[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
                  FINANCING INFRASTRUCTURE INVESTMENTS

=======================================================================

                               (110-136)

                             JOINT HEARING

                               BEFORE THE

                        COMMITTEE ON THE BUDGET

                                and the

             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                              MAY 8, 2008

                                HEARING

                               BEFORE THE

             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                             JUNE 10, 2008

                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________


                       Printed for the use of the
             Committee on Transportation and Infrastructure


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                        COMMITTEE ON THE BUDGET

             JOHN M. SPRATT, Jr., South Carolina, Chairman
ROSA L. DeLAURO, Connecticut,        PAUL RYAN, Wisconsin,
CHET EDWARDS, Texas                    Ranking Minority Member
JIM COOPER, Tennessee                J. GRESHAM BARRETT, South Carolina
THOMAS H. ALLEN, Maine               JO BONNER, Alabama
ALLYSON Y. SCHWARTZ, Pennsylvania    SCOTT GARRETT, New Jersey
MARCY KAPTUR, Ohio                   MARIO DIAZ-BALART, Florida
XAVIER BECERRA, California           JEB HENSARLING, Texas
LLOYD DOGGETT, Texas                 DANIEL E. LUNGREN, California
EARL BLUMENAUER, Oregon              MICHAEL K. SIMPSON, Idaho
MARION BERRY, Arkansas               PATRICK T. McHENRY, North Carolina
ALLEN BOYD, Florida                  CONNIE MACK, Florida
JAMES P. McGOVERN, Massachusetts     K. MICHAEL CONAWAY, Texas
NIKI TSONGAS, Massachusetts          JOHN CAMPBELL, California
ROBERT E. ANDREWS, New Jersey        PATRICK J. TIBERI, Ohio
ROBERT C. ``BOBBY'' SCOTT, Virginia  JON C. PORTER, Nevada
BOB ETHERIDGE, North Carolina        RODNEY ALEXANDER, Louisiana
DARLENE HOOLEY, Oregon               ADRIAN SMITH, Nebraska
BRIAN BAIRD, Washington              JIM JORDAN, Ohio
DENNIS MOORE, Kansas
TIMOTHY H. BISHOP, New York
GWEN MOORE, Wisconsin
                                 ------                                

             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                 JAMES L. OBERSTAR, Minnesota, Chairman
NICK J. RAHALL, II, West Virginia,   JOHN L. MICA, Florida
    Vice Chair                       DON YOUNG, Alaska
PETER A. DeFAZIO, Oregon             THOMAS E. PETRI, Wisconsin
JERRY F. COSTELLO, Illinois          HOWARD COBLE, North Carolina
ELEANOR HOLMES NORTON, District of   JOHN J. DUNCAN, Jr., Tennessee
    Columbia                         WAYNE T. GILCHREST, Maryland
JERROLD NADLER, New York             VERNON J. EHLERS, Michigan
CORRINE BROWN, Florida               STEVEN C. LaTOURETTE, Ohio
BOB FILNER, California               FRANK A. LoBIONDO, New Jersey
EDDIE BERNICE JOHNSON, Texas         JERRY MORAN, Kansas
GENE TAYLOR, Mississippi             GARY G. MILLER, California
ELIJAH E. CUMMINGS, Maryland         ROBIN HAYES, North Carolina
ELLEN O. TAUSCHER, California        HENRY E. BROWN, Jr., South 
LEONARD L. BOSWELL, Iowa                 Carolina
TIM HOLDEN, Pennsylvania             TIMOTHY V. JOHNSON, Illinois
BRIAN BAIRD, Washington              TODD RUSSELL PLATTS, Pennsylvania
RICK LARSEN, Washington              SAM GRAVES, Missouri
MICHAEL E. CAPUANO, Massachusetts    BILL SHUSTER, Pennsylvania
TIMOTHY H. BISHOP, New York          JOHN BOOZMAN, Arkansas
MICHAEL H. MICHAUD, Maine            SHELLEY MOORE CAPITO, West 
BRIAN HIGGINS, New York                  Virginia
RUSS CARNAHAN, Missouri              JIM GERLACH, Pennsylvania
JOHN T. SALAZAR, Colorado            MARIO DIAZ-BALART, Florida
GRACE F. NAPOLITANO, California      CHARLES W. DENT, Pennsylvania
DANIEL LIPINSKI, Illinois            TED POE, Texas
NICK LAMPSON, Texas                  DAVID G. REICHERT, Washington
ZACHARY T. SPACE, Ohio               CONNIE MACK, Florida
MAZIE K. HIRONO, Hawaii              JOHN R. `RANDY' KUHL, Jr., New 
BRUCE L. BRALEY, Iowa                    York
JASON ALTMIRE, Pennsylvania          LYNN A WESTMORELAND, Georgia
TIMOTHY J. WALZ, Minnesota           CHARLES W. BOUSTANY, Jr., 
HEATH SHULER, North Carolina             Louisiana
MICHAEL A. ACURI, New York           JEAN SCHMIDT, Ohio
HARRY E. MITCHELL, Arizona           CANDICE S. MILLER, Michigan
CHRISTOPHER P. CARNEY, Pennsylvania  THELMA D. DRAKE, Virginia
JOHN J. HALL, New York               MARY FALLIN, Oklahoma
STEVE KAGEN, Wisconsin               VERN BUCHANAN, Florida
STEVE COHEN, Tennessee               ROBERT E. LATTA, Ohio
JERRY McNERNEY, California
LAURA A. RICHARDSON, California
ALBIO SIRES, New Jersey
VACANCY


                                CONTENTS

                                                                   Page

Proceedings of:

  May 8, 2008....................................................     1
  June 10, 2008..................................................   125

                              May 8, 2008

Summary of Subject Matter........................................     v

                               TESTIMONY

Dalton, Patricia A., Managing Director, Physical Infrastructure 
  Team, Government Accountability Office.........................    49
Orszag, Peter, Director, Congressional Budget Office.............     6

          PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Altmire, Hon. Jason, of Pennsylvania.............................   100
Carnahan, Hon. Russ, of Missouri.................................    96
Costello, Hon. Jerry F., of Illinois.............................    96
Mitchell, Hon. Harry E., of Arizona..............................    99
Tsongas, Hon. Niki, of Massachusetts.............................    99

             PREPARED STATEMENTS SUBMITTED BY THE WITNESSES

Orszag, Peter....................................................     8
Dalton, Patricia A...............................................    52

                       SUBMISSIONS FOR THE RECORD

.................................................................
DeLauro, Hon. Rosa L., a Representative in Congress from the 
  State of Connecticut, questions submitted to Ms. Dalton and Dr. 
  Orszag.........................................................    97
.................................................................
Walz, Hon. Timothy J., a Representative in Congress from the 
  State of Minnesota, questions submitted to Ms. Dalton and Dr. 
  Orszag.........................................................   100
Orszag, Peter, Director, Congressional Budget Office, responses 
  to questions for the record....................................   100
Dalton, Patricia A., Managing Director, Physical Infrastructure 
  Team, Government Accountability Office, responses to questions 
  for the record.................................................   102

                             June 10, 2008

Summary of Subject Matter........................................   106

                               TESTIMONY

Blumenauer, Hon. Earl, a Representative in Congress from the 
  State of Oregon................................................   129
Calvert, Hon. Ken, a Representative in Congress from the State of 
  California.....................................................   132
DeLauro, Hon. Rosa, a Representative in Congress from the State 
  of Connecticut.................................................   127
Ehrlich, Everett, President, ESC Company.........................   160
Ellison, Hon. Keith, a Representative in Congress from the State 
  of Minnesota...................................................   130
Florian, Mark, Managing Director, Goldman, Sachs and Company.....   160
Penner, Rudolph, Senior Fellow, the Urban Institute..............   160
Schwartz, Bernard, Chairman and Chief Executive Officer, BLS 
  Investments LLC................................................   160

          PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Blumenauer, Hon. Earl, of Oregon.................................   177
Calvert, Hon. Ken, of California.................................   183
Carnahan, Hon. Russ, of Missouri.................................   185
Costello, Hon. Jerry F., of Illinois.............................   186
Cummings, Hon. Elijah E., of Maryland............................   189
DeLauro, Hon. Rosa L., of Connecticut............................   196
Ellison, Hon. Keith, of Minnesota................................   202
Johnson, Hon. Eddie Bernice, of Texas............................   206
Mitchell, Hon. Harry E., of Arizona..............................   208

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

Ehrlich, Dr. Everett M...........................................   209
Florian, Mark....................................................   217
Penner, Rudolph G................................................   223
Schwartz, Bernard L..............................................   235

                       SUBMISSIONS FOR THE RECORD

Schwartz, Bernard, Chairman and Chief Executive Officer, BLS 
  Investments, LLC, ``Why Prosperity Requires Public Investment''   242

                        ADDITIONS TO THE RECORD

American Society of Civil Engineers, written statement...........   249
Commission on Public Infrastructure, Center for Strategic and 
  International Studies, Felix G. Rohatyn, Co-Chair, along with 
  Warren Rudman, Co-Chair, written statement.....................   256
National Association of Water Companies, written statement.......   260
Water Resources Coalition; Brian Pallasch, Co-Chairman, American 
  Society of Civil Engineers; Marco Giamberardino, Co-Chairman, 
  Associated General Contractors; written statement..............   266

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                  FINANCING INFRASTRUCTURE INVESTMENTS

                              ----------                              


                         THURSDAY, MAY 8, 2008

                      House of Representatives,    
                               Committee on the Budget,    
             Committee on Transporation and Infrastructure,
                                                    Washington, DC.
    The Committees met, pursuant to call, at 10:09 a.m., in 
room 2167, Rayburn House Office Building, Hon. John Spratt 
[chairman of the Committee on the Budget] presiding.
    Present for Committee on the Budget: Representatives 
Spratt, Blumenauer, Scott, Baird, Ryan, Simpson, Alexander, and 
Smith.
    Present for Committee on Transportation and Infrastructure: 
Representatives Oberstar, Taylor, Tauscher, Schmidt, Latta, and 
Sires.
    Chairman Spratt. Despite the numerous votes we are about to 
have today, I think it behooves us to begin the hearing. Before 
turning to the two witnesses we have today for their testimony, 
let me ask unanimous consent that the committee agree to the 
following rules to facilitate this hearing. First of all, for 
the purpose of questioning witnesses, we will alternate between 
the two committees beginning with the Budget Committee 
Democrats, followed by the Budget Committee Republicans and 
then proceed to the Transportation and Infrastructure Committee 
Democrats, Republicans. As usual, members who were present at 
the beginning of this hearing will be recognized by seniority, 
and the members arriving later will be recognized in the order 
that they appear. Members will have 5 minutes to ask questions, 
to make statements.
    After all members have had a chance to address the 
witnesses, members may follow up with an additional 5 minutes 
if time permits. All members will be allowed to submit an 
opening statement for the record. Those members who do not have 
the opportunity to ask questions will be given 14 days to 
submit questions for the record. And the written testimony of 
all witnesses will be made part of the record so that they may 
summarize their testimony to allow time for questions and 
answers. Is there any objection to those rules and procedures 
before we begin this hearing? Hearing none, so ordered.
    I told Mr. Oberstar that I felt a bit self-conscious 
sitting in his chair here to which he has long established the 
right. I have a feeling we are being set up for something on 
the Budget Committee by the gracious hospitality that they have 
extended to us, but we are delighted to meet with them today. I 
look forward to this hearing. This is a joint hearing of the 
Committee on the Budget and the Committee on Transportation and 
Infrastructure. Today's hearing is the first joint hearing, to 
the best of my knowledge, held by these two committees.
    Historically, our committees have not always seen eye to 
eye. And I hope this hearing signals the commitment to work 
together on infrastructure issues because they are vitally 
important. Today we will put our budget and infrastructure 
experience together to explore how we can fund or finance 
capital projects in the Federal budget. Our witnesses include 
Dr. Peter Orszag, Director of the Congressional Budget Office, 
and Ms. Patricia Dalton, managing director of GAO's physical 
infrastructure team. Public infrastructure is vital to us and 
to our economy, whether we are talking about highways or mass 
transit or rail or aviation or drinking water or wastewater 
treatment. Despite their vital importance, infrastructure 
investments have not kept pace with repair, maintenance and the 
need for expansion and replacement.
    As a result, there is a growing interest in how we can 
maintain the appropriate level and the proper kind of 
infrastructure investment. The Transportation and 
Infrastructure Committee understands our infrastructure needs, 
after all, it is their charter. The Budget Committee wants to 
better understand ways that we can fund or finance such 
investments and how we can evaluate the assorted options. The 
Federal support for infrastructure usually comes in the form of 
grants embodied in the authorizing legislation and funded 
during the appropriations process. But there are numerous means 
of financing. Some are described as banks, some as revolving 
funds. Some increase borrowing or create new forms of 
borrowing. Some establish entities to manage or operate such 
projects.
    All of these proposals, along with a new highway bill 
looming on the horizon in the not too distant future, give 
these two committees a chance to put our heads together. And 
putting these two committees together, there are a lot of 
heads. Maybe a third of the House, Mr. Oberstar. We want to 
understand the budgetary implications, the amount and manner by 
which we increase our capital investments. We want to know 
under what scenarios it is appropriate to consider investment 
mechanisms other than direct Federal financing, of any policy 
tradeoffs of one mechanism over the other. We need to 
understand the new proposals for financing infrastructure 
improvements, keeping in mind there is never, in the end, such 
a thing as a free lunch. We hope this hearing will be a 
starting point for a longer and larger conversation about how 
to fund and finance infrastructure investments and how to 
evaluate such proposals. I now turn to Chairman Oberstar for 
his opening statement.
    Mr. Oberstar. Thank you very much, Mr. Chairman. Welcome to 
our committee. I am glad to have you here and I am glad to be, 
once again, part of the Budget Committee, which I served on for 
my limited 6 years in the 1980s and into 1990. And I want to 
welcome the gentleman from Wisconsin, Mr. Ryan, who represents 
three of the most important constituents in the United States, 
my granddaughters in Kenosha, Wisconsin.
    And as I said to him, we could be having this meeting at 
Tenuta's Deli in Kenosha, a wonderful welcoming place. But I 
want to welcome everyone back to the subject of capital 
budgeting. Let me just read a few brief highlights--13 percent 
of the Nation's aging dams are classified as ``high hazard.'' 
Municipal water systems need $100 billion to keep up with 
demand. Nearly 1 of every 2 miles of paved highways needs 
resurfacing or reconstruction.
    Half of America's bridges are too old, too weak to 
adequately and safely handle today's traffic; 56 of the 184 
principal locks in the Nation's inland waterways will require 
major repairs over the next 20 years. Deepwater ports have 
insufficient capacity and are stifling trade. That from a 
report by the Subcommittee on Economic Development, which I 
chaired in 1982, a report that my then-colleague and later 
Chair of the House Government Reform Committee, Bill Clinger 
from Pennsylvania, spent an enormous amount of time working on, 
developing the hearings. We spent months crafting this report.
    We concluded in our recommendations to the committee and to 
the House the adoption of a capital investment budget is a move 
toward a prospective public policy, rather than the 
retrospective action that is too often indicative of public 
works decisions. A capital budget would provide important 
information not available to the Congress and the executive 
branch so that they can then make capital decisions weighing 
the evidence, evaluating resources and projecting future needs. 
That is what we need.
    In the course of that hearing, there was an extraordinary 
moment when David Stockman turned around and said, yes, I think 
a capital budget would be a good thing. But as an annex to the 
Federal budget, not as an integral part of it. Now, those 
figures I read off from 1982, you can say that today, 260 of 
the Nation's inland waterway locks are inadequate to handle the 
capacity. Today it takes 820 hours round trip from Clinton, 
Iowa to New Orleans to export grain from America's heartland. 
That is 3 weeks travel one way. We have to do better than that, 
because the locks are 600 feet long and the barge tows are 
1,200 feet long, and you have to split them in half, send 600 
feet through--the next 600 feet through tie them together and 
then go onto the next of those five inadequate locks.
    And on the Illinois-Ohio river system, they need an 
additional 12 each--1,200 foot lock--we passed that legislation 
through this committee, through the House, by an overwhelming 
vote, overrode a presidential veto. Yet not a dime, not a 
single project entered into the President's budget for the 
coming fiscal year.
    I don't want to go back and update all these figures. But 
just on bridges we said half. That meant 73,784 structurally 
deficient bridges in the U.S. that are on the verge of 
collapse. We need to invest in America. On Monday, I 
participated as the keynote speaker for the European transport 
ministers' meeting in Slovenia, the land of half of my 
ancestors, to talk about our investment needs in infrastructure 
in waterways, highways, airways, railways and ports and to 
exchange with the European ministers on their plan. This is 
their plan--the Trans-European Transport Network (TEN-T).
    But this plan was formally presented to the council of 
ministers, all 27 of them, yesterday, by Jacques Barrat, who is 
the European Union Transport Commissioner. The TEN-T Plan would 
provide $350 billion over 10 years for highway, railway, high-
speed passenger, high-speed rail, ports and lockage systems 
that will link the Atlantic Ocean through the English Channel 
to the Black Sea, to the Seine River, to the Rhine, to the 
Danube and to the Black Sea to link with a water highway. They 
already ship enormous amounts of goods. $350 billion. They have 
every one of their priority projects listed page by page, 
process by process, funding source by funding source.
    We don't have that kind of capital budgeting. We need to do 
that. Some say it will be too much money, it will be too big a 
challenge. But if we don't know what the picture is, then how 
can you prioritize? How can you make choices? We have to make 
those choices. They are tough choices to make, of course. But 
that is our responsibility as Members of Congress.
    So I plead to develop a capital budgeting process. I think 
we need to have a roadmap, a water map, an airways map, a 
railways map as Europe is doing or we will fall behind. Just 
one final observation. In 1989, China had 168 miles of 
interstate quality highway. Today, they have 22,500 miles and 
in 10 years they will have 55,000 miles. With their investment, 
they have reduced the travel time by truck from Beijing to Hong 
Kong from 55 hours to 25 hours. Nowhere in America, with all of 
our investments, have we reduced truck travel time by 30 hours 
on any stretch of roadway. We have increased it by that amount 
of time. They have reduced the travel time by truck from 
Beijing to Shanghai from 35 hours to 14 hours. We have not made 
those kinds of investments and improvements. If we are going to 
compete in this world economy, then we have to make those 
investments. Thank you very much.
    Chairman Spratt. Thank you, Mr. Oberstar. Mr. Ryan.
    Mr. Ryan. Thank you, Chairman Spratt. And I also want to 
thank Chairman Oberstar for his gratitude and his kind 
invitation to bring us here. I hope I get invited back after I 
read my opening statement. I also want to thank our witnesses 
for joining us today, Director Orszag and Patricia Dalton, 
managing director of GAO's physical infrastructure team, 
welcome. And I look forward to your testimony. Before I share 
my statement on the subject of this hearing, I am going to take 
just a brief moment to talk about the transportation issue 
first on the minds of the American people. And I hear the bell, 
so I realize we have some time constraints here. And the issue 
that is first on the minds of the American people is clearly 
the skyrocketing price of gasoline.
    One of the things almost certain to come up today as we 
look at alternative financing mechanisms for public 
infrastructure is the possibility of increasing the gas tax. I 
think that is the last thing we want to do at this time. We 
need to be looking at ways of reducing the gas price burden on 
the American people. And that is why today I will introduce 
legislation that will suspend the 18.4 cent tax on gasoline for 
the summer and give American families at least a little relief. 
I know there is a concern, probably a lot in this room about 
the impact this proposal will have on the highway trust fund.
    So my bill holds the highway trust fund harmless and it 
goes a step further. It will actually shore up the trust fund 
by eliminating its 2009 shortfall. This may sound impossible, 
but it is not. We can address both these high priority issues, 
relief from high gas prices and needed infrastructure 
improvements. And we can do it without costing the taxpayers a 
single dime. We will do it by addressing a third issue that is 
also on the list of the American people's concerns and that is 
Congress' pork-barrel spending. If Congress will agree to give 
up earmarks for just one year as laid out in the Kingston-Wolf 
proposal, we could save $14.8 billion. This is a proposal that 
proposes a bipartisan commission to make sure that we have a 
system that is transparent and accountable to the American 
people who have lost faith in the way we spend their dollars. 
We could use that money to give taxpayers a little relief at 
the pump for the summer and still have more than enough money 
left over to shore up the trust fund in 2009, something that I 
know is a major priority for the transportation and 
infrastructure committee. Now, while my bill takes care of the 
highway trust fund's short-term financing problem, there is--
there is a longer-term issue on highway financing and that is 
what we are here to talk about today, clearly public 
infrastructure, from roads and bridges to dams and sewers is 
vitally important to the growth and productivity of our economy 
and to our way of life. There are two issues before us. First, 
how do we ensure Federal funding is allocated to high priority 
infrastructure that has a high benefit cost ratio. And second, 
what is the best means of financing this activity? Today we are 
here to discuss this second issue, what role, if any, 
alternative financing mechanisms can or should play in the 
funding of Federal investment in public infrastructure.
    In the past, the Budget Committees have concluded, as have 
CBO and GAO, that these alternative financing mechanisms from 
sale-leasebacks to third-party financing to tax credit bonds to 
be a more expensive, less transparent way to acquire and use 
capital assets when compared to conventional appropriations in 
treasury borrowing. And as Dr. Orszag notes in his testimony, 
there is no free money here. It is pay me now or pay me later. 
Regardless of what kind of mechanisms we use, alternative or 
otherwise, the bills still have to be paid.
    And while we have many worthy demands of Federal spending, 
the American taxpayers and thus Congress don't have a limitless 
supply of money to fund them. So Congress has got to set 
priorities so we can ensure that our most critical public 
infrastructure projects get every bit of funding they need in 
the most cost effective way.
    Finally, as Dr. Orszag knows and has testified before the 
Budget Committee, the question of how we might finance extra 
spending on infrastructure or anything else will soon be moot 
if we don't get to the business of reforming our entitlement 
programs. If we continue to push off entitlement reform, these 
programs will make most of our funding decisions for us. 
Because after paying for them, there simply won't be enough 
money left in the budget to even finance our highest domestic 
priorities. This will take place regardless of what financing 
methods we use for these other programs.
    Federal infrastructure makes an important contribution to 
our economy. The chairman is right to point out the needs for 
America in the future. And I hope we can find the best way to 
address these key priorities in a transparent and a responsible 
way. And once again, I thank every one for being here. I thank 
you, chairman, for your invitation. And I look forward to the 
views of Dr. Orszag and Ms. Dalton.
    Chairman Spratt. Mr. Mica, the ranking member of this 
committee is not here, I believe. Mr. Oberstar, Mr. Ryan, if it 
is agreeable to you, I thought we would start with Dr. Orszag, 
give him 5 minutes and that will leave us about 5 minutes to 
get to the floor. We have got 6 votes, nearly an hour on the 
floor. And I beg your pardon, but we didn't set the schedule. 
Let's go ahead and see if we can't make use of what time is 
available. Dr. Orszag, we will give you 5 minutes. But you can 
take your time when we come back to make sure you have a full 
presentation of your testimony.

   STATEMENT OF PETER ORSZAG, DIRECTOR, CONGRESSIONAL BUDGET 
                             OFFICE

    Mr. Orszag. Thank you very much, Mr. Spratt. I will try to 
be brief in this initial period. Mr. Oberstar, Mr. Ryan, 
members of the two committee, thank you for having me this 
morning. Growing delays in air travel and surface 
transportation, bottlenecks in transmitting electricity, 
inadequate school facilities all suggest that some targeted 
additional infrastructure spending would be economically 
justifiable.
    First, let's get some facts. As the first slide shows, the 
Nation spends about $400 billion a year on infrastructure. And 
I tried to give you a breakdown. I don't know if you can see 
that of that $400 billion. Of that, the Federal Government 
provides about $60 billion. This is from 2004. And Federal 
Government spending is very concentrated, particularly in 
highways.
    So $30 billion of the $60 billion or so in Federal spending 
on infrastructure is dedicated towards highway spending. State 
and local governments spend a disproportionate share of their 
money in other areas. You see that on utilities and other. And 
similarly, the private sector spending on infrastructure is 
disproportionately concentrated in things like electricity 
generation and transmission.
    The second slide that I have may be of more interest to 
people. For the first time, the Congressional Budget Office has 
gone through the various studies that exist on what would be 
needed to maintain current service levels from our 
infrastructure and what could be economically justifiable; that 
is, what projects could generate larger benefits than costs. 
And let me focus, for example, on highways. We currently spend 
about $67 billion a year on highway spending. The Federal 
Highway Administration has estimated that it would cost about 
$79 billion a year to maintain current levels of service. And 
so an additional, let's say, $10 to $12 billion a year would be 
required to maintain current levels of service and that as much 
as $132 billion a year could be justified in terms of benefits 
exceeding costs. So that would be an extra roughly $60 billion 
or so.
    In aggregate for transportation infrastructure, additional 
spending to maintain current levels of spending--current levels 
of service would amount to perhaps $20 billion a year and 
perhaps as much as $80 billion a year could pass an 
economically justifiable test. Now, it is important to remember 
that although the economic rationale for some additional 
infrastructure spending is strong, it depends very specifically 
on the individual projects. Some projects generate large 
additional benefits, others not so much.
    So to say that these levels of spending may be economically 
justifiable is not to say that just pumping that amount of 
money into infrastructure would generate benefits. It depends 
very sensitively on which specific projects are chosen or where 
the money is directed. It is also the case that these estimates 
are dependent on and sensitive to what else is happening. And 
in particular, if we priced and used the existing 
infrastructure that we have more efficiently, these numbers 
would go down.
    So, for example, the Federal Highway Administration has 
suggested that widespread implementation of congestion pricing 
would reduce investment needed to maintain the current highway 
system by $20 billion, significantly reducing the necessary 
investments that we are showing there. Fourth, I want to note 
that the existence of additional economically justifiable 
investments does not determine who should pay for it. And in 
general, the benefits principle suggests that Federal taxpayers 
are often the least efficient source for financial support of 
an infrastructure investment after the direct beneficiaries of 
the investment and local and State taxpayers. Even when Federal 
support for a given type of infrastructure is justified in 
principle, implementation problems may make it undesirable in 
practice. GAO for example, found that States offset roughly 
half of the increase in Federal highway grants between 1982 and 
2002 by reducing their own spending and that the rate of 
substitution increased during the 1980s.
    Let me just finally say in my final 30 seconds that I think 
there is a lot that the Federal Government could be doing to 
better utilize and make more efficient the support that we 
already provide for infrastructure. My testimony goes through 
the inefficiencies in the current tax subsidies for tax exempt 
State and local bonds and ways that that could be made more 
efficient. And I would also note that we own a significant 
amount of property and other forms of infrastructure that could 
be much more efficiently managed and that could provide offsets 
or sources of funding for new investments in things like 
highways. Thank you very much, Mr. Chairman.
    [The statement of Peter Orszag follows:]

            Prepared Statement of Peter R. Orszag, Director,
                      Congressional Budget Office



















































































    Chairman Spratt. We will recess----
    [Recess.]
    Chairman Spratt. We will let you proceed with your 
testimony.
    Mr. Orszag. I thought I was done, Mr. Chairman.
    Chairman Spratt. You are completed?
    Mr. Orszag. For now, yeah, sure.
    Chairman Spratt. Okay. Ms. Dalton, we are glad to have you 
and we look forward to your testimony. As in the case of Dr. 
Orszag, your complete statement has been made a part of the 
record. You can summarize it as you see fit, but take your 
time.

 STATEMENT OF PATRICIA A. DALTON, MANAGING DIRECTOR, PHYSICAL 
     INFRASTRUCTURE TEAM, GOVERNMENT ACCOUNTABILITY OFFICE

    Ms. Dalton. Thank you, Chairman Spratt and members of the 
committee. I really appreciate the opportunity to testify on 
infrastructure financing issues today. These are important 
issues because the Nation's physical infrastructure is under 
strain raising a host of safety, security and economic 
concerns. My remarks today are going to focus on the challenges 
associated with our infrastructure, principles that we at GAO 
have identified to help guide efforts to address these 
challenges and existing and proposed options to fund 
investments in the nation's infrastructure. The challenges are 
numerous.
    For example, just by increases in transportation spending 
at all levels of government and improvements to the physical 
condition of highways and transit facilities over the past 10 
years, congestion has worsened and safety gains have leveled 
off. In addition, demand has outpaced the capacity of our 
Nation's surface transportation and aviation systems resulting 
in decreased performance and reliability. Water utilities 
nationwide are under increased pressure to make significant 
investments. Needs across the country are estimated to range 
between $485 billion and $1.2 trillion over the next 20 years. 
For example, about a third of our water utilities report that 
20 percent of their pipes are at the end of their useful life. 
Clearly these and other challenges need to be addressed. 
Additional investment is clearly warranted. However, calls for 
increased investment in infrastructure come at a time when 
traditional funding is increasingly strained and the Federal 
Government's fiscal outlook is worse than many may understand.
    Addressing these challenges is complicated by the breadth 
of the Nation's physical infrastructure which is owned, funded 
and operated by all levels of government and the private 
sector. Moreover, infrastructure policy decisions are 
inextricably linked with economic, environmental and energy 
policy concerns. Given these types of challenges and the 
Federal Government's fiscal outlook, it is clear that the 
Federal Government cannot continue with business as usual. 
Rather a fundamental re-examination of government programs, 
policies and activities is needed, including in the 
infrastructure area. Questions to be asked include what are our 
goals and are they tied to the national interest? What is the 
Federal role? Are performance and accountability built into the 
funding decisions? Are we using the right tools, the best 
tools? Is the approach physically sustainable? Funding for the 
Nation's infrastructure comes from a variety of Federal, State, 
local and private sources. As primary owners of the 
infrastructure, State and local governments and the private 
sector generally account for a larger share of infrastructure 
funding than the Federal government, however the Federal 
Government has played and continues to play an important role 
in funding infrastructure.
    Various existing funding approaches could be altered or new 
funding approaches could be developed to help fund investments 
in our infrastructure. These various approaches can be grouped 
into two categories for funding, taxes and user fees. An 
example of a tax is clearly the Federal fuel taxes on gasoline 
and jet fuel, which are attractive because they provide a 
relatively stable stream of revenue and their collection and 
enforcement costs are relatively low. Examples of user fees 
include air passenger facility charges or highway tolls. The 
concept underlying user fees; that is, users pay directly for 
the infrastructure they use is a long standing aspect of 
infrastructure programs.
    Financing strategies on the other hand can provide 
flexibility to bridge gaps when traditional pay as you go 
funding sources are scarce as they are nowadays. Financing 
mechanisms can create potential savings by accelerating 
projects to offset rapidly increasing construction costs and 
offer incentives for investment from State and local 
governments and from the private sector. The Federal Government 
currently offers several programs that provide infrastructure 
financing. For example, the TIFIA program provides loans for 
transportation projects of national significance. The 
government also has authorized a number of revolving funds that 
are used to dedicate capital to be loaned for qualified 
infrastructure projects.
    In general, loan dollars are repaid, recycled back into the 
revolving funds and subsequently reinvested in the 
infrastructure through additional loans. Such funds exist at 
both the Federal and State level. They include State 
infrastructure banks, the clean water State revolving fund and 
the drinking water State revolving fund. Several proposed bills 
would make additional financing mechanisms available for 
infrastructure. For example, the proposed Build America Bond 
Fund would provide $50 billion in new infrastructure funding 
through bonds. The National Infrastructure Development Act bill 
introduced by Ms. DeLauro, would establish a loan program 
administered by a government sponsored entity to fund a variety 
of infrastructure projects.
    A National Infrastructure Bank Act would provide an 
infrastructure bank at the national level as a revolving fund. 
Although each of these financing mechanisms has different 
merits, each mechanism in the final analysis is a form of debt, 
but ultimately must be repaid with interest. Furthermore, since 
the Federal Government's cost of capital is generally lower 
than that of the private sector, financing mechanisms such as 
bonding should be recognized as more expensive than full 
upfront funding.
    To help policymakers make explicit decisions about how much 
overall Federal spending should be devoted to investment, we 
previously have proposed establishing an investment component 
within the unified budget by recognizing the different effects 
of various types of Federal spending. An investment focus 
within the budget would provide a valuable supplement in the 
unified budget's consideration of macroeconomic issues.
    Moreover, with direct attention to the consequent choices 
within the budget under existing budget limitations, a level 
which is now not determined explicitly by policymakers but is 
simply the result of numerous individual decisions. In 
conclusion, various investment options have been and likely 
will be continued to be identified to repair, upgrade, expand 
and better use our Nation's infrastructure.
    Ultimately, Congress and other Federal policymakers will 
have to determine which option or more likely which combination 
of options best meets the needs of the Nation. There is no 
silver bullet. The suitability of any of these options will 
depend on the level of Federal involvement the policymakers 
decide in a given area. We look forward to continuing to work 
with the committees as you consider these various options. 
Thank you, Mr. Chairman.
    [The statement of Ms. Dalton follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chairman Spratt. Thank you very much. Just to start off the 
questions. We have had several hearings here at which the topic 
of capital budgeting has been raised as if it is a beginning at 
least towards more rational planning, more rational budgeting 
and funding of infrastructure projects. How would we take the 
Federal budget and recast it into capital and noncapital 
operating budgets? Is that a viable idea and does it accomplish 
anything that we couldn't do by other means just as easily?
    Mr. Orszag. I guess I will start on that, Mr. Chairman. As 
you know, we released a study this morning on a capital budget. 
And let's separate how you would do it from whether you would 
want to. With regard to whether you would want to, there are 
trade offs, but I would note it is awkward to move to accrual 
accounting, which is what a capital budget is, just for part of 
the budget. Most of the budget is cash based. And moving to 
accrual accounting for capital spending but not for entitlement 
spending or lots of other parts of the budget is an awkwardness 
and it raises the question of whether one should move to full 
accrual accounting. And on that, I would just note that there 
are lots of countries that have evaluated that question, 
decided not to do it and that also there are many countries 
that have not moved to a capital budget for precisely that 
reason, that it is awkward to do it just for this part of the 
budget. Secondly, that if you were going to do it, just for 
part of the budget, there is a lot of pressure that would come 
to bear on the definition of what capital is. So if you have 
one system for capital and another system for noncapital, it 
becomes very attractive to start labeling everything as capital 
and one would have to pay particular attention to the 
definition of capital spending.
    With regard to how you could do it, that is frankly not as 
complicated as the normative question of whether you should. It 
would involve simply taking out--moving away from a cash basis 
system of accounting for capital investments, however defined, 
instead of when you buy something for a dollar of capital, that 
currently is scored as a dollar. Instead, what would happen is 
that you would not score that dollar; but instead as the 
capital depreciated, there would be an allocation each year, a 
charge each year for the depreciation.
    Chairman Spratt. Ms. Dalton, do you have any observation 
about capital budgeting and what it might offer us?
    Ms. Dalton. The one additional point I would make is one 
thing to consider where I don't think it will work very well at 
the Federal level is that we don't own a lot of the 
infrastructure. We do fund a lot of it, but it is owned at the 
State and local levels. So therefore, when you are looking at 
capital budgeting, fundamentally it assumes that you are owning 
the infrastructure and from an accrual basis, you are using 
that asset over time and depreciating that. When the Federal 
Government doesn't own the infrastructure, you don't have that 
opportunity from an accounting standpoint.
    Chairman Spratt. Would human investments be considered--
could they be considered a capital investment as part of the 
capital budgeting?
    Mr. Orszag. Well, I think you're touching upon one of the 
tensions which is that the theory behind a capital budget is 
that there are things that we pay for today that have long-term 
economic benefits. It is traditionally interpreted as physical 
capital, but many of the same arguments would apply to research 
and development spending, to education spending. Some people 
would even argue things like----
    Chairman Spratt. Do you need a discrete or several discrete 
revenue streams or income streams that you can then attach, 
levy or tax in order to repay the front-end capital costs?
    Mr. Orszag. Not conceptually with regard to a capital 
budget. You do need that sort of thing with regard to other 
financing mechanisms that have been under discussion. But with 
regard to a capital budget by itself, you know, conceptually at 
least you could just say that amount of capital or that 
definition of capital is not counted when it is purchased but 
rather as it depreciates. And that can be independent of 
whether there are user fees or specific tax revenues that are 
tied to that capital.
    Chairman Spratt. And how would you treat the funding of 
capital projects differently from, say, other projects which is 
funded on a year-to-year basis? Would you borrow and then have 
an identified source of money to pay back the capital outlays?
    Mr. Orszag. Well, one of the consequences, again, would 
be--and maybe this is getting to your question--one of the 
consequences would be there would be more of a divergence than 
currently exists between the reported deficit and the amount of 
financing that the Federal Government would require. So if we 
went out and we purchased a dollar of investment goods or of 
capital goods and that was excluded from the budget, only the 
depreciation would be counted in future years, we would still 
need to finance that dollar in terms of borrowing or some other 
financing mechanism. And that would be another source of 
divergence between the reported deficit and the treasury's 
borrowing needs.
    Chairman Spratt. Ms. Dalton?
    Ms. Dalton. There is nothing I could add to that.
    Chairman Spratt. There are different ideas being proposed 
that would give us a different way of identifying activities 
that generate expenses and are different from--that could be 
used to complement existing revenue sources. The gasoline tax, 
for example, which could be complemented by a congestion tax. 
Is a potential congestion tax sufficient to really put much 
stock in what could be done with it in terms of financing 
capital improvements and highway improvements, transportation 
improvements of various kinds?
    Mr. Orszag. I will take a crack at that. Congestion pricing 
has--it is almost a twofer. It has two potential benefits. I 
know there are concerns about it that we could talk about also, 
but it has two significant benefits. First it could raise 
revenue that could be used to finance new investments; and 
secondly, it reduces the amount of investment that is necessary 
to undertake or to maintain current services or to exhaust the 
economically beneficial projects that are out there. It allows 
us to use the infrastructure that we have or that we would 
build much more efficiently and the evidence on this is very 
clear. When you price something by time of day or by 
congestion, you do get the results that you are looking for in 
terms of reducing congestion costs and more efficiently using 
the infrastructure that we have. And that would apply to 
highways. It applies frankly to landing rights at airports. It 
applies in lots of different settings.
    Chairman Spratt. You can see how cities like London and New 
York can apply taxes of this kind. But is it feasible for the 
Federal Government to apply a congestion tax which depends very 
much on local conditions?
    Ms. Dalton. You are correct, Mr. Chairman, in that it does 
depend on local conditions. And traditionally the congestion 
taxes have been imposed at the local level or the State level 
reflecting the demand on the infrastructure in trying to spread 
that demand over time usually.
    Mr. Orszag. But, for example--and I agree that this is 
traditionally not a Federal role. But, for example, one could 
construct scenarios or policy options--I will just give you one 
possibility--that you could require a higher State and local 
match on Federal grants for projects that do not have 
congestion pricing relative to those that do. There are lots of 
different ways that you can have the Federal Government 
encourage this and try to recapture some of the potential 
benefits.
    Chairman Spratt. Thank you very much. Let me turn now to 
Mr. Simpson.
    Mr. Simpson. Thank you, Mr. Chairman. And thank you for 
setting up this hearing. I appreciate it. It is a subject that 
is of interest to me and should be of interest to all of us, 
because, you know, no matter where you travel in the world, you 
come back with the conclusion that one of the reasons that we 
have become the strong economy of the world is because of our 
infrastructure and the investment that we have made in it over 
the years, that our forefathers made in it.
    In fact, it is kind of interesting, I would have liked to 
have heard the debate when the Eisenhower administration 
proposed the interstate highway system. I am sure the debate 
was are you kidding me, we are not going to need interstates in 
Idaho and Montana and Wyoming. And in fact, when they built 
them there, I can remember driving 50 miles down the road and 
never passing another car. And while it was real nice, now 
those areas--actually some of them have some pretty good 
congestion in them. Those were forward looking individuals that 
did that. And I am afraid that we haven't done the same or 
aren't doing the same and future generations are going to pay 
for that if we don't invest in the infrastructure of this 
country, not only roads and bridges and railways and waterways, 
and as you said, our water systems and so forth. Let me ask 
you, does capital budgeting make much sense without capital 
planning?
    Ms. Dalton. I certainly don't believe so. I think one of 
the things that we need to be looking at is having a 
comprehensive capital plan identifying what we are trying to 
achieve, what our goals are, what the role we should be having 
in this infrastructure or any type of capital expenditures so 
that we have a way to prioritize what needs to be done. Clearly 
there is an awful lot that we need, we would like. What are our 
highest priorities and how do we set those. I think a capital 
planning approach would assist in that decision making.
    Mr. Orszag. And I would just agree that again, the return 
to different projects vary substantially and just kind of 
throwing money at infrastructure does not get you what at least 
economists would hope for.
    Mr. Simpson. Let me express one of my frustrations that I 
have had here, is that we don't have plans for those kinds of 
things. And as you know, we are sometimes accused of doing 
congressional directive spending, otherwise known as earmarking 
things, which I'm not opposed to. The problem is I never know 
where that stands in terms of a national need when you start 
looking at what projects are. And my assumption is that a local 
person that represents a district knows that district better 
than I do and so forth. So I have a tendency to listen to them.
    But I don't know how it fits the national need. And another 
example is that I sit on the Energy and Water Subcommittee. The 
Army Corps of Engineers comes in and wants to dredge harbors to 
make deepwater harbors and so forth. There are harbors all over 
this country. And I don't know that there is--well, I know 
there is not a plan to say how are the ones that we are going 
to actually make deepwater harbors going to fit into the 
overall transportation system? We need a plan somehow. Then 
we've got to sit down and say how are we going to pay for that 
plan. And it obviously can't be just the gas tax and the local 
units are about property taxed out. Registration fees in most 
places are getting high. We've got to find some alternative 
ways of doing it.
    And as we were mentioning before this hearing started, I 
think people are willing to pay when they see improvement in 
the system. If they are just hiring more employees and stuff, 
they have got some concerns. Go ahead and respond if you would 
like.
    Ms. Dalton. One of the things I was going to point out was 
one of the things that capital planning will do is that it 
helps you in choosing between projects, because there may be 
three or four different solutions for a particular problem; 
which one is the best? A rigorous analysis and evaluation of 
the project through a capital planning approach lets you 
choose.
    You know, you may be presented with two different things. 
Well, one person says this is the best; another one will say 
that. Well, how do you tell? And through that rigorous 
analysis, hopefully it will lead you to better decision-making, 
so that the return on that investment will be greater.
    What kind of performance can I expect out of a rail project 
versus building another highway?
    Mr. Simpson. Mr. Oberstar, I appreciated his opening 
statement; he seems very interested in this. And I would hope 
the T&I Committee would actually sit down and take some time 
and work on how to put together a capital plan, because, to me, 
that is a multiyear project of putting that together.
    Ms. Dalton. It is one of the reasons that we at GAO believe 
that having an investment component as part of the unified 
budget would be helpful, in that it would, at least as a start, 
start beginning together all of the investment projects and 
efforts that we have under way and identifying them clearly in 
the budget to assist in making those decisions.
    Mr. Simpson. Well, as we mentioned earlier, this is 
something that--I have been interested in the trust funds and 
how the trust funds are used. And Mr. Blumenauer and I are 
going to introduce a resolution dealing with the trust funds 
and studying the trust funds and how they are used. Because 
sometimes I think they are used improperly or not used as they 
should be. Some of them are actually growing in amount when we 
have a need out there.
    And I will be talking to you, I am sure, in the near 
future, as we do that, to see how we can work on that so that 
we are using the resources appropriately.
    And then look at, as I said earlier, how are we going to 
pay for this? We have got to find some innovative ways to pay 
for it, some that we probably don't employ right now that are 
totally different.
    So I appreciate it.
    And, thank you, Mr. Chairman.
    Chairman Spratt. The Chair recognizes Mr. Smith.
    Mr. Smith. Thank you, Mr. Chairman.
    And to our witnesses, I appreciate your time.
    In rural Nebraska, we have seen an obvious pattern of 
economic growth along four-lane interstates or expressways, and 
certainly our State trust fund is suffering, just like the 
Federal. And I would say that simply adding the gas tax on a 
per-gallon basis doesn't really address things long-term, kind 
of piggybacking off of Mr. Simpson's comments.
    But as we do look to the future and some population 
differences just within Nebraska, we see congestion being 
addressed using trust fund dollars in the urban areas. I would 
challenge whether or not that is enough forward-thinking, by 
merely adding lanes, actual lane miles. Whereas in rural 
Nebraska we can leverage more economic growth, I think, looking 
to the future, just as the interstate system did many years 
ago.
    Do you have some suggestions of how dollars should be spent 
in terms of adding lane miles versus other types of 
transportation infrastructure?
    Ms. Dalton, if you would?
    Ms. Dalton. Yes, I think there are some things that can be 
looked at, because, in some ways, in some areas, you really 
can't build your way out of the congestion. You have to look at 
how can we use what we have better.
    And there are a number of tools. Congestion pricing is just 
one of them. There is also technology that can be used. We have 
seen that here in this area, with some of the lighting systems 
to get on the interstates and trying to regulate the flow of 
traffic.
    Congestion pricing helps to spread the demand out over 
time, so that if you are going to travel from 4 o'clock to 6 
o'clock in the evenings, it may cost you more than if you are 
traveling at 6:30 or 3:30. And that just helps move the flow of 
traffic.
    And those are certainly tools that should be used in 
conjunction with overall infrastructure, construction and 
development, and trying to look at what are the least expensive 
but also the most effective alternatives in terms of 
performance, and what are we trying--it basically gets down to 
what are we trying to accomplish. If we are trying to reduce 
congestion, are there ways to spread that out? Do we really 
need to, as I said, build another lane? Are there alternative 
transportation systems available, such as bus transit?
    Mr. Smith. I guess also, you know, proactively developing 
things, rather than just waiting for the auto count to get up 
to the point where we can react.
    Ms. Dalton. Exactly. Right. And you mentioned economic 
development. You know, where is that development going to 
occur? Can you anticipate that? And, certainly, if you can 
anticipate it and build ahead of time and accommodate it, you 
are in a much stronger position.
    That is why oftentimes local governments will, as there is 
a housing development going in, they work with the developer to 
build in the infrastructure as part of that development, as one 
example of trying to anticipate what is going to happen.
    Mr. Smith. I see. Very good.
    Dr. Orszag, if you would address, perhaps, any information 
you might have that speaks to the effectiveness of 
transportation dollars being spent in more rural areas in a 
more proactive fashion. Do you guys quantify any of those 
expenditures and how that is leveraged?
    Mr. Orszag. No, we haven't.
    And I would say most of my written testimony, not 
surprisingly, given my background and our outlook, is based on 
cost-benefit analysis and similar things. There obviously are 
other considerations that policymakers want and do take into 
account. But it is the case under most cost-benefit analyses 
that rural projects often don't look as good as projects in 
more concentrated areas.
    Mr. Smith. And how far into the future would that gauge?
    Mr. Orszag. It depends on the outlook of the underlying 
study. Sir, I can't give you a generic answer to that question.
    Mr. Smith. Then, as well, do you ever look at perhaps a 
multi-State effort?
    I mean, the Heartland Expressway is an example in mid-
America where it is several States. Actually, Ports-to-Plains 
Corridor is a multi-State effort, rather than just one State at 
a time.
    Does that get much credit in the big picture?
    Mr. Orszag. Well, let me sort of broaden the question. It 
is clear that, as we tried to lay out, infrastructure 
investments generate additional economic activity. And, 
obviously, the more that the different components of the system 
fit together so that you don't have inconsistencies across the 
Nation's infrastructure, the better, in terms of generating 
economic activity.
    Mr. Smith. All right.
    Thank you, Mr. Chairman.
    Chairman Spratt. Thank you.
    Mr. Blumenauer?
    Mr. Blumenauer. Thank you, Mr. Chairman.
    I deeply appreciate having this hearing, and I hope that 
there will be an opportunity for us to explore in greater 
detail in the future, because I am concerned.
    I heard my friend from Nebraska raise some concerns that he 
has, in terms of making sure that the infrastructure needs are 
appropriately met. And I think, from where I sit, the 
deficiency we have now is not having an overall vision or plan 
about how the pieces fit together. Because there are some 
areas, frankly, that may not pencil out in the short term, but 
they are part of a network. And if we don't have a network, 
rural America and small-town America is shortchanged.
    Too often, we see investments in some rural areas that are 
just like darts thrown at a map. They have political cache, but 
they aren't part of meeting the overall needs of agriculture, 
of electrical infrastructure. And I am hopeful, I know I have 
been in consultation with my friend from Idaho, about a way to 
look at the big picture, maybe actually have an infrastructure 
plan for this century.
    Mr. Orszag, something that is not on your plan in terms 
broken out, but you have ``utilities and other,'' in terms of 
water infrastructure that is going to probably be the greatest 
stressor with climate change, with depletion of water supplies, 
with an aging infrastructure.
    These are things that I am hopeful that we, as a Congress, 
can be able to zero in, flesh out, help have a big picture, and 
then think about what is economically justifiable and how the 
pieces fit together.
    You have passenger rail, an economically justifiable 
investment; we don't have an element there. But we have 
aviation, that with one-third of the trips in this country now 
350 miles or less by airplane, that doesn't pencil with $120-a-
barrel oil. They economically don't work.
    We have the potential, if we could look at it 
comprehensively, with some modest investment in rail passenger 
service, to eliminate some of the pressures for aviation, for 
instance, for airport expansion. We would actually get 
capacity, and we would be able to have something that would be 
more pleasurable for the riding public.
    Mr. Orszag, we have talked in the past about present-value 
accounting that currently in a capital budget may help move us 
in this direction. But there are so many elements here in the 
transportation system that don't take into account the dollars 
we know we are going to spend or the cost that we are going to 
avoid.
    Have you had any further thought about what we could do 
with the Budget Committee to look at this long-term picture of 
infrastructure investment and ways that we will be able to coax 
more value out of the system to deal with rail, to deal with 
water, to deal with surface transportation, motorway, that 
would reflect avoided costs, that would reflect investments 
that will make money over time, that would have a fairer 
application of our budget rules?
    Mr. Orszag. Well, let me answer that in two ways.
    First, we did come out this morning with a report on 
capital budgeting, in particular. And I can talk more about 
that.
    But, secondly, and part of your question is, what is the 
long-term benefit or return to these various different 
investments? And we did try in this document, in the testimony 
that we prepared, the written testimony, which is longer than 
normal for us, to go through the evidence on the returns to 
infrastructure spending. And while they are positive on 
average, they vary a lot by specific project. And they are also 
lower than some early estimates from the early 1980s suggested.
    So, there is a long-term benefit to additional 
infrastructure investment. It obviously depends very 
sensitively on the specific projects, on the specific types of 
infrastructure.
    I would also just note quickly, you had mentioned 
wastewater and drinking water. We do have estimates in the 
testimony that is based on previous work by CBO, suggesting 
that the Nation is spending about $26 billion a year currently 
on those, and that investments would need to average between 
$30 billion and $47 billion a year to basically maintain 
current services and do a little more.
    Mr. Blumenauer. Thank you. I will look to further 
examination. I am sorry we were chopped up a little bit.
    Mr. Chairman, I appreciate your indulgence and having this 
hearing.
    The point of inquiry, I will warn you, next, Dr. Orszag, 
when I am sure our paths will cross, is the notion that, if we 
are able to actually have a comprehensive infrastructure plan 
and a vision, whether that wouldn't help us actually coax more 
value, avoid some of the problems Ms. Dalton is talking about, 
and be able to put us ahead overall.
    Mr. Orszag. I just hope our paths don't cross while we are 
both on bicycles. That could get a little messy.
    Mr. Blumenauer. Thank you.
    Chairman Spratt. Mr. Baird?
    Mr. Baird. I thank the Chair.
    I thank our distinguished witnesses.
    This may have been addressed already. Forgive me. I was at 
another meeting.
    I certainly felt that the most recent stimulus package 
amounted basically to dropping money out of helicopters and was 
not our best investment. There are some business provisions of 
the stimulus package that make sense, but the rebates I did not 
think did.
    We did some surveys in my own State and district about 
projects which were ready to go, in the sense that they were 
permitted, designed, could be actually putting people to work 
in the same time frame it has taken us to get the stimulus 
package out, and that would produce jobs with paychecks and 
lasting infrastructure to the good of people for many years to 
come.
    It has been quite frustrating, because there seems to be 
this sense that--it is a shibboleth but I don't think a fact--
that infrastructure investment doesn't stimulate the economy. I 
wonder if you could talk a little about that, what seems to be 
received wisdom by the economists' side, but in direct conflict 
to the evidence I get on the ground when I talk to school 
boards or local communities, et cetera. Frankly, you walk 
around these Capitol grounds and you see needed infrastructure 
repairs right there.
    Educate us on this, if you would.
    Mr. Orszag. I think that one might be for me. Let me say 
two things.
    First, as I tried to indicate earlier, there is a long-term 
return or a long-term benefit to infrastructure spending. We 
are now just talking about the degree to which money can flow 
out the door quickly in a period of economic weakness, which is 
a different question.
    There I have pushed my folks hard. And I would just again 
say, outside of road resurfacing, where it looks like money can 
flow more rapidly, that I have been eager to receive the list 
of specific projects that people believe can move fast. Because 
it is often the case that, when you start to actually go down 
those lists--and I don't want to just take it on faith; I want 
to be looking at the specifics involved--that you get responses 
like, ``Oh, no, we meant we could get it permitted rapidly, not 
actually have money out the door.'' The question is, how 
quickly can money actually go out the door?
    Mr. Baird. But permitting isn't free. You don't magically 
get a permit. I mean, someone has to be employed to do the 
paperwork for the permitting.
    And so my belief is there is a continuum of projects in the 
pipeline, some of which are at the permitting stage, some of 
which are at the design stage. People actually get paid money 
and then pay taxes on that money.
    Mr. Orszag. Yes. The question is just, what share of the 
cost of the project is occurring rapidly? And the cost of the 
permitting process is often only a very small share of the 
overall cost of the project itself.
    So the question is really, what is the spend-out rate? If 
you are going to spend $100 on this project, what share of that 
$100 do you get out the door rapidly?
    Mr. Baird. Let me ask this: If I pump $20 billion into the 
economy and it is going to transportation infrastructure, 
whether the money is going to employ a geologist or a 
hydrologist to work on permitting, even a lawyer, heaven 
forbid, or whether some of those projects--which I am convinced 
they are, because my school districts have shown me the plans--
actually get some people nailing boards and pulling wire, that 
is money that is going to a domestic workforce in all of those 
cases.
    And whether or not that permit is done now or 5 years from 
now is a bit chronologically fungible. But doing it now sets up 
later projects. So you have to invest in it at some point. So 
the point is, there are many stages on infrastructure projects 
that we could invest money in right now.
    And the second point is this: Relative to a flat-screen 
plasma TV made in Korea, that, except for the exchange, the 
import and export by shipping and the guy that works at Best 
Buy and gets a 2 percent commission, the stimulus to me and the 
long-term benefit for our society is vastly superior.
    The cost-benefit ratio to the feds and the public of 
building a water treatment plant or fixing your school, I would 
wager, pencils out a good bit better than buying that plasma 
TV.
    Mr. Orszag. Well, a couple things.
    First, it is true that the larger the share of imported 
value-added or imported goods and whatever is purchased with 
the stimulus money, the less impact there is on domestic 
production. I would note that a lot of the rebate checks will 
probably go for things like food at restaurants and what have 
you and not just for plasma televisions, and that some 
component of infrastructure spending also involves imported 
inputs or imported goods.
    Again, I think the real question is, out of that $20 
billion, and assuming it is a well-chosen project, there will 
be long-term economic benefits. If your objective, as most of 
the policy debate earlier this year was framed, was to get the 
economy a jumpstart now, within the next 3 or 4 or 5 months, 
what share of that $20 billion can go out the door within that 
3 or 4 months. And that is a separate question from whether we 
should be spending the $20 over time or not or the returns to 
it.
    Again, I would just come back to, I want to see the 
specific projects that can get a big share of their $20 billion 
or their $100 or whatever it is out the door really fast, and 
by that I mean months.
    Mr. Baird. One last comment on that. I don't think it is 
necessary that the checks arrive and the building starts in 
order to get $20 billion of economic stimulus. If you promised 
me that 4 months from now there would be money made available 
to me to do something on my home, I could start working on that 
home today and put the people to work on the promise of the 
money. So I don't have to write the check today to have the 
stimulus effect today.
    I yield back.
    Ms. Dalton. The one thing I would add is, on the spend-out 
rates, when you are going to do a project, you have committed 
the money, you may start spending. Oftentimes with 
infrastructure, that spend-out rate goes over time, often over 
years, so you in all likelihood won't have that immediate 
impact on the economy, which is one of the issues with an 
economic stimulus package.
    There are ways, if you can identify projects that are ready 
to go and the spend-out plans are immediate, yes, they could 
influence the economy.
    Mr. Baird. My problem was I saw no effort to do that in 
this stimulus package. And I think it was a terrible lost 
opportunity.
    Chairman Spratt. Mr. Simpson?
    Mr. Simpson. I just want to say that I agree with my friend 
from Washington, that we could have spent this a lot more 
wisely, and I think it would have had a better stimulus effect. 
I will guarantee you that I can show you communities, cities, 
that have wastewater treatment facilities, they are waiting for 
their match from the Federal Government. And within 4 weeks, 
they could be spending money, literally, because they have 
things ready to go, highways that are ready to be built and so 
forth that we just don't have the money for.
    I think we could have had a much more effective stimulus 
plan, and, quite frankly, that is why I voted against it.
    So, anyway, it is an interesting discussion we are going to 
have, but it is one that is vital to the future of this country 
that we have, because if we are going to have the 
infrastructure for the next generation and if we are going to 
keep America on the leading edge of the economies of this 
world, we had better start investing in our infrastructure. And 
it is one we are going to have to sell the American public, and 
we are going to have to take some political courage to do it.
    So I appreciate it. I am sure that we will be calling you 
and talking to you substantially in the near future about this. 
As Congressman Blumenauer and I were just talking about, we 
plan on making this one of our highest priorities in the next 
Congress.
    So I appreciate it. Thank you.
    Chairman Spratt. A couple of final questions. I thought 
Doris Matsui was here, but she has left.
    Back in January 2008, the National Surface Transportation 
Policy and Revenue Commission recommended an annual investment 
of $225 billion for surface transportation. Has GAO or CBO 
undertaken an examination of that?
    Ms. Dalton. We currently, Mr. Chairman, are taking a look 
at that, the recommendations of the policy commission. That 
work isn't completed yet.
    I will say, on the $225 billion, what we have seen so far 
is that it is based on their highest needs scenario, and we are 
really trying to work to get beneath those numbers at this 
point. We are not----
    Chairman Spratt. Does CBO--excuse me. Go ahead.
    Ms. Dalton. I was going to say, what we are looking for is, 
what is the support for that $225 billion?
    Mr. Orszag. And the reason the figures that I presented to 
you this morning differ from those include that it is not clear 
whether the investments proposed were economically justifiable 
or were, sort of, held to that standard. And also it is not 
clear if the opportunity cost of capital--that is, when you put 
$1 into this project, it means that you either have to pay 
interest, if you want to think about it that way, or are you 
are foregoing opportunity to invest in something else--was 
actual fully taken into account.
    Chairman Spratt. Have you produced any sort of written 
analysis of the $225 billion?
    Mr. Orszag. I don't think we have produced a written 
analysis of it, no.
    Chairman Spratt. Okay. As you know, the Budget Committee's 
principal annual output is something called a budget 
resolution. Do you have any recommendations for whether or not 
we should target or somehow identify or classify how much of 
the budget is going for capital purposes and improve the budget 
system for allocating to capital needs?
    Mr. Orszag. Again, as was earlier discussed, I do think 
there are things that can be done without moving to a full 
capital budget to better identify and classify capital 
investments and to give some structure and rigor to the process 
of deciding both on the aggregate amount and on the specific 
projects.
    With regard to the aggregate amount, as I have already 
said, there does appear to be additional capital spending that 
would be required to maintain current services and that would 
be economically beneficial in the sense of generating larger 
benefits than costs.
    And I would also say that I think there are significant 
things we can do to offset those costs through both some of the 
pricing mechanisms that we discussed and also through better 
management of the infrastructure that we already own, including 
Federal buildings and property and other capital assets that we 
already currently own and, I think, arguably, we are not doing 
a terrific job managing.
    Ms. Dalton. I would add that another benefit would be that 
it would bring together all of the various investment expenses 
and hopefully agreement on what we consider to be investments.
    We have talked a lot about transportation. Dr. Orszag just 
mentioned Federal buildings. We have talked about human 
capital. Are those part of the investment component or not?
    And I think it would be helpful, as part of the budget 
resolution and budget structure, to make some of those 
distinctions and determinations.
    Chairman Spratt. Any further observations from either of 
you before we close the hearing?
    Mr. Orszag. I would just note on this last question that, 
as part of the study on capital budgeting that we put out this 
morning, we do have a section on, for example, creating a 
separate enforcement cap under a possible new statutory pay-as-
you-go rule for capital spending and other things you can do 
along the lines that you seem to have been suggesting.
    Chairman Spratt. Ms. Dalton?
    Ms. Dalton. I would just conclude with that I think this is 
a good opening discussion of what we want in terms of our 
goals, what the Federal role should be, what are we trying to 
achieve. A lot of our programs were developed in the mid-1900s 
or earlier; do they fit with the 21st century?
    And I think, as we start looking at investment in total, it 
will help us in those decisions as to, do these programs still 
work, what do we need in the future? We definitely need more 
investment, but how do we want to go about that and get the 
greatest return from that investment.
    Chairman Spratt. We will definitely continue this inquiry, 
but the next time we hold a hearing, we will look for a better 
day.
    Thank you very much for your patience, your forbearance and 
not least your excellent presentations and testimony. It has 
been extremely useful to us. And while we didn't have as many 
members as we would have liked here, rest assured your work 
product will redound to the benefit of the whole institution, 
particularly our two committees.
    Thank you very much, indeed, for coming and testifying.
    Ms. Dalton. Thank you, Mr. Chairman.
    Chairman Spratt. The hearing is now adjourned.
    [The statement of Mr. Carnahan follows:]
    
    
    [The statement of Mr. Costello follows:]

   Prepared Statement of Hon. Jerry F. Costello, a Representative in 
                  Congress From the State of Illinois

    Thank you, Mr. Chairman. I am pleased to be here today as we 
examine financing our infrastructure investment. I would like to 
welcome today's witnesses.
    The United States has an extensive system of highways, ports, locks 
and dams, and airports. Yet, we have neglected our infrastructure over 
the years and as a result, it needs major improvements and 
modernization.
    For example, our Interstate System is almost 50 years old. Thirty-
two percent of our major roads are in poor or mediocre condition; one 
of every eight bridges is structurally deficient; and 36 percent of the 
nation's urban rail vehicles and maintenance facilities are in 
substandard or poor condition.
    I strongly believe we have an obligation to maintain it and 
modernize our infrastructure it as it becomes antiquated. According to 
the Transportation for Tomorrow report, a significant surface 
transportation investment gap exists that can only be filled by an 
annual investment level of between $225 billion and $340 billion by all 
levels of government and the private sector. If we look at our current 
capital investment from all sources in all modes of transportation, it 
is $85 billion, well below the recommended level.
    I am Chairman of the Aviation Subcommittee and according to the 
FAA's Operational Evolution Plan (OEP), new runways and runway 
extensions provide the most significant capacity increases. The FAA's 
2007-2011 National Plan of Integrated Airport Systems (NPIAS) states 
that during the next five years, there will be $41.2 billion of AIP-
eligible infrastructure development, an annual average of $8.2 billion. 
However, the FAA states that the current NPIAS report may understate 
the true cost of needed capital investment. The 2007--2011 Airports 
Council International--North America (ACI-NA) Capital Needs Survey 
estimates total airport capital needs--including the cost of non-AIP-
eligible projects--to be about $87.4 billion or $17.5 billion per year 
from 2007 through 2011.
    The FAA's ``Capacity Needs in the National Airspace System, An 
Analysis of Airport and Metropolitan Area Demand and Operational 
Capacity in the Future'' report found that 18 airports around the 
country are identified as needing additional capacity by 2015, and 27 
by 2025. As you can see, aviation infrastructure is much-needed and 
that is why in HR 2881, we increased the PFC and also increased the 
authorization for AIP by $4 billion over the Administration's proposal.
    Continued congestion and delays in our skies, on our roads, in our 
ports and on our waterways is costing us excessive amounts of money. We 
must and can do better. We must find a way to make the necessary 
improvements to our entire transportation system to make sure the 
highest level of safety is maintained and that the US economy remains 
strong. I am interested in hearing more from our witnesses on their 
recommendations as Congress looks for ways of financing the much needed 
infrastructure investment.
    With that, I look forward to today's hearing as we discuss 
financing infrastructure investment.

    [Questions submitted by Ms. DeLauro follow:]

            Ms. DeLauro's Questions Submitted to Dr. Orszag

    The Government Accountability Office released a report in February 
2006 entitled ``Excess and Underutilized Property Is an Ongoing 
Problem.'' In short, the report makes clear that the problem of unused 
federal property ``puts the government at significant risk for wasting 
taxpayers' money and missing opportunities to benefit taxpayers.'' Such 
properties are costly to maintain and could be put to more cost-
beneficial uses, including being sold to generate revenue. I believe a 
reasonable action for the federal government to take would be to sell 
these unused federal properties, which in a sense is unused and idle 
infrastructure, and use that revenue to benefit the taxpayers by 
putting it toward renovating our public infrastructure. We could, for 
example, use that to offset the $18 billion cost for funding the 
``ready to go'' infrastructure projects identified by state 
transportation departments across the country in a recent American 
Association of State Highway and Transportation Officials (AASHTO) 
survey.
    When we are talking about infrastructure, we are talking about the 
heart of our economy, jobs, GDP growth and fiscal responsibility. 
Government does not always create jobs, but it can set forth creative 
policies that do in fact bring about opportunity. Funding these 
``ready-to-go'' projects would create approximately 850,000 jobs and 
create over $110 billion in economic activity. Offsetting the cost by 
mandating the sale of these unused federal properties would allow us to 
do that in a fiscally responsible and paid for way. I would appreciate, 
from a budgetary perspective, your observations and thoughts on such a 
policy?

            Ms. DeLauro's Questions Submitted to Ms. Dalton

    I introduced a bill, the National Infrastructure Development Act 
(HR 3896). The bill would establish a tax exempt National 
Infrastructure Development Corporation that would make loans, purchase 
securities, issue ``public benefit'' bonds and offer other insured 
financing packages, in order to maximize private investment to fund our 
most critical infrastructure projects. Within five years the 
Corporation would prepare a plan to transition to a government-
sponsored enterprise, including broad distribution to long-term 
investors with all voting securities ultimately transferred to non-
federal government investors. The Corporation would at that point 
become self-financed through user fees or other dedicated sources of 
revenue, as well as the sale of public stock.
    In your prepared testimony you refer to proposals intended to 
increase investment through new financing mechanisms in the nation's 
infrastructure. You touch on bonds as a source of up-front capital, yet 
an expensive investment for the federal government. You also talk about 
a national infrastructure bank and the associated pros and cons, 
including defaults on loans and inflation. In short, you suggest there 
is no silver bullet to address the multi-faceted infrastructure 
challenges we face. I understand that my proposal surely also has pros 
and cons and is by no means a silver bullet, yet I believe it is well 
worth considering as a key component of any bold infrastructure plan to 
rebuild America. In my mind, the Federal Government simply cannot do 
this on its own. We must build effective private-partnerships and we 
must leverage significance private sector investment if we are going 
develop a 21st Century state-of-the art infrastructure.
    Accordingly, I would like to get your expert opinion on the concept 
of a GSE, a Fannie Mae type entity, in the realm of infrastructure. 
What do you see as the pros and cons in relation to the other financing 
proposals out there? Do you think there are certain infrastructure 
sectors, water treatment for example, where it might work better than 
others? Are there perhaps geographic areas where it might work best, 
perhaps funding big city infrastructure projects?

    [The statement of Mr. Mitchell follows:]
    
    
    [The statement of Ms. Tsongas follows:]

 Prepared Statement of Hon. Niki Tsongas, a Representative in Congress 
                    From the State of Massachusetts

    I thank the Committee on Budget and the Committee on Transportation 
and Infrastructure for holding this important hearing to explore 
alternative mechanisms for investing in our nation's infrastructure. 
This hearing could not be more timely or more relevant. In recent 
years, federal appropriations have failed to fully meet the demands of 
our nation's aging infrastructure while current alternative funding 
mechanisms, such as the Highway Trust Fund, are poised to run multi-
billion dollar deficits.
    These shortfalls come at a particularly critical time for 
Massachusetts, which must maintain some of the oldest infrastructure in 
the country in a climate that is often punishing to the state's roads, 
bridges, ports, airports, and railroads. Even though Massachusetts' 
share of the nation's population has decreased, its total number of 
inhabitants continues to grow, further adding to the strain on its 
infrastructure.
    According to data from the American Society of Civil Engineers, 
more than half of the bridges in Massachusetts have been deemed 
``structurally deficient'' or ``functionally obsolete,'' 40 dams have 
been deemed deficient, and 71 percent of major roads are in ``poor or 
mediocre condition.'' Nationwide, 33 percent of the nation's major 
roads are in ``poor or mediocre condition'' and 36 percent of major 
urban highways are congested.
    Failure to adequately invest in our nation's infrastructure has had 
a direct impact on our safety, our energy dependence, and our economic 
health. In my district, examples abound of the effect that 
infrastructural improvements can have on the economy. For instance, 
construction of an interchange on Interstate-93 near Tewksbury and 
Andover would alleviate existing traffic congestion, providing a major 
economic stimulus. The area is home to such global industry leaders as 
Wyeth, Proctor and Gamble/Gillette, Charles River Laboratories and 
others, each of which is currently unable to expand its operations as 
long as transportation resources remain so restricted. Similarly, at 
the national level, investments in infrastructure have been shown to 
stimulate both short term job growth and long-term economic health. 
According to the U.S. Department of Transportation, every $1 billion of 
federal highway investment supports 34,779 jobs. These jobs have a 
subsequent magnifying effect throughout the economy.
    By making critical, coordinated investments in our transportation 
systems, we can spur economic development, create jobs, restore 
confidence in the safety of our system, and maintain our global 
competitiveness.

    [Questions submitted by Mr. Walz follow:]

            Mr. Walz's Questions Submitted to the Witnesses

    To all witnesses:
     How would you say the level of coordination and 
cooperation between units of government at the federal, state, and 
local level is working now, and what would you suggest to improvement 
this coordination?
     We have been hearing a great deal lately about a temporary 
gasoline tax break. What do you think the impact of such a proposal 
would be in helping develop our national infrastructure?
     What incentives for the private sector could intensify 
their participation in public-private partnerships to develop our 
transportation infrastructure?
     Which experiences from foreign countries do you take into 
consideration when determining what strategies we should use?

      

Prepared Statement of Hon. Jason Altmire, a Representative in Congress 
                     From the State of Pennsylvania

    Thank you, Chairman Oberstar, for holding today's joint hearing 
with the Committee on the Budget to examine methods that can be taken 
to finance investments in our nation's infrastructure. I would like to 
also thank Chairman Spratt for agreeing to join us today. His 
Committee's expertise will be of great benefit to us today as we 
discuss investment opportunities and how these investments will fit 
into our nation's budget.
    Like many of my colleagues on this committee, I have serious 
concerns about the future of our nation's infrastructure. Increased 
congestion on our roads and rail lines is resulting in significant 
costs to American taxpayers. In 2005, congestion on our nation's 
roadways cost motorists over $78 billion, which equates to an average 
cost of $710 per traveler. It is apparent that steps must be taken to 
improve and expand our infrastructure.
    Furthermore, the tragic collapse of the Interstate 35W bridge in 
Minnesota last year brought to America's attention what many members of 
this Committee have known for years--the infrastructure in this nation 
is in desperate need of repair. In the six counties that I represent, 
there are currently more than 1,000 bridges considered structurally 
deficient. These repairs and improvements will not be cheap. It will 
truly take the combined efforts of the Transportation and Budget 
Committees to develop a comprehensive plan for future investments that 
can finally begin to address this growing problem and I look forward to 
being a part of this process.
    Chairman Oberstar, I would like to thank you again for holding this 
hearing.

    [Responses to questions for the record from CBO follow:]

  Responses From the Congressional Budget Office to Questions for the 
                                 Record

    Question: The Government Accountability Office released a report in 
February 2006 entitled ``Excess and Underutilized Property Is an 
Ongoing Problem.'' In short, the report makes clear that the problem of 
unused federal property ``puts the government at significant risk for 
wasting taxpayers' money and missing opportunities to benefit 
taxpayers.'' Such properties are costly to maintain and could be put to 
more cost-beneficial uses, including being sold to generate revenue. I 
believe a reasonable action for the federal government to take would be 
to sell these unused federal properties, which in a sense is unused and 
idle infrastructure, and use that revenue to benefit the taxpayers by 
putting it toward renovating our public infrastructure. We could, for 
example, use that to offset the $18 billion cost for funding the 
``ready to go'' infrastructure projects identified by state 
transportation departments across the country in a recent American 
Association of State Highway and Transportation Officials (AASHTO) 
survey.
    When we are talking about infrastructure, we are talking about the 
heart of our economy, jobs, GDP growth and fiscal responsibility. 
Government does not always create jobs, but it can set forth creative 
policies that do in fact bring about opportunity. Funding these 
``ready-to-go'' projects would create approximately 850,000 jobs and 
create over $110 billion in economic activity. Offsetting the cost by 
mandating the sale of these unused federal properties would allow us to 
do that in a fiscally responsible and paid for way. I would appreciate, 
from a budgetary perspective, your observations and thoughts on such a 
policy?

    Response: As noted in CBO's testimony, the General Services 
Administration reports that about 10 percent of all federal government 
facilities are either underused or empty. Remarkably, no information is 
readily available about the market value of those facilities, and 
federal agencies destroy thousands of facilities each year that have 
little or no market value. Some of the facilities do not meet current 
building and safety standards and some pose environmental hazards.
    Selling unused federal properties could be desirable for a number 
of different reasons. More detailed analyses of the inventory of 
federal facilities and the state of the local markets for such 
facilities appear to be warranted.

  Responses From the Congressional Budget Office to Questions for the 
                      Record for Congressman Walz

    Question 1. How would you say the level of coordination and 
cooperation between units of government at the federal, state, and 
local level is working now, and what would you suggest to improvement 
this coordination?

    Response: As noted in CBO's testimony, the Government 
Accountability Office and other researchers have found that federal 
highway grants generally do not increase total spending dollar for 
dollar, because state and local governments reduce spending from their 
own funds. Greater clarity about the appropriate roles of each of the 
three levels of government (and the private sector) in supporting the 
development of additional infrastructure could facilitate a clearer 
division of responsibility, which in turn could reduce uncertainty and 
allow for better planning.

    Question 2: We have been hearing a great deal lately about a 
temporary gasoline tax break. What do you think the impact of such a 
proposal would be in helping develop our national infrastructure?

    Response: CBO has not analyzed such proposals.

    Question 3: What incentives for the private sector could intensify 
their participation in public-private partnerships to develop our 
transportation infrastructure?

    Response: Private firms will be motivated to participate in 
partnerships with the public sector to the extent that they anticipate 
a level of profits that is sufficiently attractive given the risks 
involved. Partnerships are not sources of ``free money'': Although 
private firms may, in some cases, reduce total costs through management 
efficiencies, all infrastructure is ultimately paid for by some 
combination of users and taxpayers. Accordingly, private firms will 
evaluate the revenues expected from those sources (through contract 
fees and/or rights to charge fees to the users of infrastructure 
services) and any forms of cost-sharing by the public sector (such as 
tax-preferred financing and loan guarantees).

    Question 4: Which experiences from foreign countries do you take 
into consideration when determining what strategies we should use?

    Response: CBO does not make policy recommendations (except on 
issues relating to the budget process) but does examine other 
countries' experiences where relevant to our analyses. In the case of 
investment in infrastructure, foreign experiences with user fees, asset 
management, and capital budgeting can provide useful perspectives on 
questions facing policymakers in the United States. For example, CBO's 
May 2008 ``Capital Budgeting'' paper discusses the use of accrual 
budgeting in Australia and New Zealand--where it is applied not only to 
depreciation of government assets, but also to employees' pension 
benefits and the future cost of environmental cleanup associated with 
government services--and the rejection of separate capital budgets by 
five countries in northern Europe.

    [Responses to questions for the record from GAO follow:]

 Responses From the Government Accountability Office to Questions for 
                               the Record

                  QUESTION FROM CONGRESSWOMAN DELAURO

    Question: I introduced a bill, the National Infrastructure 
Development Act (HR 3896). The bill would establish a tax exempt 
National Infrastructure Development Corporation that would make loans, 
purchase securities, issue ``public benefit'' bonds and offer other 
insured financing packages, in order to maximize private investment to 
fund our most critical infrastructure projects. Within five years the 
Corporation would prepare a plan to transition to a government-
sponsored enterprise, including broad distribution to long-term 
investors with all voting securities ultimately transferred to non-
federal government investors. The Corporation would at that point 
become self-financed through user fees or other dedicated sources of 
revenue, as well as the sale of public stock.
    In your prepared testimony you refer to proposals intended to 
increase investment through new financing mechanisms in the nation's 
infrastructure. You touch on bonds as a source of up-front capital, yet 
an expensive investment for the federal government. You also talk about 
a national infrastructure bank and the associated pros and cons, 
including defaults on loans and inflation. In short, you suggest there 
is no silver bullet to address the multi-faceted infrastructure 
challenges we face. I understand that my proposal surely also has pros 
and cons and is by no means a silver bullet, yet I believe it is well 
worth considering as a key component of any bold infrastructure plan to 
rebuild America. In my mind, the Federal Government simply cannot do 
this on its own. We must build effective private-partnerships and we 
must leverage significance private sector investment if we are going 
develop a 21st Century state-of-the art infrastructure.
    Accordingly, I would like to get your expert opinion on the concept 
of a GSE, a Fannie Mae type entity, in the realm of infrastructure. 
What do you see as the pros and cons in relation to the other financing 
proposals out there? Do you think there are certain infrastructure 
sectors, water treatment for example, where it might work better than 
others? Are there perhaps geographic areas where it might work best, 
perhaps funding big city infrastructure projects?

    GAO response: We agree that we will need to consider all options, 
and as you mentioned, we will likely need to use a variety of options 
as there is no silver bullet. We also agree that the federal government 
cannot do it all--it will take the collective efforts of all levels of 
government and the private sector to address our infrastructure 
challenges. In considering the different options, one of the first 
steps is determining the federal role--because the suitability of any 
of the options depends heavily on the level of federal involvement 
desired.
    In terms of the advantages, government-sponsored enterprises (GSE) 
can be designed to sustain their operations from business income. In 
addition, GSEs are distinguished from other chartered private entities 
by investors' perception of an implicit federal guarantee of GSEs' debt 
obligations. Therefore, a GSE potentially could borrow funds at a lower 
interest rate since the risk is perceived to be lower. The perceived 
federal guarantee, however, is also a disadvantage--that is, there is 
an assumption that the federal government would step in and bail the 
GSE out if needed.
    One area where GSEs could be particularly useful is in the funding 
of infrastructure projects of regional or national significance--that 
is, projects that benefit regions or the nation as a whole. These 
projects can be large and costly, requiring the cooperation and 
financial support from multi-jurisdictions. However, as we have 
previously reported, it can be difficult for state and local 
governments to secure funding for these kinds of multi-jurisdictional 
projects because transportation projects that provide benefits that are 
more readily discernable to immediate localities are favored. The GSE 
could provide an alternative financing source for these types of 
projects.

                    QUESTIONS FROM CONGRESSMAN WALZ

    Question: How would you say the level of coordination and 
cooperation between units of government at the federal, state, and 
local level is working now, and what would you suggest to improve this 
coordination?

    GAO response: We did not examine the level of coordination and 
cooperation between the different levels of government for our 
testimony. However, last year we issued a report on intermodal 
transportation, which enables freight and passengers to cross between 
different modes of transportation efficiently and can improve mobility, 
reduce congestion, and cut costs. We identified several barriers that 
inhibit intermodal transportation, including limited collaboration 
among the many entities and jurisdictions involved. For example, the 
Department of Transportation (DOT) operating administrations and state 
and local transportation agencies are organized by mode--reflecting the 
structure of funding programs--resulting in an organizational structure 
that DOT's own assessments acknowledge can impede coordination between 
modes. In addition, collaboration between the public and private sector 
can also be challenging; for example, some transportation officials 
told us that private-sector interests in airport, rail, and freight 
have historically not participated in the regional planning process. 
These barriers impede state and local agencies' ability to carry out 
intermodal projects and limit DOT's ability to implement Congress' goal 
of a national intermodal transportation system. To help address these 
barriers, we recommended that the Secretary of Transportation direct 
one office or administration to lead and coordinate intermodal efforts 
at the federal level by improving collaboration and the availability of 
intermodal guidance and resources.

    Question: We have been hearing a great deal lately about a 
temporary gasoline tax break. What do you think the impact of such a 
proposal would be in helping develop our national infrastructure?

    GAO response: We have not examined the gasoline tax break proposals 
in detail. We would note, however, that fuel taxes are the primary 
revenue source for the Highway Trust Fund, which is the major source of 
federal highway and transit funding. Therefore, unless an alternative 
revenue source was identified, the suspension of the gasoline tax would 
negatively impact the balance of the Highway Trust Fund. Furthermore, 
the most recent Highway Trust Fund projections, which do not factor in 
the proposed tax break, predict that the balance of the fund will be 
exhausted by 2012.

    Question: What incentives for the private sector could intensify 
their participation in public-private partnerships to develop our 
transportation infrastructure?

    GAO response: As we reported in February 2008, the private sector 
has traditionally been involved as contractors in the design and 
construction of highways. In recent years, however, the private sector 
has become increasingly involved in assuming other responsibilities 
including planning, designing, and financing. The private sector, and 
in particular, private investment groups, including equity funds and 
pension fund managers, have recently demonstrated an increasing 
interest in investing in public infrastructure. They see the sector as 
representing long-term assets with stable, potentially high-yield 
returns. As a result, the private sector has also entered into a wide 
variety of highway public-private partnership arrangements with public 
agencies.
    In addition to the expected return on investment, there are several 
other incentives that can encourage the private sector to participate 
in highway public-private partnerships. For example, the private sector 
can also receive potential tax deductions from depreciation on assets 
involving private sector investment and the availability of these 
deductions were important incentives to the private sector to enter 
some of the highway public-private partnerships we reviewed. Obtaining 
these deductions, however, may require lengthy concession periods. In 
the United States, federal tax law allows private concessionaires to 
claim income tax deductions for depreciation on a facility (whether new 
highways or existing highways obtained through a concession) if the 
concessionaire has effective ownership of the property. Effective 
ownership requires, among other things, that the length of a concession 
be greater than or equal to the useful economic life of the asset. 
Financial and legal experts, including those who were involved in the 
Chicago and Indiana transactions, told us that since the concession 
lengths of the Chicago Skyway and the Indiana Toll Road agreements each 
exceed their useful life, the private investors can claim full tax 
deductions for asset depreciation within the first 15 years of the 
lease agreement. The requirement to demonstrate effective asset 
ownership contributed to the 99-year and 75-year concession terms for 
the Chicago Skyway and Indiana Toll Road, respectively. One tax expert 
told us that, in general, infrastructure assets (such as highways) 
obtained by the private sector in a highway public-private partnership 
may be depreciated on an accelerated basis over a 15-year period.
    Private investors can also potentially benefit from being able to 
use tax-exempt financing authorized by the Safe, Accountable, Flexible, 
Efficient Transportation Equity Act for the 21st Century--A Legacy of 
Users (SAFETEA-LU) in 2005. Private activity bonds have been provided 
for private sector use to generate proceeds that are then used to 
construct new highway facilities under highway public-private 
partnerships. This exemption lowers private sector costs in financing 
highway public-private partnership projects. As of January 2008, the 
Department of Transportation (DOT) had approved private activity bonds 
for 5 projects totaling $3.2 billion and had applications pending for 3 
projects totaling $2.2 billion. DOT said it expects applications for 
private activity bond allocations from an additional 12 projects 
totaling more than $10 billion in 2008.
    Finally, the private sector can potentially benefit through gains 
achieved in refinancing their investments. Both public and private 
sector officials with whom we spoke agreed that refinancing is common 
in highway public-private partnerships. Refinancing may occur early in 
a concession period as the initial investors either attempt to ``cash 
out'' their investment--that is, sell their investment to others and 
use the proceeds for other investment opportunities--or obtain new, 
lower cost financing for the existing investment. Refinancing may also 
be used to reduce the initial equity investment in highway public-
private partnerships. Refinancing gains can occur throughout a 
concession period; as project risks typically decrease after 
construction, the project may outperform expectations, or there may be 
a general decrease in interest rates.

    Question: Which experiences from foreign countries do you take into 
consideration when determining what strategies we should use?

    GAO response: In previous reports, we have examined how foreign 
countries approach various transportation challenges and solutions. For 
example, based on experiences from foreign countries we recently 
concluded that consideration of highway public-private partnerships in 
the United States could benefit from more consistent, rigorous, 
systematic, up-front analysis. By weighing the potential benefits of 
highway public-private partnerships against potential costs and trade-
offs through careful, comprehensive analysis, decision makers can 
better determine whether public-private partnerships are appropriate in 
specific circumstances and, if so, how best to implement them. We found 
that governments in other countries, such as Australia, have developed 
such systematic approaches to identifying and evaluating public 
interest and require their use when considering private investments in 
public infrastructure. While similar tools have been used to some 
extent in the United States, their use has been more limited. Using up-
front public interest evaluation tools can assist in determining 
expected benefits and costs of projects; not using such tools may lead 
to aspects of protecting the public interest being overlooked. For 
example, projects in Australia require consideration of local and 
regional interests. Concerns by local governments in Texas that their 
interests were being overlooked resulted in state legislation requiring 
their involvement. To balance the potential benefits of highway public-
private partnerships with protecting public and national interests, we 
recommended that Congress consider directing the Secretary of 
Transportation to consult with them and other stakeholders and develop 
and submit to Congress objective criteria for identifying national 
public interests in highway public-private partnerships. We also 
believe that, the Secretary should, when developing these criteria, 
identify what guidance and assessment tools are appropriate and needed 
to protect national public interests in future highway public-private 
partnerships.
    In 2006, we issued a report that examined how other countries--
specifically, Canada, Germany, Japan, France, and the United Kingdom--
approached efforts to reform intercity passenger rail systems. We found 
that intercity passenger rail reform efforts in other countries 
illustrate that, to be more cost effective and offer increased benefits 
in relation to expenditures, there are a variety of approaches--and 
several key reform elements--that need to be addressed when 
implementing any approach. Over the past 20 years, several countries 
have employed a variety of approaches in reforming their intercity 
passenger rail systems to meet national intercity passenger rail 
objectives--that is, primarily achieving more cost effective, value-
added passenger service for the level of subsidies spent. These 
approaches, alone or in combination with each other, have been used to 
support other national objectives as well, such as increasing 
transparency in the use of public funds and providing transportation 
benefits and public benefits. For example, France and Germany changed 
their public funding structure by devolving decision making to local 
and regional governments in order to support the purchase of intercity 
passenger rail service, allowing local and regional governments to be 
more flexible and purchase service that best fits the preferences of 
the users. Prior to, or during, implementation of these various 
approaches, several elements key to comprehensive reform were 
addressed. The national governments of most countries we visited 
focused their efforts on the following elements: (1) clearly defining 
national policy goals; (2) clearly defining the various roles and 
responsibilities of all government entities involved; and (3) 
establishing stable, sustainable funding for intercity passenger rail. 
These elements were important to determining how passenger rail fit 
into the national transportation system and to increase the value of 
both federal and nonfederal expenditures on such systems.

    [Whereupon, at 1:25 p.m., the committees were adjourned.]

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                  FINANCING INFRASTRUCTURE INVESTMENTS

                              ----------                              


                         Tuesday, June 10, 2008

                  House of Representatives,
    Committee on Transportation and Infrastructure,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:09 a.m., in Room 
2167, Rayburn House Office Building, Hon. James Oberstar 
[Chairman of the Committee] presiding.
    Mr. Oberstar. The Committee on Transportation and 
Infrastructure will come to order. We are awaiting the arrival 
of our senior Republican Member on the Committee. He is en 
route. But we will have soon the rule providing for 
consideration of the Amtrak bill. And I know that several of 
our Members want to be on the floor for that, so I will just 
get started with my comments. I want to thank, at the very 
outset, our member panel for being here for their very 
interesting and persistent and thoughtful constructive work on 
financing infrastructure investments. We will hear from that 
panel in just a moment. Welcome Mr. Mica, thank you very much.
    Mr. Mica. Thank you for beginning and also for conducting 
this meeting. And I know I have to run to the floor in a few 
minutes. I understand our Amtrak proposal is up pretty soon.
    Mr. Oberstar. The rule on the bill.
    Mr. Mica. Okay. So we have got a little bit of time.
    Mr. Oberstar. The bill will be up after all of the----
    Mr. Mica. I appreciate it after the one-minute diatribes. 
But thank you for hosting this important meeting, and also 
hearing from our colleagues. And what is interesting, I have 
read through some of the testimony and proposals of our 
colleagues, and I think we all have the same goal in mind. And 
that is providing more net dollars for America's 
infrastructure.
    We have got three leaders here, another one expected, Mr. 
Calvert, who are interested in making certain that America is 
not a Third World nation as far as its investment and 
infrastructure, a position which Chairman Oberstar and I 
maintain. We have to stay ahead of the curve. And as we look at 
probably the most comprehensive reform in transportation 
policy, which will come with next year's expiration of our 
current legislation, we want to make certain that we are all 
working together toward that goal. I have reviewed some of the 
proposals, as I say, and they provide some additional net 
dollars available through infrastructure banking. Mr. 
Blumenauer has a proposal that is similar to one that I have 
proposed and share his desire also to try to get us to develop 
a national strategic infrastructure and transportation plan.
    In fact, I had actually drafted a similar proposal to his, 
which had a commission at the top, and that was my first 
thought at the legislation and that approach in trying to get a 
solid hold on what projects are in our national interest. And 
oddly enough after sort of vetting that, I came to the 
conclusion to reverse the process, which was rather than have a 
commission that would come out with a report or a study or a 
recommendation, and, in fact, Congress would have to be the 
ultimate arbiter of what is set in policy, that we would 
reverse that process.
    And so I have changed my approach, since if you contact any 
State, any governmental entity or jurisdiction, they can 
produce to you instantaneously what their infrastructure needs 
are. I was with Mayor Bloomberg, and he has, for New York City, 
a strategic plan. Each State just about now has a comprehensive 
strategic plan, and most of them incorporate most modes of 
transportation. So we took the reverse approach and have those 
flow from grassroots up. And having Congress in the position, 
which it ultimately will be in setting what our national 
strategic policy projects and priority plans are. We must also 
incorporate a way to finance them.
    Quite frankly, I think some of the proposals offered by my 
colleagues are quite modest. I believe that we need instead of 
$500 million, which I have heard the Chairman mention as a net 
amount, I would like to see $1.5 trillion in infrastructure and 
raise the $286 billion to what the Chairman has said to 
approach a half a trillion dollars. Then through public--well, 
through, first of all, through creative financing, bonding and 
leverage financing, finance an additional half a trillion 
dollars worth of projects. My administration has not been 
conducive to those types of proposals, which I believe make so 
much sense, because we can't pay for all projects up front, we 
do need to finance them and create a fashion, which will give 
us another half a trillion dollars. And then the third half a 
trillion dollars would come from public-private partnerships. 
And if we define at the Federal level what public-private 
partnerships are available, whether it is dealing with a sale 
of portions of our interstate, whether it is public-private 
partnerships in developing in toll roads, in a whole host of 
public-private arrangements, I think the potential for another 
half a trillion dollars in that net value is there.
    So that sounds like a lot of money. Richard Nixon, of 
course, went in August, I believe it was 1954, to Lake George 
to the Governors Association Conference. The Federal budget in 
1954 was $78 billion and he proposed a half a trillion dollar 
National highway system. And I think that is the kind of 
conservative initiative that we need in these times that we 
need infrastructure. I yield back to the Chairman.
    Mr. Oberstar. I am delighted to hear my colleague and good 
friend, Mr. Mica, talk about half a trillion dollars as a 
conservative investment. And I welcome that conservatism 
because it is a progressive conservatism and it is investing in 
America's productivity in our future. I have a number of 
comments that I intended to make at the outset, but I thought 
in light of the rule on the Amtrak bill coming up very early in 
this process, I yield to the Ranking Member, because I know he 
wants to be on the floor, and the other Members of the 
Committee want to be on the floor for the rule, however, I want 
to get on with this panel and intend to listen very carefully.
    I have read your testimony ahead of time. We have a second 
panel of financial and budget experts who are very special 
people, and several of whom have testified before at this 
Committee hearing. Dr. Everett Ehrlich; Mark Florian, Goldman-
Sachs; Rudy Penner, a former CBO Director; and Bernie Schwartz, 
whom I have known for many years over the time when he took 
over IBM's failed efforts at modernization of the air traffic 
control system and brought it into the modern age with great 
improvements and our en route center technology and the TRACON 
technology.
    Unfortunately, we will not have Felix Rohatyn.
    [speaks French.]
    So Bob Rowe at the unveiling of my portrait said that we 
have two official languages in the Committee, I just used one 
of them. Thank you. And now, Ms. DeLauro, thank you. Please 
proceed.

    STATEMENT OF THE HON. ROSA DeLAURO, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CONNECTICUT

    Ms. DeLauro. Thank you very much, Mr. Chairman. I take it 
in transportation that Mr. Rohstyn is in Paris, so good for 
him, if that is the case.
    Mr. Oberstar. We are not at war with anybody after what I 
said.
    Ms. DeLauro. First of all, let me just say thank you to you 
also just as a comment. 18 years ago when I first came to the 
Congress, my first Committee assignment was to the 
Transportation Committee. It is a love that I have, and I 
appreciate all of the good work that you have done and the 
innovation that this Committee is engaged in. And to Mr. Mica, 
thank you. I heard you on the news this morning on Amtrak, well 
done, and I thank you for your comments as well. This is an 
important hearing, and I am delighted to have the opportunity 
to testify. I am also so pleased to be here with my colleagues 
Earl Blumenauer, Keith Ellison, I am hoping we will see Mr. 
Calvert, as we examine these critical issues.
    As you know, when the Congressional Budget Office testified 
before this Committee last month, they indicated that as a 
share of gross domestic product, public spending on capital 
infrastructure has been relatively constant for the past 
several decades. Yet the CBO's review suggests that billions of 
dollars of additional spending on infrastructure each year 
would make good economic sense.
    Indeed, with our national economy struggling, the smartest 
national investments are the ones that create jobs today and 
continue to pay off for years down the road and whose benefits 
reach our entire community. The National Service Transportation 
Policy and Review Study Commission, a January report, 
recommended an annual $225 billion investment to maintain and 
improve our transportation system. Approximately $140 billion 
more than is currently invested. The GAO says our national 
water infrastructure will need from $485 billion to nearly $1.2 
trillion over the next 20 years. And according to the American 
Society of Civil Engineers, the number of unsafe dams in 
America has arisen by more than 33 percent since 1998 to more 
than 3,500 in 2005.
    It is clear we need a bold national infrastructure policy. 
Of course, we need leadership on this issue from the very top, 
from the White House. But Congress also has a critical role to 
play as well to provide both a vision and a way to realize it. 
Which is why I have introduced the National Infrastructure 
Development Act, to create an objective process for evaluating 
our infrastructure needs and leveraged private dollars to help 
rebuild our Nation's infrastructure, such as highways, roads, 
bridges, pipelines and public buildings.
    The legislation would create a national infrastructure 
development corporation and a subsidiary national 
infrastructure insurance corporation initially as Federal 
entities. The corporation would make loans, purchase securities 
and issue public benefit bonds to finance infrastructure 
projects. And the insurance corporation would further reduce 
the cost of those projects by ensuring the investments. The 
development corporation would include a board of directors 
consisting of 12 members, nine appointed by the President with 
demonstrated expertise in the field of infrastructure project 
development, finance or related disciplines.
    The board would determine which projects to be funded based 
on how they would meet national critical infrastructure needs 
and the degree to which private sector finance is being 
leveraged. It would also consider whether providing funds will 
help expedite the project in question. We would fund the 
corporation with $9 billion in appropriations over 3 years. 
After 5 years, it would develop a plan to transition into a 
government sponsored enterprise, entirely self-financed through 
user fees and the sale of public stock.
    We face a critical moment, and this proposal represents, I 
believe, a powerful opportunity to accomplish two important 
obvious. First, to establish an entity that can carefully look 
at projects and fund those which are the most critical to our 
Nation's continued growth. Second, the proposal leverages 
private sector investment to the largest degree possible. This 
could not be more important during tight financial times in 
which Federal and State governments simply cannot finance these 
projects alone. SAFETEA-LU is expiring and we face funding 
constraints on our aviation, water and school building systems, 
among others.
    We need a new funding mechanism to supplement what we are 
doing. This legislation can fill that gap and meet our 
responsibilities. It is endorsed by the Associated General 
Contractors of America. The American Society of Civil 
Engineers, building and construction trades, Department AFL and 
the U.S. Chamber of Commerce, among many others.
    Mr. Chairman, I believe my proposal, as well as the 
proposal of my colleagues here today, offer innovative and 
effective ways to take our national infrastructure policy in a 
positive and in a strong direction. By ensuring our Nation can 
continue investing in its instructor we can rebuild America and 
keep our Nation highly competitive throughout the 21st century. 
And I thank you for the opportunity to testify this morning.
    Mr. Oberstar. You join the ranks of many graduates of the 
Committee on Transportation and Infrastructure that go on to 
other Committee assignments. Mostly they go to the 
Appropriations Committee, occasionally to Ways and Means. And 
you are one of those who went to the Ways and Means.
    Ms. DeLauro. Well, it is a way really to fund the programs 
that we think so highly of Mr. Chairman.
    Mr. Oberstar. Well, we start you out here in the Committee 
to learn how to do it, then you go somewhere else to do it. Mr. 
Blumenauer.
    Mr. Blumenauer. Thank you Mr. Chairman. And I feel that I 
am just on leave from the Committee. I deeply appreciate the 
decade that I spent with you.
    Mr. Oberstar. It is a sabbatical, that's all.

  STATEMENT OF THE HON. EARL BLUMENAUER, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    Mr. Blumenauer. And look forward in my other Committee 
assignments to find a way to help you generate the resources to 
be able to rebuild and renew America. The legislation that I am 
speaking to today compliments what my good friend from 
Connecticut talked about. I am intrigued with the notion of an 
infrastructure bank. What I hope to offer up for your 
consideration is the leadership from this Committee to develop 
a vision for how all of the infrastructure pieces fit together. 
We are in the midst of an infrastructure crisis. I think, if 
anything, we have understated it. From water, rail, the 
transmission of electricity, right down the line, all of the 
infrastructure we are actually, I think, investing less as a 
percent of our gross domestic product than we have in recent 
memory. And we have on a regular basis evidence in the news 
about sink holes opening up, levies failing, the strains on the 
system. And it is going to be only compounded by the impact of 
global warming and climate change.
    The numbers are staggering in terms of you pick one, $1 
trillion, $2 trillion. We are losing the infrastructure 
investment race with our competitors overseas. Some are 
concerned about China and a potential military confrontation. I 
am worried that we are losing the infrastructure race to China. 
It was not ultimately our Polaris missiles and atomic cannons 
that brought down the former Soviet Union. It was their ability 
to compete with us economically. And we at this point are in a 
situation where we are losing the capacity to compete 
economically with the European Union, with China, with Japan.
    Even India is investing eight times what the United States 
is in terms of its gross national product. But it is not just 
more money. And I will work with you as a Member of the Budget 
Committee, as a Member of Ways and Means to find more 
resources. But it is how we spend the money and what we spend 
it on. Twice in the past the United States has developed a 
large vision for infrastructure development. You passed 
legislation several months ago commemorating the 200th 
anniversary of the Gallatin plan that was commissioned by 
President Jefferson with his Secretary of Treasury, Albert 
Gallatin, to develop a plan that led to the Erie Canal, that 
led to the Transcontinental Railroad, the Homestead Act, that 
helped knit a ragtag group of 13 colonies into a 
transcontinental Nation.
    And it served us well in the 1800s. A century ago, 
President Roosevelt convened a similar conference in 
Washington, D.C. That led to infrastructure for hydro projects, 
for the National Park Service, and actually planted the seeds 
for the national plans that ultimately resulted in the 
interstate highway system. We need a vision on the scale of 
what Roosevelt and Jefferson did so that we can bring people 
together on all, in a comprehensive fashion for what 
infrastructure should look like.
    I am suggesting that we have a commission that would be 
jointly appointed by the legislative branch, by local 
governments and by the new administration so that we have a 
buy-in to how we are going to go ahead and do this. We have 
demographic strains where we are going to have 50 percent of 
the population, or excuse me, a 50 percent increase in our 
population by 2050. We are going to have reallocation in the 
Metropolitan areas. We have significant strain for rural and 
small town America. And energy prices skyrocketing. You are 
going to go to the floor in a few minutes to talk about your 
Amtrak reauthorization. And that is one other element where we 
are not putting the pieces together in terms of a robust rail 
passenger system at a time when we have airport congestion, 
where one-third of the trips for air transport are 350 miles or 
less and the economic model doesn't work with $140 a barrel 
oil.
    It is why we need to look at it comprehensively. I strongly 
urge that you consider a commission like I am suggesting. I 
know my friend from Minnesota is going to reemphasize and has 
an approach there. But unless and until we have you help us 
frame what the big picture is and we get the buy-in with a new 
administration, with local governments and have this 
conversation take place in congressional districts across the 
country, we are not going to have the consensus, the momentum 
and the insight to be able to have the big picture. Not a lot 
of studies. You know what the need is. But we need to bring 
that together in a comprehensive fashion and get a buy-in into 
a bigger picture for how the infrastructure pieces fit 
together. I appreciate your courtesy, I appreciate your past 
work in terms of putting the spotlight on plans in the past, 
and hope that this Committee can help set the tone for how we 
are going to rebuild and renew this country. Thank you very 
much.
    Mr. Oberstar. Thank you for your energy and for your 
enthusiasm and for your ideas. Mr. Ellison, my good friend and 
colleague, a first-term Member from Minnesota. He has proven 
himself and worked very hard without a lot of fanfare, just a 
good nose-to-the-grindstone work. Glad to have you hear. Thank 
you.

   STATEMENT OF THE HON. KEITH ELLISON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MINNESOTA

    Mr. Ellison. Thank you, Mr. Chairman. And let me start by 
thanking you, Chairman Oberstar, and Ranking Member Mica for 
holding this important hearing on the condition of our Nation's 
infrastructure and proposals needed for improvements to it. The 
issue of investing in public infrastructure in the state of our 
ailing public infrastructure is a very real issue that demands 
our immediate attention. You and I stood together, shook up and 
amazed at our own infrastructure tragedy in Minnesota when the 
I-35 bridge collapsed. We will never forget those moments. But 
those moments help us focus our attention on the needs of our 
country now, which unfortunately other Members of our body can 
talk about tragedies that happened in their areas.
    But it is bigger than just tragedy, it is a question of our 
economic viability. And that is why I am so happy to appear 
before the Committee today to discuss the National 
Infrastructure Bank Proposal, which is H.R. 3401 that I have 
introduced along with Representative Barney Frank of 
Massachusetts. This legislation would create an independent 
national bank with an initial outlay of about $60 billion in 
tax credit bonds. The bank would also be able to receive 
private capital and hence would be able to potentially leverage 
millions of private dollars. The bank is modeled after the 
European investment bank whose financing of public projects has 
created one of the most modern and efficient transportation 
infrastructure systems the world has ever seen. The 
infrastructure bank would not displace existing formula grants 
or earmark infrastructure, it would target specifically large 
capacity building projects that are not adequately served by 
the current financing mechanisms.
    Eligible infrastructure projects to the bank's jurisdiction 
would be limited to publicly owned mass transit systems, roads, 
bridges, drinking water, wastewater treatment systems and 
public housing properties. We ensure--to assure that we focus 
on public investment on projects with broad regional or 
national impact only projects that require a minimal Federal 
investment of $75 million would be eligible for bank financing. 
And these projects must demonstrate a substantial regional or 
national significance. Like other modern investment banks, once 
the bank identifies an investment opportunity, it will develop 
a financing package. This package would include direct 
subsidies, direct loan guarantees, long-term tax credit general 
purpose bonds. Most importantly, these bonds would be backed by 
municipal and state revenue which makes them some of the safest 
and most attractive investments.
    I believe this infrastructure bank could play a crucial 
role in tackling the major infrastructure deficit that 
currently exists in America. According to the American Society 
of Civil Engineers in its 2005 report card for America's 
infrastructure, it will take an estimated investment of $1.6 
trillion by 2010 to just bring the Nation's existing 
infrastructure to working order. In addition, the research is 
clear that investing in public infrastructure can help 
stimulate economic growth.
    According to the Department of Transportation, each $1 
billion of infrastructure investment creates 47,500 jobs. Many 
of these will be high paying high school jobs that can't be 
outsourced or offshored. We also need to consider the cost to 
our economy. For the failure to not invest in a public 
infrastructure, according to the Brookings Institution, our 
economy lost $78 billion in productivity due to public ailing, 
public infrastructure from congested roads and antiquated rail 
systems.
    Mr. Chairman, no doubt there will be a course of diverse 
opinions on these issues. Some will say we can't afford to meet 
our infrastructure needs. But in reality, we cannot afford to 
not meet our infrastructure needs, and the time to act is now. 
I believe the infrastructure, the tragic Interstate 35 bridge 
collapse which occurred in our State serves as a national call 
to action for this Congress and our Nation to focus on 
improving domestic infrastructure. In addition to health and 
safety, to maintain our competitive edge in the world America 
needs to dramatically increase our investment in public 
infrastructure. Americans deserve a need at public 
infrastructure of the 21st century that meets the demands of 
our lives and the 21st century. I look forward to working with 
this Committee and other Members of Congress to make a new 
national commitment to public infrastructure in this country. 
Thank you.
    Mr. Oberstar. Thank you very much Congressman Ellison, and 
for your remarks about that I-35 W bridge. To paraphrase 
Benjamin Baniker, a tragedy is a terrible thing to waste. We 
wasted an opportunity with that tragedy. Had the Congress been 
in session for one more week, I think we would have enacted 
legislation that I proposed in conceptual form. There was an 
opportunity, and by the time August passed and Labor Day 
passed, an appetite for action had also passed. And you are 
right to call that to mind.
    I just recently this past Friday was with Mr. Walz, our 
colleague from the Rochester area, at the Winona Bridge. And 
their bridge engineer took a hammer and tapped one of the 
girders and the hammer went right through. Rust had gone right 
through one of the critical structures of the bridge. And I 
asked, would you have done this inspection if I-35 had not 
collapsed? He said no. And then there is bridge routine to Luke 
and Superior that is now being completely rebuilt, or not 
completely rebuilt, the gusset fits are being restored, 
replaced and reinforced. And the bridge in St. Paul.
    And there are many others. But this is what was predicted 
in hearings I held 20 years ago about bridge condition. And a 
professor of bridge engineering at a prominent university said 
then the bridge maintenance and repair and inspection is in the 
stone age. It still is. We have got to pull out of it and we 
have got to make some investments to make sure those things 
don't happen again. Mr. Calvert, you have an interesting 
proposal. I look forward to hearing from you.

STATEMENT OF THE HON. KEN CALVERT, A REPRESENTATIVE IN CONGRESS 
                  FROM THE STATE OF CALIFORNIA

    Mr. Calvert. Thank you, Mr. Chairman and Ranking Member 
Mica and Members of the Committee. Thank you for giving me the 
opportunity to testify here at the hearing today. As you know, 
I represent a congressional district in southern California 
that encompasses some of the fastest growing communities in the 
Nation. My constituents are found to have the highest commuting 
cost in the Nation and the unhealthiest commute in America. 
While the region I represent faces infrastructure challenges on 
a number of fronts, I would like to focus my comments today 
solely on the emerging goods movement challenge. As many of you 
know all too well, this challenge is not exclusive to southern 
California. Trade Gateway communities all over the Nation are 
experiencing increased burdens on freight infrastructure 
surrounding air, land and seaports. During most of last year, I 
met and discussed goods movement issues with a variety of 
stakeholders, including industry leaders, think tanks which 
represent truckers, railroads, port operators, retailers and 
transportation planners.
    In a proactive attempt to address the freight challenges I 
introduced, along with my colleague Jesse Jackson, Jr., the ON 
TIME Act. The bill, H.R. 5102, which was introduced on January 
23rd of this year, will fund the construction of high priority 
transportation projects which will alleviate congestion in our 
Nation's Gateway Corridors to a dedicated trade-based funding 
stream. The ON TIME Act would direct the United States 
Department of Transportation to designate key transportation 
corridors or National Trade Gateway Corridors extending out 
from every official air, land and seaport of entry in the 
United States. Project eligibility under the ON TIME Act is 
limited to transportation projects located within the National 
Gateway Corridor.
    Furthermore, the legislation limits funding to surface 
transportation projects, such as highway improvements, truck 
climbing lanes, truck bypasses, grade separations and 
interchanges on key freight routes. Publicly owned intermodal 
freight transfer facilities and improvements to the 
transportation linkages out of port facilities also qualify as 
eligible projects. The bill grants States with the project 
selection authority, not the United States Department of 
Transportation or Congress, to ensure all interested parties 
have an opportunity to engage in the project selection process.
    The legislation requires States to seek the input from 
other government agencies, as well as the public and private 
freight stakeholders. The ON TIME Act derives its trade-based 
dedicated funding stream to the establishment of a capped and a 
nominal ad valorem fee on all goods entering and exiting 
through the official ports of entry. The ad valorem fee shall 
be equal to .075 percent of the stated value of the shipment 
with a cap or maximum fee of $500, whichever is less.
    The proceeds generated by the establishment of this fee 
which is conservatively estimated to be approximately $63 
billion over the next 10 years, will be deposited into a 
National Trade Gateway Corridor fund which the ON TIME Act 
establishes is a separate trust fund account within the United 
States Treasury. The fee established on the ON TIME Act is 
designed to ensure that it is paid for by the beneficial cargo 
owner rather than the transportation service providers such as 
shipping lines, trucking or railroad companies. Additionally, 
the fee is designed to be collected and administered by the 
existing Federal Government agencies through the use of 
existing forms and processes to the fullest extent possible. 
The bill apportions the funds collected by the newly 
establishment fee to the transportation improvement projects 
within the National Trade Gateway Corridor in which it was 
collected. Therefore, all funds generated from the application 
of the fee on goods imported and exported at the Port of 
Charleston, for example, would be apportioned to the 
transportation projects within the National Trade Gateway 
Corridor designated for the Port of Charleston. While I 
recognize that a proposal like the ON TIME Act is most 
appropriate as a possible component of the next highway 
authorization, in the short term, the Committee could move 
forward by advancing legislation that would simply direct the 
Department of Transportation to designate the National Trade 
Gateway Corridors.
    I am confident if we work together, we can create real 
solutions to ease the congestion bogging down the freight and 
commuters in our Gateway communities. Thank you again for 
allowing me to testify. I look forward to your questions. Thank 
you, Mr. Chairman.
    Mr. Oberstar. I thank you very, very much, Mr. Calvert, and 
each of our colleagues for their splendid thoughts. Each have a 
slightly different approach to the needs. But just a month ago, 
I traveled to Slovenia to the annual meeting of the Ministers 
of Transportation, 27 ministers of the EU, who were having 
their conference and asked me to be their keynote speaker of 
Slovene, French, Dutch, whatever else. But to discuss with them 
also their transEuropean transportation network, TEN-T, $350 
billion investment. Not just money planned or discussed, but a 
30-project system.
    This is not an eye test. I am just showing you it. You 
can't see from there. I can hardly see it from where I sit. But 
it is 30 individual projects. $350 billion. The most ambitious 
of which is to link the North Atlantic through the English 
Channel to the Black Sea through the Seine River, past Bahi, to 
the Rhine, and then by further canal to the Danube and the 
Danube to the Black Sea, saving hundreds of hours of transit 
and hundreds of millions of euros annually in transportation 
costs.
    And others deal with extending their existing high speed 
passenger rail systems, expanding their freight rail network, 
moving more goods from truck to rail, reducing their 
fatalities, which five years ago were 53,000 a year on their 
comparable highway network to ours. But in 5 years, they have 
reduced that down to the level of fatalities on the U.S. 
highway system, 43,000. They are serious about this. They have 
a plan. They didn't engage a commission, they engaged their 
ministers, they engaged their top policymakers, to lay out the 
needs, the sources of investment and to make the investments, 
and they are about half of the way through already ahead of 
schedule.
    Each of you, in your own specific ways, are proposing 
something similar. It really simply takes political will to get 
there. And we haven't had political will to make those bold 
investments that we need at the White House in the last 8 
years. There has been will on the part of the Congress. I 
recall very well Mr. Shuster challenging the Clinton 
administration and House Republican leadership to fence off the 
highway trust fund, to truly make it a trust and not subject to 
withholding of funds to build up surpluses and make deficits 
look smaller.
    And we succeeded in that effort. It was a bipartisan 
effort. Mr. Young advocated with the White House for a $375 
billion investment in surface transportation as recommended by 
the Department of Transportation. The White House said no. 
Speaker Hastert made the same appeal. He finally told me that 
he was told by the White House staff he was welcome any time at 
the White House but not to talk about transportation. And we 
wound up with $286.3 billion, thanks in large part to Mr. 
Thomas, a Chair of the Ways and Means Committee who insisted on 
additional investments well above the administration threshold.
    So now we have four splendid ideas set before us. I take 
heart from what Mr. Mica said a little while ago about $1.5 
trillion dollars of investment going beyond, I think that is 
total infrastructure investment, not just transportation.
    So Ms. DeLauro, let me ask, your testimony says that the 
board that you would establish would determine which projects 
to fund based on how they meet national critical infrastructure 
needs. What are the criteria? Do you spell those out or do you 
leave those up to the board to determine? How will--and private 
sector finance leveraging. The question I have is how do you 
make those decisions? The Wilson Bridge on the east coast 
through which 1 percent of gross domestic product of the Nation 
passes, or the Golden Gate Bridge on the west coast, which is a 
privately owned and operated structure, but to which we have 
committed Federal funds to strengthen against earthquake and 
terrorist damage, how much total investment will the $9 billion 
over 3 years in the corporation generate.
    Ms. DeLauro. Let me just start with that. First of all, I 
would imagine that at that conference in Slovenia, Mr. 
Chairman, that you didn't need simultaneous translation.
    Mr. Oberstar. No. For sure they can speak at least three 
languages.
    Ms. DeLauro. But I think it is very, very exciting what you 
outline there, and the kind of commitment and will that you 
have spoken about. Because my view is similar to yours and to 
Mr. Mica's that without the will or the willingness to engage 
in serious public investment, that we are not going to succeed. 
My view is that we need the robust investment from the Federal 
level. But what I have tried to do with this proposal is to 
create the opportunity for there to be public and private 
investment. Because I don't believe we can succeed alone in 
this effort. I think the scale of the problem is that serious. 
We are looking at a $1.6 trillion annual shortfall of funds. 
And I think we all know that that kind of money is not going to 
come from the Federal Government. And I think that we will 
succeed if we have the engagement of a public-private 
partnership. The national infrastructure development 
corporation would create $55.8 billion in economic activity.
    Mr. Oberstar. That is what you anticipate would be the 
leveraging, that is that the $9 billion would generate $55 
billion dollars?
    Ms. DeLauro. That's right. We would start with $3 billion a 
year over 3 years. And $30 million in terms of start-up costs. 
And this would become, over the time it would become a GSE a 
government sponsored entity, in the nature of Fannie Mae and 
Ginnie Mae.
    Mr. Oberstar. And then the criteria for the various 
projects would be----
    Ms. DeLauro. I think that we haven't filled out the 
criteria. And that that would become a function of the board. 
But there again, when we take a look at--you know, there is a 
question of what, in fact, is in the public good. And I think 
that that is something that has to be considered. But this is 
about leveraging private capital. It is not about privatizing 
our infrastructure.
    Mr. Oberstar. I understand that. I appreciate that.
    Ms. DeLauro. I want that to be clear.
    Mr. Oberstar. The reason I asked that, and I want each of 
the members to think about this, each of our witnesses, is that 
in consideration of SAFETEA-LU legislation I crafted the mega 
projects proposal. And it sailed through the House. We were 
going to have $17 billion. That eventually was cut down to $6 
billion because we had to cut the whole program back. And then 
when we got to the conference with the Senate they didn't want 
criteria, they didn't want any national standards. I envisioned 
maybe six or seven national mega projects were going to get $1 
billion to solve a critical juncture of confluence of goods 
movement, people and congestion. Huh-uh.
    The Senate told us very frankly we know how to make these 
investments and we will make the decision. We will take half of 
that money and spread it out. So it all got frittered away out 
on the national stage. We have to go into this with a clear 
national commitment as Europe did. 30 projects, $350 billion. 
We don't have to take a lesson from Europe, but we can take a 
lesson from their experience. Mr. Blumenauer, what do you 
envision the commission, how long a time do you anticipate it 
would take for a commission to review and make policy 
statements and to make recommendations to the Congress?
    Mr. Blumenauer. Mr. Chairman, it would be my hope that we 
would be able to streamline this process. As I mentioned 
briefly in my testimony, we don't have to have any original 
studies. There is ample documentation about cost, about 
challenges. I hope synthesizing that information and being able 
to take the show on the road to help develop the criteria you 
talk about. We, I would hope that within the course of the next 
two years of the new administration and the new Congress that 
we would be able to use this to supplement the work that this 
Committee would be doing to be able to have the overview to 
give impetus for what you have tried to do in terms of buying 
into a big picture, having criteria, having grassroots support, 
which is why the commission that I am proposing would have a 
minimum of 50 hearings around the country, to be able to give 
the sort of stamp of approval for the big picture and help us 
with the synthesizing process.
    One of the challenges we face is that the responsibility is 
spread in Congress throughout, although the primary thrust is 
here with your Committee, we have Commerce, we have Ways and 
Means, we have Homeland Security, the Natural Resource 
Committee. This would I think help us engage the administration 
and some outside experts in the big picture.
    Mr. Oberstar. I thank you for that. I just am troubled. I 
think the National Surface Transportation Policy and Revenue 
Study Commission did a good job in 18 months. But I worry about 
commissions, having observed them over many years, that they 
are a little like college professors. I have never seen a 
college professor's study proposal for less than three years. 
They are usually five-year grant proposals or at least three 
years. And we need some tangibles. So think more how you 
compress that whole process into a much shorter time frame.
    Mr. Blumenauer. I appreciate your admonition Mr. Chairman 
and would look forward to working with you and the Committee in 
doing that. Part of the good news is that the rest of America 
is not waiting for us. The Chamber of Commerce is rolling out, 
I think, 40 hearings that they are going to have around the 
country, we have been working with some groups that are looking 
at major conferences and public gatherings. We are having one 
with Senator Cardin in Baltimore on Monday. The number of 
national unions, including the laborer's union, are moving 
forward.
    I think that with your help, we could craft an admonition 
for a short time frame, engage the new administration, the 
grassroots effort, so that it comes back in a quick enough time 
that we can do this integrative process. And I look forward to 
working with you to make it happen.
    Mr. Oberstar. We will do that. Thank you. Mr. Ellison, the 
bonds issued by this national infrastructure bank proposed 
would be backed by full faith and credit of the U.S. 
Government, is that your concept?
    Mr. Ellison. Well, no, it is not envisioned that the 
Federal Government would be responsible for repaying the 
principal. The $60 billion in tax credits would be issued with 
the full faith and credit of the Federal Government, you are 
right about that. The principal of these initial bonds would be 
paid from the bank's revenues, which is taken from the 
subsidized loans that the bank offers to infrastructure 
projects around the country.
    Mr. Oberstar. Will government have to repay the principal?
    Mr. Ellison. Well, the--well, because the bonds, the tax 
credit bonds, not paying an interest rate, the bank would not 
be responsible for interest payments of the bond, only the 
repayment on the original principle.
    Mr. Oberstar. Okay. Thank you. Mr. Calvert, your proposal, 
together with Representative Jackson, Jesse Jackson that is, is 
a very intriguing one. It harkens back for me to the Port 
Security Act that we passed in 2002. And Mr. Young, then 
Chairman of the Committee, and I, and Senator Hollings from 
South Carolina advocated very much what you are proposing, a 
container security fee, and the White House vigorously 
resisted.
    Finally, Mr. Young and I, Senator Hollings, just said, 
well, we will drop it, let us get the framework port security 
policy in place and then figure out what we are going to do 
from there. I remember at the White House at the signing of the 
bill, the President signed the bill and he said, thank you, 
Jim, for your help in getting this through, I know you had to 
give up a lot. I said, now, Mr. President, how are we going to 
pay for it. He said, well, we will do that, we will get there. 
Well, we haven't. And I think that your container fee idea is a 
good one.
    A maximum of $500, do you know what the cost is, the 
transportation cost of moving a container from Long Beach, Los 
Angeles to the east coast.
    Mr. Calvert. Significant.
    Mr. Oberstar. $800 minimum. Probably getting more these 
days with the price of fuel. So your maximum cap on this would 
be minimal. Do you know how much money, do you have any idea, 
ballpark idea what agrees with that?
    Mr. Calvert. We are talking about approximately $63 billion 
over a 10-year period.
    Mr. Oberstar. Given what Mr. Mica said a moment ago, that 
is a modest investment.
    Mr. Calvert. Well----
    Mr. Oberstar. But it is a significant one.
    Mr. Calvert. --it is a start.
    Mr. Oberstar. But it is targeted, isn't it?
    Mr. Calvert. That's correct, it is targeted to the Gateway 
communities of the land, air and seaports throughout the United 
States.
    Mr. Oberstar. And intermodal applications?
    Mr. Calvert. Yes, sir. And also grade separations, truck 
dedicated lanes.
    Mr. Oberstar. Some of the biggest cost items in the 
portfolio?
    Mr. Calvert. That's correct.
    Mr. Oberstar. Thank you. Mr. Duncan.
    Mr. Duncan. Well, thank you very much, Mr. Chairman, and 
thank you for calling this hearing. I made extensive comments 
on this issue when we had the hearing with the National Surface 
Transportation Commission several weeks ago, and then again 
last week, when we had a hearing before the Highways and 
Transit Subcommittee, and so I won't make additional comments 
at this time except to say that Ms. DeLauro has hit the nail on 
the head when she says that it will take obviously public and 
private investment. There is certainly an important role for 
this Committee and this Congress in regard to our Nation's 
infrastructure.
    As I have pointed out many times, people in California use 
infrastructure in Tennessee and vice versa and there is a 
legitimate and important national role. And I share some of the 
Chairman's skepticism about another commission. But because I 
have such great respect for my friend, Mr. Blumenauer, who was 
such a fine Member of this Committee, I have co-sponsored his 
bill, and I think he is headed in the right direction.
    And there is good suggestions from all the Members. 
Especially, I think Mr. Calvert has made some good suggestions 
too. I will have a chance to talk with all these members, and 
so I will save my questions for the witnesses on the next 
panel. Thank you very much.
    Mr. Oberstar. I thank the gentleman. Mr. Nadler.
    Mr. Nadler. Thank you Mr. Chairman. Congresswoman DeLauro, 
Rosa, in your bill, as I read your testimony, am I correct in 
deducing that these projects would have to be self-funding 
ultimately?
    Ms. DeLauro. Ultimately they become self-sustaining through 
user fees, through tolls, those kind of mechanisms.
    Mr. Nadler. So a project that could not be self-sustaining 
because it was more important for whatever reasons or more 
expensive than it could recoup in user fees or tolls, could be 
financed in part through this bank but not in total?
    Ms. DeLauro. That may be. What we want to try to do here is 
to try to make the entity after the initial period a self-
sustaining one. And the best way to try to do that, in my view, 
is--you know, for instance, with water projects, there are 
already fees associated with water usage. It is a safe 
investment usually thought to be by the investment community.
    Mr. Nadler. The reason I ask is that clearly there are many 
infrastructure investments that are very important that could 
be self-sustaining over the long term, but also many that are 
very important that could not, and we have to make sure that we 
provide for them too.
    Ms. DeLauro. Let me just, if I can, for a second, because 
this is not meant to take----
    Mr. Nadler. The place of everything else.
    Ms. DeLauro. --the place of everything. In essence, it is 
meant, as my colleague Mr. Blumenauer pointed out, this to 
supplement what is in place, not to take the place of, because 
that would be a mistake. And you could look at other ways in 
which you might be able to address some of these issues. And 
Mr. Chairman I also might add, while I said to you that the 
criteria would be established by the board of directors of the 
corporation, there are further, and I won't go through them, 
that are listed within the bill where the proposals can come 
from, what projects are ready to go projects in the first 3 
years, evaluation processes, et cetera, in terms of eligibility 
criteria. I just wanted to make that clear. I am sorry, Mr. 
Nadler. 
    Mr. Nadler. Okay. Thank you. Keith, Mr. Ellison, I will ask 
you the same question. In your proposal, as I understand it, 
these projects would also have to be ultimately self-sustaining 
in order to be financed through this bank?
    Mr. Ellison. Yeah. The projects are ultimately envisioned 
to be self-sustaining.
    Mr. Nadler. Thank you. Earl, Mr. Blumenauer, I have no 
question. I simply want to observe that your history of the 
Gallatin, et cetera, is fascinating. I would also commend to 
you Henry Clay's American play which came between Gallatin and 
the later things which we saw the developments of that, and 
provided some of the basis for the formation of our political 
party system.
    Mr. Calvert, I have a question for you. You say that in 
your proposal--well, you say a number of things, but it says 
that the legislation limits funding to service transportation 
projects such as highway improvements, truck climbing lanes, 
truck bypasses, et cetera. Publicly owned intermodal freight 
transfer facilities and improvements to the transportation 
linkage at port facilities would also qualify as eligible 
projects. So for example--I have two questions. One is a tunnel 
or a bridge for rail freight coming from a port, that would 
qualify?
    Mr. Calvert. The local commission would determine whether 
or not that is a priority project.
    Mr. Nadler. I understand that. It would qualify as a 
possible project?
    Mr. Calvert. It could very well qualify, yes.
    Mr. Nadler. Okay. Thank you. My second question, the bill 
apportions of funds collected by the newly established fees to 
transportation improvement projects within the National Trade 
Gateway Corridor in which it was collected. Therefore, all 
funds generated from the application of the fee on goods 
imported and exported to the port of Charleston for example 
would be apportioned to transportation projects within the 
National Gateway Corridor designated for the Port of 
Charleston. If we are looking at a national infrastructure 
system, and I know nothing about Charleston, we are just using 
it as an example because you used it, might it not be the case, 
for example, and isn't this the purpose of the Federal 
Government, among other things, that it might serve a national 
purpose to invest more in the Port of Los Angeles than could be 
generated in Los Angeles, and maybe we should take some money 
from Charleston and give it to Los Angeles or vice versa? Isn't 
that why we have a Federal Government? In other words, not 
every port has to be self-sustaining. And if it serves the 
national interest, we should be able to--just as we don't say 
that every dollar of taxes collected in New York has to be 
spent in New York.
    Mr. Calvert. The assumption behind this by the way is not 
that the fee would raise enough money to take care of all the 
problems in the transportation network related to freight. 
There would be additional revenues that are collected by the 
Federal Government and could be determined to go to a port that 
may be deemed as a higher priority. Certainly the busier the 
port, the more revenue that that port would generate. Certainly 
the Port of LA, Long Beach, is a significant port facility in 
the United States. The Port of New York generates a significant 
amount of revenue. And there is significant projects that are 
needed to help alleviate some of the problems that those port 
facilities are having.
    Mr. Nadler. But there is no question of that. But my 
question is, if you are setting up--if we are saying we have a 
national infrastructure crisis, which we clearly do, and if we 
are looking for various revenue streams to support projects and 
to prioritize projects within that national need, shouldn't we 
set up those financing mechanisms to be directed wherever the 
greatest need is?
    Mr. Calvert. The users of the system are paying the fee. 
And so after a year of talking to the freight forwarders, the 
truckers, the railroad folks, the retailers that are using the 
system obviously to move goods, a consensus was that they did 
not want to see those amounts diminished by others who would 
determine what the priorities of those projects should or 
should not be. If the fee was in effect collected where the 
facilities need to be improved, then they were more or less in 
favor of this process moving forward. If the monies are 
diverted by well meaning folks, like appropriators, to other 
projects, there was less enthusiasm for this approach.
    Mr. Oberstar. The gentleman's time has expired.
    Mr. Nadler. Thank you.
    Mr. Oberstar. Mr. Mica.
    Mr. Mica. Thank you. Just a couple of questions. First of 
all, I guess, Ms. DeLauro, you have a development bank with a 
net value of about $9 billion is it?
    Ms. DeLauro. Yes.
    Mr. Mica. And Mr. Ellison, you have a infrastructure bank 
backed by bonds in the neighborhood of $60 billion?
    Mr. Ellison. That's right. Yes, sir.
    Mr. Mica. The only problem I have is again the low dollar 
amounts. I was up in New York last week and told the Chairman 
about this. Went down to look at the Long Island subway 
extension to Grand Central Station. It is a $7.2 billion 
project. We got FTA to finally agree on moving forward with it. 
It is far in excess of $5 billion for the Dulles Rail 
extension. The projects are getting very high in dollar 
amounts. I met with some financiers in New York when I was up 
there in promotion of our high speed rail private sector 
initiative. And one of them told me he is working on a $40 
billion project. I thought it was in Japan, but I know it was 
in Asia, that they are working on financing.
    Mr. Mica. So I just have questions about the numbers of 
dollars. That is why I said I want to look towards half a 
trillion in taking some of the revenue stream and expanding 
it--some for bonding, some for loan guarantees, some for 
government backing, some for creative leveraging, a host of 
those--so I think we are on the same target.
    Mr. Blumenauer, tell me, from the Commission how do you get 
into law the priority projects from your bill?
    Mr. Blumenauer. The goal, Mr. Mica, is to develop a 
national infrastructure vision of how the pieces fit together.
    Mr. Mica. Yeah. And I agree with you that we don't have 
that. But how do I get from--the Commission creates that; then 
in order to enact it, it has to be incorporated into law?
    Mr. Blumenauer. Absolutely.
    Mr. Mica. How do you get from----
    Mr. Blumenauer. Part of what needs to happen is that 
Congress needs to be operating under an overall framework for 
how infrastructure pieces fit together.
    Mr. Mica. But that would be, again, the law that we pass. 
And the Commission is going to develop basically the blueprint. 
But then I need to get the blueprint into law.
    Mr. Blumenauer. Absolutely. And what I would hope is that 
if we would finally have a comprehensive infrastructure vision 
for this century, that it would guide what happens with 
reauthorization.
    For instance, we just passed----
    Mr. Mica. Okay. Basically a guide. It doesn't go into----
    Mr. Blumenauer. We just passed a farm bill that has nothing 
aggressive in terms of water quality and water quantity. And we 
are going to have communities across the country spend billions 
of dollars to take farm waste, pesticide, and fertilizer 
pollution out of drinking water. If we had a framework that 
could be used to guide legislation as it goes through, we could 
have the various pieces fit together.
    Mr. Mica. I think we both agree that we need a strategic 
infrastructure plan. My concern is getting it into law. Because 
unless it is in law we can't get it enacted and we can't get it 
financed or funded.
    And the third part of my proposal also deals with moving 
the process forward, Mr. Ellison, which is my 437-day process 
plan, which is the amount of time it is going to take to 
replace that bridge in Minneapolis. Staff tells me that 
normally that takes 6 or 7 years through the normal process. 
But we should be able to do that for most projects that are 
basically in the same footprint.
    And finally, Mr. Calvert, I think you have got a great 
proposal. I think it would generate revenue. But I think it 
needs to be part of a more comprehensive plan like Mr. 
Blumenauer is proposing and I am proposing, because even if I 
solve southern California's problems and I get to the Nevada 
border, I get to some other jurisdiction and my road narrows 
from 10 lanes down to four lanes, and my rail goes to single 
track, and my other infrastructure is not adequate, then things 
instead of getting clogged up at the dock are getting clogged 
up somewhere else.
    So, yes, I think we need some of the vision that you have 
provided. That needs to be meshed into the larger plan so that 
we are doing the rest of the puzzle to make the whole thing 
work. Would you agree?
    Mr. Calvert. Well, certainly you are correct this is a step 
forward. There isn't a freight strategy in this country, as you 
all know. And there are certain areas in this country that are 
suffering the consequences of that. And I can't think of any 
area moreso than southern California.
    Mr. Mica. I just want to take your plan nationwide.
    Mr. Calvert. What is that?
    Mr. Mica. I just want to take your plan nationwide.
    Mr. Calvert. Well, it is nationwide. Obviously, all ports 
of entry, air, land and sea, would collect that fee; and it 
would collect $63 billion in 10 years.
    Mr. Mica. And part is again this infrastructure plan.
    But we are going to have to look at all of the above when 
it comes to financing, because we have got some incredible--we 
have an incredible backlog of needs.
    Ms. DeLauro. Mr. Mica, may I just add something?
    Mr. Mica. If it is friendly, go ahead.
    Ms. DeLauro. Oh, it is always friendly.
    With regard to my proposal, it is $9 billion, 3 billion 
over the 3 years and the $30 million in start-up; but in terms 
of the economic activity we are talking about, you know, close 
to $60 billion in economic activity.
    But--I understand your point, but I think that what is the 
latter part of the way you want to divide up your revenue 
stream that you talk about, I concur that this needs to be a 
massive investment. But I think the degree to which we can work 
with the private communities in terms of that investment, and I 
will be very honest with you, I think at this juncture may be, 
and I am hoping that is not the case, there is more interest on 
our part, and we need a ready, willing, and able investment 
community to work in concert in order for us to begin to get to 
the scale that you are talking about.
    And that is why I believe that the way in which we can do 
it is through this proposal, other proposals, or some entity 
that provides the interest to the investment community of 
getting engaged with the public sector in order for us to carry 
out truly a national infrastructure development policy. And we 
need to be creative and innovative in that way in working with 
the investment community.
    Thank you.
    Mr. Mica. Mr. Chairman, you are going to have to give 
special footnote advice to the transcriber for this hearing 
because part of this is in French and part of this is 
conservatives talking very liberally and liberals talking very 
conservatively.
    Ms. DeLauro. One should never stereotype, Mr. Mica.
    Mr. Oberstar. Very pertinent observation.
    Mr. Mica. I never do that. I am just stating an 
observation.
    Mr. Oberstar. Mr. Ellison, you had a comment?
    Mr. Ellison. Yes, in response to the Ranking Member's 
comment, I just thought I would mention that we don't envision 
that the infrastructure bank would just cover the whole 
regional project when an area would apply.
    Our expectation is that they would have to come up with 
matching funds. And so perhaps, even if we did an equal match, 
we are talking about 120 billion--not quite to that half a 
trillion you mentioned, but closer.
    Mr. Mica. We will get you there. We are going to work with 
the liberals on the other side to try to get you thinking in 
terms of spending more money.
    Mr. Bishop.
    Ms. DeLauro. Let's get the investors to do it.
    Mr. Mica. With the investors.
    Mr. Bishop. No questions.
    Mr. Oberstar. No questions.
    Ms. Napolitano.
    Mrs. Napolitano. Thank you, Mr. Chairman. And I am glad 
that we have vision in some of the proposals that are presented 
here today. This has been something that has been long, long 
overdue, investment in the infrastructure, especially Ken's 
area. What goes through Ms. Richardson's area goes through my 
area, the great separation, the pollution, the safety issues 
that we keep talking about in this Committee.
    But beyond that, we get into the areas of the port; and I 
am very interested in your comments, Mr. Calvert, in regard to 
being able to add some additional cost to the shippers. What I 
would also like to see is being able to fund Homeland Security 
to inspect them to see what is in them so you can have the ad 
valorem. Because at one point several years ago one of our 
major colleagues from your neck of the woods indicated that if 
we were able to inspect every rail car, every U.S. citizen 
would have seven lawn chairs, because that is how they are 
manifested. And we lose a lot of funding because of 
miscalculations, if you will.
    That being said, the areas I think that all of you are 
touching upon, which are totally critical, is the reinvestment 
in job development for this country which would build the 
economy. To the extent that it hasn't been done in decades, 
that is critical to be able to insert not just money into 
people's pockets, but jobs that are ongoing and investment into 
the infrastructure which has been so--how would I say--
"neglected" for many, many, many years. I look forward to 
hearing more about all those.
    I have questions, but at this point the questions are 
really, not necessarily useless, I just need to learn more 
about what each one of you are proposing and how we can meld 
and marry--this is not a one-size-fits-all--for funding for all 
the other areas that we have. And I would like to hear some of 
the comments about how you feel that this can help this 
country's economy begin to get back on track by providing jobs 
and infusing a lot of what is needed in this country.
    Ms. DeLauro. Well, I think that the main premise of what I 
have been talking about is the way in which, by serious 
investment both by the Federal Government--continued serious 
investment by the Federal Government, which has been historic 
in the areas of infrastructure, and that in today's world, 
given that the public sector--and we are not going to do the 
kinds of things that we have done historically with the 
millions and millions of dollars that went into what they 
called old "public works projects" and that what we now are 
looking at is the need for the public and private sector to 
come together to look at this $1.6 trillion shortfall that we 
have in being able to look at our infrastructure and 
transportation infrastructure, but also water. Let's take a 
look at energy and broadband and some other areas that are 
critical.
    We are a great Nation and we built rail nationally, we did 
communications nationally; we have done other areas. And that 
kind of investment created economic growth. And with economic 
growth that was--it created jobs. What I am talking about here 
when I talked about this $58 billion in economic activity 
creating 427,000 jobs, or close to 500,000 jobs, because of 
what you generate in terms of being able to put people, you 
know, to work with good jobs.
    Mrs. Napolitano. Ms. DeLauro, also, though--I am making a 
comment because I am losing time--we need to ensure that 
whatever is worked on, whatever is developed, that there is 
some provision to be able to do the further maintenance and 
ensure that that is not going to fall in disrepair----
    Ms. DeLauro. Absolutely.
    Mrs. Napolitano. --20, 30 years from now, which is what is 
happening.
    Anybody else want to comment?
    Mr. Calvert. I just would point out that whatever fee is 
placed on--and I don't call this a container fee; we call it a 
shipment fee because it is based upon an existing customs form, 
which makes it much less burdensome to collect that fee. 
Whatever that fee may or may not be, it needs to be equitable.
    As the Chairman knows and others know, the harbor 
maintenance fee, for instance, as an example, I think has not 
been handled properly, and maybe it is the fault of the 
appropriators. But the LA Port, for instance, is always 
complaining that they are not getting the fees back in the City 
of Los Angeles and Long Beach that they pay into that fund.
    If we are paying this fee, I think that those who are 
paying the fee should experience the benefit of that fee. And 
so that is the point I just want to make.
    Mrs. Napolitano. Yeah. Not only that----
    Mr. Oberstar. The gentlewoman's time has expired.
    Mrs. Napolitano. Thank you. Thank you, Mr. Chair.
    Mr. Oberstar. That is the problem with establishing a trust 
fund. You have to wall it off from reservations by the 
executive branch and by the legislative branch to make deficits 
look smaller or to shift dollars elsewhere, to be a cover for 
some other purpose.
    If we are going to establish trust funds, then we have to 
have the trust that the money will be used for the purpose for 
which the fee was collected.
    The gentleman from Wisconsin, Mr. Petri.
    Mr. Petri. Thank you very much. Thank you very much, Mr. 
Chairman, for having scheduled this important hearing to help 
set up the reauthorization of the Surface Transportation Act 
and other areas.
    Thank you all for being here.
    I just want to make an observation first, and that is, as a 
country, it is my sense that we are sort of at an inflection 
point. The national effort in infrastructure investment has 
been dwindling in the United States for the better part of a 
generation now. And yet, in our history, every--from the 
beginning, when they were all interested in developing this 
great continent, and then almost every 50 years since then, we 
have had leadership that has managed to lead the country to 
renew its commitment to having a first-rate infrastructure, 
from Henry Clay and the expansion westward, to Lincoln and the 
huge railroad investments that were a public-private 
partnership, to Dwight Eisenhower, who led us to build the 
biggest public works project in the history of the world that 
transformed our economy and our country.
    But now to maintain that actually costs twice as much as to 
build new, because people are using that road and so they have 
to repair it and improve it while working around existing 
traffic; and we are spending less than we did when Eisenhower 
was President, as a country.
    India, China, others are stepping up to bat and increasing 
their investments dramatically because they know that that is 
the way to maintain and improve their standard of living; and 
yet if we can't figure out how to do it, we will see ourselves 
gradually slip down.
    These things don't happen overnight, but a generation of 
neglect, followed by a second generation of relative neglect 
will send us into a situation where we may not be able to 
recover and go the way of Argentina, which led the world--in 
this new world was one of the big leaders 100 years ago, and is 
now sort of struggling because of neglect.
    So I just have two real quick questions: One, on the 
Commission, you know, there are two kind of commissions. One 
is--and the worry is that you kick the problem down the road, 
and it can be used as an excuse for procrastination. I think 
the Chairman expressed that concern that we don't really want 
to provide another occasion for delay. We need to marshal our 
forces and get the job done. So I would like, if you could, to 
address that.
    And the second question is that I think the public will 
rise to the occasion, provide leadership and increase 
investment. But they would want to have a good plan, not have 
it wasted and not have unnecessary delay. And we have tied 
ourselves up like Gulliver's Lilliputian where we have a lot of 
well-meaning regulations and so on. And they do--we do have to 
have good environment, but do we have to spend 10 or 20 years 
to build a new airport or expand a road? Isn't there some way 
we can work together to speed up these approval processes?
    So I will yield.
    Mr. Blumenauer. If you are addressing that to me, Mr. 
Petri, I took the Chairman's admonition to heart. I mean, the 
whole thrust behind this is that there is a sense of urgency 
now. I think there is a recognition that infrastructure is in 
crisis, and that it is only going to become compounded by 
global warming and international competition and the fact that 
the Highway Trust Fund is going into deficit for the first time 
in history.
    So the whole thrust behind the creation of the Commission 
and tying this down is to make sure that it is not an excuse 
for procrastination, but instead provides a framework so that 
we can move forward.
    And it is not, I am convinced, a question of just more 
money--we do need more money--but the value proposition, how 
the money is spent and what it is spent on. I find it 
fascinating that, as we look around the country, there are 
local initiatives for transportation, for transit, for water, 
for parks and recreation; and 75 percent of them pass and they 
are financed by property taxes and sales taxes that are not 
always the most popular. But it is because they have had the 
vision, they have had the connection, and they have had a plan 
to move forward, and people know what they are getting.
    It is my hope that we can create a national commission, 
have a sense of urgency with the new administration to move 
forward, and that with that sense of urgency and direction that 
it will be easier for people to make the adjustments in 
financing that are going to be necessary for water, for 
transportation, for broadband, for energy; and that they fit 
together.
    Mr. Calvert. Mr. Chairman--one thing you mentioned, Mr. 
Petri, which I want to point out to the Committee, if the 
railroad builds a grade separation in the United States, they 
are exempt from NEPA, the National Environmental Protection 
Act. I think that it is something you should look into.
    If a private entity or another government entity is going 
to build a grade separation, they should be given the same 
exemption. It would save millions of dollars per grade 
separation, saving the taxpayers a tremendous amount of money 
without any real lessening of the environmental quality laws in 
the United States, because most of these grade separations are 
done in an existing urban area and, in fact, improve the 
environmental situation rather than degrade it.
    So that is a simple change, when you reauthorize the 
transportation act, which would have tremendous effect 
throughout the country.
    Mr. Oberstar. The gentleman's time has expired.
    The gentleman from California raised an interesting point, 
which I am not quite sure is accurate, but at any rate we will 
pursue it.
    Ms. Hirono.
    Ms. Hirono. Thank you, Mr. Chairman. And I thank the 
panelists for your leadership in providing us with these bills.
    Sitting on this Committee, it is clear to me that the 
infrastructure of all 50 States is critical to our Nation's 
economic health. And all 50 States are experiencing huge gaps 
between their infrastructure needs and the funding to provide 
for these needs. So I am interested in--I am looking at the 
practical application of these proposals.
    Hawaii is the most isolated landmass in the world, and so 
statutory language requiring substantial regional or national 
significance poses challenges for us, because if too narrowly 
interpreted, people argue, because of our isolation, what 
happens in Hawaii stays in Hawaii. And that is not true.
    So Mr. Ellison and Ms. DeLauro, both of your bills use this 
kind of language, and I hope that it is not your intent, to 
leave out a State like Hawaii from being able to obtain these 
kinds of financing from the outset.
    Mr. Ellison. Absolutely not. I think that Hawaii is a vital 
part of our national scene and needs to be fully engaged in 
this process. And I think what you are saying is borne in mind, 
and I think considers Hawaii; and I think we will be counted on 
to do that.
    Ms. DeLauro. This is a project or proposal that includes 
the application to all 50 States. This is not, you know, 
cherry-picking or doing anything else. This is meant to deal 
with infrastructure nationally, and as far as I know, Hawaii 
qualifies under the national rubric.
    Ms. Hirono. Good. Thank you. Because there have been other 
times when language such as this has pretty much iced out 
Hawaii; and as the only Member from the Hawaii delegation to 
sit on this important Committee in decades, if ever, I am glad 
to be able to point out these things.
    Mr. Calvert, along the same lines, I know that the State of 
California is pursuing the possibility of assessing fees on 
goods that go through your ports. And I certainly understand 
the stress on your roads and highways because of all of the 
goods that are going through.
    Now, Hawaii is one of the most--it is probably the most 
dependent on goods coming through shipping. And so I hope that 
as we discuss your proposal further that that kind of unique 
situation, where there are no highways, there are no 
alternative ways for people of Hawaii to obtain their goods--
90-plus percent come through, I think, the ports of 
California--that we can give some recognition to the potential 
of a very, very adverse impact on the cost of goods to Hawaii.
    We already have some of the highest cost of living in the 
country.
    Mr. Calvert. By the way, the fee would only be collected at 
the port of entry. So, in fact, it would only be one fee paid.
    So there wouldn't be a duplication of fee in the State of 
Hawaii; you would pay that fee, the importers of goods, at the 
port of entry of Hawaii, and those funds would remain in 
Hawaii.
    As you know, there is a problem with these States and local 
communities imposing fees within the States and the communities 
because of the provisions of the Interstate Commerce Clause, 
which many in the freight industry claim is unconstitutional. 
And many attorneys agree. So more than likely a fee, if one is 
to be placed, has to be done by us here in the United States 
House of Representatives, and not by the State and local 
communities.
    So I would be happy to work with the gentlelady from Hawaii 
to make sure it is an equitable fee and Hawaii benefits from 
this, not be taken away from any benefit from this bill.
    Ms. Hirono. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Oberstar. The gentleman from North Carolina, Mr. Coble.
    Mr. Coble. Thank you, Mr. Chairman. Mr. Chairman, I may be 
in and out, so I may repeat some of the questions.
    At previous hearings witnesses have advised us that one of 
the reasons that we have a surging infrastructure problem is 
that some communities have not maintained their infrastructure 
and had no plan for replacement. If this is true--and I am 
inclined to think that it is--do you all agree with me that it 
would be reasonable to ask, as a condition of receiving Federal 
financial assistance, that this problem be corrected?
    Either of the panel members.
    Mr. Ellison. Mr. Chairman, Representative Coble, I think in 
the course of this, my plan for infrastructure bank would be 
that local communities, regional projects would be presented. 
And I am hoping this would be a spark for greater planning 
regarding local needs so that we would have communities 
thinking about what they need over the longer term.
    So that is sort of the idea behind focusing on regional--
projects of regional significance, because then it would force 
communities to say, what are our needs; how are we maintaining 
what we have?
    Mr. Coble. I've got you.
    Anybody else?
    Mr. Blumenauer. Part of what I would hope would come out of 
a national infrastructure vision would be a reassessment of 
what the appropriate role of the Federal Government should be. 
And I would hope that out of that comes the notion that there 
will be local skin in the game everywhere.
    The era of 100 percent Federal money, or largely Federal 
money, I think, as it relates to infrastructure should go away. 
And I would hope that part of what we could do in the context 
of an infrastructure plan for the country would be to harmonize 
what the match ratios would be for different types of 
infrastructure.
    Right now, you get 80 percent for a road project, you might 
get 50 percent for a transit project, you get something else 
for a water infrastructure. And we find that the Federal 
formula sometimes drives the decision, not what is the best 
transportation solution.
    So I would hope that there would be local skin in the game, 
a uniform Federal match ratio, and that we rethink the myriad 
of all these goofy little things that we have embedded in 
statute over time. That is one of the reasons why it takes so 
long, is because we have so many permutations that no longer 
make sense.
    Mr. Coble. I thank you for that.
    Mr. Calvert. Mr. Coble, you have an excellent point on the 
issue of maintenance. As you know, if we are in the private 
sector, we depreciate capital improvement, we hopefully set 
aside dollars and make improvements along the way and maintain 
that equipment in good working order.
    Mr. Coble. Thank you, sir.
    Mr. Calvert. In government, that is not the case. And 
unfortunately, the government's a reactive body to a disaster 
such as what happened in obviously well-publicized events here 
in the United States.
    We ought to, when we finish an infrastructure project, 
deliver to whoever the recipient of that project is going to 
be. They should also deliver to us a maintenance program and 
how they are going to maintain that project in future.
    Mr. Coble. You mentioned dollars, Mr. Calvert. Speaking of 
dollars, let me ask you this. What is the practical effect of 
applying Davis-Bacon prevailing wage laws to Federal 
infrastructure funds? And--well, strike that. Let me put it a 
different way.
    Would this mean that fewer projects could be constructed?
    Mr. Calvert. Well, obviously every State has different 
laws. And the effect of, quite frankly, in our State of 
California any public infrastructure project would be more than 
likely built under Davis-Bacon. For a person who believes that 
should not be the purview of the Federal Government, but left 
to the States to determine their own, right-to-work States, for 
instance, may have different laws.
    So I would not pursue Davis-Bacon provisions with the 
Federal law. But that is my position.
    Mr. Coble. I didn't mean to ignore the lady from 
Connecticut.
    Ms. DeLauro. Thank you, Mr. Coble. The question of 
maintenance, I think, has got to be very, very much a part of 
the discussion and debate, whatever entity we try to put 
together. I think we--and I come from the northeast, which has 
a very old infrastructure. And we see the issue of 
deterioration and the lack of maintenance and what effect it 
has.
    And so, whatever new infrastructure project, including the 
one that I am talking about, I think we need to build in and 
sort through what is the best way in which we commit to 
maintenance and what is the Federal obligation there, what is 
the State and local obligation to deal with that, what kind of 
a proposal would come forward from a private sector in dealing 
with that?
    I think maintenance is critical. We have seen what happens 
when you don't deal with maintaining what we have. And we have 
sorely neglected, as Mrs. Napolitano pointed out earlier, our 
infrastructure. And when it collapses, our economic development 
and our revitalization and the thriving economy collapses with 
it.
    Mr. Coble. Thank you all very much.
    Mr. Chairman, I yield back.
    Mr. Oberstar. And now Mr. Arcuri.
    Mr. Arcuri. Thank you, Mr. Chairman. I would like to thank 
the panel.
    Just one brief comment that I have. You know, you talk 
about how we are going to fund this, and obviously that is 
critically important. But after we decide how we are going to 
fund it, my concern comes to what priorities do we use?
    And, Mr. Blumenauer, you brought it up. I think it is--no 
matter where I go in my district, people talk about water, 
sewer; that is their number one concern. Every mayor, every 
county executive has that concern and how they are going to 
fund it.
    Broadband, everyone wants it.
    Then when we move into the areas, though, of energy and 
transportation, there is a lot of controversy as to what is the 
best thing for the Nation, the region, for the State.
    How do you think that we prioritize these different 
projects? What suggestions do you have once we get the funding 
in place for setting up priorities? Do we have a national 
priority? Do we make the priorities based upon what the local 
communities want, or do we set a national priority list in 
terms of how we fund these?
    Mr. Blumenauer. It would be my hope that this process, 
particularly one that, for the first time, the Federal 
Government really does engage people at the State and local 
level in terms of the formulation, will help develop a 
consensus. I find as I work around the country--every month I 
go to one or two different communities--I find that there is 
much greater consensus about what the needs are, and that 
complying with Federal requirements with clean air, with clean 
water, with congestion, that there is less controversy than one 
would think when people are given a chance to come together and 
work on it.
    If we systematize what the Federal partnership is going to 
be, if we streamline the value proposition so there aren't 
people--I mean, right now in the Department of Transportation 
there are people cranking away on a stupid cost-effectiveness 
formula for transit that has no relationship to how any transit 
agency in America is operated. But they are still spending time 
and money on it in Republican and Democratic administrations.
    We have got to get to a point where we strip this stupid 
stuff out, that we streamline what it is that the Federal 
Government is going to do, that we give greater accountability 
for the money according to a broader framework.
    I think that this is something that Congress can agree to, 
and I think it will enable more money to move faster to areas 
of greater need.
    Mr. Arcuri. Well, again it is easy with respect--I think 
with water and broadband, everyone agrees. But when you get to 
transportation, then you get the push and pull between rail--do 
we move to road construction? Energy? You know, how do you make 
that decision of what priorities?
    Mr. Blumenauer. Having established, for example, criteria 
that transit projects are going to have to reduce the carbon 
footprint--I mean, I think that is a reality--and deal in a 
uniform fashion in terms of how we are going to move the 
greatest number of people for the amount of money involved. It 
will enable us, I think, very quickly as a nation to stop 
subsidizing airplane trips that are 19 minutes from here to 
Philadelphia, for instance.
    I mean, the economic model I mentioned a moment ago doesn't 
work for $140-a-barrel oil. It would argue for shifting more 
resources to rail passenger service and giving people 
flexibility, giving corridors opportunities in terms of how you 
are going to solve congestion problems. In some cases it will 
argue for beefing up rail as opposed to short hops for 
aviation.
    This will I think get us to the 30,000-foot level so that 
there are criteria to make those evaluations.
    Mr. Arcuri. Thank you.
    Ms. DeLauro?
    Ms. DeLauro. I think that what we are trying to do here is 
create an entity--at least what I am trying to do here is, 
where you do have a 12-member board, 9 of the members of the 
board of directors who are people appointed by the President, 
people who have experience in the area of transit, public 
housing, roads, bridges, water infrastructure, public finance 
or related disciplines where there is a--now that is a board of 
people who have the capability and the credentials in the area 
to deal with, you know, an examination of what it is that we 
need and where we need it, et cetera.
    Now, we have the Society of Engineers. We have all kinds of 
groups that are moving forward with what our priorities need to 
be, what areas are out there. So this is not reinventing the 
wheel. We will deal with input from State and, you know, local 
government in terms of those priorities.
    But what you have, and probably a heretical statement in 
many respects here, but there is--it is a way of, if you will, 
lifting the decision-making process out of what is beneficial 
to yourself or to me in terms of my own community. And 
obviously, that would continue because we have a local 
perspective, we listen to local government.
    But I am saying it is about trying to utilize an 
independent board, if you will, with representation from 
government, et cetera, in helping to create that.
    You had the ministers, when the Chairman pointed out what 
the European governments have come up with here, they laid out 
a plan, and it was based upon some very serious analysis of 
where the shortfalls are. We have again a number--I am 
repeating myself--a number of entities today that do that year 
in and year out. And most of the time those projects and plans 
lie on the shelf and they collect dust.
    I think we can create a mechanism, and we have tried to lay 
that out in this, which will help us to make those kinds of 
determinations with the appropriate input.
    Mr. Arcuri. Thank you.
    Mr. Oberstar. The gentleman's time has expired.
    This panel certainly is not collecting any dust. We have 
had panels of Members testifying before us many times in the 
last several years, and never has a Member panel attracted so 
much interest.
    Ms. Capito.
    Mrs. Capito. Well, thank you, Mr. Chairman. I think in 
light of your comments what we are really seeing here is that 
while we may have our differences on a lot of things, this is 
an area where we have so many similarities. I come from a State 
that has a lot of infrastructure needs, but some of our needs 
are not restructuring what we already have or repairing or 
redoing; it is still trying to reach people with clean water 
and waste water and broadband. And we know that to reach these 
areas it becomes so expensive, and that is why they are not 
being reached.
    So I would like to see something where we have a 
combination of not just restructuring what we already have, but 
still high prioritizing people who have never had that chance, 
never had the ability to access clean water in a fashion that 
most of our constituents have.
    The other thing I think that I am certain we have 
similarities on--and I don't know if you address this in any of 
your bills--is the "time is money" aspect of infrastructure. I 
mean, I have a road in my congressional district, Route 35, you 
know, if we had started building it when we got our first 
estimate--oh, I wish we had, because now it is so inordinately 
expensive that to complete this is going to be a challenge for 
years to come. And so I think that is why GARVEE bonds and 
those types of things have been attractive. We did a design-
build--the governor did a design-build on this segment of 
highway.
    But I don't know how you answer that question or how you 
meet that challenge of moving forward. I do believe it goes 
back to what Congressman Blumenauer was saying, that you have 
got to have a lot of local skin in the game in order to set the 
priority to move it forward.
    And but it also has to be vetted. I think a lot of people 
in our local communities, you know, their project is the number 
one project for them. And so that is where it really becomes 
hard. As we all know, we are political people. It becomes very 
political at the same time.
    So I don't know if the "time is money" aspect of 
infrastructure development, if this is something that you all 
have gotten to--and the totally unserved areas, if anybody has 
any comment on that.
    Mr. Calvert. The gentlelady, in fact, the name of my bill 
is called the ON TIME Act, so it is an appropriate name for 
what you are talking about. And obviously when you are moving--
this bill is specifically about freight--when you are moving 
freight, absolutely time is money, especially with 
manufacturing processes in the United States where you 
literally manufacture goods as the basic parts are received. 
And so it is a cost to every consumer if, in fact, freight is 
delayed at the port facilities, whether it is air, land, or 
sea.
    So you are absolutely correct to say that it is necessary 
to get freight moving in America, because that would help 
alleviate costs to manufacturers, make them more competitive, 
and have fewer jobs go offshore because of that. So it is an 
important thing that we address through this process.
    Mr. Blumenauer. The reference I made to the value 
proposition in the plan, when we have construction costs going 
up 40 percent in the last 3 years--and it is going to be higher 
than that going forward--that is a huge potential benefit if we 
can get our act together. And I would hope it would be a 
primary thrust of a national commission on comprehensive 
infrastructure, addressing the precise point that you make.
    Ms. DeLauro. Just to say that in the first 3 years funding 
is directed towards projects that are ready to go. And so the 
notion is on how we can move and how we can get going.
    And then I think you are right in terms of the length of 
time that it takes. And I, you know, think this is what we are 
trying to do, to not have the kinds of delays that we have had 
in the past. But specifically it talks about the first 3 years 
of this, saying it is stuff that is ready to go. And I hear all 
the time that there are projects ready to go, and there just 
isn't the financing to deal with them.
    And the purpose of the Infrastructure Development Act, Ms. 
Capito, is--really one of my primary concerns has been that 
there are areas of this country that don't have the kinds of 
services that the rest of us have, and it is because of 
financing. I look at that particularly as Chair of the Ag 
Subcommittee of Appropriations.
    And I look at broadband; we are just not doing it, and it 
is not happening. And I think that is why it has to be public 
and private in order to make it happen. Thank you.
    Mrs. Capito. Thank you, Mr. Chairman.
    Mr. Oberstar. The gentlewoman's time has expired.
    Mr. Carney.
    Mr. Carney. Thank you, Mr. Chairman.
    Mr. Blumenauer and Ms. DeLauro, your commissions do what 
differently than this Committee? Actually, what should we be--
you know, where is the Committee missing the mark for what you 
are proposing here?
    Ms. DeLauro. I don't have a commission. Mr. Blumenauer 
does. I will have to look at that.
    And this is an infrastructure bank. As I said earlier, this 
supplements the work of the Committee. This ultimately becomes 
an independent, government-sponsored entity similar to a Fannie 
Mae or a Freddie Mac, there again meant to supplement other 
efforts in terms of you have got State investment banks, you 
have got the good work of this great Committee, and you would 
have this effort in trying to leverage--essentially, and maybe 
I haven't made this point strong enough with regard to this 
proposal, this bill is about public-private partnerships to 
deal specifically with the shortfall that we experience every 
single year in being able to finance infrastructure.
    Mr. Blumenauer. The Chairman recalled some of the 
difficulties that we have had in recent years with 
administrations. Actually, I recall, as a Member of the 
Committee, we were arm wrestling with the Clinton 
administration and OMB. We have certainly had our differences 
with the current Bush administration and a lack of vision and a 
different approach.
    The Commission that I am recommending would have the new 
administration be part of the formulation so that it makes it 
easier to work with them in a cooperative fashion. It would 
have local and State because, as Ms. Capito is talking about, 
we have got lots of different needs around the country. We want 
to have them to be participating in the buy-in.
    Last but not least, as important as this Committee is, it 
doesn't have exclusive jurisdiction in the House. We have 
issues that take place in some of the Superfund cleanups, in 
terms of water with Commerce, with Natural Resources, with 
Homeland Security, even--dare I say--with the Department of 
Defense, which is the largest manager of infrastructure in the 
world.
    So by having a comprehensive commission, State and local, 
the administration and other elements, it would give us an 
opportunity to have a comprehensive effort so that it increases 
the likelihood that we are pulling in the same direction 
because we have no time to waste.
    Mr. Carney. Do you want sort of a Ben Bernanke for 
transportation?
    Mr. Blumenauer. For infrastructure.
    Mr. Carney. For infrastructure.
    Mr. Blumenauer. Comprehensive infrastructure.
    Mr. Carney. Thank you.
    I missed Mr. Mica's earlier comments on $1.5 trillion. I 
think that is what he was after.
    Mr. Oberstar. Yes, comprehensive for all infrastructure.
    Mr. Carney. Comprehensive.
    Is there any sense of how much that would generate in 
revenue for the government if we actually improved 
infrastructure and became more efficient, what that means?
    Mr. Ellison. That question can be answered a lot of ways, 
Representative Carney, but I would like to say, on the job 
front for every billion dollars spent, we are looking at about 
47,500 new jobs, generally union paying jobs, actually jobs you 
can't offshore and you can't outsource.
    So--it has an amazing and tremendous economic impact, and 
so I just thought I would add that.
    Mr. Blumenauer. One of the assignments I have taken for the 
Chairman with one of my other budget responsibilities on the 
Budget Committee is, we need to do a better job of actually 
assessing the economic impact.
    Mr. Carney. Right.
    Mr. Blumenauer. Because there has been talk about, quote, 
"dynamic scoring," but the current system does not take into 
account savings that occur by making investments properly or 
the ripple effects of doing it right. And as important as 
anything we need to do is to reassess how the budget rules 
craft, so that they don't actually lead to nonsensical and 
artificially understating the value of our investments.
    Mr. Carney. Mr. Calvert, do you have a comment?
    Mr. Calvert. I would only point out, yes, that obviously 
you spend a tremendous amount of money on infrastructure 
development. Like any business, if you spend money on capital 
improvement, you would hope it leads to efficiencies and in, 
effect, more profits down the road. But as you develop the 
mechanism to collect that fee or tax--and whatever mechanism 
you have, that it is an equitable one, and that those that are 
using the system pay, obviously, an equitable amount, and that 
those who benefit from the system benefit at least to the 
amount that they pay in.
    As we go through that process, I think if we can keep that 
basic tenet that we will be just fine.
    Mr. Carney. Let me tell you, as a Blue Dog, I don't like to 
spend money we don't have to, but when we spend money, I want a 
return on the investment. And if this does that, you know, we 
have got to actually be serious about how we approach this one.
    Thank you, Mr. Chairman.
    Mr. Oberstar. The gentleman's time has expired.
    Mr. Platts?
    Mr. Platts. No questions.
    Mr. Oberstar. No questions.
    Mr. Diaz-Balart?
    Mr. Diaz-Balart. No questions. Thank you.
    Mr. Oberstar. Ms. Fallin?
    Ms. Fallin. Thank you, Mr. Chairman. I just have a couple 
of comments, and I appreciate all of our fellow colleagues that 
have come today to help us with a good discussion about 
important issues for our Nation.
    And I will just say on the record that I do support public-
private partnerships, and I appreciate the good discussion and 
some of the ideas.
    I didn't get to hear everything discussed today, but got to 
hear a little bit of it. And I do agree that we need to have a 
national plan for infrastructure, especially in light of the 
rising fuel costs, congestion delays, the issues that we have 
with our airlines and costs involving them, the aging of our 
infrastructure in general, whether it is railroads, bridges, 
airports, whatever it might be. So I appreciate the discussion 
of having a group that comes together with all the parties 
involved.
    But I know one of the issues that is very important to my 
State is that the local department of transportation, the 
director of our transportation and our transportation committee 
members who are appointed by our governor, also like to have 
input into what is a priority for our State as far as our 
spending needs.
    So I guess my question is, how can we ensure that our 
States have a good role to play in determining the priorities 
of how that money will be spent, the timing that it will be 
spent, in light of us also needing to have a national plan to 
address movement throughout our Nation, especially on our major 
interstate areas?
    Mr. Ellison. Well, Mr. Chairman, Representative Fallin, 
under my bill states and regions that wanted to apply, they 
would come up with the projects that they wanted funded. So 
they would always be right involved. And of course there would 
be an expectation that they would lay some money out on the 
table to get that Federal assistance. So they would be right 
there.
    Ms. DeLauro. In terms of the National Infrastructure 
Development Bank, proposals may come from the State revolving 
fund or another entity. "Entity" is defined as an individual, 
corporation, partnership, joint venture, trust, governmental 
entity or instrumentality, so absolutely included in terms of 
what the State and local government feel is in their best 
interests.
    Mr. Calvert. In my legislation, the Department of 
Transportation would pick the national gateway corridors. 
However, the bill states that the project selection authority 
would not be the U.S. Department of Transportation or Congress, 
but a local--State and local-driven process in which those 
priorities would be driven. And also the users of the system, 
including the private entities that would be using the system, 
would also be involved to make sure that the system is 
prioritized to make sure that the money is spent a proper way.
    Mr. Blumenauer. The Infrastructure Commission that I am 
proposing would have representation from State and local in 
terms of the formulation. And one of the tasks of creating a 
national infrastructure division is to refine the role of the 
various partners in that equation.
    As I mentioned earlier, I think the era of 100 percent 
Federal money should not return. I think we ought to look at 
balancing the partnership and providing a framework so people 
can work comfortably within it.
    Ms. Fallin. One other follow-up question, too: One of our 
other big concerns is that we send our Federal Highway Trust 
Fund taxes in, and many times we don't get as much money back 
as some other States. So that also has been a huge concern of 
our State; we don't mind doing our share, but we also want to 
have our share back. So how do you ensure that states will be 
treated fairly?
    Mr. Calvert. From California's perspective, being the 
largest donor State in the country, that is certainly an 
important issue. We have important needs in our own State. As I 
mentioned to Mr. Carney, any process that we do here, whether 
it is a Republican process or a Democratic process, it has to 
be thought of as equitable.
    And California is willing to do its fair share, as are 
other large States, but it has to be for a national purpose, 
where we all believe that we are getting something out of the 
process. And hopefully, that is what will happen in future 
transportation bills.
    Mr. Blumenauer. If you do it comprehensively for 
infrastructure, and you are dealing with transportation and 
water and broadband and energy transmission and aviation and 
rail, if you do it comprehensively, it is easier to have an 
equitable balance than if you are just picking one and another.
    And so I would suggest the more comprehensive, the easier 
it is to reach the objective that you are seeking.
    Ms. Fallin. All right.
    Thank you, Mr. Chairman.
    Mr. Oberstar. I thank the gentlewoman.
    And Mr. Hall.
    Mr. Hall. Thank you, Mr. Chairman.
    In my district and in the Hudson Valley of New York there 
are pressing needs both with regard to transportation and clean 
water, sewage treatment. It is a heavy commuter district. We 
have 13 bridges on the deficient list. We have a number of dams 
on the deficient flagged list of dams in need of repair.
    We have infrastructure needs that I wouldn't have thought 
of, maybe, until recently. Metro North Railroad, for instance, 
is suffering from a lack of parking spaces since the price of 
fuel went up so much that a lot of people are leaving their 
cars home and commuting to the New York area, to the New York 
City region by train. And so that is the kind of infrastructure 
that needs to be considered.
    Buses, which may not be thought of as infrastructure, but 
nonetheless in an area that is heavily populated, like 
Westchester County, where it is so densely populated it is hard 
to find a right of way for a new rail transit, it has been 
brought to my attention that buses that are designed to compete 
with the high-speed rail or airplanes in terms of comfort--
ergonomically designed seats, drink holders, Internet access 
and so on--these high-quality accoutrements that we are used to 
seeing in other modes of travel would attract people to use the 
buses, which are currently thought of still as sort of the old 
Greyhound model.
    And they had the added advantage of being able to have 
managed bus lanes while they go through the major routes. And 
then when they go out into the counties, they can split and go 
on existing infrastructure, roads that already exist, to take 
people to diverse drop-off points. So just a couple of ideas 
there.
    In terms of skin in the game, for many of the communities 
in my district, they are strapped for cash; and property tax is 
a constant and yearly concern or, for some, a daily concern.
    If a 20 percent cost-share on a road or a 45 percent cost-
share for a water grant is a high hurdle to climb, how would 
these infrastructure proposals help them? And would communities 
be able to band together to spread costs for projects with 
multijurisdictional benefits?
    And I would ask for a brief answer from each, starting with 
Ms. DeLauro, please.
    Ms. DeLauro. Well, I think that needs to get--we talked 
about skin in the game. I said at the outset, I--and I think 
that we want to deal with localities, but I want to see skin in 
the game from the investment community in terms of this public-
private partnership effort.
    I think that we need to engage them and talk about what 
kind of incentives we can provide for investment into these 
projects. And then we can sort out with a locality and stuff 
what makes sense in terms of the appropriate match.
    We looked at this in terms of when we did the COPS program 
here. We said, hey, you have got some money here for 3 years, 
and then after that you have to take on some of the 
responsibility or all of the responsibility.
    And I think we can sort that out. I don't have a dollar 
amount for you; I don't have a percentage for you. I think we 
have got to start to put pieces together and deal with it.
    I am, frankly, of the concern at the moment that we do not 
have the kind of capitalization of these projects at an 
investment level that is going to help us to meet the shortfall 
in your community and other communities.
    And then I think we can go from there to figure out how it 
is that we make this actually, when we say "public-private," 
that is on the public side the Federal Government and State and 
local government in terms of their participation.
    Mr. Calvert. I just point out on the freight proposal we 
have before us, it is 80-20, but of course the fees are 
collected by the users of the system, so their skin is in the 
game substantially.
    And so in my experience most communities that are given the 
opportunity for an 80-20 project take it happily in water 
projects or in transportation projects. So I think we can work 
out some kind of an equitable process by which it will work.
    Mr. Ellison. Under my proposal, these are projects of 
national or regional significance. So, absolutely, local 
communities would be banding together with other local 
communities in order to get these kinds of projects funded and 
would be able to pool resources.
    I think that is exactly what you are asking, so that is an 
answer to the question.
    Mr. Hall. Mr. Blumenauer?
    Mr. Oberstar. The gentleman's time has expired.
    Ms. Richardson?
    Ms. Richardson. Yes. Thank you, Mr. Chairman.
    First of all, I would like to applaud my colleagues for 
your testimony today, particularly your concern with 
transportation and what is going on in this Nation. Given, 
though, many of you don't serve in this jurisdiction, I really 
applaud your efforts to help us as we struggle to do better in 
this area.
    I am going to focus my questions, because I am limited in 
time, to Mr. Calvert, because your proposal most impacts my 
particular district. I have five questions for you. So if you 
could be as brief as possible, because I would like to say a 
closing comment.
    Number one, do you have a list of supporting companies and 
organizations that are supporting H.R. 5102?
    Mr. Calvert. Yes. I can supply that for you.
    Ms. Richardson. Thank you.
    Number two, why did you include exports in your proposal? 
Many would say that companies here in the Nation are having a 
difficult enough time competing with products in Japan and 
China and everyplace else. So why did you consider including 
exports?
    Mr. Calvert. One, there are some regulations that are 
international regulations regarding trade. This is a fee, and 
if you exclude exports, it may be deemed as disproportionate to 
imports. And so in order for this to meet legal requirements 
under collection of fees, exports were necessary.
    And obviously exports do impact transportation as well as 
imports.
    Ms. Richardson. Third question, what is the cost of 
collecting these fees and administering the program? You said 
you were talking about a $63 billion profit over a 10-year 
period of time.
    Is that net, gross, or is this less?
    Mr. Calvert. That is gross. It is a very nominal fee 
because you are using an existing customs form on a shipment 
fee. So, in effect, it would be a software change. I understand 
from those who are involved, it would be somewhere in, about, 
the 2 percent range.
    Ms. Richardson. Okay. And Mr. Calvert, I am a little 
concerned about the wide scope of the use of the funds. In the 
notes that were provided to this Committee, it said that the 
second option of where funds could be utilized is for 
construction of, or improvements to, a publicly owned, 
intermodal freight transfer facility for providing access to 
such facility or for making operational improvements to such a 
facility.
    I will tell you, in my district, I am the home of the 710 
freeway, the 405; 45 percent of the entire Nation's cargo, 
almost half of the entire Nation's cargo is going through my 
district.
    So could you describe why you felt the need to include the 
use of funding for construction of these intermodal facilities 
given the dramatic impacts on our roads and highways, which is 
what this Committee is really all about.
    Mr. Calvert. Obviously--and I know your district well--
obviously, we are trying to encourage shippers to get on more 
trains and use fewer trucks.
    And so, as this process moves forward--and by the way, it 
would be prioritized by the local community, your community, 
the State and the users of the system, to find the points that 
are clogging traffic through the system and clear it to get 
those trains and trucks through the system, through the highway 
system as quickly as possible.
    These dollars could be used to improve the 710 highway, for 
instance, for truck-dedicated lanes. It could be used for 
truck-dedicated lanes throughout the National Gateway corridor, 
how it is defined, to help move freight. Certainly rail is an 
important component of that and will continue to be an 
important component.
    As you know, we built the Alameda corridor, but we stopped 
building it, and now the train traffic is backing up throughout 
southern California all the way to the Cajon Pass.
    So this is a way for the local communities to collect a fee 
which would alleviate that traffic and collect a significant 
amount of money to pay for those improvements.
    Ms. Richardson. Okay.
    My final question, Mr. Chairman, although I do agree that 
Mr. Calvert's bill is well timed, some point of this is 
absolutely needed. I would like to respectfully request that we 
do a hearing, particularly in my district, since 50 percent of 
the Nation's cargo is impacted by this idea.
    In California right now, the Port of Long Beach and Los 
Angeles is in the process of instituting an IE container fee. 
And I think it is quite timely for this Committee and welcome 
all the many questions that were stated by Committee Members. I 
think it really speaks to the need of this issue.
    My final point, though, Mr. Calvert, I would like to bring 
up of my concern of your bill, your comment you said that the 
benefits should be at least as much as we put in. And in your 
bill you talk about a corridor of 300 miles. Well, California, 
we are pretty well congested, so in my particular, district 300 
miles goes past San Diego into Mexico; 300 miles goes all the 
way up to Sacramento. And I have got to tell you, I am going to 
have a real hard time supporting why 50 percent of the entire 
Nation's cargo is going through my district, and yet you would 
say San Diego would benefit, you would say Sacramento would 
benefit.
    So my question to you is, are you considering making an 
adjustment in terms of that corridor? Because that would be an 
extreme objection not only of myself, but many of my colleagues 
who represent southern California.
    Mr. Calvert. As this bill moves forward I am sure that 
there will be improvements to the legislation. But I would like 
to point out that the Port of L.A., Long Beach is not the only 
areas impacted by the trade activity that takes place at that 
port. Obviously with 44 percent of all imports and exports 
taking place at that port, it has a tremendous amount of 
traffic. But the trains, the majority of the trains that leave 
the Port of L.A. Long Beach go through San Bernardino and 
Riverside Counties, the inlet empire. Most of the distribution 
facilities where the trucks are going are located in the inlet 
empire of the State of California.
    And so I would point out to the gentlelady that those 
impacts are shared by other communities, not just Los Angeles. 
And as a matter of fact, the train traffic is so backed up in 
Riverside, the standard grade crossing now is 25 minutes in the 
city of Riverside and the city of San Bernardino.
    So obviously we need to work together to help alleviate 
this. This is a regional problem in southern California. I have 
been working with the Port of L.A., Long Beach for a long 
period of time, and with the freight forwarders, the truckers, 
the American Railroad Association, the U.S. Chamber of 
Commerce, all the people that are interested in pursuing a 
solution to this problem. And I found that it is not simple, 
but we would be happy to work with the gentlelady to try to 
come up with an equitable solution.
    Ms. Richardson. I welcome that. And Mr. Calvert, I would 
say I agree with you there are impacts throughout; however, a 
formula is definitely needed because it is not equal impacts. 
As you stated, if you expect people to be supportive they are 
going to have to feel that there is true equity, and I think 
there is more work to be done, but I welcome your openness.
    Mr. Oberstar. The gentlewoman's time has expired. If the 
panel has not expired, I think they should be fatigued at this 
point. There has been a longer grilling of this panel than we 
have of most other noncongressional witnesses, and I thank you 
for your patience for remaining with us throughout this whole 
period of time. Usually Members come, give their statement and 
run off to a hearing or to a floor statement. But you have 
stayed with it and you have been responsive to all the 
searching questions by our colleagues on the Committee. And for 
that I thank you. I invite you all, and will make sure you get 
a copy of the statements of the subsequent witnesses on today's 
hearings. It is very informational reading, very instructional, 
and I think it is extremely substantive material that will add 
to your understanding of the already advanced understanding of 
and proposals for the problems we are all facing.
    Mr. Calvert, I did want to observe, however, that whenever 
a railroad undertakes an action that triggers review by the 
Surface Transportation Board that also triggers a NEPA review. 
Should a railroad want to add a second line, for example, it 
must seek under Federal law review by the Surface 
Transportation Board and that entails NEPA review.
    Mr. Calvert. Mr. Chairman, I ask a question for 
clarification. Could they ask for a negative declaration of 
that?
    Mr. Oberstar. Could they ask for what?
    Mr. Calvert. A negative declaration? In effect, that they 
have that review.
    Mr. Oberstar. Usually railroads do. When they are making an 
acquisition, for example, they will ask for either a negative 
declaration or for a short course review of the acquisition. In 
some cases that is approved, in other cases it is denied.
    Mr. Calvert. Thank you, Mr. Chairman.
    Mr. Oberstar. I thank the panel and the whole panel is 
dismissed. Our next panel is Dr. Everett Ehrlich, Mr. Mark 
Florian, Dr. Rudy Penner and Mr. Bernard Schwartz. And in that 
sense, Dr. Felix Rohatyn, whose testimony has already been 
submitted and will be included in the record. I want to welcome 
this panel. Thank you for your participation today and for the 
splendid statements that you have already submitted, which I 
read at great length and with keen interest. I think it is 
collectively a splendid contribution to the work of the 
Committee.

  TESTIMONY OF EVERETT EHRLICH, PRESIDENT, ESC COMPANY; MARK 
FLORIAN, MANAGING DIRECTOR, GOLDMAN, SACHS AND COMPANY; RUDOLPH 
    PENNER, SENIOR FELLOW, THE URBAN INSTITUTE; AND BERNARD 
SCHWARTZ, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, BLS INVESTMENTS 
                              LLC

    Mr. Oberstar. And Dr. Ehrlich we will begin with you.
    Mr. Ehrlich. Thank you very much, Mr. Chairman. I am 
flattered by your invitation and to be on a panel with my three 
colleagues. I have submitted a statement for the record. Let me 
speak broadly and discursively about our topic today of 
infrastructure finance. We are here to consider the ways in 
which we pay for infrastructure because we find very 
frightening levels of needs that come out of engineering 
statements and other estimates. And the point that I want to 
make is that perhaps we are entering the worm wood at the wrong 
hole. Needs, when we talk about infrastructure, are a 
biological, not an economic term.
    When we have a statement of need for a dam or a bridge, is 
the dam the best solution, is it cost effective? Simply the 
fact that it is in disrepair doesn't tell us, for example, 
whether or not we should rehabilitate it, whether or not we 
should build a new one or whether we should let the dam go 
obsolescent or take it down and allow on other nonstructural 
solutions to provide the benefits with regard to electric power 
or wetlands preservation or whatever our objectives may be.
    The point is that we do not have a system that evaluates 
comprehensively all of our infrastructure opportunities. And my 
belief is that if we want to get more out of Federal resources, 
that we would do better to look at not how we pay for these 
projects, but how we select them. This is particularly true 
because of credit scoring in the 1990 Act that now takes direct 
outlays, loan guarantees, other forms of credit arrangements 
and puts them on a parity dollar-for-dollar basis in the 
Federal budget. The problem is less that we don't have a new 
method of infrastructure finance, than we have 90/10 or 80/20 
cost sharing or 100 percent cost bearing by the Federal 
Government regardless of the scope of national versus local 
benefits, regardless of the presence of nonstructural 
alternatives, regardless of whether or not user fees have been 
used to manage peek uses or otherwise to maximize our use of 
the asset.
    The proposal that came out of the CSIS Infrastructure 
Commission was to create a single national infrastructure bank. 
And not only would it be able to wield all of the tools that we 
have heard discussed and will hear discussed on this panel, 
such as direct subsidies or loan guarantees, or interest rate 
subsidies and the like, or whatever kind of assistance the 
government wants to provide to make an infrastructure debt 
instrument creditworthy, but also to have a place where all 
infrastructure proposals are evaluated using consistent 
parameters for the value of time, the interest rate, the cost 
of capital, the discount rate, the value of human life, to put 
all of them on an equal footing so that we know that we are 
allocating Federal dollars to the most pressing needs.
    And the infrastructure bank would create a variety of 
interesting opportunities, and I will highlight three very 
quickly. Representatives Calvert and Jackson have a proposal 
for a container system. And they have an idea that users would 
be willing to pay for it. And the point was made, I believe by 
Congressman Mica, that is inherently multi-state. Let the 
states come together with a package of user fee proposals, with 
perhaps supplementary private financing, go to the bank and 
say, we think that this is worth Federal involvement of X. And 
that can be directly negotiated.
    I will give you another example. New York City has a very 
daring vision for how it will exist in 2025. But when it takes 
that vision and tries to get funding for roads versus mass 
transit versus ports versus sewer, it has to go to different 
places. Let it take that comprehensive vision and take it to 
one place, to a national infrastructure facility, that would 
allow it to say, well, New York, if you raise this on your own 
and the State helps you, we will give you this. Or finally, we 
have very innovative new private financing entering the 
infrastructure area, and yet we have concerns about whether or 
not we are hocking assets or whether or not Federal and state 
prerogatives are being balanced.
    Let us establish a framework within which private money can 
refinance old assets or, more importantly, finance the 
construction of new assets within the framework of the bank and 
let the bank be a true financing partner. I dislike the term 
public-private partnership, I think the right term is business 
deal, but let us make good business deals with the private 
sector with the bank as the Federal Government's agent. Thank 
you, sir.
    Mr. Oberstar. Thank you very much for your rather concise 
statement of your written presentation. It is a remarkable 
feat.
    Mr. Ehrlich. We have a shared interest in my doing so.
    Mr. Oberstar. Mr. Florian.
    Mr. Florian. Chairman Oberstar, Ranking Member Duncan and 
the Committee, thank you for the opportunity to present to you 
today. My name is Mark Florian. I run the infrastructure 
banking group at Goldman, Sachs. In my 23 years at the firm, I 
focused on financing of infrastructure development. It truly is 
my passion. The Nation's transportation system, as the 
Committee knows, is in a crisis because current funding 
sources, as well as financing tools, are insufficient. As 
everybody knows, we are falling behind. The use of our highways 
have doubled in the last 25 years, yet the capacity of the 
system is only up 3 percent. The cost of maintaining and 
expanding this system has accelerated.
    Construction inflation is up 40 percent over the last 3 
years. The cost of asphalt alone this year is up over 25 
percent. The fuel tax has served our country well since 1956, 
but it is not keeping up. There is no silver bullet to our 
Nation's transportation crisis, but there are a number of 
actual steps we can take in order to address our problems. Two 
main categories; more funding or revenues available which will 
help us to use broader capabilities in financing infrastructure 
investments. The gas tax is an important source of funding. We 
could try to increase the fuel tax in the short term, but it is 
a challenge from both a political will and a public acceptance 
perspective. One alternative that the Committee has considered 
is to index the fuel tax. I think that makes sense. We can 
index it either to CPI or to construction inflation. That being 
said, however, I think most importantly for the long-term it is 
imprudent to rely primarily on a funding source that is based 
on fuel consumption given the reality that Americans are 
shifting to more efficient vehicles so consumption will 
naturally go down vis-a-vis the vehicle miles traveled and cars 
that don't even use gasoline are in our future, and not a 
distant future, one of the most promising solutions for the 
funding shortfall is to explore greater use of direct user 
charges, tolling or vehicle miles travel charges.
    We need to pursue greater use of user fees and availability 
of user fees in their various forms. At the same time we need 
to be cognizant that there are citizens of our country that 
have less means and we need to provide alternatives for all of 
our citizens, particularly those who don't have the financial 
capacity necessarily to pay user fees. Secondly, in addition to 
funding, we need better and broader use of financing tools. We 
need to tap all the sources of capital. Taxes on debt, 
government funding tools, as well as private sector funds. The 
tax exempt municipal bond market supplies about $400 billion a 
year of funding for infrastructure. We need to encourage it and 
to expand it. And it is provided at a very attractive cost to 
capital. As a result of this Committee's efforts under SAFETEA-
LU, private activity bonds in TIFIA have been expanded and have 
been an important part of our transportation funding in recent 
years.
    We need to expand these programs and streamline them. There 
has been a lot of interesting discussion about the exciting 
proposal for the national infrastructure bank. I believe this 
national infrastructure bank will only be effective if we 
specifically figure out what we intend to accomplish with this 
tool. There is no lack of capital to provide financing. We have 
the deepest capital markets in the world in the U.S. We don't 
need another source of money to lend to projects. But we can 
use a source to subsidize and to help assist in infrastructure 
projects getting them done better, faster and cheaper. First 
the bank could provide an interest cost subsidy, lower rates. 
We have tax exempt bonds already. It should be competitive with 
tax exempt bond financing or better.
    Second, the bank could provide a credit subsidy, 
essentially lending to projects that are higher risk, much like 
TIFIA does today, but perhaps more aggressively. And third, the 
bank could provide project cost subsidies with grants for early 
stage developments. It is always important to keep in mind, 
though, that while financing tools are incredibly important, we 
need more funding. Without that funding we can't finance. 
Public-private partnerships are also an opportunity. We should 
encourage these structures since our own U.S. pension plans are 
now interested in investing in them. We have seen that CalPERS, 
New Jersey teachers, Texas teachers, CalSTERS and many others 
are very, very interested in investing in infrastructure.
    We should tap into that source of capital. What are our end 
steps? What do we do from here? As we look to improve the 
quality of our Nation's transportation infrastructure, I think 
there are four key objectives. First, faster delivery of 
projects. Second, better choices for users, more revenue 
available and using the broad range of financing alternatives. 
While the Committee's focus on financing alternatives is 
appropriate, I urge you to continue your consideration of 
additional revenue sources that will underpin that financing 
that is necessary to fund our Nation's needs into the future. 
Thank you.
    Mr. Oberstar. Thank you very much, Mr. Florian. I 
appreciate it very much. Dr. Penner, good to have you back at 
the witness table. I remember your years at CBO and your 
contributions over a very long period of time.
    Mr. Penner. Well, thank you very much Mr. Chairman. And I 
would like to thank you and other Members of the Committee for 
this opportunity to testify. It is difficult to handle public 
investments in government budgets. The rewards from the 
investments are spread over an extended period, while the cost 
of investing is immediate. This creates something of a bias 
against investment. My full testimony describes six options for 
dealing with this bias. For highways and mass transit, there 
are very strong arguments for raising the fuel tax, but 
obviously that is difficult politically. A related, and I think 
superior option, probably not much easier politically, is 
relying more on tolling and congestion fees, which are now much 
easier to collect because of technological advances. They could 
generate very large amounts of revenue while increasing the 
efficiency of highway investment.
    Quite another approach would be to adopt capital budgeting 
for the Federal Government. I don't think that would work very 
well in our system. The basic idea of capital budgeting is to 
reduce capital's disadvantage in the budget process by allowing 
it to be financed with borrowing, while requiring the operating 
budget to be balanced with tax and other revenues. The problem 
is that we seldom come close to balancing our operating budget. 
And if you allow the marginal operating expenditure to be 
financed by debt, you are no longer reducing capital's relative 
disadvantage. If you do find a way to reduce it, then there is 
a danger in the budgeting process and all sorts of things get 
defined to be capital.
    My full testimony looks at various types of infrastructure 
banks, and they can be designed in a great variety of ways with 
varying degrees of control by the Federal Government. One form 
is a government sponsored enterprise. But they have to be 
carefully regulated to limit their risk taking. Given the 
problems in dealing with institutions such as Fannie Mae, I 
would suggest that the Congress should think long and hard 
before creating any new GSEs. One could create a revolving fund 
to deal with the problem of the lumpiness of investments for 
agencies that invest only occasionally. In years when an agency 
was not making large investments, they could contribute to the 
fund, and when they needed to invest, they could draw on their 
deposit or borrow for the fund. I think this is a promising 
idea that was discussed by President Clinton's commission to 
study capital budgeting. It is certainly worth an experiment.
    The full testimony discusses public-private partnerships by 
which, I mean, a private ownership of parts of the 
infrastructure. I think that could be a useful way to bring 
more resources to infrastructure investment. Last, the 
testimony discusses ways of making Federal subsidies for 
highways more efficient. The structure of Federal grants is 
very complicated, but many think that a considerable portion 
just displaces investments that States and localities would 
make anyway. It would be useful to study minimum effort and 
cost sharing requirements to see if they could be designed to 
provide the Federal Government more bang for the buck. While 
that is not an easy task, there is a much simpler improvement 
efficiency out there that could be pursued, that is, looking at 
the tax exemption on municipal bond.
    It costs the Federal Government far more in lost revenues 
than it reduces interest costs at lower levels to government. A 
carefully designed tax credit could greatly improve the 
efficiency of this subsidy. Having said all that, it is clear 
that getting money for infrastructure investment is going to be 
very difficult in future years. Social security, Medicare and 
Medicaid expenditures are approaching one half of noninterest 
spending and are growing faster than tax revenues and the 
economy. This puts a hard squeeze on all the rest of the 
government, including infrastructure. I think that a greater 
use of tolling and congestion fees and public-private 
partnerships are the most efficient ways of countering this 
squeeze. Thank you very much, Mr. Chairman.
    Mr. Oberstar. Thank you, Dr. Penner. I really appreciate 
your testimony. Mr. Schwartz, good to have you back again at 
the Committee. I appreciate your contributions over a very long 
time. As I said at the outset, when you were at Loral and we 
were trying redirect the energies of the FAA to modernize the 
air traffic control system, you made a great contribution. 
Thank you.
    Mr. Schwartz. Thank you for your nice introduction. 
Chairman Oberstar and Ranking Member Mica and the Members of 
the Committee, thank you for the opportunity to appear before 
your Committee. Over several decades, our country has 
accumulated a sizable infrastructure deficit, and as a result 
there have been numerous breakdowns and bottlenecks that have 
impeded the free flow of goods and services in this country. 
There is a wide inventory of deficiencies in our infrastructure 
from congested roads to water systems, et cetera. I will not 
recite them here. But I will say that there has been a wide 
deterioration. As a matter of fact, most people regard our 
infrastructure as broken. And this deterioration has undercut 
the Nation's economy and productivity, it has endangered our 
national security and it has undermined the quality of our 
life.
    One of the reasons for this infrastructure deficit is that 
our system for financing infrastructure has become increasingly 
inadequate with the passage of time. It has not kept up with 
the practices of other advanced industrialized economies. At 
the Federal level infrastructure is funded largely out of 
general revenues and highway trust funds, and at the State 
level the great majority of infrastructure is funded through 
the municipal bond markets as well as through state and local 
budgets. But these funding mechanisms have failed to keep pace 
with our national requirements.
    The current economic slowdown in turmoil in housing and 
credit markets threaten to further constrain State and local 
capabilities for infrastructure spending. Because States and 
municipalities rely heavily on property and sales taxes the 
housing correction in consumer slowdown will create a budgetary 
crisis even greater than we are having today. In addition to 
the absence of a Federal capital budget, the prevention, the 
lack of having a Federal budget, prevents us an appropriate 
sensible transparent and fully accountable method of funding 
the Nation's investment in long-term productive assets which 
are so necessary for our global competitiveness.
    A Federal budget would better focus our national priorities 
in a timely fashion. Also, it would better structure the 
payment and amortization of long-term investment so as to match 
resulting revenues derived from the investment. I disagree with 
Dr. Penner's approach to the Federal budgeting as being an 
additional problem. Most industrialized countries in the world 
do have a separate capital budget and operating budget and do 
very well with it. And every business in the United States is 
able to manage that problem as well. The major impediment to 
closing the infrastructure deficit is not lack of available 
cash, as Mr. Florian mentioned, or because of high interest 
rates.
    Notwithstanding recent credit problems and bank liquidity 
concerns, the world is awash with capital and long-term 
interest rates remain near historic low levels. In fact, there 
is no shortage of privately held funds to help pay for 
infrastructure, reconstruction and development if it is 
undertaken in a market sensitive manner. A new approach to 
funding infrastructure capital investment would open up new 
capital markets on international sources and domestic and 
fiduciary and pension funds. It would further enhance access to 
sizable pools of capital which require larger projects for 
scale and efficiency. Recently several legislative initiatives 
have been introduced in the Congress. The Dodd-Hagel Senate 
bill S. 1926, would create a national infrastructure bank.
    Representatives Ellison and Frank have introduced similar 
provisions in 1301 and they spoke to those issues today. These 
bills would authorize up to $60 billion in U.S. Government 
guarantees for bonds with maturities up to 50 years for 
infrastructure projects. Properly structured government 
guaranteed bonds could leverage up to $300 billion. As 
proposed, the national infrastructure bank would not operate as 
a bank but as a Federal agency with no capitalization.
    However, if Ms. DeLauro's legislation were modified for the 
bank to be capitalized for up to $10 billion, the bonds would 
be sufficiently flexible to achieve investment grade status as 
well as access to broader markets. In the House Congresswoman 
DeLauro's bill, I think it is 3896, has proposed an 
Infrastructure Development Act of 2007 which would be 
capitalized at $9 billion over 3 years. This entity would act 
like a bank, even though it is not called a bank. It would be 
able to make loans, issue and settle debt and equity 
securities. All of these new institutional arrangements would 
help remove politics from the funding of infrastructure 
projects and provide needed professional expertise and 
standards to states and localities for project development. 
They would also help States acquire financing for projects of 
national and regional significance. Further, by offering 
Federal guarantees State and local governments would keep 
borrowing costs low and provide both leverage and flexibility. 
The adoption of the significant elements of these combined 
pieces of legislation is strongly urged in order to achieve the 
following imperatives; to create high skilled well paid jobs to 
put the economy on a net growth path it is estimated, as stated 
here earlier today, for example, that for each $1 billion spent 
in infrastructure there is a creation of 47,500 jobs. Secondly, 
to divert the economic gains of our economic economy into long-
term investments and away from consumer stimulus programs which 
inevitably lead to excessive speculation. I would like to 
stress this in particular.
    Congress, in its attempt to offset the lack of jobs and a 
deteriorating economy, passed legislation for a stimulus that 
is short-term and would be a consumer-driven stimulus which, in 
the end, leads to the kind of excessive speculation that we 
have trouble with dealing. However, an infrastructure 
investment program provides for a stimulation but through long-
term projects that continue to add to the economy's wealth in 
the future. The third imperative is to enable us to close the 
infrastructure gap at a time of low borrowing costs, to create 
significant wealth in the form of productive long-term national 
resources, to increase future revenues and to provide access to 
new large capital markets here and abroad.
    In summary, public investment is the most responsible and 
reliable way to stimulate new private investment, create good 
jobs in the country and sustain innovation and productivity 
growth. This country can ill afford to delay infrastructure 
investment.
    And finally, America's competitiveness depends on the 
healthy infrastructure and needs long-term job creations as 
part of its program. I commend the Committee for addressing 
this very long-term but very, very substantial issue for the 
country. I think it is critical that this debate that we heard 
here today be continued. And I thank you for the opportunity to 
participate.
    Mr. Oberstar. Thank you very much, Mr. Schwartz, for your 
thoughtful comments and to each of the members of the panel for 
your contributions. Your back-up papers go in much greater 
depth into the oral summaries that you have already provided. I 
want to refer to the European Commission. The Transport Council 
that I addressed in the early part of May, May 5th, that 
council consisted of 27 transport ministers of the European 
Union. They have spent a great deal of time over a period of 
several years in fashioning a transEuropean transportation 
network above and beyond what individual member countries of 
the European Union have crafted, and boiled those down to 30 
major projects that are of significance because they are 
transborder projects and because they relate to priority 
transportation needs. Of those 30, 19 are rail projects. Three 
are mixed, that is intermodal railroad projects. Two are 
inlandwaterways, one of which would link the North Atlantic to 
the Black Sea traveling across the heartland of Europe. And one 
they call motorways of the sea, a fascinating concept.
    High priority in their report has been given to more 
environmentally friendly transport modes. And they have a map 
for each one of the 30 projects, and a progress report on how 
much money has come from the European infrastructure bank, how 
much has come from national governments, how much has come from 
private sources, and the state of progress on each one of the 
30 projects. It is a remarkably well-structured, thought-
through plan. Some of the largest scale projects have been 
completed. The fixed link between Sweden and Denmark, Malpensa 
Airport, the railway line linking Rotterdam to the German 
border. And then the high speed Brussels--Paris-Brussels-
Cologne-Amsterdam-London. Those are massive projects.
    The result of the Paris Brussels link is that there is no 
commercial air service between Paris and Brussels, it is all by 
high speed train. A trip that I took as a graduate, en route to 
a graduate program from Paris to Brussels in 1956 took 6 hours. 
Last year that trip was 80 minutes. One train leaves every 3 
minutes from Brussels to Paris, and likewise from Paris to 
Brussels with 1,100 passengers aboard at 184 miles an hour from 
six in the morning to midnight, carrying millions. People 
commute daily between the capital of Europe and the capital of 
France. People commute from, business persons commute from 
Tours in the southeast Loire Valley 220 miles daily to Paris in 
an hour and 15 minutes. You could hardly get through security 
at the nation's airports to your gate in 75 minutes, and they 
are doing this.
    Now, they have their national--they have their European 
community budget. They have something called a cohesion fund. 
They have the European redevelopment fund, they have the 
European investment bank and then they have private sector 
sources. But all of this investment which in the short term is 
350 billion U.S. Dollars, but in the long term will be in the 
range of well in excess of $1 trillion, is subject to a master 
plan that the ministers have agreed to.
    Now, Dr. Penner, you have been a critic of capital 
budgeting, but I suspect you would not disagree that we should 
know what those capital needs are.
    Mr. Penner. Absolutely, Mr. Chairman. And we should be very 
careful in selecting the kind of projects that we finance to 
make sure they pass cost benefit tests of one kind or another. 
But I think that is very different from capital budgeting. The 
capital budget is a way of planning how you divide your capital 
and operating expenditures.
    Mr. Oberstar. If you can just stop there and say we need to 
assess the portfolio of capital requirements of the civilian 
side of government. That is a first step, isn't it?
    Mr. Penner. Yes, that is a first step. But I don't think 
you have to have capital budgeting to do that. I think the 
advantage of capital budgeting, if you do it right, is that you 
can finance the capital with debt and you can pay it off as it 
amortizes, therefore the citizens who actually use it are the 
ones who pay for it. But that only works if you balance your 
operating budget. And that is a great defect in our system. We 
don't come anywhere close to that.
    In my full testimony, I give the numbers of capital 
investment. And you can define it to just include physical 
capital, you can include R&D, you can include education. If you 
include all of those things, the warranted deficit under 
capital budgeting would only be a little over $100 billion. And 
our deficit last year was well over $200 billion and this year 
it is going to be well over $400 billion. So unless you have 
the discipline to do it right, I don't think you should do it 
at all.
    Mr. Oberstar. That is the key, that is the key. At that 
very witness table 20 or so years ago, David Stockman said that 
he was opposed to a capital budget because if we had one, 
Congress would want to fund it. However, I said, well, we are 
doing it now, but it is done in a haphazard fashion and we have 
no way of prioritizing unless we know what the total portfolio 
of capital needs.
    The European Commission has done that. They have looked at 
the total range of capital investments and then narrowed it 
down to transportation, to those transportation projects that 
have met national, that is European national benefits. So I 
think my personal preference is that we at least establish a 
capital budget so we have an assessment of the needs, then 
engage as a political will to prioritize and to invest in 
those. And you are quite right, Dr. Penner, to point out the 
difference in the operating budget and the capital budget. That 
is a separate matter for the Appropriations Committee and the 
Budget Committee. Dr. Ehrlich, you make a very interesting 
distinction between financing infrastructure that compares new 
projects to managing the old ones and allows nonstructural 
alternatives. The European Commission also introduced an 
element that I cited a moment ago, environmentally friendly. 
Why do you make that distinction?
    Mr. Ehrlich. Because we pay for people to build things, and 
we generally don't pay for people to pursue those nonstructural 
alternatives. And they might be better, they might not. So a 
congestion charge akin to the one charged in London might be a 
better solution than building new mass transit or than other 
capital expenditures in a given urban area. Preserving wetlands 
or planning land use might be a better solution to flood 
control than building new dams and levees. The system we have 
now doesn't hunt up those answers. What it does is encourage 
localities to apply for capital grants so that they can get 100 
percent funding from the Corps of Engineers. And if they don't 
get it that year, the system encourages them to ride the merry-
go-round for another year and come back and see if they can get 
it next year. So what is lost is directing their attention 
first to nonstructural solutions and second to getting the best 
solution that can be funded now in place. And so what we get 
are solutions biased towards capital and that are often delayed 
because of the process by which we select these projects.
    Mr. Oberstar. You are quite right to point out that 
distinction and the importance, and we have in the Water 
Resources Development Act that the President vetoed and 
Congress overrode, a new direction for the Corps of Engineers 
to review nonstructural alternatives. And that is a principle 
that we should probably extend to other aspects of our 
infrastructure portfolio.
    One of the tantalizing propositions for the surface 
transportation program is, in addition to the user fee gas tax, 
vehicle miles traveled, to which I would add weight. Now, the 
State of Oregon is experimenting with this vehicle miles 
traveled which requires a transponder in the vehicle, a 
satellite and downloading and gathering that information in 
some meaningful way to assess. Are you familiar, Mr. Florian, 
with how well that is working and at this stage.
    Mr. Florian. Yes. I know the State of Oregon feels, and I 
don't want to speak for the Oregon DOT, but I think they feel 
that their pilot program to explore vehicle miles traveled has 
been quite successful. And the way that system worked was 
basically your odometer when you go to the gas station it is 
checked, and to the extent you have traveled more miles you get 
a charge that is built into your tax bill. That is one 
technology.
    In Germany right now for trucks, there is a GPS system 
where there are transponders and the trucks are tracked across 
the country. And when they travel over a highway there is a 
pennies-per-mile charge that is allocated to them. And one of 
my concerns, Mr. Chairman, is I do think the fuel tax has been 
a terrific source of revenue for us, but I think the world is 
changing. It is not going to be a growing revenue source in the 
future and we need other alternatives like a VMT, vehicle miles 
travel charge or more tolling or other user fees.
    Mr. Oberstar. I would call them supplements.
    Mr. Florian. Supplements, exactly sir. It is not a 
replacement.
    Mr. Oberstar. Yes. I think we are going to need the highway 
trust fund as a cornerstone for investment. Mr. Schwartz, you 
recommend that Congress capitalize a national infrastructure 
financing entity so that it can leverage a capital. What level 
of capitalization would be appropriate? Have you given that 
some thought?
    Mr. Schwartz. Yes, I have.
    Mr. Oberstar. You have dealt with billion dollar projects 
in the private sector?
    Mr. Schwartz. Yes, sir I have, and most of those were 
adopted under the discipline of a capital budget which requires 
a certain amount of oversight to see that you meet your 
objectives. I think that it was mentioned earlier today that a 
$9 billion capitalization over a three-year period would be 
adequate for the kind of leverage and financing. And I think 
that is probably right. I favor, strongly favor theDodd-Hagel 
structure of infrastructure bank. It is not quite a bank, but a 
method of financing. And with a $60 billion authorization to 
offer guarantees that would attract much capital in the United 
States through pensions and other fiduciary pools of capital, 
and certainly in Europe. I think a $60 billion funding for 
infrastructure, plus a $10 billion capitalization to be used 
for banking purposes would be a very good mixture Mr. Chairman.
    Mr. Oberstar. Thank you. That is very helpful, very useful. 
Dr. Peter Orszag testified before the Committee last month and 
said that the government could save $3 billion to $6 billion a 
year by replacing the tax exemption on municipal bonds with 
partial tax credit bonds.
    Dr. Penner, you have been on the inside on this. What do 
you think about that? Would it make some sense to shift from 
tax exempt to partial tax credit bonds for supporting State and 
local government?
    Mr. Penner. Absolutely, Mr. Chairman, because as I said in 
my full testimony, the current tax exemption costs much more in 
terms of the revenues we lose than the benefit that actually 
goes to the State and local governments. I guess looking at the 
CBO testimony, they figured that you break even at about a 21 
percent tax rate, so that anybody above that is getting more of 
a tax advantage than the subsidy that is being conveyed to the 
lower level of government. So certainly a carefully thought out 
credit would be far, far superior to what we have now.
    Mr. Oberstar. That is great food for thought. I like Dr. 
Ehrlich's reference to public-private partnerships as business 
deals. That is really what they are. But in the European 
context, those P3s are subjected to a public utility service 
sort of overview. And they are strictly subjected to public 
scrutiny. We don't seem to have such a structure in our system.
    Mr. Ehrlich. But we are yet to be confronted with the 
issue, and therefore we are yet to devise a solution. I would 
find it unfortunate if every business deal surrounding an 
infrastructure asset were a pretext to create a new regulatory 
structure. But I think that it is possible, through the kinds 
of contracts and arrangements that we build into these deals, 
to create equity.
    An example I used in my testimony is that we would want the 
private manager of a toll road_a private owner and manager of a 
toll road_to charge some kind of congestion fees to optimize 
the use of the road. Now that in essence says here is a 
monopoly on the road, do with it what you will. And so you 
would want to balance that with something that looks like rate 
based regulation perhaps, saying, well, you really can't make 
more than X or alternatively less than Y on the asset, but 
otherwise go and do what you need to do. You can't create a 
regulatory regime surrounding every deal that scares away the 
money that you hope the deal will attract.
    Mr. Oberstar. We have 3 minutes remaining on this vote. I 
would propose that we--we have two more votes after this one, 
and they are 5 minutes each, and I propose that we recess and 
come back so that the Members may have more time to ask more 
questions. We will stand in recess for about 20 minutes.
    Mr. Oberstar. The Committee will resume its sitting, with 
apologies to the witnesses for a delay of much longer than the 
point I anticipated we would be able to return. Votes on the 
House floor are beyond the control of even the Chair and even 
the House leadership.
    And I acknowledge that Mr. Schwartz had to leave. He 
indicated prior to his testimony that he had a commitment on 
the West Coast. And I understand if you miss your--even when 
you have your own aircraft, if you miss your departure time 
then you are in a long waiting queue. And that is not good. But 
his testimony has been very valuable.
    I want to return to the question of the vehicle miles 
traveled and a weight factor as a substitute for the highway 
user fee or gas tax. Mr. Florian, we started on that. I welcome 
the contribution of the other two members. How long do you 
think it would take, given where Oregon is today with their 
experience, with Germany's experience in a similar initiative, 
how long do you think it would take to implement such a 
structure? And then how would such a scheme be calibrated to 
generate at least a substitute for the existing 18 and a half 
cents and index it, if you will, into the future?
    Mr. Florian. Thank you, Mr. Chairman. A couple thoughts on 
that. The technology exists today. But getting it implemented 
in a broad base is complicated. You know, we have tens of 
millions of vehicles across the country. So it is in use in 
Germany, it has been for a few years. The Netherlands is doing 
a study, and will likely put in a vehicle miles traveled charge 
for not only trucks, but also for all other vehicles as well. 
So they are in the process of looking at it and potentially 
implementing it. I think this could potentially be rolled out, 
if we studied it intensively with appropriate pilot programs, 
in the next 2 to 3 years. This could start to be--I am not 
saying comprehensive for all vehicles across the country, but 
we could start to roll this out perhaps starting with trucks, 
perhaps starting with certain regions of the country. So it 
is--the technology exists. There is another thing that would be 
very important. If we want to use a GPS-like system, it would 
be important for the OEM manufacturers to start to put that 
technology in all vehicles so we could utilize such a system. 
There might be a cost to that. We would need to analyze that 
and figure that out.
    But I actually think--I am personally concerned that the 
gas tax is going to start to certainly be flat, if not go down 
in pretty short order. Taxicab drivers in New York City are now 
buying hybrids, which tells you a lot. So I am concerned about 
the gas tax and its viability unless it gets ramped up 
dramatically in the next several years. So there is an 
opportunity here.
    Mr. Oberstar. Do you factor weight into this as well? Dr. 
Penner?
    Mr. Florian. Yes, you can.
    Mr. Penner. Yes, Mr. Chairman. I chaired a Committee for 
the TRB of the National Academy of Sciences, and we looked into 
this very carefully. And I really think it has incredible 
promise. I think the transition is very difficult. You hear a 
lot of people voice privacy concerns. And while the technicians 
assure me that that is no problem, I think a lot of people 
worry about it, and you have really got to prove to people that 
you can do it without snooping on them. But in terms of the 
potential revenue yield, it is enormous. I mean if you really 
priced our Beltway the way economists say it should be priced 
you would collect billions of dollars just in this locality. So 
there would be no problem with thinking up ways of getting 
revenues if it was politically feasible.
    But I am very pleased, I think your most recent 
authorization allowed for some more experimentation, I believe. 
And I think that is very important. We have got to figure out 
how to do it and we have got to agree on the specifics of the 
technology. But I think it is one of the most promising things 
to come along for a very long time.
    Mr. Oberstar. Thank you for your thoughts. Dr. Ehrlich.
    Mr. Ehrlich. I think I am only going to second at greater 
length what was said. The privacy concerns are going to be very 
important. But we are building precedent now, because of EZ 
Pass and other comparable uses of technology, regarding 
privacy, and this is an area that we should establish what our 
expectations are early. Rolling it out, to my thinking, would 
take a period of something like 3 to 4 years. New manufacturers 
would have to be given a mandate. And then the cycle of either 
state maintenance or environmental vehicle inspection could be 
a window to require old automobiles to conform to the new 
standard and the like.
    The last point I would make, and this might be a parochial 
view as an economist, and I have talked about this with other 
transportation economists, the system would give you the 
ability to analyze trips, and therefore provide a database for 
comprehensive automotive transportation planning that we do not 
now have. We know about cars, we know about households, but 
what is the distribution of the distance of trips? What is 
their timing? We would now understand that and know in a much 
more rich way how people use roads, and therefore how to build 
them and how to manage them.
    Mr. Oberstar. Thank you. I think that is a very keen 
observation. It strikes me that a vehicle miles traveled plus 
weight relates more to the concept of a fee as defined by OMB 
historically over many years as a charge for--charge directly 
related to the service for which the fee is exacted. And by 
narrowing the focus down to vehicle miles traveled, your trip 
length, and the weight of the vehicle, this reflects the stress 
put on the infrastructure, the roadways and the bridges, better 
than the amount of fuel purchased times cents per gallon. It is 
a different concept for highways than we have for the Aviation 
Trust Fund, where the tax is a percentage of the value of your 
airline ticket, not expressed in miles traveled, although that 
ticket is supposed to reflect somehow miles traveled.
    Next question is what is apparent from your testimony and 
that of my congressional panel is that we have kind of a two-
tiered approach. We have a cornerstone of financing through the 
Highway Trust Fund, but then we have mega needs. There are some 
really high profile project needs. I will go back and cite the 
Wilson Bridge. At the time it was proposed, there wasn't a 
great deal of thought about its importance to the national 
transportation system or to the national economy. But as we dug 
into the issue, particularly in House-Senate conference, I made 
some calculations and found that the Wilson Bridge transports 1 
percent of the total gross domestic product of the United 
States. There are other similar entry points, intermodal points 
that are vital to the national economy. The transit of freight 
rail and passenger rail and interstate highway movement through 
Chicago is one such chokepoint, if you will, in the Nation's 
system. If it takes, as it does, as long for a container to 
move seven miles through Chicago as it does for that container 
to move 1,800 miles from Long Beach, Los Angeles to Chicago, 
then there is something wrong with our system. And then it has 
to move 1,200 miles to the East Coast, because 70 percent of 
that container traffic from the West Coast is destined for the 
rest of the country, and a little more than half of it for the 
East Coast.
    The CREATE project in Chicago merits national investment. 
Why shouldn't we have a national focus on unlocking that part 
of the grid? Alameda corridor is another such example. I think 
you can make the point that Seattle, with I-5, with the two 
freight rails, the UP and the BNSF in that corridor, and not 
only a north-south interstate but an east-west interstate that 
intersect at that point, that this cries out for a national 
investment.
    Now just using those examples, wouldn't those kinds of 
projects qualify for something above the board, whether a TIFIA 
type approach or national infrastructure bank approach, or as 
one of you has suggested, and I don't remember now because the 
testimony has merged in my mind, a World Bank type approach? Is 
that approach sort of separating out onto a national scale 
these super projects that deserve a special category of 
financing that goes beyond the Highway Trust Fund?
    Mr. Florian. I would be glad to comment, Mr. Chairman. I 
think that there are projects of national significance that 
benefit all of us, even though they might be in a particular 
locale. The CREATE project I know--I am from Chicago--I am very 
familiar with the grade separation and a lot of the key things 
that need to happen in Chicago to get freight rail through the 
city. And so I agree with you that is a project that affects 
everybody across the country. There is obviously a lot of 
congestion that has happened in southern California with the 
ports of Long Beach and Los Angeles. That needs to be fixed. 
One of my colleagues in my group actually did the financing for 
the Alameda corridor. So I do think there is a real rationale 
for targeting specific projects that--particularly in freight--
that will open up corridors, create less congestion, and have 
more mobility across the country. I think freight is a natural 
for that, and that might be one way of separating out some 
focus with regard to projects with national significance.
    Mr. Oberstar. Dr. Penner?
    Mr. Penner. Yes. I think projects like that could actually 
be financed under our current framework. Obviously, you would 
have to provide more resources for the trust fund one way or 
another. But I think there is a fundamental problem with our 
grant structure in that so much of the money is given away by 
formula, and that doesn't really induce States to prioritize 
taking the national interest into account. And I think that 
really should be looked at very carefully, and see whether we 
could make more use of cost-sharing grants, or at least require 
more minimum effort. Because I don't think we are getting out 
of the States what we deserve for the amount of money we are 
sending them. And it is a very complicated business. And I 
could go on at great length about it. But that is one area 
where a technical commission might help sort out the main 
issues and how you might provide the best incentives for 
States.
    Mr. Oberstar. You are certainly right about that. I think 
one only has to go to the bridge program itself. Now several 
years ago, over a decade ago, the States asked for more 
flexibility. In fact, 20 years ago they wanted to reduce the 
number of categories. I think we had at one time 50 or 60 
categories in the Federal Surface Transportation Program. We 
got those down to well under 30, and a half dozen major 
categories. One of those is the bridge program. And they wanted 
flexibility so that if they didn't need to dedicate the money 
to bridge repair or reconstruction or rebuilding to use it 
elsewhere. So we gave them that authority. And then just in the 
last 4 years they flexed $4-1/2 billion out of their bridge 
program to other categories of need in the State, and then a 
bridge collapses, and they say oh, my God, we don't have enough 
money for the bridge program. Well, wait a moment. We gave you 
the authority, you used it somewhere else, and now you are 
complaining.
    So it comes back to again a statement in the panel's 
testimony that the Highway Trust Fund is a kind of Federal-
State revenue sharing program.
    Dr. Ehrlich?
    Mr. Ehrlich. That was mine, and I will stand by it. I mean 
it is the transportation equivalent of what I used to say to my 
kids: Here is 20 bucks, have a good time. When you get right 
down to it, saying that we will pick up $0.90 on the dollar or 
75 for local connecting roads and the like becomes an 
invitation to shop for that kind of money. Rudy is right in 
that if we were to make that cost share negotiable in some way, 
we would get out of the States far more, and we would eliminate 
the biases inherent in saying we will pick up 90 percent, 
whatever it is. There would remain the freight projects we are 
talking about, the multimodal issue, the fact that there is 
money coming through several windows and the like, and there is 
a lot of coordination.
    I want to go back to that because there is one thing that 
projects we are talking about, these national scope projects, 
have in common. And that is they have a local steward. The City 
of Chicago. That fact can't be avoided. So we have to recognize 
Chicago's stewardship_we are not going to federalize it in some 
sense. There is not going to be any eminent domain exercised 
over it. Same thing in Alameda. We have to get that local 
steward's incentives in line with the country's, get it done 
now, create a workable balance between local costs and other 
users' costs and the like, create an opportunity for private 
money to enter.
    I can imagine that Mark, understanding the Chicago freight 
issue, sees the opportunity for private money, but it has got 
to be part of what is really a mosaic of different 
contributions from different classes of user and our own 
superimposition of the national need and a national cost share. 
We need a place where all of that can get done. And we can 
either do it on an ad hoc basis or we can do it on an 
institutionalized basis. And in essence, the testimony I have 
given you today prefers the latter.
    Mr. Oberstar. Will any such investment have public 
credibility if it is--unless it is--unless those priorities are 
set by an independent entity?
    Mr. Ehrlich. Let me free up my colleagues for a second. I 
think it will have credibility if the process that appraises 
projects has credibility.
    Mr. Oberstar. Okay.
    Mr. Ehrlich. It needs to be independent, it needs to be 
expert, it needs to resemble the World Bank_that is one model, 
the Public Company Accounting and Oversight Board is another_
dedicated experts whom we wall away in some way to make these 
very important professional project appraisal decisions. 
Because if there is confidence in that process, then the 
markets will have an appetite for securities that derive their 
value from the projects that are being picked. If the people in 
securities markets look at this bank and think, well, who the 
heck is over there, what are they doing, then there is going to 
be no appetite for their securities. But if they have faith 
that there are transparent and expert standards being employed 
across a range of modes, then they will understand the value, 
much as they--much as Goldman did its own analysis in looking 
at the Indiana toll road or the Skyway, which allows me to 
segue to Mark.
    Mr. Florian. I think the key, Mr. Chairman, is that 
citizens need to see the benefit of a particular project. And 
if there is a cost-benefit analysis that shows that either that 
project that is getting done benefits the general populous in 
some way, shape or form, or because that project gets done it 
benefits others elsewhere, that if there is that linkage we 
have seen in other projects there is success. If there isn't 
that linkage and it doesn't have the credibility of a real 
benefit that comes from allocating dollars that way, that is 
when projects become controversial.
    Mr. Penner. I think, too, that is the real value of moving 
toward a per mile fee adjusted for weight, and allowing the 
private sector to charge such fees. Because the amount of money 
you collect from a particular network of roads then is a very 
good indicator of how valuable they are to the public. And if 
you don't collect much money, there isn't much of a case for 
expanding that particular network. And then if you put it in 
private hands, of course they are interested in making a buck, 
so they will do the work of analyzing what they might collect 
with a very sharp pencil. And I think we can have some 
confidence in their calculations.
    Mr. Oberstar. Dr. Ehrlich suggested that a crucial element 
is having a central facility, in his words, that picks projects 
coherently, independently, provides subsidies transparently, 
and faces a market test. There are very few market tests that I 
have seen of any of the projects of State highway departments. 
They are based on vehicle miles traveled, they are based on 
fatalities. If you have a roadway that had no fatality it has a 
very low rating. One that kills 57 people in 15 years, that too 
often goes, as in the case of one in my district, goes 
unnoticed by State highway departments, because they put money 
someplace else. But turn the page to transit, and transit 
projects have to meet this very strict cost-effectiveness index 
test that has some subjective elements to it. But we don't 
impose that same responsibility on highway and bridge projects. 
We do with the Corps of Engineers. And we have raised the bar 
for the Corps of Engineers in the Water Resources Development 
Act that was passed over the President's veto last fall. Raised 
very--well, much more rigorous testing than ever in the 
history. And we will probably up that again in the future.
    But if you have locks that are 600 feet long on the 
Mississippi River and barge tows that are 1,200 feet in length, 
and they have to split the barge tow, send 600 feet through, 
send the next 600 feet through, lash them together, no wonder 
it takes 820 hours for a barge leaving Clinton, Iowa, northeast 
Iowa, to New Orleans round trip.
    And if you look at a map of the Southern Hemisphere, that 
point of Brazil that sticks out on the south Atlantic Ocean at 
that point is the port of Recife. And just below Recife is 
another port of Santos. They export soybeans from Brazil to the 
same markets that our soybean farmers in the Midwest are 
marketing, West Africa, East Africa, Pacific rim. They have a 
2,500-mile advantage because that is how much further Recife is 
out into the Atlantic Ocean than New Orleans. And that is a 5- 
or 6-day sailing advantage. And if you add to that 3 weeks to 
get to the Gulf with your commodities, and then 2,500 miles on 
top of that, and grain moves in international markets on as 
little as an eighth of a cent a bushel, then we are losing 
enormously in the marketplace. There is no cost-effectiveness 
index applied to that movement of goods in the internal market 
of the United States.
    So we are making these infrastructure investments, you 
know, based on somebody on this Committee, somebody else from 
another region is on another Committee, and there is no global 
view. Now, the European TEN-T plan has a national view. And 
they really are Europeanists now in the EU. And they think in 
these big terms and how they are going to be competitive in the 
world marketplace. And that is where I think this panel is 
leading us. I think you have given us a real financial 
investment map by which to make judgments for the future, and I 
think this may be the most important testimony that we have 
received in our evaluation of where we are and where we are 
going and where we are going to make the next investments.
    Any other comments from any of you? Well, we will look 
forward, this will not--consider this part of a continuing 
conversation, and we will need to engage your expertise and 
your judgment, your insights as we move further down this road. 
My goal is we have a surface transportation bill, at least the 
outlines of it, and much of the substance of it, in place 
before the next administration takes office so they can't mess 
it up.
    Thank you very much. The Committee is adjourned.
    [Whereupon, at 2:00 p.m., the Committee was adjourned.]

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