above 60 percent for the first time since 1959. The 
rate of growth of State and local funding was unusually high during 
this 3-year period, relative to historic trends. Given increasingly 
tight State and local budgets, it would not be surprising if State and 
local highway capital investments were to grow more slowly in the short 
term.
    While final data are not yet available, preliminary indications 
suggest that State and local capital investment has grown more slowly 
than Federal investment in 2001 and 2002. However, there is no 
indication that State and local governments would have major 
difficulties in sustaining their capital investment levels in the long 
term, though the high rates of spending growth experienced from 1997 to 
2000 may not be repeated.

    Question 5. Please explain how the operational performance of the 
nation's highways and bridges declined at the same time as their 
physical condition has improved. What needs to be done to improve the 
operational performance of our highways and bridges?
    Response. Changes in the condition and performance of the nation's 
highway system over time depend both on changes in travel behavior and 
demand and on the level and type of investment in highway 
infrastructure. Some types of highway and bridge improvements (such as 
resurfacing and bridge rehabilitation) are aimed at preserving the 
existing infrastructure, while others (such as ITS and lane additions) 
are designed to increase the effective capacity of the system. During 
the late 1990's, increases in the level of highway capital investment 
were accompanied by a shift in highway capital investment from system 
expansion toward system preservation. The result was a significant 
increase in system preservation expenditures, which in turn led to 
improvements in pavement quality and reductions in bridge deficiencies. 
Investments in system expansion, however, were not able to keep up with 
increases in highway travel, resulting in increased congestion and 
declining performance.
    Congestion and performance are also affected by a variety of 
temporary disruptions, such as crashes and breakdowns, work zones, bad 
weather, and special events. FHWA is working with its State and local 
partners to improve traffic monitoring, incident response, work zone 
management, traveler information, and other operational strategies to 
mitigate the delay caused by these disruptions.
    The C&P investment analysis suggests that there are tremendous 
current and future needs for strategies to address highway congestion 
and delay, in addition to investment needs to preserve the physical 
condition of the existing infrastructure. While investment in capacity 
expansion would be required to address growing congestion problems, 
this investment can come in many forms. A comprehensive strategy of 
improving the effective capacity of the highway system through improved 
facility management and operations, along with selective additions of 
new roads and new lanes may be the best approach for dealing with the 
capacity deficiencies identified in this report.

    Question 6. I understand that you have called for the creation of a 
blue-ribbon commission to study and make recommendations on addressing 
the needs of the Interstate highway system. Can you describe in more 
detail what you propose the blue-ribbon commission study? Will the 
blue-ribbon commission be ready to make recommendations in time to 
inform the debate for the highway bill next year?
    Response. The Interstate System will reach its fiftieth year during 
the middle of the next reauthorization bill. As the Interstate System 
approaches this milestone, it is appropriate to critically examine all 
aspects of this System, the backbone of America's surface 
transportation network. That is why the Federal Highway Administration 
is seriously considering a blue-ribbon commission to evaluate the many 
dimensions of this system, including its needs, conditions, and 
performance. Additionally, the future of the Interstate System should 
be examined, including the System's relevance to emerging economic and 
demographic changes.
                                 ______
                                 
 Responses of Mary Peters to Additional Questions from Senator Jeffords
    Question 1. We have heard from your testimony that we have seen 
some improvements in areas such as safety, bridge and pavement ratings 
due to increased funding levels of TEA-21. At the same time, system 
performance is on the decline despite our increased investment levels. 
What needs to be done in the way of improving the operation of our 
transportation system? Are there barriers within the current funding 
structure that limit a State's ability to make operational improvements 
or implement operational programs?
    Response. The operation of our transportation system can be 
improved by monitoring and responding quickly to the many disruptions 
to traffic, such as incidents and bad weather. Work zones and special 
events can be better managed. More effective information can be 
provided to travelers so that they can adjust their routes, schedules, 
or choice of mode. Traffic signals can be better synchronized and 
modest design changes, such as turn lanes, can be made to improve 
traffic flow. These improvements typically involve the application of 
technology, the deployment of people and equipment to respond to 
incidents or clear snow, and better coordination of the many agencies 
which operate or affect local roads.
    There are relatively few absolute barriers to spending on 
operational improvements, but there are numerous impediments and a 
common lack of priority. Many operational improvements are eligible for 
Federal funds, but operations have not been emphasized in legislative 
programs or policy statements as has the traditional focus on 
construction and preservation.
    We have elevated the importance of operations with our Congestion 
Mitigation Vital Few Goal activities and the creation of our Office of 
Operations. We are working with our State and local partners to 
identify and encourage effective practices for incident management, 
work zone management, traveler information, and development of 
congestion management partnerships.

    Question 2. We have heard a lot about the physical needs in terms 
of pavement, bridges, and buses for our transportation system. Are 
there any estimates for needed or desired operational improvements or 
programs? Intelligent Transportation Systems are tools that can assist 
in improving systems performance. Are there any estimates for 
implementing ITS nationally?
    Response. A combination of improved operations, capital 
investments, and behavioral adjustments is needed to maintain flows of 
people and goods, respond to emergencies, correct unsafe conditions, 
reduce security threats, and preserve highway assets. Historically, 
highway agencies have focused most of their attention on building and 
maintaining road infrastructure. Less attention has been paid to 
operating the road system to provide the highest level of service 
possible. With increasing road congestion, the expense and difficulty 
of building new facilities, and the need for safe and secure highways, 
this view has begun to change. Many highway officials now recognize 
that operational strategies, including traffic control and enforcement, 
incident and emergency operational strategies, ice and snow removal, 
and the deployment of Intelligent Transportation Systems (ITS) 
technologies, can make a major difference in how the highway system 
performs.
    We have begun to develop and validate a comprehensive assessment of 
operations as part of the Highway Economic Requirements System (HERS) 
for future editions of the Conditions and Performance Report. At this 
time, we have preliminary estimates for various aspects of operations, 
as described below.
    Major forms of operational improvements in metropolitan areas 
include incident management, variable message signs, advanced traffic 
signal control, ramp metering, and emergency vehicle signal preemption. 
Infrastructure needed to support these strategies includes electronic 
roadway monitoring and traffic management centers. Over the next 20 
years, $8 billion may be needed just to maintain existing investments 
in metropolitan area operations. Expansion of technologies could cost 
an additional $5 billion for expansion at current rates, to $29 billion 
for more aggressive deployment to meet the most pressing operational 
needs by 2020.
    Weather has a major effect on highway mobility and safety and is a 
significant expense for State and local highway agencies. Each year, 
State and local agencies spend more than $2 billion on snow and ice 
control operations, and over $5 billion annually for infrastructure 
repair because of snow and ice damage.
    Roadway Weather Information Systems (RWIS) provide critical data 
for efficient and effective responses to bad weather. The total capital 
cost for a basic nationwide system may be about $32 million for 
expressways and $54 million for principal arterials. The operation and 
maintenance cost of a weather station is estimated to be about 15 
percent of the capital cost, which adds about $13 million per year to 
the totals for expressways and principal arterials.
    Traveler information systems provide assistance to the individual 
surface transportation traveler and allow transportation agencies in 
urban and rural environments to manage service disruptions and 
congestion. Costs for metropolitan areas may range from $17 million to 
$41 million for capital and $1 million to $2.4 million a year for 
operation and maintenance.
    There are numerous other areas where investments will improve 
operations especially in the area of freight transportation. For 
example, the Federal Railroad Administration estimates that lost time 
for highway users at the most heavily traveled rail-highway grade 
crossings on the Federal-aid system will increase from between $5.5 
billion to $7.8 billion over the 2003 to 2022 period. Annual hours of 
time wasted for autos could increase to between 35 million and 123 
million hours by 2022. Trucks could spend between 4.9 and 6.6 million 
more hours behind closed gates by 2022 than presently, depending on how 
frequently trains passed through crossings during daily highway traffic 
peaks. Much of these losses can be eliminated by replacing the grade 
crossings with bridges.

    Question 3. In your testimony, you mention the need for metrics and 
performance measures to better assist decisionmakers in making the 
proper balance of investments. What metrics and performance measures 
should be in place nationally to better assist Congress in 
understanding how and where to invest transportation resources?
    Response. One of the purposes of the 1993 Government Performance 
and Results Act (GPRA) is to ``improve Federal program effectiveness 
and public accountability by promoting a new focus on results, service 
quality, and customer satisfaction.'' FHWA has developed a Strategic 
Plan that sets out long-term programmatic, policy, and management 
goals. Strategic goals measure the FHWA's contribution to mobility; 
safety; productivity; the human and natural environment; and national 
security. Each year, the FHWA prepares a Performance Plan that helps 
the agency meet the broad goals in the Strategic Plan. These metrics 
help measure and assess how well the FHWA is delivering products and 
services to its customers.
    The FHWA has been working to develop new metrics that better focus 
on the impact that the condition and performance of the highway system 
has on highway-users, our ultimate customers. For example, our 
Performance Plan has been modified to look at the percentage of travel 
that occurs on roads with acceptable ride quality, rather than simply 
looking at miles of pavement. New measures of operational performance 
have been adopted to measure the annual delay experienced by drivers, 
rather than simply looking at the percentage of congested roads. We are 
also engaged in research to better quantify the costs that congestion-
related unpredictability of trip time imposes on drivers. As we have 
worked to improve our understanding of the impacts of different types 
of investments on highway-users, we have identified areas where we may 
need to change the type of condition, performance and safety data that 
we routinely collect. We will continue to work with our State and local 
partners to identify and obtain the information required to assist 
decisionmakers at all levels of government in maximizing the 
effectiveness of their transportation spending.

    Question 4. I look forward to working with the Administration on 
the next reauthorization. When can Congress expect to receive detailed 
legislative proposals from the Administration for the reauthorization 
of the transportation bill?
    Response. The Administration is working expeditiously to complete 
its reauthorization proposal. Secretary Mineta has indicated his desire 
to transmit a reauthorization proposal no later than the transmittal of 
the President's fiscal year 2004 budget.
                                 ______
                                 
   Responses of Mary Peters to Additional Questions from Senator Reid
    Question 1. Thank you for your testimony on the 2002 Conditions and 
Performance Report. Your statement highlights a simple fact: At 
existing levels of investment, travelers and freight haulers will 
continue to experience increased congestion and delays. Our 
transportation sector is too important to our economy and our quality 
of life to accept continued decline in system performance. Our greatest 
challenge will be to increase funding to levels necessary to address 
this deterioration in performance. In know that the Administration is 
currently developing its reauthorization proposal. Will your proposal 
include funding levels that are high enough to ensure that both 
conditions and performance will improve rather than decline over the 
next 6 years?
    Response. The Conditions and Performance Report provides an 
important assessment of the needs and investment requirements of the 
Nation's highways and bridges. Accordingly, the Administration will use 
this report, along with other policy documents, when developing its 
reauthorization proposal. The reauthorization proposal will try to 
strike the appropriate balance between competing policy and budgetary 
interests.

    Question 2. We appreciate your testimony today on the Department of 
Transportation's upcoming 2002 Conditions and Performance Report. This 
report provides us with information that is critical to our efforts to 
write the next transportation bill. When can we expect to receive the 
full report?
    Response. Various officials within the Department of Transportation 
and the Office of Management and Budget have worked extensively to 
review, revise and clear the key report findings so that we could share 
them in today's testimony. However, the full report explores a number 
of other critical issues that have not been covered today, and these 
sections have not yet been fully reviewed. Also, due to the sheer size 
and complexity of the document, significant time will be required for 
the layout and printing of the report once the content has been 
finalized.
    Based on these considerations, we anticipate that we will be 
transmitting the report to you in early December of this year; printed 
and electronic versions of the report should be available for the 
general public by the end of December.

    Question 3. While DOT's Conditions and Performance Report finds 
that the conditions of our highway system have improved somewhat, the 
operational performance of our highway system continues to deteriorate. 
This comes as no surprise to anyone who drives regularly. Each of you 
recommends an increased emphasis on operations, which is the theme that 
this subcommittee has addressed twice in the past year with a hearing 
on Intelligent Transportation Systems and a symposium on operational 
issues. I intend to address this issue in next year's transportation 
bill and would appreciate your thoughts on how we can encourage States 
and metropolitan areas to focus more attention to the operations and 
management of road systems.
    Response. The Federal Highway Administration recognized the 
importance of operations when it reorganized into core business units 
and placed operations on a par with infrastructure and safety. Other 
national organizations, such as the American Association of State 
Highway and Transportation Officials and the Transportation Research 
Board, have made similar changes to their committee structures. State 
Departments of Transportation tend to realign themselves to be 
consistent with their national partners, so we expect operations to 
receive increasing emphasis at the State and local levels.
    FHWA further reinforced the importance of operations by assigning 
leadership for our Congestion Mitigation Vital Few Goal activities to 
our Office of Operations. We are focusing our attention on incident 
management, work zone management, traveler information, and development 
of congestion management partnerships.
    FHWA met with officials from State and local governments at the 
National Summit on Operations, held in October 2001. Participants in 
the Summit recognized that managers of the highway system need timely 
and comprehensive information, effective traffic management tools, 
adequate financial resources, and institutional authority and 
accountability to enable users to make the best use of the 
transportation system. Much of the discussion centered on an 
information infrastructure, or ``infostructure,'' and regional 
operations collaboration and coordination.
    Participants discussed an ``infostructure'' of monitoring 
technology and data sharing to provide timely, comprehensive 
information to managers and users of highway and transit systems. The 
proposed infostructure would include statewide reporting of capacity 
reducing events on the National Highway System, additional monitoring 
of freeways and principal arterials in major metropolitan areas, and 
additional security monitoring of critical infrastructure. Participants 
also felt that locally determined additional monitoring of traffic 
conditions, weather, and surface transportation facilities should be 
encouraged.
    An increased emphasis on Regional Operations Collaborations and 
Coordination (ROCCs) was proposed to provide the institutional 
coordination and accountability needed to operate highways and transit 
across jurisdictional and agency boundaries. ROCC activities would: 
establish and sustain a forum in which regional operations policies, 
protocols, activities, and projects are defined, discussed, debated, 
and coordinated by transportation system operators, including State and 
local transportation and public works agencies, public safety 
personnel, and transit system operators; carry out regional planning 
for operations activities, including development, maintenance, and 
monitoring of effective implementation of a regional concept of 
operations; set performance targets and report to the public on system 
performance; prepare a Regional Operations Action Plan, using 
performance data to identify operational problems, evaluate potential 
solutions, and facilitate their accomplishment; ensure the coordinated 
delivery of timely information on transportation system operations to 
the full range of system users; and provide substantive input to the 
statewide and/or regional transportation planning process on necessary 
investments to improve system performance.
                               __________
  Statement of Joseph L. Perkins, Commissioner, Alaska Department of 
    Transportation and Public Facilities, on Behalf of the American 
   Association of State Highway and Transportation Officials (AASHTO)
    Founded in 1914, AASHTO represents the departments concerned with 
highway and transportation in the 50 States, the District of Columbia 
and Puerto Rico. Its mission is a transportation system for the Nation 
that balances mobility, economic prosperity, safety and the 
environment.
    Mr. Chairman and members of the subcommittee, I am Joe Perkins, 
Commissioner of the Alaska Department of Transportation and chairman of 
the American Association of State Highway and Transportation Officials' 
(AASHTO) Standing Committee on Highways, and am appearing before you 
today on behalf of AASHTO's members, which include the transportation 
agencies representing the 50 States, the District of Columbia and 
Puerto Rico. I am here to report to you on AASHTO's Bottom Line Report 
which we released jointly with you on September 26th and which 
documents the nation's highway, bridge and transit needs.
    First, however, I want to thank you for your recognition of the 
needs of our nation's surface transportation and its vital contribution 
to preserving the nation's economy and our quality of life. We 
appreciate your leadership and efforts to ensure that in the final year 
of the Transportation Equity Act for the 21st Century (TEA-21), funding 
will be restored to current levels.
Key Findings
    As Congress begins its deliberations on the reauthorization of 
Federal highway and transit programs, AASHTO with the assistance of the 
U.S. Federal Highway Administration, the U.S. Federal Transit 
Administration and the Transportation Research Board has undertaken a 
comprehensive assessment of the investments needed through 2009 to 
maintain or improve our nation's surface transportation system.
    The results of this assessment show that:

      An annual capital investment of $92 billion by all levels 
of government for highways and bridges is necessary to maintain both 
the physical condition and performance of the system over 20 years and 
explicitly during the next reauthorization cycle. This level of 
investment holds user cost at less than a 1-percent increase; holds 
pavement roughness and delay constant; and maintains current levels of 
system reliability.
      An annual capital investment of $125.6 billion by all 
levels of government for highways and bridges is necessary to improve 
both the physical condition and performance of the system over 20 years 
and explicitly during the next reauthorization cycle. With this level 
of investment, pavement condition improves by almost 15 percent; delay 
falls by almost 13 percent despite expected growth in travel; average 
speeds increase; and decreased user costs equate to an approximate $60 
billion per year savings.
    From Fiscal Year 1990 to 2000, spending by all levels of government 
for capital, maintenance and operations grew from $75 billion to $128.5 
billion--a 71 percent increase. In Fiscal Year 2000, $64.4 billion from 
all levels of government was invested in highway and bridge capital 
improvements. Applying the same rate of growth--71 percent--would 
increase capital investment by all levels of government to $110 
billion, which is comparable to the results of AASHTO's assessment.
      An annual capital investment of $18.9 billion is required 
between 2004 and 2009 from all levels of government just to maintain 
the existing physical condition and service performance of the nation's 
transit systems, if ridership only grows modestly at 1.6 percent per 
year. In Fiscal Year 2000, about $9.5 billion was spent by all levels 
of government on transit capital infrastructure.
      An annual capital investment of $43.9 billion is required 
to improve the current physical condition and service performance of 
the nation's transit systems, if ridership continues to grow at 3.5 
percent.
    AASHTO's assessment of investment needs is based on rigorous, 
quantitative evaluation using the same data sets and models as used for 
the development of the U.S. Department of Transportation's Conditions 
and Performance Report. Highway data used for this assessment is 
provided to the FHWA by the State transportation agencies, which 
inventory and analyze 112,000 sample road segments. The source of 
bridge data is FHWA's National Bridge Inventory data base, and transit 
system and facility data supplied to FTA by transit agencies.
    While AASHTO and FHWA utilize virtually the same data and modeling 
techniques, there are likely to be differences in the results that are 
reported. The differences can be attributed to variations in base years 
and time spans, and modeling assumptions and scenarios.
Key Factors Contributing to Needs
    The Backlog. Our nation's repair backlog is a key contributor to 
our investment needs. Much of the growth in investment needs results 
from the aging of the transportation system. Over time, weather, ear 
and age take their tolls on roads, bridges and transit facilities. The 
repairs, replacements and upgrades needed to bring the existing system 
up to standard have created a huge backlog of needed investment.
    The good news is that with the expanded funding under ISTEA and 
TEA-21, much progress has been made. The 1999 bridge repair backlog of 
$87 billion has been reduced to $57 billion today, and the percentage 
of bridges rated acceptable has increased from 65 percent to 72 
percent. More than 80 percent of all roads are rated good to fair. 
Rural roads, which comprise the great majority of roads, but a much 
smaller share of travel, have been able to hold their condition 
relatively stable. Urban roads, in poorer condition to begin with, have 
deteriorated further. There is continuing improvement in the condition 
of Interstate pavements, both rural and urban, but despite this 
progress 18 percent of the Interstate pavements are in poor or mediocre 
condition, requiring immediate investment.
    While we currently have no means of statistically monitoring 
highway performance, anecdotal evidence and specialized studies make it 
clear that congestion and declining performance is common. For example, 
according to the Texas Transportation Institute's most recent Urban 
Mobility Report, which examines congestion in 75 metropolitan areas, 
``All of the size categories show more severe congestion that lasts a 
longer period of time and affects more of the transportation network in 
2000 than in 1982. The average annual delay per peak road traveler 
climbed from 16 hours in 1982 to 62 hours in 2000. And delay over the 
same period more than quadrupled in areas with less than 1 million 
people.''
    With regard to transit, the significant increase in funding made 
possible through ISTEA and TEA-21, together with expanded State and 
local investment, helped spur a 22 percent transit ridership increase 
during the past 6 years, bringing ridership to its highest level in 40 
years. However, 22 percent of the nation's buses and 43 percent of its 
rail rolling stock currently exceed their recommended service life. In 
rural areas, an estimated 55 percent of the existing fleet has already 
exceeded their recommended service life.
    While ISTEA and TEA-21 enabled us to make great strides, much 
remains to be done.
    The Outlook for Demand. A second factor contributing to needs is 
demand. The U.S. population grew by 100 million over the last 40 years, 
and is expected to grow by at least 100 million over the next forty. 
Fifty-four percent of this travel takes place on major highways--
Interstates, expressways and major arterials. These are the very 
facilities--under the States' jurisdiction--which must serve 
interstate, interregional, intercity commercial and passenger traffic 
while increasingly serving as the main streets for connecting us with 
the activities of our daily lives.
    Over the past 30 years, the Nation has experienced extraordinary 
growth in workers and in their travel. This era has been characterized 
by the baby boom generation's arrival in the work force, the surge of 
women into the workplace, sharp increases in driver licensing and auto 
ownership and a shift in lifestyles. Growth in travel tracks directly 
with rising incomes, employment and the economy. Over the last decade, 
vehicle miles traveled (VMT) increased from 2.1 trillion miles to 2.7 
trillion, and is expected to grow by another 600 billion by the year 
2010.
    Since the mid-1990's, transit ridership has increased more than 22 
percent from 7.8 billion trips annually in 1995 to more than 9.5 
billion trips in 2001. Transit ridership has been growing at a rate of 
3.5 percent annually over the last 6 years. If this rate of growth 
continues, ridership will double in the next 20 years.
    Over the next 20 years, domestic freight moved by truck is expected 
to increase by 70 percent. International trade, which is expected to 
increase by more than 3 percent annually--doubling by 2020--will strain 
the nation's highways, ports and gateways. Growing volumes of NAFTA 
trade with Canada and Mexico, and trade with Latin America, the Pacific 
Rim and Europe--which is giving Americans and residents of other 
nations greater access to a wide variety of goods at lower costs--has 
brought significant challenges. The infrastructure at our seaports has 
grown older and less efficient. Larger trucks operating on older access 
routes have to deal with short traffic signal cycles and deficient 
roadway designs. Key border crossings are increasingly congested and 
our major trade corridors lack the capacity to accommodate projected 
freight traffic. Increased investment is needed to fix bottlenecks, 
provide capacity and enhance security.
    In rural areas, the competitiveness of the U.S. agricultural sector 
depends on an efficient, economic and competitive U.S. domestic 
transportation system. In urban areas, businesses increasingly are 
dependent on reliable, just-in-time delivery.
    Managing the System. Over the past 20 years, growth in travel on 
the nation's highways has far exceeded growth in highway capacity. As a 
result, congestion is a critical problem for metro areas nationwide. It 
is estimated that more than 60 percent of all delays are the result of 
non-recurring congestion caused by crashes, weather or other incidents. 
Efficient management and operation strategies can reduce delays and 
improve reliability, while also providing such benefits as quicker 
response by emergency vehicles.
    System management and operations covers a wide array of strategies 
including: incident detection and response; snow and ice management; 
emergency and disaster response; planning construction disruption; 
traffic and transit operation and management; and traveler/shipper 
information. Both capital and operating investments are needed to 
achieve the benefits of system management. Such investments are 
eligible for TEA-21 funding, and are an important element for 
reauthorization.
Other Highway Cost Factors
    In addition to the needs estimates produced through the modeling 
analysis, there are other cost factors, which need to be considered. 
These include estimates for safety and security, Interstate 
interchanges, and increasing program delivery costs, which together may 
equal as much as $11 billion annually.
    Safety. On a typical day, 114 people lose their lives on the 
nation's highways. In the year 2000, a total of 41,821 peoples died and 
3.2 million were injured. Studies by the U.S. Department of 
Transportation show that this staggering number of deaths and injuries 
results in over a $200 billion per year economic loss to the Nation. 
AASHTO has developed a Strategic Highway Safety Plan that identifies 22 
key emphasis areas targeted at drivers, vehicles, highways, 
enforcement, emergency medical services and management. We estimate 
that implementation of activities in these emphasis areas could save 
even more that the goal of 5,000 to 7,000 lives annually. 
Implementation is estimated at $3 billion annually in capital costs and 
$1 billion annually in operating costs.
    Security. The heightened threat of terrorism introduces new 
imperatives to the Nation's highway and transit systems. While our 
highway and transit network is robust and redundant, the consequences, 
direct and indirect, of a large-scale attack can be significant. Lost 
links could have long-term significant economic consequences--not to 
mention the immediate harm done. It is also critical as a means through 
which first responders reach impacted areas and by which the public is 
removed from the area in danger.
    Protecting the traveling public and commerce from terrorism will 
require measures to harden facilities from attack, improve emergency 
response capabilities, upgrade traffic management during crises, and 
enhance communications among the public, the military, law enforcement 
and rescue services. Federal, State and local transportation agencies 
have a joint responsibility to minimize vulnerability of critical 
transportation infrastructure assets and to prepare for the 
transportation role in emergency response and recovery.
    Over the past year AASHTO's members examined the security issue, 
focusing on defense mobilization, asset protection, emergency response 
preparation and motor carrier security activities, including tracking 
and credentialing. The cost of enhancing highway and transit security 
is estimated at $2 billion annually in capital costs and at least $1.2 
billion annually in operating costs.
    The Cost of Interstate Interchanges. The Interstate is an aging 
system. Many of the nation's interchanges are coming due for renewal 
and reconstructing them can be very costly, in part because these 
projects often involve safety and efficiency improvements. There is a 
sense that these costs may be rising faster than other forms of highway 
costs.
    Given the large number of interchange projects planned for the next 
10 years, AASHTO in conjunction with TRB undertook an investigation of 
the cost of Interstate interchange projects and the portion of total 
Interstate spending they represent. Twelve States surveyed were chosen 
to provide diversity in terms of geography and Interstate system 
extent. The results indicate that over the past decade approximately 10 
percent of national Interstate capital spending went to interchanges. 
Based on current programs, this percentage could double to 20 percent 
during this decade. In a few States, interchanges costs are consuming 
one-third to one-half of Interstate capital outlays.
    Increasing Program Delivery Costs. The combination of environmental 
reviews and mitigation and right-of-way acquisition is adding time and 
cost to transportation projects. The increase nationally is 
conservatively estimated at $1 billion annually.
Transit Needs
    The nation's extensive public transportation network provides 
access to jobs; mobility for the young, elderly or disabled and helps 
reduce congestion, conserve fuel, enhance the efficiency of highway 
transportation, reduce air pollution and support security and emergency 
preparedness activities. An efficient, safe and environmentally sound 
public transportation system is essential to moving people in both 
urban and rural areas.
    Transit capital asset needs include:

      Replace of bus and rail vehicles;
      Major rehabilitation of bus and rail vehicles;
      Elimination of the backlog of vehicle need to bring the 
nation's fleet into a state of good repair;
      Replacement or rehabilitation of bus and rail maintenance 
and yard facilities, stations and tracks;
      Fleet expansion to accommodate increased ridership 
demands; and
      Expansion of new rail systems to meet demand

    If the nation's urban and rural transit systems only maintain 
physical conditions and service performance at the levels that are 
being observed today, annual capital investment needs will be about $19 
billion--assuming 1.6 percent annual ridership growth. If the decision 
is made to improve both the existing physical conditions and improve 
service performance at the current ridership growth rate of 3.5 
percent, the annual transit capital need is about $44 billion.
    Core Capacity Needs. In many of the nation's largest cities, 
transit ridership has significantly increased during the last 6 years. 
As a result, existing rail systems are operating near to, or in excess 
of, their physical capacity and above a level that provides acceptable 
passenger comfort and safety. To meet this demand, upgrades will be 
necessary, including for example, new signal systems to allow more 
throughput of rail vehicles, double tracking of existing rail lines to 
provide for additional system capacity and station platform extensions.
    New Starts. Many areas across the country have recently completed 
or are seeking major rail transit capital improvements. Between 1996 
and 2001, more than 350 miles of rail transit service were added in 20 
cities. The demand for future rail projects continues to grow. 
Currently, 26 States and the District of Columbia have 78 New Start 
projects that have moved beyond the study phase and which carry a price 
tag of an estimated $47 billion. In addition, more than 150 studies are 
underway around the country.
    Rural Public Transportation Needs. Mobility and access to meet the 
needs of the 60 million people living in rural areas must include the 
availability of safe and reliable public transit service, especially to 
meet the needs of the growing elderly population retiring to rural 
areas, the disabled and the young--all dependent on alternatives to the 
automobile. Rural transit needs consist of two major components--the 
maintenance of the existing system and the expansion of the system to 
address unmet needs.
    The total estimated annual need for rural transit is:

      $191 million for replacement and rehabilitation of 
existing general public vehicles; and
      $194 million for replacement and rehabilitation of 
specialized vehicles
      $50 billion for replacement and rehabilitation of 
intercity vehicles
      $81 billion for replacement and expansion of rural 
general public and rural specialized maintenance and administrative 
facilities
      $495 billion expansion of rural general public, rural 
specialized and rural facilities to improve service

    In total, rural public transportation needs are estimated at $0.5 
billion annually for the maintain condition and performance scenario, 
and $1.0 billion for the improve service performance scenario.
Benefits of the Surface Transportation System
    Transportation is vital to the national economy and to our quality 
of life. Its benefits extend from maintaining America's competitiveness 
in the global economy to providing access to jobs and education. Here 
is a sampling of the many ways transportation contributes value to 
every aspect of American life:

      Today, 11.3 million Americans--one in 11--are employed in 
transportation occupations.
      Every billion dollars of Federal highway investment 
generates 47,500 jobs; for every billion in transit investment, job 
generation is virtually the same.
      In 1997, the country's roads, railroads, airways, 
waterways and pipelines shipped 11 billion tons of freight valued at $7 
trillion.
      The Federal-aid highway program creates 2.5 acres of 
wetlands for every acre it takes for road construction.
      Since 1970, States have built more than 1,600 miles of 
noise barriers at a cost of more than $1.9 billion.
      Over the past 11 years, $4.9 billion in enhancement 
projects--such as bike paths and the preservation of historic bridges 
and train stations--have been programmed for almost 15,000 communities.
      Today, 28 percent of U.S. production is based on just-in-
time practices, which is dependent on a healthy transportation system.

    Travel, Tourism and Recreation. Transportation and tourism are 
vital to our economy. In 2000, 51 million foreign visitors came to the 
United States, spending $100 billion, generating more than 1.1 million 
jobs and making tourism America's fourth-largest export. Travelers to 
the United States from outside North America spend an estimated $220 
per visitor on transportation. Although many use transit or tour buses 
initially, significant numbers shift to private automobiles on second 
and third visits.
    Domestic travel and tourism dwarf international visits. Americans 
touring America spent $481 billion and generated an additional 6.5 
million jobs during 2000. According to the Travel Industry Association 
of America, 43.9 million adults in the U.S. took some 272 billion 
business trips during 1998.
    Recreation is one of the fastest growing sectors in the U.S. 
economy, expanding at 5 percent a year. The American Recreation 
Coalition estimates that there are 8.6 million recreation vehicle-
owning households now and 10.4 million expected by 2010. The recreation 
sector is also heavily dependent on federally owned lands that comprise 
650 million acres, or about 29 percent of the total land area of the 
country. National Park Service areas get more than 273 million visitors 
annually, who bring more than $5.5 billion in spending a year to nearby 
communities. The use of Forest Service roads, which total over 380,000 
miles, has increased 15fold over the past 20 years.
    Business and leisure travelers, whether foreign visitors or next 
door neighbors, depend on our nation's infrastructure for access to a 
variety of activities and destinations. Transportation investment helps 
generate greater tourism earnings by making tourist destinations more 
accessible. Investments to relieve congestion, improve road conditions 
and signage and increase parking facilities and scenic turnouts help 
increase tourist volumes, lengths of stay and spending while reducing 
tourist transportation costs. Investments in transit in and around 
popular tourist destinations create a more attractive and accessible 
environment for visitors.
The Bottom Line Series of Needs Documentation
    The Bottom Line Report, which is attached, presents AASHTO's 
assessment of the nation's current and projected highway and transit 
capital investment needs, and was prepared as one source of 
documentation to inform the coming debate on reauthorization of the 
Federal highway and transit programs. We recognize, however, that the 
all the modes comprising the nation's transportation system are 
inextricably linked and we need all parts to function well for the 
health of the entire system. Moreover, over the next year Congress may 
consider reauthorization of Amtrak, freight rail financing and 
reauthorization of the Federal airport program as well as 
reauthorization of the Federal highway and transit programs. Therefore, 
the Highway and Transit Bottom Line Report is the first in a series of 
Bottom Line Reports that are underway. Others that are recently 
completed or currently underway include AASHTO's Freight Rail Bottom 
Line Report; AASHTO's Intercity Rail Passenger Report; and AASHTO's 
Aviation Bottom Line Report, being prepared with cooperation from the 
National Association of State Aviation Officials.
    AASHTO's Freight Rail Bottom Line Report concludes that to simply 
keep up with freight rail's share of forecasted demand, the freight 
rail system needs substantial addition capital investment. Estimates 
include:

      $13.8 billion for rail safety, including warning systems, 
grade separations, grade crossing eliminations and track relocations 
for both freight and passenger systems.
      $11.8 for short-line improvements, including upgrading of 
tracks and bridges to handle the newer 286,000 pound and 315,00 
railcars coming into service.
      $80 billion to $100 billion over 20 years for Class I 
infrastructure repair and maintenance.
      $70 billion over 20 years for Class I infrastructure 
improvements above and beyond repair.

    The total cost to achieve this ``base case'' scenario is estimated 
at $175 billion to $195 billion over the next 20 years. A more 
aggressive investment strategy to capture a larger portion of the 
forecast growth in freight demand would require an additional $30 
billion.
    Intercity Passenger Rail. AASHTO believes that intercity passenger 
rail service is a basic element of the nation's multimodal 
transportation system. Passenger rail offers opportunities to 
supplement highway and airport capacity in congested and rapidly 
growing traffic corridors, offers an essential transportation 
alternative and contributes to a more dependable and resilient 
transportation system. At least 36 States are involved in the operation 
and/or planning of intercity passenger rail corridors. By their 
estimate, over the next 20 years, $60 billion in capital investment is 
needed for these rail corridors, which include the federally designated 
high speed rail corridors. This level of investment does not include 
additional capital resources needed for longer distance train routes 
nor does it include the costs of operations. Linked to air, bus and 
passenger car transportation, these corridors will expedite travel for 
short-to-mid-length trips in transportation corridors where highway 
travel is increasingly congested and air travel is increasingly 
difficult.
    Mr. Chairman and members of the committee, AASHTO looks forward to 
working with you over the coming year as you begin your deliberations 
on reauthorization of the Federal highway and transit programs. I will 
be pleased to answer any questions now or that you may have for the 
record.
                                 ______
                                 
                                 
                                 
                                 
                               __________
 Statement of JayEtta Hecker, Director, Physical Infrastructure Issue, 
                       General Accounting Office
    Mr. Chairman and members of the committee: We appreciate the 
opportunity to testify on the challenges faced by the surface and 
maritime transportation systems in maintaining and improving mobility. 
Your hearing today focuses on important issues about the physical 
condition, performance, and future investment requirements of the 
nation's roadways and bridges.\1\ Our remarks will focus on the 
performance of the transportation systems. More specifically, we will 
discuss the ultimate desired outcome of transportation infrastructure 
improvements--enhanced mobility-and the possible strategies for 
achieving that outcome.\2\
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     \1\We have not had an opportunity to review the Department of 
Transportation's Conditions and Performance Report that is expected to 
be released at today's hearing.
     \2\In a July 2001 testimony before the former Subcommittee on 
Transportation and Infrastructure, Senate Committee on Environment and 
Public Works, we reviewed the infrastructure investment estimates of 
seven Federal agencies and found that they focus mostly on the 
condition of the infrastructure rather than the desired outcomes (e.g., 
less traffic congestion) that can be expected from additional 
infrastructure investments. We cautioned against relying mainly on 
measures of need based primarily on the condition of existing 
infrastructure and instead suggested comparing the costs and benefits 
of alternative approaches for reaching outcomes, including noncapital 
alternatives (such as strategies to manage demand rather than build new 
infrastructure). See U.S. General Accounting Office, U.S. 
Infrastructure: Funding Trends and Federal Agencies' Investment 
Estimates, GAO-01-986T (Washington, DC.: July 23, 2001).
---------------------------------------------------------------------------
    The scope of the U.S. surface and maritime transportation systems-
which primarily includes roads, mass transit systems, railroads, and 
ports and waterways\3\--is vast. One of the major goals of these 
systems is to provide and enhance mobility. Mobility provides people 
with access to goods, services, recreation, and jobs; provides 
businesses with access to materials, markets, and people; and promotes 
the movement of personnel and material to meet national defense needs. 
However, the U.S. surface and maritime transportation systems have 
become congested and concerns have been raised about the burden they 
impose on the nation's quality of life through wasted energy, time, and 
money; increased pollution; and threats to public safety. Barriers to 
transportation accessibility for certain population groups and the 
level of financial resources available to address transportation 
problems are also major concerns. Balancing the goal of improving 
mobility with other social goals, such as environmental preservation, 
will present challenges.
---------------------------------------------------------------------------
     \3\In this testimony, we define the surface transportation modes 
to include highways, mass transit systems, and railroads; and the 
maritime transportation modes to include ports, inland waterways, and 
the intermodal connections leading to them. Pipelines were not part of 
our review.
---------------------------------------------------------------------------
    Our statement is based on a report that we are releasing today on 
surface and maritime transportation mobility.\4\ We will discuss (1) 
key challenges in maintaining and improving mobility and (2) key 
strategies for addressing the challenges. Our report is primarily based 
on expert opinion drawn from two panels of surface and maritime 
transportation experts that we convened in April 2002. Our work also 
included a review of reports prepared by Federal agencies, academics, 
and industry groups. Appendix I provides further information on our 
scope and methodology and appendix II contains a list of relevant GAO 
products.
---------------------------------------------------------------------------
     \4\U.S. General Accounting Office, Surface and Maritime 
Transportation: Developing Strategies for Enhancing Mobility: A 
National Challenge, GAO-02-775 (Washington, DC.: Aug. 30, 2002).
---------------------------------------------------------------------------
    In summary:

      With increasing passenger and freight travel, the surface 
and maritime transportation systems face a number of challenges in 
ensuring continued mobility. These challenges include:

      Preventing congestion from overwhelming the 
transportation system. Increasing passenger and freight travel has 
already led to increasing levels of congestion at bottlenecks and peak 
travel times in some areas. For example, the amount of traffic 
experiencing congestion during peak travel periods doubled from 33 
percent in 1982 to 66 percent in 2000 in 75 metropolitan areas studied 
by the Texas Transportation Institute.\5\ Freight mobility is also 
affected by increasing congestion within specific heavily used 
corridors and at specific bottlenecks that tend to involve intermodal 
connections, such as border crossings, and road and rail connections at 
major seaports within metropolitan areas. Furthermore, congestion is 
increasing at aging and increasing unreliable locks on the inland 
waterways.
---------------------------------------------------------------------------
     \5\David Shrank and Tim Lomax, 2002 Urban Mobility Report (College 
Station, Tex.: Texas Transportation Institute, June 2002).
---------------------------------------------------------------------------
      Ensuring access to transportation for certain underserved 
populations (including some elderly, poor, and rural populations that 
have restricted mobility) and achieving a balance between enhancing 
mobility and giving due regard to environmental and other social goals. 
Policies and patterns of development that encourage automobile 
dependence and favor provision of transit services with inflexible 
routes and schedules-such as subway or bus-may disadvantage some groups 
by limiting their access to needed services or jobs. The surface and 
maritime transportation systems also face the challenge of effectively 
addressing pollution problems caused by increased travel levels. 
Emissions from passenger and freight vehicles, shipping waste disposal 
practices, and excessive noise levels have contributed to the 
degradation of air quality, disruption of ecosystems, and other 
problems.

    There is no one solution for the mobility challenges facing the 
Nation, and our expert panelists indicated that numerous approaches are 
needed to address these challenges. From these discussions, we believe 
that the wide range of approaches can be clustered into three key 
strategies that may help transportation decisionmakers at all levels of 
government address mobility challenges. These strategies include the 
following:

      Focus on the entire surface and maritime transportation 
system rather than on specific modes or types of travel to achieve 
desired mobility outcomes. Transportation agencies at the Federal, 
State, and local level might shift focus from their current emphasis on 
single modes to consider performance outcomes of all modes in 
addressing mobility challenges, and to recognize interactions across 
modes between passenger and freight traffic, and between public and 
private interests. This is important because addressing the mobility 
challenges outlined above can involve a scope beyond a local 
jurisdiction or a State line, and may require coordination across 
multiple modes, types of travel, or types of transportation providers 
and planners.
      Use a full range of techniques to achieve desired 
mobility outcomes. Using various techniques-such as new construction, 
corrective and preventive maintenance, rehabilitation, operations and 
system management, and pricing-to address complex mobility challenges, 
may be more effective than placing emphasis on any one technique.
      Provide more options for financing mobility improvements 
and consider additional sources of revenue. This strategy-which 
involves providing more flexibility in funding across modes, expanding 
financial support for alternative financing mechanisms (e.g., credit 
assistance to State and local governments), and considering various 
revenue-raising methods-may offer promise for addressing key mobility 
problems.
Background
    The U.S. surface and maritime transportation systems facilitate 
mobility through an extensive network of infrastructure and operators, 
as well as through the vehicles and vessels that permit passengers and 
freight to move within the systems. The systems include 3.9 million 
miles of public roads, 121,000 miles of major private railroad 
networks, and 25,000 miles of commercially navigable waterways. They 
also include over 500 major urban public transit operators in addition 
to numerous private transit operators, and more than 300 ports on the 
coasts, Great Lakes, and inland waterways.
    Maintaining transportation systems is critical to sustaining 
America's economic growth. Efficient mobility systems significantly 
affect economic development: cities could not exist and global trade 
could not occur without systems to transport people and goods. The 
pressures on the existing transportation system are mounting, however, 
as both passenger and freight travel are expected to increase over the 
next 10 years, according to Department of Transportation (DOT) 
projections. Passenger vehicle travel on public roads is expected to 
grow by 24.7 percent from 2000 to 2010. Passenger travel on transit 
systems is expected to increase by 17.2 percent over the same period. 
Amtrak has estimated that intercity passenger rail ridership will 
increase by 25.9 percent from 2001 to 2010. Preliminary estimates by 
DOT indicate that tons of freight moved on all surface and maritime 
modes-truck, rail, and water-are expected to increase by 43 percent 
from 1998 through 2010, with the largest increase expected to be in the 
truck sector. The key factors behind increases in passenger travel, and 
the modes travelers choose, are expected to be population growth, the 
aging of the population, and rising affluence. For freight movements, 
economic growth, increasing international trade, and the increasing 
value of cargo shipped may affect future travel levels and the modes 
used to move freight.
    The relative roles of each sector involved in surface and maritime 
transportation activities-including the Federal Government, other 
levels of government, and the private sector-vary across modes. For 
public roads, the Federal Government owns few roads but has played a 
major role in funding the nation's highways. With the completion of the 
interstate highway system in the 1980's-and continuing with passage of 
the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA)\6\ 
and its successor legislation, the Transportation Equity Act for the 
21st Century (TEA-21)\7\, in 1998-the Federal Government shifted its 
focus toward preserving and enhancing the capacity of the system. While 
the Federal Government's primary role has been to provide capital 
funding for the interstate system and other highway projects, State and 
local governments provide the bulk of the funding for public roads in 
the United States and are responsible for operating and maintaining all 
nonFederal roads, including the interstate system.
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     \6\P.L. 102-240 (Dec. 18, 1991).
     \7\P.L. 105-178 (June 9, 1998).
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    For transit systems--which include a variety of multiple-occupancy 
vehicle services designed to transport passengers on local and regional 
routes-the Federal Government provides financial assistance to State 
and local transit operators to develop new transit systems and improve, 
maintain, and operate existing systems. The largest portion of capital 
funding for transit comes from the Federal Government, while the 
primary source for operating funds comes from passenger fares.
    The respective roles of the public and private sector and the 
revenue sources vary for passenger as compared with freight railroads. 
For passenger railroads, the Rail Passenger Service Act of 1970 created 
Amtrak to provide intercity passenger rail service because existing 
railroads found such service unprofitable. Since its founding, Amtrak 
has rebuilt rail equipment and benefited from significant public 
investment in track and stations, especially in the Northeast corridor, 
which runs between Boston and Washington, DC. The role of the Federal 
Government in providing financial support to Amtrak is currently under 
review amid concerns about the corporation's financial viability and 
discussions about the future direction of Federal policy toward 
intercity rail service. For freight railroads, the private sector owns, 
operates, and provides almost all of the financing for freight 
railroads. Currently, the Federal Government plays a relatively small 
role in financing freight railroad infrastructure by offering some 
credit assistance to State and local governments and railroads for 
capital improvements.
    The U.S. maritime transportation system primarily consists of 
waterways, ports, the intermodal connections (e.g., inland rail and 
roadways) that permit passengers and cargo to reach marine facilities, 
and the vessels and vehicles that move cargo and people within the 
system. The maritime infrastructure is owned and operated by an 
aggregation of State and local agencies and private companies, with 
some Federal funding provided by the Corps of Engineers, the U.S. Coast 
Guard, and DOT's Maritime Administration.
    Funding authorization for several key Federal surface 
transportation programs will expire soon. For example, TEA-21's 
authorization of appropriations expires in fiscal year 2003 and the 
Amtrak Reform and Accountability Act of 1997\8\ authorized Federal 
appropriations for Amtrak through the end of fiscal year 2002. In 
addition, the Federal funding processes and mechanisms for the maritime 
transportation system are currently under review by two interagency 
groups.\9\
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     \8\P.L. 105-134 (Dec. 2, 1997).
     \9\The two groups are the Interagency Committee on the Marine 
Transportation System and the Marine Transportation System National 
Advisory Council.
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Key Mobility Challenges Include Growing Congestion and Other Problems
    There are several challenges to mobility. Three of the most 
significant are growing congestion, ensuring access to transportation 
for certain underserved populations, and addressing the transportation 
system's negative effects on the environment and communities.
Congestion
    Ensuring continued mobility involves preventing congestion from 
overwhelming the transportation system. Congestion is growing at 
localized bottlenecks (places where the capacity of the transportation 
system is most limited) and at peak travel times on public roads, 
transit systems, freight rail lines, and at freight hubs such as ports 
and borders where freight is transferred from one mode to another. In 
particular:

      For local urban travel, a study by the Texas 
Transportation Institute\10\ showed that the amount of traffic 
experiencing congestion during peak travel periods doubled from 33 
percent in 1982 to 66 percent in 2000 in the 75 metropolitan areas 
studied. In addition, the average time per day that roads were 
congested increased over this period, from about 4.5 hours in 1982 to 
about 7 hours in 2000. Increased road congestion can also affect public 
bus and other transit systems that operate on roads. Some transit 
systems are also experiencing increasing rail congestion at peak travel 
times.\11\ In addition, concerns have been raised about how intercity 
and tourist travel interacts with local traffic in metropolitan areas 
and in smaller towns and rural areas, and how this interaction will 
evolve in the future. According to a report sponsored by the World 
Business Council for Sustainable Development, Mobility 2001,\12\ 
capacity problems for intercity travelers are severe in certain heavily 
traveled corridors, such as the Northeast corridor, which links 
Washington, DC, New York, and Boston. In addition, the study said that 
intercity travel may constitute a substantial proportion of total 
traffic passing through smaller towns and rural areas.
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     \10\Shrank and Lomax, 2002 Urban Mobility Report.
     \11\For example, the Washington Metropolitan Area Transit 
Authority's studies on crowding found that, of the more than 200 peak 
morning rail trips observed over a recent 6-month period, on average, 
23 percent were considered ``uncomfortably crowded or crush loads.'' 
See U.S. General Accounting Office, Mass Transit: Many Management 
Successes at WMATA, but Capital Planning Could Be Enhanced, GAO-01-744 
(Washington, DC.: July 2, 2001).
     \12\Massachusetts Institute of Technology and Charles River 
Associates, Inc., Mobility 2001: World Mobility at the End of the 
Twentieth Century and Its Sustainability (World Business Council for 
Sustainable Development, Aug. 2001).
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      Congestion is expected to increase on major freight 
transportation networks at specific bottlenecks, particularly where 
intermodal connections occur, and at peak travel times. This 
expectation raises concerns about how interactions between freight and 
passenger travel and how increases in both types of travel will affect 
mobility in the future. Trucks contribute to congestion in metropolitan 
and other areas where they generally move on the same roads and 
highways as personal vehicles, particularly during peak periods of 
travel. In addition, high demand for freight, particularly freight 
moved on trucks, exists in metropolitan areas where overall congestion 
tends to be the worst.
      With international trade an increasing part of the 
economy and with larger containerships being built, some panelists 
indicated that more pressure will be placed on the already congested 
road and rail connections to major U.S. seaports and at the border 
crossings with Canada and Mexico. According to a DOT report,\13\ more 
than one-half of the ports responding to a 1997 survey of port access 
issues identified traffic impediments on local truck routes as the 
major infrastructure problem. This congestion has considerable 
implications for our economy given that 95 percent of our overseas 
trade tonnage moves by water, and the cargo moving through the U.S. 
marine transportation system contributes billions of dollars to the 
U.S. gross domestic product.\14\
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     \13\An Assessment of the U.S. Marine Transportation System 
(Washington, DC.: U.S. Department of Transportation, Sept. 1999).
     \14\U.S. General Accounting Office, Marine Transportation: Federal 
Financing and a Framework for Infrastructure Investments, GAO-02-1033 
(Washington, DC.: Sept. 9, 2002).
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      Railroads are beginning to experience more severe 
capacity constraints in particular heavily used corridors, such as the 
Northeast corridor, and within major metropolitan areas, especially 
where commuter and intercity passenger rail services share tracks with 
freight railroads. Capacity constraints at these bottlenecks are 
expected to worsen in the future.
      On the inland waterways, congestion is increasing at 
aging and increasingly unreliable locks. According to the Corps of 
Engineers, the number of hours that locks were unavailable due to lock 
failures increased in recent years, from about 35,000 hours in 1991 to 
55,000 hours in 1999, occurring primarily on the upper Mississippi and 
Illinois rivers. Also according to the Corps of Engineers, with 
expected growth in freight travel, 15 of 26 locks that they studied are 
expected to exceed 80 percent of their capacity by 2020, as compared to 
4 that had reached that level in 1999.

    Some of the systemic factors that contribute to congestion include 
(1) barriers to building enough capacity to accommodate growing levels 
of travel; (2) challenges to effectively managing and operating 
transportation systems; and (3) barriers to effectively managing how, 
and the extent to which, transportation systems are used. First, there 
is insufficient capacity at bottlenecks and during peak travel times to 
accommodate traffic levels for a variety of reasons. For example, 
transportation infrastructure (which is generally provided by the 
public sector, except for freight railroads) takes a long time to plan 
and build, is often costly, and can conflict with other social goals 
such as environmental preservation and community maintenance. 
Furthermore, funding and planning rigidities in the public institutions 
responsible for providing transportation infrastructure tend to promote 
one mode of transportation, rather than a combination of balanced 
transportation choices, making it more difficult to deal effectively 
with congestion. In addition, some bottlenecks occur where modes 
connect, and because funding is generally mode-specific, dealing with 
congestion at these intermodal connections is not easily addressed.
    Second, many factors related to the management and operation of 
transportation systems can contribute to increasing congestion. 
Congestion on highways is in part due to poor management of traffic 
flows on the connectors between highways and poor management in 
clearing roads that are blocked due to accidents, inclement weather, or 
construction. For example, in the 75 metropolitan areas studied by the 
Texas Transportation Institute, 54 percent of annual vehicle delays in 
2000 were due to incidents such as breakdowns or crashes. In addition, 
the Oak Ridge National Laboratory reported that, nationwide, 
significant delays are caused by work zones on highways; poorly timed 
traffic signals; and snow, ice, and fog.\15\
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     \15\S.M. Chin, O. Franzese, D.L. Greene, H.L. Hwang, and R. 
Gibson, Temporary Losses of Capacity Study and Impacts on Performance, 
Report No. ORNL/TM-2002/3 (Oak Ridge, Tenn.: Oak Ridge National 
Laboratory, May 2002).
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    Third, some panelists said that congestion on transportation 
systems is also due in part to inefficient pricing of the 
infrastructure because users-whether they are drivers on a highway or 
barge operators moving through a lock-do not pay the full costs they 
impose on the system and on other users for their use of the system. If 
travelers and freight carriers had to pay a higher cost for using 
transportation systems during peak periods to reflect the full costs 
they impose, they might have an incentive to avoid or reschedule some 
trips and to load vehicles more fully, possibly resulting in less 
congestion.
    Panelists also noted that the types of congestion problems that are 
expected to worsen involve interactions between long-distance and local 
traffic and between passengers and freight. Existing institutions may 
not have the capacity or the authority to address them. For example, 
some local bottlenecks may hinder traffic that has regional or national 
significance, such as national freight flows from major coastal ports, 
or can affect the economies and traffic in more than one State. Current 
State and local planning organizations may have difficulty considering 
all the costs and benefits related to national or international traffic 
flows that affect other jurisdictions as well as their own. 
Furthermore, in our recent survey of States, most States reported that 
the increasing volume of both car and truck traffic over the next 
decade would negatively affect the physical condition of pavement and 
bridges and the safety of their interstate highways.\16\
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     \16\U.S. General Accounting Office, Highway Infrastructure: 
Interstate Physical Conditions Have Improved, but Congestion and Other 
Pressures Continue, GAO-02-571 (Washington, DC.: May 31, 2002).
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Other Mobility Challenges
    Besides dealing with the challenge of congestion, ensuring mobility 
also involves ensuring access to transportation for certain underserved 
populations. Settlement patterns and dependence automobiles limit 
access to transportation systems for some elderly people and low-income 
households, and in rural areas where populations are expected to 
expand.
    The elderly have different mobility challenges than other 
populations because they are less likely to have drivers' licenses, 
have more serious health problems, and may require special services and 
facilities, according to the Department of Transportation's 1999 
Conditions and Performance report.\17\ People who cannot drive 
themselves tend to rely on family, others caregivers, or friends to 
drive them, or find alternative means of transportation. Many of the 
elderly also may have difficulty using public transportation due to 
physical ailments. As a result, according to the 1999 Conditions and 
Performance report and a 1998 report about mobility for older 
drivers,\18\ they experience increased waiting times, uncertainty, and 
inconvenience, and they are required to do more advance trip planning. 
These factors can lead to fewer trips taken for necessary business and 
for recreation, as well as restrictions on times and places that 
healthcare can be obtained. As the population of elderly individuals 
increases over the next 10 years, issues pertaining to access are 
expected to become more prominent in society.
---------------------------------------------------------------------------
     \17\Federal Highway Administration and Federal Transit 
Administration, 1999 Status of the Nation's Highways, Bridges, and 
Transit: Conditions and Performance (Washington, DC.: U.S. Department 
of Transportation, 2000).
     \18\Jon E. Burkhardt, Arlene M. Berger, Michael Creedon, and Adam 
T. McGavock, Mobility and Independence: Changes and Challenges for 
Older Drivers (July 1998). This report was developed under a 
cooperative agreement with the U.S. Department of Health and Human 
Services (DHHS), under the auspices of the Joint DHHS/DOT Coordinating 
Council on Access and Mobility.
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    Lower income levels can also be a significant barrier to 
transportation access. The cost of purchasing, insuring, and 
maintaining a car is prohibitive to some households, and 26 percent of 
low-income households do not own a car, compared with 4 percent of 
other households, according to the 1999 Conditions and Performance 
report. Among all low-income households, about 8 percent of trips are 
made in cars that are owned by others as compared to 1 percent for 
other income groups. Furthermore, similar uncertainties and 
inconveniences apply to this group as to the elderly regarding relying 
on others for transportation. In addition, in case studies of access to 
jobs for low-income populations, Federal Transit Administration (FTA) 
researchers found that transportation barriers to job access included 
gaps in transit service, lack of knowledge of where transit services 
are provided, and high transportation costs resulting from multiple 
transfers and long distances traveled.\19\
---------------------------------------------------------------------------
     \19\Federal Transit Administration, Access to Jobs: Planning Case 
Studies (Washington, D.C: U.S. Department of Transportation, Sept. 
2001).
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    Rural populations, which according to the 2000 Census grew by 10 
percent over the last 10 years, also face access problems. Access to 
some form of transportation is necessary to connect rural populations 
to jobs and other amenities in city centers or, increasingly, in the 
suburbs. Trips by rural residents tend to be longer due to lower 
population densities and the relative isolation of small communities. 
Therefore, transportation can be a challenge to provide in rural areas, 
especially for persons without access to private automobiles. A report 
prepared for the FTA in 2001\20\ found that 1 in 13 rural residents 
lives in a household without a personal vehicle. In addition, according 
to a report by the Coordinating Council on Access and Mobility,\21\ 
while almost 60 percent of all nonmetropolitan counties had some public 
transportation services in 2000, many of these operations were small 
and offered services only to limited geographic areas during limited 
times.
---------------------------------------------------------------------------
     \20\Community Transportation Association of America, Status of 
Rural Public Transportation-2000 (April 2001).
     \21\Coordinating Council on Access and Mobility, Planning 
Guidelines for Coordinated State and Local Specialized Transportation 
Services (Washington, D.C: U.S. Department of Transportation, Dec. 20, 
2000).
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    Finally, transportation can also negatively affect the environment 
and communities by increasing the levels of air and water pollution. As 
a result of the negative consequences of transportation, tradeoffs must 
be made between facilitating increased mobility and giving due regard 
to environmental and other social goals. For example, transportation 
vehicles are major sources of local, urban, and regional air pollution 
because they depend on fossil fuels to operate. Emissions from vehicles 
include sulfur dioxide, lead, carbon monoxide, volatile organic 
compounds, particulate matter, and nitrous oxides. Vehicle emissions in 
congested areas can trigger respiratory and other illnesses, and runoff 
from impervious surfaces, such as highways, can carry pollutants into 
lakes, streams, and rivers, thus threatening aquatic environments.\22\
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     \22\See U.S. General Accounting Office, Environmental Protection: 
Federal Incentives Could Help Promote Land Use That Protects Air and 
Water Quality, GAO-02-12 (Washington, DC, Oct. 31, 2001).
---------------------------------------------------------------------------
    Freight transportation also has significant environmental effects. 
Trucks are significant contributors to air pollution. According to the 
American Trucking Association, trucks were responsible for 18.5 percent 
of nitrous oxide emissions and 27.5 percent of other particulate 
emissions from mobile sources in the United States. The Mobility 2001 
report states that freight trains also contribute to emissions of 
hydrocarbons, carbon monoxide, and nitrous oxide, although generally at 
levels considerably lower than trucks. In addition, while large 
shipping vessels are more energy efficient than trucks or trains, they 
are also major sources of nitrogen, sulfur dioxide, and diesel 
particulate emissions. According to the International Maritime 
Organization, ocean shipping is responsible for 22 percent of the 
wastes dumped into the sea on an annual basis.
Three Strategies for Addressing Mobility Challenges Include Focusing on 
        Systemwide Outcomes, Using a Full Range of Techniques, and 
        Providing Options for Financing Surface and Maritime 
        Transportation
    The experts we consulted presented numerous approaches for 
addressing the types of challenges discussed throughout this statement, 
but they emphasized that no single strategy would be sufficient. From 
these discussions and our literature review, we have identified three 
key strategies that may help transportation decisionmakers at all 
levels of government address mobility challenges and the institutional 
barriers that contribute to them.
Focus on the Entire Surface and Maritime Transportation System Rather 
        Than on Specific Modes or Types of Travel to Achieve Desired 
        Mobility Outcomes.
    Shifting the focus of government transportation agencies at the 
Federal, State, and local levels to consider all modes and types of 
travel in addressing mobility challenges-as opposed to focusing on a 
specific mode or type of travel in planning and implementing mobility 
improvements-could help achieve enhanced mobility. Addressing the types 
of mobility challenges discussed earlier in this statement can require 
a scope beyond a local jurisdiction, State line, or one mode or type of 
travel. For example, congestion challenges often occur where modes 
connect or should connect-such as ports or freight hubs where freight 
is transferred from one mode to another, or airports that passengers 
need to access by car, bus, or rail. These connections require 
coordination of more than one mode of transportation and cooperation 
among multiple transportation providers and planners, such as port 
authorities, metropolitan planning organizations (MPO),\23\ and private 
freight railroads. Therefore, a systemwide approach to transportation 
planning and funding, as opposed to focus on a single mode or type of 
travel, could improve focus on outcomes related to user or community 
needs. The experts we consulted provided a number of examples of 
alternative transportation planning and funding systems that might 
better focus on outcomes that users and communities desire, including 
the following:
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     \23\MPOs are organizations of city, county, State, and Federal 
officials that provide a regional forum for transportation planning.

      Performance-oriented funding system. The Federal 
Government would first define certain national interests of the 
transportation system-such as maintaining the entire interstate highway 
system or identifying freight corridors of importance to the national 
economy-then set national performance standards for those systems that 
States and localities must meet. Federal funds would be distributed to 
those entities that address national interests and meeting the 
established standards. Any Federal funds remaining after meeting the 
performance standards could then be used for whatever transportation 
purpose the State or locality deems most appropriate to achieve State 
or local mobility goals.
      Federal financial reward-based system. Federal support 
would reward those States or localities that apply Federal money to 
gain efficiencies in their transportation systems, or tie 
transportation projects to land use and other local policies to achieve 
community and environmental goals, as well as mobility goals.
      System with different Federal matching criteria for 
different types of expenditures that might reflect Federal priorities. 
For example, if infrastructure preservation became a higher national 
priority than building new capacity, matching requirements could be 
changed to a 50 percent Federal share for building new physical 
capacity and an 80 percent Federal share for preservation.
      System in which State and local governments pay for a 
larger share of transportation projects, which might provide them with 
incentives to invest in more cost-effective projects. Reducing the 
Federal match for projects in all modes may give States and localities 
more fiscal responsibility for projects they are planning. If cost 
savings resulted, these entities might have more funds available to 
address other mobility challenges. Making Federal matching requirements 
equal for all modes may avoid creating incentives to pursue projects in 
one mode that might be less effective than projects in other modes.

    In addition, we recently reported on the need to view various 
transportation modes, and freight movement in particular, from an 
integrated standpoint, particularly for the purposes of developing a 
Federal investment strategy and considering alternative funding 
approaches.\24\ We identified four key components of a systematic 
framework to guide transportation investment decisions including (1) 
establishing national goals for the system, (2) clearly defining the 
Federal role relative to other stakeholders, (3) determining the 
funding tools and other approaches that will maximize the impact of any 
Federal investment, and (4) ensuring that a process is in place for 
evaluating performance and accountability.
---------------------------------------------------------------------------
     \24\GAO-02-1033.
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Use a Full Range of Techniques to Address Mobility Challenges
    Using a range of techniques to address mobility challenges may help 
control congestion and improve access. This approach involves a 
strategic mix of construction, corrective and preventive maintenance, 
rehabilitation, operations and system management, and managing system 
use through pricing or other techniques. No one type of technique would 
be sufficient to address mobility challenges. Although these techniques 
are currently in use, the experts we consulted indicated that planners 
should more consistently consider a full range of techniques, as 
follows:

      Build new infrastructure. Building additional 
infrastructure is perhaps the most familiar technique for addressing 
congestion and improving access to surface and maritime transportation. 
Although there is a lot of unused capacity in the transportation 
system, certain bottlenecks and key corridors require new 
infrastructure.
      Increase infrastructure maintenance and rehabilitation. 
An emphasis on enhancing capacity from existing infrastructure through 
increased corrective and preventive maintenance and rehabilitation is 
an important supplement to, and sometimes a substitute for, building 
new infrastructure. Maintaining and rehabilitating transportation 
systems can improve the speed and reliability of passenger and freight 
travel, thereby optimizing capital investments.
      Improve management and operations. Better management and 
operation of existing surface and maritime transportation 
infrastructure is another technique for enhancing mobility because it 
may allow the existing transportation system to accommodate additional 
travel without having to add new infrastructure. For example, the Texas 
Transportation Institute reported that coordinating traffic signal 
timing with changing traffic conditions could improve flow on congested 
roadways. One panelist noted that shifting the focus of transportation 
planning from building capital facilities to an ``operations mindset'' 
will require a cultural shift in many transportation institutions, 
particularly in the public sector, so that the organizational 
structure, hierarchy, and rewards and incentives are all focused on 
improving transportation management and operations.\25\
---------------------------------------------------------------------------
     \25\Joseph M. Sussman, ``Transitions in the World of 
Transportation: A Systems View,'' Transportation Quarterly 56 (2002): 
21-22.
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      Increase investment in technology. Increasing public 
sector investment in Intelligent Transportation System (ITS) 
technologies that are designed to enhance the safety, efficiency, and 
effectiveness of the transportation network, can serve as a way of 
increasing capacity and mobility without making major capital 
investments. ITS includes technologies that improve traffic flow by 
adjusting signals, facilitating traffic flow at toll plazas, alerting 
emergency management services to the locations of crashes, increasing 
the efficiency of transit fare payment systems, and other actions. 
Other technological improvements include increasing information 
available to users of the transportation system to help people avoid 
congested areas and to improve customer satisfaction with the system.
      Use demand management techniques. Another approach to 
reducing congestion without making major capital investments is to use 
demand management techniques to reduce the number of vehicles traveling 
at the most congested times and on the most congested routes. One type 
of demand management for travel on public roads is to make greater use 
of pricing incentives. In particular, some economists have proposed 
using congestion pricing that involves charging surcharges or tolls to 
drivers who choose to travel during peak periods when their use of the 
roads increases congestion. These surcharges might help reduce 
congestion by providing incentives for travelers to share rides, use 
transit, travel at less congested (generally off-peak) times and on 
less congested routes, or make other adjustments-and at the same time, 
generate more revenues that can be targeted to alleviating congestion 
in those specific corridors.

    In addition to pricing incentives, other demand management 
techniques that encourage ride-sharing may be useful in reducing 
congestion. Ride-sharing can be encouraged by establishing carpool and 
vanpool staging areas, providing free or preferred parking for carpools 
and vanpools, subsidizing transit fares, and designating certain 
highway lanes as high occupancy vehicle (HOV) lanes that can only be 
used by vehicles with a specified number of people in them (i.e., two 
or more).
    Demand management techniques on roads, particularly those involving 
pricing, often provoke strong political opposition. The panelists cited 
a number of concerns about pricing strategies including (1) the 
difficulty in instituting charges to use roads that previously had been 
available ``free'', (2) the equity issues that arise from the 
potentially regressive nature of these charges (i.e., the surcharges 
constitute a larger portion of the earnings of lower income households 
and therefore impose a greater financial burden on them), and (3) the 
concern that restricting lanes or roads to people who pay to use them 
is elitist because that approach allows people who can afford to pay 
the tolls to avoid congestion that others must endure.
Provide Options for Financing Mobility Improvements and Consider 
        Additional Sources of Revenue
    More options for financing surface and maritime transportation 
projects and more sources of revenue may be needed to achieve desired 
mobility outcomes and address those segments of transportation systems 
that are most congested. Our panelists suggested three financing 
strategies:

      Increase funding flexibility. The current system of 
financing surface and maritime transportation projects limits options 
for addressing mobility challenges. For example, separate funding for 
each mode at the Federal, State, and local level can make it difficult 
to consider possible efficient and effective ways for enhancing 
mobility. Providing more flexibility in funding across modes could help 
address this limitation.
      Expand support for alternative financing mechanisms. The 
public sector could also expand its financial support for alternative 
financing mechanisms to access new sources of capital and stimulate 
additional investment in surface and maritime transportation 
infrastructure. These mechanisms include both newly emerging and 
existing financing techniques such as providing credit assistance to 
State and local governments for capital projects and using tax policy 
to provide incentives to the private sector for investing in surface 
and maritime transportation infrastructure. These mechanisms currently 
provide a small portion of the total funding that is needed for capital 
investment and some of them could create future funding difficulties 
for State and local agencies because they involve greater borrowing 
from the private sector.\26\
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     \26\See U.S. General Accounting Office, Transportation 
Infrastructure: Alternative Financing Mechanisms for Surface 
Transportation, GAO-02-1126T (Washington, DC.: Sept. 25, 2002).
---------------------------------------------------------------------------
      Consider new revenue sources. A possible future shortage 
of revenues may limit efforts to address mobility challenges, according 
to many of the panelists. For example, some panelists said that because 
of the increasing use of alternative fuels, revenues from the gas tax 
are expected to decrease, possibly limiting funds available to finance 
future transportation projects.

    One method of raising revenue is for counties and other regional 
authorities to impose sales taxes for funding transportation projects. 
A number of counties have already passed such taxes and more are being 
considered nationwide. However, several panelists expressed concerns 
that this method might not be the best option for addressing mobility 
challenges because (1) moving away from transportation user charges to 
sales taxes that are not directly tied to the use of transportation 
systems weakens the ties between transportation planning and finance 
and (2) counties and other taxing authorities may be able to bypass 
traditional State and metropolitan planning processes because sales 
taxes provide them with their owns funding sources for transportation.
    New or increased taxes or other fees imposed on the freight sector 
could also help fund mobility improvements, for example, by increasing 
taxes on freight trucking. The Joint Committee on Taxation estimated 
that raising the ceiling on the tax paid by heavy vehicles to $1,900 
could generate about $100 million per year.\27\ Another revenue raising 
method would be to dedicate more of the revenues from taxes on 
alternative fuels, such as gasohol, to the Highway Trust Fund rather 
than to Treasury's general fund, as currently happens. However, this 
would decrease the amount of funds available for other Federal 
programs. Finally, pricing strategies, mentioned earlier in this 
statement as a technique to reduce congestion, are also possible 
additional sources of revenue for transportation purposes.
---------------------------------------------------------------------------
     \27\See U.S. General Accounting Office, Highway Financing: Factors 
Affecting Highway Trust Fund Revenues, GAO-02-667T (Washington, DC, May 
9, 2002).
---------------------------------------------------------------------------
    In summary, the Nation faces significant challenges in maintaining 
and enhancing mobility on its surface and maritime transportation 
systems, particularly with the growing congestion that accompanies 
increased passenger and freight travel. However, as the Congress 
considers reauthorizing surface transportation legislation-and weighs 
the structure, nature, and level of Federal investment it will provide 
in future years to support surface and other transportation activities-
it has an opportunity to consider new strategies for dealing with 
congestion and promoting enhanced mobility. While no single approach is 
sufficient, the key strategies that we have outlined today may help 
transportation decisionmakers at all levels of government address 
mobility challenges and the institutional barriers that contribute to 
them.
    Mr. Chairman, this concludes my prepared statement. I would be 
pleased to respond to any questions you or other members of the 
committee may have at this time.
    Contacts and Acknowledgments
    For further information on this testimony, please contact JayEtta 
Z. Hecker at (202) 512-2834 or [email protected]. Individuals making key 
contributions to this testimony include Christine Bonham, Jay Cherlow, 
Colin Fallon, Rita Grieco, David Hooper, Jessica Lucas, Sara Ann 
Moessbauer, Jobenia Odum, Katherine Siggerud, and Andrew VonAh.
                               Appendix I
Scope and Methodology
    Our work covered major modes of surface and maritime transportation 
for passengers and freight, including public roads, public transit, 
railways, and ports and inland waterways. To identify mobility 
challenges and strategies for addressing those challenges, we primarily 
relied upon expert opinion, as well as a review of pertinent 
literature. In particular, we convened two panels of surface and 
maritime transportation experts to identify mobility issues and gather 
views about alternative strategies for addressing the issues and 
challenges to implementing those strategies. We contracted with the 
National Academy of Sciences (NAS) and its Transportation Research 
Board (TRB) to provide technical assistance in identifying and 
scheduling the two panels that were held on April 1 and 3, 2002. TRB 
officials selected a total of 22 panelists with input from us, 
including a cross-section of representatives from all surface and 
maritime modes and from various occupations involved in transportation 
planning. In keeping with NAS policy, the panelists were invited to 
provide their individual views and the panels were not designed to 
build consensus on any of the issues discussed. We analyzed the content 
of all of the comments made by the panelists to identify common themes 
about key mobility challenges and strategies for addressing those 
challenges. Where applicable, we also identified the opposing points of 
view about the strategies.
    The names and affiliations of the panelists are as follows. We also 
note that two of the panelists served as moderators for the sessions, 
Dr. Joseph M. Sussman of the Massachusetts Institute of Technology and 
Dr. Damian J. Kulash of the Eno Foundation, Inc.

      Benjamin J. Allen is Interim Vice President for External 
Affairs and Distinguished Professor of Business at Iowa State 
University.
      Daniel Brand is Vice President of Charles River 
Associates, Inc., in Boston, Mass.
      Jon E. Burkhardt is the Senior Study Director at Westat, 
Inc., in Rockville, Md.
      Sarah C. Campbell is the President of TransManagement, 
Inc., in Washington, DC.
      Christina S. Casgar is the Executive Director of the 
Foundation for Intermodal Research and Education in Greenbelt, Md.
      Anthony Downs is a Senior Fellow at the Brookings 
Institution.
      Thomas R. Hickey served until recently as the General 
Manager of the Port Authority Transit Corporation in Lindenwold, N.J.
      Ronald F. Kirby is the Director of Transportation 
Planning at the Metropolitan Washington Council of Governments.
      Damian J. Kulash is the President and Chief Executive 
Officer of the Eno Transportation Foundation, Inc., in Washington, DC.
      Charles A. Lave is a Professor of Economics (Emeritus) at 
the University of California, Irvine where he served as Chair of the 
Economics Department.
      Stephen Lockwood is Vice President of Parsons 
Corporation, an international firm that provides transportation 
planning, design, construction, engineering, and project management 
services.
      Timothy J. Lomax is a Research Engineer at the Texas 
Transportation Institute at Texas A&M University.
      James R. McCarville is the Executive Director of the Port 
of Pittsburgh Commission.
      James W. McClellan is Senior Vice President for Strategic 
Planning at the Norfolk Southern Corporation in Norfolk, Va.
      Michael D. Meyer is a Professor in the School of Civil 
and Environmental Engineering at the Georgia Institute of Technology 
and was the Chair of the school from 1995 to 2000.
      William W. Millar is President of the American Public 
Transportation Association (APTA).
      Alan E. Pisarski is an independent transportation 
consultant in Falls Church, Va., providing services to public and 
private sector clients in the United States and abroad in the areas of 
transport policy, travel behavior, and data analysis and development.
      Craig E. Philip is President and Chief Executive Officer 
of the Ingram Barge Company in Nashville, Tenn.
      Arlee T. Reno is a consultant with Cambridge Systematics 
in Washington, DC.
      Joseph M. Sussman is the JR East Professor in the 
Department of Civil and Environmental Engineering and the Engineering 
Systems Division at the Massachusetts Institute of Technology.
      Louis S. Thompson is a Railways Advisor for the World 
Bank where he consults on all of the Bank's railway lending activities.
      Martin Wachs is the Director of the Institute of 
Transportation Studies at the University of California, Berkeley and he 
holds faculty appointments in the departments of City and Regional 
Planning and Civil and Environmental Engineering at the university.
                              Appendix II
Related GAO Products
    Transportation Infrastructure: Alternative Financing Mechanisms for 
Surface Transportation. GAO-02-1126T. Washington, DC.: September 25, 
2002.
    Highway Infrastructure: Preliminary Information on the Timely 
Completion of Highway Construction Projects. GAO-02-1067T. Washington, 
DC.: September 19, 2002.
    Marine Transportation: Federal Financing and a Framework for 
Infrastructure Investments. GAO-02-1033. Washington, DC.: September 9, 
2002.
    Surface and Maritime Transportation: Developing Strategies for 
Enhancing Mobility: A National Challenge. GAO-02-775. Washington, DC.: 
August 30, 2002.
    Highway Infrastructure: Interstate Physical Conditions Have 
Improved, but Congestion and Other Pressures Continue. GAO-02-571. 
Washington, DC.: May 31, 2002.
    Highway Financing: Factors Affecting Highway Trust Fund Revenues. 
GAO-02-667T. Washington, DC.: May 9, 2002.
    Transportation Infrastructure: Cost and Oversight Issues on Major 
Highway and Bridge Projects. GAO-02-702T. Washington, DC.: May 1, 2002.
    Intercity Passenger Rail: Congress Faces Critical Decisions in 
Developing National Policy. GAO-02-522T. Washington, DC.: April 11, 
2002.
    Environmental Protection: Federal Incentives Could Help Promote 
Land Use That Protects Air and Water Quality. GAO-02-12. Washington, 
DC.: October 31, 2001.
    Intercity Passenger Rail: The Congress Faces Critical Decisions 
About the Role of and Funding for Intercity Passenger Rail Systems. 
GAO-01-820T. Washington, DC.: July 25, 2001.
    U.S. Infrastructure: Funding Trends and Federal Agencies' 
Investment Estimates. GAO-01-986T. Washington, DC.: July 23, 2001.
    Mass Transit: Many Management Successes at WMATA, but Capital 
Planning Could Be Enhanced. GAO-01-744. Washington, DC.: July 3, 2001.
    Intercity Passenger Rail: Assessing the Benefits of Increased 
Federal Funding for Amtrak and High-Speed Passenger Rail Systems. GAO-
01-480T. Washington, DC.: March 21, 2001.
    Performance and Accountability: Challenges Facing the Department of 
Transportation. GAO-01-443T. Washington, DC.: September 19, 2002.
    Highway Funding: Problems With Highway Trust Fund Information Can 
Affect State Highway Funds. RCED/AIMD-00-148. Washington, DC.: June 29, 
2000.
    Highway Infrastructure: FHWA's Model for Estimating Highway Needs 
Is Generally Reasonable, Despite Limitations. RCED-00-133. Washington, 
DC.: June 5, 2000.
    Mass Transit: 'Mobility Improvements' Is One of Many Factors Used 
to Evaluate Mass Transit Projects. RCED-00-6R. Washington, DC.: October 
15, 1999.
                                 ______
                                 
   Responses of JayEtta Hecker to Additional Questions from Senator 
                               Voinovich
    Question 1. In your testimony, you stated that shifting the focus 
of government transportation agencies to consider all modes and types 
of travel in addressing mobility challenges could help achieve enhanced 
mobility. What stands in the way of transportation agencies looking 
comprehensively at all modes and types of transportation to address 
their mobility issues? What mode or type of transportation is most 
often considered at the expense of other modes and why? What mode or 
type of transportation is least often considered and why?
    Response. In our report and testimony on surface and transportation 
mobility\1\, we describe a number of barriers that stand in the way of 
transportation agencies looking comprehensively at all modes and types 
of transportation, including:
---------------------------------------------------------------------------
     \1\See U.S. General Accounting Office, Surface and Maritime 
Transportation: Developing Strategies for Enhancing Mobility: A 
National Challenge, GAO-02-775 (Washington, DC.: Aug. 30, 2002) and 
U.S. General Accounting Office, Surface and Maritime Transportation: 
Challenges and Strategies for Enhancing Mobility, GAO-02-1132T 
(Washington, DC.: Sept. 30, 2002).

      Mode-Specific Funding: Provisions of the Transportation 
Equity Act for the 21st Century (TEA-21) have broadened the flexibility 
of Federal funds to be used across modes, such as the flexibility to 
use highway funds for transit or pedestrian projects afforded by the 
Surface Transportation Program. However, according to the experts we 
consulted and the Transportation Research Board's Critical Issues in 
Transportation 2002,\2\ the broad array of agencies responsible for 
various portions of the transportation network remain uncoordinated and 
unconnected. No single agency or funding mechanism has authority over 
the system as a whole (i.e., freight and passenger travel on all 
modes), making it difficult for the various public agencies and the 
private sector to plan and coordinate mobility improvements that affect 
more than one mode. For example, a channel improvement at a port may 
necessitate improvements to connecting road and rail networks and will 
affect freight and passenger travel on those systems. However, channel 
improvements go through a Corps of Engineers planning process for 
approval and then a congressional appropriation process for funding, 
whereas road improvements would go through the appropriate State and 
Metropolitan Planning Organization's (MPO) process for approval, and 
rail improvements would most likely be financed privately by the 
railroad. These different processes administered by various agencies 
with differing priorities, time lines, and access to resources are one 
type of barrier that make it difficult for agencies to look 
comprehensively at all modes and types of travel.
---------------------------------------------------------------------------
     \2\Transportation Research Board, Critical Issues in 
Transportation 2002 (Washington, DC.: The National Academies, November 
2001).
---------------------------------------------------------------------------
      Incentives in Project Selection Processes: According to 
the expert panelists we consulted and our other work, existing Federal 
matching requirements and increasing designation by the Congress of 
Federal funds create incentives for states and MPOs to pursue 
particular types of projects, thereby distorting the planning process. 
The non-Federal matching shares for public transit capital projects 
have effectively approached 50 percent of the total project cost, 
although Federal legislation requires only 10 or 20 percent. This is 
because projects that propose higher non-Federal matches are scored 
higher and are more likely to receive the limited Federal funds than 
projects that propose lower non-Federal matches. In contrast, the 
effective non-Federal matching shares for highway projects are closer 
to the 20 percent required under most highway programs. This imbalance 
between the Federal support for transit and highway programs can create 
incentives for transportation agencies to get ``more bang for their 
buck'' by pursuing projects that provide high Federal contributions 
rather than those projects that make a significant improvement to 
mobility. Some of our panelists also pointed out that designation of 
transportation funds for particular projects could result in bypassing 
the traditional planning processes, which may lead to logical 
connections or interconnections between projects being overlooked.
      Shortage of Personnel with Intermodal Expertise: A number 
of our panelists said that many State and local transportation agencies 
have a shortage of personnel with expertise in and across some modes 
and types of travel, resulting in barriers to identifying and planning 
projects across modes and types of travel. One panelist explained that 
there is a particular shortage of expertise in freight mobility within 
transportation agencies.
    With regard to the relative consideration of one mode over another, 
while our report contained information on funding levels for each mode, 
it did not address how funding levels compare to estimated investment 
needs in each mode. The Federal funding approaches differ across the 
modes in that the funding for the highway and aviation systems relies 
almost exclusively on dedicated trust funds that are financed with 
collections from users of those systems while the funding for the 
maritime and rail systems relies heavily on general fund revenues. 
Total funding for each mode varied widely--during fiscal years 1999 
through 2001, Federal agencies expended an average of $25 billion each 
year on the highway system, $10 billion each year on the aviation 
system, and $3.9 billion each year on the maritime system. Our work has 
shown that there is growing awareness of the need to view various 
transportation modes, and freight movement in particular, from an 
integrated standpoint, particularly for the purposes of developing and 
implementing a Federal investment strategy and considering alternative 
funding approaches.

    Question 2. Based on your work, what is the greatest challenge we 
face in enhancing mobility? What strategy (or strategies) is most often 
suggested to help address mobility challenges nationwide?
    Response. With increasing passenger and freight travel, the surface 
and maritime transportation systems face a number of challenges in 
ensuring continued mobility. These challenges include preventing 
congestion from overwhelming the transportation system, ensuring access 
to transportation for certain underserved populations (including some 
elderly, poor, and rural populations that have restricted mobility), 
and achieving a balance between enhancing mobility and giving due 
regard to environmental and other social goals.
    There is no one solution for the mobility challenges facing the 
Nation, and our expert panelists indicated that numerous approaches are 
needed to address these challenges. We believe that the wide range of 
approaches can be clustered into three key strategies that may help 
transportation decisionmakers at all levels of government address 
mobility challenges. These strategies include the following:

      Focus on the entire surface and maritime transportation 
system rather than on specific modes or types of travel to achieve 
desired mobility outcomes. Transportation agencies at the Federal, 
State, and local level might shift focus from their current emphasis on 
single modes to consider performance outcomes of all modes in 
addressing mobility challenges, and to recognize interactions across 
modes between passenger and freight traffic, and between public and 
private interests. This is important because addressing the mobility 
challenges outlined above can involve a scope beyond a local 
jurisdiction or a State line, and can require coordination across 
multiple modes, types of travel, or types of transportation providers 
and planners.
      Use a full range of techniques to achieve desired 
mobility outcomes. Using various techniques-such as new construction, 
corrective and preventive maintenance, rehabilitation, operations and 
system management, and pricing-to address complex mobility challenges, 
may be more effective than placing emphasis on any one technique.
      Provide more options for financing mobility improvements 
and consider additional sources of revenue. This strategy-which 
involves providing more flexibility in funding across modes, expanding 
financial support for alternative financing mechanisms (e.g., credit 
assistance to State and local governments), and considering various 
revenue-raising methods-may offer promise for addressing key mobility 
problems.
                                 ______
                                 
   Responses of JayEtta Hecker to Additional Questions from Senator 
                                Jeffords
    Question 1. In your testimony you mention there is a growing 
consensus that the modal funding mechanisms distort public 
decisionmaking. You also mentioned that these modal funding programs 
are an impediment for the best investment and the best decisionmaking 
in infrastructure and meeting mobility needs. What changes can be made 
to the current funding program structure to improve investment 
decisions and eliminate these ``modal stovepipes''?
    Response. An intermodal approach is vital in order to match the 
nation's infrastructure with its diverse mobility needs. However, the 
current system of financing surface and maritime transportation 
projects limits options for addressing mobility challenges. Congestion 
often occurs where modes connect or should connect-such as ports or 
freight hubs where freight is transferred from one mode to another, or 
airports that passengers need to access by car, bus, or rail. These 
connections require coordination of more than one mode of 
transportation and cooperation among multiple transportation providers 
and planners. In addition, according to the panelists we consulted, 
designation by the Congress of Federal funds for particular 
transportation projects bypasses traditional planning processes used to 
identify the highest priority projects, thus potentially limiting 
transportation agencies' options for addressing the most severe 
mobility challenges.
    Overcoming such limitations involves taking a systemwide, rather 
than mode-specific, approach to transportation planning and funding. 
Transportation agencies at the Federal, State, and local level might 
shift focus from their current emphasis on single modes to consider 
performance outcomes of all modes in addressing mobility challenges, 
and to recognize interactions across modes between passenger and 
freight traffic, and between public and private interests.
    The experts we consulted suggested several options for encouraging 
the development of transportation planning and funding systems that 
focus on the entire surface and maritime transportation system to 
achieve desired mobility outcomes. We have not evaluated these options, 
but we would be pleased to work with the committee if you wish to 
request a GAO study in this area. The options that panelists provided 
for alternative planning and funding systems include:

      Link funding to performance-based outcomes. This option 
focuses on mobility outcomes that users-both freight and passengers, 
for both intercity and local travel-desire from the transportation 
system. The Federal Government would first define certain national 
interests of the transportation system-such as increasing the 
reliability of commute times on all modes-then set national performance 
standards for those systems that States and localities must meet. 
Federal funds would be distributed to those entities that are 
addressing national interests and meeting the established standards. 
Any Federal funds remaining after meeting the performance standards 
could then be used for whatever transportation purpose the State or 
locality deems most appropriate to achieve State or local mobility 
goals.
      Provide financial rewards for increasing efficiency or 
meeting other goals. Federal support would reward those States or 
localities that apply Federal money to gain efficiencies in their 
transportation systems, or tie transportation projects to land use and 
other local policies to achieve community and environmental goals, as 
well as mobility goals.
      Revise Federal matching requirements. There are several 
variations on this option, including the following:

  Align Federal matching requirements with Federal priorities. 
    In this case, Federal matching criteria would reflect priorities 
    based on the type of project rather than the mode. For example, if 
    infrastructure preservation became a higher national priority than 
    building new capacity, matching requirements could be changed to a 
    50 percent Federal share for building new physical capacity and an 
    80 percent Federal share for preservation.
  Equalize Federal matching requirements across modes. Making 
    Federal matching requirements equal for all modes may avoid 
    creating incentives to pursue projects in one mode that might be 
    less effective than projects in other modes.
  Reduce the Federal match for projects in all modes. This 
    might give States and localities more fiscal responsibility for 
    projects they are planning and provide them with incentives to 
    invest in more cost-effective projects independent of Federal 
    support for various modes. If cost savings resulted, these entities 
    might have more funds available to address other mobility 
    challenges.
                                 ______
                                 
 Responses of JayEtta Hecker to Additional Questions from Senator Reid
    Question 1. While DOT's Conditions and Performance report finds 
that the conditions of our highway system have improved somewhat, the 
operational performance of our highway system continues to deteriorate. 
This comes as no surprise to anyone who drives regularly. Each of you 
recommends an increased emphasis on operations, which is a theme that 
this subcommittee has addressed twice in the past year with a hearing 
on Intelligent Transportation Systems and a symposium on operational 
issues. I intend to address this issue in next year's transportation 
bill and would appreciate your thoughts on how we can encourage States 
and metropolitan areas to focus more attention to the operations and 
management of road systems.
    Response. Better operations and management of existing 
transportation infrastructure is an important technique for enhancing 
mobility because it may allow the existing transportation system to 
accommodate additional travel without having to add new infrastructure. 
One of our expert panelists noted, however, that shifting the focus of 
transportation from building capital facilities to an ``operations 
mindset'' would require a cultural shift in many transportation 
institutions, particularly in the public sector, so that the 
organizational structure, hierarchy, and rewards and incentives are all 
focused on improving transportation management and operations.\3\ As 
noted above, the expert panelists we consulted provided a number of 
ways in which the planning and funding systems can be modified to 
eliminate modal ``stovepipes'' and focus more attention on the 
operations and management of transportation systems, including the 
following:
---------------------------------------------------------------------------
     \3\Joseph M. Sussman, ``Transitions in the World of 
Transportation: A Systems View,'' Transportation Quarterly 56 (2002): 
21-22.

      Performance-oriented funding system. The Federal 
Government would first define certain performance goals for the 
transportation system, such as improving commute times or improving on-
time performance of transit systems. By linking funding to performance 
outcomes, transportation agencies would have a greater incentive to 
compare operations and management strategies with other strategies in 
determining how to best improve mobility.
      Federal financial reward-based system. Federal support 
would reward those States or localities that apply Federal money to 
gain efficiencies in their transportation systems. This could provide 
transportation agencies with an incentive to invest in operations and 
management to improve system efficiency.
      Different Federal matching criteria for different types 
of expenditures that might reflect Federal priorities. For example, if 
operations and management became a higher national priority than 
building new capacity, matching requirements could be changed to give 
State and local agencies more fiscal responsibility for building new 
capacity. This would provide an incentive to invest in operations and 
management improvements.

    Question 2. In your testimony, you recommended that policymakers 
focus on the entire transportation system rather than on individual 
modes of transportation. I agree that we need to employ the full range 
of potential solutions if we are to improve the performance of our 
system. What can we do in the next transportation bill to encourage 
States and metropolitan areas to take an intermodal and broad-based 
view of solutions to transportation problems?
    Response. In our report, we describe a number of barriers that 
stand in the way of transportation agencies looking comprehensively at 
all modes and types of transportation, including such things as mode-
specific funding mechanisms, incentives in project selection processes, 
and a shortage of expertise in any one transportation agency for 
effectively identifying and implementing mobility improvements across 
multiple modes or types of travel. Our expert panelists discussed 
potential methods for modifying existing programs to shift the focus of 
States and Metropolitan Planning Organizations toward intermodal 
solutions to transportation problems, and there may be an opportunity 
in the next transportation bill to provide incentives to achieve this 
desired outcome. The methods included (1) focusing on system 
performance and outcomes related to customer service; (2) considering 
and using a full range of tools to address mobility challenges, and (3) 
providing more options for financing transportation improvements and 
considering additional sources of revenue.

      Performance and Customer Service: Our panelists described 
various types of systems that could focus on outcomes and customer 
service. All of these systems were focused on determining national 
performance goals based on customer service and mobility, regardless of 
mode. One panelist suggested a system where Federal support would 
reward those States or localities that apply Federal money to gain 
efficiencies or meet performance goals across the entire transportation 
system. For example, if the performance goal is to achieve a particular 
level of freight mobility in the area, the appropriate transportation 
agencies would then have an incentive to look at freight mobility 
across the entire system and determine improvements that would best 
meet that goal, regardless of mode. The improvements might focus on 
road connections to major ports of freight hubs, or on increasing 
throughput within the port or intermodal facility, or on rail capacity 
improvements such as eliminating grade crossings. Any Federal funds 
remaining could then be used to pursue local priorities.
      Full Range of Tools: Many panelists emphasized that 
transportation agencies need to consistently consider the full range of 
tools to address transportation problems and improve customer service 
and mobility. These tools range from investing in new capital, where 
appropriate, to infrastructure preservation, improving the management 
and operation of transportation systems, and employing various demand 
management techniques. Our panelists said that States and metropolitan 
areas experience some difficulties in using the full range of tools. 
For example, some of these techniques are politically contentious, such 
as demand management techniques that involve pricing or major capital 
projects that could have environmental impacts. Another factor is that 
the Federal Government's role as an investment partner in 
transportation systems is more focused on providing assistance for 
capital investments as opposed to providing funding for some of these 
other tools, although our panelists did not agree on whether the 
Federal Government should shift to providing more operating or other 
type of assistance. One panelist said that the appropriate Federal role 
was as a capital investment partner and that the operation of 
transportation systems is a local responsibility. Other panelists said 
that the Federal Government may be somewhat over invested in capital-
intensive projects, and that the need for more balanced investment in 
management, maintenance, and operations calls for reevaluating the role 
of the Federal Government as an investment partner.
      Additional Revenue and Financing Options: While our 
panelists noted the need for funding flexibility, they stated that the 
possibility of a shortage of revenues in the future presents a 
fundamental limitation to addressing mobility challenges in all modes. 
Panelists said that due to such things as increasing use of alternative 
fuels, revenues from the gas tax are expected to decrease in the 
future. To combat the reduction of revenues available for 
transportation, panelists discussed various options for new sources of 
revenue and different ways to finance transportation projects. These 
options include the following:

  Raising additional revenues from users of the systems, such 
    as raising the gas tax, raising fees on freight carriers, 
    dedicating more revenues from taxes on alternative fuels, and 
    expanding the use of pricing principles.
  Raising revenues from general taxes and dedicating a portion 
    to transportation. Many local governments have passed or are 
    considering passing such taxes, but this could result in local 
    authorities bypassing traditional planning processes.
  Expanding alternative financing mechanisms and public/private 
    partnerships. Alternative financing mechanisms, such as Grant 
    Anticipation Revenue Vehicles (GARVEE) or State infrastructure 
    banks (SIB), can help speed the completion of transportation 
    projects and may stimulate additional investment in infrastructure. 
    However, these mechanisms can pose difficulties for transportation 
    agencies in the future because they rely on future Federal 
    revenues. Many of our panelists also advocated providing incentives 
    or opportunities for private sector investment in transportation 
    systems.

    Question 3. Your written testimony and AASHTO's Bottom Line Report 
both repeatedly refer to the Texas Transportation Institute's Mobility 
Study. Is this the only authoritative study available on system 
performance? Given the importance of having a reliable measurement of 
system performance how can we do a better job of ensuring that the 
relevant data is available?
    Response. The Federal Highway Administration (FHWA) has expanded 
its traditional measures of tracking highway operational performance-
how highways accommodate travel demand-in recent years. While still 
including measures of traffic density and volume during peak travel 
times, FHWA's 1999 Conditions and Performance report\4\ also included 
measures of delay and several congestion measures developed by the 
Texas Transportation Institute (TTI).\5\ In its most recent report, 
FHWA has added three additional TTI measures of congestion: percent of 
additional travel time, annual hours of delay, and percent of travel 
under congested conditions.\6\
---------------------------------------------------------------------------
     \4\Federal Highway Administration and Federal Transit 
Administration, 1999 Status of the Nation's Highways, Bridges, and 
Transit: Conditions and Performance (Washington, DC.: U.S. Department 
of Transportation, 2000).
     \5\David Shrank and Tim Lomax, 2002 Urban Mobility Report (College 
Station, TX: Texas Transportation Institute, June 2002).
     \6\Federal Highway Administration and Federal Transit 
Administration, 2002 Status of the Nation's Highways, Bridges, and 
Transit: Conditions and Performance (forthcoming).
---------------------------------------------------------------------------
    Likewise, in its Performance Plan for Fiscal Year 2001, the 
Department of Transportation moved away from density-based measures in 
assessing progress toward the goal of reducing highway congestion. The 
Department replaced its goal of reducing hours of delay per 1,000 
vehicle miles traveled with three new performance goals-reducing 
congested travel time, peak period travel time, and traveler delay. The 
Department made this change because it believed the original measure 
did not reflect the actual performance of the highway system in places 
where congestion regularly happens (e.g., congested, urban areas). The 
added measures, developed by TTI using FHWA data, reflect changing 
travel conditions more comprehensively by focusing on the different 
aspects of inefficient road performance in areas where congestion 
regularly occurs.\7\ The Department continues to use these measures in 
its Performance Plan for Fiscal Year 2003 and Performance Report for 
Fiscal Year 2001.
---------------------------------------------------------------------------
     \7\U.S. General Accounting Office, Department of Transportation: 
Status of Achieving Key Outcomes and Addressing Major Management 
Challenges, GAO-01-834, (Washington, DC.: June 2001).
---------------------------------------------------------------------------
    GAO has not evaluated the congestion measures produced by TTI. 
However, in its 1999 Conditions and Performance report, FHWA called 
TTI's ongoing work on congestion ``the most significant continuing 
study being done on congestion in the United States.'' FHWA commended 
TTI for its contribution to the knowledge base of congestion and said 
that the results of TTI's studies were useful measures of congestion's 
trends and costs in metropolitan areas. However, FHWA also noted that 
measuring congestion is difficult and that additional research is 
needed to determine optimal measures and data collection methods. 
Likewise, the Department of Transportation noted in its latest 
Performance Plan and Performance Report that the ``proportion of 
congested travel'' figures on which TTI's measures are based are 
computed rather than measured values, possibly resulting in an 
understatement of the level of congestion. The Department is working 
toward the development of an additional measure of traffic congestion 
reliability based on minute-by-minute data gathered through traffic 
monitoring systems, including those funded by the Intelligent 
Transportation Systems program.

    Question 4. GAO has done some work reviewing the methodology DOT 
uses in compiling its Conditions and Performance Report. What were your 
conclusions on the reliability of the data provided?
    Response. We reviewed the model FHWA uses to estimate investment 
requirements for the nation's highways, including the estimates FHWA 
presented in its 1999 Conditions and Performance report, and found it 
reasonable. FHWA used the same model, with some modifications, to 
arrive at its 2002 highway investment requirement estimates. In June 
2000, we reported that the model's strengths included: (1) its 
contribution to a comprehensive assessment of investment needs to meet 
results-oriented agency goals and (2) the independent reviews that 
showed FHWA had made improvements to the model. However, we reported 
that the model had some limitations. For example, the model could not 
estimate the full range of uncertainties within which its estimates 
vary. In addition, FHWA used its model combined with other less 
reliable techniques to reach its estimate of highway investment 
requirements, so the total investment requirement estimates in the 
Conditions and Performance report included a combination of estimates 
with varying levels of rigor. We did not comprehensively review the 
data that feeds the administration's model, although we had previously 
reported that data used in the model are subject to some uncertainties.
    We also compared the infrastructure investment estimates of a 
number of Federal agencies, and, in July 2001, reported that FHWA's 
approach met some of the leading practices GAO identified for capital 
investment decisionmaking including (1) using a benefit-cost analysis 
and (2) using results-oriented estimates of the amounts needed to 
maintain or improve the performance of highways.
    Since we last reviewed FHWA's highway needs forecasting model, the 
Administration has modified its highway and bridge models for 
estimating future investment needs. These modifications should improve 
the quality of the highway investment needs forecasts, according to an 
FHWA official. To improve the model used to estimate highway investment 
requirements, FHWA made technical improvements in four cost areas: 
delay, air pollution, benefit-cost analysis procedures, and traveler 
response to changes in user costs. The new bridge model's advantages 
are that it filters out improvements that are not cost beneficial, and, 
compared to the prior model, it more accurately forecasts routine costs 
and bridge owners' management strategies.
                                 ______
                                 
                                 
                                 
                                            __________
    Statement of Gordon Proctor, Director of the Ohio Department of 
                             Transportation
    Mr. Chairman, members of the committee, I am Gordon Proctor, 
Director of the Ohio Department of Transportation. On behalf of Ohio 
Governor Bob Taft, I thank you for this opportunity to testify and we 
especially would like to acknowledge the assistance of Sen. Voinovich 
in making this possible. His leadership on transportation has been 
greatly appreciated.
    As you shape the next transportation act, I ask that you focus on 
the tremendous need to rebuild, reconstruct and rejuvenate the 
interstate highway system. This system will reach its 50th anniversary 
in 2006, mid-way through the next Act. The Interstate Highway System 
has served us well and today plays a vital and irreplaceable role in 
our transportation system. At the same time, this system is aging, 
stressed and sorely in need of additional investment to ensure the 
safety, adequacy and competitiveness of our nation's transportation 
system.
    Let me put the interstate system in context for you. It represents 
only 1.2 percent of the public road miles in the United States but it 
carries 24 percent of our country's traffic and 80 percent of all truck 
freight. Traffic volumes on the interstate system nationally have risen 
41 percent in the past 10 years and truck volumes have grown by even 
more.
    The advent of computerized inventory systems combined with the ease 
and access of the interstate highway network led to the creation of 
Just in Time Inventory. This strategy played a large role in dropping 
the nation's cost of logistics from 16 percent of the Gross Domestic 
Product in1978 to only 10 percent of the Gross Domestic Product today.1 
That means that a substantial portion of America's rise in productivity 
in the past 20 years has been attributable to our Interstate Highway 
System. As Governor Taft has said, the interstates are the conveyor 
belt for America's Just In Time economy.
    However, we are experiencing very troubling trends in Ohio and 
across the country. Ohio is a good microcosm because our interstate 
highway system is America's fourth largest and we estimate it carries 
the third greatest value of truck freight in the country.
    In the past 25 years we have experienced an 89 percent increase in 
truck volumes on our interstate highways. Routinely, every day in 
almost every major Ohio city, truck volumes on our major interstate 
highways exceed 20,000 thousand trucks a day. We estimate, truck 
volumes will grow approximately 60 percent over the next 20 years, and 
some estimate the growth will be even higher. This means that within 20 
years, 30,000 trucks a day will be the norm on the interstates in 
Cincinnati, in Dayton, in Springfield, in Toledo, in Cleveland, in 
Akron, in Canton, in Youngstown and in Columbus.
    These routes used to be our safest and our most reliable routes. 
Severe congestion, outdated interchanges, poor geometrics and 
tremendous volumes have turned nearly every urban interstate route in 
Ohio into a high-congestion, high-accident bottleneck.
    I-75 in Toledo carries 19,000 trucks a day. It is 43 percent over 
capacity and it averages 100 accidents per year per mile. A 17-mile 
stretch of I-75 in Cincinnati carries 184,000 vehicles a day, including 
14,000 trucks and it averages 80 accidents per year per mile. I-75 in 
Dayton carries 20,000 trucks per day and averages 80 accidents per year 
per mile.
    The most congested location in Ohio is the overlap of Interstate 70 
and Interstate 71 in downtown Columbus, the figurative and literal 
crossroads of Ohio. At that location, the interstates are 114 percent 
over capacity and average 274 accidents per mile per year. That equals 
more than one accident for every business day of the year. Within a 2.5 
mile radius of the junction, the routes experienced 2037 accidents over 
a 3-year period.
    I will offer one final example from Dayton, Ohio, which I suspect 
is indicative of what is happening in dozens of American communities. 
We recently completed a conceptual analysis of alternatives to improve 
the unsafe and congested design on I-75 near downtown Dayton. The 
estimated cost to bring the corridor up to modern standards was $750 
million. Such costs are so far beyond the resources we have that we had 
no choice but to reject even an attempt to bring all aspects of the 
highway up to standard. Instead, we are opting for a much reduced 
project which will make the highway adequate for an estimated $300 
million. Three hundred million dollars equals an entire year's new 
construction budget for the Ohio Department of Transportation. While 
that one project may be feasible, multiply that project times 10 and 
you have an idea of the magnitude of the repairs needed in Cincinnati, 
Toledo, Cleveland, Akron, Canton, Youngstown and Columbus. If Ohio's 
needs are this great, the needs of other States also are enormous and 
represent a major challenge in the next transportation act.
    What can Congress do about this? First, please do not dilute the 
core, basic highway funding formulas which are essential to maintaining 
the backbone of our system. Special set asides and narrowly focused 
programs may be popular with certain groups. However, full funding of 
the basic core highway programs will do the most to rebuild our 
interstates.
    Second, as the interstates approach their 50th year, do not let 
them be treated as historical artifacts subject to preservation in 
their current outmoded state under the nation's historic preservation 
statutes.
    Third, please recognize that the Nation needs to restore the 
capacity of these critical bottlenecks and do not allow any agencies to 
promulgate new rules to slow down or impede our progress in repairing 
these locations.
    Finally, we support an idea suggested by Administrator Peters that 
a national study or national commission is needed to evaluate the 
future of our interstate highway system. This system is so important to 
our transportation network that its future must be secure.
    Mr. Chairman, Senator Voinovich, members of the committee, thank 
you for this opportunity and I would be happy to answer any questions.
                                 ______
                                 
   Responses of Gordon Proctor to Additional Questions from Senator 
                               Voinovich
    Question 1. You stated during the hearing that truck volumes on 
Ohio's major Interstate highways approach 20,000 trucks per day. How 
does the truck volume compare to passenger car volume on the same 
roadways? Has the ratio of passenger cars to trucks increased or 
decreased in Ohio?
    Response. As I stated in my testimony, the I-70/I-71 split in 
downtown Columbus carries 20,000 trucks per day. That section of 
roadways also carries 130,000 cars a day. In 1977, trucks comprised 
nearly 11 percent of the total traffic volume on Ohio's highway system. 
Today, that figure has increased to 13 percent. This might not seem 
like a significant increase at face value, but truck volumes in Ohio 
have doubled during that same period. Total truck volumes have 
increased from 12 billion to 24 billion trucks annually. Passenger car 
volumes are keeping pace with the dramatic truck volumes our State is 
enduring.

    Question 2. In your testimony, you indicated that 7 percent of 
Interstate pavements in Ohio will require replacement by 2008. In what 
areas of Ohio are Interstate pavement replacements needed and how much 
do you estimate it will cost? What is the status of these projects and 
have funds been identified?
    Response. We have an aggressive pavement reconstruction program 
beginning in 2005 through 2008. Approximately $400 million in State and 
Federal maintenance and preservation funds will be used to repair some 
of the State's worst highway conditions. The following is a list of the 
projects scheduled for rehabilitation:
      I-71 in Morrow and Richland counties
      I-70 in Clark, Madison and Montgomery counties
      I-71 and SR 83 in Medina County
      I-80 in Mahoning County
      I-71 in Wayne County
      SR 2 and I-90 in Lake County
      I-75 in Wood and Lucas counties
      I-480 in Cuyahoga County
      I-75 in Warren County
      I-90 in Ashtabula County
      I-275 in Hamilton County

    Question 3. You stated during the hearing that the number of 
traffic accidents and fatalities has stalled in recent years. What do 
you believe is the most important thing we can do to reduce traffic 
accidents and fatalities in Ohio?
    Response. The most important factor in reducing traffic accidents 
and fatalities in Ohio is proper maintenance and repair of our 
highways. Some examples of important maintenance and repair items 
include capacity additions for alleviating congestion, remedying 
outdated geometrics, leveling grades, improving skid resistance, and 
improving shoulders. By making our roadways safer by fully funding all 
of these items, we feel strongly that accidents can be reduced.

    Question 4. You indicated in your statement that Congress should 
not dilute the basic core highway programs with special set asides or 
narrowly focused programs. What are the basic core programs and why are 
they so important to helping Ohio meet its transportation needs? What 
would you recommend be done to address special transportation project 
needs without ``diluting'' the basic core highway programs?
    Response. The basic core funding programs, in our opinion, are the 
Interstate Maintenance Program, the Bridge Rehabilitation Program and 
the other Surface Transportation Programs. The Congestion Mitigation/
Air Quality Program is also important but additional flexibility should 
be given for the expenditure of these funds. To truly address 
congestion, capacity expansions are sometimes necessary. CMAQ funding 
should be made available for projects of that type.
    Additional flexibility in all programs would be beneficial so that 
each individual State can use Federal funds to address any special 
needs it may have. Stringent guidelines and multiple programs would 
only dilute the core highway programs and result in special projects 
remaining unfunded.

    Question 5. You stated in your testimony that Congress should not 
allow any agencies to promulgate new rules to slow down or impede 
progress in repairing critical bottlenecks to improve capacity. Are 
there such rules already in place that slow down or impede States' 
ability to improve the condition and performance of highways and 
bridges? Are there any rules that are being considered which might 
impact the ability of States to meet their needs?
    Response. At this time, we are unaware of any pending rules that 
may be considered that might impact our ability to deliver important 
transportation projects. The Streamlining rules proposed during the 
previous Administration were of great concern to us. We were very 
pleased to learn of their withdrawal and of President Bush's recent 
Executive Order on this issue. We strongly support the actions that 
Secretary Mineta and Administrator Peters have taken since issuance of 
the Order. In fact, Ohio has submitted 4 projects to be considered by 
the Transportation Infrastructure Streamlining Task Force as priority 
projects. We will closely monitor and participate in this process.

    Question 6. Federal Highway Administrator Mary Peters has called 
for the creation of a blue-ribbon commission to study and make 
recommendations for addressing the needs of the Interstate highway 
system. How could this blue-ribbon commission be most helpful in 
informing the debate for next year's highway bill?
    Response. The interstate is the most important part of our nation's 
transportation system. Ohio, like many States, is facing a massive 
reconstruction and rehabilitation of its Interstate system. The 
magnitude of national Interstate reconstruction needs is unknown. We 
feel that in order for Congress to be truly knowledgeable on this 
issue, a forum should be established that focuses solely on Interstate 
needs and concerns. The building of the Interstate system was a 
national effort. A clear, concise national plan should be identified 
for the massive reconstruction and rehabilitation that will be 
necessary in the upcoming years.
                                 ______
                                 
 Responses of Gordon Proctor to Additional Questions from Senator Reid
    Question 1. Mr. Proctor, I appreciate your testimony about the 
looming reconstruction needs of the interstate highway system. Are 
these needs taken into account in DOT's Conditions and Performance 
Report or AASHTO's Bottom Line Report?
    Response. Yes, the Ohio Department of Transportation participated 
with USDOT and AASHTO in the completion of their respective reports.

    Question 2. How has the steady growth of truck traffic impacted the 
physical condition and useful life of the Interstate system and 
National Highway System?
    Response. Truck volumes in Ohio have grown from 12 billion annually 
to 24 billion annually. As a result our pavements and bridges are 
sustaining increasing loadings. A large, legally loaded truck weighing 
80,000 pounds puts about the same wear and tear on a road as 9,000 to 
10,000 cars. Moreover, a large truck causes as much congestion as 2.5 
to 3.5 cars on flat terrain and as much as 15 cars on uphill grades. As 
a result, we have seen bridges and pavements deteriorate more rapidly 
in those areas of the State that carry high volumes of trucks.
                               __________
Statement of Thomas L. Jackson, P.E., President-Elect, American Society 
                       of Civil Engineers (ASCE)
    The American Society of Civil Engineers (ASCE) is pleased to 
provide this statement on ``The State of America's Highway 
Infrastructure'' for the record as the Environment and Public Works 
Committee examines the reauthorization of the nation's surface 
transportation program.
    ASCE, founded in 1852, is the country's oldest national civil 
engineering organization representing more than 125,000 civil engineers 
in private practice, government, industry and academia who are 
dedicated to the advancement of the science and profession of civil 
engineering. ASCE is a 501(c) (3) non-profit educational and 
professional society.
    ASCE believes the reauthorization of the nation's surface 
transportation programs should focus on three goals:\1\
---------------------------------------------------------------------------
     \1\To read ASCE's ``Reauthorizing the Nation's Surface 
Transportation Program: A Blueprint for Success,'' visit www.asce.org/
govrel/tea3
---------------------------------------------------------------------------
      Expanding infrastructure investment
      Enhancing infrastructure delivery
      Maximizing infrastructure effectiveness
    In 2001, ASCE released the Report Card for America's 
Infrastructure, which gave the nation's infrastructure a grade of 
``D+'' based on 12 categories. Roads received a grade of ``D,'' bridges 
a ``C,'' and transit a ``C-.''
    The nation's surface transportation programs have benefited from an 
increase in Federal and local funding currently allocated to ease road 
congestion, to repair decaying bridges, and to add transit miles. In 
our role as stewards of the infrastructure, ASCE developed its first 
Report Card for America's Infrastructure in 1998, and the 
infrastructure scored an overall grade of ``D.''
    Although many Americans were alarmed by these report cards, few 
were surprised. Their daily experience had prepared them. They were 
coping with traffic congestion and crumbling pavement. Their children 
and grandchildren were attending schools so overcrowded the first lunch 
shift started at 10:15 a.m. or so old and neglected that the roof 
leaked whenever it rained.
    Indeed, ASCE's first report card in 1998 did help to prompt action. 
Soon after its release, Congress passed the Transportation Equity Act 
for the 21st Century (TEA-21), P.L. 105-178, providing record levels of 
authorized funding for roads, bridges, and transit. Voters in 
communities throughout the United States passed bond initiatives to 
provide desperately needed funds to build and restore school 
facilities.
    At the same time, however, growing frustration with worsening 
traffic congestion, school overcrowding and the other burdens placed on 
our overtaxed infrastructure has led voters to put the brakes on 
development by passing initiatives to limit growth.
A. The State of the Nation's Surface Transportation Infrastructure
                                 roads
    According to ASCE's 2001 Report Card, the nation's roads earned a 
D+, up from a D-in 1998. The major reason for this is that the Congress 
and State and local governments have begun to address the investment 
crisis and crumbling infrastructure through the enactment of TEA-21, 
which provided $218 billion for the nation's highway and transit 
programs, and additional State and local programs to fund surface 
transportation infrastructure. But even at these increased funding 
levels, capital investments fall short of needs by 43 billion dollars a 
year.
    On our highways, nearly 70 percent of peak-hour traffic experiences 
congested conditions. And, according to a study by the Texas 
Transportation Institute the total congestion ``bill'' for the 75 areas 
studied in 2000 came to $67.5 billion, which is the value of 3.6 
billion hours of delay and 5.7 billion gallons of excess fuel 
consumed.\2\ To keep congestion from increasing between 1999 and 2000 
would have required 1,780 new lane-miles of freeway and 2,590 new lane-
miles of streets--OR--an average of 6.2 million additional new trips 
per day taken by either carpool or transit, or perhaps satisfied by 
some electronic means--OR operational improvements that allowed 3 
percent more travel to be handled on the existing systems--OR--some 
combination of these actions.\3\ None of this took place and congestion 
increased.
---------------------------------------------------------------------------
     \2\``2002 Urban Mobility Report,'' Texas Transportation Institute, 
Texas A&M University, http://mobility.tamu.edu
     \3\Ibid.
---------------------------------------------------------------------------
    TEA-21 funds, combined with additional revenues from State and 
local governments, have begun to make an impact on road projects in all 
50 States. Total highway expenditures by all levels of government and 
all expenditure types (including capital outlays; maintenance; and 
research, policing and administrative) have increased from $93.5 
billion in 1995, before TEA-21 was enacted, to $111.9 billion in 1999. 
Additionally, the obligation of Federal funds for roadway projects has 
almost doubled during this same period from $8.6 billion in 1995 to 
$16.3 billion in 1999. Another good measure of the increased attention 
to our nation's highways is the miles of Federal-aid roadway projects 
underway. This number has also increased dramatically from 16,654 miles 
in 1995 to 29,030 miles in 1999.
    Even with TEA-21's commitment, our nation must increase annual 
investment by $27 billion at all levels to improve conditions and 
performance adequately, according to the Federal Highway Administration 
(FHwA). An FHwA report concludes that the Nation should be investing 
$94 billion a year in its road and bridge system over the next 20 
years. However, this investment level refers only to capital investment 
and does not include maintenance, research, policing or administrative 
expenditures.
    In 1999, the total capital investment by all levels of government 
was $59.4 billion, well short of the needed $94 billion.
    Yet even with this added attention, 58 percent of America's urban 
and rural roadways are in poor, mediocre or fair condition, according 
to the FHwA.\4\ Although this is a slight improvement from previous 
years, conditions remain at substandard levels.
---------------------------------------------------------------------------
     \4\U.S. Dept. of Transportation (DOT), 1999 Status of the Nation's 
Highways, Bridges, and Transit: Conditions and Performance, 2000.
---------------------------------------------------------------------------
    The FHwA ranks ``poor'' roads as those in need of immediate 
improvement. ``Mediocre'' roads need improvement in the near future to 
preserve usability. ``Fair'' roads will likely need improvement. 
``Good'' roads are in decent condition and will not require improvement 
in the near future. ``Very good'' roads have new or almost new 
pavement.
    Substandard road conditions are dangerous. Outdated and substandard 
road and bridge design, pavement conditions, and safety features are 
factors in 30 percent of all fatal highway accidents, according to the 
FHwA.
    Americans' personal and commercial highway travel continues to 
increase at a faster rate than highway capacity and our highways cannot 
sufficiently support our current or projected travel needs. Between 
1970 and 1995, passenger travel nearly doubled in the U.S. and road use 
is expected to increase by nearly two-thirds in the next 20 years. 
Growth can be attributed to changes in the labor force, income, makeup 
of metropolitan areas and other factors.
    While passenger and commercial travel on our highways has increased 
dramatically in the past 10 years, America has been seriously under-
investing in needed road and bridge repairs and has failed to even 
maintain the substandard conditions we currently have. This is a 
dangerous trend that is affecting highway safety, as well as the health 
of the American economy.
                                bridges
    According to ASCE's 2001 Report Card, the nation's bridges received 
a grade of C, an improvement from a C minus in 1998. Almost a third of 
America's bridges are rated structurally deficient or functionally 
obsolete.
    In one example from Alabama, a school bus bringing students to one 
Washington County school had to stop at a structurally deficient 
bridge, let all the kids get off and walk across so the empty--and 
therefore lighter--bus could safely cross the bridge. The children then 
climbed back on the bus and continued their trip. Naturally, this 
ritual was repeated on the way home. To avoid this, that bus now drives 
15 miles out of the way.
    According to the FHWA, 10.6 billion dollars are required per year 
for 20 years to eliminate the current backlog of bridge deficiencies 
and ensure acceptable levels of safety.\5\
---------------------------------------------------------------------------
     \5\Ibid.
---------------------------------------------------------------------------
    In 1998, 29 percent of the nation's bridges were rated structurally 
deficient or functionally obsolete by the Federal Highway 
Administration.\6\
---------------------------------------------------------------------------
     \6\Ibid.
---------------------------------------------------------------------------
    While this number remains high, it is a slight improvement over 
previous years. In fact, over the last 10 years the number of bridge 
deficiencies steadily declined from 34.6 percent in 1992 to 29.6 
percent in 1998. FHwA's strategic plan states that by 2008 less than 25 
percent of the nation's bridges should be classified as deficient.\7\
---------------------------------------------------------------------------
     \7\Ibid.
---------------------------------------------------------------------------
    A structurally deficient bridge is closed or restricted to light 
vehicles because of its deteriorated structural components. While not 
necessarily unsafe, these bridges must have limits for speed and 
weight. A functionally obsolete bridge has older design features and 
while it is not unsafe for all vehicles, it cannot safely accommodate 
current traffic volumes, and vehicle sizes and weights.
                                transit
    Though transit is not within the jurisdiction of the Senate 
Environment and Public Works Committee, it is difficult to completely 
discuss the problems facing the nation's surface transportation program 
without mentioning it.
    According to ASCE's 2001 Report Card, the grade for transit 
declined from a C to a C minus. While transit bus and rail facilities 
have improved in recent years and new systems are being built, those 
improvements can't keep up with the heavy strain placed on the system 
by rapidly increasing ridership, which has increased by 15 percent 
since 1995--even faster than aviation or highway transportation.
    Capital spending must increase 41 percent just to maintain our 
transit system at its present level of service. But we need to do more 
than that. Many transit systems were designed to transport workers from 
the suburbs to jobs in urban centers--a pattern that has now shifted to 
include suburb-to-suburb commutes as well. In order to reduce highway 
congestion and the associated pollution, we need to build a flexible, 
coordinated transportation system. Improvements like that will require 
up to 16 billion dollars annually.
    For transit there is both good news and bad news. The bad news is 
that while investments at both the Federal and State/local levels are 
increasing, ridership demand is increasing at an even faster rate. The 
good news is that increased ridership means increased fare box 
revenues. However, it means additional public investment is needed. 
Yet, the question remains, can investment keep pace with demand?
    In 2000 Americans took more than 9 billion trips on transit, and 
transit ridership increased by 4.5 percent over 1998. This continued a 
trend that marked the fourth straight year of ridership increases, and 
amounted to a 15 percent increase since 1995.
    Transit funding is growing, but at a slower pace. Total spending 
for mass transit in 1997 was $25.1 billion. The Federal share was $4.4 
billion, State and local governments contributed $13.2 billion and 
operating revenue provided the rest. For fiscal year 2000, the Federal 
investment increased to $4.56 billion and to $6.2 billion for fiscal 
year 2001. Total spending from all sources on transit capital projects 
for fiscal year 1997 was $7.6 billion.
    The Federal Government invests $7.66 billion annually in mass 
transit capital improvements. However, according to the Federal Transit 
Administration an additional $10.8 billion is needed to maintain 
current conditions and $16 billion to eliminate identified 
deficiencies. Capital spending on transit needs to increase 41 percent 
to reach $10.8 billion annually.
    Even with the increased investment, many people in the U.S. have 
little or no access to transit at all. The Federal Transit 
Administration reports that 25 percent of the nation's urban population 
does not have pedestrian access to transit. In addition, 30 percent of 
the nation's non-metropolitan counties have no transit service at all. 
This can prevent those without motor vehicles from participating in the 
economy, places the financial burden of automobile ownership on many 
low income families, and adds unnecessary automobile trips to our 
nation's congested streets and highways.
    There are substantial benefits to the taxpayer in exchange for 
public investment in transit infrastructure. Transit provides basic 
mobility for those lacking a motor vehicle or who are unable to drive. 
It promotes location efficiency and reduces other infrastructure costs 
by encouraging dense, multi-purpose, pedestrian-oriented urban 
development. Transit is more energy efficient on a per-person basis 
than the automobile. Finally, and perhaps most important, it provides 
an environmental benefit. By reducing passenger car traffic transit 
reduces air, noise, and water pollution precisely where those 
reductions are needed most, in major urban areas.
    The U.S. Department of Transportation reports that:\8\
---------------------------------------------------------------------------
     \8\U.S. Department of Transportation, 1999 Status of the Nation's 
Highways, Bridges, and Transit: Conditions and Performance, May 2000.

      Investment in transit continues to increase, including 
increased Federal funding through TEA-21. Transit system route miles 
show a 10-year increase of 44.2 percent in rail service and 10.4 
percent in non-rail service.
      In 1997, there were 149,468 transit vehicles; 9,922 miles 
of track; 2,681 stations; and 1,179 transit maintenance facilities in 
the U.S.
      There were 156,733 non-rail route miles of transit 
service in 1997.
      Transit system capacity, measured in vehicle revenue 
miles, increased by 19.7 percent from 1987 to 1997, while non-rail 
increased 17.1 percent.
      The average condition of urban bus vehicles was 3.1 on a 
scale of 5.0 or adequate, largely unchanged for the past 10 years. 
Sixty-three percent of urban bus vehicles are full-sized buses whose 
average condition has remained steady at 3.0 for the last decade.
      The average condition of rail vehicles was 4.0 or good. 
This is down slightly and caused by heavy ridership in major urban 
areas.

    According to the Department of Transportation, the estimated 
average annual investment required to maintain the same physical 
conditions and operating performance of the nation's transit systems as 
in 1997, by replacing and rehabilitating deteriorated assets and 
expanding capacity to accommodate expected transit passenger growth, is 
$10.8 billion. The cost to improve conditions and performance is 
estimated to be $16 billion.\9\
---------------------------------------------------------------------------
     \9\Ibid.
---------------------------------------------------------------------------
B. Expanding the Investment in the Nation's Surface Transportation 
        Programs
    Establishing a sound financial foundation for future surface 
transportation improvements is an essential part of the reauthorization 
of the surface transportation program. TEA-21 provided record funding 
levels to the States and significant improvements have been made to our 
nation's infrastructure. In spite of these notable efforts, the 
nation's surface transportation system will require an even more 
substantial investment. United States Department of Transportation 
(DOT) data reflects the fact that an investment of $50 billion per year 
would be needed just to preserve the system in its current condition. 
With funding as the cornerstone of any attempt to reauthorize TEA-21 it 
is imperative that a variety of funding issues be advanced as part of 
ASCE's overall strategy.
    ASCE supports total annual funding of $40 billion to $50 billion 
for the Federal-aid highway program. To achieve this level, ASCE 
supports an increase of six cents per gallon in the Federal user fee on 
gasoline. This would raise approximately $10.2 billion a year, of which 
an estimated $8.4 billion in new revenues would be available in direct 
financing for Federal-aid highway projects annually. The remainder--
approximately $1.8 billion annually--would be directed to Federal 
transit programs. These increases are desperately needed.
    ASCE supports the following goals for increasing our infrastructure 
investment.

      A 6 cent increase in the user fee with one cent dedicated 
to infrastructure safety and security. These new funds should be 
distributed between highways and transit using the formula approved in 
TEA-21.
      The user fee on gasoline should be indexed to the 
Consumer Price Index (CPI) to preserve the purchasing power of the fee.
      The Transportation Trust Fund balances should be managed 
to maximize investment in the nation's infrastructure.
      Congress should preserve the current firewalls to allow 
for full use of trust fund revenues for investment in the nation's 
surface transportation system.
      The reauthorization should maintain the current funding 
guarantees.
      Congress should stop diverting 2.5 cents of the user fee 
on ethanol to the General Fund, and put it back into the Highway Trust 
Fund.
      Make the necessary changes to alter the Revenue Aligned 
Budget Authority (RABA) to decrease the volatility of the estimates 
from year to year and ensure a stable user fee based source of funding.
      The current flexibility provisions found in TEA-21 should 
be maintained. The goal of the flexibility should be to establish a 
truly multi-modal transportation system for the Nation.

    First to be addressed is the issue of raising the user fee on motor 
fuels. While the gas tax is an important element of the current revenue 
stream feeding the Federal Highway Trust Fund, it continues to erode in 
value due to its inherent inelastic nature. Two strategies must be 
advanced to remedy this condition. First, raise the gasoline user fee 
by six cents. This would provide a much needed infusion of funding 
toward the $50 billion per year need. In tandem with raising the motor 
fuel tax, ASCE believes that it is important to shore up the weakness 
of the motor fuel tax and its inability to retain value over the long 
term by adding a provision to the law that would index it based on the 
Consumer Price Index (CPI). This would allow the rate to adjust and 
reflect the current economic conditions of the Nation.
    As the needs of the users change so must the priorities of the 
nation's transportation owners and operators. Safety and security have 
always been important but have been driven to the top of the priority 
list by events of the last year. In response to this important need, 
ASCE is advancing the position that one cent of the proposed six cent 
increase in the motor fuel tax be directed toward safety and security 
projects as deemed appropriate by the transportation agencies 
administering the funds.
    Important provisions of TEA-21 are embodied in the principles of 
Revenue Aligned Budget Authority (RABA) and firewalls. RABA was 
established to ensure that the Federal Highway Trust Fund revenues 
would be spent in accordance with the rate at which they were deposited 
into the fund. Over the life of TEA-21 it has allowed States to 
construct many projects with these additional moneys that would have 
otherwise languished in the trust fund. In addition, with the 
establishment of firewalls on the Federal Highway Trust Fund, a 
condition was created wherein the States could count on their funds in 
a long term investment strategy. This has eliminated the fear that some 
major projects would fall victim to various budget strategies at the 
national level.
    Any transportation legislation must have two fundamental 
philosophies to buildupon. First is the issue of equity. Some measure 
of equity was accomplished through the establishment of minimum 
guarantees. This provision of TEA-21 raised the return to the States to 
a minimum level in order to bring greater equity to the donor/donee 
situation that exists across the country. In addition, a commitment to 
spend the maximum amount possible from the Federal Highway Trust Fund 
was an important part of this legislation. Positive, proactive 
management of the trust fund balance will be essential to addressing 
the critical transportation needs facing our nation today.
Innovative Financing
    Even with increases in the gasoline user-fee, it is likely that 
tax-based revenues will not be sufficient to keep pace with the 
nation's transportation needs.
    There is a compelling need for enhanced funding, to a large extent 
through user-oriented fees that have been demonstrated to be a well-
accepted and equitable source of infrastructure financing. In the case 
of surface transportation, federally sponsored studies demonstrate the 
need for higher levels of investment. An additional challenge is to 
convince our citizens and our elected leaders that we must either ``pay 
now'' or ``pay later'', and that paying now is much more cost-effective 
and prudent in the long run.
    Innovative financing techniques can greatly accelerate 
infrastructure development and can have a powerful economic stimulus 
effect compared to conventional methods. This is the current approach 
in South Carolina, Georgia, Louisiana, Florida, and Texas, where 
expanded and accelerated transportation investment programs have been 
announced. Innovative financing techniques, including toll road-based 
funding, figure heavily in several of these State programs.
    The innovative programs in TEA-21 have been a good start, but more 
needs to be done to expand their scope, and new programs or approaches 
must be introduced. We must find new and innovative ways to finance the 
critical transportation infrastructure needs of the Nation.
    ASCE supports the innovative financing programs and advocates 
making programs available to all States where appropriate. 
Additionally, the Federal Government should make every effort to 
develop new programs.
    ASCE supports the following changes to enhance the existing 
programs:
Transportation Infrastructure Finance and Innovation Act (TIFIA)
      The TIFIA process for review, approval and negotiation is 
regarded as burdensome, and could be streamlined.
      TIFIA projects have a minimum eligibility threshold of 
$100 million and consideration could be given to lowering this to $50 
million to expand the pool of projects.
      TIFIA loans could be ``fully subordinated''. Current 
TIFIA legislation is written to subordinate TIFIA loans to other 
creditors. However, in the event of liquidation/default, the TIFIA loan 
advances to parity status with other creditors. This is known as the 
``springing lien'' provision. It is thought by some that this has 
limited the availability of other credit. The issue is controversial, 
with pros and cons on both sides, but reform should be seriously 
considered.
State Infrastructure Banks (SIBs)
      With the exception of five States (Texas, Rhode Island, 
Florida, Missouri, and California), TEA-21 did not permit further 
capitalization of SIBs with Federal funds. It is felt that this has 
suppressed SIB activity.
      Federal regulations still apply to loan funds that are 
repaid to the bank, encumbering SIB funded projects with Federal 
regulatory requirements.
Grant Anticipation Revenue Vehicles (GARVEEs)
      Increase the flexibility of GARVEE bond repayment 
methods. For example, utilize the total apportionment amount as a 
source of repayment (i.e., all funding categories), so that no 
particular funding category is overburdened.
    New programs for consideration as part of the next reauthorization 
are:

      Increased use of user fees, tolls, value pricing, and HOT 
lanes.
      Possible indexing of highway trust fund motor fuels tax 
to inflation.
      Establishing a true multimodal funding program (i.e., 
funds can be used interchangeably for rail, highway, freight, 
intermodal facilities, etc.).
      Tax credit bonds, private activity bonds, and tax-exempt 
bonds for privately developed projects.
Long-term Viability of Fuel Taxes for Transportation Finance
    ASCE supports the need to address impacts on future surface 
transportation funding and believes that provision should be made in 
the next surface transportation authorizing legislation to explore the 
viability of the most promising options to strengthen this funding. In 
particular, the impacts of fuel cell technology should be studied as 
well as how to create a mileage based system for funding our nation's 
surface transportation system as this technology comes to market and 
lessens the nation's dependence on gasoline as a fuel source for 
automobiles.
    Fuel taxes have long been the mainstay of transportation 
infrastructure finance, but their future is now uncertain. In many 
States, there is a strong reluctance to raise fuel taxes, and some 
State legislatures have even reduced taxes to compensate for the sharp 
increase in average gasoline prices over the last 2 years. Many 
localities and States are supplementing or replacing fuel taxes with 
other sources, such as sales taxes and other general revenue sources. 
There is also a growing trend to use additives to gasoline for 
environmental reasons. The most prominent additive, ethanol, enjoys a 
Federal exemption from fuel taxes that reduces Federal and State trust 
fund revenues by some several billion dollars annually. Looking ahead, 
a slow but steady increase in fleet efficiency--perhaps due to 
increased market penetration by electric, fuel cell, or hybrid 
technologies--would reduce the revenue per mile of use generated by 
users. Whereas cleaner-burning fuels and increased fuel efficiency are 
desirable policy goals in their own right, particularly in regard to 
global warming, they may reduce the reliability of fuel taxes in the 
future.
    A helpful first step in this process will be the Transportation 
Research Board's recently initiated Study on Future Funding of the 
National Highway System, which will describe the current policy 
framework of transportation finance and evaluate options for a long-
term transition to sources other than fuel taxes. The goals of the 
study are to: (1) determine the extent to which alternatives to fuel 
taxes will be needed in the next two decades or so; (2) analyze the 
pros and cons of different alternatives in terms of political 
feasibility, fairness, and cost; (3) suggest ways in which barriers to 
these alternatives might be overcome; (4) recommend ways in which the 
efficiency and fairness of the fuel tax could be enhanced, and (5) 
recommend, as necessary, a transition strategy to other revenue 
sources. The study's first task, to be summarized in an interim report, 
will provide one or more scenarios to illustrate the time span during 
which petroleum-based gasoline availability and cost might reduce fuel 
tax revenues. The interim report has been requested to provide insight 
to those parties involved in the development of the surface 
transportation reauthorization legislation, particularly with regard to 
projections of fuel tax revenues during the next reauthorization cycle. 
The study will also provide estimates of trends in expenditures for 
transportation infrastructure from sources other than the fuel tax.
C. Life Cycle Cost & Surface Transportation Design
    The use of Life-Cycle Cost Analysis (LCCA) principles will raise 
the awareness of clients of the total cost of projects and promote 
quality engineering. Short-term design cost savings which lead to high 
future costs will be exposed as a result of the analysis. In the short-
term the cost of projects will increase; however, the useful life of a 
project will increase, and there may be cost savings in operations and 
maintenance over the long term.
    When the cost of a project is estimated only for design and 
construction, the long-term costs associated with maintenance, 
operation, and retiring a project, as well as the cost to the public 
due to delays, inconvenience and lost commerce are overlooked. The 
increasing use of bidding to select the design team has resulted in a 
pattern of reducing engineering effort to remain competitive, with the 
result of higher construction and life cycle costs.
    ASCE encourages the use of Life-Cycle Cost Analysis (LCCA) 
principles in the design process to evaluate the total cost of 
projects. The analysis should include initial construction, operation, 
maintenance, environmental, safety and all other costs reasonably 
anticipated during the life of the project, whether borne by the 
project owner or those otherwise affected.\10\
---------------------------------------------------------------------------
     \10\American Society of Civil Engineers, Policy Statement 451, 
``Life-Cycle Cost Analysis,'' 1999.
---------------------------------------------------------------------------
D. Integrated Truck and Highway Design\11\
---------------------------------------------------------------------------
     \11\For a more technical discussion of the truck weight issue 
please see: Ghosn, Michael, ``Development of Truck Weight Regulations 
Using Bridge Reliability Model,'' Journal of Bridge Engineering, 
American Society of Civil Engineers, November 2000, and Ghosn, Michael, 
and Moses, Fred, ``Effect of Changing Truck Weight Regulations on U.S. 
Bridge Network, Journal of Bridge Engineering, American Society of 
Civil Engineers, November 2000.
---------------------------------------------------------------------------
    Truck sizes and weights need to be viewed in the context of major 
changes in cargo movement caused by the deregulation of the truck, 
railroad and aviation industries. Changes are continuing and will have 
profound impacts on the highway industry. Thus, while the use of larger 
and heavier trucks improves the productivity of the trucking industry 
and reduces the cost of transporting commodities, such vehicles also 
affect highway safety and accelerate deterioration of highway pavements 
and bridges.
    History documents a continuing trend toward larger trucks and 
smaller passenger vehicles along with significantly increasing truck 
volumes. The safety issue and highway pavement and geometric design 
aspects of mixing large trucks and smaller passenger vehicles will 
continue to be a subject of importance to highway administrators and 
designers.
    State limits for weights may not differ from the Federal maximums 
on the Interstate system except where ``grandfather'' provisions allow 
heavier combinations. Realistically, these trucks must also use 
highways which are not a part of the Interstate system for access. Many 
miles on the National Highway System do not meet the standards to 
qualify for the designated highway network. There are many miles of 
State and local roads which are even more deficient in meeting the 
standards of geometric and structural capability. States should balance 
the need for access to widely dispersed industrial and commercial sites 
with the need to protect inadequate road segments.
    Increases in truck sizes and weights impact negatively on the 
structural life and geometric adequacy of the present road network. 
Users of the transportation system, both the general public and the 
trucking industry, will experience reduced service levels, delays, 
increased vehicle wear and operation costs and reduced safety. These 
negative impacts must be balanced against productivity gains and 
reduced commodity costs. Highways can be designed and constructed to 
accommodate various truck sizes and weights. Additional maintenance can 
be provided to sustain the pavements, capacity and safety of the 
system. Trucks can be designed to reduce axle loadings, enhance 
productivity and improve safety. Truck safety can also be enhanced 
through improved inspection, enforcement and operator safety programs.
    Thus, highways and trucks can be designed and operated to improve 
their interaction, protect the highway investment and enhance safety. 
Industry and government cooperation in research, testing and evaluation 
can identify ways to improve trucking efficiency and safety while 
protecting the public investment in the highway system.
The American Society of Civil Engineers (ASCE) supports a program 
        where\12\:
---------------------------------------------------------------------------
     \12\American Society of Civil Engineers, Policy Statement 276, 
``Integrated Truck and Highway Design,'' 2000.

      Truck and highway design should be coordinated through 
joint research activities, such as in the National Cooperative Highway 
Research Program (NCHRP), and others. ASCE urges Congress, the Federal 
Highway Administration, the Federal Motor Carrier Safety 
Administration, the State transportation agencies, and the trucking 
industry to form these strong cooperative relationships.
      New and reconstructed roadways should be structurally, 
geometrically, and environmentally designed to support modern truck 
sizes and weights, and to insure the safe operation of the system.
      Truck designers should consider the effects of vehicle 
configuration and suspension systems on pavement and bridge 
performance. Manufacturers should also consider the effects of these 
factors on the safe operation of the vehicle in mixed traffic.
      Industry and government should ensure that trucks meet 
legal size and weight limitations and are safely maintained and 
operated.
E. Intermodal Facilities
    TEA-21 continues a surface transportation program with flexible 
funding for highway, transit and other modal facilities. Traditional 
transportation practice inhibits attainment of a truly intermodal 
process because of customary approaches and philosophies that support 
the modal orientation of agencies, the lack of connections among modes, 
the inequities in Federal matching ratios for different modes, and the 
consolidation of funding for multimodal projects.
    A primary emphasis of passenger intermodalism is to facilitate 
connections between the private automobile and other access modes and 
public transportation systems. For example, park-and ride facilities 
provide critical connections for mass transit commuters using 
automobiles for a portion of their trips.
    The movement of freight from origin to destination is increasingly 
multimodal. Most freight is carried by trucks for final delivery, 
making planning the connections between highways and other modes 
critical to efficient freight movement.
    TEA-21 continues to highlight intermodalism. Increased 
intermodalism is accomplished by statewide and metropolitan planning 
organizations, management systems and compliance with the Clean Air Act 
Amendments of 1990 (CAAA). Federal regulations explicitly state that 
``each State . . . carry out a continuing, comprehensive, and 
intermodal statewide transportation planning process,'' and that 
metropolitan transportation plans and programs shall ``lead to the 
development and operation of an integrated intermodal transportation 
system that facilitates the efficient, economic movement of people and 
goods.''
    TEA-21 and the CAAA have changed the way transportation plans have 
been developed from a mode by mode to an intermodal basis.
    Programs of the Federal, State and local governments should 
maintain and strengthen the TEA-21 provisions and funding mechanisms to 
consider a wide range of multimodal options and new technologies in the 
development of transportation plans, programs and projects.
    The American Society of Civil Engineers (ASCE) supports the vision 
of the Transportation Equity Act for the 21st Century (TEA-21) in the 
development of ``a National Intermodal Transportation System that is 
economically efficient, environmentally sound, provides the foundation 
for the Nation to compete in the global economy and will move people 
and freight in an energy efficient manner.'' Support for partnerships 
among the Federal, State and local governments, with various citizens, 
groups and firms from the private sector are essential to further the 
intermodal goals of TEA-21.\13\
---------------------------------------------------------------------------
     \13\American Society of Civil Engineers, Policy Statement 149, 
``Intermodal Transportation Systems,'' 2002.
---------------------------------------------------------------------------
F. Operations and Maintenance of the Nation's Surface Transportation 
        Infrastructure
    There is a clear and present need for an increased focus on 
transportation operations and maintenance at all levels--Federal, 
State, regional, and local. This need is based on several factors:

      An aging transportation infrastructure.
      Growing congestion and incident problems are causing 
transportation system performance to be a top priority in many areas of 
the country.
      Capacity constraints and costs of new construction are 
forcing us to look at alternative solutions and place a premium on 
maintaining and improving the existing transportation system.
      Customers desire travel choices, better information, and 
increased reliability to meet their mobility needs.
      An efficient and responsive transportation system is 
critical to meeting homeland security priorities.

    An increased focus on transportation operations functions can 
enhance performance of the transportation system, for example:

      Routine traffic and transit operations;
      Public safety responses;
      Planned construction disruptions;
      Incident management;
      Network and facility management;
      Traveler and shipper information; and
      Bicycle and pedestrian mobility.

    The Department of Transportation should encourage local matching 
and innovative funding. The Federal Government has a role in exploring 
and promoting best practices related to innovative funding for 
operations and maintenance.
    ASCE supports a strong Federal role in the nation's transportation 
system and strongly endorses Federal leadership in increasing the focus 
on transportation operations and maintenance, thereby enhancing the 
performance of and preserving our investment in the transportation 
system. Reauthorization of TEA-21 should accomplish the following 
regarding Operations and Maintenance:\14\
---------------------------------------------------------------------------
     \14\American Society of Civil Engineers, Policy Statement 495, 
``Operations and Maintenance of Transportation Systems,'' 2002.
---------------------------------------------------------------------------
      Support and assist homeland security initiatives. 
Transportation operations and homeland security share many of the same 
goals and functions. Resource sharing (e.g. communications 
infrastructure, traffic control centers) and joint planning are 
appropriate. Transit security and preparedness, international border 
security, asset security and tracking, vulnerability assessment, 
planning, and creation of system redundancy are important 
transportation priorities for homeland security.
      Support and assist State and local agencies. Beyond 
establishing transportation operations and maintenance as a national 
priority, the Federal role should be to support and assist State and 
local entities in accomplishing related goals. This includes support of 
research and development, provision of tools, promotion of best 
practices, and enhancement of education and training at all levels.
      Provide flexible funding. Flexible funding approaches are 
important components to supporting operations and maintenance needs. 
Expanding funding eligibility for operations and maintenance programs, 
enabling direct funding to local and regional operating agencies, 
public-private partnerships or outsourcing, and simplifying and 
clarifying Federal funding processes are important actions.
      Recognize that the private sector has much to offer in 
management and technical skills in operations and maintenance. Public-
private partnerships may provide enhanced operations and management 
programs.
      Specific programs. In addition to flexible funding, 
several programs should be considered for targeted funding:
      Homeland security initiatives related to transportation
      Incident management programs
      Implementation of infostructure for data collection and 
management
      Provision of real-time information to and from customers
      Support for regional cooperation and partnerships
      Programs to alleviate bottlenecks.
G. Conclusion
    As Congress grapples with the reauthorization of the nation's 
surface transportation program ASCE recommends that the following 
concepts guide the process:

      Expanding infrastructure investment.
      Enhancing infrastructure delivery.
      Maximizing infrastructure effectiveness.

    Unless we act now, the problem will only get worse because road use 
is expected to increase by nearly two-thirds in the next 20 years.
    The lack of adequate investment in America's infrastructure has 
left us with a vast backlog of deteriorated facilities that no longer 
meet our nation's increasing demands.
    To remedy America's current and looming problem, ASCE estimated in 
2001 a $ 1.3 trillion investment in all categories of infrastructure 
over the next 5 years and called for a renewed partnership among 
citizens, local, State and Federal Governments, and the private sector.
                                 ______
                                 
   Responses of Thomas Jackson to Additional Questions from Senator 
                               Voinovich
    Question 1. In your testimony, you proposed a 6 cent per gallon 
increase in the Federal gas tax. If the gas tax cannot be increased, 
how much more do you think we need to generate from other financing 
mechanisms to invest in our nation's transportation system? How crucial 
is a user fee increase to meeting our future transportation needs?
    Response. ASCE supports total annual funding of $40 billion to $50 
billion for the Federal-aid highway program. Currently, we are 
investing nearly $32 billion a year in the Federal-aid highway program. 
It will be nearly impossible to reach the $40-50 billion investment 
level without an increase in the user fee on gasoline.
    ASCE does support the following policy changes to increase the 
funds available to the Federal-aid highway program:

      The user fee on gasoline should be indexed to the 
Consumer Price Index (CPI) to preserve the purchasing power of the fee.
      The Transportation Trust Fund balances should be managed 
to maximize investment in the nation's infrastructure, including 
spending down the trust fund balance.
      Congress should stop diverting 2.5 cents of the user fee 
on ethanol to the General Fund, and put it back into the Highway Trust 
Fund.
      Congress should preserve the current firewalls to allow 
for full use of trust fund revenues for investment in the nation's 
surface transportation system.
      The reauthorization should maintain the current funding 
guarantees.

    If all of these revenue enhancements were enacted by Congress, they 
would add $5 billion to projected Highway Account revenues in fiscal 
year 2004. This would gradually rise to $9 billion in fiscal year 2009. 
This would allow the program to grow to $44 billion by fiscal year 
2009, far short of the $60 billion needed just to maintain current 
structural, safety and traffic conditions.
    This illustrates that to maintain a minimally adequate Federal 
highway program after TEA-21 the Federal user fee on gasoline must be 
raised. ASCE supports an increase of six cents per gallon in the 
Federal user fee on gasoline. This would raise approximately $10.2 
billion a year, of which an estimated $8.4 billion in new revenues 
would be available in direct financing for Federal-aid highway projects 
annually. The remainder--approximately $1.8 billion annually--would be 
directed to Federal transit programs. These increases are desperately 
needed.
    United States Department of Transportation (DOT) data reflects the 
fact that an investment of $60 billion per year would be needed just to 
preserve the system in its current condition. With funding as the 
cornerstone of any attempt to reauthorize TEA-21 it is imperative that 
a variety of funding issues be advanced as part of the overall strategy 
to improve the nation's surface transportation program.

    Question 2. As Highway Trust Fund revenues decrease in the future 
due to increased fuel efficiency and use of alternative fuels, what can 
we do to maintain a reliable source of highway funding and still rely 
on a user fee based system that pays its own way?
    Response. ASCE supports the need to address impacts on future 
surface transportation funding and believes that provision should be 
made in the next surface transportation authorizing legislation to 
explore the viability of the most promising options to strengthen this 
funding. In particular, the impacts of fuel cell technology should be 
studied as well as how to create a mileage based system for funding our 
nation's surface transportation system as this technology comes to 
market and lessens the nation's dependence on gasoline as a fuel source 
for automobiles.
    Fuel taxes have long been the mainstay of transportation 
infrastructure finance, but their future is now uncertain. In many 
States, there is a strong reluctance to raise fuel taxes, and some 
State legislatures have even reduced taxes to compensate for the sharp 
increase in average gasoline prices over the last 2 years. Many 
localities and States are supplementing or replacing fuel taxes with 
other sources, such as sales taxes and other general revenue sources. 
There is also a growing trend to use additives to gasoline for 
environmental reasons. The most prominent additive, ethanol, enjoys a 
Federal exemption from fuel taxes that reduces Federal and State trust 
fund revenues by some several billion dollars annually. Looking ahead, 
a slow but steady increase in fleet efficiency--perhaps due to 
increased market penetration by electric, fuel cell, or hybrid 
technologies--would reduce the revenue per mile of use generated by 
users.
    A helpful first step in this process will be the Transportation 
Research Board's recently initiated Study on Future Funding of the 
National Highway System, which will describe the current policy 
framework of transportation finance and evaluate options for a long-
term transition to sources other than fuel taxes. The goals of the 
study are to: (1) determine the extent to which alternatives to fuel 
taxes will be needed in the next two decades or so; (2) analyze the 
pros and cons of different alternatives in terms of political 
feasibility, fairness, and cost; (3) suggest ways in which barriers to 
these alternatives might be overcome; (4) recommend ways in which the 
efficiency and fairness of the fuel tax could be enhanced, and (5) 
recommend, as necessary, a transition strategy to other revenue 
sources. The study's first task, to be summarized in an interim report, 
will provide one or more scenarios to illustrate the time span during 
which petroleum-based gasoline availability and cost might reduce fuel 
tax revenues. The interim report has been requested to provide insight 
to those parties involved in the development of the surface 
transportation reauthorization legislation, particularly with regard to 
projections of fuel tax revenues during the next reauthorization cycle. 
The study will also provide estimates of trends in expenditures for 
transportation infrastructure from sources other than the fuel tax.
 Responses of Thomas Jackson to Additional Questions from Senator Reid
    Question 1. We have heard numerous times today about expected 
increases in truck traffic in the next ten to 20 years. What impact 
will this increased traffic have on our ability to maintain our 
highways?
    Response. History documents a continuing trend toward larger trucks 
and smaller passenger vehicles along with significantly increasing 
truck volumes. The safety issue and highway pavement and geometric 
design aspects of mixing large trucks and smaller passenger vehicles 
will continue to be a subject of importance to highway administrators 
and designers.
    Increases in truck sizes and weights impact negatively on the 
structural life and geometric adequacy of the present road network. 
Users of the transportation system, both the general public and the 
trucking industry, will experience reduced service levels, delays, 
increased vehicle wear and operation costs and reduced safety. These 
negative impacts must be balanced against productivity gains and 
reduced commodity costs.

    Question 2. If trucks that are heavier than currently allowed are 
permitted to travel our highways, what will be the consequences with 
respect to the condition and performance of existing highways and 
bridges?
    Response. Increases in truck sizes and weights impact negatively on 
the structural life and geometric adequacy of the present road network. 
Users of the transportation system, both the general public and the 
trucking industry, will experience reduced service levels, delays, 
increased vehicle wear and operation costs and reduced safety.
    In numerous instances bridges will need to retrofitted or replaced 
to accommodate larger trucks and bigger loads, and this is the largest 
cost associated with allowing larger trucks on road system.

    Question 3. If reconstruction projects and new infrastructure are 
built to withstand heaver trucks, what will that do to the costs of 
these projects?
    Response. There will certainly be additional costs associated with 
increasing truck weights, but some of these costs can be borne early in 
the design and construction process which can minimize the final cost. 
This is especially true in bridge repair and replacement. It is well 
documented that increasing truck weights will necessitate more 
attention to bridge deficiencies, and this will require Federal highway 
funds. Some of these deficiencies can be addressed by FHWA's Bridge 
Program, but in some instances this will need to be accelerated. 
Highways can be designed and constructed to accommodate various truck 
sizes and weights. Additional maintenance can be provided to sustain 
the pavements, capacity and safety of the system. Trucks can be 
designed to reduce axle loadings, enhance productivity and improve 
safety. Truck safety can also be enhanced through improved inspection, 
enforcement and operator safety programs.

    Question 4. You mention life cycle costs in your testimony. Can you 
explain the importance of looking at life cycle costs when selecting 
infrastructure projects?
    Response. The use of Life-Cycle Cost Analysis (LCCA) principles 
will raise the awareness of clients of the total cost of projects and 
promote quality engineering. Short-term design cost savings which lead 
to high future costs will be exposed as a result of the analysis. In 
the short-term the cost of projects will increase; however, the useful 
life of a project will increase, and there may be cost savings in 
operations and maintenance over the long term.
    When the cost of a project is estimated only for design and 
construction, the long-term costs associated with maintenance, 
operation, and retiring a project, as well as the cost to the public 
due to delays, inconvenience and lost commerce are overlooked. The 
increasing use of bidding to select the design team has resulted in a 
pattern of reducing engineering effort to remain competitive, with the 
result of higher construction and life cycle costs.
    ASCE encourages the use of Life-Cycle Cost Analysis (LCCA) 
principles in the design process to evaluate the total cost of 
projects. The analysis should include initial construction, operation, 
maintenance, environmental, safety and all other costs reasonably 
anticipated during the life of the project, whether borne by the 
project owner or those otherwise affected.

    Question 5. As a practicing engineer, have you seen highway 
pavement research results that have been practical and utilized in a 
beneficial way? How can research help improve the durability and life 
span of new and reconstructed roads?
    Response. Research results have led to many benefits for the 
nation's surface transportation system including: materials that 
improve the performance and durability of pavements and structures; 
design methods that reduce scour (and consequent threat of collapse) of 
bridges; intelligent transportation systems technologies that improve 
safety and reduce travel delay; methods and materials that radically 
improve our ability to keep roads safely open in severe winter weather; 
innovative management approaches that save time and money; analytical 
and design approaches that reduce environmental impacts and improve the 
aesthetic and cultural aspects of transportation facilities; and many 
more.
    In general, pavement research had led to longer lasting road 
surfaces which have lowered maintenance cost for many road systems. The 
following are a few recent examples of highway pavement research that 
has produced useable results.

      A flexible pavement life-cycle model has been developed 
to yield an optimum maintenance and rehabilitation plan. The model 
incorporates into the optimization process both performance and cost 
associated with a life-cycle analysis period for a given pavement 
structure project. A single life-cycle indicator called ''life-cycle 
disutility'' has been introduced and defined as the ratio of cost to 
performance. The optimum plan is the one associated with the minimum 
life-cycle disutility value. The model evaluates several potential 
maintenance and rehabilitation plans generated according to two defined 
decision policy options. The first decision policy option requires a 
fixed analysis period, whereas the second one involves a variable 
analysis period. Both options require a specified number of major 
rehabilitation cycles. Pavement life-cycle cost includes initial 
construction, scheduled major rehabilitation cycles, and routine 
maintenance and added user cost. Pavement life-cycle performance is 
defined as the area under the life-cycle performance curve either 
generated from actual pavement distress data or based on an incremental 
analysis of the American Association of State Highway and 
Transportation Officials basic design equation of flexible pavement.
      Every year, large amounts of pavement deicing chemicals 
are used for snow and ice control on Canadian highways and airports. 
Until recently, urea had been the only pavement deicing chemical in use 
at Canadian airports, but due to recent concerns about the impact of 
this deicer on the environment, consideration has been given to 
replacing it with more environmentally friendly deicers. The test 
results showed that for all deicers the critical concentration, the one 
that caused the greatest damage to the aggregate, was in the 1-2 
percent range, and for all deicers the quartzite aggregate suffered 
more damage than the limestone. It was also found that the road salt 
produced comparable damage to that caused by other deicers to 
quartzite, while the damage was significantly less for limestone 
aggregates. In case of asphalt concrete samples, it was found that 
conditioning asphalt samples using freeze-thaw cycles in the presence 
of a deicer solution caused a decrease in the indirect tensile strength 
and modulus of elasticity and an increase in the penetration values of 
the recovered asphalt cement. In addition, the test results showed that 
the maximum damage was caused by urea, while the damage due to the 
other deicers was comparable to that of distilled water.
      Because of the lack of formulas for evaluating the peak 
value of dynamic vehicle load on rigid pavement, the need to derive a 
simple closed-form solution to predict the peak load for pavement 
design is apparent. Researchers developed a theoretical solution for 
evaluating the probable peak vehicle load on rigid pavement due to the 
passage of a vehicle moving at constant speed along a rough road 
surface. Based on the proposed solutions, relations of design vehicle 
load and traffic volume for discrete risks are constructed for 
applications of pavement design.

    Question 6. Your group's ``Report Card on America'' makes it easy 
for us non engineers to understand the State of our infrastructure. You 
have given our roads a D+ grade and bridges a C grade. Can you tell 
this committee more about this grader system and why our transportation 
system is scoring so low?
    Response. Led by an 11-member advisory council, ASCE evaluated 
existing data reports for each infrastructure category. ASCE determined 
its grades by evaluating the infrastructure's condition, performance, 
capacity and funding. The grades reflect experts' views of the 
conditions and performance versus the current and anticipated funding 
level combined with the expected future needs.
    According to ASCE's 2001 Report Card, the nation's roads earned a 
D+, up from a D- in 1998. According to ASCE's 2001 Report Card, the 
nation's bridges received a grade of C, an improvement from a C minus 
in 1998. Almost a third of America's bridges are rated structurally 
deficient or functionally obsolete.
    The major reason for this improvement is that the Congress and 
State and local governments have begun to address the investment crisis 
and crumbling infrastructure through the enactment of TEA-21, which 
provided $218 billion for the nation's highway and transit programs, 
and additional State and local programs to fund surface transportation 
infrastructure. But even at these increased funding levels, capital 
investments fall short of needs by 43 billion dollars a year.
                               __________
    Statement of William Buechner, Vice President for Economics and 
    Research, American Road and Transportation Builders Association
``One of our great material blessings is the outstanding network of 
    roads and highways that spreads across this vast continent. Freedom 
    of travel and the romance of the road are vital parts of our 
    heritage, and they helped to make America great. Four million miles 
    of streets and roads make it possible for the average citizen to 
    drive to virtually every corner of our country-to enjoy America in 
    all its beauty and variety. They also form a vital commercial 
    artery unequaled anywhere else in the world.
``Our interstate system has reduced by nearly a day and a half the time 
    it takes to drive coast to coast. And more efficient roads mean 
    lower transportation costs for the many products and goods that 
    make our abundant way of life possible. But let's face it: Lately, 
    driving isn't as much fun as it used to be. Time and wear have 
    taken their toll on America's roads and highways. In some places 
    the bad condition of the pavement does more to control speed than 
    the speed limits.
``We simply cannot allow this magnificent system to deteriorate beyond 
    repair. The time has come to preserve what past Americans spent so 
    much time and effort to create, and that means a nationwide 
    conservation effort in the best sense of the word. America can't 
    afford throwaway roads or disposable transit systems. The bridges 
    and highways we fail to repair today will have to be rebuilt 
    tomorrow at many times the cost.
``So I'm asking the Congress when it reconvenes next week to approve a 
    new highway program that will enable us to complete construction of 
    the interstate system and at the same time get on with the job of 
    renovating existing highways. The program will not increase the 
    Federal deficit or add to the taxes that you and I pay on April 
    15th. It'll be paid for by those of us who use the system, and it 
    will cost the average car owner only about $30 a year. That's less 
    than the cost of a couple of shock absorbers. Most important of 
    all, it'll cost far less to act now than it would to delay until 
    further damage is done . . .
``Common sense tells us that it'll cost a lot less to keep the system 
    we have in good repair than to let it crumble and then have to 
    start all over again. Good tax policy decrees that wherever 
    possible a fee for a service should be assessed against those who 
    directly benefit from that service. Our highways were built largely 
    with such a user fee--the gasoline tax. I think it makes sense to 
    follow that principle in restoring them to the condition we all 
    want them to be in.
``So, what we're proposing is to add the equivalent of 5 cents per 
    gallon to the existing Federal highway user fee, the gas tax. That 
    hasn't been increased for the last 23 years. The cost to the 
    average motorist will be small, but the benefit to our 
    transportation system will be immense. The program will also 
    stimulate 170,000 jobs, not in make-work projects but in real, 
    worthwhile work in the hard-hit construction industries, and an 
    additional 150,000 jobs in related industries. It will improve 
    safety on our highways and will make truck transportation more 
    efficient and productive for years to come.
``Perhaps most important, we will be preserving for future generations 
    of Americans a highway system that has long been the envy of the 
    world and that has truly made the average American driver king of 
    the road . . .''

                                    President Ronald Reagan
 Radio Address to the Nation on Proposed Legislation for a Highway 
                       and Bridge Repair Program, November 27, 1982
                                 ______
                                 
    Mr. Chairman, Senator Inhofe, members of the subcommittee, thank 
you very much for providing the American Road and Transportation 
Builders Association (ARTBA) an opportunity to testify on highway 
investment needs and to present its recommendations for the 
reauthorization of the Federal highway and mass transit programs.
    I am Dr. William Buechner, ARTBA's vice president for economics and 
research and chief economist. Prior to joining ARTBA in 1996, I served 
22 years as a senior economist for the congressional Joint Economic 
Committee, and I have a doctorate in economics from Harvard University.
    ARTBA marks its 100th anniversary this year. Over the past century, 
its core mission has remained focused on aggressively advocating 
Federal capital investments to meet the public and business community's 
demand for safe and efficient transportation. The transportation 
construction industry ARTBA represents generates more than $200 billion 
annually to the nation's Gross Domestic Product and sustains more than 
2.5 million American jobs. ARTBA's more than 5,000 members come from 
all sectors of the transportation construction industry. Thus, its 
policy recommendations provide a consensus view.
    Mr. Chairman, at the outset I want to express our deep appreciation 
to you personally and the bipartisan leadership of the committee for 
its work thus far to maintain the fiscal year 2003 highway program at 
the current year's $31.8 billion level.
    Earlier this morning, the Federal Highway Administrator, Mary 
Peters, told this committee that an average annual investment of $75.9 
billion by all levels of government during the next 20 years would 
maintain current conditions on the nation's highways and bridges. 
During the past 20 years, the Federal share of highway investment has 
averaged about 45-47 percent of the total, which implies that a Federal 
investment of about $35 billion annually for the next 20 years would 
meet our highway investment requirements.
    You don't have to be an economist to recognize that, if we are 
currently investing $32 billion at the Federal level, there is 
something odd about that assessment.
    There are three reasons why the $75.9 billion investment figure is 
understated.
    1. The figure is stated in year 2000 constant dollars. Obviously, 
anyone planning a future investment would consider inflation, which 
will add significantly to the investment required. We recommend that 
the Senate mandate that future reports provide estimates that are in 
both constant and inflation-adjusted dollars.
    2. The $75.9 billion figure, as the administrator has stated, will 
not even maintain the status quo in terms of traffic congestion. 
Traffic congestion at that investment level would, not maybe, would get 
worse over the next 10 years. We can't let that happen because of its 
impact on productivity and the future economic growth of the Nation.
    3. The findings of the report are based on the assumption that 
traffic growth will decline from 3 percent annually during the past 20 
years to 2 percent annually over the next 20 years. This assumption 
reduces investment needs because less traffic means fewer highway and 
bridge repairs and less need for new capacity. Every Conditions and 
Performance report has underestimated travel growth. But over the next 
20 years, the nation's work force must continue to grow. It will be 
fueled largely by immigration and upward mobility of lower-income 
Americans. Research shows that as incomes rise, so does auto ownership 
and vehicle miles traveled. The chart on the bottom of page A-9 of the 
Administrator's attachment shows that traditional travel growth would 
increase annual investment needs almost 50 percent to $120 billion per 
year.
    You will note that the American Association of State Highway and 
Transportation Officials upcoming 2002 ``Bottom Line Report,'' which is 
based on the same econometric model and data used by the U.S. DOT, 
concludes that an annual investment of $92 billion in 2000 dollars by 
all government levels will be needed from fiscal year 2004--fiscal year 
2009 just to maintain current conditions and performance. This is about 
$16 billion more per year than in the figure Administrator Peters 
mentioned this morning.
    When ARTBA analyzed the data in the 1999 Conditions and Performance 
report, and adjusted the data with conservative estimates of future 
inflation and VMT growth, we concluded that a Federal highway program 
averaging $50 billion per year would be needed for fiscal year 2004 
through fiscal year 2009 just to maintain existing structural, safety 
and travel performance conditions on the nation's highways and bridges.
    When the new Conditions and Performance report is issued later this 
year, the data will inescapably show that it will take a Federal 
highway investment of at least $50 billion per year just to stabilize 
congestion at its current level, and more likely a program of $60 
billion or even more.
    Of course, we must also look at mass transit capital needs which 
are in addition to the highway investment needs reported by 
Administrator Peters.
    ARTBA has developed a TEA-21 reauthorization funding proposal, 
which we call ``Two Cents Makes Sense,'' that shows how the Federal 
share of highway investment requirements during the next 6 years can be 
substantially met. We are recommending a Federal highway program funded 
at $35 billion in fiscal year 2004 and then increased by $5 billion per 
year to $60 billion by fiscal year 2009. This program would bring us to 
an investment level that would maintain current physical and safety 
conditions and assure that traffic congestion will not get materially 
worse over the next 10 years. It would also double mass transit 
investment to about $14 billion by fiscal year 2009.
    Our approach would result in a manageable program for both the 
State DOTs and the transportation construction industry. The funding 
levels we recommend should be guaranteed and firewall-protected just as 
under TEA-21. But we would recommend that there not be a RABA 
adjustment of the kind that caused the funding uncertainty and 
political problems we saw in fiscal year 2003.
    We are suggesting a fundamental change in Highway Trust Fund cash 
management to assure that highway users pay no more into the trust fund 
each year than is needed to cover actual outlays from the trust fund. 
Under our recommended changes, we calculate that a small annual 
increase in the Federal highway user fee of about 2 cents per gallon 
would be needed at most to meet projected cash outlays from the Highway 
Trust Fund to fund the program we visualize.
    About half a cent of this increase would come from permanently 
indexing the motor fuels tax to the Consumer Price Index, which would 
preserve the purchasing power of highway user fees even beyond the 
reauthorization period. The other 1.5 cents would have to be included 
in the reauthorization legislation.
    To put a 2-cent annual increase in perspective, we have included a 
chart on page 9 below showing that the average weekly change in the 
retail price of gasoline during the past year and a half was almost 2.5 
cents per gallon.
    If Congress were to enact any other source of new revenues for the 
Highway Trust Fund, like transferring the 2.5 cents per gallon of the 
gasohol excise from the general fund to the Highway Trust Fund, the 
necessary increase in the motor fuels user fee would be even smaller.
    Finally, our proposal would include a revenue RABA provision to 
assure that the Federal highway program does not contribute to the 
Federal deficit. Under a revenue RABA, if the Highway Trust Fund were 
to run a deficit during any fiscal year, the user fee would be 
automatically increased the following year by just enough to make the 
trust fund whole. Conversely, if the trust fund ran a surplus, then the 
user fees would be automatically reduced the following year. This would 
assure that the Federal highway program would be completely budget-
neutral and would have no impact on the Federal surplus or deficit.
ARTBA Recommendations for Meeting Highway and Transit Investment Needs 
        in TEA-21 Reauthorization
    In March 2001, the American Road and Transportation Builders 
Association published its detailed proposals for improving the Federal 
highway and mass transit programs in a 72-page report entitled ``A 
Blueprint for Year 2003 Reauthorization of the Federal Surface 
Transportation Programs.'' This report was the culmination of the work 
of a task force of over 100 ARTBA members. Our refined funding proposal 
for reauthorization, ``Two Cents Makes Sense,'' was released on July 
16.
    Mr. Chairman, ARTBA's vision for TEA-21 reauthorization is centered 
on three goals:

    First, cutting the number of deaths and injuries on America's 
highways between 2004 and 2009 through targeted capital investments.
    Second, ensuring that traffic congestion for the American public 
and business community does not get materially worse between now and 
2009; and
    Third, ensuring that the structural conditions of federally aided 
highways, bridges and transit systems do not get materially worse over 
that same period.

    These goals can only be accomplished by providing the capital 
investments the data from the U.S. Department of Transportation and the 
American Association of State Highway and Transportation Officials 
(AASHTO) reports suggest are necessary to, at minimum, maintain 
existing system safety, physical conditions and performance.
New Assessments of National Transportation Capital Investment Needs: 
        AASHTO, USDOT, APTA
    The upcoming AASHTO ``bottom line'' report uses year 2000 data 
provided by the State transportation departments and the U.S. 
Department of Transportation's HERS model to project highway and mass 
transit capital investment needs over the period 2000 to 2019. The 
report states that an annual capital investment of $92.0 billion in 
2000 dollars will be required during the next 20 years by all levels of 
government to maintain current conditions and performance on the 
nation's highways and $125.6 billion will be needed annually to make 
all of the economically beneficial improvements identified by the 
model.
    The AASHTO report does not assign a Federal share to these needs 
estimates, nor does it factor in future price inflation. If one assumes 
the Federal share of total highway capital investment, fiscal year 
2004-09, will continue to be about 47 percent\2\--the average share 
over the past 20 years--and that annual inflation will be 2.4 
percent43-the estimate used in the president's fy 2003 budget--the 
``bottom line'' report suggests:
---------------------------------------------------------------------------
     \2\This is the average Federal share of total public highway 
capital investment over the past 20 years, including FHWA 
administrative costs, found in the U.S. Department of Transportation 
annual publication ``Highway Statistics'' Table HF-10 for 1995-2001 and 
``Highway Statistics Summary to 1995'' Table HF210 for 1982-1994.
---------------------------------------------------------------------------
      The Federal share of the investment needed ``just to 
maintain'' year 2000 highway safety, structural and traffic congestion 
conditions would be $47.7 billion in fiscal year 2004, rising to $53.6 
billion in fiscal year 2009.
      The Federal share of the investment needed to make all 
economically justifiable improvements to the highway system would be 
$65.1 billion in year 2004, rising to $73.2 billion in year 2009.
    Figure 1 graphically depicts how the ARTBA ``two cents makes 
sense'' proposal addresses these investment needs estimates suggested 
by the AASHTO ``bottom line'' report.


    The U.S. Department of Transportation is expected to soon release 
the biennial surface transportation conditions, performance and 
investment requirement report it is mandated to submit to Congress. The 
most recent report, issued in 2000 and utilizing 1997 data, suggested a 
minimum $50 billion per year Federal investment requirement, when 
adjusted for inflation and historic traffic use. Annual inflation alone 
would be expected to drive that reported annual investment need beyond 
$60 billion by fiscal year 2009.
    The American Public Transportation Association (APTA) has stated 
that a $14 billion per year annual Federal investment is necessary to 
meet minimum national transit needs.
Existing Revenue Options
    Financing this level of investment will require more revenues than 
highway users are currently projected to pay into the Highway Trust 
Fund during the next 6 years. Based on information such as current 
highway user fees, expected population growth, number of drivers, 
vehicle miles traveled and other factors, the Congressional Budget 
Office and the U.S. Department of the Treasury currently project that 
revenues into the Highway Account will grow from $30 billion in fiscal 
year 2004 to just under $35 billion in fiscal year 2009. Projected 
revenue growth between now and fiscal year 2009 will thus be far less 
than needed to meet Federal highway investment requirements during the 
next 6 years.
    Nearly 2 years ago, ARTBA proposed a number of options for 
enhancing Highway Account revenues. These include:

      spending down the current cash balance;
      indexing the motor fuels excise taxes for inflation;
      crediting the Highway Account with gasohol tax revenues 
that currently go into the General Fund;
      ending the gasohol subsidy or reimbursing the Highway 
Trust Fund from the General Fund for the cost of the subsidy;
      crediting interest on the Highway Trust Fund balances;
      eliminating fuel tax evasion; and
      expanding innovative financing programs.

    Table 1 provides the latest revenue estimates for each of these 
options. These figures were computed by ARTBA's economics and research 
team based on the most recent available data from the U.S. Department 
of the Treasury, the Congressional Budget Office and other government 
agencies.


    If all of these revenue enhancements were enacted by Congress, they 
would add $5 billion to projected Highway Account revenues in fiscal 
year 2004. This would gradually rise to $9 billion in fiscal year 2009. 
This would allow the program to grow to $44 billion by fiscal year 
2009, far short of the $60 billion needed just to maintain current 
structural, safety and traffic conditions.
    Whether Congress will, in fact, adopt any, or all, of these options 
is at this point a matter of conjecture.
    What is abundantly clear is that a minimally adequate Federal 
highway program after TEA-21 will require significant new revenues, 
beyond these seven options.
    The main sources of funds for Federal highway investment are the 
fees paid by highway users in the form of excise taxes on motor fuels-
gasoline, diesel fuel and gasohol. Each penny of the motor fuels excise 
taxes currently generates about $1.7 billion per year, with about $1.4 
billion being deposited into the Highway Account of the Highway Trust 
Fund and $260 million deposited into the Mass Transit Account.


    ARTBA has endorsed an increase in highway user fees as needed to 
maintain current structural, safety and traffic mobility conditions on 
the nation's highways and bridges. But highway users should not be 
asked to pay any more than absolutely necessary. The proposal I want to 
outline this morning is designed to provide the necessary level of 
Federal highway investment during the next 6 years at the minimum cost 
to highway users
``Two Cents Makes Sense''--A Funding Proposal to Meet the Investment 
        Requirements Outlined by the U.S. Department of Transportation 
        and AASHTO
    On July 16, 2002, ARTBA announced a needs based financing proposal 
for TEA-21 reauthorization-``Two Cents Makes Sense.'' The financing 
plan is a refinement of the funding recommendations ARTBA published in 
March 2001.
    The ``Two Cents Makes Sense'' plan would provide the revenue stream 
necessary to double the annual Federal investments in highways-to $60 
billion-and mass transit-to almost $14 billion-by fiscal year 2009. 
This proposal is the only one currently being discussed that would grow 
Federal highway investment during the next authorization period to the 
level the U.S. Department of Transportation (USDOT), the American 
Association of State Highway and Transportation Officials (AASHTO) and 
the American Public Transportation Association (APTA) report is the 
minimum needed just to maintain current safety, traffic congestion and 
structural conditions.
    The ``Two Cents Makes Sense'' plan would provide steady, 
predictable and manageable Federal highway program increases-in $5 
billion increments-from $35 billion in fiscal 2004 to $60 billion in 
fiscal 2009. Federal transit investment would increase under our 
proposal in $1 billion annual increments. This would be achieved 
through:

      more efficient cash management of Highway Trust Fund 
(HTF) revenues; and
      a small, annual adjustment in the Federal motor fuels 
excise user fee rate to assure the revenue stream necessary to cover 
the government's cash outlay in that year for the highway and transit 
programs.

    Our proposal is a logical evolution of the concept embraced by 
Congress in TEA-21 of directly linking annual highway investment to the 
user fee revenue stream.
    Under our proposal, the TEA-21 budget firewalls and protections 
would be maintained. This would include annual funding guarantees in 
the authorization legislation and the budgetary protections for the 
highway and mass transit programs, including the separate budget 
categories and the point of order in the House Rules that can be raised 
against legislation that would reduce the guaranteed funding.
More Efficient Cash Management of Highway Trust Fund Revenues
    Under TEA-21, as has been the case for several decades, the Federal 
Government has been collecting more highway user revenue each year than 
it actually needs to pay the annual bills-or outlays-for the highway 
and transit programs. As a result, this money is being ``warehoused'' 
for up to 7 years before it is actually spent. That's why the trust 
fund balance continues to balloon. Here's how it happens:
    Based on years of analysis, the White House Office of Management & 
Budget and the Congressional Budget Office have determined Federal 
highway funds spend out over a period extending 7 years. This spend out 
rate is unique among Federal programs. Unlike the case with virtually 
every other Federal program, of every dollar obligated during a fiscal 
year for the Federal highway program, only 27 cents will actually have 
to be paid out of the HTF Highway Account during the first year. The 
next year, 42 cents will be paid, followed by 17 cents the third year 
and smaller amounts in following years (See Figure 2).


    This ``lag'' between collection of user fee revenue from motorists 
and truckers to actual complete spend out of those revenues causes the 
significant annual growth in the Highway Trust Fund balance. Absent 
changes, the Highway Trust Fund's Highway Account balance would grow 
steadily through fiscal year 2010.
    ARTBA proposes to correct this inefficient money management by 
returning the Federal highway program to a true ``pay-as-you-go'' 
approach.
Returning to a True ``Pay-as-You-Go'' Approach
    In the reauthorization, Congress would set annual investment 
targets to work toward accomplishing needs based performance results. 
This could be accomplished by starting with $35 billion in fiscal year 
2004 and ramping in $5 billion increments annually thereafter to $60 
billion in fiscal year 2009. This would similarly be done for transit 
investment. Once these authorization levels are established, the 
Congressional Budget Office would determine the annual cash outlay 
needed to fund the new authorization, plus remaining past 
authorizations.
    The reauthorization legislation would also include authority for an 
annual adjustment of the Federal motor fuels user fee excise rate to 
produce the amount of revenue to the HTF needed to meet the highway and 
transit program cash outlays for the year. This adjustment would have 
two parts: (1) a base adjustment to protect that purchasing power of 
the highway and transit programs that would be linked to the annual 
Consumer Price Index (indexing); and (2) depending on U.S. Treasury 
revenue projections for the Highway Trust Fund from all sources during 
the upcoming year (i.e., could include possible recapture of ethanol 
revenues, interest on the trust fund, prudent use of the existing HTF 
balance, revenues from innovative financing) an adjustment in the motor 
fuels rate above indexing that is necessary to provide the revenue 
needed to meet the outlay target.
    By implementing these recommended changes, it is possible to 
increase Federal highway and transit investment significantly without a 
large, one time increase in the motor fuels excise user fee rate (which 
would also exacerbate the HTF balance buildup just discussed).
    Funding the annual authorizations we have proposed, would, with 
implementation of the changes we have recommended, require at most an 
annual adjustment of the Federal motor fuels excise user fee rate of 
2.2 cents per gallon. Approximately one-half cent of that increase 
would be the result of indexing to the CPI. If the HTF revenue stream 
were enhanced by redirection and equitable taxation of ethanol, use of 
the existing HTF balance, more revenues due to a robust economy-any or 
all-the annual adjustment in the motor fuels excise user fee rate would 
be lower than 2.2 cents per gallon (including indexing)! (See Figure 3)


Revenue RABA Provision: An Approach that Eliminates Current RABA 
        Political and Program Planning Problems.
    The ``Two Cents Makes Sense'' proposal would also replace the TEA-
21's RABA (Revenue Aligned Budget Authority) adjustment with a 
``Revenue RABA Provision.'' The necessary user fee increases in Figure 
3 were calculated using the most recent Highway Trust Fund projections 
by the U.S. Department of Treasury and the Congressional Budget Office. 
When TEA-21 is reauthorized, new calculations, based on the then 
current data, may indicate user fee increases slightly higher or lower 
than those in Figure 3.
    Under a ``Revenue RABA Provision,'' if revenues into the HTF during 
any given fiscal year were to fall short of outlays, then the following 
year the statutory motor fuels excise user fee rate would be 
automatically allowed (or certified) to increase by the amount required 
to offset the deficit and make the trust fund whole. This would 
eliminate the political problems and program disruptions that have 
occurred with the fiscal year 2003 transportation appropriation caused 
by the current RABA construct.
    Conversely, if revenues to the HTF were to exceed required outlays 
during a fiscal year, then the following year the motor fuels excise 
user fee rate would be automatically decreased by the amount needed to 
offset the resulting surplus.
    This ``Revenue RABA Provision'' would ensure that the highway and 
mass transit program does not contribute to the Federal deficit during 
the next 6 years.
Looking Rationally at the Impact of an Annual Two Cent User Fee 
        Adjustment: The Real World Gas Price Experience
    During the past year and a half, the retail price of gasoline has 
fluctuated by an average 2.5 cents per gallon per week! (See Figure 4). 
In 14 of the weeks, the average national retail price of gasoline 
either increased or decreased by 5 cents per gallon or more. In 39 of 
the 75 weeks shown in Figure 4-or more than half the time-the average 
retail price nationally fluctuated at least 2 cents per gallon from 1 
week to the next.


    What this means, of course, is motorists are used to paying each 
week the level of annual adjustment in the Federal motor fuels excise 
user fee rate proposed by ARTBA to support a $60 billion Federal 
highway and $14 billion Federal transit program by fiscal year 2009!
    ARTBA commissioned Zogby International to conduct a national survey 
of likely voters July 9-12, 2002, which found almost 70 percent would 
support an annual 2 cent per gallon increase in the Federal motor fuels 
tax rate if the money it generated was used exclusively for 
transportation improvements. A 2-cent gas tax increase would cost the 
average driver $12 per year, or 6 cents per day. That compares to the 
estimated $259 each motorist pays per year in extra vehicle repair and 
operating costs driving on poor roads.
    Tables 2 and 3, found at the end of this testimony, provide an 
analysis of how our ``Two Cents Makes Sense'' proposal would benefit 
individual State highway programs, based on both the existing 
apportionment formulas and in response to proposals to increase minimum 
State returns to 95 percent.
Maintenance of Effort Provision to Ensure Program Growth in Every State
    A key component of financing highway, bridge and mass transit 
improvements is the partnership between Federal, State and local 
governments to develop and maintain the nation's surface transportation 
network. It is critical for all partners to make an appropriate 
commitment to transportation investment. Unfortunately, a number of 
States let their own funds for highway and bridge investment lag upon 
realizing the increased Federal funds they would receive under TEA-21.
    To ensure increased Federal surface transportation investment 
actually results in more funds for transportation improvement projects, 
ARTBA believes the reauthorization of TEA-21 should include a 
``maintenance of effort'' provision that makes increased apportioned 
Federal funds contingent on individual State highway and transit 
program investment levels consistent with, at least, their prior year 
investment.
    Mr. Chairman, thank you again for the opportunity to testify before 
the subcommittee on this important subject.
    I would be happy to respond to questions.
    
    
    
                                 ______
                                 
     Responses of William Buechner Questions from Senator Voinovich
    Question 1. What level of funding could the Highway Trust Fund 
support over the life of the next highway bill if the Federal gas tax 
is not increased?
    Response. The first line of the attached table shows the latest 
official estimate of revenues into the Highway Account of the Highway 
Trust Fund from the Congressional Budget Office and the U.S. Department 
of the Treasury. It shows that Highway Account revenues will grow by 
about $1 billion annually, from just over $30 billion in fiscal year 
2004 to just under $35 billion by fiscal year 2009. Under TEA-21, 
Congress established an arrangement where the funding level for the 
highway program each fiscal year is to be set equal to Highway Account 
revenues the previous fiscal year. If that arrangement were carried 
into the next authorization legislation, funding for the highway 
program would grow to about $33.8 billion in fiscal year 2009, or about 
$2 billion above the fiscal year 2002 level. Just to maintain fiscal 
year 2002 purchasing power would require program growth to $37.5 
billion by fiscal year 2009, assuming inflation matches the 2.4 percent 
annual increase projected by the President's Council of Economic 
Advisers. Failure to reach at least this funding level would result in 
a significant cut in the actual amount of highway construction and 
repair work that could be performed.
    It is also important to note that the Federal motor fuels excise 
tax is, in fact, a user fee which ensures that the Federal investment 
in highways is funded solely by highway users. We agree with President 
Ronald Reagan, who said November 27, 1982 in his weekly radio address 
to the Nation that ``good tax policy decrees that wherever possible a 
fee for a service should be assessed against those who directly benefit 
from the service. Our highways were built largely with such a user 
fee--the gasoline tax. I think it makes sense to follow that principle 
in restoring them to the condition we all want them to be in.''

    Question 2. Financing for the Highway Trust Fund is derived from a 
variety of Federal highway user taxes, including excise taxes on motor 
fuels (gasoline, gasohol, diesel, and special fuels) and truck-related 
taxes on truck tires, sales of trucks, and the use of heavy vehicles. 
Besides increasing the Federal gas tax by 2 cents per gallon, do you 
recommend any increases to any of the other Federal highway user fees?
    Response. ARTBA's ``Two Cents Makes Sense'' proposal is a program 
that would increase Federal investment in highway improvements from $35 
billion in fiscal year 2004 to $60 billion in fiscal year 2009 through 
an increase in the Federal motor fuels tax of just over 2 cents per 
gallon per year, if Congress does not provide for any other new revenue 
sources. The above table shows the potential revenue impact of some new 
revenue sources that have been identified. If Congress were to enact 
any of these, the required motor fuels tax increase would be smaller 
than 2 cents per year. ARTBA supports the options listed in the table. 
Increasing the truck use taxes would also be an option, but ARTBA has 
not examined the potential revenue effect. ARTBA supports the current 
policy of financing Federal highway investment through fees levied on 
highway users, including the truck use taxes. As the table makes clear, 
however, it will be impossible to increase funding for highway 
investment during the next 6 years without additional revenues. ARTBA's 
``Two Cents Makes Sense'' proposal would fund the Federal highway 
program at a level that would meet the nation's highway investment 
needs during the next 6 years at the lowest cost to America's highway 
users, and we hope Congress will seriously consider it.
  Responses William Buechner to Additional Questions from Senator Reid
    Questions 1. Both your organization and the American Society of 
Civil Engineers propose raising the Federal gas tax to provide 
additional infrastructure investment. This hearing has made it clear 
that additional funding is necessary to improve the conditions and 
performance of our transportation system. As an economist can you 
elaborate on the economic benefits of increasing the level of 
investment in our highway, transit and rail infrastructures?
    Response. There are a number of ways increased investment in 
transportation infrastructure would benefit the American economy.
    Jobs.--According to the Federal Highway Administration, each $1 
billion of Federal investment in highways supports approximately 47,500 
jobs throughout the U.S. economy. This includes onsite construction 
jobs, jobs in firms that provide products and services to highway 
contractors, jobs in Federal, State and local DOTs, and jobs induced in 
other parts of the economy as the resulting wage and salary income is 
spent for household goods and services. ARTBA has calculated that 
transportation construction annually supports more than 2.5 million 
jobs in the construction and supplier industries, and probably well 
over 4 million jobs when all of the induced jobs in other sectors of 
the economy are included. An increase in Federal investment in highway, 
transit and rail infrastructure would generate new jobs and help 
strengthen the recovery from the recent economic downturn. Standard and 
Poor's economists calculate that investment in infrastructure and 
defense procurement are the most stimulative forms of fiscal policy, 
including tax cuts.
    Productivity.--The level of mobility provided by the U.S. 
transportation system to individuals and freight movements has a 
significant impact on the productivity and growth of the U.S. economy. 
Today, the nation's highways are its warehouse. During the 1980's and 
1990's, the adoption of just-in-time delivery by manufacturing firms 
allowed billions of dollars of financial resources that had been tied 
up in inventories to be invested in more productive uses, which 
contributed to the strong growth of the economy during those decades. 
Growing congestion in the U.S., both urban and rural, however, impedes 
the use of just-in-time delivery. If firms are forced to protect their 
production schedules by warehousing inputs and products, this process 
would be reversed, which would negatively affect productivity. Many 
service-producing industries also depend on mobility to get employees 
where they are needed. Time spent maneuvering employees through and 
around congestion is diverted from more productive uses and economic 
growth.
    Congestion costs.--Congestion also costs households billions of 
dollars in wasted time and motor fuel, and impairs the quality of life. 
The annual report on Congestion in America by the Texas Transportation 
Institute documents the growing cost of congestion to American 
households. If the Federal highway program is funded at a level that 
fails to address congestion, the problem will continue to worsen during 
the next 6 years and the costs will continue to grow.
    International competitiveness.--Improving the nation's 
transportation infrastructure and reducing transportation costs is 
critical to maintaining the nation's competitiveness in world markets. 
Other nations are well aware of this and have made significant 
improvements to their transportation systems to give their industries 
an edge. With the U.S. trade deficit growing each year, transportation 
investment becomes increasingly important to U.S. competitiveness, 
including investment in freight rail, water ports and intermodal 
connectors.
    Federal budget.--As pointed out earlier, each $1 billion of Federal 
investment in highways supports approximately 47,500 jobs. The average 
wage of highway construction workers is $812 per week, according to the 
Bureau of Labor Statistics, or about $42,000 per year. Workers in 
supplier industries, such as aggregates mining, asphalt and concrete 
production and equipment manufacturing, earn even more per year. Thus 
each $1 billion of Federal highway investment supports almost $2 
billion of family earnings, and probably much more. According to the 
Fiscal Year 2002 Budget of the President of the United States, the 
marginal tax rate on earnings is about 27 percent, include both the 
personal income tax and both halves of the social security tax. This 
means $1 billion of Federal highway investment generates about $540 
million of Federal income and social security tax receipts. The net 
budget cost of each $1 billion of Federal highway program funding is 
thus less than $500 million.
    Public health.--Each year, there are more than 42,000 highway 
traffic fatalities. According to the National Highway Traffic Safety 
Administration, more than 15,000 of these fatalities involve poor road 
conditions or out-of-date highway alignments. In addition, more than 
3,000,000 people are injured each year in highway crashes. The annual 
cost of motor vehicle crashes is over $230 billion, including lost 
workplace and household productivity, medical costs and property 
damage. Many of the fatalities and costs could be avoided by 
improvements in highway infrastructure, such as improving shoulders, 
widening and straightening lanes, installing median barriers and guard 
rails, and installing traffic signs and signals. Increasing Federal 
highway investment would be a proven way to save American lives.
                               __________
     Statement of William D. Ankner, Ph.D., Director, Rhode Island 
                      Department of Transportation
    Thank you for the opportunity to submit this statement on an issue 
that has very serious implications for the quality of our highway 
infrastructure, and which I understand has already been discussed in 
previous hearings before this committee. I speak of the issue of truck 
size and weight and of the disproportionate amount of pavement and 
bridge damage caused by heavy trucks--and more specifically, of the 
huge increases in infrastructure damage we would experience if current 
truck size and weight limits are relaxed, as some are advocating.
    Since 1996 I have had the honor of serving as Director of the Rhode 
Island Department of Transportation. I am also a past president of the 
Northeast Association of State Transportation Officials, a past member 
of the Executive Committee of the American Association of State Highway 
and Transportation Officials (AASHTO), and a member of the 
Transportation Research Board (TRB) Executive Committee.
    I understand the compelling pressures at issue in the debate over 
truck sizes and weights, with some arguing forcefully that rapidly 
growing demand for freight transport necessitates legislation to permit 
the operation of longer and heavier trucks on our Interstate Highways.
    While I appreciate the economic arguments for larger and heavier 
trucks, I could not disagree more strongly with the conclusion. While 
the advocates of lifting the current restrictions can cite studies, 
including a recent TRB report, which appear to support their arguments 
in favor of increased truck sizes and weights, other more authoritative 
studies and reports--and my own long experience--convince me that if 
anything, Congress should strengthen the existing limits.
    The trucking industry has been masterful in shaping this issue. The 
incremental increases have been just enough for them to argue that 
their impact on safety and the infrastructure is similar to current 
conditions. The problem is that the total culmination of the increases 
poses a serious threat to safety and the infrastructure, particularly 
the aging and design-deficient infrastructure in the Northeast and 
Middle Atlantic States. Congress needs to examine this issue not solely 
on the basis of what these impacts are compared to current conditions, 
but where we have come from and where we want to go. In my judgment, 
the size and weight where we have come from has exceeded the structural 
and operational capacity of the highway system in Rhode Island. 
Similarly, I believe that longer and heavier trucks should not be our 
future in the Northeast.
    There are three central reasons for maintaining or strengthening 
current Federal limits on truck size and weight: bigger trucks would 
cause massive increases in infrastructure damage, particularly to 
bridges; they do not fully pay for the damage they cause; and they 
would make our highways more dangerous both for motorists and for truck 
drivers.
    Heavy trucks are already responsible for a disproportionate amount 
of pavement damage: at the current Federal limit of 80,000-pounds, a 
five-axle truck does as much damage as 9,600 cars. Adding weight to the 
same truck will sharply increase pavement damage: at 100,000 pounds the 
truck will do as much damage as 27,000 cars. (Calculations are based on 
AASHTO's Road Test.) Bigger trucks will also cause a massive increase 
in bridge costs. According to the 2000 US Department of Transportation 
Comprehensive Truck Size and Weight Study (US DOT Study), national 
operations of longer combination vehicles--long double and triple 
trailer trucks--would cost the country $319 billion ($53 billion in 
capital costs and $266 billion in user delay costs). (US DOT Study, 
August 2000, Vol. III, p. VI-12.)
    Even without building new highways, the US will need to spend 
$1.132 trillion per year simply to maintain the condition of the 
current bridge and highway system. (US DOT, 1999 Status Report on the 
Nation's Highways, Bridges, and Transit, Exhibit 7-1, p. 7-5.) The 
infrastructure damage and new costs that would result from a weakening 
of current truck size and weight limits would add considerably to this 
already staggering figure.
    In Rhode Island, 60 percent of our bridges are already structurally 
deficient or functionally obsolete. For fiscal year 2003, we are faced 
with $110 million of bridge and highway restoration that we are unable 
to undertake. Most of my counterparts in other States are also 
suffering from a lack of funding to cover necessary road and bridge 
repairs.
    Moreover, bigger trucks substantially underpay their share of 
highway costs, according to the Federal Highway Cost Allocation Study. 
For example, a five-axle truck registered at 80,000 pounds pays only 80 
percent of its highway costs. Long double trailer trucks and triples 
pay 70 percent. Heavier trucks pay even less of their costs. For 
example, one 100,000-pound five-axle truck pays 40 percent of its 
costs. (2000 Addendum to the Federal Highway Cost Allocation Study, 
unpublished Table 3.)
    In addition to these issues of infrastructure damage and cost 
underpayment, bigger trucks will be less safe.
    In the Comprehensive Truck Size and Weight Study, USDOT compared 
the safety of multi-trailer trucks to single trailer trucks. It found 
that multi-trailer trucks ``could be expected to experience an 11 
percent higher overall fatal crash rate than single-trailer 
combinations.'' (p. VIII-5.) Heavier single trailer trucks will also be 
more dangerous. According to the University of Michigan Transportation 
Research Institute, there is a strong statistical link between higher 
weights and a greater risk of fatalities. (US DOT Study, Phase 1, 
Working Paper 1 & 2, 1995, p. 37.) One reason is that heavier singles 
will tend to have a higher center of gravity, making them more likely 
to roll over. (US DOT Study, p. VIII-8.)
    For all of these reasons, I believe it is imperative that Congress 
retain jurisdiction over truck size and weight on the Federal System. 
Proponents of bigger trucks have asked for a ``State option'' plan 
whereby the States would be able to set their own truck size and weight 
limits on the most important part of the Federal system: the Interstate 
Highways. But any law regarding the national transportation system 
should have national oversight.
    This State option ploy by the industry has been tried before. The 
trucking industry is only interested in a ``State option'' so that it 
can then come back and show how harmful States that have not increased 
size and weight are to the economy and interstate commerce, and unfair 
to the trucking industry that has invested 100's of millions of dollars 
in new equipment that they cannot optimally use. The industry will then 
call upon Congress to use the Interstate Commerce Clause to correct the 
inequities and allow the bigger trucks. They did with doubles. They are 
trying to do it again.
    Congress should reject any proposals to increase truck size and 
weight. But Congress should also take it one step further. There are 
loopholes in the current law that allow trucks to get longer and 
heavier, and weights on the National Highway System (NHS) are being 
ratcheted up. The Safe Highways and Infrastructure Preservation Act, 
H.R. 3132, which has been introduced in the House of Representatives, 
would put a stop to these backdoor increases. The bill would freeze 
truck size and weight limits on the National Highway System and close 
loopholes in the law that allow longer and heavier trucks. The Senate 
should consider a similar measure.
    In Rhode Island as elsewhere in the Nation, highway users have 
grown all too accustomed to the delays and hazards that have become 
commonplace on our aging highway system. As the committee prepares to 
reauthorize the Transportation Equity Act for the 21st Century and to 
reinvest in maintaining and improving the highway infrastructure, I 
hope you will also maintain or strengthen the current, common sense 
limitations on truck size and weight.
    1. Cambridge Systematics, Freight Impacts on Ohio's Roadway System, 
2002, ES 4.
    43 Council of Economic Advisors, the President's ``FY 2003 Budget 
of the U.S. Government.''

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